Saturday, October 06, 2007

Michigan Man Gets 10 Years In Mortgage Fraud Conspiracy

In Michigan, Crain's Detroit Business reports:
  • Safi Sobh, 34, of Dearborn, was sentenced to 10 years in prison by U.S. District Judge Patrick Duggan on his May 15 jury trial conviction for leading a mortgage fraud conspiracy that used inflated appraisals on residential properties and created false applications to obtain millions of dollars in bank loans. [...] Sobh, using his realty company, The Success Group, hand-picked and taught co-conspirators how to commit these crimes, Murphy said. Eight indicted co-conspirators pleaded guilty as corrupt loan originators, processors, appraisers and straw buyers.
For more, see Man gets 10 years for mortgage fraud.

Delaware Contractor Arrested For Allegedly Defrauding Homeowner Of $200K+

The News Journal (Wilmington, Delaware) reports:

  • A 48-year-old Delaware City man has been arrested for allegedly bilking a Middletown homeowner out of more than $200,000 for contracting repairs to her fire-ravaged home, state police said today. Paul Zugehoer, of Clinton Street, was charged last week with felony home improvement fraud and felony issuing a bad check over $1,000. Zugehoer, who was identified as a self-employed insured general contractor for Absolute Equity, was released on $3,000 unsecured bail and ordered to have no further contact with the 48-year-old woman who hired him to do the work.
After paying $226,000 when given an itemized list of expenditures for over $228,000, the victim sought out two independent contractors to appraise the work completed. The first independent contractor estimated that only 20 percent of the work had been completed. The second contractor estimated the value of the 20-25 percent of work completed by Zugehoer as between $100,000 to $125,000. At that point, she contacted state police. For more, see Del. City man charged in home improvement fraud.

Go here for other posts on builders & contractors accused of stiffing customers & subcontractors. contractors stiff subs customers alpha

New Jersey Contractor Convicted Of Stealing $375K+ From Customers

The Asbury Park Press reports:
  • A 47-year-old home improvement contractor from Point Pleasant Beach has been convicted of stealing more than $375,000 from three homeowners, authorities said.
    Following a three-week trial in state Superior Court, Monmouth County, Mark A. Tracey, 47, was found guilty Thursday of five counts of theft by deception and three counts of theft of services. [...] Those homeowners had contracted with Tracey's business for home improvements, including remodeling and new construction. They paid for the work, which was started, but not completed, the news release said. Tracey also did not pay three subcontractors who completed jobs he hired them to perform, according to the Prosecutor's Office.

For more, see Home improvement contractor convicted of taking $375,000 (Man, 47, never did the work).

For press releases from the Monmouth County Prosecutor's Office:

Go here for message board on this story.

Go here for other posts on builders & contractors accused of stiffing customers & subcontractors. contractors stiff subs customers alpha

NJ Consumer Advocates Call For Law To Protect Customer Deposits Paid To Homebuilders

In New Jersey, the Asbury Park Press reports:
  • In the wake of Kara Homes Inc.'s bankruptcy, New Jersey should pass a law that would safeguard home buyers' deposits until the home is complete, a consumer group said last week. A law, modeled after an existing law in California, would change a common practice in which home builders use deposit money to fund their operations. As it stands, if a home builder goes under, buyers risk losing thousands of dollars.

  • [The bankruptcy filing] left many Kara customers in the lurch. Elliot Egenburg, 40, of New York City, put down $220,000 to purchase a Kara home at Crine West in Marlboro. The project's lender, Amboy National Bank, eventually foreclosed on the property, leaving buyers to get reimbursed through bankruptcy court.

For more, see Consumer advocates want law to protect buyers.

Go here for other posts on builders & contractors accused of stiffing customers & subcontractors. contractors stiff subs customers alpha

Friday, October 05, 2007

House OK's "Short Sale" Tax Relief Bill

The New York Times reports:
  • The House approved a measure yesterday to protect borrowers from getting a surprise tax bill from the Internal Revenue Service after lenders foreclosed on their homes.
    The bill, which still must pass in the Senate and be signed by President Bush to become law, would prevent the I.R.S. from taxing any debt forgiven in a foreclosure. The legislation would be retroactive to Jan. 1, sparing many of those who lost their homes to foreclosure this year from a surprise tax bill if their mortgage was canceled.
    The measure passed by a vote of 386 to 27.

For more, see House Passes Foreclosure Aid. short sale income tax

Florida Builders Face Criminal Charges Of Misapplication Of Construction Funds, Grand Theft, Issuing Rubber Checks

According to a recent story in the Daytona Beach News-Journal, the Flagler County, Florida Sheriff's Office has been busy investigating and charging local home builders for taking customers' money and either not performing the work contracted for, or having the work done by a subcontractor, and then not paying the sub for the work. According to the story:
  • Flagler County sheriff's Detective John Gaspar, who led two of the last three Flagler County building company investigations that resulted in arrests, said it appears to be a "trend" that local contractors and builders are involved in mismanaging their customers' money.

  • In August, investigators arrested Gregory Bleyl, owner of Osprey Custom Homes Inc., after they say he bilked 18 Russian and Ukranian immigrants out of more than $700,000. He was charged with grand theft and misapplication of construction funds and remains in the Flagler County jail.

  • And last week, authorities arrested Joseph Fasino, owner of Sandcastle Homes for operating a building scam that also involved liens on customers' homes, bad checks, and misapplication of construction funds, investigators said. Fasino is being held at the St. Johns County Jail on $287,500 bail.

In the most recent case, Herbert Heron and Noel Richardson, owners of Canterbury Estate Homes Inc. and Oxford Title Company Inc. (the company that handled Canterbury's real estate closings), were charged with grand theft, organized fraud, misapplication of construction funds and issuing worthless checks, for, among other things, allegedly taking over $400,000 from more than half a dozen people for work they promised, but never performed. For more, see Home builders charged with multiple felonies (no longer available online).

For related stories on:

  • Gregory Bleyl and Osprey Custom Homes Inc., see Poor economy boosts Flagler crime (no longer available online).
  • Joseph Fasino and Sandcastle Homes, see Another Flagler builder charged with fraud (no longer available online).

