City Of Baltimore "Pays Cash" For "We Buy Houses" Signs

According to the website of the non-profit legal services organization Community Law Center in Baltimore, Maryland:

• The Community Law Center (CLC), Citizens Housing & Planning Association (CPHA) and St. Ambrose Housing Center (St. Ambrose) have joined forces to combat the foreclosure “rescue” scam artists responsible for illegally posted “We Buy Houses” signs throughout Baltimore City. [...] The groups’ initiative is bolstered by [...] legislation passed by Baltimore’s City Council allowing residents to remove signs from utility poles or stop signs. The [...] law [...] increases fines to $200 per sign and allows for neighborhood associations with 501 (c) (3) status to qualify for a cash credit when presenting the removed sign to a designated agency for collection.

For more, see We Don't Buy Houses (We Can Help You Keep Yours).

For other stories on the "We Buy Houses" road signs, see:

• The News & Observer: Reasons to beware of 'We Buy Homes',
• Richmond Times-Dispatch: Richmonders declare war on lending scams (They take to city streets to remove signs connected to foreclosure rescue schemes),
• HOME press release: "Sign Swiping Day" Sept 30 in the City of Richmond "trying to stop the foreclosure rescue scam artists".

NC AG To Financially Struggling Homeowners, Wanna-Be Homebuyers: Beware Of Being Baited By Roadside 'Bandit Signs' Advertising "We Buy Homes" Or "Rent-To-Own" Deals; Offers May Be Nothing More Than Cover For Rent-Skimming Racket

From the Office of the North Carolina Attorney General:

• Scammers are trying to take advantage of struggling families by promising to buy homes for quick cash.
  
  These scammers send postcards and put out signs proclaiming, “We buy homes!” But rather than buying houses as advertised, most of these companies will try to convince you to sign over control of your home. The company then leases the property out to a new tenant. As a result, you lose rights to your home but remain on the hook for mortgage payments.
  
  Homebuyers or tenants can also be hit hard by these scams, which can advertise homes in deceptive rent-to-own agreements for big upfront fees.
  
  Before you reply to a “we buy homes” ad, remember:
  
  These companies aren’t likely to pay cash for your home or help secure a fast payoff of your current mortgage.
  
  Beware of anyone who asks you to sign over the title to your home based only on their promises to sell your property.
  
  If you’re struggling to pay your mortgage, speak with your lender directly. You can also contact the State Home Foreclosure Prevention Project for help at 1-888-442-8188.
  
  Prospective tenants and buyers should never pay money upfront before signing a lease or contract. Work with a real estate or leasing agent you trust.
  
  In rent-to-own agreements, always confirm that the person you’re signing the contract with is the owner of the home.
  
  If you think you’ve experienced a “we buy homes” scam or have questions about mortgage help you’ve heard advertised, please contact our Consumer Protection Division at 1-877-5-NO-SCAM or online at www.ncdoj.gov.

Source: “We buy homes” signs don’t provide the relief they promise.

Editor's Note: This advisory is equally applicable to contract for deed ripoffs and land contract rackets.

Texas-Based Real Estate Slum Operator Notorious In Houston & Buffalo For Peddling Crappy Rent-To-Own Deals To Unwitting Wanna-Be Homebuyers Hit With Baltimore Suit Alleging His Business Model Presents Nuisance That Threatens Communities' Well-Being

In Baltimore, Maryland, Baltimore City Paper reports:

• Backed by the non-profit Community Law Center,(1) six Baltimore neighborhood associations have sued a Texas-based property speculator for $8 million, saying his business model presents a nuisance that “threatens the well being of the communities.”
  
  The defendant, Scott Wizig, owns about 140 city properties, plus dozens more in Houston, where he is based. In the early 2000s he was charged criminally by the state of New York and dubbed “Buffalo’s worst slumlord,” eventually settling the case for several hundred thousand dollars. He started buying in Baltimore in 2001; City Paper took note of him three years later and not much has happened in the nine years since then.
  
  “He first got our attention with the ‘We buy houses’ signs,” says Kristine Dunkerton, the Community Law Center’s executive director. “He racked up quite a bill with the city for posting the signs. But he never did anything with the properties.”
  
  (Baltimore city strengthened its ordinance against so-called bandit signs in 2006. The city’s housing department enforces the ban, though with difficulty according to this 2009 City Paper story).
  
  Wizig buys run down houses via tax sales, paying just a couple thousand dollars each for houses that are arguably worth even less, because most need expensive rebuilding to be habitable. In the early 2000s he was renting them to tenants for about $500 a month through a local property manager. City Paper found tenants who said promised repairs were never made. The manager and Wizig blamed each other and Wizig said he was getting out of the rental business then: “We don’t anticipate doing any more rentals with new customers [in Baltimore], but we are certainly going to look into and make sure the existing customers are being taken care of.”
  
  In Buffalo and Houston, Wizig’s business model revolved around a lease-to-own contract, often one that required the lessee to rent for a couple of years before being able to exercise their option to buy the property. Houses Wizig picked up for a couple grand would routinely be sold for ten times that—though the buyers often defaulted, beginning the cycle anew.
  
  New York prosecutors called the scheme deceptive; Wizig eventually pleaded guilty to hundreds of violations of state housing laws there. The Houston Press, an alternative weekly, wrote about Wizig’s deals in Houston, though he has apparently faced much less legal trouble there.
  
  Land records indicate that Wizig has sold many houses in Baltimore, financing the purchase through one of his companies. It is unclear in the documents whether these are rent-to-own deals. But Wizig’s buyers do not always fare well, and Wizig is himself a defendant in five open foreclosure actions listed in Baltimore courts. The oldest, filed in August of 2011, involves 4046 Park Heights Ave., which a Wizig company called Compound Yield Play sold to Joan E. Lilly in 2008 for $43,200. Wizig had bought the property two years earlier for $2,202.
  
  Another house Wizig sold to Lilly, 1419 E. Federal St., is now in receivership after city action. Wizig’s bought it for $4,396 in 2006 and sold it to Lilly in 2008 for $39,900.
  
  Wizig did not return City Paper’s phone call.
  
  Wizing’s buyers and business partners are not party to the suit. Instead, neighbors of the dilapidated properties are suing under a law called The Community Bill of Rights. The law is more than a decade old, but amended only last year to make it usable to community associations, Dunkerton says. “We decided with the new Community Bill of Rights legislation . . . to put the community in the shoes of code enforcement.”

For the story, see Fed Up: Community associations sue problem landlord for millions.

(1) Community Law Center, a nonprofit law firm, provides legal services to community and nonprofit organizations throughout Maryland to promote stronger nonprofits and more vibrant neighborhoods.

Newark "Anti-Foreclosure Scam" Volunteers Sweep Thru City Distributing Warning Fliers, Ripping Down "We Buy Houses" Road Signs

In Newark, New Jersey, The Star Ledger reports on the first day of foreclosure outreach organized by the Newark/Urban Essex Foreclosure Task Force, a coalition of community organizations, government officials and nonprofit groups. Dozens of volunteers met after canvassing the city, ripping down "foreclosure rescue" signs and distributing information warning against such scams:

• Michael Heard was part financial consultant, part city code enforcer yesterday afternoon as he spoke to Newark residents about home foreclosures and ripped down signs. "I'm angry," he said shortly after taking down two signs in his neighborhood in the West Ward of Newark that claimed to get people out of foreclosures or offered to buy homes on the cheap. [...] Heard was one of dozens of volunteers in bright orange T-shirts who swept through all five wards of the city yesterday armed with fliers and door hangers to warn citizens against foreclosure and mortgage scams designed to prey on the elderly or the desperate.

***

• "I'm tired of driving around my city and seeing these signs," Booker said, pointing to the dozens of blue, red, yellow and green signs volunteers had torn down around the city and brought to the meeting. He said he was so sick of seeing them, he stopped at Home Depot to buy a crowbar that he keeps in his car. He tears down signs whenever he sees them. It's illegal to post any kind of sign on utility poles and trees.

For more, see Newarkers try to stem foreclosure scams (Groups remove signs, hear Mayor Booker).

Go here for other posts on the battle against the ubiquitous "We Buy Houses", "Stop Foreclosure", etc. road signs.

Former Employees Of Nationwide Outfit That Uses Rent-To-Own Approach To Peddling Dilapidated Properties Admit That Business Model Was A Racket That Targeted Low-Income, Unsophisticated Homebuyers w/ Crappy Credit & Set Them Up For Failure; Company Now Being Probed By Wisconsin, Pennsylvania AGs

In Green Bay, Wisconsin, WFRV-TV Channel 39 reports:

• There's now confirmation that a company that's been the subject of a Local 5 Investigation, is now being investigated by the Wisconsin attorney general's office.
  
