Demolition Not An Option For Mold-Infested Townhome; Couple Coughs Up $478K Over Five Years To Remediate Virginia Residence

In McLean, Virginia, The Wall Street Journal reports:

• Jenny Guinness of McLean, Va., waited as men in moon suits cut away chunks of drywall in 2-foot increments. They would bag and seal the material, and start again. Soon they had removed the walls of an entire room. A mold remediator sat her down and said: "I have really bad news for you. This looks like it goes in every direction…I think you need to have a demolition company come in and start removing whole walls because I can't see an end to it anywhere."
  
  In January 2012, Jenny Guinness decided to oversee the rest of the work on her home. Drawing from her experience as a real-estate agent for 10 years, she served as her own general contractor and interior designer.
  
  In 2008, Ms. Guinness and her husband, Os, discovered that their townhouse in a suburb of Washington was contaminated with stachybotrys—also known as black mold. That launched a painstaking five-year renovation that cost as much as the couple originally paid for the house and involved ripping out walls, replacing many of the finishes and sterilizing nearly every surface and item they owned.
  
  What they couldn't clean, they threw away, including stuffed animals, sweaters and other items from their son's childhood that they were saving for his kids. "I remember standing in the snow in the street in a moon suit, throwing these precious things into a bin," Ms. Guinness says.

***

• In 2007, Ms. Guinness was diagnosed with lung cancer. Even after undergoing successful surgery, she still had trouble breathing in the house and, in early 2008, decided to test the home for mold. She discovered that black mold had streaked the firewalls and settled in thick clumps near the floor. The breadth of the mold shocked Ms. Guinness, who says she normally keeps her home spotless. "You could scrape it off with a spoon," she says.
  
  John Spangenberg, production manager of Columbia Restoration, a fire and water restoration service in Jessup, Md., broke the initial news to Ms. Guinness. He says the McLean townhouse had one of the worst cases of hidden mold he has seen in his 13-year career. "Most of the time when we deal with mold, you can usually find a stopping point. In her situation, the stopping point was after every wall was out," he says.

***

• Virginia is a "buyer beware" state, meaning that homeowners aren't legally required to disclose a mold problem. Mold can be such a detriment to a home's value, though, that homeowners are almost always better off paying to remediate or even tearing the house down and starting from scratch, says appraiser Donald Boucher, president of Washington, D.C.-based Boucher & Boucher. Often "it can cost more to renovate a house than it would cost to build it new. You're better off knocking it down," he says.
  
  With a townhouse, tearing it down wasn't an option, the couple says. "The simple fact was, unless we renovated it, we couldn't sell it," Mr. Guinness says.

***

• The total renovation cost $478,500, as much as the house itself, which was $479,000, according to public records. Ms. Guinness estimates that they spent $107,000 just on getting rid of the mold alone: $17,000 on testing, $70,000 on remediation and $20,000 on cleaning. Since their insurance doesn't cover mold, the couple paid for the renovation themselves with their retirement savings.
  
  "We read about people who did mold lawsuits and how many lawyers you had to go through and how many experts to go through," Ms. Guinness says. "We just didn't think we could face this. We were already fighting something." Generally, mold isn't covered under most homeowners insurance policies because it's considered to be a maintenance issue, says a spokesperson for the Insurance Information Institute.

For the story, see The $500,000 Housecleaning (When a Virginia couple discovered that their townhouse was infested with mold, it was the start of an arduous, expensive multiyear cleanup).

Cheap, Shoddy Rehab Work, Improvements Made Without Pulling Proper Permits, Encroachments, Unexpected Red Tags Among Potential Hazards Facing Novice Prospective Homebuyers When Dealing With Foreclosure Flippers

From the San Francisco Bay Area, the San Francisco Chronicle reports:

• There's a surge in Bay Area homes being remodeled, as run-down foreclosures find new owners. Some of those new owners are house flippers, whose goals are to fix up and resell a property as quickly as possible. That can mean cutting corners by skipping permits and inspections for the renovations, city building officials say.
  
  "Time is money when you're flipping a house," said Dan Marks, Vallejo's interim economic development director. "Especially in this crazy market when we have no idea how long this (house-buying) frenzy will last. Timing is critical for these guys, and going through the permit process takes time."
  
  While non-permitted work is a perennial issue for cities, the sheer volume of dilapidated properties changing hands in recent years has spurred a big increase in unpermitted work, building officials say. The fallout can include slipshod construction standards, big headaches for new owners, and loss of revenue for cities. The problem is big enough that Oakland passed an ordinance requiring investors to register properties and comply with city rehab codes.
  
  "With the volume of (remodeling) work increasing as it is, I would expect work without permits to follow," Ed Sweeney, San Francisco deputy director for permit services, said in an e-mail. "The developer who is flipping houses is under added pressure to bring a product to market. Since the work being performed is interior ... a sense of security is there" about not being caught.
  
  Holding the bag
  
  Short-staffed building departments throughout the region said they rely on complaints from neighbors to catch unpermitted work in process, although inspectors keep an eye out when they're driving through town.
  
  "The house flipping is still going on here and we still find some in our travels performing inspections," Gary West, Vallejo's chief building official, said in an e-mail. "We have found contractors performing substandard work and converting unoccupied areas to living spaces. The new property owner is left holding the bag on getting the work legalized, which is sometimes a problem or not allowed."
  
  One contractor was found working on 12 different homes with no permits, he said. In another case, an addition to a home had to be removed because it encroached on the house's front "setback" area, even though a recent purchase had included that square footage as part of the home's value.

***

• New Oakland ordinance
  
  A new ordinance requires investors who purchase foreclosures to register the properties with the city and do all rehab work to city standards, said Margaretta Lin, strategic initiatives manager for the Department of Housing & Community Development.
  
  "We're targeting investors who weren't planning to do the rehab work up to code," she said. "We know the foreclosure stock has a lot of deferred maintenance issues. If investors are buying a property that was in foreclosure, there's a high likelihood that it needs rehab work."
  
  Besides flippers, the new law targets investor landlords to make sure they don't simply rent out run-down properties without bringing them up to code.

For more, see House flippers often skip city permits (requires subscription; if no subscription, go here, then click appropriate link for story).

Slipshod Construction, Unpermitted Rehab Work Leave Homebuying Couple Holding The Bag, Facing Foreclosure; Prior Owner's Response To Inquiries On Nature Of Renovations: 'I Can't Recall!'

In Matlock, Manitoba, CBC News reports:

• For sale: cozy two-bedroom home just minutes from the beach. Black mould, caving-in walls and crumbling foundation included. That's the property in Matlock, Man., that will be up for grabs in a foreclosure sale at the end of this month.
  
  Steven Tymchuk, left, and Tracey Walsh bought their Matlock home in 2005, only to find a number of issues with it. It's a property that Tracey Walsh and Steven Tymchuk fell in love with back in 2005.
  
  "See that robin's nest under the awning? She's got babies in there," Walsh said. "See that sign on the door next to the nest? Our house is condemned."
  
  It's a worst-case ending to a nightmare that began right after the couple bought the home. That's when they learned that much of it appears to have been renovated without building permits and was not up to code.
  
  The result? Insulation made up of beach towels, vermiculite and shavings. Sewage seeping underneath the foundation. A wall caving in, partially because a tree had fallen on it two years earlier, and a roof and foundation so unstable that both could collapse at any moment.
  
  "We were shocked, we were shocked," said Walsh.
  
  But the real shock came when they learned there was little recourse for them — systemic checks and balances they thought were in place to protect them.
  
  To a point, they were right. First, in most cases, the "buyer beware" rule applies: a person selling a home is not required to disclose any flaws or problems with the home.
  
  But there's an important exception.
  
  "The fundamental ancient rule is that the buyer is without a remedy and has to accept a property," said John Neufeld, who both practises and teaches real estate law.
  
  "But if the defect is so serious that it renders the property dangerous, then the seller could be successfully sued."
  
  The catch? One has to prove that the seller knew about the defects. In this case, Walsh and Tymchuk can't.
  
