Saturday, March 24, 2007

Alleged Identity Theft Scam Targets The Dead

An alleged Louisiana mother-son-daughter in law team has been charged in an identity theft scam involving the information of over 100 dead people, according to a report in The Times-Picayune.

The mother, an emergency room clerk at Slidell Memorial Hospital, allegedly sent her son text messages with the names, birth dates and Social Security numbers of hospital patients who had recently died or were near death so he could submit fraudulent credit card applications in their names as soon as they died, authorities said.

Robert Ezell and his mother, Rebecca Stockdale, both of Slidell, Louisiana, were booked with 124 counts of identity theft among a slew of other charges. Ezell's wife, Charlotte Cooper-Ezell, accused of filling out some of the fraudulent credit applications, was booked with 84 counts of identity theft.

For the whole story, see Identity theft targeted the dead (Three arrested; more than 100 names stolen)

Disbarred Massachusetts Attorney Pleads Not Guilty

Peter L. Schofield, a disbarred lawyer of Grafton, Massachusetts pleaded not guilty at his arraignment earlier this month to nine charges of stealing about $750,000 from former clients, according to an article in the Worcester Telegram & Gazette. The charges include alleged theft of sale proceeds from real estate transactions. To read more, see Lawyer denies stealing $750K - Not guilty plea to theft charges.

Click here for other posts on the Schofield case.

Home Thieves Zero In On Homes With "For Sale" Signs

Putting a "For Sale" sign on your front lawn could be placing a homeowner's home and personal information at risk, according to a report in CityNews. When a "For Sale" sign goes up on someone's front lawn, scammers will look up the owner's information and use those details to take out a mortgage against the home. To read more, including the story of Toronto, Canada woman Susan Lawrence who had her home stolen from out from underneath her, see Mortgage Fraudsters Targeting Homes With "For Sale" Signs.

Click here to watch the TV report on, or here for other posts on the Toronto home theft.

Friday, March 23, 2007

Junk Mail May Fuel Identitity Theft Problem

A recent survey in Northern Ireland indicates that there may be a connection with junk mail delivery and identity theft, according to a report in the Belfast Telegraph. According to the report, the average Belfast household gets 509 unsolicited letters stuffed into their mailboxes annually; this equates to almost 40,000 in a lifetime.

But in an insurance company-commissioned survey of 4,000 people, 85% of those polled admitted to chucking the junk mail in the garbage unopened - thereby leaving valuable personal information available to dumpster divers, scam artists, and other collectors of garbage. For more, see Junk mail ID theft warning.


New Century Off The Hook On $1 Billion In Bad Loans

New Century Financial Corporation has informed the Securities and Exchange Commission in a filing that it had reached a deal with Barclays Bank PLC that releases New Century from nearly $1 billion in repurchase claims associated with the subprime mortgage lender, according to a report on Housing Wire. For more, see Barclays, New Century Reach Agreement

Mortgage Lenders Facing $100 Million Lawsuit

In a lawsuit filed in November, Countrywide Financial Corp., IndyMac Bancorp Inc. and 23 other defendants were named as defendants by two dozen homeowners in which they are asking for $100 million in fraud damages and a halt in debt collection and foreclosures, according to a Bloomberg News article published in today's Los Angeles Times website. The homeowners recently increased their money damages demand from $50 million.

The homeowners claim that they were duped into borrowing the money and investing the proceeds. To read more, see Countrywide, IndyMac sued by homeowners.

Defending Against Eviction And Voiding Title Transfers In Foreclosure Rescue Transactions

Additional posts are available containing a survey of selected state court cases regarding the application of the equitable mortgage doctrine. These cases could be useful in building a case to both void title transfers and defend against homeowner evictions in foreclosure rescue transactions. See Equitable Mortgage Defense In Homeowner-Tenant Evictions:

California AG Closely Watching Foreclosure Rescue Activity

California State Attorney General Jerry Brown's office is keeping close tabs for reports of activity by foreclosure rescue operators and their offers to financially strapped homeowners facing foreclosure, according to the chief of the AG's consumer law section and reported by Reuters. To read more, see California alert for mortgage rescue scams.

