Saturday, October 31, 2015

Facing Prospect Of Expensive Costs To Raze Or Rehab, Sneaky Chicago Real Estate Operator Wiggles Way Out Of City Lawsuit By Unloading Title To Six Dilapidated Homes Bought At Tax Sale To Unwitting Homeless Man

In Chicago, Illinois, the Chicago Tribune reports:
  • Abana Tabb carries a small cardboard sheet hand-printed with the words "Help Please Homeless" while he panhandles in downtown Chicago, often near the Metra station at Millennium Park.

    His homelessness is something of a contradiction, though. Cook County land records show that Tabb owns six properties in the Chicago area, thanks to an investment corporation that passed deeds to him.

    "I feel like Donald Trump with all them houses," Tabb said, laughing on a rainy afternoon in the Burger King at the Millennium Park station.

    But the run-down properties owned by Tabb — who was subsequently named in several lawsuits — wouldn't likely be holdings in Trump's portfolio. [...] Those holdings are what real estate agents call distressed properties, and they were transferred to Tabb by Z Financial Illinois G Properties LLC, a property investment firm with offices on LaSalle Street in the Loop, where Tabb occasionally panhandles.

    Tabb said he never lived in them and until recently didn't know he was their owner.

    Records show that the company deeded the majority of the properties to Tabb shortly after the city of Chicago filed suit seeking to force the firm to rehab, demolish or allow the city to charge the firm for the cost of tearing down the decrepit structures.

    In nearly every case, records show that the company was dismissed from the lawsuit and Tabb was added as a defendant after the transfers occurred.

    The practice of transferring properties is legal but raises ethical questions, experts and law enforcement officials say. This summer, the Cook County sheriff's office investigated the transfers but closed the case without filing charges.

    "It might not be illegal, but ... a good property owner doesn't do that," said Lindsay Thompson, an associate professor at Johns Hopkins University who runs an urban redevelopment lab and teaches about character in business.

    But Keith Moll, a principal in the LaSalle Street company, defended the decision to transfer the properties to Tabb as acts of charity toward a man in need. "I tried to give Abana every opportunity to own a home and get back on his feet," Moll said in an email response to the Tribune.

    ***

    6 homes for homeless man

    Moll, one of Z Financial Illinois G Properties' managers, established a relationship with Tabb about six years ago, according to public records from the Cook County sheriff's police, which opened a probe into the transactions and interviewed Tabb and Moll this summer.

    Sheriff's spokeswoman Cara Smith said the office was researching titles of buildings scheduled to be torn down in Dixmoor, and "we came upon this problem of these scavenger businesses and their role in entrenched blight" in the south suburb.

    "What the solution to this problem is and how to hold these scavenger companies accountable is what we're focused on now," she said. "While we have conduct here that is tremendously concerning and unethical, we have not found the right criminal law to hang on this problem."

    What Tabb and Moll told the Tribune about their relationship and the property transfers largely mirrors what they told authorities. Both accounts indicate that Moll and Tabb struck up a relationship and Moll occasionally gave cash to Tabb.

    Their relationship evolved in July 2009, when Tabb said Moll offered him a chance to make a few bucks.

    "(He said) 'I wanna dump a couple of houses on you. Don't worry about it. You're not gonna get in trouble, blah, blah, blah ... sign here,'" Tabb told the Tribune.

    In his email, Moll said Tabb "expressed a desire to acquire one of these homes" and restore it.

    ***

    'He wanted to dump the houses'

    At the Burger King last month, Tabb recalled signing documents in Moll's office and being paid "25, 30, 40, 50 dollars" in cash each time. Weeks earlier he had told sheriff's investigators he was paid $20 each for signing the documents.

    Tabb, 56, has a police record showing arrests for public intoxication, possession of drug paraphernalia, panhandling, trespassing and other minor offenses. He told the Tribune he's trying to kick his heroin addiction and has been seeking treatment at a methadone clinic on the West Side.

    He said he didn't ask many questions when given the chance to make some cash.

    "I knew that he wanted to dump the houses," Tabb told the Tribune, "but I didn't know what did he need my name for. I was like, 'Well, can I move in 'em?' He was like, 'No, I just need you to help me so I can get rid of 'em.'"

    Tabb said he thought the documents were insignificant and procedural, requiring signatures merely to clear the way for demolition or to provide a contact if police were called to the buildings.

    ***

    Court records for at least three of the properties indicate they were uninhabitable by the time Tabb took ownership. Documents also show that Z Financial Illinois G Properties deeded each Chicago property to Tabb after the city initiated legal action seeking to have the buildings repaired or razed.

    ***

    After the company transferred one of the Chicago properties to Tabb, its attorney filed documents with the court asking to be removed as defendants in the lawsuit because it no longer owned the building. Included in the filing was a copy of the deed showing Tabb as the new owner. Z Financial Illinois G Properties was subsequently dismissed from the case, and Tabb was added as a defendant. The city subsequently foreclosed on the property and can recoup costs through its sale.

    "He was real slick about it," Tabb said. "So I ran with it 'cause I needed the money."

    ***

    Looking back on his odyssey, Tabb said he now believes he may have been used by Moll.

    "Why would a man who has so much ... pull that on somebody?" Tabb said. "I mean, basically, he could have said something, you know?"

    But Tabb said he wasn't angry.

    Shortly before trudging up the steps to resume his panhandling position at Michigan Avenue and Randolph Street, Tabb recalled how Moll "helped me out through thick and thin" over the years, adding, "If I was in a crunch, he was there for me."

    Tabb said he and Moll are still friendly and that he saw Moll on the street in early September. Asked what they discussed, Tabb said: "Nothing, I just hit him up for 20 bucks."

    And Moll gave it to him.
For the whole story, see Tax buyer deeds abandoned properties to homeless man ('I feel like Donald Trump with all them houses,' homeless man says after tax buyer transfers six homes to him).

Atlanta Real Estate Operator Gets Up To 30 Days In Jail For Failing To Cure Housing Code Violations In Connection With Slumlord Business; City Mayor Vows To Slam Similar Scofflaws

In Atlanta, Georgia, WGCL-TV Channel 46 reports:
  • Atlanta Mayor Kasim Reed is determined to track down property owners who don't keep their properties up to par and force them to clean up their properties or send them to jail.

    On Tuesday, the mayor took a highly unusual step. Reed was in the courtroom as Buckhead real estate mogul Rick Warren was sentenced to up to 30 days in jail for housing code violations. Reed told CBS46 that Warren is one of the biggest property owners in one of the city’s poorest communities and has long refused to clean up his act. The problem area is the Vine City and English Avenue neighborhoods in northwest Atlanta.