Go here for other posts on builders & contractors accused of stiffing customers & subcontractors. contractors stiff subs customers alpha

Gerogia Man Pleads Guilty In Cash Back Scheme

In Georgia, The Augusta Chronicle reports:
  • An Evans man who tried his hand at real estate admitted Tuesday morning that he played a role in a mortgage fraud scheme. Daniel Goodwin, 42, pleaded guilty in U.S. District Court, less than 24 hours after he tried to minimize his participation in a scheme to defraud mortgage brokers.

Goodwin participated in a scheme where, in the purchase of two properties, a co-participant in the deals, Marilyn Swan, was paid about $34,400 off the top for maintenance, management and repairs - services never provided. She then kicked back about $25,300 of that to Goodwin, according to the testimony of an FBI agent.

Swan pleaded guilty this summer to misprision of a felony - knowing mortgage fraud was occurring and helping to hide it. For more, see Man pleads guilty in real estate scam.

More On Proposed "Forced Mortgage Modifications" In Chapter 13 Bankruptcy

According to a U.S. Senate Press Release:
  • United States Senator Dick Durbin (D-IL) introduced legislation [Wednesday] which will allow hundreds of thousands of homeowners to modify their mortgages in bankruptcy to avoid foreclosure. The collapse of the subprime mortgage market has put approximately 2.2 million families in danger of losing their homes. Durbin’s bill, The Helping Families Save Their Homes Act, will allow these families, as a last resort, to file for Chapter 13 bankruptcy and work with a judge and the lender to modify the mortgage so families can make affordable payments and keep their homes.
Similar legislation, called the Emergency Home Ownership and Mortgage Equity Protection Act of 2007, was introduced in the U.S. House of Representatives last week. Among the things Durbin's legislation would do is:
  • Eliminate a provision of the bankruptcy law that prohibits modifications to mortgage loans on the debtor’s primary residence, so that primary mortgages are treated the same as vacation homes and family farms.

  • Extend the time frame debtors are allowed for repayment, to support long-term mortgage restructuring.

  • Waive the bankruptcy counseling requirement for families whose houses are already scheduled for foreclosure sale, so that precious time is not lost as families fight to save their homes.
For more, see Durbin Introduces Bill to Help Hundreds of Thousands of Homeowners Avoid Foreclosure.

See also:

Wells Fargo Spends $19K In Repairs On Foreclosed Home; City Demolishes It Anyway

In Cleveland, Ohio, The Cleveland Plain Dealer reports:
  • Cleveland tore down an empty century home on the city's East Side last month after a bank spent more than $19,000 to fix it up. Wells Fargo Bank of Minnesota complained, but city officials said they had no idea the house was under repair because the bank failed to obtain permits for the work. [...] The city has been on an anti-blight crusade, razing hundreds of abandoned houses at a clip, including the Wells Fargo property on East 98th Street. The bank, which foreclosed on the property, had taken title at a sheriff's sale and was restoring the condemned structure. Contractors had painted the house and repaired its slate roof, gutters and foundation. [...] Today, all that remains on the lot is a sumac tree.

In another Cleveland demolition case, a crew last May knocked down an empty two-family house after a local councilman e-mailed the Building Department asking that it be taken off the wrecking list. A prospective buyer had already fixed the garage and rewired the house.

For more, see Cleveland tears down house that was being fixed up (Cleveland steps up demolition efforts).

NY Lawyer Gets Year In Jail for Stealing $1M+ From Clients' Real Estate Escrow Funds

In White Plains, New York, The Joutnal News recently reported:
  • The more than $1 million that lawyer Eric Kellerman stole from his clients' real estate escrow funds went to pay off gambling debts and home renovations and to stake a harness racing stable. But none of that was for Eric Kellerman. Kellerman, 46, of Yonkers, gave the money to his twin brother, Paul, and two Scarsdale sisters who he said told him God wanted him to give them the money. Paul Kellerman has been sentenced to two years in prison for conspiracy to commit mail fraud. The two sisters, Ann and Mary Martin, have not been charged.

  • [Last week], a federal judge sentenced [Eric] Kellerman to a year and a day in prison for mail fraud and ordered him to repay more than $800,000 to the state bar's Lawyers Fund for Client Protection.

For more, see Yonkers lawyer gets year in prison for stealing clients' money (if link expired, try here).

Other states also have a Lawyers Fund for Client Protection that offers some protection to clients from these types of thefts.sneaky slick escrow agents beta

Thursday, October 04, 2007

Upstate NY Widow Falls Victim To Foreclosure Rescue Operator; Files Suit To Preserve Equity

In Orange County, New York, the Times Herald-Record reports:
  • [A] Long Island man who identified himself as Paul Jean, said he could save [Helen] Wargo's house from foreclosure. She believed him. But now the 64-year-old widow is losing her home. Wargo is among thousands of Americans who have fallen victim to a foreclosure rescue scam. The scam artist usually says he will buy out a family's mortgage and then have them pay rent, according to a study by the National Consumer Law Center. Other predators come in and strip the house of its equity. Many families end up evicted as a result of either scam, according to the study.


  • Wargo has turned to civil courts for help. In a lawsuit filed last year in state Supreme Court, Wargo alleges Jean forged her signature and misrepresented and/or concealed the purpose of documents, including the deed to her house. The lawsuit seeks to get her house back in her name. "Instead of soliciting permission, he bought the house from right under her," said David Maho, Wargo's lawyer. "He left her with nothing."

Reportedly, Paul Jean has disappeared. A phone number on Jean's business card was out of service when called [recently]. Other attempts to contact Jean for comment were not successful. For more, see Widow losing home after foreclosure scheme ('Rescue' scams usually involve mortgage buyout).

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Minnesota Foreclosure Rescue Scammer Cops Plea To Mail Fraud

In St. Paul, Minnesota, the Shakopee Valley News reports:
  • Michael Fiorito, 39, of Prior Lake pleaded guilty to one count of mail fraud in federal court on Tuesday in connection with contriving schemes to skim equity from financially distressed and vulnerable homeowners. Fiorito, who was a mortgage broker, and his assistant, Kristen Louise Jerde, 21, of Eagan, were charged with conspiracy to commit mail fraud, three counts of mail fraud and engaging in a financial transaction with criminally derived property in federal court on June 20. The charges alleged that Fiorito and Jerde sought out and contacted vulnerable homeowners who were in foreclosure or behind on their payments, encouraged the homeowners to refinance or sell their homes and then stole some or all of the proceeds using a variety of schemes. [...] Jerde is expected to enter a plea [this week] in federal court in St. Paul.