Texas Straw Buyer Scammer Convicted

Vernon Cooks, Jr. a/k/a Jibreel Rashad was convicted on all counts of a federal indictment (one count of bank fraud, seven counts of wire fraud, and six counts of money laundering) that charged him with operating a mortgage fraud scheme in the Dallas area, according to the U.S. Attorney's Office in Dallas.

One other co-defendant who was involved in the same scheme has pleaded guilty and is awaiting sentencing. Co-defendant Deirdre Dione Anderson, who was charged with six counts of wire fraud, was acquitted.

The fraud scheme involved was your basic straw buyer scam involving:

  • Recruiting and paying straw buyers to use their names and credit to purchase homes that Cooks was going to rent to others,
  • Promises that Cooks would pay all closing costs, mortgage payments and taxes associated with the properties until he transferred them out their names, within six months to a year after closing,
  • Use of bogus appraisals to support the inflated sales prices of the homes,
  • Use of fraudulent loan applications and other supporting documents, including fraudulent tax returns, W2s, and employment, rent and deposit verifications, to be submitted to the mortgage lenders so that the straw borrowers would qualify for the inflated loans,
  • Use of the fraudulently-obtained proceeds to pay off the original, bona-fide sellers, keeping the rest of the money for himself,
  • Ultimately defaulting on the mortgage loans in the straw buyers’ names, thereby leaving them stuck "holding the bag."
Source: U.S. Attorney Press Release, Federal Jury Convicts Real Estate Investor In Mortgage Fraud Scheme.

For story update, see Co-defendant in City Hall case sentenced in mortgage fraud (Dallas: House flipper gets 11 years in jail, denies wrongdoing) (The Dallas Morning News - 10-19-07).

Thursday, March 22, 2007

U.S. Senate Hearings On Subprime Mortgage Lending

The U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing today to address the current turmoil in the subprime mortgage market.

Click here for the televised subprime lending Senate proceedings.

Click here for Opening Statement of Chairman Chris Dodd - Hearing on "Mortgage Market Turmoil: Causes and Consequences"

Click here for list of witnesses and links to their prepared statements.

Subprime Mortgage Loan "Autopsies"?

When big Wall Street firms in the business of pooling real estate loans into mortgage-backed securities end up getting stiffed on loans that go sour, did you ever wonder who gets called in to do the "autopsy" on the bad mortgage?

Did you ever wonder who these big firms call in to perform a "physical" on the mortgage loans they're buying before actually buying them in the first place?

A recent Fortune Magazine article, appearing at features Clayton Holdings, described as "a tiny $240 million Shelton, Conn., company that performs an important service: reducing subprime risk for such clients as Bear Sterns, Goldman Sachs, and Morgan Stanley."

When a loan goes bad, the article reports:
  • Clayton's forensic analysts get to work, looking for fraud and other slip-ups that can get its clients off the hook for big investment losses.
(Presumably, only for the loans that go bad after the early payment default / buy-back period expires. After expiration of this period, the Wall Street firm can still generally demand that the mortgage lender buy back the bad loan if there was fraud or underwriting errors involved in originating the loan.)

Before buying a pool of mortgages from a mortgage lender in the first place, the article reports:
  • [W]all Street firms use Clayton to visit lenders and pore through a sampling of the loans they're buying before pooling them into mortgage-backed securities and selling them off to investors.
  • Generally, Clayton tests between 15 percent and 25 percent of the mortgages for sale. (Considering the industry's current mess, Wall Street firms will probably be asking for bigger samples in future securitizations.)
To read more, see CSI: Subprime (Before big Wall Street firms sell off bundles of mortgages, they turn to tiny Clayton Holdings to investigate.)

California Man Charged In Identity Theft Involving Alleged Real Estate Fraud

An Apple Valley, California man, who was arrested in December and charged with identity theft in connection with the purchase of a home and a vehicle using a stolen identity, was charged again last week with six felony charges involving identity theft and forgery using the same stolen identity in connection with three separate escrows he allegedly opened on properties within San Bernadino County, according to a report in the Victorville Daily Press. For more see Apple Valley man charged with identity theft and forgery.