    Reed told CBS46 he is determined to do whatever it takes to turn the neighborhood around. He was there for the ribbon cutting of a new park in the heart of English Avenue Wednesday morning.

    “This is part of a massive effort, really, to uplift English Avenue and Vine City,” Reed said.

    “We went through the worst mortgage foreclosure crisis in the history of the United States of America… When you actually start doing the deep dive on who owns these properties, it is not as easily visible as people think,” Reed added.

    After the park opening, Reed walked through the neighborhood looking at blighted houses, many belonging to Warren.

    We are going to apply that same kind of accountability to others and so you will see many other Rick Warrens,” Reed contended.

    Reed also told CBS46 the National Guard will knock down up to 100 abandoned homes in the neighborhood.

    Click here to report code violations to the city [of Atlanta].

Rent Skimming Landlord In Foreclosure Walks Away From 40+ Unit Building Without Running Water, Electicity; Leaves Dozens Of Tenants, Kids Dry & In The Dark

In High Point, North Carolina, WFMY-TV Channel 2 reports:
  • “Water should be back on!” A High Point city crew shouted to a resident in front of a row of apartment buildings on North Hamilton Street.

    That was all it took to turn a challenging day into a much better one for the tenants occupying more than 40 units on the property.

    “We do have water!” Cindy Messer exclaimed as she turned on her faucet. It’s been a long day. Barely 24 hours -- but it feels longer.

    “I was trying to cook and there was no water to cook with so if you didn't have something in the refrigerator to eat you just did without unless you want to the store somewhere,” Messer told WFMY News 2.

    City crews turned off the water and lights in shared areas Tuesday afternoon to the complex. As night fell, darkness in the hallways -- desperation behind the walls.

    We’ve got about 42 tenants living out here and most of them have three and four children and I guess the fire department over here they were toting water in buckets out here last night so the kids can eat and everything,” Messer said.

    The issue is a result of a foreclosure dispute between the former and current owners of the property.

    Vivian Thorpe, the current owner who originally sold the property, says, she sold the housing units to S&S Sterling LLC about 6 years ago. For the last year and a half, Thorpe says, the investors weren't paying the mortgage. She filed foreclosure papers on September 30th.

    And after a mandatory 10-day upset period, Messer assumed the property Tuesday. It was then, she says, she found out S&S Sterling had left the water, light and gas bills unpaid.

    Fees, Messer says, the company was still charging her and other tenants as part of their rent. “They've just been taking the money and running off with it,” Messer said.

    And when it came to a head Tuesday afternoon, it left more than 3 dozen unsuspecting tenants dry and in the dark.

    “It’s been very upsetting that the city did what they did and just come out here and cut everything off because the tenants didn't have anything to do with this,” she said.

    According to city officials, High Point is in a tough situation.

    A city spokesperson says S&S Sterling had asked for the water and light to be shut off Tuesday since it was no longer in charge of the property. But the shut off day happened to be the same day Thorpe took over the apartment buildings.

    Thorpe explains, as a result of the holiday weekend and documents not being ready at the courthouse, she couldn’t prove to the city she was the new owner.

    The city says it couldn't transfer the account to her name because of liability and privacy issues. City officials plan to work with the previous owner to work out the unpaid bills.

    Meanwhile, Thorpe is not sure what she wants to do with the property. Calls to S& S Sterling Properties have yet to be returned.

Rent-Stiffing Landlord Facing Eviction From 100-Unit Residential Building Dodges Boot, Coughs Up $270K+ To Cure Default On Ground Lease Payments Owed To City/Land Owner

In Chattanooga, Tennessee, The Chattanoogan reports:
  • Owners of the Walnut Commons apartments on Walnut Street have paid up on money owed the city for a ground lease after the city filed suit in Circuit Court.

    Earlier, the apartment owners had submitted a check for $11,025, which the city did not cash.

    The city contended the total amount owed was $262,418 more than the amount submitted. Soon after the lawsuit was filed, the apartment owners sent a check for the full amount the city says it was owed. The city is expected to dismiss the lawsuit.

    The local owners of the Walnut Commons apartment complex in October 2014 sold out to a large real estate investment firm, APRO II LLC.

    John Clark, David Hudson and Bob McKenzie spent years developing the site at Walnut, Aquarium Plaza (Second Street) and Riverfront Parkway. The 100 apartment units were quickly leased when it finally opened in 2013.

Friday, October 30, 2015

Unit Owners In Fear Of Losing Their Homes Accuse Local Real Estate Operator Of Self-Dealing, Using 'Puppet' HOA Board Members In Effort To Wrestle Away Control Of 84-Unit West Palm Beach Condominium Complex & Squeezing Them w/ Exorbitant Fees, Assessments In The Process

In West Palm Beach, Florida, The Palm Beach Post reports:
  • When three members of the Green Terrace Condominiums board — all given condos by Ken Bailynson — were asked during a court hearing in May about Bailynson’s sober housing business, they took the Fifth.

    Board members also told the court they did not know the details of the $1.5 million loan they had approved from a lending company created by Bailynson, who ran Good Decisions Sober Living before it was closed after an FBI raid.

    The loan from Bailynson’s company carries a 24 percent interest rate.

    When the association could not make its monthly $30,000 loan payment in September, Bailynson foreclosed on 10 condos. The board, controlled by Bailynson cronies, failed to dispute the foreclosure — a decision that would enable Bailynson to quickly take ownership of the units.

    How the Bailynson-controlled board spends its money is the target of an investigation by the state Department of Business and Professional Regulation.

    At stake is whether a controversial former sober home operator will seize control of an 84-unit low-rise condominium complex off Belvedere Road east of Interstate 95 in West Palm Beach.

    “It seems clear to me that there is a conspiracy between Ken and the board members to continue to jack up assessments,” said William Pincus, attorney for a group of residents suing Bailynson and the board. “Everything he’s doing reads to me like he’s intending to take over the entire community.”

    The rising fees can force residents out of their homes. With few buyers willing to jump in, it’s unlikely the condo owners could sell — to anyone other than Ken Bailynson.

    For Angela Ciriello, the $613 assessment now tops $2,000 a month on a condo with a market value of $16,000. When she couldn’t pay, the homeowner’s association slapped a lien on the unit. “It was crazy,” Ciriello said.

    Controlling 75 percent

    In March, the board, with Bailynson as treasurer, approved a $1.5 million loan from BOK lending II, a company created by Bailynson in February. The board also considered borrowing an additional $2.5 million to pay for upgrades and repairs at Green Terrace.