In one deal, Fiorito convinced a Duluth woman to sell her home to him as part of a sale and leaseback arrangement to prevent the sheriff’s sale of the home. Upon the closing of the sale, Fiorito intercepted the woman’s equity check for the amount of $36,061.38. Fiorito forged her signature on the delivery receipt and claimed the FedEx envelope that contained the check.
Fiorito coerced the woman into endorsing the equity check to him. He wrote her a check for $2,200, falsely representing the equity in her home after paying him her first month’s rent- stealing $33,861.38. For more, see Prior Lake man pleads guilty in home equity schemes.

For a copy of the grand jury charges, see Indictment - U.S. vs. Fiorito & Jerde.

For other media reports on this guilty plea, see:

Go here for other posts on this case.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Florida Builders Charged With Taking Customers & Subcontractors For $400,000+

The Daytona Beach News-Journal reports:
  • The owners of another Flagler County home building company were booked into jail on multiple first-degree felony charges Tuesday. Herbert Heron and Noel Richardson, owners of Canterbury Estate Homes Inc. and Oxford Title Company Inc. (the company that handled Canterbury's real estate closings), were charged with grand theft, organized fraud, misapplication of construction funds and issuing worthless checks, investigators say. The men landed in jail after more than half a dozen people came forward saying the men took their money, more than $400,000 in total, but didn't provide the home building services they promised.

In addition to not getting what they paid for, in some cases, the customers had to pay twice for work that had been done. Reason: the builders stiffed the subcontractors for work the subs had performed, which resulted in the subs placing liens on customers' homes. The customers had to pay off the liens or risk foreclosure. For more, see Home builders charged with multiple felonies.

Go here for earlier posts on criminally implicated homebuilder Canterbury Estates Homes.

Go here for other posts on builders & contractors accused of stiffing customers & subcontractors. contractors stiff subs customers alpha

California DA Denies Need For Fraud Unit

The Bakersfield Californian reports:
  • [Kern County, California] District Attorney Ed Jagels said Tuesday that, despite recent headlines, he is not convinced real estate fraud is a big enough problem to warrant a special prosecuting unit in Kern County. "We have had remarkably few real estate fraud cases over the years," Jagels said. Jagels was responding to a proposal made Monday by Sen. Dean Florez, D-Shafter, asking the county Board of Supervisors to create a specialized fraud unit within the District Attorney's Office.

  • At least 14 other California counties have enacted similar programs, according to a Florez news release. "We absolutely need this," Florez said in a news conference Tuesday. The delicate, hidden nature of real estate fraud calls for more resources to halt the crimes, Florez said.

Reportedly, Bakersfield real estate appraiser Gary Crabtree has approached DA Jagels with several fraud cases in the past and all of them have been turned down, citing lack of resources in the DA's office as the reason.

(I suspect that robbery and theft at gunpoint or knifepoint is something this DA feels more comfortable prosecuting; the same crimes committed at "pen point" - the way real estate fraud typically goes down, is something this DA seemingly is shying away from.)

For more, see D.A.: Fraud unit not necessary.

For a related story, see Florez calls Kern 'hotbed' of mortgage meltdown (Forum gives victims chance to vent fears).

Go here for other posts on this story.

Illinois Feds Indicted Ex-Mortgage Company Owner In Alleged Flipping Scheme

In Illinois, the Springfield State Journal Register reports:
  • The former owner of a Springfield mortgage company was indicted by a federal grand jury Tuesday for allegedly providing fraudulent financing in a real estate “flipping” scheme in Springfield and Decatur that involved more than $8 million worth of transactions. Dennis R. Schneider, 53, ... who previously owned and operated State Street Mortgage and Finance Co. ..., is accused of brokering more than $3 million in fraudulent real estate sales and financing transactions from 2000 to 2003. Schneider specifically is charged with 11 counts of bank fraud, mail fraud and conspiracy to commit money laundering.
According to the indictment, Schneider helped finance deals involving Decatur businessman Gary Knox, who bought dozens of rundown rental properties, which would then be flipped for more than the homes were worth.

Mortgages were allegedly approved for amounts greater than the properties appeared to be worth, and closing statements showed that Knox sometimes pocketed thousands of dollars from the loans. The loans were then sold off, many times to out-of-state lenders, who were left stuck with them as many of the properties went into foreclosure. Some people who bought rental property from Knox and his associates ended up with multiple foreclosures.

In addition to Knox, 61, of Decatur, Frank Kelly Ciota, 46, of Riverton and Dennis Wiese, Jr., 39, a real estate appraiser from Belleville, were implicated in the scheme. Knox, Ciota and Wiese all have pleaded guilty and are awaiting sentencing.

As far as Schneider goes, each fraud count he faces carries a maximum of up to 30 years in prison; the count of conspiracy to commit money laundering carries a penalty of up to 20 years. For more, see City man indicted for ‘flipping’ real estate (Previously owned State Street Mortgage).

Wednesday, October 03, 2007

Countrywide Financial Running For Cover - Hires Public Relations Firm To Overcome Bad Press

Blogging Stocks reports:
  • After being savaged in The New York Times for dubious lending practices, announcing it will lay-off 12,000 people, and watching its stock price fall from over $45 to $20, Countrywide Financial is hiring a PR firm.

(Not to mention Countrywide CEO Angelo Mozilo pulling down a $142 million/year paycheck last year.)

For more, see Countrywide hires a PR firm.