  No recollection
  
  When contacted by CBC News last week, the previous owner said he had no recollection of renovations done, with or without permits, and no recollection of any defects.
  
  That same condition applies to the real estate agent who sold the property. Walsh and Tymchuk filed a complaint against her through the real-estate arm of the Manitoba Securities Commission.
  
  Tracey Walsh points to black mould that covers part of the bathroom. Its conclusion was that while the agent was wrong to list the property as fully insulated on the MLS listing, she cannot be held responsible for not disclosing the other flaws of the home, as she did not know about them.
  
  The couple's next option was to file a claim through their title insurance policy. There are policies, while not mandatory, offered to protect buyers from things like problems over the title of the property, or problems borne of zoning violations or building code violations.
  
  "Our lawyer said, 'Why don't you try title insurance? It will benefit you,'" Walsh said.
  
  "That's why we started right with title insurance, knowing that if there was something wrong with the home, they would hire a lawyer and take care of it. Well, right from the beginning, we've been given nothing but the runaround."
  
  Over the years, on the insurance company's request, the couple was asked to provide proof that the home was unlivable, that the damage was due in part to work done without permits, and that they were required to repair it before they could live in it again.
  
  They did all of that, Walsh said, but their claim was still denied.
  
  "You know, what more can you do?" said Neufeld. "If I was the judge, I would make the natural conclusion — 'You gotta pay.'"
  
  'This is devastating'
  
  It's cases like these that, in part, have sparked a review of title insurance policies a few years ago.
  
  A report out of Saskatchewan raised questions about the validity of these policies, noting that the companies don't disclose their premium payout ratio, how much money they pay out in claims, or how long it takes to settle a claim.
  
  Regardless, it was the protection of last resort that Walsh and Tymchuk thought would help make right all that went wrong with the home.
  
  Today, thanks in part to years of going into overdraft to pay for these efforts, their home is now officially in foreclosure. "This is devastating. It is unbelievable," Walsh said.
  
  "This was the home we were supposed to grow old in together," said Tymchuk. "That's all been taken away from us."

Source: Manitoba couple has little recourse in house nightmare.

Busted Single Family Home-Based Meth Labs Begin Finding Their Way Back Onto The Real Estate Market

In Ardmore, Oklahoma, KXII-TV Channel 12 reports:

• When a meth lab is busted, law enforcement removes all the chemicals, drugs and lab components, but the meth isn't entirely gone. "Itching eyes, burning skin, it may be difficult to breathe," said Bill Coye, who is a registered nurse and owner of Apex Bioclean--a company that cleans meth labs.
  
  Those symptoms are just an example of what a family living in a former lab can experience, and Coye said the fix is remediation. "Anything absorbent in the home has to be removed," he said. "Carpet pad, tack strip, ceiling texture if it's very coarse. And what do you do with the furnace and the duct work?"
  
  Coye's company tests the level of chemical residue, scrubs the house top to bottom, and retests.But depending on the level of contamination and size of the home that can cost anywhere between $5,000 and $15,000.(1)
  
  Oklahoma Bureau of Narcotics spokesman Mark Woodward explains that law enforcement puts a placard on the door stating that the property was a meth lab and that the owner needs to have it cleaned--but the owner doesn't always foot the bill.
  
  "Some we fear are taking the placard off the door when we leave, airing the house out, putting some new paint on the walls, new carpet, smells wonderful like a brand new apartment and they rent it to somebody else," Woodward said.
  
  That's because the law in Oklahoma doesn't require homeowners or landlords to clean a home before selling or renting. They are required by law to disclose to tenants or buyers that the home used to be a meth lab. But Rita Ponder with Frances One Realty said it can get tricky if the home was a foreclosure--and they often are. "It's just a home that's put on the market, and we try to sell," Ponder said. "But we don't know the circumstances of the home."
  
  Last year 829 homes were busted as meth labs in the state, and with that number on the rise, Woodward said some Oklahomans have wondered why no law exists requiring meth lab cleanup. The answer comes down to money. "Is it the Bureau of Narcotics that pays and then we recoup the loss from the defendants? Well no, because the defendants don't have any money," said Woodward.
  
  And OBN estimates it would cost the state between $17 million and $37 million to finance all the cleanups.
  
  So to avoid being stuck with the bill, Woodward, Coye and Ponder all recommend doing your homework before you move in: ask neighbors about the history of the home, ask the police or sheriff's office to look it up, or check the DEA's list of clandestine labs online. But the only way to really know is to test.
  
  "To make sure that that individual who moves into that house with his or her family is going to be safe," said Coye. "And that really is what this is about. This is about public health and safety."
  
  If you've already moved into a former meth lab and that fact wasn't disclosed by the seller or landlord, Woodward adds that you have grounds for legal action.

Source: Busted meth labs go back on housing market.

(1) See, generally, METH: Cleaning the site of a former meth lab can be costly.

Civil Rights Feds Indict Missouri Woman For Alleged Intimidation Of Black Family By Torching Their Rented Home With Molotov Cocktail, Drawing Swastikas & Writing "White Power" On Their Driveway

From the U.S. Department of Justice (Washington, D.C.):

• An Independence, Mo., woman was indicted by a federal grand jury [] for violating the civil rights of an African-American family by setting fire to their residence, announced Roy L. Austin Jr., Deputy Assistant Attorney General for the Civil Rights Division of the Department of Justice, and Tammy Dickinson, U.S. Attorney for the Western District of Missouri.
  
  Victoria A. Cheek-Herrera, 33, of Independence, was charged in a three-count indictment returned by a federal grand jury in Kansas City, Mo.
  
  [The] indictment charges Cheek-Herrera with participating in a conspiracy to threaten and intimidate an Independence family from exercising their constitutional right to reside in their home because of their race or color. It also charges Cheek-Herrera with committing a racially-motivated arson and with using fire during the commission of a felony.
  
  According to the indictment, Cheek-Herrera conspired with others on June 26, 2008, to injure, oppress, threaten and intimidate Larry Davis, Stacey Little and the couple’s minor children in the free exercise of their constitutional right to occupy and rent their home in Independence, because of their race and color. Davis, Little and their children are all African American.
  
  The indictment alleges that Cheek-Herrera discussed with others her desire to set fire to the home of Davis and Little, and that Cheek-Herrera and a co-conspirator drew a swastika and wrote the words “White Power” on the driveway to Davis and Little’s residence.
  
  Cheek-Herrera allegedly asked a juvenile acquaintance for gasoline then helped create a Molotov cocktail by filling a glass bottle with gasoline and inserting a rag into the bottle to serve as a wick. Cheek-Herrera and a co-conspirator then allegedly lit the wick and threw the gasoline-filled bottle into the side of the house that Davis and Little were renting, which set the residence on fire.

For the Justice Department press release, see Missouri Woman Indicted for Violating Civil Rights of Family by Setting Fire to Their Home.

Fair Housing Feds: BofA, Fannie Screwed Over Disabled Woman By Stiffing Her On HAMP Loan Mod Request Based On Her Purported Failure To Provide Adequate Documentation On Nature Of Physical Impairment

From the Department of Housing and Urban Development (Washington, D.C.):

• The U.S. Department of Housing and Urban Development (HUD) announced [] that it has reached a Conciliation Agreement with Bank of America and Fannie Mae, settling allegations that the Charlotte, NC-based lender and Fannie Mae violated the Fair Housing Act by denying a borrower’s application to modify her mortgage loan because she did not provide sufficient information about the nature of her disability. The woman was applying for a loan modification through the Obama Administration’s Home Affordable Modification Program (HAMP).
  
  The Fair Housing Act makes it unlawful to deny or discriminate in the terms and conditions of a mortgage or loan modification based on disability, race, color, religion, national origin, sex, or familial status.
  
  “People with disabilities should not have to answer unnecessary questions about the nature of their disability when seeking a loan modification,” said Bryan Greene, HUD General Deputy Assistant Secretary for Fair Housing and Equal Opportunity. “HUD will continue to take action against lenders that subject persons with disabilities to discriminatory practices.”
  