  We spoke with half a dozen former employees of Vision Property Management. Two of them agreed to be interviewed for this report, but only if we hid their identities.
  
  They confirm what many suspected - that the company knew exactly what it was doing when it offers substandard housing as rent-to-own opportunities.
  
  "We knew we were putting people into situations that they couldn't handle."
  
  That's how one former employee describes his time at the company who specializes in lease-to-own housing - claiming to give potential tenants a chance to become homeowners, regardless of poor credit.
  
  "What initially started as us trying to help folks get on their feet, was more like those title loan companies. Like car places where you're just taking advantage of them - not explaining everything that's going on, jacking up the interest and then leaving them holding the bag," said another employee.
  
  After 5 Investigates dug deeper into some properties in the Green Bay area, some former employees offered to give us more insight into the culture of the company.
  
  "My big problem with the culture there was that we knowingly manipulated people's bad situations for our own gain. When people presented us with their problems like 'oh i need a little help with this, i need a little bit of help with that, i can't swing that,' they were pretty much ridiculed. They were never worked with."
  
  This was especially relevant when it came to contract agreements and inspections. Houses advertised in the Green Bay area consisted of broken pipes, rotting floors, crumbling roofs and much more.
  
  "An inspection is done with the purchase of every single property. It's kind of a brief one, but it gives us a good idea of what shape the property is in. That information isn't always translated or shared correctly."
  
  "When the customer ended up signing the contract and there were liens or the pipes were missing, we could say 'well we had a recorded phone call with you, I instructed you to go find that out.' But by nature, we weren't dealing with the most sophisticated real-estate consumer. So I can say 'go to the clerk of court, go look up public records' all day long, but if you don't know how to do that or if you don't even know what I'm talking about and you just want to get off the phone with me so you can get into this house, just say yeah all day long."
  
  "If they're already in a financial situation that puts them in a position to be working with a company like this, they probably can't afford to throw down several hundred dollars to have an inspector come in and look at all this stuff. Often times when they do, the inspectors are appalled like, 'no, no don't buy this!'"
  
  "We sold a considerable amount of houses to people who were making a $721 month social security check - and with $228 monthly payments, they had no business living in the house. They obviously didn't have the means to repair it themselves or pay somebody to repair it. I knew that was happening from the jump and that made me uncomfortable."
  
  One of the former employee was responsible for much of the official paperwork, including deeds on the properties. She says Vision would buy properties in bulk and wanted the deeds processed quickly so the investor could send the money. However when it came to sending the information to the particular county, a sales tax had to be paid. This was something Vision tried to avoid through their LLC - Kaja Holdings.
  
  "I would sometimes record two or three deeds at a time for one actual sale or one actual purchase, and no tax would be paid because Michigan, Pennsylvania and Maryland have higher taxes. They yelled at me and told me they refused to pay that tax and I would need to find a loophole. There were some that were legit, but the majority of them we just didn't send them in. We were told that 'we'll just pay it if we get caught, but if we don't, we're not paying the government a dime,' and so that's what I did."
  
  She added that many times she was told to get the deeds to the county overnight so Vision could get it processed in the tenants name before they found out - even if the house had many repairs needed or was up for demolition.
  
  "Once it's in their name, they can't do anything about it. They can be mad and call us, but they can't really do anything because it's in their name. It's just some really shady practices."
  
  The employees say Vision simply leaves their customers holding the bag.
  
  "Each one of them had a story, and each one of them wanted to tell it to us - and we didn't care."
  
  "There's a lot of customers who have complained and who have lost their homes when they thought they were going to be there forever and raise their families there, and it was taken from them because of these manipulative practices."
  
  Our 5 investigates team has been reaching out to Vision Property Management for their comment on this story since July. We contacted them again Thursday, and they said they are not interested in giving an interview.
  
  Aside from this new investigation by the attorney general's office here in Wisconsin, the Pennsylvania attorney general's office has launched an investigation into the company's practices as well.
  
  We've also learned some more about where Vision gets its financial backing. We'll be looking into that in the months to come.

Source: Rent to Own: Former Vision Property Management employees speak out (The company is now being investigated by the Wisconsin attorney general's office). land contract for deed

Shaky Loan Modifications That Turn Into Questionable Short Sales?

A new form of foreclosure rescue involving purported loan modification services coupled with questionable short sale arrangements has arrived on the scene and possibly gaining in popularity, according to DESPERATE HOMEOWNERS: Loan Mod Scammers Step In When Loan Servicers Refuse To Provide Help, a recently issued report by the National Consumer Law Center:

• Information is beginning to surface about a new variety of foreclosure rescue involving the sale of a house that is upside down (that is, more is owed on the house than is worth). Indeed, some loan modification websites tout their expertise in short sales.

***

• In one version of a short sale scam, the realtor and the buyer collude to conceal the full price of the sale from the lender so that they can pocket the difference, often by using option contracts and back-to-back closings.(1) This version is aimed primarily at defrauding the lender, though the homeowner is also hurt by an artificially low sales price, either by being liable on a deficiency or by paying taxes on a higher forgiven balance.(2)

• In another version of a short sale scam, the buyer takes over the mortgage without satisfying the due-on-sale clause and the sale is concealed from the lender.(3) The owner of a We Buy Houses franchise explained at trial that these deals work when the homeowner is only 10% to 15% upside down, because the home is sold to a buyer who cannot qualify for a regular loan and so is willing to pay a premium above fair market value to avoid a credit check. Depending on how the transaction works, the homeowner may be out cash, lose the home, and still end up with a foreclosure on the credit report.

***

• These transactions may begin as traditional loan modification contracts, in which the homeowner pays a fee in the hopes of saving the home. The rescuer may then pressure the homeowner into agreeing to the sale—and into paying a sales commission to the rescuer. Thus, the homeowner has to pay two fees, loses the home, may still have her credit blemished by a foreclosure if the new buyer defaults, and may be exposed to liability for violating the contract.

For more, see What Else Are They Selling? Loan Mods That Turn Into Questionable Short Sales? (begins at page 17 of the report).

See also ATIF Refuses To Issue Title Insurance On Controversial Short Sale Deals Involving Simultaneous Investor "Flips" - involving the recent decision by title insurance underwriter Attorneys' Title Insurance Fund to refuse to issue title insurance policies on deals made using the controversial method for closing flips of short sales (possibly recognizing the potentially fraudulent nature of these transactions).

(1) Also known as "flipping."

(2) The NCLC report cites three media reports indicating the existence of this scam. See Nick & Cindy Davis, Sellers Beware of Short Sale Scams (Apr. 21, 2009); Bill Gassett, Short Sale Scammers We Buy Houses (Aug. 14 2008); New "short sale" scam taking root?, St. Petersburg Times (April 22, 2008).

(3) The NCLC report cites an article appearing on several real estate investing websites which explains how the due on sale clause is avoided. "The game for us is how to transfer ownership to the property without getting caught by the lender." Attorney William Bronchick, There's No "Due on Sale" Jail (an article which pre-dates the foreclosure crisis and the loan modification explosion).

Winning Bidders At Foreclosed Home Auction Invest Time, Money Into Fix-Up Only To Then Find Out They Bought Wrong Property

In Spartanburg, South Carolina, the Spartanburg Herald Journal reports:

• A local couple hopes their misfortunes with the purchase of a foreclosed property will serve as a cautionary tale for anyone seeking to buy a home cheap.
  
  Earlier this year, Benjamin and Railynn Spence saw what they thought was an available house in the city at 777 Hayne St. listed with the Spartanburg County Forfeited Land Commission.
  
  The couple made a bid on the property for $601.64 on March 2. The Spences said they were informed by the county auditor's office on March 28 that they had the winning bid, and they needed to come down and fill out some final paperwork.
  
  At the signing, the couple said an official told them it would take two to six weeks for them to receive their deed. They said the official also handed them a docket that contained pictures of the house and other documentation that confirmed the home's address, and they walked away with the understanding that the home was theirs.
  
  By the end of May, the Spences, who had been keeping an eye on the property, said they still had not yet received their deed. But they were anxious to move in, so the couple began working on the house — painting, scraping and re-installing wiring and plumbing that was missing from the structure. On July 14, they moved all of their belongings from their hotel room to the home and continued fixing up the place.
  
  “I had people pull up in the front yard telling me ‘You're doing such a good job,' ” Benjamin Spence said. “They told me that it was such an eyesore before and to keep up the good work.”
  