For the recent New York Times articles on Countrywide Financial, see:

See also:

Federal Investigation Of Bidding Patterns At Maryland Tax Sales Continues

The Baltimore Sun reports:

  • Records turned over to a federal grand jury investigating municipal tax-sale auctions show that two of Maryland's largest tax-sale investors didn't bid against each other for properties during the past four years in Montgomery County. Bidding lists were among documents demanded in the subpoena, which also sought any records from 2002 to 2007 that would show whether bidders communicated with one another about what properties they would bid on and prices they would pay, or about any inducement not to bid on certain properties or not bid at all. The subpoena is part of an investigation being coordinated by the Justice Department's antitrust division in Washington. It was issued on the same day in August that the FBI conducted simultaneous raids at two Baltimore County real estate offices, seeking evidence of restraint of trade in tax sales.
For more, see Probe of tax sale bids (Federal grand jury subpoenas records on bidding patterns).

For earlier story, see Probe targets tax-lien sales (U.S. agents raid 2 area businesses), or try here for prior post.

Arrest Warrant Issued, Lawsuit Filed Against Operator Of South Carolina "Rent To Own" Real Estate Program

In Simpsonville, South Caroloina, WSPA News Channel 7 reports:
  • A warrant has been issued and a lawsuit has been filed against a man running a rent-to-own home company called Buy Now Properties in Simpsonville. [...] The Greenville County Sheriff's Office has issued a warrant for the arrest of Douglas E. Johnson, who ran Buy Now Properties. [One couple] says they paid $12,000 to Buy Now Properties for what they believed was a deposit on a home they thought they were purchasing. They say two months later they were being evicted and they fear the money is gone. [...] That same couple has also filed a lawsuit against Johnson and Buy Now Properties.

For more, see Consumer Investigation: Warrant issued in Buy Now Properties case.

For an earlier report on Buy Now Properties, see Buy Now Properties: From Lease to Loss.

For an earlier post on this story, see South Carolina Real Estate Deals Leaves "Rent To Own" Tenants & Straw Buyers Holding The Bag.

Go here for other posts on "rent to own" scams.

For other stories on tenants unknowingly renting homes in foreclosure, go here, or here, or here. rent to own lease purchase option scams zebra equity skimming unwittingly epsilon

Illinois Regulators Uncover Flipping Operation; Case Forwarded To Feds

In Illinois, the Daily Herald reports:
  • A real estate fraud ring at a high-rise condo building in Palatine has been shut down, a state agency announced Friday. Officials from the Illinois Department of Financial and Professional Regulation say One Renaissance Place was the target of a real estate "flipping" scheme involving 13 condos in the building. Of the units under investigation, nine are in foreclosure, officials said. State officials say a Chicago woman, Radostina Todorova, a real estate broker and loan officer, was at the center of the scheme. Officials said the scheme was uncovered when the building's property manager, Phyllis Peters, filed a complaint with the Mortgage Fraud Task Force in May.
Reportedly, the purported new owners never moved into some of the units nor were they ever even seen, no assessments were paid, and in some cases, the newly purchased units were already in foreclosure after a few months. Todorova's real estate and loan agent's licenses have reportedly been revoked. Brian Angarone, a loan officer who worked with Todorova, has been suspended for 60 days and fined $5,000 for filing the loan documents prepared by Todorova without verifying that the information was accurate, according to state officials. For more, see State busts scheme to inflate condo prices.

West Palm Beach Developer Stiffs Customers Out Of $10 Million In Deposits For Unbuilt Condo

In Florida, The Palm Beach Post reports:
  • Finally, an answer for why a developer won't return about $10 million in deposits to buyers of the unbuilt Palladio Terrace condo: Merco Group says it doesn't have to return the money! Merco Group has been a virtual stone wall when it comes to explaining why it is keeping money from its prospective buyers, even though the company canceled plans for the luxury West Palm Beach condo in January. Buyers have begged, cried and sued to get their money back, mostly to no avail. But in a recent court filing, Merco says that state law allows it to keep deposits for "construction and development," Merco emphasized. We're not exactly sure what "development" means, especially since Merco lawyer Harold Patricoff didn't return a phone call to explain.
A lawsuit on behalf of customers has reportedly just been amended to include civil theft, which carries a possible award of triple damages, plus interest and attorneys fees. For more, see Fight over Palladio deposits rages on.

Go here for other posts on builders & contractors accused of stiffing customers. contractors stiff subs customers alpha

District Of Columbia Considering Statutes To Regulate "Foreclosure Rescue"

The Washington Post ran an editorial on Monday on the Maryland-based foreclosure rescue operator Metropolitan Money Store. There's nothing new on the case itself, but there is a mention that:
  • The D.C. Council is considering a bill to prohibit foreclosure consultant rip-offs in the District. Shepherded by Mary M. Cheh (D-Ward 3), the legislation, which is likely to pass, would outlaw the kind of promise that the Metropolitan Money Store allegedly made and allegedly broke: Hand over the title to your house in return for a bailout. The bill also declares that anyone who engages in the foreclosure rescue business is legally bound to act in the homeowner's best financial interest.

For more, see Foreclosure Fraud (The D.C. Council contemplates a law to prevent it).

Go here for other posts on Metropolitan Money Store.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.). joy jackson

Tuesday, October 02, 2007

Federal Court Denies "Dream Homes" Request To Lift Cease & Desist Order

The Free Lance-Star reports:
  • Metropolitan Grapevine has failed in its attempt to have a federal judge overturn an order to temporarily stop its operations in Maryland. The company, which has an office in Spotsylvania County, got an emergency hearing Sept. 12 in U.S. District Court to protest the Maryland Attorney General's order to stop accepting members in its Dream Homes program until the state holds a hearing. Metropolitan Grapevine officials submitted affidavits to U.S. District Judge Roger W. Titus stating that they are getting numerous inquiries from worried current and prospective investors about the status of the program, and "are hemorrhaging their business goodwill."

As I understand it, the Federal Court's decision doe nothing more than allow the State of Maryland's temporary injunction against Metropolitan Grapevine to continue pending a resolution of their ongoing dispute between them which is currently being litigated in front of the Maryland Securities Commissioner.

The investment program involved in this case is also known as POS Metro Dream Homes. For more, see Dream Homes loses bid to restart business (A federal judge denies Metropolitan Grapevine officials' plea to overturn an order to stop taking new investors into its Dream Homes program).

