Saturday, June 09, 2007

Three Sentenced In Washington State I.D. Theft Operation

A Washington State Federal judge sentenced three members of an organized identity theft ring on Friday, according to a story in The Seattle Times. Rahsaan Moore, 25, (5+ years in prison, $544,000 in restitution) was sentenced for his role in the scheme, which reportedly was to manufacture fake driver's licenses, employee badges and counterfeit checks that he and his cohorts used to fraudulently obtain cash and merchandise. He used personal data that his co-conspirators stole from several institutions — including Virginia Mason Medical Center, Washington Mutual Bank and Seattle Metropolitan Credit Union — where they either worked as insiders or persuaded others to help them.

Also sentenced was Anthony Purdmon, 23, (30 months in prison, $106,500 in restitution) for his role in the conspiracy, which was to have his girlfriend steal information about people applying for home equity loans from Washington Mutual Bank, where she worked. He then passed along the stolen information to Moore so he could perform his handiwork.

Finally, April Tyson, 23, was sentenced (24 months in prison, $32,850 in restitution) for her role, which was to use the phony I.D. to withdraw money from at least three bank accounts. For more, see Forger in ID-theft ring sentenced to 5 years.

Another Home In Foreclosure Goes Up In Flames; Labeled Suspicious

Fire officials in Wilson, North Carolina have determined that a house that burned down and declared to be a total loss was in foreclosure and had been abandoned and left unsecured. They have not, as of yet, declared the fire to be arson, but are labeling the fire as suspicious because there was no electricity or gas at the structure. The home next door, which is also vacant and being held out for rent, sustained some mild heat damage.

Source: The Wilson Daily Times - Officials investigate house fire (Officials are calling a fire that destroyed an abandoned house early this morning suspicious).

Go here for other posts involving fires in foreclosure homes. zebra

ACORN Deal With Lenders To Make Mortgage Loan Workouts Easier

The Boston Herald reports:
  • "The activist group ACORN plans to announce a deal ... with 29 lenders to make it easier for people [who are financially strapped] to seek “workouts.” That’s where banks give those in trouble breaks, such as lower loan rates, to avoid foreclosure."

The plan is designed to cut through all of the red tape when dealing with financial institutions by avoiding dealing with banks’ customer service representatives or collection agents who are generally powerless to negotiate loan workout agreements. The lenders in this deal have agreed to give ACORN names of specific employees to deal with on workouts. Banks are also providing detailed instructions on how people can apply for help.

For more, see ACORN deal with lenders eyes easier ‘workouts’ (no longer available online).

Many Subprime Borrowers Qualified For Prime Mortgage Loans

A recent story in reports that many borrowers who wound up with higher rate subprime mortgage loans actually qualified for lower rate, prime mortgages. Among other things, the story states:
  • "Freddie Mac, a government-sponsored mortgage-loan buyer, estimated that borrowers of 15 to 35 percent of all subprime loans it bought in 2005 could have qualified for prime-rate loans."
  • "Fannie Mae, another government-sponsored loan buyer, estimated up to 50 percent of the borrowers, whose subprimes it bought that year, had credit profiles that could have qualified them for prime rates."

For more, see Wow, I could've had a prime mortgage (Why many borrowers who qualified for prime-rate loans wound up with subprimes instead).

Bank, Mortgage Banker, Mortgage Broker: What's The Difference?

Did you ever wonder what the difference is between a mortgage lender and a mortgage broker? Or that there are companies that advertise that they loan money for real estate, but they are not banks. In a recent column in The Daily Herald, one industry professional gives an explanation. For more, see Who's who in the mortgage industry.

Friday, June 08, 2007

More On 38 Count Arizona Indictment In Alleged Tri-State Mortgage Fraud Ring

The Arizona Federal Court hearing the case charging twelve people with conspiracy, money laundering and fraud for their roles in an alleged mortgage fraud ring stretching from Arizona to Nevada to California unsealed the Federal grand jury indictment last week. Those charged in the indictment are Lutrell Maurice Sharpe, 39, (the alleged ringleader) , Charles Dozzell, 63, of California, and Arizona residents Alonzo Love, 33; Breanna Carmela Davis, 25; Misti Lenoir-Stewart, 28; and Autumn-Leigh Bruce, 24; Nevada residents Micah Bowens, 38; Jennifer Sue Sellers, 29; Marcus V. Dozzell, 33; Gina Marie Greco, 37; and Kristy Lynn Murdock, 28.

For those of you interested in a copy of the indictment in this case, e-mail me at and I'll e-mail it to you.

For story update, see Mortgage Fraud Leaders Sentenced To Prison.

Maryland Man Pays Off Mortgage; Loses Home To Foreclosure Anyway

In this story, reported in yesterday's Baltimore Sun, an immigrant from Ghana and his family lost their home to foreclosure involving a mortgage that they had already paid in full (or so they thought). The problem apparently started with a refinancing of a home mortgage in 2001 with Washington Mutual Bank ("WaMu") (the existing mortgage that was being refinanced, and which is central to the problem in this story, was also held by WaMu - acquired through a bank merger with a predecessor bank). Four years later, claiming that they never received the proceeds from the 2001 mortgage payoff, WaMu forecloses on the property, and the homeowner and his family lose their home.