Toronto Woman Victim Of House Theft, Cost $50K To Recover It

A Toronto woman attempting to sell her home had it swiped instead. A "For Sale" sign in her front yard may have made her a target of house thieves. It took her close to a year and $50,000 to get it back. To read the full article reported in The Vancouver Province, see Beware fraudsters stealing homes (You can lose your house without even realizing it).

Wednesday, March 21, 2007

Fremont To Dump $4 Billion In Subprime Mortgage Loans

Fremont General Corporation said today that its investment and loan subsidiary has entered into agreements to sell approximately $4 billion of its subprime residential mortgage loans at an unspecified discount, according to Housing Wire. To read more, see Fremont Unloads $4 Billion in Whole Loans.

To get a view of the current climate in the mortgage lending business from the perspective of a loan originator, see the blog, Blown Mortgage.

Employees Flee New Century Financial Subsidiary

35 employees from the Boca Raton, Florida office of mortgage lender Home 123 Mortgage, a New Century Financial Corporation subsidiary, have left the company and joined Boca-based WCS Lending. Reportedly, most of the remaining employees of Home 123's Boca office have also joined other firms.

Reportedly, the abrupt fleeing came after New Century gave the Home 123 Boca office's division manager a notice to vacate the office and stop accepting loan applications last Friday. To read more, see:

Wells Fargo Lays Off 444 In Subprime Unit

Wells Fargo & Co. is eliminating an additional 444 jobs in their subprime lending division, which stems from their recent decision to tighten up their mortgage lending underwriting guidelines. They cut loose about 70 positions earlier this year. See Wells Fargo cuts jobs, in the Monterey Herald

This news comes on the heels of a layoff of between 400 and 600 at Argent Mortgage Company, see When mortgage workers are axed; watch your back (The Journal News), and a layoff of about 350 people at NovaStar Financial Inc., see NovaStar will cut work force 17 percent (The Kansas City Star).

Editor's Note: articles no longer available online.

Legislation Pending To Require Loan Originator's Name On Mortgages

North Carolina lawmakers are considering N.C. House Bill 313, which would require carrying the name of the mortgage broker or loan originator on the actual mortgage or deed of trust that is recorded in the public records as a way to help the state regulate mortgage loan originators. See Proposed Legislation (Efforts to curb foreclosures) (Charlotte Observer)

Florida Non Profit Law Firm Swamped With Foreclosure Cases

Jacksonville Area Legal Aid is so swamped with foreclosure cases that it can't take on more clients, according to a recent article in The Florida Times-Union, at It has recently asked the city's Housing Commission for a $250,000-a-year grant to hire more attorneys. The Housing Commission also is considering a separate proposal that would let people borrow up to $5,000 at zero interest so they can keep making mortgage payments if an illness, job loss or death in the family puts home ownership in jeopardy. To read more, see Foreclosure cases swamp Legal Aid (Jacksonville is asked to help people keep homes)

Investigation Reveals Questionable Lending Practices In Lawrence

A Boston Globe article published in August, 2006 describes an investigation that Globe staff writers did into mortgage fraud in Lawrence, Massachusetts. They reported that in almost all cases that they examined, "monthly mortgage bills were hundreds of dollars more than borrowers could afford. The buyers soon faced foreclosure and ruined credit ratings that will probably hound them for years." To read more, see Housing dreams turning into nightmares (Mortgage fraud cases detailed in Lawrence)

Washington Loan Officer Gets 68 Months In Mortgage Scam

J. Anthony Hansen, of Tacoma, was sentenced to 68 months incarceration, $70,600 in restitution and a $10,000 fine, according to a recent Press Release from Washington State Attorney General Rob McKenna's office.

He was accused of stealing more than $44,000 from 68 homeowners as part of a program to pay off their mortgages. He used the pretense that he was enrolling the homeowners in a Mortgage Payment Acceleration Program, and charged them on average $600 for the service. In fact, no one was enrolled by Hansen.

To read more, see
Mortgage loan officer sentenced for theft and money laundering.

Tuesday, March 20, 2007

Subprime Mortgage Lenders Lay Off Hundreds

Two subprime mortgage lenders have announced layoffs of several hundred of its employees.