For a copy of the Federal Court's decision, see Memorandum Opinion - Williams, et al. vs. Lubin, (Securities Commissioner of Maryland).

For other media reports on latest developments, see Mortgage company loses court appeal (Laurel Leader, 10-4-07).

Go here for other posts & links to earlier stories on Metropolitan Grapevine / Metro Dream Homes.

West Virginia Predatory Lending Lawyers "Never Lost a Case"

In Charleston, West Virginia, The Charleston Gazette recently ran a story on the local non-profit law firm Mountain State Justice, who has reportedly represented thousands of West Virginians in predatory lending lawsuits against major financial institutions. An excerpt from the story:
  • Eight years ago, Charleston public interest attorneys Dan Hedges and Bren Pomponio started suing predatory mortgage lenders and brokers. “These companies target elderly and low-income West Virginians and talk them into signing fraudulent mortgage loans they can’t afford,” Hedges said. Their homes are at stake.

  • These are not sophisticated borrowers,” Pomponio said. Most found themselves up against the financial wall because of job loss, old age, medical bills or some other big expense, he said.

  • Their law firm, Mountain State Justice, has filed about 800 cases on behalf of thousands of West Virginians facing foreclosure. Their clients have contended with bogus appraisals, kickbacks to brokers, misrepresentations and outright lies, illegal fees and other fraudulent practices. [...] Hedges and Pomponio take only mortgage cases with clear evidence of fraud. Their success rate? “We’ve never lost a case,” Hedges said. “These cases are that egregious.” He defines success as “getting the loans voided or substantially altered so people can stay in their homes.”

For more, see Recipe for foreclosure: Fraudulent mortgages devastate home-loving West Virginians and fuel national subprime crisis.

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. undo mortgage loans TILA alpha

West Virginia Homeowner Facing Foreclosure In Lawsuit Involving Mortgage Refinance Dispute

In Vienna, West Virginia, the Sunday Gazette-Mail reports on another story of a homeowner who appears to have been screwed over in a mortgage refinance of the family home.

  • For seven years, 78-year-old Jerry Davis made payments on a $36,700 mortgage he and his late wife took out on their home, on land that was part of his parents’ farm. Then in November 2004, he said, he received a monthly bill for $38,000. Pay this month, it said, or face further action. His mortgage contains a “balloon” clause. That means the mortgage-holder can send the borrower a lump-sum bill for the entire remaining debt, after the borrower pays for years. Balloons are illegal under state law, but federal law, which allows them, supercedes state law.


  • Usually, these lenders tell people orally that they can refinance, but they don’t write it into the contract. This time, they did. So Select Portfolio, representing Bank of America, was refusing to honor the contract,” said [attorney] Dan Hedges, who represents Davis. He has filed suit on Davis’ behalf.

Hedges is with the non-profit law firm Mountain State Justice. The financial companies mentioned in this story are Select Portfolio Services (formerly known as Fairbanks Capital Corporation), Bank of America, and EquiCredit. For more, see Their stories: ‘I was sick at my stomach’.

For related West Virginia stories from the Sunday Gazette-Mail, see:

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. undo mortgage loans TILA alpha

Do Big Banks, Mortgage Companies & Loan Servicers Really Lose Big When Subprime Mortgages Are Foreclosed?

According to this blurb in a recent New York Times story, the answer is probably not as bad as they would like everyone to believe:

  • But on the billions of dollars worth of mortgage loans that have been sold to investors [through investment trusts owning pools of residential mortgages] in the last few years, it is not the banks or lenders like Countrywide that are hit with big losses when homes go into foreclosure. It is the sea of faceless investors who own pieces of these trusts. Also, under the trusts’ pooling and servicing agreements, Countrywide and other servicers typically recoup any costs they cover in the foreclosure process, such as legal and appraisal fees.
The real losers appear to be those who invested money (insurance companies, mutual funds, municipal & corporate pension funds, private individuals, etc.) in what Wall Street refers to as Residential Mortgage Backed Securities.

For more, including a story on the problems financially strapped homeowners are reportedly facing when trying to work out their troubled mortgages with large mortgage servicing companies like Countrywide Financial Corporation, see Can These Mortgages Be Saved? (if link expired, try here).

See also, Bay Area Complaints Pile Up Against Countrywide. (CBS 5 - San Francisco)

There is currently a lawsuit against a mortgage servicing company containing allegations which, if true, provides support for the proposition that homeowners aren't the only ones that have cause for concern about allegedly unfair or predatory treatment from mortgage servicers. Mortgage holders such as banks, trusts that own pools of mortgages, investors who own Residential Mortgage Backed Securities (RMBS), and others owning direct or indirect interests in residential mortgages that are serviced by mortgage servicing companies may also have reason for concern about possible unfair practices.

The allegations, if true, go a long way towards explaining why it seems like mortgage servicing companies actually seem to want to drive homeowners into foreclosure.

For a copy of the lawsuit, see Ellington Credit Fund, Ltd. vs. Select Portfolio, Inc., et al. (Plaintiff's First Amended Complaint - 19 counts - 52 pages, 2.35 MB approx.) - available online courtesy of Michael Dillon and

For a prior post that highlights a couple of the allegations in this lawsuit, see Fairbanks Capital Screwing Mortgage Lender Too, Says Lawsuit.
Go here , go here , and go here for posts on questionable mortgage servicing practices. questionable mortgage servicing practices tactics yak

Indiana AG Sues Investor For "Flipping Options" Without A Real Estate License

Indiana Attorney General Steve Carter has filed a lawsuit against Jeffrey L. Radabaugh for the unlicensed practice of real estate. Carter alleges that Radabaugh took nearly $800,000 in assignment fees (ie. "flipping profits") from the sales of real estate involving at least 32 transactions, according to a news release issued by the AG's office.

According to reports, Radabaugh, doing business as J.T. Real Estate Investments, LLC allegedly contracted with numerous property owners in the Fort Wayne, Indiana area for options to purchase their properties at set prices with the ability to sell the option to another if Radabaugh located a buyer. Radabaugh then found straw buyers who agreed to buy the properties for more than the option price, with Raddabaugh pocketing the difference. Allegedly, the prices paid by the buyers were in excess of the market value for the homes and the mortgages obtained to finance the purchases were based on inflated appraisals. In each case, Radabaugh never took title to the homes. He is alleged to have pocketed $797,826 from participating in the sales of at least 32 homes in the last year and a half.