  According to the complaint, a San Bruno, CA, woman applied for a loan modification at Bank of America that would have reduced her interest rate and made it easier for her to pay her mortgage after her disability caused her to miss several months of work. During her extended leave of absence, the woman used her savings to pay her mortgage. Fearing that she would not be able to continue paying her mortgage without a lower interest rate, the woman applied for the loan modification, citing her physical “hardship.”
  
  In responding to her request, a loan officer with the bank asked her to provide documentation relating to her medical condition. The woman provided the loan officer with a letter from her physician, a current medical bill, and a letter from her employer certifying her approved leave of absence due to her disability.
  
  Still, the bank denied her application, allegedly telling her that she had not provided sufficient information about the nature of her disability. Even after the woman provided another letter from her physician and insurance records showing her medical treatment between 2007 and 2011, the bank reportedly denied her modification application and Fannie Mae allegedly stated that her doctor’s letters and other documentation were insufficient to show that she was permanently disabled.
  
  Under the terms of the agreement, Bank of America will pay the woman $22,449, which includes $19,349 to cover the approximate closing costs on a refinance loan, and agreed to follow HAMP and Fannie Mae’s servicing guidelines. Bank of America will also provide fair lending training to its newly-hired employees. In addition, Fannie Mae will pay the woman $3,400.

For the HUD press release, see HUD Settles Claim Alleging Bank of America And Fannie Mae Discriminated Against Loan Applicant With Disabilities.

Nashville Landlord To Cough Up $170K+ To Identify, Compensate Hispanic Tenants Who Were Allegedly Intimidated, Harassed & Otherwise Screwed Over On The Basis Of Their National Origin

From the Department of Housing and Urban Development:

• The U.S. Department of Housing and Urban Development (HUD) announced {[] that a Nashville, TN, apartment complex will pay more than $170,000 as part of a settlement resolving allegations that it discriminated against Hispanic tenants based on their national origin.

***

• After being told about the complex’s discriminatory rental practices, HUD filed a Secretary-initiated complaint alleging that TriTex Real Estate Advisors, Inc., of Atlanta, and its management company terminated lease agreements, ignored maintenance requests, and intimidated and harassed Hispanic tenants.
  
  Under the terms of the agreement, the manager and owner will establish a $150,000 victims’ compensation fund for former residents administered by an independent agency and to pay $10,000 each to two non-profit organizations – the Tennessee Fair Housing Council and the Tennessee Immigrant and Refugee Rights Coalition (TIRRC) – to identify potential claimants. In addition, TriTex and its management company will adopt fair housing policies and its employees will undergo fair housing training.

For the HUD press release, see HUD And Owners,  Managers Of Tennessee Apartment Complex Settle Allegations Of Discrimination Against Hispanic Tenants (Manager and owner to establish $150,000 victims’ compensation fund).

Housing Feds, County Housing Authority Settle Discrimination Suit Alleging Failure To Increase Access To Dwelling Units For Persons With Disabilities, Families With Kids Under 18

From the Department of Housing and Urban Development:

• The U.S. Department of Housing and Urban Development (HUD) announced [] that it has reached a Voluntary Compliance Agreement with the Jackson County Housing Authority (JCHA) in Murphysboro, Illinois, to increase access for persons with disabilities and families with children under age 18.
  
  HUD reviewed JCHA’s housing programs and services and determined that the housing authority had not ensured that at least five percent of its units were accessible to persons with disabilities, as required by Section 504 of the Rehabilitation Act of 1973. The review further indicated that JCHA had not allowed children under the age of 18 to reside in housing designated for elderly families, in violation of the Fair Housing Act.
  
  Section 504 of the Rehabilitation Act of 1973, as amended, prohibits discrimination based on disability in any program or activity receiving federal financial assistance. Under Section 504, a public housing authority must make a minimum of five percent of its total dwelling units accessible to persons with mobility impairments.
  
  The Fair Housing Act prohibits housing discrimination against families with children under 18 years of age. Public housing or federally assisted housing for the elderly is not exempt from the Fair Housing Act’s prohibition against familial status discrimination.

For the HUD press release, see HUD And Jackson County Housing Authority Reach Agreement To Ensure Equal Housing Opportunities For Persons With Disabilities And Families With Children.

Service Animals & Assistance Animals For People With Disabilities In Housing, HUD-Funded Programs

From the Department of Housing and Urban Development (Washington, D.C.):

• The U.S. Department of Housing and Urban Development (HUD) [] issued a reaffirming that housing providers must provide reasonable accommodations to persons with disabilities who require assistance animals. The “Notice on Service Animals and Assistance Animals for People with Disabilities in Housing and HUD-Funded Programs” discusses how the Fair Housing
  Act and the Americans with Disabilities Act (ADA) intersect regarding the use of service or assistance animals by persons with disabilities.
  
  The Fair Housing Act prohibits landlords from discriminating based on disability, race, color, national origin, religion, sex, and familial status. The ADA prohibits discrimination against people with disabilities in employment, transportation, public accommodations, communications, and state and local government activities. Both laws contain provisions which address the use of service or assistance animals by people with disabilities. While the Fair Housing Act covers nearly all types of housing, some types of housing, such as public housing, are covered by both laws.
  
  “The vital importance of assistance animals in reducing barriers, promoting independence, and improving the quality of life for people with disabilities should not be underestimated, particularly in the home,” said John Trasviña, HUD Assistant Secretary for Fair Housing and Equal Opportunity. "Disability-related complaints, including those that involve assistance animals, are the most common discrimination complaint we receive. This notice will help housing providers better understand and meet their obligation to grant reasonable accommodations to people with disabilities that require assistance animals to fully use and enjoy their housing.”
  
  HUD’s new notice explains housing providers’ obligations under the Fair Housing Act, including the requirement to provide reasonable accommodations to people with disabilities who require assistance animals. Pet restrictions cannot be used to deny or limit housing to people with disabilities who require the use of an assistance animal because of their disability. Housing providers must grant reasonable accommodations in such instances, in accordance with the law. The guidance also describes the Department of Justice’s revised definition of “service animal” under the ADA, as well as housing providers’ obligations when multiple nondiscrimination laws apply.
  
  The Americans with Disabilities Act requires equal access for people with disabilities using trained service dogs in public accommodations and government facilities.
  
  Under the Fair Housing Act, housing providers have a further obligation to accommodate people with disabilities who, because of their disability, require trained service dogs or other types of assistance animals to perform tasks, provide emotional support, or alleviate the effects of their disabilities.
  
  HUD’s and the Department of Justice’s Joint Statement on Reasonable Accommodations provides additional information regarding housing providers’ obligations to provide reasonable accommodations. The Department of Justice has also published a fact sheet on service animals and the ADA.
  
  Click here to read HUD’s new notice.
  
  Persons who believe they have been denied a reasonable accommodation request may file a complaint by contacting HUD’s Office of Fair Housing and Equal Opportunity at (800) 669-9777 (voice) or (800) 927-9275 (TTY). Housing discrimination complaints may also be filed by going to www.hud.gov/fairhousing, or by downloading HUD’s free housing discrimination mobile application, which can be accessed through Apple devices, such as the iPhone, iPad, and iPod touch.

For the HUD press release, see HUD Issues Notice On Assistance Animals And Reasonable Accomodations For Persons With Disablities.

Foreclosure Fraud Settlement Monitor: Banksters Falling Short On Living Up To Their End Of Deal

Bloomberg reports:

• The largest U.S. mortgage servicers, including Citigroup Inc (C). and Bank of America Corp., haven’t done enough to upgrade their treatment of customers in danger of foreclosure, according to a court-appointed monitor.
  
  To meet the terms of a legal settlement with the U.S. Justice Department and 49 state attorneys general, the monitor said in a report released [this week], the banks must improve their response to loan-modification requests and their collection of records, and provide a single point of contact for borrowers. The settlement over botched foreclosures requires the banks to submit plans to the monitor for improving their performance.
  
  “I want to send a simple message to these banks that it’s time for them to live up to their end of the deal by complying with all aspects of the settlement,” Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said on a conference call with reporters.
  