    The board told owners the complex was in such disrepair that it had racked up more than $300,000 in code violations and did not have windstorm insurance. As collateral, the board put up 18 condominiums owned by the association.

    Bailynson owns 38 units. If the board takes over 18 more, he would have control of 56 units. He needs 63 units, 75 percent of the complex, to have the power to dissolve the association.

    “Seventy-five percent allows him to do whatever he wants,” Pincus said. “He would have control and our people would lose their homes.”


    Bailynson refused to answer a reporter’s questions for this story. His lawyer, Steve Cohen, also declined to comment.

    In March, residents sued. In their lawsuit they asked a judge to block steep increases in fees and assessments, stop the second loan, halt construction and end the use of armed security guards, which costs the association $174,000 a year.

    The security company, Black Diamond Security Agency, is not licensed by the state, Department of Agriculture and Consumer Services records show.

    Monthly fees for residents had tripled, the lawsuit said. Plus residents had to pay an assessment of $5,550 or more. For many, that meant paying more in assessments than their condos are worth, ranging from $17,000 to $40,000.

    But at hearings in May, board President Sandra Matus, who lived in a condo Bailynson gave her, said she did not know whether the association had windstorm insurance.

Real Estate Operator Cops Plea To Using Phony Short Sale Promises To Dupe Financially Distressed Homeowners Into Signing Over Title To Homes, Then Filing Fraudulent Bankruptcy Petitions To Delay Foreclosures While Pocketing Rent From Newly-Placed Tenants

From the Office of the U.S. Attorney (Riverside, California):
  • A Seal Beach man has pleaded guilty to federal fraud charges related to a mortgage rescue scheme in which he made false promises to the distressed homeowner, filed fraudulent bankruptcies to delay foreclosure and rented the property to third parties as the foreclosure proceedings were delayed.

    Terry Meisinger, 74, [...] pleaded guilty to two counts of wire fraud.

    Meisinger admitted he defrauded a distressed homeowner by inducing him to sign a quitclaim in exchange for promises that included negotiating a short-sale agreement with his lender that would free the homeowner from his mortgage on a property in North Las Vegas, Nevada.

    But, instead, Meisinger caused a deed of trust to be recorded on the property, which was followed by a fraudulent bankruptcy on behalf of the person who supposedly now held an interest in the home. Meanwhile, Meisinger rented out the home to another person while foreclosure proceedings were stayed as a result of the fraudulent bankruptcy.

    Meisinger “repeated the process of causing the recording of deeds of trusts in the names of various beneficiaries whose identities he controlled and causing the filing of bankruptcies on behalf of those lenders to delay the foreclosure proceedings, while collecting rents” on property in North Las Vegas, according to the plea agreement filed in this case.

    Meisinger admitted in court [] that he repeated this scheme with approximately 150 properties between 1999 and 2014 and gained more than $1.5 million from this scheme.(1) Altogether, Meisinger admitted there were at least 50 victims of his scheme, which included homeowners, lenders and renters.

    Meisinger also admitted that his illegal conduct violated Judge Phillips’ court order in a prior civil matter barring Meisinger from participating in the home finance or real estate industries for 10 years (see: http://go.usa.gov/3Sr23). Meisinger was also barred from filing bankruptcy petitions. In that civil action, Judge Phillips had imposed a $5 million civil fine on Meisinger.

    As a result of the guilty pleas, Meisinger faces a statutory maximum sentence of 40 years in federal prison, as well as a $3 million fine. Judge Phillips is scheduled to sentence him on December 21.

    The criminal case against Meisinger is the result of an investigation by the United States Department of Housing and Urban Development, Office of the Inspector General (HUD-OIG).
Source: Seal Beach Man Pleads Guilty in Foreclosure Rescue Scheme (Defendant’s Illegal Conduct Allegedly Continued after $5 Million Sanction by Judge).
------------------------------

(1) For more on foreclosure rescue scams employing the abuse of the Federal Bankruptcy Court system, see Final Report Of The Bankruptcy Foreclosure Scam Task Force.

Thursday, October 29, 2015

Michigan Appeals Court Lowers Restitution Liability For Loan Modification Scammer Currently Doing 3 To 20 In State Prison, Saying Only Those Five Victims Named In Charges Are Entitled Payment From Defendant

In Allegan County, Michigan, mlive.com reports:
  • Alleged victims of the "foreclosure rescue" -- a scam described by the Michigan Attorney General as a "one-woman crime wave" -- will not see restitution from the business owner because of a Michigan Court of Appeals decision.

    In a decision released Wednesday, Oct. 21, the Appeals Court ruled that only the five victims actually named in the racketeering charge substantiated against Fennville resident Tanya Raisbeck could receive compensation of about $4,225.

    That compares to the more than $23,000 that was ordered by Allegan County Circuit Judge Kevin Cronin, who also sentenced the now 40-year-old woman to three to 20 years in prison on Oct. 25, 2013.

    Raisbeck had a "foreclosure rescue" business that took thousands in advance fees from desperate homeowners, according to state Attorney General Bill Schuette.

    Raisbeck incorporated Mobile Modification, Inc., as a for-profit corporation that allegedly would perform mortgage modifications. Customers were promised lower mortgage payments and foreclosure prevention by paying $795, plus assorted other fees.

    The AG's office said victims often wound up in worse shape than when they started. Some lost homes.

    "Raisbeck was a one-woman crime wave, defrauding at least 85 victims struggling to keep their homes during an economic downturn," Schuette said in a prepared statement.

    At sentencing, the court determined there were an additional 26 claims that had not been charged, but had been substantiated.

    However, three members of the Court of Appeals ruled that only the five victims named in the charges could receive restitution from the defendant.

    But what, if any, restitution would be forthcoming from Raisbeck is questionable since she will not be eligible for parole consideration for another year and could remain in prison until Oct. 23, 2033.

    Raisbeck has been spending at least some of her time in Ypsilanti's Huron Valley Women's Correctional Facility filing complaints against the prison because she allegedly had to share a single cell with three other women.

    Other victims of the mortgage scam can potentially find relief by applying to the [Michigan] Victim Restitution Program, established with funds from the National Mortgage Settlement.

NJ Longshoreman Cops Plea To Theft By Deception For Fleecing Six Co-Workers Out Of $86K+ Via Bogus Loan Modification Scheme

In Union County, New Jersey, njtoday.net reports:
  • A longshoreman working at the Port Newark-Elizabeth Marine Terminal has admitted to bilking half a dozen co-workers out of nearly $87,000 via a fraudulent mortgage loan modification program.