NovaStar Financial Inc. announced a 17 percent reduction of its 2,000-strong work force, which equates to about 350 people in Missouri, California, and Ohio. To read more, see NovaStar will cut work force 17 percent (The subprime lender reacts to the downturn of mortgage market) (The Kansas City Star)

Argent Mortgage Co. has announced the close of its local shop in White Plains, New York and has resulted in layoffs estimated at between 400 and 600 of its employees, who reportedly learned of their fate via e-mail. Shortly after the announcement, the workers were asked to leave the premises, with extra security looking on. To read more, see When mortgage workers are axed; watch your back (The Journal News).

Editor's Note: articles no longer available online.

Another Atlanta Attorney Indicted In Mortgage Fraud

Closing attorney Mary Reagan was arrested and made her initial appearance in Atlanta Federal Court yesterday. She and three co-defendants, Adriene Newby-Allen, aka Cassandra Miller, and Brinson Allen, both of Alpharetta; and James Howard Bailey III, of Houston, have been indicted on charges of conspiracy, bank fraud and wire fraud.

The alleged fraud reportedly involved inflated appraisals, false credit applications, and income, employment and asset misrepresentations.

The government alleges Reagan disbursed loan proceeds in a manner inconsistent with the closing statements (HUD-1) she prepared and also is alleged to have prepared multiple closing statements (double HUD-1 scam). She allegedly received $40,000 in kickbacks.

According to one news report, "Reagan is among a growing number of real estate lawyers being federally prosecuted in Atlanta for closing real estate loans that were found to be fraudulent." In 2005, former Stone Mountain lawyer Chalana W. McFarland got a 30 year prison sentence for her role in a mortgage fraud scheme.

Two other lawyers, Andrew E. Wolf, of Wolf & Associates, and Cumming attorney J. Christopher Halcomb, await sentencing for their roles in another mortgage fraud case.

To read more, see:


Is FHA Going Into The Subprime Mortgage Lending Business?

The answer is a definite maybe. According to recent articles by syndicated columnist Kenneth Harney, the Federal Housing Administration (FHA) "is actually expanding its business nationwide for credit-impaired and first-time home purchasers" and "which recently has seen a doubling of customers refinancing out of private, subprime loans into its insured mortgage programs."

FHA loans do not offer all of the features that the subprime mortgage industry has become known (some would say notorious) for. For example, the maximum loan under FHA is currently just under $363,000 in high cost areas, but reportedly, Federal legislation is expected to be introduced this year that will propose to have the FHA loan limits match the limits of Fannie Mae (FNMA) and Freddie Mac (FHLMC) - currently $417,000. To read more, see
Click here to watch a March 15, 2007 U.S. Senate subcommittee hearing on FHA solvency and reform proposals, and commentary on the subprime mortgage lending problems (Courtesy of C-Span)

More On Subprime Mortgage Lending

For those interested in the current problems in the subprime mortgage lending industry, (be sure you have the most recent version of the Real Player media player) watch the following C-Span TV interviews (no longer available online):
  • C-Span's Washington Journal interview with Doug Duncan, Chief Economist with the Mortgage Bankers Association, who offers his views on the subprime market, and
  • C-Span's Washington Journal's interview with Michael Crittenden, Congressional Quarterly, Reporter, who discusses how federal regulators and legislators are looking at more oversight in the subprime mortgage market as well as reaction from the Federal Reserve and other banking regulators and members of Congress.
For more on the troubled subprime lender New Century Financial Corporation, see:
For other stories related to the trouble in the subprime mortgage lending industry, see:
  • When mortgage workers are axed; watch your back (The Journal News - no longer available online) - Argent Mortgage Company's branch in White Plains, NY lays off hundreds of employees.
  • How Sub-prime Crisis Could Hurt Home Sales (Realty Times)

Federal Fraud Allegations Against Atlanta Attorneys Dismissed

Atlanta Federal prosecutors quietly dismissed mortgage fraud charges last week against attorneys Michael A. Brochstein of the Atlanta firm Brochstein & Bantley and sole practitioner Russell H. Hippe III, according to an article in the Daily Report. They had been under federal indictment since October 2005.