  Donovan, who helped negotiate the February 2011 settlement, called the banks’ performance “unacceptable” and said federal and state authorities would fine or “haul them back into court” if they failed to improve their treatment of borrowers seeking mortgage relief.
  
  The banks were required to meet new servicing standards as part of the accord, which came about after disclosures that they used faulty documents to seize homes.

For more, see Banks’ Mortgage-Service Fixes Faulted by Settlement Monitor.

Antitrust Feds' List Of N. California Foreclosure Sale Bid-Rigging Suspects Admitting Guilt Now Grows to 31 As Probe Continues

From the U.S. Department of Justice (Washington, D.C.):

• A Northern California real estate investor has agreed to plead guilty for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.
  
  Felony charges were filed [] in the U.S. District Court for the Northern District of California in San Francisco against Robert Williams of Atherton, Calif. Williams is the 31st individual to plead guilty or agree to plead guilty as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California.
  
  According to court documents, Williams conspired with others not to bid against one another, but instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in San Mateo County, Calif. Williams was also charged with conspiring to use the mail to carry out schemes to fraudulently acquire title to selected properties sold at public auctions, to make and receive payoffs and to divert to co-conspirators money that would have otherwise gone to mortgage holders and others.

***

• “Collusion at these foreclosure auctions enabled the conspirators to present the illusion of competition, when they were actually thwarting the competitive process and profiting at the expense of lenders and distressed homeowners,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division remains committed to holding accountable those who illegally subvert competition at real estate foreclosure auctions across the country.”

For the Justice Department press release, see Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Public Foreclosure Auctions.

Dubious Conduct Involving Straw Buyer Scams, Loan Modification Rackets & Solicitations Targeting Victims Of Time Share Ripoffs Among Reasons For Recent Discipline Handed Out By Florida Supreme Court

The Florida Bar recently published its periodic 'gossip sheet' announcing the discipline meted out to some of its wayward members.

The following lawyers were disciplined for a variety of real estate-related missteps:

• Ronald Clyde Denis, 801 Spencer Drive, West Palm Beach, suspended for 60 days, effective 30 days from an April 16 court order. (Admitted to practice: 1997) Between 2009 and 2010, Denis was associated with a loan modification company that was run by non-lawyers. He accepted clients from the company, although it was not an approved lawyer referral service. The non-lawyer company had clients sign a special power of attorney stating that it was their attorney in fact. (Case No. SC12-2177)
  
  Daniel Nathan Hoskins, 1154 Adair Park Place, Orlando, disbarred for five years, effective immediately, following an April 16 court order. Hoskins pleaded guilty in federal court to one count of conspiracy to commit wire fraud and bank fraud — both felonies. In and between March 2006 and October 2008, Hoskins, along with another attorney, conspired with individuals involved in the development of three condominium conversion projects to artificially inflate their sales prices through the use of straw buyers and nominee purchasers. Hoskins failed to disclose to lenders the existence of the kickbacks or disguised payments made to straw buyers and Realtors. (Admitted to practice: 1996) (Case No. SC12-2171)
  
  Harold George Uhrig, 370 Lake Seminary Circle, Maitland, suspended for 60 days, effective May 1, following an April 16 court order. (Admitted to practice: 1975) Uhrig created another law firm, outside of his criminal law practice, to assist his non-lawyer son’s company, which assisted timeshare owners who felt they’d been scammed by timeshare resale companies and wanted refunds. The new firm provided form letters to customers that were misleading and implied that the law firm was available to litigate against timeshare resale companies, if necessary. (Case No. SC12-2175)
  
  Alexander Zouzoulas, 1270 Miller Ave., Winter Park, disbarred effective 30 days from an April 16 court order. (Admitted to practice: 1983) In August 2012, Zouzoulas pleaded guilty in court to conspiracy to commit wire fraud and bank fraud. Between 2006 and 2008, Zouzoulas and another attorney conspired with persons involved in the development of three condominium conversion projects, to artificially inflate the sales prices of the condominium units. He also made several misrepresentations regarding the condominiums and failed to disclose to lenders the existence of kickbacks or disguised payments. (Case No. SC12-2167)
  

Source: Supreme Court Disciplines 29 Attorneys.

Oakland Federal Judge Green-Lights Another Lawsuit Alleging Banksters Bilked Home Loan Borrowers In Default With Inflated Junk Fee Racket, Clipping Homeowners For Exorbitant Mark-Ups For Services Provided By 3rd Party Vendors

In Oakland, California, American Banker reports:

• JPMorgan Chase (JPM) must defend itself against allegations that it charged millions of dollars in improper fees to mortgage borrowers who were in default, a federal judge has ruled.
  
  Thursday's ruling by Judge Yvonne Gonzalez Rogers of the U.S. District Court in Oakland, Calif., means borrowers may proceed with a lawsuit that accuses JPMorgan of inflating fees for inspections, brokers' estimates and other so-called property preservation services. Vendors hired by JPMorgan's servicer performed the services.
  
  The decision follows rulings in April by Rogers that allowed similar lawsuits against Wells Fargo (WFC) and Citigroup (NYSE:C) to proceed.
  
  The homeowners, who live in California, Tennessee and Oregon, say they are suing JPMorgan Chase on behalf of hundreds of thousands of borrowers who have had a mortgage serviced by the company since May 2011.
  
  The borrowers, who sued JPMorgan Chase last year, charge that the allegedly marked-up fees violated state and federal law, forced them deeper into debt, damaged their credit scores and had the potential to add hundreds or thousands of dollars to their loans.
  
  JPMorgan Chase sought to dismiss the lawsuit, contending it was preempted by an April 2011 settlement with the Office of the Comptroller of the Currency that required the company and seven other servicers to fix problems with their foreclosure processing.
  
  Rogers disagreed although she narrowed some of the charges.
  
  "First, the deficiencies and unsafe or unsound practices identified by the OCC were primarily, if not entirely, devoted to foreclosures," Rogers wrote in an opinion issued Thursday. "The consent order did not require remediation to borrowers for financial injuries outside the scope of the review."
  
  According to the borrowers, loan paperwork issued by JPMorgan Chase failed to inform borrowers that JPMorgan Chase could allegedly profit from default-related services. As of Dec. 2010, JPMorgan Chase allegedly charged borrowers between $95 and $125 for so-called broker's price opinions that allegedly cost the bank $50 or less, the lawsuit charged.

For the story, see Mortgage Fee Suit Against JPM May Proceed: Judge.

Wisconsin AG: Attorneys Associated With Consumer Debt Adjustment Firm Merely A Facade For Outfit Providing Services Thru Non-Lawyer, 3rd Party Companies

From the Office of the Wisconsin Attorney General:

• Attorney General J.B. Van Hollen and the Wisconsin Department of Justice (DOJ) have filed an enforcement action in Dane County Circuit Court against Legal Helpers Debt Resolution, LLC, a/k/a the law firm of Macey, Aleman, Hyslip & Searns, as well as the company’s principal managers and owners.
  
  According to the complaint, Legal Helpers Debt Resolution provides debt settlement services to people nationwide, including in Wisconsin. Under Wisconsin’s statute governing adjustment service companies, Wis. Stat. § 218.02, companies that negotiate with creditors on behalf of debtors must obtain a license, file certain disclosures with the Department of Financial Institutions -- Division of Banking, and limit the amount of fees they charge from debtors.
  
  The complaint alleges that the defendants and their Chicago-based company illegally charge exorbitant upfront fees for their debt settlement services while maintaining that, as lawyers, they were not required to be licensed as an adjustment service company pursuant to Wis. Stat. § 218.02.
  
  The complaint alleges, however, that the attorneys with Legal Helpers Debt Resolution are merely a façade for the company, and the debt settlement services are fulfilled by non-lawyer, third-party companies. Consumers report they never meet an attorney, talk to an attorney and when seeking consult with an attorney about the status of their debt, are not permitted to speak with one.
  
  According to the complaint, Legal Helpers Debt Resolution has enrolled nearly 2,000 Wisconsin consumers, charging illegal upfront fees that range from $500-$900, and monthly maintenance fees from $50.00 to more than $75.00. This has resulted in the collection of millions of dollars of illegal upfront fees from Wisconsin consumers.