  Last Tuesday, the couple was at home when a city inspector and Spartanburg Public Safety Department officers came knocking on their front door. The inspector told them that the property's owner wanted them out of the house, and they had two weeks to vacate.
  
  “We were like ‘what?' ” Railynn Spence said. “We said, ‘We're the owners. We bought it out of an FLC sale.' ”
  
  The Spences said they went up to the county's Delinquent Tax Office. There, an official showed them that the parcel number for the home at 777 Hayne St. ended in the digits 156.00, and paperwork showed that the Spences had made their bid on a parcel ending in 157.00, which was the empty lot.
  
  “I told them, why would we buy a property with no house?” Benjamin Spence said. “Why would we do all of the work on a house that wasn't ours? Even one of the policemen said that squatters don't fix up houses, so we couldn't be squatters. The paperwork clearly showed the address on the house was 777. How else would we have found the place?”
  
  Frustrated, the Spences decided to pack their bags. The county mailed them a refund for their bid on Aug. 17, and the couple was busy this week moving into a temporary home provided by one of Benjamin's friends.
  
  “We would've still been in the dark about this had (the inspector) not come by to tell us,” Railynn Spence said.
  
  According to officials, the cause of the confusion over the address was caused by the renumbering of lots along the west side of Hayne Street near the intersection of Williams Street that was conducted in early March.
  
  The restructuring was done to make sure that the addresses matched up with the parcel numbers on file with the assessor's office. The Spences' lot was given the address of 757 Hayne St. and the house remained at 777 Hayne St.
  
  A county official said the Spences won their bid while the addresses were in the process of being updated. The photos of the home were included in the information docket likely as a point of reference for the address.
  
  “On the tax records, that (empty) lot was given the same address as the house. A lot of times that happens when the lot is at one point tied to the house,” said Steve Ford, with the auditor's office. “In this case, the property had the correct address when it was sold even though the map numbers were different. By the time they realized it, the address was different.”

***

• The Spences estimated that they have put $3,500 to $4,000 of work, including materials and man hours, into the house. [...] Benjamin Spence said he is facing a $350 fine from Spartanburg Water System for turning on the home's water to inspect for leaks in the plumbing prior to moving in.

For more, see Spartanburg couple finds home isn't theirs (Buyers need to be wary).

Contract For Deed: Handy, Informal Way For Sleazy Investors To Trap Novice, Low-Income, Crappy-Credit Homebuyers w/ Long Term Contracts For Dilapidated Homes; Typically Avoids Standard Formalities (Appraisal, Inspection, Title Search, Attorney Review) Of Conventional Sales; No Different From 'Buy-Here, Pay-Here' Used Car Lots; 'White Picket Fence' Dreams Used Against Victims, Says One Lawyer

In Corpus Christi, Texas, the Corpus Christi Caller-Times reports:

• Arturo Rodriguez wished for a house of his own for most of his life. When he found someone who would sell him one, he willingly stepped into a trap.
  
  "I wanted a house," he said. "My credit was bad. This was all I could afford. It was falling apart."
  
  Rodriguez and hundreds of others entered into a type of legal arrangement called a contract-for-deed.(1) House dwellers make payments, pay taxes and insurance on a house as if they own it, but they don't receive the property deed until it is paid off. Equity doesn't accrue. Interest rates are high, a home inspection and appraisal aren't conducted and repairs are the responsibility of the residents.
  
  Seven years ago, a storm damaged Rodriguez's roof and water soaked through to his ceiling tiles. He eventually made repairs himself, spending at least $10,000 to $12,000.
  
  He already has paid for the house's $50,000 sale price through his monthly payments, but because of the high interest rate, his deed wont mature for another eight years. By that time, he could have bought his house twice. His monthly payments that were $470 are now $620.
  
  The questionable sales become a public concern when the houses are falling apart, trash accumulates in yards and weeds grow wild. The city has to follow a legal maze to find out who is accountable.
  
  It's a problem that puzzles city leaders, plagues neighborhoods and makes a living for a small group of people -- owners who have a convenient, legal exit from maintaining the property.
  
  Those who sell and rent the houses say they're giving people with bad credit and low incomes an opportunity to own a home they wouldn't have otherwise. The contracts are legal, and people should know what they're getting into, they said.
  
  Despite legal reforms that now allow those such as Rodriguez to modify contract-for-deeds to their advantage, the local agency that offers free legal assistance to the needy couldn't convince anyone to file the paperwork.
  
  While homeowners can sell their houses and renters can walk away from the dilapidated properties when their lease expires, this group of people has few options.
  
  Because it's often those with low or middle incomes and bad credit who sign up, repairs often lag. When absentee landlords sell groups of houses under these contracts, neighborhoods take a turn for the worse.
  
  Councilman Kevin Kieschnick, who represents a district that includes many rundown neighborhoods where renters entered such agreements, asked city officials to develop a plan to tackle the problem. But the contract agreements are legal, not always abused and difficult for the city to track.
  
  "These people are being taken advantage of," he said. "This is predatory lending at its worst. There are holes in these peoples floors."
  
  The agreements aren't all scams, but many are, said Darrell W. Cook, a Dallas-based real estate contract attorney.
  
  "They can be legitimate, but they are the perfect way to get scammed," he said. "You're someone who can't qualify. You think it's a lot better than leasing the property. Its really not anything different from a buy-here, pay-here auto lot. They're assuming you're going to fail. It's using their dream of a white picket fence against them."
  
  Jacqueline Capriles said she didn't realize what she was getting into when she bought her Northside home last March. She wanted an escape from rising rent at her Flour Bluff apartment. A friend recommended her to Ralph Shepard, who with his wife owns more than 70 moderately priced houses on the Northside and central area of the city.
  
  Her agreement isn't a contract-for-deed, but it is an owner-financed house that she believes is a rent-to-own agreement. "Stupid me, I signed that contract," she said. "The house is basically falling apart."
  
  Capriles' 30-year contract ties her to $650 monthly payments for a house that is appraised at $63,000. The interest rate is 12 percent, twice what many homeowners pay.
  
  When she moved her furniture into the front bedroom, an heirloom dresser started sinking through the floor. Her partner, Melissa Bolten, fell through a soft spot in the bedroom floor. The walls started cracking. She learned that holes in the walls were covered by a piece of stick-on tile. Every doorway is slanted. The gap between the porch steps and the house floor is wide enough to stick a finger through.
  
  The floor tilts in various directions. Soup cans roll downhill from one side of the kitchen to the other.
  
  Capriles said Shepard told her he was fixing it up. Her contract says otherwise. The house was sold as-is, without an inspection. "I try to fix it a little bit here and there," she said. "It's going to cost more than I ever make. I'm pretty much stuck here. If a real good wind would come along, it would be gone."
  
  Shepard tells a different story. Buyers should know what they're getting into, he said. "I tell them to check it out," he said. "I say, 'Take people over. Have an inspection. It's as-is." He told Capriles they could leave the house behind soon after they moved in and began complaining, he said. They didn't.
  
  He's made a living buying foreclosed and dilapidated houses and selling them on owner-financed contracts. Although he said he hasn't done a contract-for-deed in several years, he finances the houses himself. Buyers, many with bad credit scores, pay him directly. Capriles signed the contract thinking she was renting to own, she said.
  
  Shepard says the houses were sold outright but sees many buyers abandon the homes when they can't make payments. He then tries to sell them again.
  
  He said the legal arrangements with his buyers allow them to sell the house. In more than 15 years, his name is attached to more than 175 sales registered in the Nueces County Clerk's system. He estimated about 20 to 25 people sold their houses.
  
  "Trying to sell their house doesn't even enter into their mind," he said. "They might owe me three or four months of payments. They just walk away."
  
  That leaves Shepard with the cleanup bill. "Sometimes, it will look like a bomb went off inside," he said. "They leave all their dirty clothes. The pick up and go. It turns into my responsibility again, and I deal with it."
  
  Shepard said he would like the city to focus its enforcement on tenants. "When they go after the landowner, those people realize they can just move out," he said.
  
  The city doesn't have a grasp on how widespread the problem is but is beginning to evaluate it one neighborhood at a time, beginning with the Hillcrest neighborhood in Kieschnick's district.
  
  Barry Wolfson, whose family company leases homes in Hillcrest, said he thinks his rental houses fill a void for those who can't afford to rent in newer areas of town and don't qualify for public assistance. His company rents homes and has never sold homes on contract-for-deed.
  
  Several of Wolfon's shotgun-style houses have splintered siding, dirt driveways and rolled-on roofs.
  