    Pedro Lopez, 60, of Elizabeth pleaded guilty [] to one count of second-degree theft by deception.

    The case was referred to the county’s Special Prosecutions Unit by the Waterfront Commission earlier this year, according to Union County Prosecutor Grace H. Park.

    A joint investigation involving both law enforcement agencies determined that starting in June 2010, Lopez began approaching co-workers to solicit their involvement in a mortgage loan modification program he claimed would significantly lower their individual mortgage payments or eliminate their mortgages altogether, according to Union County Assistant Prosecutor Rob Vanderstreet, who is prosecuting the case.

    Each victim was required to pay up to $15,000 to become part of the program, and several later were asked for additional funds for the processing of paperwork, Vanderstreet said.

    Lopez allegedly collected a combined total of $86,800 from the six victims, and despite reassuring them during the course of nearly five years that the program took time to yield results, none of the promised mortgage savings ever materialized.

    Lopez is scheduled to be sentenced on December 11, at which time he is expected to be ordered to serve 180 days in Union County Jail, serve a term of several years of probation, and pay full restitution to his victims.

Wednesday, October 28, 2015

NJ AG Reaches Settlement w/ Four Real Estate Operators Resolving Allegations Of Deception, Misrepresentations Made In Targeting Ex-Homeowners For Foreclosure Sale "Surplus Funds" Ripoffs

From the Office of the New Jersey Attorney General:
  • Three companies and one individual that advertised, offered for sale and sold services to locate “surplus funds” or other property owed to consumers have entered into settlements with the New Jersey Division of Consumer Affairs.

    According to the terms of the settlements, the Division of Consumer Affairs identified violations of the Consumer Fraud Act and/or the Advertising Regulations arising from the advertisement, offering for sale and/or sale of services to locate, deliver, recover or assist in the recovery of property by the following:

    U.S. Financial Funding LLC and Jeffrey Richman, of Charlotte, North Carolina;

    Capital Recovery III, LLC, Capital Recovery Inc. II, Charles Demes and Alan Dumond of Chicago, Illinois;

    Jose A. Danoys d/b/a “JD Assets Recovery” of Old Bridge, New Jersey; and

    Hunterdon Legal Service LLC, d/b/a “Superior Court Services,” and Steven C. Searfoss, d/b/a “Steven C. Thomas,” of Flemington, New Jersey.

    Under the terms of the settlements, these businesses were collectively assessed $309,673.33 in civil penalties, disgorgement to consumers, and reimbursement of attorneys’ fees and costs.

    “Surplus funds” are funds remaining after a property foreclosure sale and all payments ordered by the Court have been made, which can often total in the thousands of dollars. The homeowner is entitled to apply for these funds if they exist.

    “These settlements resolve allegations that these businesses falsely represented that consumers needed their assistance to obtain surplus funds from foreclosure sales. Homeowners who have lost their homes in foreclosure should be aware that they do not need to pay a business in order to apply for money they are rightfully entitled to,” Acting Attorney General John J. Hoffman said.

    “Some businesses allegedly convinced consumers to pay thousands of dollars for unnecessary help obtaining ‘surplus funds’ by making misrepresentations and creating confusion,” said Steve Lee, Acting Director of the Division of Consumer Affairs. “Consumers should be aware of such illegal practices whenever they are going through a foreclosure.”

    As to U.S Financial Funding, the alleged violations included misrepresenting that surplus funds and other property would be lost to the government if not recovered quickly; using contracts that failed to set forth the consumer’s share of the surplus funds; and charging fees that were more than 35% of the value of the property recovered. In the settlement, U.S. Financial Funding was assessed $71,250.77, of which $66,250.77 is suspended and will become vacated if it follows the terms of its settlement with the Division for the next three years. As part of the settlement, U.S. Financial Funding also agreed to discontinue doing business in New Jersey.

    As to Capital Recovery, the alleged violations included failing to identify the property to be recovered in its solicitation letters; using contracts that failed to set forth the consumer’s share of the surplus funds; and charging fees for the recovery of property that were excessive or unjust. In the settlement, Capital Recovery was assessed $97,197.30, of which $40,000 is suspended and will become vacated if the terms of the settlement with the Division are successfully met for the next three years.

    As to JD Assets Recovery, the alleged violations included using a solicitation letter which misrepresented that “time is of the essence” and that after a period of time the property would be permanently lost; and using contracts that failed to set forth the consumer’s share of the surplus funds after deduction of its recovery. In the settlement, JD Assets Recovery was assessed $36,000, of which $30,000 is suspended and will become vacated if the terms of its settlement with the Division are successfully met for the next three years.

    As to Hunterdon Legal Service, the alleged violations included using the term “Superior Court Services” in its solicitation letters and contracts, thus suggesting an affiliation with the Superior Court, which was not the case; misrepresenting that it was entitled to a fixed percentage of any property to be recovered; and charging fees for recovery of property that were excessive or unjust. In the settlement, Hunterdon Legal Service was assessed $105,225.26, of which $40,000 is suspended and will become vacated if terms of its settlement with the Division are successfully met for the next three years.

    Homeowners can apply for surplus funds themselves, by contacting the Trust Fund Unit of the State Superior Court at (609) 292-4012. To learn more about surplus funds, please see the Division of Consumer Affairs’ Consumer Brief online.

Disgraced Ex-Lawyer Dodges Hard Time As Judge Suspends 3-Year Prison Sentence, Instead Gives Conditional One Year Term In County Jail, Five Years Probation After Conviction For Fleecing $180K Of Surplus Proceeds From Foreclosed Disabled Client

In Modesto, California, The Modesto Bee reports:
  • A former Oakdale attorney will spend a year in jail for stealing more than $180,000 from a client to make extravagant purchases including a Jaguar and a European vacation, among other things, the Stanislaus County District Attorney’s Office announced [].

    James Arthur Fonda, 70, was convicted of grand theft last month in a case prosecuted by Deputy District Attorney Jeff Mangar.

    In 2009, Fonda’s disabled client inherited two San Jose homes and lost them in foreclosure but realized $486,706 in equity proceeds at public auction.

    Because the victim was going through a divorce, Fonda agreed to keep the money in his client trust fund account to conceal the inheritance from being included in a divorce settlement.

    From September 2009 to February 2012, Fonda withdrew more than $180,000 via 163 checks written to himself for personal reasons without his client’s permission.