The factors that make this story as troubling as it is are:
  • WaMu claims that they never recieved the payoff of the existing mortgage from the closing agent back in 2001,

  • However, WaMu was both the existing mortgage holder and the bank providing the refinancing; why they disbursed money to the closing agent on a new mortgage that was only going to be sent back to them anyway as a payoff of the existing mortgage is a question that apparently has no answer - the refinance on WaMu's books could have easily been handled in-house by making the appropriate bookkeeping entries,

  • While there is no evidence that Dwayne E. Pope, owner of Advance Settlement Agency Inc., the now-defunct title company that handled the homeowner's refinancing, did anything improper in this particular case, the less-than-honorable Mr. Pope is currently doing "a 30 month residency" at the Federal Correctional Institution at Fairton, N.J. for embezzling more than $1.6 million in escrow settlement funds on apparently unrelated cases that occurred in 2002 and 2003,

  • Assuming WaMu didn't get paid on the existing refinanced mortgage in 2001, it didn't do anything to immediately seek out the whereabouts of the payoff when the refinancing took place and when the transaction was still fresh in everyone's mind. Rather, they apparently fell asleep on its rights to demand payment until 2005, at which point it woke up from its four year nap and initiated a foreclosure action against the homeowner (at a point in time when the above mentioned closing agent / embezzler Mr. Pope was probably being criminally prosecuted, if not already in prison; I can only speculate that getting the relevant transaction records from someone in Pope's shoes is probably pretty tough, especially if such records may have already been destroyed),

  • The homeowner couldn't prove in court that the mortgage was paid off because of the alleged loss of key documents by the mortgage lender and the now-incarcerated Mr. Pope (for example, the original check for the payoff is missing, and only a copy of the front of the missing check was found),

  • The attorneys for Washington Mutual who foreclosed on the home filed an affidavit saying that it had lost the original promissory note that was signed by the homeowner (legally, the foreclosing mortgage lender is required to present the original promissory note as a prerequisite to foreclosure; but because the vast majority of foreclosures are not contested by the homeowner - usually because they don't know their rights - although many attorneys don't know what rights homeowners have in these situations, either - and they have neither the time or expertise to go out and find an attorney who knows what they're doing, nor the money to pay the attorney if he/she is found, mortgage lenders can typically get away with not presenting the original note in court simply by filing an "affidavit of lost note", knowing that the affidavit will probably go unchallenged),

  • Reportedly, Maryland law puts homeowners at a severe disadvantage in foreclosure cases. Unlike renters in disputes with landlords, or cases involving even the smallest of small claims lawsuits, the law in Maryland reportedly neither guarantees a court hearing in disputes between homeowners and mortgage companies, nor does it require receipt of notice by a homeowner about a foreclosure. In addition, Maryland reportedly has the fastest foreclosures in the country.

  • Proposed legislation was introduced in the Maryland legislature to require at least 30 days' notice and posting of the property before any foreclosure sale. The homeowner in this story actually testified at a state Senate hearing in this regard, giving his story. However, the proposed legislation ultimately failed, although reportedly, it is expected to be reintroduced next year.

For the whole story, see Out of townhouse, but not by choice (Immigrant loses his dream through foreclosure). - Story Page 1, Page 2, Page 3, Page 4.

Postscript - Legal Question

In the "too little - too late" department, I wonder if, given the inexplicable and (in my view, unreasonable) delay by WaMu in waiting four years to initiate the foreclosure action, coupled with the possible difficulty in obtaining all the relevant transaction records from Pope that could have proven that the mortgage payoff was received by WaMu (given Pope's own legal troubles that arose well after the 2001 refinancing), there was enough for the homeowner to assert a defense of laches in the foreclosure action under Maryland law, notwithstanding the fact that the statute of limitations on bringing a foreclosure action may not have expired.

Baltimore Sun Follows Up

I suspect that this story was troubling enough to those over at the Baltimore Sun that they decided to give this story more space in their newspaper today. For one follow-up story and an opinion article related to this story, see:

Help for homeowners (Md. officials vow hearings, reforms on foreclosure) (6-8-07)

The court of Catch- 22 (6-8-07). Kwaku Att Poku

Go here for other posts on this story, including links to media reports. Kwaku Atta Poku

Maryland Homeowner Granted Right To Return Home Until Resolution Of Foreclosure Rescue Lawsuit

By court order, a Glen Burnie, Maryland homeowner and her three children have been granted the right to return to their home pending the resolution of a lawsuit in which she alleges that two business associates perpetrated a foreclosure rescue scam against her, according to a story in The Capital (Annapolis, Maryland). As a condition of the court order, however, the homeowner will have to pay the mortgage and bills, which currently appear unaffordable. "We just won, but it doesn't mean anything," said Michael Gregg Morin, one of the homeowner's attorneys.

Reportedly, the lawsuit charges that Michael W. Powell, of Baltimore, and Amanda Mende, of Linthicum, swindled her out of more than $100,000. Her attorneys claim she paid them more than $50,000 in the past 15 months and they bought her $325,000 house from her for $50,000 less than market value. For more, see Family wins right to go home, but bills still pose problem.

New Hampshire Senate Passes Foreclosure Rescue Legislation

New Hampshire Business Review reports:
  • "In a 23-0 vote, the Senate passed a bill May 31 that would regulate mortgage foreclosure consultants, some of whom offer to “help” those facing foreclosure by getting them to sign over the deed of their house for a rental purchase agreement. Theoretically under such agreements, the homeowner would be able to gain the equity back while living at the home, but because of undisclosed terms, the victim could end up losing the house anyway — and go deeper in the hole as well. As amended in the Senate – at the request of the Banking Department — House Bill 365 would increase disclosure requirements, allow cancellation requirements and implement civil and criminal penalties, including forcing violators to repay equity to the homeowner.