  "I won't deny some of the houses need some tender loving care," he said. "Our renters are paying well below market. Some people pay tithes to church. We're even doing something better than that by helping out the poorest sects of society."
  
  In the Hillcrest area, which is bordered by the Port of Corpus Christi, refineries and other heavy industrial development, only 18 percent of homes are owner-occupied. Many landlords there are what Kieschnick considers slumlords. They lock renters into 15-year, 20-year and 30-year contracts, offer no help maintaining the houses and are difficult to pin down.
  
  Any enforcement action against the landlords could displace residents who have spent thousands on homes they thought they were buying.
  
  It's a dilemma that attorney Carlos Aguinaga, the regional director of Texas Rio Grande Legal Aid, faces often. The organization, with offices in the Nueces County Courthouse, offers free legal assistance to people with low incomes.
  
  People who have problems with sellers in rent-to-own contracts or their landlords have few options, he said. "I tell them, 'We can go after the slumlord, but you'll be out of a house,'" he said.
  
  Those buyers who have already scraped together enough money for deposits, payments and taxes rarely can afford to move. When the city tries to address problems at those crumbling houses, it's snagged in a legal maze trying to find out who is responsible.
  
  When houses fall into disrepair and violate city codes, it can be difficult for the city to determine who needs to pay.
  
  The seller is listed as the owner on property tax records, but the contract with the buyer says the owner isn't responsible for upkeep. The buyer could likewise say he doesn't own the house because he doesn't have the deed.
  
  Mayor Joe Adame, who owns a commercial real estate firm, said the landlords need to be held accountable. He hopes to identify major land owners who lease or sell problem properties and reach out to them.
  
  He supports a buyout for homes near the industrial corridor, a project that would pay residents to abandon their homes, tear them down and convert the area to green space. It could take years and require millions of dollars.
  
  In the meantime, he's also asking the city to study the problem.
  
  "We need to find them a way out," he said. "They're in checkmate. They can't move out and can't take care of the houses there."

Source: Residents stuck in contract-for-deed trap (No apparent fix for many homes).

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

(1) A 'contract for deed' (sometimes known as a “land contract,” "agreement for deed," "land installment contract" or an “installment sale agreement”) is a contract between a seller and buyer of real property in which the seller provides financing to buyer to purchase the property for an agreed-upon purchase price and the buyer repays the loan in installments.

Under such a contract, the seller retains the legal title to the property, while permitting the buyer to take possession of it for most purposes other than legal ownership. The sale price is typically paid in periodic installments, often with a balloon payment at the end to make the time length of payments shorter than a corresponding fully amortized loan without a final balloon payment. When the full purchase price has been paid including any interest, the seller is obligated to convey legal title to the property to the buyer. An initial down payment from the buyer to the seller is usually also required by such a contract. The legal status of such contracts varies from region to region. (Reference: Wikipedia).

Short Sale Flipping Fraud: Use Of Inflated Appraisals, Straw Buyers, Sale Terms Undisclosed To Lenders All Indicate That Scammers Are Still At It

In Central Florida, the Sarasota Herald Tribune reports:

• Untold millions of dollars that banks could have recovered from the sale of distressed Florida homes have instead been pocketed as profits by a new breed of property flipper. These flippers target houses on the verge of foreclosure and persuade banks and mortgage companies to accept lowball buyouts, sometimes by using questionable appraisals and not disclosing that a quick sale at a higher price has already been arranged, experts say. No one knows how widespread the scheme has become. But a national glut of short sales -- pre-foreclosure sales in which the lender agrees to let the house sell for less than the mortgage owed -- has spawned a small industry of short-sale flippers, some of whom use these questionable tactics, experts say.(1)

***

• Bankers and some organizations that regulate the real estate industry have taken steps to curb the latest form of flipping.(2) But the measures, including restrictions on writing mortgages for flipped properties, have not halted questionable transactions. Experts warn the number of short sale flips is likely to continue growing nationwide.

***

• [F]raud experts warn that some of the real estate flipping they see today involves the same kind of insider deals and manipulated sale prices that plagued the housing bubble. The FBI recently added short sale flipping, dubbed "flopping" by some mortgage fraud experts, to its list of recognized real estate fraud. In a June 2009 report on mortgage fraud, FBI officials described various forms of short sale flipping fraud.(3) Each type involves misrepresenting the value of a house to a lender.

***

• "These people are doing exactly what they did during the run-up," said Tim Mattingly, who owns an Orlando mortgage brokerage and title agency. "They are getting inflated appraisals. They are selling to straw buyers and they are hiding terms of their deals from lenders. It's amazing that after all we've been through, these people are still at it."

For more, see The new flipping: short sales.

See also, Toronto Sun: Florida's flopping circus (The Florida town made famous by Ringling Brothers' "greatest show on earth" has become a three-ring real estate circus of flippers, floppers and amazing deals).

(1) A Herald-Tribune examination of nearly 18,000 property sales that occurred in Sarasota and Manatee counties in 2009 showed that at least 250 properties have been sold multiple times at escalating prices so far this year, the story states. Reportedly, nearly 50 of those properties were bought then resold within 24 hours, suggesting that banks were underpaid for properties that already had a buyer willing to pay more. Just the most suspicious sales, where properties flipped within a day, have cost banks $1.7 million in Sarasota and Manatee counties so far this year. On houses bought and resold within a month, the bank short sales were $3.2 million less than the houses fetched just a few days or weeks later.

(2) In a June, 2009 story (see Title insurance group's move could stymie short sale flips), The Tampa Tribune reported that the Attorneys' Title Insurance Fund ("The Fund"), an Orlando-based outfit that is a major underwriter for attorneys who write title insurance in Florida, notified its 6,000 member attorneys that it will not insure deals made with a popular – but controversial – method for closing flips of short sales being advertised on the Internet that promises to make investors lots of money with little or no work.

In Sepember, 2009, The Fund announced that it will go ahead and insure short sale flipping deals that meet certain guidelines (see The Fund Underwriting Bulletin: Short Sale Transactions - Guidelines Revised). With all the heat now being applied to these deals by federal investigators, The Fund may want to rethink its most recent announcement. For examples of federal indictments involving alleged fraud in connection with short sales, see the following U.S. Attorney press releases:

• Bridgeport, Connecticut: Two Connecticut Real Estate Agents Charged with Engaging In Short Sale Mortgage Fraud Schemes (Feds indict two in alleged short sale flipping scam using straw buyers to dupe lenders into accepting less than full payment on underwater loans),
• New York City: Manhattan U.S. Attorney Charges 41 Defendants In Coordinated Mortgage Fraud Takedown Across New York State (pages 4-5) (Feds describe short sale flipping deals and sale leaseback foreclosure rescue arrangements in one recent indictment of ten suspects; for the indictment, see U.S. v. Bills, et al.),
• Phoenix, Arizona: Foreclosure-Rescue Schemers Indicted (Feds indict pair in alleged scheme abusing HUD "short sale" program to pocket illegal profits by flipping homes facing foreclosure).

(3) See also, What Else Are They Selling? Loan Mods That Turn Into Questionable Short Sales? (begins at page 17 of the recent National Consumer Law Center report, DESPERATE HOMEOWNERS: Loan Mod Scammers Step In When Loan Servicers Refuse To Provide Help):

• In one version of a short sale scam, the realtor and the buyer collude to conceal the full price of the sale from the lender so that they can pocket the difference, often by using option contracts and back-to-back closings. This version is aimed primarily at defrauding the lender, though the homeowner is also hurt by an artificially low sales price, either by being liable on a deficiency or by paying taxes on a higher forgiven balance.
• In another version of a short sale scam, the buyer takes over the mortgage without satisfying the due-on-sale clause and the sale is concealed from the lender. The owner of a We Buy Houses franchise explained at trial that these deals work when the homeowner is only 10% to 15% upside down, because the home is sold to a buyer who cannot qualify for a regular loan and so is willing to pay a premium above fair market value to avoid a credit check. Depending on how the transaction works, the homeowner may be out cash, lose the home, and still end up with a foreclosure on the credit report.

For a story on a questionable arrangement that combines short sales with sale leaseback deals that give short sellers an option to repurchase their homes in the future (presumably without the knowledge of the lender and/or loan servicer approving the short sale), see Short Sales Coupled With Lease-Buyback Option A Way To Help Those Facing Foreclosure Stay In Their Homes?

Would-Be Homeowner Victimized In Rent-To-Own Racket: "If Somebody Says, 'We Finance Homes; Ugly Credit, No Credit,' Don't Buy It! Do Your Research. I Didn't, & I Got Stung!"