    The checks to Fonda were marked for “advance fees,” but he ultimately admitted to the State Bar that he did nothing to earn them, the affidavit says.

    Fonda used the money to purchase a Jaguar, pay for a European vacation and gamble at casinos, as well as pay for groceries, rent and payroll for his law practice.

    “The victim sought out an attorney to help him,” Mangar said in a press release. “Fonda took advantage of his position of trust to then swindle the money.”

    Although Fonda has no criminal history and had acknowledged wrongdoing to investigators before his arrest, Judge Linda McFadden sentenced him to the maximum term of three years in prison. However, the prison sentence was suspended pending the successful completion of five years of felony probation and one year in county jail. He was also ordered to pay full restitution.

    Fonda was disbarred and can no longer practice law.

    “This was more than a one-time lapse of judgment, which violated the public trust and cost Fonda his law practice,” stated prosecutor Mangar.

Tuesday, October 27, 2015

Another Lawyer Faces Bar Boot For Pocketing Ten$ Of Thousand$ From Desperate Homeowners Seeking Loan Mods, Foreclosure Challenges, Then Abandoning Them w/out Doing Any Work; State Bar: Once California Supremes OK Disbarment, Attorney Ripoff Reimbursement Fund Will Begin Processing Victims' Recovery Claims

In Orange County, California, Metropolitan News Enterprise reports:
  • Orange County attorney James M. Parsa is facing disbarment for abandoning numerous clients in October 2009 after he was criminally convicted for unlawful sexual intercourse with a 17-year-old employee, the State Bar said [].

    State Bar Court Hearing Judge Pat McElroy found that Parsa, 50, abandoned 43 clients and failed to return their unearned fees of more than $120,000. Parsa accepted new clients and their fees even when he knew his license was about to be suspended in connection with the criminal conviction, the judge found, and failed to notify his clients that he intended to withdraw and would not be pursuing their loan modification applications.

    Heavy Advertising

    Parsa advertised heavily in Southern California media for several months in 2008 and 2009, at the height of the mortgage foreclosure crisis. He was one of a number of such lawyers targeted by State Bar and state attorney general investigators amid reports that lawyers were receiving fees from desperate homeowners to seek modifications of their loans or challenge foreclosures, but doing no work. (State law has since been amended to prohibit the charging of advance fees for seeking loan modifications.)

    Although Parsa was not charged in connection with his mortgage loan work, investigators discovered he had been convicted of the misdemeanor sex offense in 2001, and he was placed on interim suspension in October 2009. Less than two weeks later, he tendered his resignation, which remained pending for two years before the Supreme Court rejected it.

    The State Bar then brought new charges of client abandonment. In response, Parsa noted that the State Bar had taken over his practice after the suspension and said he left it to his “trusted office manager” to notify his clients of what had transpired. He added that he had stayed away from his office during this period, in part because the State Bar had taken charge of the practice and also because he was receiving death threats from angry clients.

    Two-Year Suspension

    He received a two-year suspension of his law license last year in connection with the misdemeanor conviction.

    He has also been under suspension in Nevada since 2011 for failing to notify bar counsel there of the California discipline, according to State Bar of Nevada records.

    In seeking his disbarment, the State Bar noted that the practice had about 4,500 clients and 100 employees, about 90 of whom were laid off. In addition to the 43 clients named in the court decision, another 1,130 people have filed State Bar complaints against Parsa, the State Bar said.

    The State Bar noted in its release that the disbarment is not final until approved by the California Supreme Court. “Once that happens, the State Bar’s Client Security Fund can begin processing claims for reimbursement,” the release said.(1)
Source: Suspended Lawyer Faces Disbarment for Forsaking Clients.

See also, Orange County attorney facing disbarment for abandoning numerous clients:
  • Consumers who have been defrauded by a California attorney may file a complaint with the Office of Chief Trial Counsel or call 800-843-9053. The State Bar also maintains the Client Security Fund to reimburse eligible victims.(2)
-------------------------------

(1) The State Bar of California's Client Security Fund was established to reimburse eligible clients who have suffered a loss due to misappropriation or embezzle­ment by a California-licensed attorney.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

(2) Id.

Suspended Attorney Gets Pinched For Pocketing $650K+ In Trust Funds Misappropriated From Foreclosure Transactions; Seeks To Voluntarily Surrender Law License In Effort To Dodge Disbarment In Separate Bar Probe

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:
  • Coconut Creek attorney Nicholas Theodore Steffens turned himself in to a Broward County jail to face charges of grand theft after prosecutors said more than a half-million dollars were misappropriated from foreclosure transactions.

    Last month the Supreme Court of Florida suspended Steffens, 36, of Parkland, from practicing law, based on an ongoing investigation by the Florida Bar.

    In four mortgage foreclosure cases, funds totaling $654,696.83 were used to pay Steffens' personal expenses and to pay money owed to a mortgage lender or loan servicing company, an arrest affidavit said.

    Two transactions happened in Miami-Dade County and two were in Broward County.

    The Florida Bar said it opened its investigation into Steffens on Jan. 29 and on Sept. 16 filed its petition for emergency suspension, which the Supreme Court approved two days later.

    With ongoing disciplinary proceedings that could eventually mean disbarment, Steffens filed a document on Sept. 28 with the Supreme Court to voluntarily surrender his law license, his lawyer Kevin Tynan said.

    The court's response is pending.

    Meanwhile, Steffens cannot accept new clients and had to stop representing existing clients 30 days after his suspension, according to the court's order.

    He also had to notify clients, opposing lawyers and the courts of his status with the Bar. And he was ordered to stop disbursing or withdrawing any monies from clients' trust accounts related to his law practice without the Supreme Court's approval.

    Broward County Circuit Judge Elizabeth Scherer ordered a $200,000 bond for Steffens, who surrendered on Tuesday. To get out of jail before trial, Steffens must show that the bond money is from legal sources.

Sneaky Young Lawyer Gets Bagged For Allegedly Doctoring Court Document Used To Slam Brakes On Foreclosure Sale; Gets Away With Judicial Hand Slap, No Criminal Charges After Receiving Admonition On His 5th Amendment Rights

In San Antonio, Texas, the San Antonio Express-News reports:
  • A San Antonio associate with the white-shoe law firm Jackson Walker LLP found himself in quite the predicament Wednesday, accused of doctoring a court document that was then used to stop a scheduled foreclosure sale on a $1.5 million home in Houston.

    On the witness stand during a civil hearing in state District Judge Stephani Walsh’s courtroom, Jackson Walker attorney Matthew Vandenberg denied he would file a “fraudulent” document because of signs posted in the Bexar County District Clerk’s office that warn that doing so is a crime.