I suspect that House Bill 365 will shortly be going to the Governor to be signed into law. For more, see State House wrap-up: Foreclosure ‘rescues’ targeted.

Ex-Delaware County Official Avoids Fraud & Racketeering Charges; Pleads To One Count of Lying On Loan Application

In Delaware, less than a week before she was to stand trial on racketeering and fraud charges, former New Castle County chief administrator Sherry Freebery decided to plead guilty in Federal court Wednesday to one count of making a false statement on a loan application. Prosecutors dropped remaining racketeering and fraud charges against her. Freebery's guilty plea involved an application for a mortgage refinancing in which she failed to disclose that she had signed a promissory note for a $2.3 million loan. For more, see Guilty plea ends Freebery ordeal (reported in The Delaware News Journal).

For local editorial commentary on the conviction of Sherry Freebery, see Years spent to get Freebery to admit she erred on paperwork.

Thursday, June 07, 2007

More On FBI, IRS Raid Of Sacramento-Area Real Estate Offices

KCRA-TV Channel 3 has provided updated information on its website in connection with raid of the Sacramento area real estate offices by Federal investigators earlier this week related to an investigation of possible real estate and mortgage fraud involving Freedom Capital Mortgage, VFM Investment Group, Lyon Real Estate, Gabriel Viramontes, Jim Martin, Mario Fellini, Joseph Gallo, and Jennifer Huang.

Go here to watch the updated KCRA Channel 3 TV report (no longer available online) (by investigative reporter Josh Bernstein) and go here for Application And Affidavit For Search Warrant, which sets forth the necessary probable cause for the Federal agents to conduct their raid of the real estate offices and homes - about a half dozen locations (Note: this document is a 22.2 MB "monster", just in case you're using a "dial-up" connection).

Go here for prior posts on this story, with links to prior KCRA reports.

P.S. Thanks to one of my Northern California readers for the "heads-up" on this additional information.

Ohio AG Sues Ten Companies Alleging Improper Pressure On Appraisers today reports:

  • "Ohio, the state with the third highest number of foreclosures, sued 10 real estate companies for improperly pressuring appraisers to inflate home values. The companies, based in Ohio, California, Arizona and New York, set specific estimated values on properties and communicated a desired price to appraisers, according to the lawsuits filed by Attorney General Marc Dann today. In Ohio, it's illegal to influence an appraiser. Those sued include seven mortgage brokers, two lenders and an appraiser."

For the whole story, see Ohio Sues Real Estate Firms for Pressuring Appraisers.

Tanking Of Subprime Mortgage Market A Good Thing For Some On Wall Street

On Tuesday, I put up a post regarding possible legal complications that are arising from Wall Street hedge funds that may impact the ability of financially strapped homeowners with subprime mortgages to negotiate with many mortgage holders the modification of the terms of their troubled mortgages (see Legal Complications Arise In Modifying Troubled Subprime Loans).

While, admittedly, I don't have a clue as to how the Wall Street trading strategies involving the subprime mortgage market work, I am reading that there are Wall Street hedge fund investors that have made "indirect bets against the financial health of struggling homeowners" and that stand to make (additional?) fortunes if the subprime market keeps tanking and financially strapped homeowners "default and get thrown out of their homes." Apparently, these investors are now starting to bellyache at the fact that measures are being taken to stabilize this market, with the intent on keeping these financially strapped homeowners from losing their homes (exactly what some of these hedge funds don't want).

In any event, for those who want a better prospective as to what is going on with these hedge funds in the subprime mortgage market context, see The Sure Bet Turns Bad (Funds Howl As Bear Stearns Buys Mortgages) (reported in The Wall Street Journal Online).

For commentary about the millions of dollars that are reportedly flowing into the campaign coffers of presidential candidates from Wall Street hedge funds, and the questioning of whether there is any connection between this reported flow of cash and the desire of these hedge funds to see a continuation of the tanking of the subprime mortgage market, see The Dangers of Democratic Hedging (Not About Iraq) (The Huffington Post).

Go here for links to other blogs on this story. MortgageServicingIssuesAlpha

Delaware Homeowner Victimized In Foreclosure Rescue Scam

In Delaware, The News Journal reports a story of a Wilmington homeowner facing foreclosure who had a "smooth talking savior" appear at her front door offering to bail her out from foreclosure. The foreclosure rescue operator talked the homeowner out of $600 and a signed deed to the home in exchange for a purported promise allowing the homeowner to buy back the home through a 25-year "installment sale". The homeowner found out that the arrangement was a scam when, about a month later, someone from the mortgage company came to her door, told her the house would be sold at a sheriff's sale and offered her $1,000 to move out. For more, see This conference may save your home (Public foreclosure notices invite con artists masquerading as saviors).

Connecticut Real Estate Agency Sued; Predatory Lending, Fraud Alleged

In Connecticut, the New London real estate agency that has been the subject of an investigation by the Connecticut Attorney General involving a possible straw buyer, mortgage fraud scam has now been sued by four former clients for alleged predatory lending, claiming they were defrauded of their money and credit, according to a story by

New London attorney Jason Westcott filed three lawsuits on behalf of the former clients in a Connecticut state court naming the real estate agency Elizabeth Athan Real Estate as the defendant in the lawsuit. This company, which lists loan officer Jose Guzman, real estate broker Elizabeth Athan, and her husband, William Athan, as its principal agents, are also listed as participants in dozens of real estate transactions under investigation by Connecticut Attorney General Richard Blumenthal's office.