In Philadelphia, Pennsylvania, WPVI-TV Channel 6 reports:

• In a special consumer report, Action News helps some families who have fallen victim to a real estate scam and are now on the verge of losing their homes. Action News Consumer Reporter Nydia Han has been investigating the man they say is responsible for their troubles.
  
  It is a heartbreaking situation. They say they invested almost all of their money to own what they thought would be their dream home, but after putting in tens of thousands of dollars, they say they are at risk of losing everything.
  
  "We like it here," said one homeowner. "It's a nice little neighborhood. There are children around they can play with." The father of three, who has asked us to be identified as James, tells Action News he spent $30,000 making his house in Montgomery County a home.
  
  Deneane Grigger says she did the same thing on her home in Delaware County. "Fixing the light fixtures and all kinds of stuff with my money, my hard-earned money that I saved up," she said.
  
  Both say they responded to ads targeting people with Bad Credit, No Credit, or Ugly Credit, and then entered into Rent-to-Own agreements for their homes with Jimmy Zaspel of JimmyZHomes.
  
  "We buy and sell houses and we specialize in selling houses on rent-to-own programs and help people with less than stellar credit realize the dream of home ownership," said Jimmy Zaspel.
  
  James says he gave Jimmy Z a total of more than $50,000, first for rent and then to pay his mortgage. Deneane says she paid out $13,000. Both say their money was wasted.
  
  "I am a single mother with three kids, and I don't have money like that to be wasting," said Deneane. "I am out of everything that I had been saving, thinking that I was finally getting a house that I can fix up and call my own. I've been flim-flammed." The home Deneane lives in was foreclosed on this week.
  
  James is petrified he could lose his home, too, because he says Jimmy Z failed to pay the underlying mortgage. "We just sunk down roots and there's the very real possibility that they could move to foreclose on this property, and I don't have a say in it," said James.
  
  Deneane has filed a lawsuit accusing Jimmy Zaspel and his company, Tulip Enterprises, of negligent misrepresentation, fraud, breach of contract, and violation of the unfair trade practices and consumer protection law.
  
  "I'm just looking for my money back so I can just move on and find another house for me and my family and just be done with it," said Deneane.
  
  Deneane says her house was already in foreclosure when she entered into the Rent-to-own deal with JimmyZ. When asked about it, Zaspel said, "That's what she says. She's mistaken."
  
  Action News asked Zaspel how the home could be in foreclosure when he put it under a rent-to-own agreement? His response, "Well, that's because you're not a real estate investor, are you?"
  
  But consumer advocates say it doesn't take a real estate investor to spot this kind of trouble. Ed Magedson of RipOff Report warns that all renters and home buyers must beware. "This is a tremendous problem around the country," said Magedson. "This is going on everywhere."
  
  "If somebody says, 'We finance homes; ugly credit, no credit,' don't buy it. Do your research. I didn't, and I got stung," said James.(1)
  
  Zaspel says he stopped paying the underlying mortgage on the home James lives in only after James stopped paying him. Both Zaspel and James tell me they plan on filing lawsuits against each other.(2)

Source: Nydia Han tracks down man behind real estate scam.

(1) If the allegations made against Zaspel are true, he may make for a pretty good suspect for, at a minimum, criminal charges of theft by deception/theft by false pretenses and organized fraud, charges that could be brought by local and state law enforcement authorities. The Feds could also be interested in his antics for possible violations of federal conspiracy charges, as well as federal wire and mail fraud charges if he employed telephonic communications or mail delivery in pulling off this racket.

In a similar-sounding case, the Detroit, Michigan Feds recently criminally charged a real estate operator for allegedly using dubious 'land contract' deals to peddle illusory home ownership dreams using houses in foreclosure to unwitting, would-be homebuyers. See Detroit Feds Pinch Notorious Area R/E Operator Suspected Of Screwing Over Naive Homebuyers With Land Contracts On Homes In Some Stage Of Foreclosure. (Reportedly, the victims found the property on Craigslist ads, which in part, lead to the wire fraud charges against the real estate operator. See Real estate investor charged with wire fraud in connection to homes sold through Craig's List).

In addition, the Philadelphia, Pennsylvania Feds (prosecutors that may have jurisdiction in the case reported in the WPVI-TV Channel 6 story, above) have not been reluctant to bring prosecutions involving home ownership-related  ripoffs. See, for example:

• Philly 'Dream-Killing Slumlord' Cops Plea To Loan Fraud In Connection With Rent To Own Racket That Left Wanna-Be Homeowners Screwed Over,
• Use Of Novel Dual Criminal/Civil Prosecution Targeting Sale Leaseback-Peddling Racket Yields Guilty Pleas, Keeps Victims From Getting Boot From Homes.

(2) As a reminder to those who mistakenly believe that these apparent ripoff deals are nothing more than civil cases (as opposed to criminal matters), it is clear that all the sophisticated paperwork in the world (ie. business/purchase contracts, leases, closing statements, etc.) isn't enough to permit scammers to insulate themselves from criminal prosecution when they target their victims with legitimate-looking business propositions when screwing them over. Criminal prosecutors have the authority to "pierce through" such attempts to disguise a blatant criminal real estate ripoff as a common, legitimate business deal.

Clear precedent exists for such a "pierce through" approach to overcome any objections that will certainly arise when the scammers make the argument that the arrangement was just a civil transaction that, if challenged, should be done with a civil lawsuit, not a criminal prosecution. See, for example:

• People v. Frankfort, (1952) 114 Cal.App.2d 680, 700; 251 P.2d 401:
  
  The simple answer to this argument is that "The People prosecuting for a crime committed in relation to a contract are not parties to the contract and are not bound by it. They are at liberty in such a prosecution to show the true nature of the transaction." (People v. Chait, 69 Cal.App.2d 503, 519 [159 P.2d 445]; People v. McEntyre, 32 Cal.App.2d Supp. 752, 760 [84 P.2d 560]; People v. Jones, 61 Cal.App.2d 608, 620 [143 P.2d 726]; People v. Pierce, supra, p. 605.)
  a
• People v. Jones, (1943) 61 Cal.App.2d 608, 620 [143 P.2d 726]:.
  Defendant argues that the deal with each "seller" was a civil transaction; [...] Cloaked in the draperies of his corporation and pretending to act in its behalf, he boldly approached his unsuspecting victims.
  
  [***]a
  Although each deal in its incipiency bore the color and trappings of a normal, civil contract, yet when subjected to a postmortem it exhaled the stench and disclosed the carcass of a fraud. (People v. Epstein, 118 Cal.App. 7, 10 [4 P.2d 555].) There appears no sign of good faith at any turn. Each taking and appropriation was a grand theft.
  The use of the corporate name and the promises made in accomplishing his purpose were a camouflage of such common variety that no excess of genius was required to discern the fraud. Parol evidence of all that occurred was admissible to show the intention of defendant. (People v. Robinson, 107 Cal.App. 211, 221 [290 P. 470].)

Crumbling Infrastructure Forces Shutdown Of 180-Lot, City-Owned Mobile Home Park, Leaves Many Lot-Leasing Homeowners Nearing Homelessness As Houses (Many With Existing Mortgages) Are Too Old To Either Be Safely Moved Or Accepted By Other Parks

In Calgary, Alberta, the Calgary Sun reports:

• Debby Kok had tears in her eyes as she watched crews slowly lift her home from its foundations.
  
  Neatly clad in pink siding and a pleasingly coordinated grey shingle roof, her mobile home sat precariously atop wooden cribbing as workers bolted in place a double-axle set of temporary trailer wheels Wednesday afternoon [August 16].
  
  "This was our home for 13 years," sighed Kok — the latest resident of Midfield Mobile Home Park to pull up stakes ahead of next month's mandatory move-out date.
  
  "It was supposed to be our home forever. It was our retirement — our place to live until we died or had to go into an old folks' home."
  
  It was a little over two years ago when residents of the central Calgary trailer court were blindsided by notices that began appearing on doors: due to crumbling infrastructure, the 180-lot property was to be closed permanently — and everybody had until Sept. 30, 2017, to vacate.
  
  With a little under six weeks left to go, some residents are still finding it hard to move out.
  
  As Kok wipes her eyes, she talks of the work she and her husband lovingly put into their home over the years, including new windows, siding, a roof and extensive interior renovations.
  
  Unable to find space in any local parks, Kok was forced to sell.
  
  Motioning towards her home — now secured on the back of a transport truck — she takes some comfort knowing it'll be a safe and loving home for the family set to move in once it reaches its new destination.
  
  But for now, it's a bitter pill to swallow.
  
  "On the other hand, we're also very lucky because we were able to sell it," she said.
  