    Just before breaking for lunch, Walsh advised Vandenberg that he might want to speak with the two other Jackson Walker lawyers in the courtroom about his Fifth Amendment rights, which protect a witness against self-incrimination.

    Walsh then called the lawyers arguing the matter into her chambers. What was said was not disclosed in court.

    When the parties reconvened in court after lunch, though, the proceeding came to an abrupt and peculiar end.

    Jackson Walker lawyer Scott McElhaney and opposing counsel David Lopez presented an agreed order to Walsh saying they had resolved their dispute. Walsh signed the order, which essentially cancels a court filing that was used to halt the foreclosure. Lopez’s firm, Pulman, Cappuccio, Pullen, Benson & Jones LLP of San Antonio, also was awarded sanctions — $15,325 to cover its attorney’s fees and the cost of posting the Houston house for foreclosure again. Lopez had asked for $8,875 in his motion for sanctions.

    After noting that her comments were off the record, Walsh proceeded to admonish McElhaney, a partner in Jackson Walker’s Dallas office.

    Do not send a young four-year lawyer down here to do your work,” Walsh said, referring to Vandenberg. “It could make him not want to practice law anymore.”

    Vandenberg was not in the courtroom to hear the judge’s remarks. [...]
For more, see San Antonio lawyer accused of tampering with court document (Judge scolds his superior as case comes to quick end).

Monday, October 26, 2015

Lawsuit: Bribe-Receiving HOA, Greedy Real Estate Developer Conspired To Blindside, Bulldoze NYC Co-Op Unit Owners Into 'Green-Lighting' Building Sale For Less Than Full Value; Intimidation Threats Included Warnings That Projected Increase In Existing Ground Lease Payments In 2018 Threatened To Wipe Out Their Home Equity In Apartments

In New York City, The Real Deal (NYC) reports:
  • Residents of a Chelsea co-op claim they were strong-armed into the shady sale of their building, alleging that the buyer, Galil Management, may have plied board members with cash or flashy new apartments.

    In a lawsuit filed [] in state Supreme Court, a dozen residents of 101 West 23rd Street accuse the board and Galil Management of launching a “campaign of intimidation, harassment, threats coercion and scare tactics” to get support for its “devious plan” to sell the 80-unit building. Galil, formerly E&M Associates, bought the land and ground lease in 2014 for $95 million in 2014. The lawsuit claims the board may have undersold the property to Galil because the firm paid off members or promised them apartments in a development that will replace the co-op.

    An attorney for the residents, Andrew Wong, told The Real Deal that the bribes allegation is based on rumors and the belief of his clients. He said so little is known about the building sale that they believe more factors are at play.

    The terms are so favorable to the buyers that there’s something else going on here that we want to know about,” he said.

    Representatives for Galil and the board could not immediately be reached for comment.

    The complaint accuses Galil and board members of concealing details of the building sale from the co-op’s shareholders and harassing residents until they signed onto the deal, which needed 81 percent of the shareholders to succeed. The board members painted the building sale as an imperative move to avoid financial ruin for the co-op, the lawsuit states.

    “The board told shareholders that this was the only deal in town and if it was not approved, then everyone would lose everything,” the lawsuit claims. “They have rammed through this sale without regard to the best interests of all the shareholders and the cooperative.”

    The lawsuit alleges that the residents were also first blindsided by the board’s plans to sell the co-op when they announced a deal with the Chetrit Group — which owns the land at 115 West 23rd Street, the adjacent parcel — for $40 to $45 million.

    That sale fell through, and in the spring of 2015, the board told the residents that it was in talks with Bateleur Capital. This sale also soured because the board was “insulted” by Bateleur’s significantly lower offer of $20 million, according to the lawsuit. But only a few weeks after the fallout with Bateleur, the board announced that it would sell the co-op to Galil — the land owner — for roughly the same price: $20 to $25 million. The residents allege that the building is worth at least $46 million.

    During a shareholder meeting on August 19, the board said the co-op needed to go through with the sale or it would need to file for bankruptcy due to an impending increase in maintenance costs when the ground lease reset in 2018. If it came to that, residents would lose the entire value of their shares, the board allegedly warned.(1)

    Galil also only gave the shareholders until Oct. 1 to agree to the sale and stipulated that the residents would need to be out by February 2016, effectively giving them only four months to find somewhere else to live, according to the lawsuit.

    The complaint suggests that one of the board members, David Carlos, as a broker with Savills Studley, stood to benefit from the deal, but also intimates that Galil might be paying off board members or offering them apartments in a development that will replace the co-op.

    The group of residents are seeking at least $25 million in damages.
Source: Galil, Chelsea co-op board conspired on building sale, residents claim (A lawsuit alleges that bribery may have taken place at 101 West 23rd Street).
------------------------------

(1) Periodic escalations in ground lease payments for co-ops & condominiums that don't own the land their buildings are situated on appears to be a big problem for unit owners in those buildings. See, for example:

Unit Owners In Lower Manhattan 40-Story Condominium/5-Star Hotel Combo Fear Loss Of Luxury Living, Value Of Their $3M+ Apartments If Ground Lease Change Is Made To Allow Developer To Convert Hotel Space Into Add'l Condos

In the Battery Park City section of New York City, Tribeca Trib Online reports:
  • Taxis and black cars regularly roll up to Battery Park City's Ritz-Carlton Hotel, their doors opened by crisply uniformed, impeccably mannered doormen, their passengers among the most pampered of guests to Lower Manhattan. It is a scene befitting the luxury and amenities of this towering five-star hotel at the southern tip of the neighborhood.

    Sharing such treatment are the hotel’s residents, whose condominiums, with a separate lobby entrance, occupy the 40-story building’s upper 26 floors.

    “It’s absolutely gorgeous,” said Carl Accettola, showing a reporter around his 26th-floor apartment, with its spectacular views north, south and west. “When I first came up here, I fell in love with the place.”

    But while the views won’t change, there are worries among residents like Accettola that the good life of hotel living may be coming to an end.

    Two years ago the owners, Millennium Partners, a real estate investment firm, put the building up for sale, according to The Real Deal, and it remains in the company's portfolio. But resident leaders say that another giant real estate investment firm, Westbrook Partners, has been in talks with the Battery Park City Authority about a change to the building's ground lease that would enable a developer to convert the hotel to apartments. In 2012, Millennium Partners sold the Ritz-Carlton Hotel on Central Park South to Westbrook Partners for a reported $150 million. (The residents leaders have said they believe that Westbrook Partners now owns the Ritz-Carlton Battery Park.)