Once the houses were sold to the straw buyers, they then reportedly sold the houses to Radabaugh on land contracts, and Radabaugh managed them as rentals.

Attorney General Carter's position (apparently) is that the "options to buy" negotiated with the original home owners were used as a mechanism (similar to a real estate agent "listing" agreement) to circumvent state law that requires a license for real estate brokering which neither Radabaugh nor J.T. Real Estate Investments, LLC hold. Radabaugh and J.T. Real Estate Investments have been ordered by the court from engaging in the unlawful sale of real estate while the lawsuit is pending.

In addition, the Fort Wayne Journal Gazette has reported:

  • In February, The Journal Gazette identified Radabaugh as the dealmaker behind the sale of more than 100 houses in which mortgage loans were dramatically higher than the sale price.

  • In August, home appraisers Richard Roberts and Jennifer Lyons agreed to voluntarily surrender their licenses for 90 days over allegedly inflated appraisals as part of Radabaugh’s deals. Carter’s office is seeking to remove their licenses permanently.

  • Twelve of Radabaugh’s investors are suing his limited liability company, J.T. Real Estate Investments, in federal court, alleging he owes them a combined $8 million.

  • Although the newspaper had found 10 investors and 124 houses involved, the attorney for the investors suing Radabaugh has said there may be as many as 30 investors and the number of houses involved may be as high as 200.
The Attorney General’s action is based on at least 32 of the transactions and, at least at this time, does not involve any allegation of mortgage fraud and is limited to the issue of selling real estate without a state license. Reportedly, most of the houses are in danger of foreclosure. For more, see:

New Nevada Homeowner Protection Laws Take Effect

KOLO-TV Channel 8 in Reno, Nevada reports that "[n]early 200 new state laws, more than a third of all measures passed by Nevada lawmakers this year, take effect on Monday [October 1]. Among the new laws are two that protect homeowners:
  • AB440 is intended to block bogus real estate deals and ensure that borrowers can afford a home loan. However, unclear wording in the law could make it tougher for some qualified Nevadans to get home loans. Among the real estate transactions the new statute regulates are foreclsoure rescue, sale leaseback transactions, where financially strapped homeowners are asked to sign over their homes and then lease them back as part of "rescuing" them from foreclosure, and it regulates the activities of foreclosure consultants.

  • AB483 which, among other things, increases the amount of equity protected in homestead property from forced sale (except in certain circumstatnces) from $350,000 to $550,000. (Note: In this context, mortgage foreclosures are generally not considered "forced sales" since the homeowner voluntarily signed the mortgage or trust deed, agreeing to a foreclosure or trustee's sale in the event of default).

For the KOLO-TV Channel 8 report, see New Nevada Laws Take Effect on Monday.

Monday, October 01, 2007

Chicago Ex-Con In Trouble Again - This Time For Mortgage Fraud

In Chicago, Illinois, The Chicago Tribune reports:
  • After serving prison stints for rape and armed robbery, Edwin Evans reinvented himself as a financial adviser. Driving around town in a Lexus sedan and pin-striped suit, he promised cash-strapped homeowners that he could help them stave off foreclosure. But after Evans was featured in a 2005 Tribune series on mortgage fraud, federal authorities opened a criminal investigation. On Thursday, prosecutors announced an indictment charging Evans with fraud. Federal prosecutors allege that Evans, 41, used phony documents and bogus credit reports to prepare two home loan applications for a Chicago woman in 2002. A company Evans controlled took unspecified cash payments from those land deals, the indictment said.


  • Evans specialized in controversial bailout deals, in which a homeowner deeded his house to Evans or an investor for a year, believing the reprieve would allow time to get out of debt and repurchase the home with a fresh mortgage. But the home is often lost in the process, not rescued, court records show. Because the houses typically fall vacant, the crime can threaten entire neighborhoods, as well as the homeowners and lenders.

  • With a dollar sign tattooed on his right hand, Evans had an unlikely pedigree as a mortgage broker. As a teenager, he was repeatedly found delinquent for burglarizing his Morgan Park neighbors. He spent 7 years in Illinois prisons for raping a 14-year-old girl, then 4 more for hijacking a delivery truck at gunpoint. Paroled in 1999, Evans went into the mortgage business.
For more, see Lender accused of fraud (Ex-convict used fake documents in mortgage scheme, U.S. says).

Court Allows Lawsuit Against Foreclosure Rescue Operator To Continue; Says Sale Leaseback May Be An Equitable Mortgage

In a lawsuit filed by a financially strapped homeowner against a foreclosure rescue operator to void a sale leaseback of a home that was entered into with the operator, a Virginia Federal Court recently refused to dismiss the homeowners claims under the Federal Truth In Lending Act ("TILA") and related statutes.

The operator requested a dismissal of the TILA claims on the basis that the foreclosure rescue transaction in question was a sale leaseback and did not involve a consumer debt or formal mortgage agreement. The court observed that the State of Virginia recognizes the "equitable mortgage" doctrine, and recognized that the substance of the foreclosure rescue transaction could well be considered an equitable mortgage under Virginia law. If the sale leaseback is recharacterized as an "equitable mortgage", the transaction could be subject to the TILA and related claims. Accordingly, the court rejected the operator's request to dismiss the homeowner's TILA claims, and is allowing the case to proceed.

The homeowner is represented by the firm Bullock & Cooper, Virginia Beach, Virginia. For a copy of the decision, see Opinion & Order - Clemons v. Home Savers, LLC.

For the longer version of this post, see Virginia Federal Court Says Sale Leaseback May Be A Mortgage, Denies Motion To Dismiss TILA Claims.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.). equitable mortgage yak

More NYC Homeowners In Trouble From Subprime Refinancing

The New York Post recently ran a story about a Staten Island family who ran into trouble when they were approved for a second mortgage loan that they couldn't afford. For more, see Foreclosing In (S.I. Family losing House).