  "We were able to get out with being able to pay the mortgage off, but not everybody here is in that position — they have mortgages they can't pay off because the money the city's offering doesn't even come close."
  
  Kok's situation has eluded many of her neighbours, as their units were too old to either safely move or be accepted by other parks, who often put a maximum age on trailers they allow to be moved in.
  
  It's a familiar dilemma for 82-year-old Rudy Prediger, whose home faces the double whammy of being both too old and too big.
  
  "Nobody wants a double-wide," he said, sitting in his nostalgia-packed living room crammed full of memories from an eventful life.
  
  "Most parks won't take double-wides. They take up too much space."
  
  With only six more week before deciding to leave or demolish, many say neither are an option.
  
  "They gave us a list of where we can go — know what's on that list? The homeless shelter, the Mustard Seed … they think we're all homeless here," Prediger said.
  
  "We'll be homeless when they knock them all down."
  
  According to the city, the park's infrastructure has been a concern since the early 2000s.
  
  ***
  Doug Cassidy, Calgary's director of real estate and development services, said 118 of the park's 183 pads currently sit vacant.
  
  "Over 80 per cent have either vacated, or have communicated their plans to move," he said.
  
  "We can't speculate at this point of anybody that won't have vacated (by Sept. 30), but we're continuing to provide extensive support to connect them with appropriate resources."
  
  That includes financial compensation, he said, consisting of a $10,000 lump sum, $10,000 in available moving or demolition funds, and up to $500 to cover legal expenses.
  
  Kok said it's nowhere near that simple.
  
  "The $10,000 closure settlement depends on when the city checks your lot," she said.
  
  "If everything's cleaned up to their satisfaction, then you qualify for a maximum of $10,000."
  
  She also said the moving/demolition allowance depends on city approval of receipts before residents are reimbursed.
  
  "$10,000 against some of the mortgages here is nothing. What are you supposed to do if you have a $40,000 mortgage? You have no place to move your trailer to, you have no place to live. You're going to have it demolished, so now you're having to pay a mortgage for a home you don't even have?"
  
  Prediger said the settlement money from the city is insulting.
  
  "Before I take $10,000 from the city, I'll take nothing," Prediger said.
  
  "Because then, I'm saying it's alright. It's not alright."
  
  "Ten thousand dollars? What can you buy for $10,000? You can't even buy a Volkswagen. That's rent somewhere eight months, and then it's gone."

For the story, see Time running out on Calgary's Midfield Mobile Home Park as closure looms.

See also, Calgary’s Midfield Mobile Home Park resident says city abandoned them, Nenshi says help was offered. aging infrastructure

Unwitting Denver Couple Left Holding The Bag On Recent REO Buy As Foreclosing Lender Unloads Meth-Infected Time Bomb On Young Family

In Denver, Colorado, KMGH-TV Channel 7 reports:

• Josh and Areli LeFevre have spent tens of thousands of dollars renovating a house in the south side of Denver as a new home for their growing family. But they didn’t know the previous tenants cooked methamphetamine in the house until a neighbor brought it up. “We were just outside talking about what we were going to do to the house, and he came up to us and just told us it was a meth lab,” Areli LeFevre said.



• The couple called their Realtor who told them the house had been cleaned up and had a certificate of the cleanup filed with the Denver Department of Environmental Health. But CALL7 Investigators retested the house, finding it still tested positive for the drugs. The attic was 10 times over what the state regulations say are acceptable.



• The LeFevres are at a loss for what to do. "We’re just concerned about it because we have a baby,” Areli said. "We live here. I’m trying to get pregnant again so we’re just mad about it."



• An expert, who testified about meth contamination and clean up at the General Assembly when lawmakers passed the regulations in 2006, said the state certification process does not ensure a house is safe to inhabit. The owner of a meth house must have it cleaned and then that company certifies that the property is safe for people to inhabit. A certificate of the cleanup is filed with the county. But the county never verifies the house was properly cleaned up because the legislature never provided funding to check the houses. And the seller doesn’t have to notify a buyer that there was a meth lab in the house because it is certified as cleaned up.



• The LeFevres’ house wasn’t the only one meth testing consultant Caoimhín Connell found was certified cleaned but still had high levels of meth residue.

***

• The LeFevres’ house was a foreclosure they bought from a bank, and Connell said the banks often have an incentive to get the affidavit and sell the house whether it’s safe or not.



• "My experience is that if (it's) a foreclosure and banks want to move that along, they’re hoping to get someone to issue a letter and say it’s OK even when it’s not OK," Connell said. (Sellers) "hold up that affidavit and say we’re off the hook, we did our best and (the affidavit) may never be seen again."(1)

For more, see Meth May Remain In Homes After Certified Cleaning (CALL7 Investigators Find Meth In Home Despite Certificate With City Saying It's Clean).

(1) For other stories relating to the unwitting purchase of homes infected with methamphetamine residue, see:

• Meth Lab Residue in Homes Triggers Litigation (Lawsuits over contaminated homes focus on failure to disclose issue),
• Lawyer Successfully Squeezes Settlement From Insurer For Client's Damage Claim From Unknown Meth Lab,
• Unwitting Buyer Of Home Used As Meth Lab Wins Lawsuit Against Broker, Seller; Court Orders Rescission, Damages, Attorney Fees,
• Wave Of Meth Lab Home Contamination Litigation On The Horizon?,
• Ohio Woman Unwittingly Buys Home Once Used As Meth Lab; Sues Former Owner While Fighting Foreclosure; Fears Connection To Kids' Chronic Illnesses,
• Minnesota Couple Duped Into Buying Home Once Used As Meth Lab; Arbitration Award A "Pyrrhic" Victory, Lender May Wind Up Holding The Bag,
• Post-Closing Meth Contamination Discovery Keeps Couple From Moving Into 1st Home As 'Wells' Unloads REO Once Used By Squatters As 'Party Pad',
• HUD Left Holding The Bag On Potentially 'Flammable F'closure' As Hazardous Materials Crews Step In, Rip Apart Premises In Search For 'Meth' Chemicals.

Stopping "Stop Foreclosure" Signs On Haverhill City Council Agenda

In Haverhill, Massachusetts, The Eagle Tribune reports:

• [C]ity Councilor William Macek said he's been asked to do something about a recent wave of advertising signs popping up all over Haverhill, especially in the northern part of the city and on streets such as heavily traveled North Avenue that leads to Plaistow, N.H. "I responded to a constituent who is absolutely correct in the amount and usage of telephone poles to advertise," Macek said. "She was referring to a sign about not losing your house and stopping foreclosure. She also commented on, and I've heard the chief mention, that we need strong ordinances to prevent these groups from using our highway ramps to advertise."

For more, see Haverhill targets 'eye pollution' Wave of signs on poles, sides of streets draws complaints.

Go here for other posts on the battle against the ubiquitous "We Buy Houses", "Stop Foreclosure", etc. road signs.

Foreclosed Homeowners Get Premature Boot As Auction Buyers/Investors Rush To Take Possession Of Premises Before Sales Becomes Final; Cops, DA Fiddle In Bringing Criminal Charges

In El Paso, Colorado, The Colorado Springs Business Journal reports:

• As real estate investment heats up and the El Paso County Public Trustee’s foreclosure auctions overflow with anxious bidders, ethics have become a bigger issue.
  
  Those closest to the action say there are regular stories of investors breaking into houses to check them out before the sale, trashing houses after lien holders redeem them, banks sending eviction notices on properties they don’t own yet, and investors going into homes to start remodeling them before they have the title.
  
  That last scenario is actually getting out of hand, said Public Trustee Tom Mowle. “We’ve had a rash lately of what I would characterize as burglaries,” Mowle said. “We’ve had a couple cases lately where people have bought property at sale and immediately go to the house, lock people out and take their stuff.”
  
  Whoever buys a property at the foreclosure auction — an investor or the bank — has to wait eight business days before taking possession of the property. That period allows the bank to discover mistakes and lien holders an opportunity to buy the property even if it already has been sold to an investor.

***

• An El Paso County sheriff’s deputy responded to a burglary call on Sept. 4. Lydia Graham, referred to as Lydia Upchurch in the deputy’s report, said she felt an investor had burglarized her home.
  
  Graham told the CSBJ that she saw a dumpster in front of her property [...] on Monday, Sept. 3, which was a holiday and was only seven business days after her home sold at the El Paso County Public Trustee’s foreclosure auction on Aug. 22. She said there were cabinetry and personal items in the dumpster.
  