Sharel L. Payne, a third attorney who was indicted along with Brochstein and Hippe, remains under indictment. The government has certified her case as ready for trial along with five other co-defendants, including accused ringleader Nathan Parker. The case involves a now seemingly standard alleged straw buyer, flipping scam (ie. "recruited middlemen [used] to masquerade as fictional, or “straw,” buyers and sellers using fictitious or misappropriated identities, use of faulty appraisals and fictional, quick sales to inflate artificially the value and prices of Atlanta real estate").

To read more, see Charges against two attorneys dismissed (A third attorney who voluntarily surrendered her law license still is under federal indictment in the bank fraud case)


Monday, March 19, 2007

New Jersey AG, Consumer Affairs Director Warn Against Foreclosure Rescue Scams Involving "Surplus Funds"

New Jersey Attorney General Stuart Rabner and Acting Consumer Affairs Director Stephen B. Nolan recently issued a warning to New Jersey residents about a foreclosure rescue scam involving "surplus funds", the money that represents that portion of the sale proceeds of a foreclosure sale that is left over after the proceeds are first applied to paying off the amount owed to a foreclosing mortgage lender and, (apparently) in New Jersey, any unpaid real estate taxes, according to a Press Release from the New Jersey AG's office.

These surplus funds, also referred to as the "surplus money", "excess funds" or "overage" (and possibly other terms), represent the homeowner's equity in his/her home that they are entitled to claim after the foreclosure sale takes place. Therefore, and contrary to what some foreclosure rescue operators will falsely have people believe, when a homeowner loses his/her home in a foreclosure sale, the home equity, if any, is not necessarily lost. If the sale price exceeds the amount owed, the balance (ie. the surplus funds) is typically held in an account by the court that ordered the sale and it simply sits there until the homeowner comes forward and claims it (or until a scam artist comes forward, forges or otherwise tricks the homeowner into signing the necessary paperwork, and steals it - see, for example, Arrests Made in South Florida Foreclosure Scams, involving an alleged theft of foreclosure surplus funds that may have victimized at least 20 Florida homeowners).

Further, because of the significant increase in third party investors attending and bidding at these foreclosure sales throughout the U.S. over the last few years (in large part due to the spike in property values in many parts of the country during the early 2000's; in some part due to the "foreclosure investing" infomercials on late night cable TV), the sale prices at these foreclosure sales have typically come pretty close to full fair market value (unlike the old days when an investor could pick up a pretty good deal at a significant discount at these forced sales). As a result, it has been quite common for there to be surplus funds left over after a foreclosure sale took place and a foreclosing lender got paid off on its outstanding loan.

Due to the fact that many homeowners are unaware of their rights to the surplus money, a profit opportunity is open for both the ethical and the unethical to capitalize on the recovery of these surplus funds. This is the case in spite of the fact that, at least in New Jersey, homeowners can obtain the surplus funds on their own simply by filing a simple form and paying less than $100 (if you're a New Jersey resident, more information is available from the New Jersey Superior Court Trust Fund Unit at 609-292-3937; my guess is that other local court systems throughout the rest of the U.S. have some type of system for assisting homeowners recover their surplus funds).

The unethical and the con artists who have gotten into this area of foreclosure rescue have engaged in one of two forms of this scam (which can be thought of as a creative form of "equity stripping") and which are described in the Press Release. To read more, see Consumers Cautioned About “Surplus Funds” Scams Amid Rising Foreclosure Filings.

For concise, one page brochures warning against scams involving the surplus money left after a foreclosure sale, see:

To read about the recent legal action settled by the Washington State Attorney General against three foreclosure rescue operators involving a "surplus funds" scam, see More On AG McKenna's Settlement With Foreclosure Rescue Operators.

Click here to Watch the TV report on the Washington case on Channel 4 KOMO-TV

Editor's Note:

I suspect that, because of the general downturn in values in the real estate market recently, more and more lenders will be foreclosing on homes on which they're owed more than what the properties are worth; these properties are said to be "upside down". In these cases, the foreclosing mortgage lenders will be stuck buying these "upside down" properties themselves at a foreclosure auction or forced into allowing the properties to be sold to third party bidders at said auction for less than the amount owed. Accordingly, in these cases there will be no surplus funds for homeowners to claim.
(corrected 3-22-07)

1031 Exchange Accomodators, Others Accused in $80 Million Theft

A class action lawsuit has been filed in California against Donald Kay McGhan, 1031 exchange accommodators Southwest Exchange, of Nevada and Qualified Exchange Services, of Santa Barbara, and others containing allegations of theft of over $80 million from 130 people in 12 states, according to a report by the San Luis Obispo Tribune.