The New York Times recently ran a similar story about two Queens families, each of whom are in position to possibly lose their long-time homes to foreclosure due to a subprime refinance (in one case, the home has been in the family for over 30 years; in the other - close to 45 years). For more, see Urban Tactics - Stranger at the Door.

Two NYC Homeowners Regret Doing Business With Foreclosure Rescue Operators

The New York Daily News recently ran a story on two New York City homeowners in the borough of Queens who expressed their regrets for falling for "rescue" arrangements that were purported to "save their home" from foreclosure. Excerpts from the story:
  • The Rodriguez family slammed the door on many shady firms that came by after their foreclosure was made public, but representatives from a company called Real Financial Solutions made them reconsider. "They looked so innocent. They were real, churchgoing people, she said. "I told my husband, 'These people are the real deal.' I really fell for them."

  • The same was true for C.C., 41, who lost her Cambria Heights home when she tried to refinance with a now-defunct company called Action Funding. "They make you feel like they're your friends," she said. "You'd call them to just say, 'How are you doing?' or 'You want to come to my Thanksgiving dinner?' You feel real at home and safe."

  • A state law enacted in February called the Home Equity Theft Prevention Act hopes to decrease the number of new victims by requiring more disclosure. But it can't help those already in trouble.

For more, see Foreclosure 'rescuer' is your best pal - and then he cons you out of home.

For more on equity stripping scams, generally,see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Accounting Requirement For NY Foreclosure Rescue Operators

Under New York State's Home Equity Theft Prevention Act:
  • Within 120 days of either the eviction or voluntary relinquishment of possession of the residence by the Equity Seller, the Equity Purchaser must provide the homeowner (Equity Seller) with cash payments or consideration of at least 82% of the fair market value of the property. The Equity Purchaser also must make a detailed accounting of the basis for the payment amount, or a lack thereof, to the homeowner on a Homeowner Payment Accounting Form and include written documentation of expenses.

Go here for the Homeowner Payment Accounting Form required to be filed under New York law.

Go here for the Instructions for Homeowner Payment Accounting Form.

Go here for Information on the HETPA (both for consumers and the real estate industry).

The statute, the accounting form, the form instructions and the general information are all made available online courtesy of the New York State Banking Department.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

"'Conflict Of Interest" Probe On Wisconsin Supreme Court Justice Expands

(originally posted 9-30-07)
The Wisconsin State Journal reports:
  • A panel investigating conflicts of interest by Wisconsin Supreme Court Justice Annette Ziegler signaled Wednesday that it plans to expand the probe by further examining Ziegler's ties to West Bend Savings Bank and her statements prior to this spring's election about those conflicts. The three-judge panel ordered Ziegler and the Wisconsin Judicial Commission to provide additional information about a reported $2 million in loans Ziegler and her husband received from West Bend Savings Bank, where J.J. Ziegler serves on the board of directors. In their request for additional information, the judges cited media reports detailing potential conflicts of interest beyond those cited by the commission.

For more, see Panel widens Ziegler conflict of interest probe.

For an earlier media report on this investigation, see Commission faults Ziegler, asks for only reprimand.

Go here for copy of complaint against Judge Ziegler.

Go here for Judge Ziegler's response to complaint.

Story update: (5-28-08) Supreme Court reprimands Ziegler. naughty judges

Sunday, September 30, 2007

Cleveland Neighborhood Fast Becoming Ghost Town; "Foreclosure Destabilization" May Be To Blame In Deaths Of Two

Sunday's Washington Post ran a story written by Jim Rokakis, Treasurer of Cuyahoga County, Ohio in which he describes the plight of one Cleveland-area neighborhood. Below is an excerpt:
  • Twenty years ago, the Slavic Village neighborhood of Cleveland was a tightly knit community of first- and second-generation Polish and Czech immigrants. Today, it's in danger of becoming a ghost town, largely because a swarm of speculators, real estate agents, mortgage brokers and lenders saw an opportunity to make a buck there.

  • You could say it was because of them that 12-year-old Asteve' "Cookie" Thomas lost her life on Sept. 1, shot in Slavic Village when she stumbled into the crossfire of suspected drug dealers. The neighborhood wasn't always a haven for criminals -- not until hundreds of foreclosures destabilized the community. Houses (800 at last count) and then entire streets were abandoned. Crime increased as vacant properties offered shelter to people who had a reason to hide.

  • Another victim was Joe Krasucki. On the night of March 15, his 78th birthday, he thought he heard vandals prying the aluminum siding off his house, where he had lived for 40 years. Looters had already ransacked his neighbor's abandoned property -- a fate that awaits the majority of foreclosed houses in cities such as Cleveland. When Joe went outside to investigate, a gang of teenagers beat him so severely that he died a week and a half later.

For more, see The Shadow of Debt (Slavic Village Is Fast Becoming a Ghost Town. It's Not Alone) (if link expired, try here).

Equity Skimming Part Of The Mess For Virginia Beach Landlord

The reported collapse of Virginia Beach-based landlord, CM Development, that has left it facing foreclosure, with outstanding real estate tax debts, and under the jurisdiction of a Federal Bankruptcy Court has left its tenants in a bad spot, according to a recent story in The Virginian-Pilot.
  • "I won't get my security deposit back," [said one tenant] of the $750 she put down 18 months ago when she moved in. "I can't even find anybody to get it back from. So that's it." CM Development was forced into bankruptcy this summer. Its collapse has left some of the region's most vulnerable residents in a difficult spot. Living in houses that are no longer being maintained, renters have found the company also is holding much of their savings in the form of security deposits, making it harder for them to move.


  • In some cases, tenants have been evicted because the company stopped paying water bills or because their house was foreclosed upon. [...] Under Virginia law, landlords must return security deposits within 45 days of a tenant moving out. Some CM Development tenants who moved months ago said they still haven't received their money.

Reportedly, a Virginia-Pilot investigation "revealed that CM Development financed itself by selling its properties repeatedly among a group of about 30 investors (ie. straw buyers), who took out ever larger bank loans in their names. In exchange, the company would pay investors money up front, then agree to manage the properties and pay the mortgages and taxes." For more, see CM Development's bankruptcy leaves many In a bind.