  “I was hot,” she said. “I was livid. They went in there without permission and were throwing my things in the trash.” Graham said she hadn’t received any notice that the property had finally sold at auction. She said she had furniture, cutlery, clothes, tile, paint and other home improvement supplies along with a motorcycle stored in the house. “They didn’t have any right to move stuff,” Graham said.
  
  Graham told deputies that the investor, Nikolas Fedorczuk, had called her and told her she could come get her things, but she had to get them before Sept. 4 or he would take possession of them.
  
  Mowle learned of the case Sept. 4 and said it was an upsetting example of recent behavior.

***

• Civil or criminal?
  
  The county deputy who handled the case consulted with the 4th Judicial District Attorney’s office and determined that Fedorczuk had no criminal intent when he went into the house, so they would not file criminal charges. That sets a dangerous precedent, Mowle says.
  
  “In my opinion this is a property crime,” he said. “There’s absolutely no right for anyone to do anything other than secure against theft and damage.” That means fixing broken windows and leaky roofs and locking the doors, he said. It doesn’t mean moving motorcycles into storage facilities or tearing out carpets.
  
  “How is it a civil matter when you’re destroying someone else’s property?” Mowle said. He’s heard enough stories of this kind of thing and he’s sure it happens even more often than he realizes.
  
  “If a property is vacant, I think a majority of investors are going to bet the owner isn’t coming back,” he said. “And unless they contact me, I wouldn’t know about it.”
  
  While the DA’s office might have advised the sheriff’s office that Graham’s particular case is a civil matter, Robin Cafasso, chief deputy district attorney, said not all cases like this will be civil. “We do not have a policy that all cases like this are civil,” Cafasso said. “On the contrary, we would urge law enforcement to investigate it as a burglary.”
  
  In most cases, she said this type of thing probably should be handled as a criminal matter. “How did they get in? If they broke a lock, there’s property damage,” she said. “If they’re taking things out of the home, there’s theft.” She said ignorance of the law is no excuse.
  
  “Anyone buying property in a foreclosure process should know the law,” she said. “There is just no way that someone holding a certificate of purchase holds the right of possession.”

For more, see Burglary? Investors seize houses before they officially own them.

Foreclosure Rescue Sales Voided; Return Of Homes Ordered

A recent article in The Kansas City Star warns against those looking to capitalize on the current problems with home foreclosures throughout the country. Included in the report is a note on Miami, Florida economic crimes prosecutor William Kostrzewski, who reportedly personally goes out and takes down all those homemade signs on the side of the road advertising foreclosure help, "we buy houses", etc. He is quoted as saying, "If there's no sign, there's no victim, there's no investigation, there's no money lost and there's no prosecution. I like it that way." (That's sounds like a pretty good way for him to cut down on his caseload.)

Also in the report is the story of a victimized 75 year old Miami woman who had lived in her home for more than 25 years when an operator named Hencile Dorsey showed up at her home in 2003 offering help with her unpaid $3,000 property tax bill. It wasn't until she tried to get a mortgage on the home some time thereafter that she learned that she had unwittingly conveyed her title to Dorsey and had been making payments on a home that was no longer in her name. She has subsequently developed health problems that it is believed attributable to the ordeal.

In January, 2006, the homeowner, through her attorney, filed a lawsuit to void the title transfer. In February of this year, a judge voided the transfer, returned the property to the victimized homeowner and voided the mortgages that used her home as collateral. Attorney Carolina A. Lombardi, of Legal Services of Greater Miami, represented the victimized homeowner.

A similar story of a case in Bellevue, Washington is also recounted, where the homeowner ultimately fought back, sued the foreclosure rescue operators, and according to the article, the operators:

• "[w]ere found to have committed fraud and violated the state consumer-protection act by engaging in unfair or deceptive business practices. They were ordered to transfer title of the home back to [the victim], reimburse her for the estimated $35,000 she paid in rent and pay her the rent that other tenants had paid on the property since she'd been evicted."

The case is currently being appealed. Attorney Melissa Huelsman of Seattle, Washington, who successfully sued to get the home back on behalf of the victim, said that more than half of her practice now involves defending foreclosure rescue victims.

To read more, see As foreclosures rise, scam artists flourish.

(Editor's Note: To attorneys - Prevailing on allegations that the foreclosure rescue operator violated state consumer protection laws as in this case is one way to open the door to court ordered attorney fee awards to be imposed on the operator, since those statutes typically provide for an attorney fee award to a prevailing plaintiff; and if your state allows for it, a fee enhancement by applying a contingency fee risk multiplier to the base fee calculated by the court).
.

Group Declares "Sign Swiping Day", Removes Foreclosure Rescue Roadside Signs

The Richmond Times-Dispatch reported some time ago on a story about a small group from a Richmond, Virginia fair housing organization who set aside a day, declared it "Sign Swiping Day", and then went around the neighborhoods taking down the "Stop Foreclosure" signs and other such signs that one sees posted on the side of the road that are associated with foreclosure rescue operators. By day's end, between 75 and 100 of the signs were collected. To read more, see Richmonders declare war on lending scams (They take to city streets to remove signs connected to foreclosure rescue scams).

See also, HOME press release: "Sign Swiping Day" Sept 30 in the City of Richmond "trying to stop the foreclosure rescue scam artists". we buy houses

'Head-In-The-Sand' Approach Prevails With Title Insurers, Agents When Dealing With Foreclosed Properties

The San Francisco Chronicle reports:

• Chain of title - proof of who really owns a house - underpins the entire U.S. system of real estate. Broken chain of title due to slipshod paperwork was a serious issue uncovered in the nationwide robosigning scandal and again last month in a city report that found San Francisco foreclosure paperwork riddled with errors. Those revelations draw new attention to title companies, which insure a home's clear title for both buyers and lenders.

***

• When the robosigning issue first exploded on the scene in October 2010, major title insurers briefly stopped writing policies for some foreclosed properties. That could have stopped foreclosure sales cold: Without title insurance, a bank will not issue a mortgage.

***

• But the title insurance industry said its concerns have been addressed and it's not worried about the latest disclosures undercutting the assurances it provides people who buy foreclosed houses from banks.



• "When robosigning first came to light publicly, it caused the industry to pause, almost hiccup for a second, in that would we be able to meet our obligations and protect homeowners who purchased homes out of foreclosure if these irregularities had occurred in the process," said Steve Gottheim, legislative and regulatory counsel for the American Land Title Association, the industry's trade group. "The whole goal of that small period was to get more information. When we had more information, the industry was able to get back to what it does best, insuring title."



• That additional information consisted of finding that some of the paperwork defects were not that egregious and of reviewing legal statutes, he said. "Folks who buy (property) and have no knowledge that there may be some defect in the chain of title are protected very strongly by state law," he said. "Every state provides protection to bona fide purchasers of real property for value."(1)



• It's a high bar for the purchaser to know about a title defect. Media reports, or even government reports like the one produced by Ting, would not be sufficient, he said. Suppose the previous homeowner camps out in front of the house with a sign saying the foreclosure was unjust? "It would take a lot more than picketing the property," he said. "It would take really good evidence and a court order that says it was an illegal foreclosure."



• Gottheim said title insurers are prepared to step up when issues arise. "At the end of the day we are the folks who are going to be on the front lines protecting the new homeowner," he said. "If a homeowner has purchased a title insurance policy and a defect in the foreclosure comes up after the fact, we will stand there and protect them."



• However, he said there has not been a wave of lawsuits by foreclosed-upon people seeking to take back their properties. "They don't have the money to bring these lawsuits," he said. "Even if they have a valid lawsuit and a chance to win, which state law would make very difficult for them, if they did win, they get the house back, but also get back the mortgage which they were unable to pay."

For more, see Robosigning focuses attention on title companies.

(1) What this title insurance industry flack fails to mention (either intentionally, or merely ignorantly) is whether or not one qualifies for protection as a bona fide purchaser does not turn merely on the purchaser's lack of knowledge. It turns on the purchaser's lack of notice, which could be actual notice, constructive notice, or implied notice (in some states, implied notice is considered to be a sub-category of actual notice).

In effect, protection as a bona fide purchaser turns on whether the purchaser either knew or should have known about the defects in the title. And there is at least a school of thought that finds great support in the case law that posits that any defect in a foreclosure action that could have been discerned by a purchaser by a careful review of a foreclosure file (in judicial states) and the recorded documents at the county land title registry (in all jurisdictions) that would have either:

• revealed irregularities in the process, or
• revealed facts that would lead any reasonably prudent person, using ordinary diligence, to make further inquiries concerning possible irregularities. Such a failure to make further inquiries would leave the negiligent purchaser chargeable with notice of what such inquiries and the exercise of ordinary caution would have disclosed. If all the inquiry which due diligence requires is made, and the irregualrity remains undiscovered, the purchaser is excused and is not deemed to be on notice. But a failure to use due diligence leaves the purchaser chargeable, as a matter of law, with notice of every fact (ie. irregularity) which the inquiry would have disclosed.

