Friday, October 03, 2014

Philly Feds Bag Six in Probe Alleging Group Peddled Bogus Sale Leaseback Arrangements To Homeowners Facing Foreclosure In Scam To Strip Their Home Equity Out From Under Them

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):
  • An indictment was filed yesterday charging six people, including a couple and their daughter, in a wide-reaching mortgage fraud conspiracy in which the defendants allegedly stripped the equity from the homes of desperate homeowners facing foreclosure, announced United States Attorney Zane David Memeger. The scheme caused losses to mortgage lenders of approximately $3.8 million.(1)

    Silver Buckman, 36, of Cherry Hill, NJ, her parents, Vincent Foxworth, 69, and Cynthia Foxworth, 63, of Turnersville, NJ, Danette Thomas, 52, of Pennsauken, NJ, Byron White, 44, of Pennsauken, NJ and Franklin Busi, 46 of Sicklerville, NJ, are charged with conspiracy to commit bank fraud and wire fraud. Some of the defendants are also charged with bank fraud and wire fraud.

    According to the indictment, the defendants engaged in a scheme in which they offered to help financially-vulnerable individuals save their homes from foreclosure or obtain money from the equity in their homes and, instead, defrauded the homeowners and mortgage lenders. Buckman owned and operated Fresh Start Financial Services (“FSFS”), in Mount Laurel, NJ and was an employee of American Home Lending as well as a mortgage broker for American One Mortgage (“AOM”). Her father is an experienced Realtor.

    Between October 2006 and November 2009, Buckman and her co-defendants allegedly targeted financially vulnerable homeowners and represented to them that they could improve their credit, save their homes from foreclosure, or provide them with money through Buckman’s lease buyback program.

    The homeowners were told that “investors” would be used to temporarily refinance their homes and that they could repurchase the homes in one year, or once they regained their financial footing. The defendants also allegedly induced the homeowners into signing documents related to the sale and lease of their homes by their representations that the homeowners would remain on the title to their homes, that the equity from their homes would be placed into an individual escrow account in their names, and that new mortgages would be paid from the escrow accounts to establish their timely payment histories.

    According to the indictment, in order to carry out the scheme, Buckman recruited Vincent Foxworth and Cynthia Foxworth and others to be straw borrowers. White also recruited a straw borrower. Ultimately, Buckman and Busi submitted false financial and employment information about the straw borrowers to mortgage lenders. Once lenders agreed to fund the mortgage loans, Buckman and some of the other defendants allegedly prevented the homeowners from receiving the settlement proceeds and did not put money into escrow accounts for the homeowners. Instead, the defendants distributed the proceeds amongst themselves.

    Buckman used the majority of the proceeds due the homeowners to pay the fees due the straw borrowers, the down payments on behalf of the straw borrowers in subsequent transactions to further the scheme, and her personal expenses. She used only a fraction of the homeowners’ monies toward the payment of the mortgages obtained by the straw borrowers for the homeowners’ homes and thereby caused the loans to go into default.

    If convicted, the defendants face an advisory sentencing guideline range of at least 87 to 108 months in prison plus restitution.

    The case was investigated by the Federal Bureau of Investigation and the United States Postal Inspection Service and is being prosecuted by Assistant United States Attorney Anita Eve.
For the press release, see Indictment Charges Six New Jersey Residents In Multimillion-Dollar Mortgage Fraud Scheme.

Footnote

(1) A few years ago, the U.S. Attorney's Office in Philadelphia took a novel approach in prosecuting a similar type of sale leaseback, equity stripping racket. This press release (if link expires, go here) describes the approach taken in that case:
  • At the time of indictment, the U.S. Attorney's Office Civil Division filed a verified complaint and temporary restraining order to help the original homeowners save their homes. The complaint and temporary restraining order sought novel relief that would bring all the individuals and entities that have a stake in the homes before the Court in an orderly process by which the damage caused by the defendants' alleged fraud could be mitigated.

    In 2011, U.S. District Court Judge Michael Baylson approved conversion of the temporary restraining order into an injunction that stopped foreclosures and evictions that were related to the alleged fraud, and that set forth the details of the mediation process.
See Use Of Novel Dual Criminal/Civil Prosecution Targeting Sale Leaseback-Peddling Racket Yields Guilty Pleas, Keeps Victims From Getting Boot From Homes for the earlier blog post.

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For those contemplating bringing civil lawsuits in these types of cases in Pennsylvania, see Pennsylvania B'kruptcy Court Voids Sale Leaseback Scam; Victimized Homeowners' Continued Possession Leads To Invalidation Of Subsequent Deed, Mortgage for a post on a recent U.S. Bankruptcy Court case in Philadelphia which could provide a roadmap for one way in which a sale leaseback, equity stripping foreclosure rescue scam can be undone or unwound, invalidating both the initial title transfer (that was coupled with a contemporaneous leaseback of the premises with a repurchase option) by the victimized homeowner to the foreclosure rescue operator, as well as subsequent conveyances to others.

Other Resources:

See Foreclosure Rescue Scams (a chapter in a longer publication from the National Consumer Law Center) for a lawyer's guide to making a case on behalf of a victimized homeowner in attempting to void or set aside an abusive real estate transaction.

See the National Consumer Law Center's Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams for an extensive report on this type of home equity ripoff.

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