For the Wisconsin AG press release, see Attorney General J.B. Van Hollen Files Complaint Against Chicago-based Debt Settlement Company and its Principals for Violations of Wisconsin's Consumer Protection Laws.

For the lawsuit, see State of Wisconsin v. Legal Helpers Debt Resolution, LLC, et al.

FHFA IG, Nevada Feds Bag Hubby/Wife Real Estate Operators For Allegedly Structuring Short Sale-Leaseback Of Underwater Home In Effort To Stiff Bankster Out Of Loan Deficiency Without Unloading Residence; Straw Buyer-Relative Roped In By Suspects To Assist In Scheme: Investigators

From the Office of the U.S. Attorney (Las Vegas, Nevada):

• A husband and wife who worked in the real estate profession in southern Nevada, have been charged in U.S. District Court in Las Vegas with conspiracy and fraud for making false statements to Wells Fargo Bank in order to get it to approve a short sale on their home, announced Daniel G. Bogden, United States Attorney for the District of Nevada.
  
  Cynthia Hosbrook, 41, currently a licensed real estate agent in Nevada, and Robert Hosbrook, 51, formerly a licensed real estate agent in Nevada, both of Henderson, are charged in a criminal indictment dated June 12, 2013, with one count of conspiracy to commit bank fraud and one count of bank fraud.
  
  According to the indictment, the Hosbrooks allegedly solicited a relative to act as a straw buyer for their residence at 2704 Mallard Landing in Henderson.
  
  In a short sale contract dated March 2, 2010, and in other paperwork submitted to Wells Fargo Bank, the Hosbrooks falsely represented that the sale of their home would be an arms length transaction, that it was between two unrelated parties, that no party to the contract was a family member or business associate, that there were no agreements that the seller would remain in the property as a renter, and that the short sale did not constitute straw buying, when they allegedly knew that they were selling the residence to a relative and a straw buyer.(1)
  
  The Hosbrooks also allegedly caused the relative/straw buyer to falsely sign a title company form on July 9, 2010, stating that the relative would be residing at the property, which the Hosbrooks knew was a false and fraudulent representation.
  
  Cynthia Hosbrook and Robert Hosbrook have been summoned to appear for an initial hearing and arraignment on June 21, 2013, at 3:00 p.m. before U.S. Magistrate Judge Carl W. Hoffman. If convicted, they face up to 30 years in prison and fines of up to $1 million on each count.
  
  The case is being investigated by the Federal Housing Finance Agency Office of the Inspector General, and is being prosecuted by Assistant U.S. Attorney J. Gregory Damm.

For the U.S. Attorney press release, see Husband And Wife Charged With Short Sale Fraud.

(1) Despite the fact that getting a mortgage lender to approve a deal like this appears to be quite difficult, if not impossible, unless a false representation is made, some real estate operators remain undeterred in their pursuit to peddle sale leaseback deals to underwater homeowners in the context of a proposed short sale in an effort to purportedly allow homeowners to unload a significant amount of home mortgage debt without actually having to move from their home.

See, for example, ShortSaleLeaseBack.org Helps Home Owners Avoid Foreclosure with New Program (Newly launched short sale lease back programs lets homeowners short sale to escape toxic mortgage debt and foreclosure, but lets them rent back the home):

• The short sale leaseback program works in a similar way to a conventional short sale. This means that the toxic mortgage debt is completely removed, and the decimation of credit history is avoided.
  
  However unlike a normal short sale, the previous homeowner can remain in the home as a tenant. This stops a huge amount of family upheaval and stops people from having to dramatically change their lifestyle. When times are better, the homeowner may even be able to buy their home back at market price. This is known as a short sale buy back.

Tacoma Feds Pinch Local 'Loan Wolf' In Business Of Taking Away Homes From Financially Vulnerable; "I Am A Wolf!" Suspect Once Said In Response To Inquiries About Loan Agreements He Used With Hapless Borrowers

From the Office of the U.S. Attorney (Tacoma, Washington):

• A hard money lender who resides in University Place, Washington was arrested [] after being indicted by the grand jury for conspiracy, making false statements on loan applications and mail fraud. EMIEL A. KANDI, 36,was taken into custody by the FBI this morning and will make his initial appearance on the indictment in U.S. District court in Tacoma at 2:30 today.
  
  “The business practices of this defendant harmed individuals who lost their homes. Then the lies told in mortgage documents harmed taxpayer funded institutions such as the Federal Housing Administration,” said U.S. Attorney Jenny A. Durkan. “These mortgage fraud cases result from thorough and intensive investigations. I’m grateful for the hard work of the dedicated agents and investigators working to hold Mr. Kandi accountable.”
  
  According to the indictment, between 2008 and 2009, KANDI submitted false information to obtain home mortgage loans. Some of these loans were designed to let KANDI cash out of properties that KANDI owned through his hard money lending. KANDI’s lending activities were typically secured by a borrower’s home and charged a high rate of interest.
  
  The hard money loans were structured, in some instances, to allow KANDI to seize control of a home if the borrower missed a single payment. Other loans included an inflated and often disguised commission payment to KANDI. In at least 19 loans, KANDI and his co-schemers submitted false information regarding the borrowers’ employment, salary, and intention to live in the home. Some of the loan paperwork included inflated appraisals so that KANDI could maximize the money he obtained in the scheme.
  
  The false statements were designed to make the loans appear legitimate and ensure that they would meet federal lending standards. Many of the loans were processed by Pierce Commercial Bank and were insured by the Federal Housing Administration (FHA), a unit within the federal Department of Housing and Urban Development (HUD).

For the U.S. Attorney press release, see Pierce County Hard Money Lender Indicted For Conspiracy, False Statements And Mail Fraud In Mortgage Fraud Scheme (Submitted False Documents Defrauding Bank and Federal Insurers).

Go here for links to earlier stories on Emiel Kandi.

See generally, The Seattle Times: Lender seizes desperate borrowers' homes (A Seattle Times examination of numerous Emiel Kandi loan deals shows that they are set up so he can quickly take borrowers' homes and in some cases flip them for a profit. And he gets away with it):

• Kandi is the lender of last resort for some people who've been turned down by banks because of poor credit or limited income. He says his requirement for a borrower is merely "a pulse and a legal ability to sign." He admits he charges borrowers as much as he can get away with — 45 percent interest in one case — and makes it clear to them that if they fail to comply with the loan agreements, he will take their property. "I am a wolf," he explained.
  
  A Seattle Times examination of numerous Kandi loan deals shows that they are set up so he can quickly take borrowers' homes and in some cases flip them for a profit. And he gets away with it. "He's in the business of taking people's property," said Martin Burns, a lawyer who sued Kandi on behalf of [one homeowner]. "He finds vulnerable people and exploits them."(1)

-----------------------------------------------------------

(1) Reportedly, one of Kandi's common practices is to have his victims sign over their title to the property using a quitclaim deed, writing the loan as a purported 'commercial' (as opposed to a 'consumer') loan in attempt to dodge certain consumer protections, and employing 'hair-trigger' default clauses in the loan agreement that allow him to take possession of the house immediately using the deed after a missed payment without going through foreclosure, which includes a 190-day waiting period and several consumer protections.

Dad/Son Duo Belted With Multi-Year Prison Sentences For Running Fraudulent Foreclosure Rescue Outfit Peddling Bogus Sale Leaseback Arrangements To High-Equity, No-Cash Homeowners

From the Office of the U.S. Attorney (Newark, New Jersey):

• A father and son who ran a mortgage loan fraud scheme that succeeded in obtaining $4.4 million in mortgage loans while masquerading as a foreclosure rescue operation were both sentenced to prison [], U.S. Attorney Paul J. Fishman announced.
  
  Vito C. Grippo, 58, of Jackson, N.J., the president of Morgan Financial Equity Shares and Vanick Holdings, LLC, based in Holmdel, N.J., was sentenced to 96 months in prison.

***

• Frederick “Freddie” Grippo, 32, of Old Bridge, N.J., formerly a loan officer at Worldwide Financial Resources and an officer of Vanick Holdings, was sentenced to 41 months in prison.