    This is a high-end residential building,” said Accettola, who moved with his wife Danielle into the Ritz-Carlton, a second home, nearly five years ago. “If they were to go with an all-apartment type setup we wouldn’t have the difference from all the other buildings in the area.”

    The conversion would not only mean an end to luxury hotel services and a prestigious hotel address, the residents complain, but also the devaluation of their apartments, where two-bedroom units are now on the market for about $3 million and up.

    “We bought with the representation that this was a first class hotel and what we were purchasing was unique,” said Louis Grandelli, president of the residential condominium board. “And for them to add another 100 or 150 units next door, it’s not unique any more.”

    Sol Reischer, another resident leader, moved with his family from Gateway Plaza to the Ritz-Carlton when the hotel opened soon after 9/11. He said that the additional hotel services were important for his daughter, who has special needs, as well as some other residents who rely on the help of hotel staff.

    "We had assistance all the time and that was important to us," Reischer said.

    The potential for a residential conversion would likely make the property more valuable if the Battery Park City Authority allowed a change to the ground lease. But there is yet another hurdle. A city law passed in June created a two-year moratorium on owners of hotels with more than 150 rooms from converting more than one-fifth of those rooms to residential use. (The Real Estate Board of New York is challenging the law.)

    According to the authority, there has been no formal request to change the ground lease.

    “If such a formal request were ever made,” the authority told the Trib in a statement, “it would have to be considered within the parameters of the law, which currently restricts conversions of more than 20% of a hotel’s rooms to condominiums to very limited instances.”

    One of those “instances,” resident leaders say, may be a hardship claim that the hotel is a financial loser. It is a claim, they insist, the authority should reject.

    The authority, whose board took up the matter of a "sale or lease" of the property in a closed-door executive session in July 2014, would not comment on its position if a hardship claim were to be made.

    In a September resolution, Community Board 1 supported the residents, saying that the authority should "weigh the effects" of more residents on the infrastructure and services in the area, and the absence of an "anchor hotel" in the neighborhood. "There should not be any changes to the ground lease," the resolution stated.

    "It's offensive to us that someone could come in on a whim...and change the ground lease and make a lot of money," Ritz-Carlton resident Lisa Paige told CB1’s Battery Park City Committee. "Sure they can make a lot of money, but is that right for everyone else?"
Source: Ritz-Carlton Residents in Battery Park City Fear End to 'Unique' Hotel Life (The 40-story Ritz-Carlton is residential above the 14th floor, with about 300 hotel rooms and 150 condominium apartments. Residents fear that if the building becomes totally residential, there will be a loss of services and real estate value).

NYC Tenants Facing Harassment Intended To Force Them Out Of Below-Market Rate, Rent Regulated Apartments Begin Smartphone-Centric Counterattack, Submitting Mobile Device-Generated Audio, Visual Evidence In Court In Effort To Stay Put, Live In Peace, Punish Greedy Landlords

From a recent post on The Real Deal (NYC):
  • Landlords have been known to collect documentary evidence against tenants during bitter disputes in housing court. Turns out, two (or more) can play at that game.

    Rent-stabilized tenants of Raphael Toledano’s 444 East 13th Street in the East Village submitted audio and video recordings to housing court depicting the landlord’s agents as engaging in a campaign of harassment to force them out.

    The evidence is part of a months-long dispute at the building between Toledano, Goldmark Property Management, and a group of tenants at the building, who pay between $800 and $1,400 a month for units. Those units could, according to previous media reports, could make as much as $4,000 a month if they were destabilized.

    Andrew Scherer, policy director of New York Law School’s Impact Center for Public Interest, highlighted the difference that documentation makes. “If the landlord denies it, it becomes he said or she said,” he told the New York Times. “This evidence is much more conclusive.”

    The developer bought the six-story, 10,000-square-foot building in January, paying $6.1 million. In August, state investigators issued subpoenas as part of a probe into allegations Toledano and his agents threatened tenants with police raids and eviction while shutting off essential services like gas and hot water.

    Toledano, the Times reported, laid the blame at the feet of Goldmark, and said he’s been working to resolve issues with tenants. The number of open violations at the property has dropped from 247 to 81 in recent months, according to city records. Goldmark is led by a Toledano business associate, Paulius Skema, who brokered several deals with the Brook Hill Properties head and was even named a minority owner on the purchase of 97 Second Avenue in 2014. Skema’s prior firm, Castellan Real Estate Partners, paid fines to New York state regulators following claims it demanded to see passports of Spanish-speaking tenants at its buildings and evicted those who didn’t provide documentation.
Source: You’re on candid camera: Toledano tenants bring alleged harassment evidence to court (Residents say taped conversations support their allegations).

For the full underlying story, see The New York Times: Tenants in New York Press the Record Button in a Dispute With the Landlord.

Sunday, October 25, 2015

Chalk Up Two More Florida Appeals Court Reversals Of Standing-Lacking, Bankster-Favoring Trial Judge Rulings In Foreclosure Cases

And the beat goes on ... from a recent client alert from the Florida law firm Carlton Fields Jorden Burt:
  • Foreclosure/Standing: although bank established it had possession of note prior to commencement of action, bank did not demonstrate when blank endorsement was placed on note, nor did it prove it was a nonholder in possession of the note with the rights of a holderRodriguez v. Wells Fargo Bank, N.A., Case No. 4D14-100 (Fla. 4th DCA Oct. 14, 2015) (reversed and remanded for entry of involuntary dismissal)

    Foreclosure/Standing: trust failed to prove it had possession of original note containing undated, blank endorsement before Trust filed original complaintPeoples v. SAMI II Trust 2006-AR6, Bank of New York as Successor in Interest to JP Morgan Chase Bank, N.A., as Trustee, Case No. 4D14-2757 (Fla. 4th DCA Oct. 14, 2015) (reversed and remanded for entry of judgment for the borrower)

National Realtor Group, Title Industry Continue Waving Red Flags On Hacker/E-Mail Scams That Look To Hijack Closing Funds From Homebuyers In Pending Real Estate Transactions

The Washington Post reports:
  • [Y]ou’re about to settle on a home. You get an e-mail from your real estate agent or from the title company, requesting funds to be wired to an account for settlement. The e-mail purports a last-minute change in wiring instructions.

    You dutifuly wire the money using the new instructions.

    Then, the call comes from the title company the day before settlement, asking why you have not sent your funds for settlement. This is the moment you learn that you have sent hundreds of thousands of dollars to a thief.