For more, see NL Real Estate Firm Target Of Three Lawsuits Alleging Fraud (Company took money and ruined credit, according to complainants).

Go here for other posts on this investigation.

Oklahoma Realtor, 4 Others Convicted In Mortgage Fraud Conspiracy

Edmond, Oklahoma Realtor Theresa Ann Campbell was sentenced Monday in an Oklahoma Federal Court (2 months in jail, 2 years probation, ordered to pay restitution - $52,490 at sentencing and a $4,000 fine) for conspiracy to commit wire fraud in connection with the sale of a home, according to The Edmond Sun. According to the criminal charge filed by Federal prosecutors, Campbell and others were charged with falsely causing the closing statement (HUD-1) to falsely reflect the source of the payment of closing costs, accomplishing this by inflating the purchase price of the home involved by $75,000 more than the price the home was listed in the Realtors' local Multiple Listing Service. In addition, the Oklahoma Real Estate Commission revoked Campbell’s real estate license and fined her $5,000 in March.

For the details of the criminal charge, see USA vs. Campbell.

In separate but related cases, four other individuals pleaded guilty and were convicted in this scheme. They were: Timothy J. McDaniel, of Edmond, Anthony Jew, (ordered to pay restitution - $449,409 at sentencing), also of Edmond, Dalton Joe Alford (8 months in prison, 2 years probation, ordered to pay restitution - $172,500 at sentencing), of Oklahoma City, and Toney Charles Mykel (6 monthes in prison, 1 year probation, ordered to pay restitution - $263,489 at sentencing), of Edmond. For more, see Realtor receives sentence.

Wednesday, June 06, 2007

California Feds Storm Sacramento-Area Real Estate Offices; Seize Records

KCRA-TV Channel 3 in Sacramento, California reports:
  • "More than 20 agents stormed the offices of Freedom Capital Mortgage, VFM Investment Group, Lyon Real Estate and several homes in the surrounding area. During one of the raids in Elk Grove, Gabriel Viramontes was arrested. Viramontes and his business partners Jim Martin and Mario Fellini allegedly falsified millions of dollars in loan applications so investors could qualify for loans they couldn't afford. The FBI and IRS seized hundreds of files, computers and other records. At Freedom Capital Mortgage, they detained Joesph Gallo, the company's president and the mortgage broker who handled almost all of the transactions. At Lyon Real Estate, agents seized records relating to Jennifer Huang, the real estate agent who handled the sale of almost 20 of the homes involved in our investigation."

For more, watch the KCRA-TV report (no longer available online) (by reporter Josh Bernstein). To read the online report, see FBI, IRS Take Action On Mortgage Fraud (Indictments Could Soon Be On The Way).

Go here for prior posts on the KCRA-TV investigation of this case.

North Carolina AG Settles Consumer Protection Lawsuit With Three Builders

In North Carolina, local media outlets are reporting that Charlotte-area builders Dixie Homes (Gastonia), and MCE Properties Inc. and Evans-Davis Inc., (both of Kings Mountain), have agreed to forgive nearly $2 million in second mortgages arranged by a broker accused of deceiving home buyers, according to the office of North Carolina Attorney General Roy Cooper.

A total of 66 second mortgage loans for homeowners in Gaston and Cleveland counties are being forgiven by the three companies and are part of a settlement agreement with the North Carolina AG's office and the Office of the Commissioner of Banks that resolve allegations that the companies violated state consumer protection laws that prohibit the use of unfair and deceptive business practices. The second mortgages were reportedly arranged by Hall Financial Services of Matthews, which, along with its owners, James Markham Hall and Sharese Hall, were accused of making unfair and illegal home loans to consumers in Gaston, Lincoln and Cleveland counties. One third of the 139 mortgage loans Hall Financial made are either in or near foreclosure. All three builders have agreed to cooperate in the ongoing investigation of Hall Financial. For more, see:

California Mortgage Banker Pleads Guilty In Massive Mortgage Fraud

(modified 8-16-07)
Originator Times reports that:
  • "West Los Angeles mortgage banker Richard A. Maize has agreed to plead guilty to federal criminal charges in a massive mortgage fraud scam that caused more than $18.5 million in losses to banks, including his former employer. [...] Maize and five others previously charged in the case were involved in a wide-ranging and sophisticated conspiracy to defraud federally insured mortgage lenders out of tens of millions of dollars. As part of the scam, the conspirators obtained inflated mortgage loans on expensive homes in some of California's most exclusive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills and Malibu. Five people have previously been charged in the scam. They are: Charles Elliott Fitzgerald, 47, of Newbury Park; Mark Alan Abrams, 45, of Long Beach; Nicole LaViolette, 37, of Palm Springs; Jamieson Matykowski, 33, of Laguna Niguel; and Timothy Holland, 35, of Santa Ana. Fitzgerald, who is in custody, is scheduled to go on trial on July 31 on a host of federal charges related to the alleged scheme. The other four previously charged have pleaded guilty to charges related to the fraud scheme and are pending sentencing."

For more, see Top Producing Originator Pleads Guilty In Massive Fraud Scam.