***

• According to documents filed in this case and statements made in court:
  
  Between January 2008 and February 2010, Vito Grippo held Morgan Financial out to the public as a company that could help homeowners who faced foreclosure on their homes through something Grippo called the “Equity Share Program.” As described by Grippo and his associates, the Equity Share Program involved creating a limited liability company (LLC) in the name of the homeowner’s house, in which the homeowner would supposedly own a 90 percent interest with the rest to be owned by one or two private investors.
  
  In reality, the so-called investors invested nothing and were instead straw buyers recruited by Vito Grippo or his son, Frederick Grippo, because they had good credit. The Grippos and their associates then applied for mortgages in the names of the “investors” for the purchase of the properties owned by the homeowners in distress.
  
  A homeowner in distress would come to a closing in Vito Grippo’s office in Holmdel and be given a stack of documents to sign to prevent foreclosure. The homeowners frequently did not understand that they would be transferring title to their homes to the “investor.”
  
  The new mortgage loan applications filled out by the Grippos or their associates in the name of one of the investors contained materially false information about the loan applicant’s monthly income, his assets and whether the residence to be bought would be applicant’s primary residence.

***

• Properties that lost money through the Equity Share Program were found throughout the metropolitan area, including homes in Rutherford, N.J., Monroe, N.J. and Brooklyn, N.Y.

For the U.S. Attorney press release, see Father And Son Sentenced To Prison In Connection With Bogus Foreclosure Rescue Company.

Deficiency Judgments, Statutes Of Limitations, Collection Period Extensions, Lien Renewals & Other Pleasant Thoughts For Now-Foreclosed Ex-Homeowners

The Washington Post reports:

• Lenders are filing new motions in old foreclosure lawsuits and hiring debt collectors to pursue leftover debt, plus court fees, attorneys’ fees and tens of thousands in interest that had been accruing for years.
  
  It’s an aftershock of the foreclosure crisis, and most homeowners don’t know it’s coming.
  
  “When people take out a loan, they generally think the home is the security for the loan,” said Alys Cohen, an attorney in the Washington office of the National Consumer Law Center. When they no longer have that home, “people don’t expect that debt to follow them,” she said.
  
  It’s all part of a legal process known as a “deficiency judgment,” which is allowed in the District and 40 of 50 states, including Maryland and Virginia. Since the start of the mortgage meltdown of 2008, at least 400 Maryland homeowners have been pursued in court, according to a Washington Post analysis of state court data. In the first four months of this year, 57 new court actions have been filed against homeowners — on pace to exceed last year’s total of 120.

***

• Suing people immediately after foreclosure was problematic. For one thing, lenders usually could not get more money out of already broke homeowners. But, if lenders waited a few years, some forecast that people would have money again once the economy recovered.
  
  The irony is not lost on Evan Goitein, a Bethesda-based foreclosure attorney.
  
  “There is very little to be gained from the bank’s perspective to be suing people for the money at this point,” Goitein said. “While deficiency judgments are not really a problem right now, I can see it being a big problem in the future. So seven years from now when my client has recovered from his foreclosure, he’s got a job again, he’s saved up enough money . . . [from the bank’s perspective], that would be a great time for the bank to try to sue them.”

***

• States have different statutes of limitation on how long they allow lenders to pursue deficiency judgments, ranging from 30 days to 20 years. In Kansas, a deficiency judgment must be sought at the time of foreclosure. If a judge feels the bid at foreclosure sale isn’t “fair value,” the judge can deny or reduce the judgment.
  
  In Maryland, it’s three years. However, there’s a little-known exemption for most mortgage documents that gives debt collectors 12 years to sue homeowners, plus another 12 years to collect the debt and on top of that a one-time renewal of 12 years for a total of 36 years.
  
  “That’s 36 years that lenders have to go after people,” said [Maryland bankruptcy attorney Tate] Russack, whose firm has taken on 80 bankruptcy cases in the past four months, all of which involve deficiency judgments.

***

• Already-foreclosed homeowners won’t know that they’re being targeted until they receive the court notice. In many cases, it is hard to even know who owns the debt until the notice arrives. Often times, the entity pursuing the debt is not the original lender, because that debt can be sold by the homeowner’s lender to someone on the secondary debt market for pennies on the dollar. Most of the deficiency cases that Goitein said he sees involve smaller banks.

***

• The wave of deficiency judgments had a prologue in Texas.
  
  During the 1980s in Houston, the bottom went out of the oil market, with the price dropping to about $15 a barrel. Homes that had been assessed at $200,000 couldn’t be sold for $100,000. More than 200,000 people lost their jobs and could not pay their mortgages.
  
  The lenders foreclosed on the homes and then pursued the homeowners for the outstanding balance.
  
  Once a judgment was granted, debt collectors had 10 years to collect, according to the Texas statute at the time, and another 10 years if the debt collector petitioned the court to renew the judgment. “It was an absolute disaster,” [retired professor at the University of Houston Law Center John] Mixon said.
  
  In response to the situation, the state passed laws increasing consumer protections in deficiency cases. “It’s less an event in Texas today than it was back then,” Mixon said. “But Texas still provides the object lesson of what could happen.”
  
  But for the moment, efforts to pursue deficiency judgments are ramping up rather than winding down.

For the story, see Lenders seek court actions against homeowners years after foreclosure.

Ex-BofA Employees Spill Beans, File Sworn Statements On Bankster's Approach To Giving Financially Strapped Homeowners Loan Modification Jerk-Arounds

ProPublica reports:

• Bank of America employees regularly lied to homeowners seeking loan modifications, denied their applications for made-up reasons, and were rewarded for sending homeowners to foreclosure, according to sworn statements by former bank employees.
  
  The employee statements were filed late last week in federal court in Boston as part of a multi-state class action suit brought on behalf of homeowners who sought to avoid foreclosure through the government’s Home Affordable Modification Program (HAMP) but say they had their cases botched by Bank of America.(1)
  
  In a statement, a Bank of America spokesman said that each of the former employees’ statements is “rife with factual inaccuracies” and that the bank will respond more fully in court next month. He said that Bank of America had modified more loans than any other bank and continues to “demonstrate our commitment to assisting customers who are at risk of foreclosure.”
  
  Six of the former employees worked for the bank, while one worked for a contractor. They range from former managers to front-line employees, and all dealt with homeowners seeking to avoid foreclosure through the government’s program.

For more, see Bank of America Lied to Homeowners and Rewarded Foreclosures, Former Employees Say.

(1) Statements by the Bank of America Employees:

William Wilson, Jr.,
Simone Gordon,
Theresa Terrelonge,
Steven Cupples,
Recorda Simon,
Erika Brown.

Statement by Bank of America Contractor:
Bert Sheeks

Banksters Continue Dual-Tracking Home Loan Borrowers Into Foreclosure, Relying On Subtle Loopholes In 49-State Settlement Agreement To Keep Screwing Homeowners

In West Palm Beach, Florida, The Palm Beach Post reports:

• Crafters of the National Mortgage Settlement clearly wanted banks to pause the foreclosure process while in negotiations with homeowners for a loan modification, but the double-dealing is only “restricted” in the lengthy agreement, leaving workarounds for lenders to continue the practice.
  
  Foreclosure defense attorneys cite dozens of cases where homeowners with pending loan modification applications are also finding themselves moving quickly toward a final judgment and foreclosure sale — a procedure known as dual tracking.
  
  West Palm Beach foreclosure defense attorney Paul Krasker said he has 143 clients who are being dual-tracked. He said lenders are outright violating the dual-tracking restrictions, but are also using the complicated rules to legally continue with a foreclosure during the modification process.
  
  “The banks know they can find loopholes in this type of detailed language,” Krasker said. “I assume the banks would not commit to a simple ‘no dual-tracking’ provision and insisted on carving out exceptions.”
  
  The dual-track rules, which are outlined in more than four pages in settlement documents, include time lines for when foreclosures will be put on hold, appeals processes, trial payment periods and expedited review requirements.
  
  There are different rules depending on when the modification is requested and whether the application is considered complete.
  