This civil lawsuit, filed by the Santa Barbara law firm of Hollister & Brace, claims the money was stolen in a scheme involving "1031" or "tax-free" exchanges of real estate. "1031" is a reference to a provision in the Federal tax law (Section 1031 of the Internal Revenue Code) that essentially says that, if you structure your transaction correctly, you can sell your investment real estate, take the proceeds and reinvest it in, what the tax law refers to as, property of a "like kind" without having to pay immediate capital gains taxes; the tax liability is deferred indefinitely. Part of structuring your transaction correctly involves the use of an independent third party intermediary to hold the sale proceeds from the sale of one property in trust until the reinvestment property is purchased.

The money that was allegedly stolen represents the proceeds of the alleged victims' sales of their investment real estate that was being held in trust by the intermediary and earmarked for reinvestment. Because the funds now aren't available for reinvestment, these investors have not only had their money stolen, but they are now ineligible for the indefinite deferral of their capital gains taxes allowed by the tax law. In other words, they will have to pay immediate capital gains taxes on the profits from their real estate sales and, hopefully for them, they have enough money from other sources to pay it.

Further, the lawsuit indicates that these investors had purchase contracts to buy property that the reinvestment proceeds were earmarked for. Because the money is now no longer available, the investors are liable for contractual damages to the sellers of the reinvestment property for defaulting on the purchase contracts.

Reportedly, the FBI is investigating the possibility of criminality. To read more, see Santa Barbara suit alleges ponzi scheme by breast implant pioneer. sneaky slick escrow agents gamma

Sunday, March 18, 2007

Florida Feds Get Guilty Pleas On Two In "Operation Whose House"

The U.S. Attorney's Office in Miami, Florida obtained guilty pleas this past week from Megan McGuire and Christine A. Brown, two members of an alleged 11 person mortgage fraud ring indicted in November, in connection with an investigation referred to as "Operation Whose House" by Federal investigators.

Authorities decribed the operation as a complex mortgage fraud scheme involving more than thirty (30) properties bought and sold in Broward County. The fraud resulted in the issuance of approximately $10,000,000 in mortgage loans.

According to authorities, the defendants devised a scheme to enrich themselves by obtaining mortgages from lenders using straw purchasers and through the submission of false documentation, including false loan applications, false employment verification forms, false salary statements, and false bank account statements reflecting high account balances. The defendants also used and caused others to use false or stolen Florida’s driver’s licenses, identification cards, and social security numbers as their personal identification at closings to purchase property in the names of individuals whose identification documents had been previously stolen.

To read more, see:

Straw Buyer, Equity Skimming Scam Claims Dozens Of Victims

(Orig. post 3-18-07; revised 6-12-07)
Dozens of victims have reportedly been sucked into the back end of a possible straw buyer scam, according to a report on KMBC-TV Channel 9 website, at Reportedly, homes recently purchased by straw buyers were subsequently rented with an option to buy to the equity skimming scam victims. The victims unwittingly moved in to the homes, made some rent payments, and then found out that the homes were in foreclosure.

In one case, the straw buyer lives in Houston, and has several Kansas City homes in her name.

Dozens of homes have already been sold at foreclosure sales and later this month, more victims will lose their homes as well, according to the report. The FBI is investigating the possible link between the affected homes.

To read more, see Mortgage Scam Claims Dozens Of Victims (Northland Families Evicted From Homes)

For other stories on tenants unknowingly renting homes in foreclosure, go here, or here, or here. alpha

D.C. Resident Tricked Out Of Title To Home; Local Government Eyeing Legislation To Curb Foreclsoure Rescue Scams

The Washington D.C. City Council says it is crafting legislation that will curb foreclosure rescue scams and subprime mortgage money, according to a report on To read more, including a story of a local resident who unwittingly signed away his home, see D.C. Officials Look To Help Homeowners Keep Homes.