See, for example, Kordecki v. Rizzo, 106 Wis.2d 713, 317 NW 2d 479 (Wis. 1982), in which the court stated that had the party claiming bona fide purchaser status at a foreclosure sale examined the record prior to purchase, which he did not, the purchaser would have found the lis pendens recorded against the property being foreclosed. The lis pendens, in turn, would have led the purchaser to the county circuit court file on the foreclosure proceedings (the foreclosure court file number is typically noted on the lis pendens), and more specifically to the documents contained in said foreclosure file that, had they been examined, would have placed the purchaser on notice of defects in the process. Accordingly, the court ruled that the purchaser was not entitled to protection as a bona fide purchaser.

See also, Carnation Co. v. Midstates Marketers, Inc., 2 Kan. App. 2d 236, 577 P. 2d 827 (Kan. Ct. of App. 1978), supporting the proposition that an adequate title search of land requires the inspection/examination of a court file which is referred to in a recorded instrument affecting title to land:

• [I]t is apparent that the appellant's argument that he had no notice of the lien is without foundation. The entry on the judgment docket is intended to serve as an index which alerts an interested party that judgment has been rendered. Specific and detailed information regarding the action is located in the appearance docket and the court file.
  
  A reasonably diligent search of the records available to the appellant would have revealed that judgment was entered on September 20, 1973, for that was the date reflected in the appearance docket and the court file containing the journal entry of judgment.

'Involuntary' Probate Scheme That Exploits Obscure Michigan Law To Target Homes Owned By Recently-Deceased Homeowners Uncovered In Southeastern Michigan; Broker Known For Peddling Books On Real Estate Investment Linked To Operation, Says He'll Take His System Across The Country

In Macomb County, Michigan, WXYZ-TV Channel 7 reports:

• When you lose a loved one, often the last thing on your mind is what to do with the home they once lived in. But several local families say before they could do anything with their relatives’ estates, some realtors and attorneys are swooping in to cash in.
  
  “It’s really shady,” said Kristin Bobier Rekowski. Rekowski tells the 7 Investigators that her late father would be furious if he knew what had happened with his home.
  
  When Richard Bobier died last year, Kristin says she had been told his Warren house was worth far less than what he owed on it. “I was just working on getting his belongings out of the house and just trying to salvage what could be salvaged,” said Rekowski.
  
  After the foreclosure process started, Rekowski and her siblings talked about trying to redeem the house and put it up for sale. But before they could do that, somebody else stepped in.
  
  “We were summoned to the court. Someone opened a probate case in his name,” said Rekowski.
  
  That someone is attorney Cecil St. Pierre. St. Pierre is also the Warren City Council President, and he’s a state-appointed Public Administrator who’s authorized to open estates, like Richard Bobier’s, in Probate Court.
  
  An estate is everything you own, such as your house, and your bank account, which are known as your assets. An estate is also everything you owe, including things like your mortgage, or credit card debts.
  
  And when someone dies, even if you have a will, in Michigan the probate courts are in charge of making sure your heirs get what they’re due from your estate.
  
  But if the heirs don’t take certain steps when a loved one dies – after 42 days a Public Administrator attorney can put themselves in charge of the estate.
  
  And that’s what several lawyers and heirs say Cecil St. Pierre has been doing in Macomb County at a rate they’ve never seen before. And he’s not doing it alone. A company called Probate Asset Recovery, or PAR, is often paying the $150 filing fee so St. Pierre can open the estates – a practice other Public Administrators and lawyers call unusual.
  
  When Rekowski received notice from the court announcing that St. Pierre was becoming the Personal Representative of her dad’s estate, she says she had no idea what to do – so she did not fight St. Pierre taking over the estate. She says that meant St. Pierre could dictate which realtor would sell the home. Rekowski says she told him Ralph Roberts Realty would be handling the sale.
  
  Roberts is a Macomb County realtor who literally wrote the book on flipping houses in foreclosure, “Flipping Houses for Dummies.” Roberts sold the Bobier house for a $31,729.52 profit.
  
  Now court records show, one of Roberts’ companies is set to get $3,390 from the estate. But here’s what Kristin wasn’t told about until recently: another company, Probate Asset Recovery, is getting the biggest cut of $10,576.53.
  
  So who owns PAR? That’s exactly what the judge wanted to know at Kristin’s last hearing.
  
  “Is there an owner,” asked Macomb County Circuit Court Judge Kathryn George. “Yes. Ralph Roberts is the owner,” answered PAR Manger Steve Mogdis during that hearing.
  
  That means, between Robert’s other company and PAR, nearly $14,000 will ultimately end up in Ralph Robert’s pocket. Kristin Rekowski and her brothers (after she’s reimbursed for funeral expenses she already paid) will only net $3158.71 each.
  
  “It’s really not fair,” said Rekowski.
  
  Moments after Rekowski’s court hearing last week, I asked Cecil St. Pierre why he’s using a private company’s money to open so many estates.
  
  “I deal with Probate Asset Recovery because they work with Ralph Roberts Realty in order to sell the house on the multi-list and get the top dollar for the asset. We don’t deal with any investors, or do anything other than what’s on the multi-list,” said St. Pierre.
  
  “Well of course they work with Ralph Roberts Realty – they’re owned by the same person,” said 7 Investigator Heather Catallo. “I don’t know – I don’t know who owns PAR,” said St. Pierre.
  
  But the PAR manager had just admitted that Roberts is the owner in court, with St. Pierre present. In fact, St. Pierre and Ralph Roberts go way back – all the way to middle school – and they even once owned property together.
  
  “I’m very fortunate to have Cecil as one of my best friends,” said Ralph Roberts. “Is he your attorney,” asked Catallo. “He’s represented us in the past,” said Roberts.
  
  Roberts says he’s helping people in southeast Michigan, by finding assets they didn’t know about. He says he’s brought $4.5 million dollars into probate estates since 2013.
  
  “You get 1/3 correct,” asked Catallo. “25[%] to a third, depending on what the case is,” said Roberts. “I used to buy these houses and I would get 100% of the profit. And I don’t need to make money anymore, I want to do good for the community.”
  
  “It needs to be stopped,” said attorney Gary Allen. Allen says Robert’s company paid for Cecil St. Pierre to petition to open an estate without contacting his clients (the heirs) first, even though his clients don’t want to sell their late mother’s condo.
  
  Allen says one of the heirs had already been named personal representative in the will.
  
  “I called the public admin almost every day from July 27th through August the 3rd, sometimes twice a day. And he never returned my calls,” said Allen “Not once. Never spoke with him. And so then I was forced to go to court, and my client who lives in Brooklyn, she came in from Brooklyn so that she could appear at the hearing. When we got to the hearing, the Public Admin did not show up for an hour.”
  
  Allen says all that extra time and expense was unnecessary for his client. He said St. Pierre did let his client take over the estate, but then he sent them a bill for $892 to come from the estate, including $187 in filing fees – even though Ralph Roberts company had already paid those costs.
  
  “I think it’s a huge problem,” said Allen.
  
  St. Pierre is also asking the court to grant him $4196.25 in fiduciary and attorney fees on the Bobier estate.
  
  “We follow the law to the T. Dot the I’s and cross the T’s. There’s nothing being done wrong,” said Roberts.
  
  “I haven’t said it was illegal – I asked you if it was the right thing to do,” asked Catallo. “It’s absolutely the right thing. I’m doing great things for thousands of people. I’m getting them money. I’m going to take this across the country. And I’m going to make probate great again,” said Roberts.
  
  Since the 7 Action News started investigating this back in August, the State Attorney General has stepped in to issue new guidelines for Public Administrators. “The allegations and associated case will be reviewed in a thorough and exacting fashion,” said spokeswoman Andrea Bitely.
  
  Both Roberts and St. Pierre insist they’re helping these estates, by turning around the properties to make money for the estate. Roberts also says by selling empty homes, he’s getting the properties back on the tax rolls and fighting blight.
  
  St. Pierre says if an heir wants to take over the estate they can. But estate lawyers tell 7 Action News if the estate is opened formally like this without an heir realizing it, heirs could end up with a bunch of legal fees.
  
  The Attorney General regulates Public Administrators in Michigan (for complaints).

Source: Families say local realtors, attorneys cashing in on estates of their recently passed loved ones.