For copies of relevant Federal court documents, USA vs. Maize - Crininal information(Charging document setting forth all criminal allegations made by Federal prosecutors), and USA vs. Maize - Plea Agreement, drop me a line at and I'll e-mail you a copy (be sure and put USA vs. Maize in the "Subject" line). babajian

California Mortgage Broker Pleads Guilty In Mortgage Fraud

(orig. post 6-6-07; revised 7-5-07)
In California, The Monterey Herald reports:
  • "In a real estate fraud case that stretched through nine California counties, Fremont mortgage broker Altaf Abdulrehman Shaikh pleaded no contest Wednesday to charges that he misrepresented home refinance loans to 16 people in Monterey County. As part of a plea agreement with prosecutors in all nine counties involving more than 100 felony charges, Shaikh will be sentenced to one year in county jail and five years felony probation, and will be required to pay restitution. He was facing up to 13 years in state prison."

For more, see Plea Deal In Loan Fraud (Broker to pay restitution, serve year in jail) (no longer available online).

For more on Altaf A. Shaikh (aka Zak Khan), see Mortgage Mess Shines Light on Brokers' Role (Job-Hopping Mr. Shaikh Left Trail of Lawsuits, Failed License Exams).

Two More Sentenced In Colorado Straw Buyer Flipping Scam

In Colorado, The Denver Post recently reported that a Denver Federal judge sentenced Taiwan Lee (30 months) and Talita James (27 months) to federal prison terms in connection with a mortgage fraud conspiracy that devastated the Villas at Cherry Creek neighborhood, a 100 villa, gated community overlooking Cherry Creek State Park, with foreclosures. Both participated in the scheme as straw buyers; the scheme allegedly purchased 17 homes at inflated prices and took $2.1 million from the excess proceeds.

To date, eight people have pleaded guilty to felony charges in a continuing federal investigation. Developer Timothy Todd DeNeui and Jerrold Minney, a real estate broker who helped sell the villas, have denied knowing the buyers were engaged in a fraud conspiracy.

For more, see Two sentenced in mortgage fraud (Taiwan Lee and Talita James get federal prison terms for a scheme that led to foreclosures at Villas at Cherry Creek).

For an earlier Denver Post story on the devestation and subsequent revitalization of the Villas at Cherry Creek community, see Villas close on better future.

Tuesday, June 05, 2007

Abandoned Animals Feeling Foreclosure Fallout

In a recent online story, BusinessWeek Online reports:
  • "The mortgage mess is getting even messier. Literally. Malnourished and flea-ridden animals, feces-covered floors and urine-soaked furniture, piles of rotting garbage, swarms of diseased mosquitoes—these are the horrors that may await the ill-fated sheriff, property inspector, Realtor, or passerby making that first visit to a deserted home."

For more, see Foreclosure's Filthy Aftermath (As foreclosures become more frequent, so do the bizarre and shocking stories of abandoned animals, insect infestations, and deplorable living conditions).

Go here for a BusinessWeek slide show of what people leave behind after they lose their homes to foreclosure.

For one story about 23 animals being found in a foreclosed home during eviction proceedings, see Animals taken from Lake Carmel home recovering.

Go here for more on pets and foreclosures.

Legal Complications Arise In Modifying Troubled Subprime Loans

Possible legal complications are arising on Wall Street that may impact the ability of financially strapped homeowners with subprime mortgage to negotiate with some mortgage holders to modify or otherwise alter the terms of their troubled mortgages. The New York Post reports:
  • "A big hedge fund on one whopper of a winning streak is picking a bitter fight with Bear Stearns over whether renegotiating loans for homeowners struggling with subprime mortgages is fair play. Paulson & Co., an $11 billion hedge fund, has written regulators over concerns that Bear and other investment banks may be engaged "in market manipulation" when the banks' mortgage-issuance units modify loans so that homeowners can avoid foreclosure. The Madison Avenue-based Paulson is ready to do major battle."

Paulson & Co. has made "a multibillion-dollar bet on the decline of the subprime mortgage market, using [sophisticated, Wall Street] trading strategies." Apparently, Paulson & Co. is concerned that the help being sought by and given to homeowners stuck with onerous subprime mortgages in order to avoid foreclosure may cause Paulson's "multibillion dollar bet" to go sour. For more, see Hedge Fund Bear-ish On Subprime Relief.

For a comment on the concerns of hedge funds regarding the assistance being offered to homeowners facing foreclosure who are stuck with subprime mortgage loans, see The Dangers of Democratic Hedging (Not About Iraq), (by Robert Weissman in The Huffington Post). According to Weissman, "The hedge funds have invested in various derivative instruments that pay off when borrowers default and get thrown out of their homes."

Go here for other related posts on mortgage servicing issues. MortgageServicingIssuesAlpha

Defending Consumers In Foreclosure Actions

A number of articles have recently addressed the use of the Federal Truth In Lending Act by attorneys defending homeowners facing foreclosure as a way to undo subprime mortgages where it is alleged that the loan originator failed to fully comply with Federal law when making the loan. For prior posts on this point, containing links to online media reports, see:

Another approach in defending homeowners facing foreclosure is addressed in a recent article in Forbes magazine. Mortgage loans get sold and resold in the open market and, if they end up in the hands of the Wall Street players who issue mortgage-backed securities, the ownership interests in those mortgages will then get "sliced and diced" among short, medium, and long term "investor pools". The focus of the Forbes article is the apparent difficulty many foreclosing mortgage lenders are having in maintaining, keeping track of, and presenting in court the required mortgage loan paperwork when they initiate a foreclosure action, given the number of times the mortgage loans are sold, resold, sliced, and diced.