  Krasker said some bank attorneys interpret the rules to mean they can get a final judgment against a homeowner but not go to sale. In Florida, sale dates are set when a judgment is entered, and with the courts under pressure to move cases, it may not be so simple to get a sale changed.
  
  Also, lenders are ruling applications incomplete for minor reasons, such as checking the wrong box on a tax return transcript request, Krasker said.
  
  “The banks are relying on borrowers to not be able to complete the applications and then the banks notify the borrowers to resubmit after the time deadline passes,” he said. “The worst part is you get banks who come back and say you’re too close to a sale date so we won’t issue a modification.”
  
  Florida Attorney General Pam Bondi scolded Bank of America and Wells Fargo for possible violations of the 2012 settlement this month, including concerns about dual tracking.
  
  In a May letter to Wells Fargo that preceded a meeting with the National Mortgage Settlement monitoring committee, Bondi’s office said homeowners are complaining they are wrongfully referred to foreclosure during the modification process and then charged for attorneys costs and other default-related fees. According to the settlement, a homeowner who is late on payments by 10 months or less, but submits a loan modification application, should not be referred to foreclosure.
  
  Still, the attorney general’s office acknowledges dual tracking is permitted in some circumstances.
  
  “While there are stringent restrictions on dual tracking in the settlement, the settlement does not prohibit it entirely as there are instances when it is appropriate or mandated by the terms of the mortgage and the entity that controls the loan,” wrote Assistant Attorney General Michael Moore in a June 7 letter to Krasker.

For the story, see Loopholes in mortgage settlement allow for dual-tracking foreclosures.

Loan Servicer Cops Guilty Plea To Pocketing Payoff Proceeds From Homeowners' Mortgages, Then Continuing To Remit Monthly Payments & Creating Phony Amortization Schedules To Dupe Note Holders Into Believing Loans Remained Unpaid

From the U.S. Department of Justice (Washington, D.C.):

• The former president and chief executive officer of U.S. Mortgage, a loan servicing company in Nevada, pleaded guilty [] for his role in a scheme to defraud Wells Fargo Bank out of more than $8 million.

***

• Earl Gross, 75, of Las Vegas, pleaded guilty to one count of bank fraud. Gross faces a maximum penalty of 30 years in prison when he is sentenced on Sept. 19, 2013. Gross has agreed to forfeit $8,440,439 pursuant to his plea agreement.
  
  According to plea documents, Wells Fargo Bank contracted with U.S. Mortgage to service pools of residential mortgage loans held by investors in mortgage-backed securities. Under the agreement, Gross and U.S. Mortgage were obligated to collect from the borrowers the monthly payments that the borrowers made toward their mortgage obligations and forward these proceeds to Wells Fargo Bank.
  
  In the event that a borrower paid off the loan – usually by selling the mortgaged property – U.S. Mortgage was obligated to remit to Wells Fargo Bank the full payoff amount. U.S. Mortgage agreed to provide Wells Fargo Bank with monthly reports, which described the status of the loans, such as the balance, principal and interest, and payment status and received servicing fees for each loan it serviced.
  
  According to the indictment, from 2004 to 2009, Gross and U.S. Mortgage withheld more than $8 million in loan payoffs that were due Wells Fargo Bank by submitting to the bank reports stating that numerous borrowers were continuing to make monthly payments when in fact they had paid off the loans in full.
  
  Rather than remit to Wells Fargo Bank the full payoff amount, Mr. Gross and U.S. Mortgage forwarded only what the borrowers’ monthly payment would have been and retained the difference in U.S. Mortgage’s bank account. To deceive Wells Fargo Bank about the status of paid off loans, Mr. Gross and U.S. Mortgage created fake amortization schedules indicating that borrowers who had sold and paid off homes were continuing to make monthly payments. In addition to withholding loan payoff amounts to which he was not entitled, Mr. Gross charged Wells Fargo Bank fees to service mortgage loans that had been paid off.

For the Justice Department press release, see Former Chief Executive of Mortgage Servicing Company Pleads Guilty to Bank Fraud for Scheme to Withhold Funds from Wells Fargo Bank.

California Attorney Slammed With State Bar Discipline For Attempting To Circumvent Loan Modification Rules Prohibiting Collection Of Upfront Fees By Unbundling Services, Then Clipping Clients For Cash As Each Service Was Performed

The June 2013 issue of the California Bar Journal announced the discipline handed out to a California attorney for pocketing upfront fees for loan modifications under the mistaken belief that the statute can be circumvented by unbundling his services, then charging for each service as it is provided:

• SWAZI ELKANZI TAYLOR [#237093], 34, of Beverly Hills, was suspended for two years, stayed, placed on two years of probation with an actual six-month suspension and was ordered to take the MPRE and pay restitution. The order took effect March 29, 2013.
  
  Taylor committed nine counts of misconduct in eight client matters involving loan modifications. Eight of the counts of misconduct involved charging pre-performance fees for loan modifications. Civil Code Section 2944.7 prohibits the collection of any fees until all loan services are performed.
  
  Taylor believed he could unbundle the fees for his legal advice and real estate consulting services, charging separately when each service was performed, but the court rejected that argument. Taylor was also found to have failed to provide a client with a separate statement about the lack of necessity for a third-party negotiator. He was ordered to pay $14,350 in restitution, plus interest, to his former clients.

Source: California Bar Journal: Suspensions/Probation.

State Bar Of California Acts Against Members Involved In Various Types Of Client Ripoffs

The Sate Bar of California recently published its periodic 'gossip sheet' announcing the discipline meted out to some of its wayward members.

The following lawyers were disciplined for either playing fast & loose with client's trust funds, attempting to improperly rip off clients out of unwarranted legal fees, or being involved in some form of loan modification scheme:

• CALEB PAUL LEYS [#171683], 70, of Beverly Hills, was suspended for one year, stayed, and placed on one year of probation with an actual 120-day suspension that will continue until he pays restitution. He was ordered to comply with rule 9.20 of the California Rules of Court. The order took effect March 16, 2013.
  
  Leys stipulated that he failed to perform legal services with competence, to return unearned fees and to promptly respond to reasonable status inquiries in connection with a home loan modification. The client paid Leys $2,995 in advance attorney fees and Leys pledged to file a civil suit if he was unable to negotiate with the lender. Instead, he performed no services of value and failed to return any part of the unearned fees.
  
  Leys was previously disciplined for similar misconduct that occurred between March and September 2009. Leys failed to perform legal services with competence and return unearned fees in two client matters involving loan modifications, and in a third matter, engaged in the unauthorized practice of law and collected an illegal fee.
  .....................................
• CURTIS GEORGE MUCK [#190328], 42, of Rolling Hills Estates, was suspended for two years, stayed, placed on three years of probation with an actual six-month suspension, and was ordered to take the MPRE . The order took effect March 16, 2013.
  
  Muck committed misconduct in three client matters, all of which involved aiding in the unauthorized practice of law. In one of the matters, Muck also shared fees with a non-lawyer and failed to cooperate with a disciplinary investigation. In that matter, he allowed a non-attorney to give legal advice to a client and to collect fees from her, which the two later shared. Muck later failed to acknowledge a letter from a State Bar investigator asking him to respond to complaints the client made against him.
  ..................................
• MITCHELL BERENSON [#183166], 48, of Los Angeles, was suspended for one year, stayed, and he was placed on probation for one year subject to conditions, including paying restitution and passing the MPRE. The order took effect March 16, 2013.
  
  Berenson stipulated to four acts of misconduct in one client matter. Berenson failed to perform legal services with competence in an immigration matter, failed to respond to repeated inquiries from his client regarding the immigration matter, failed to return advance fees, and failed to cooperate and participate in the State Bar investigation. Berenson was ordered to pay his former client $1,500 in restitution, plus interest.
  ....................
• CHARLOTTE SPADARO [#190328], 61, of Riverside, was suspended for one year, stayed, and placed on three years of probation with an actual six-month suspension until she makes restitution in the amount of $26,500, plus interest. She was also ordered to take the MPRE. The order took effect March 22, 2013.
  