    This scheme is not new. But a recent resurgence of wire fraud in the real estate industry, and the increase in its sophistication, prompted the National Association of Realtors (NAR) and many national title insurance companies to issue warning bulletins to the industry.

    “We don’t have any hard numbers about how much buyers have lost, but we do have an increasing number of reports that it is happening,” said Katie Johnson, general counsel of the NAR.

    According to Johnson, the hackers are monitoring e-mails and waiting patiently to determine what is the best scam. They realized that real estate transactions involve a large amount of money right before closing.

    The scammers are following information about transactions online on the MLS [multiple-listing service] or in the public records,” said Matthew Alegi, a partner at Potomac law firm Shulman Rogers. “It is only a matter of time before someone local gets hit with a six-figure cybertheft.”

    Alegi and his staff foiled a recent attempt by a hacker to have proceeds of a property sale wired to the hacker’s account.

    “We received an e-mail saying that the proceeds should be wired rather than mailed,” Alegi said. “Our title processor checked with the seller and learned that the e-mail had not come from him.”

    According to Alegi, if you wire money to a wrong account, the bank will not reimburse you. “There is usually no recourse to get your money back,” Alegi said.

    These schemes are getting harder to catch. The hackers have improved their grammar, and they obtain an almost identical e-mail address, making it very difficult to identify it as a scam.

    Patrick Weed, broker of Patrick Realty Company in Kensington, and his buyer client also prevented a potential $20,000 loss.

    “I received a call from my buyer asking why I e-mailed her asking for an additional deposit of $20,000 for her purchase in Olney,” Weed said. “She told me that she responded to my e-mail, and that I sent her an e-mail back.”

    The e-mails stated that the money was necessary to ensure a smooth and easy transaction.

    Weed said he never sent his client an e-mail asking for an additional $20,000. The hacker monitored his e-mail and was able to garner exact details about the transaction. The hacker provided wiring instructions to a bank in Texas.

    Unfortunately, some people have fallen for this scheme and have lost money.

    “Someone in Chicago recently lost $130,000, and in Texas there was a recent loss of $30,000,” said Johnson. “It is prevalent, and it is increasing.”

    “We have to be more vigilant than ever,” Alegi said. “Consumers need to be aware. Brokers need to be aware. Title companies need to be aware.”

Sneaky Banksters Slip "Simple Interest" Clauses Into Mortgages To Squeeze More Out Of Homeowners; Only Way To Beat It Is To Chronically Make Early Monthly Payments

Sneaky banksters and their relentless efforts to rip off unwitting consumers is highlighted in a recent Q&A column by The Mortgage Professor, Jack Guttentag on the so-called "simple interest" mortgage ("SIM"):
  • Q: I represent a couple facing the foreclosure of their home. ... My clients' loan is currently being calculated as a daily simple interest loan, which is causing them to be in default. ... Attached is a copy of the note, deed of trust and a payment history.

    A: Your clients had terrible payment habits, which made them ill-equipped to handle a simple interest mortgage, or SIM.

    A borrower with disciplined payment habits can manage a SIM at virtually the same cost as a standard mortgage with the same rate and term, but few borrowers have the required discipline. Most will slip up now and then, which will cost them more than the standard mortgage would have in the same circumstances. And for some borrowers, the SIM can be a financial quicksand from which they can never extricate themselves. This was the case for your clients.

    _The major issue is disclosure: There is nothing wrong with the SIM being an option that the borrower can choose, provided that the differences between the SIM and the standard mortgage are clearly disclosed. The borrower who selected the SIM would then understand the differences and would adjust her budgetary practices to them. But I have yet to see a SIM being offered in transparent fashion. The practice is to foist the SIM on a borrower who doesn't understand the difference, which is inexcusably sneaky. And in some cases, standard mortgages are converted to SIMs because the note allows it, which is even less excusable and should be illegal.

    _The major difference is in the calculation of interest due: The calculation of the monthly payment on a SIM and a standard mortgage is the same. For example, on a 30-year loan for $100,000 with a rate of 6 percent, the monthly payment is $599.56 in both cases.

    The major difference is that the interest due is calculated monthly on the standard mortgage and daily on the SIM. On the standard mortgage, the 6 percent is divided by 12, converting it to a monthly rate of 0.5 percent. The monthly rate is multiplied by the loan balance at the end of the preceding month to obtain the interest due for the month. In the first month, it is $500.

    In the SIM version, the annual rate of 6 percent is divided by 365, converting it to a daily rate of .016438 percent. The daily rate is multiplied by the loan balance to obtain the interest due for the day. The first day and each day thereafter until the first payment is made, it is $16.44.

    _The SIM accrual account: The $16.44 is recorded in a special accrual account, which increases by that amount every day. No interest accrues on this account, which is why it is called "simple interest." When a payment is received on a SIM, it is applied first to the accrual account, and what is left over is used to reduce the balance. When the balance declines, a new and smaller daily interest charge is calculated. But if the payment is not large enough to pay off the accrual account, the balance and interest rate remain unchanged and the accrual account continues to grow.

    _Budgetary implications: Borrowers who pay right away every month reduce their loan balance on a SIM almost as well as on a standard mortgage. Over 30 years, they will have to pay a month or two longer, due to leap years which add an extra day's interest to the tab.

    SIM borrowers who persistently pay early will pay off the balance before the scheduled term. Persistent early payment is the way to beat the SIM. Aside from avoidance, it is the only way.

    Borrowers who persistently pay late do much worse with a SIM. The SIM borrower who persistently pays on day 10, for example, won't pay off the 30-year, 6 percent loan until the 32nd year.

    Borrowers with erratic payment habits fare the worst of all because of the likelihood that at some point their payment won't cover the amount in the accrual account. That is the quicksand that your clients fell into. They fell so far behind that they could never catch up, and ended up owing far more than they had borrowed originally.

    _Recognizing a SIM when you see one: Your clients claim that they were never told that they were getting a SIM. I examined their note, and there is nothing in it that indicates it was a SIM. For example, the rate shown in the note is the annual rate divided by 12, which gives the monthly rate. The daily rate used in a SIM is not shown in the note. That it is permissible to show a monthly rate in the note but charge the borrower a daily rate is a glaring deficiency of the disclosure rules.

    _A message to the Consumer Financial Protection Bureau: Your new mortgage disclosure requirements continue to allow lenders to be ambiguous on whether the mortgage described in their notes is a standard monthly accrual type, or a SIM. This would be really easy to fix.