Stated another way, some attorneys representing homeowners are making an issue of the sloppiness with which foreclosing mortgage lenders maintain their loan paperwork and the sloppiness with which they present their case in court. In one case in Florida, Jacksonville Area Legal Aid lawyer April Charney got a foreclosure filed against her client withdrawn after discovering that the company that filed to foreclose didn't own the mortgage loan that they were attempting to foreclose. The following excerpt from the article reflects the thinking behind this approach in defending homeowners:

  • ""I buy time, then get lenders to cut interest rates and fees," says Charney, who claims she's stopped dozens of foreclosures over ownership issues. Other lawyers are making similar moves in Maryland, New York, Massachusetts, Ohio, Kansas and Washington State--often forcing sloppy lenders to offer generous terms to avoid litigation."

The article goes on to report that Charney "stumbled upon the industry's paperwork problem two years ago after noticing that nearly all lenders seeking to foreclose against clients were filing "affidavits of lost notes."" These affidavits are filed in court by foreclosing mortgage lenders in an attempt to get the judge to, in effect, waive the legal requirement that they present the required paperwork that proves that they, in fact, own the loan they are trying to foreclose.

Reference is also made in the article to prominent foreclosure filer--Mortgage Electronic Registration Systems ("MERS"), a Vienna, Virginia company whose name is reportedly on 30% of the mortgages in county clerk offices around the country, and have been known in the industry as a company that files foreclosure actions in connection with mortgage loans that they may service but do not actually own.

For more, see Paper Chase (You're in luck. Your mortgage lender has flipped, sliced and diced your loan--and now no one knows who holds it).


The carelessness and sloppiness in which some foreclosing mortgage lenders and their attorneys often go about their business when initiating forecloure actions has been observed by at least one Federal bankruptcy judge in Massachusetts. In fact, the judge, Judge Joel B. Rosenthal, "has observed instances in which attorneys representing alleged mortgagees or their servicing agents did not know whether the client was a mortgagee or a serving agent, or how their client came to acquire its role." For more on the apparent cluelessness that some lenders and their attorneys seem to possess as it relates to their legal obligations when initiating a foreclosure action, see Judge Rosenthal's Memorandum of Decision in In re Shwartz, (Bankr. Ct., Ma. April 19, 2007).

For a comment on the significance of a foreclosing mortgage lender's failure to present in court the actual, original promissory note, signed by the borrower / homeowner when bringing a foreclosure action, see "Editorial Note" in my prior post, Dillon Continues Battle Against Alleged Predatory Mortgage Servicer.

For a copy of a court order from a Pinellas County, Florida trial court ruling that the mortgage servicer mentioned above, Mortgage Electronic Registration Systems, Inc. ("MERS") "lacked standing" to bring foreclosure actions on behalf of the actual mortgage holders whose loans MERS was servicing, (and, accordingly, dismissed twenty foreclosure actions that MERS brought on their behalf), see in re Mortgage Electronic Registration Systems, Inc. (MERS), available online courtesy of Mortgage Servicing Fraud .org, at

(Please note that the Pinellas County, Florida trial court decision, the logic of which might still be found to be persuasive in courts outside Florida, has subsequently been reversed by a Florida appellate court. For more on this point, see Mortgage Servicer "Has Standing" To Bring Foreclosure Actions, Say Three Courts.)

Go here for more posts on homeowners who have refinanced into bad mortgage loans and are now using the Federal TILA to try and undo the bad loans.

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here and Go Here. missing mortgage foreclosure docs alpha undo mortgage loans TILA alpha

Homeowners Facing Foreclosure Suing Lender To Undo Mortgage Loans

The Boston Herald recently reported that Rhode Island attorney Christopher Lefebvre "said he is representing 200 current and former Ameriquest homeowners in Massachusetts and other states - many now facing foreclosure - who are suing to undo mortgages taken out through the California-based lender." According to the article:
  • "The homeowners he is representing contend they were either not given all the correct mortgage paperwork, or that it was provided in a confusing or misleading way. Federal and state laws spell out, in minute detail, various disclosure documents mortgage companies are required to give borrowers. Lefebrve contends paperwork problems were common during the recent hectic boom in subprime mortgages. “People got sloppy,” he said."

For more, see Lawyer eyes Ameriquest: Clients: Home loan paperwork faulty (no longer available for free online; the story may be available in the Boston Herald paid archives).

For other posts about homeowners suing their mortgage lenders for violation of Truth In Lending statutes to undo onerous subprime mortgage loans, see:

Florida "No Money Down" Scam Artists Convicted Of Equity Skimming

Florida real estate agent Synthia Ippolito, 37, was convicted last week of scheming to defraud and equity skimming in connection with an abuse of the classic "nothing down" real estate acquisition technique that is commonly promoted at real estate investment seminars. Sentencing is forthcoming and she can receive up to 30 years in prison. A Tampa, Florida area jury took only three hours to reach their verdict. Ippolito's ex-husband, Christopher Nickelson, 45, was convicted in the scheme last year and was sentenced to 15 years in prison.

The real estate investment technique used, which in itself is not illegal (and is about as old as Methusalah's grandmother, notwithstanding what Carleton Sheets, Robert Allen, and the other real estate gurus may lead you to believe) involved seeking out properties that were owned by their owners free and clear of any mortgages (or had extremely low balance mortgages, relative to the property value). Once found, Ippolito and her husband talked the owner into financing approximately half the purchase price themselves by providing "owner financing" (ie. seller financing, holding or "taking back" paper, taking payments, etc.).