Go here for posts and links to other stories on CM Development and Cary McEntee.

For other stories on tenants unknowingly renting homes in foreclosure, go here, or here, or here. equity skimming unwittingly delta

Foreclosures Leave Tenants In Trouble In Brand New North Carolina Subdivision

In Gibsonville, North Carolina, the Greensboro News Record reports:
  • At least when you rent, you can't lose the roof over your head to a mortgage foreclosure. Can you?

  • Well, that's exactly what is happening to almost two dozen tenants who landed what seemed like a good deal on pre-fab rental homes in a new subdivision east of U.S. 29. Within months of moving in, they recently came home to find the notices .

  • The California-based investor who owns the houses, so new they don't even have grass planted yet, is in foreclosure. The homes will be auctioned off on the courthouse steps in October, and the tenants must move.

  • "There's nobody to call to get my security deposit back," said [one tenant]. "I've got to find a new place, and I'm left with nothing."


  • Tenants said last week they had repeatedly tried to contact the rental agent for refunds of security deposits of $800 to $900 — with no success. "It's a mess," said [another tenant], who like other tenants paid in cash each month to an agent who came to collect the rent. "I thought it was strange. Then when we got these papers, red flags went up."

Reportedly, a new North Carolina law giving tenants in foreclosed property 30 days' notice doesn't take effect until Oct. 1. For more, see Houses of cards: A pre-fab bubble bursts for renters.

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


Postscript: This appears to be one more example of some real estate investors resorting to equity skimming to salvage what they can in an ill-advised real estate investment that they can no longer afford. In such a practice, the landlord pockets the rent from unwitting tenants while stiffing the mortgage lender out of its mortgage payments. The practice continues until the mortgage lender takes over ownership in a foreclosure sale, where it and the tenants find themselves holding the bag (and in many cases, the tenants are out their security deposits).

In light of a recent story out of Minnesota (see Minnesota Builder, Straw Buyers Possibly Involved In Equity Skimming Scam) involving a developer who allegedly either lease-optioned or sold on a land contract a significant amount of his unsold inventory after first selling the newly built homes to straw buyers, I can't help wondering whether the same thing is going on here. The Minnesota developer, Parish Marketing & Development, is reportedly the subject of a current Federal grand jury investigation. equity skimming unwittingly delta

One Group Of Victims In Need Of "Foreclosure Rescue"

The Dallas Morning News recently reported on the plight of one group of victims in need of foreclosure rescue:
  • Some of the saddest victims of the home mortgage meltdown don't walk away when their home goes into foreclosure. Real estate agents who sell foreclosed homes say they sometimes find pets left behind when the owners clear out. They come to the rescue of starving cats abandoned in vacant houses and desperate dogs chained up in overgrown back yards. "I keep dog food and cat food in my car, and leashes," said Connie Zetterlund, a Coldwell Banker agent who sells foreclosed houses. "I'm running out of people to give animals to." Along with left-behind furniture, vandalism and damage done by copper thieves, she and other foreclosure agents occasionally must cope with the pets that people cast off when their houses wind up in foreclosure.

For more, see In foreclosures, pets are often abandoned with home.

Go here for more on pets and foreclosures. copper metal theft zebra

More Trouble With Abandoned Animals In Vacant Building In Foreclosure

In Troy, New York, the Troy Record reports on a dangerous situation that recently confronted a code inspector, an animal control officer and a local cop when inspecting an abandoned building in foreclosure that had an approximately 85-pound pit bull and a puppy in an upstairs bedroom with the door closed:
  • When Animal Control Officer Kevin McDonough and Police Officer Chris McDonald tried to get in the bedroom, the dog attacked, and they were forced to put it down ... . McDonough took the puppy to the Mohawk & Hudson River Humane Society shelter in Menands. It is unclear why the dogs were in the abandoned building, but authorities suspect the building was being used for an illicit purpose, possibly drug related, and the dogs were for protection.

  • There was so much dog feces all over the place [Code Inspector David Sheeran] said he did not even inspect the rest of the building. Crews secured the building and pad locked the doors until they can find the owner. Crews may be forced to don suits and masks and clean out the building, Sheeran said.

For more, see Police shoot attacking dog abandoned in Troy building.

Go here for more on pets and foreclosures. foreclosure side effects zebra

Cops Arrest Alleged Copper Thief At Vacant Foreclosed Home

In Ferndale, Michigan, the Royal Oak Daily Tribune reports:
  • A man paroled from prison last month was charged ... with breaking into a Ferndale house and stealing about 100 pounds of copper pipes. Larry L. Flood, 32, of Detroit, was arrested after neighbors called police a day earlier to report a suspicious man at a recently foreclosed house ..., police said.


  • "The suspect had taken all of the copper pipes out of the basement," [Ferndale Detective John ] Thull said. "He didn't use any cutting tools, he just twisted the pipes around with his hands until the pipes broke." Police have seen a sharp rise in recent years of thieves stealing all kinds of metal they can sell to scrap dealers. The price of copper has jumped more than 300 percent to about $3.50 a pound over the past four years. The theft of aluminum, and especially copper, is a nationwide problem. Thieves have pried copper loose from public utility wires, cell phone towers, air conditioners and even massive electrical transformers at power company substations.
For more, see Man stole copper from foreclosed home, cops say (Suspect was recently released from prison).

Go here for posts on copper & other metal thefts. copper metal theft zebra

Ohio Fire Chief On Vacant Home Fires

In Youngstown, Ohio, the Youngstown Vindicator recently ran a story on Fire Chief John J. O'Neill Jr. and his comments on the reasons for fires in vacant structures.
  • O'Neill said some arsons are a form of vigilante justice when structures on the demolition list are burned by those who want to clean up their neighborhood and don't want to wait for houses to be torn down. Sometimes, kids torch vacant houses "for kicks," he said. Other causes include squatters who light fires to keep warm, those involved in drug activity, and people who take copper pipes and wire, he said.

He asks for patience from local residents stuck living next to vacant eyesores that are scheduled to be demolished and asks that they not set them ablaze instead. For more, see A plea on arson: Stop (Each year, the city typically has 400 structure fires, half deliberately set). copper metal theft zebra