  Spadaro was found culpable of failing to account for client funds, failing to return advanced fees and unused advanced costs totaling $7,500, and three counts of entering into an improper business relationship with a client.
  ....................
• LOUIS GORDON BRUNO [#137898], 60, of Escondido, was suspended for two years, stayed, placed on two years of probation with an actual six-month suspension, and was ordered to take the MPRE and to pay restitution. The order took effect March 23, 2013.
  
  Bruno stipulated to three counts of misconduct in one client matter, collecting an illegal fee, holding himself out to be eligible to practice law when he wasn’t and misrepresenting his entitlement to practice law. [...] Bruno was ordered to pay $1,500 in restitution, plus interest.
  ....................
• MARIE DARLENE ALLEN [#138263], 63, of Cypress, was suspended for one year, stayed, placed on one year of probation with an actual 30-day suspension and was ordered to take the MPRE. The order took effect April 6, 2013.
  
  Allen was found culpable of two counts of misconduct: issuing numerous checks from her client trust account without sufficient funds to cover them and failure to cooperate with a disciplinary investigation by not responding in a timely matter to three letters she received from a State Bar investigator.
  .....................
• ALLYSON ERWIN BAUTISTA [#202023], 55, of Escondido, was suspended for three years, stayed, placed on three years of probation with an actual six-month suspension and was ordered to take the MPRE and comply with rule 9.20 of the California Rules of Court. The order took effect April 6, 2013.
  
  Bautista stipulated that he charged and collected an unconscionable fee and failed to provide a client with a full accounting of a settlement the client received.
  
  Bautista settled his client’s personal injury matter for $15,000 then essentially double billed the client, withholding $2,967.68 for hourly fees as well as $5,000 in contingency fees for the same services. Bautista also failed to provide the client with an itemized list of “administrative costs” he charged for his services.
  .........................
• NICOLE ROSIE GALLEGOS [#231744], 36, of Irvine, was suspended for two years, stayed, and placed on two years of probation with an actual nine-month suspension that will continue until she pays restitution. She was also ordered to take the MPRE and comply with rule 9.20 of the California Rules of Court. The order took effect April 6, 2013.
  
  Gallegos stipulated to 15 counts of misconduct in seven loan modification matters, six of which involved collecting illegal fees from out-of-state clients. Gallegos also committed multiple counts of unauthorized practice of law. She has been ordered to pay $ 11,979.98 in restitution.
  ................................
• TANYA CORA ZEROUNIAN [#235207], 36, of Simi Valley, was suspended for two years, stayed, placed on 18 months of probation with an actual six-month suspension and was ordered to take the MPRE, comply with rule 9.20 of the California Rules of Court and pay restitution. The order went into effect April 6, 2013.
  
  Zerounian stipulated to misconduct in three client matters. In each instance, Zerounian failed to prepare and file clients’ bankruptcy petitions, to respond to inquiries about the clients’ cases and to return unearned fees. Zerounian also failed to respond to allegations in a complaint one of the clients made to the State Bar. She was ordered to pay $5,600 in restitution, plus interest.

Source: California Bar Journal (June 2013): Suspensions/Probation.

Playing Fast & Loose With Trust Accounts, Attempted Legal Fee Ripoffs Among Reasons For Attorney Discipline Recently Meted Out By Florida Supreme Court

The Florida Bar recently published its periodic 'gossip sheet' announcing the discipline meted out to some of its wayward members.

The following lawyers were disciplined for either playing fast & loose with client's trust funds, or attempted to improperly rip off clients out of unwarranted legal fees:

• Rosalyn Dunlap, P.O. Box 616705, Orlando, disbarred effective immediately, following an April 16 court order. (Admitted to practice: 2006) Dunlap admitted to intentionally misappropriating more than $40,000 from a trust account belonging to an estate. She did not maintain the required trust account records, did not regularly perform mandatory trust accounting procedures, and entered into a business transaction with a client with interests adverse to the client. Dunlap failed to communicate the status of a client’s case, failed to show reasonable diligence, and failed to provide adequate and timely representation. (Case No. SC12-145)
  
  David A. Hoines, 3081 E. Commercial Blvd., Suite 200, Fort Lauderdale, suspended for 30 days, effective 30 days from an April 16 court order. (Admitted to practice: 1975) Hoines shall also return $25,000 in equal shares to three clients. Hoines entered into a contingent fee agreement with out-of-state clients in a probate matter involving assets of an indeterminable value. Hoines’ use of the contingent fee contract was improper because it caused him to obtain a pecuniary interest in the matter and receive a larger than normal fee. (Case No. SC12-229)
  
  C. Michael Magruder, 203 S. Clyde Ave., Kissimmee, to be publicly reprimanded by publication in the Southern Reporter, following an April 16 court order. (Admitted to practice: 1990) Magruder was hired by a client to handle business related to an estate and a pending lawsuit. He delegated the estate matter to a paralegal firm and failed to take adequate steps to ensure that the client understood his legal matter. Magruder also failed to timely account to the client regarding the settlement proceeds of the lawsuit, all of which went to pay the hospital lien for services rendered prior to the death of the testator. Magruder also failed to maintain minimum trust accounting records and he failed to follow minimum trust accounting procedures. (Case No. SC12-519)
  
  Scott Elliott Rovenger, 8 Port Side Drive, Fort Lauderdale, permanently disbarred effective immediately, following an April 17 court order. (Admitted to practice: 1978) Rovenger was disbarred for trust accounting violations in May 2012. In September 2012, Rovenger gave a sworn statement to the Broward County State Attorney’s Office, as a result of a criminal investigation. He admitted to misappropriating more than $1 million in client funds over a period of several years. He also admitted to settling clients’ matters without their knowledge or consent and forging client signatures on settlement checks. (Case No. SC12-1819)
  
  Guy Bennett Rubin, 1649 Atlantic Blvd., Jacksonville, to be publicly reprimanded by the Board of Governors at a date and time to be determined by the Board, following an April 16 court order. (Admitted to practice: 1987) Rubin filed a suit against a former client alleging breach of contract. A court later ruled that Rubin was not entitled to recover any fees because the agreement violated Bar rules. (Case No. SC12-2059)
  
  Silvia Rodriguez Sanders, P.O. Box 974, Orlando, to be publicly reprimanded by publication in the Southern Reporter, following an April 16 court order. (Admitted to practice: 1992) Sanders and her husband practice law together. She failed to exercise reasonable diligence to ensure that her firm’s trust account was in compliance. Her husband had managerial authority over the trust account and her mother was the firm’s bookkeeper in the two-attorney law firm. (Case No. SC12-2174)
  
  Tristan Wilson Sanders, P.O. Box 974, Orlando, suspended for two years, effective 30 days from an April 16 court order. (Admitted to practice: 1992) Sanders and his wife practiced law together. Funds that should have been held in trust on behalf of the firm’s personal injury clients were transferred to the law firm operating account and used for other purposes. Sanders had primary responsibility for the law firm’s trust account at the time the violations took place. His violation of misconduct is based on the grossly negligent supervision of his bookkeeper in the administration of his firm’s trust account. (Case No. SC12-2173)
  
  Harold Milton Windlan III, 6334 Madison St., New Port Richey, suspended for one year, effective 30 days from an April 16 court order. Windlan shall pay restitution totaling $2,040 to three clients. (Admitted to practice: 2003) Windlan failed to provide adequate representation to clients. In several instances he accepted attorneys' fees and subsequently failed to communicate. He did not take action on cases but led clients to believe he had. Windlan also failed to refund fees he did not earn. (Case No. SC12-666)
  
  Lawrence Philip Zolot, 3864 Sheridan St., Hollywood, disbarred effective retroactive to Jan. 12, 2011, following an April 22 court order. Zolot shall pay restitution totaling $1,089 to two clients and shall deposit more than $130,000 into the court registry for the 17th Judicial Circuit in and for Broward County. (Admitted to practice: 1974) Instead of disbursing the funds to his clients, in two separate matters, Zolot misappropriated trust funds and used them to pay his personal expenses. (Case No. SC11-267)

Source: Supreme Court Disciplines 29 Attorneys.