They then structured the transaction to make the seller-held mortgage subordinate in priority to a new first mortgage (the article is not expilcit as to whether they talked the property owners into voluntarily subordinating the priority of their seller-held mortgage to the new first mortgage, or whether Ippolito and her husband simply "snuck" a subordination clause into the purchase contract and/or the seller's mortgage without telling them, possibly in collusion with the closing agent). They then obtained a new first mortgage from a private lender to complete the 100+% financing, pocketing cash at each closing.

The final step taken by the scam artists was to rent the homes to tenants, collect the rent, and make a few payments on the mortgages before beginning to "milk the rent" from the properties, stiffing both the private lenders and the former homeowners on their expected mortgage payments and walking away from the properties.

Reportedly, some of the victims lost both their homes and their accumulated home equity altogether while others spent tens of thousands of dollars to get their homes back. For more, see Woman convicted in equity fraud case (She and her husband, who was convicted last year, made about $70,000 in two years) (reported in the St. Petersburg Times).

More On Tenants Unwittingly Renting Homes In Foreclosure

In California, KCRA-TV Channel 3 in Sacramento reports of the problem tenants face when they unwittingly find themselves renting homes on which the landlords are skimming the equity by pocketing the rent without paying on the existing mortgage on the property.

Go here to watch the Channel 3 report (by reporter Lynsey Paulo).

To read the online report, see Call 3: Renters At Risk In Property Foreclosure.

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

Equity Skimming Statutes In Washington State, California, Florida

Equity skimming, which is generally (and very loosely) defined as a situation where a party obtains title to mortgaged property from another (typically with little or no out of pocket investment), and then proceeds to fail to make any mortgage payments while renting out the property (ie. "milking" the rent out of the property) until foreclosure takes place several months later, is the subject of specific statutes in a number of states.

In Washington State, equity skimming, as it is specifically defined by statute, is both a criminal act as well as an unfair or deceptive act or practice and unfair method of competition in the conduct of trade or commerce that is a basis for a civil lawsuit. For more, see Chapter 61.34 RCW - Equity skimming.

In California, the statutes addressing equity skimming (referred to as rent skimming in California) also provide a basis for both criminal prosecutions and civil lawsuits. For more, see Section 890 through Section 894 of the California Civil Code.

In Florida, the statute defining equity skimming provides for criminal sanctions only. The statute does not specifically create a private cause of action for the victim. For more, see Section 697.08, Florida Statutes. (It wouldn't surprise me, however, if such conduct violates the Florida Deceptive and Unfair Trade Practices Act - Section 501.201-501.213, Florida Statutes, which does provide a basis for a civil lawsuit.)

Monday, June 04, 2007

Southeast Missouri Hit With Rash Of Home Title Thefts

KFVS-TV Channel 12 in Cape Girardeau, Missouri has recently reported on a rash of forgeries and other improprieties that is threatening the property ownership of many Missouri residents. In one story, a 78-year-old Sikeston man reportedly had the title to three properties that he owned sold out from under him as a result of a forgery of his signature. According to the story:

  • "Scott County Recorder Tom Dirnberger noticed an unusual pattern in property sales, dating back to 2004. Dirnberger explains is as a three part process: 1. Low-end rental homes are bought 2. The homes are purchased through an out-of-state bank for two to three times their assessed value 3. The homes are foreclosed on just a few months later. Dirnberger [says] he's seen hundreds of properties sold like this, adding up to more than $15 million. In the last few weeks, he's also received several calls from local property owners wanting to check their deeds."

The Sikeston man is currently represented by Missouri attorney Jim Robison, who filed a "petition to set aside deeds and deeds of trust" in order to restore clear title to the three properties in the victim's name. Robison is reportedly also representing three other Scott County property owners, who have also experienced the same problem with forged signatures. For more:

  • watch Part 1 - Channel 12 TV report, (by reporter Kathy Sweeney)
  • watch Part 2 - Channel 12 TV report, or
  • to read online report, see House-jacked in the Heartland.

For another Channel 12 story, this time of a Millersville, Missouri family whose home is threatened with foreclosure due to what appears to be a skimming scam, where payments made by the homeowner to one party (a modular home vendor) weren't ultimately remitted to the mortgage lender who now seeks foreclosure, see:

Go here for other posts on this story.

S. California Man Accused Of Stealing His Grandmother's Home Equity

According to a report by television station NBC 7/39 in San Diego, California:
  • "Jay Ladran, 31, is facing charges of elder abuse and fraud. According to the sheriff's department, Ladran forged his grandmother's signature in order to steal her home. He allegedly borrowed close to $400,000 against the home, which is located in Imperial Beach. The sheriff's department said that Ladran admitted he used some of the money for a down payment on a home, a failed business and on his "sexual compulsions.""

For more, watch the NBC 7/39 TV report (no longer available online).

To read the online report, see (no longer available online) Man Accused Of Stealing Grandma's Cash (Deputies Say Grandson Used Cash On Strippers, Prostitutes)

Mass. AG Issues Emergency Rule Banning Foreclosure Rescue Scams; Sues Attorney / Foreclosure Rescue Operator

In Massachusetts, The Boston Globe reports:

  • "Massachusetts Attorney General Martha Coakley yesterday issued an emergency regulation to ban foreclosure-rescue scams that rob financially troubled homeowners of their properties. The ban extends for 90 days, but Coakley intends to follow up with a permanent regulation to make foreclosure-rescue scams illegal in Massachusetts."
Also in the article is the story of one foreclosure rescue victim who said she lost $96,000 in equity and her Brockton home after signing over her property to attorney Alec G. Sohmer, who offered to help homeowners facing foreclosure save their homes. The victim reportedly stated, "I trusted him, because he's a lawyer".

Reportedly, the attorney general brought legal action last August against Sohmer and his wife, Jennifer, claiming they were offering a foreclosure rescue scam. According to the story:

  • "The state said Sohmer persuaded clients to sell him their properties unwittingly , promising they could stay in them by making payments to him and then "repurchase" them later. When the clients couldn't make the payments, Sohmer tried to evict them and sell the property, the attorney general's office claims."

For more, see:

Florida Non Profit Law Firm Swamped With Calls From Homeowners Facing Foreclosure

In Jacksonville, Florida, The Times-Union reports:
  • "Jacksonville Area Legal Aid, a nonprofit law firm, has been swamped with people seeking help to keep their homes. Since January, the firm has been able to open 26 new foreclosure cases but it has been forced to turn away 152 people because it lacks enough attorneys, [executive director Michael] Figgins said. He said that based on the firm's past success, he figures Jacksonville Area Legal Aid could have been successful in at least 90 percent of the cases that were turned away. Lenders often must make accommodations to homeowners, but the process is so complex that homeowners "run into a brick wall" if they don't have a lawyer representing them, said Lynn Drysdale, an attorney for Jacksonville Area Legal Aid."

For more, see Wait's longer for help with foreclosures (The city's new no-interest loan program won't be ready until fall).

Washington Authorities Investigating Fire Of Home Involved In Foreclosure; Arson Suspected

In Clark County, Washington, The Columbian reports:

  • "A Sifton-area man died Friday of injuries he suffered in a house fire early Thursday that also severely injured his wife. Also Friday, the Clark County Sheriff’s Office said the fire was arson."

Reportedly, the couple was renting the house from Gary Colemansmith, who said he bought the house at a foreclosure auction last October and rented it back to the couple, the former owners. Colemansmith said the wife had given him written notice recently that the couple would be moving out May 31. For more, see Sifton-area man dies from fire injuries; arson blamed. zebra

Another California Appraiser Fighting Mortgage Fraud

In Southern California, the North Country Times reports the story of one local real estate appraiser's efforts to combat mortgage fraud. According to the article:
  • "Real estate appraiser Todd R. Lackner's second job as mortgage fraud investigator began when he stumbled onto a suspicious-looking transaction while online one day last March, he said last week. Within weeks, he was chest-deep in dozens of investigations of suspected mortgage fraud, and was helping federal investigators get the goods on real estate scammers who commit what are known as inflated-sale and-crash schemes, Lackner said."

For more, including how he went about compiling the information on the suspicious transactions for authorities, see Real estate scam emerges -- 'Crash and inflate' method generally leads to foreclosure.

Go here for prior posts on Northern California real estate appraiser Gary Crabtree's efforts to compile and provide authorities with information on suspicious real estate transactions.

Sunday, June 03, 2007

Typo In Mortgage Scam Letter Claims Unintended Victim

In Utah, The Salt Lake Tribune reports that a woman received 75 phone calls over a few days - all mistakenly directed to her cell phone number by what appears to be a typographical error contained in a mortgage fraud scam letter. "I just hope it stops and that I don't have to change my [cell-phone] number," said the accidental victim. For more, including the details contained in the scam letter, see Sorry, wrong number: Scam snares accidental victim (A fake letter meant to deceive mortgage holders somehow gums up cell-phone user's voice-mail).

Pennsylvania AG's Elder Abuse Unit Fast-Tracks Financial Crime Cases Involving Senior Victims

The Pittsburgh Tribune-Review recently ran a story about several financial scammers who preyed on the elderly in scams involving millions of dollars, and the work of the Elder Abuse Unit of the office of the Pennsylvania Attorney General in prosecuting those cases. Included in the cases was that of a Fayette County lawyer accused of stealing more than $100,000 in mortgage settlement payments from older clients. Mark Morrison, 49, of Hopwood, is awaiting trial. The AG's office is targeting these types of cases and encouarges seniors to come forward and report these crimes. For more, see Western Pa. scammers who prey on elderly targeted.

If a Pennsylvania attorney is representing you and screws you out of money or property through dishonest conduct, go to the Pennsylvania Lawyers Fund for Client Security for more information.

For other states, see:

Go here , go here , and go here for other posts on elder financial abuse. zeta elder financial abuse

Hawaii Passes Law To Protect Elderly From One Form Of Home Equity Theft

The State of Hawaii has passed three new laws directed to the protection of its senior citizens from scams, according to the Hawaii Reporter. Included in those laws is HB1336 SD1 (Act 50), which is designed to punish unscrupulous brokers who convince elderly homeowners to sign mortgages that cause them to forfeit the equity in their property or lose their home by imposing fines of up to $10,000 for each violation. For more, see Governor Signs Bill to Protect Hawaii's Seniors from Financial Abuse and Fraud.

Go here , go here , and go here for other posts on elder financial abuse. zeta elder financial abuse

Weekend I.D. Theft Blotter

This week's identity theft related links follow: