Saturday, November 17, 2007

850+ FHA Loans Originated In Alleged Scam End Up In Foreclsoure; Six indicted

The San Bernadino County Sun reports:
  • Four San Bernardino County residents and two other people have been indicted in a mortgage fraud scheme that federal officials said cost the government and private lenders more than $10 million.

  • John Richard Varner, 54, of Hesperia; Stephen Ray Harper, 50, of Ontario; Katherine Ann Kilmer, 52, of Hesperia; Ricardo Bonilla, 46, of Fontana; Abraham Julian Rezex, 59, of Downey; and Richard Elroy Giddens, 67, of Riverside face federal charges of conspiracy, bank fraud and tax violations, according to a news release issued by the Department of Justice.

  • Investigators with the Department of Justice said that from 1997 to 2002, all six ran a scheme out of the Mortgage One Corporation, formerly based in Hesperia, and M-1 Capital Corporation, formerly based in Riverside and Rancho Cucamonga. The companies had been in the business of approving, funding and then selling home mortgage loans, Assistant U.S. Attorney Sheri Pym said. Many of those loans were insured through the Federal Housing Administration, an agency within Housing and Urban Development.


  • HUD has since identified more than 850 FHA-insured loans approved by Mortgage One and M-1 Capital that went into foreclosure and made insurance claims to HUD. The estimated losses suffered by the government and the private lenders are at least $10 million, officials said.

For more, see 6 indicted in mortgage fraud (Officials say scheme cost government, lenders $10M).

See also, U.S. Attorney Press Release.

Friday, November 16, 2007

Bond Revoked For Foreclosure Rescue Operator Facing Criminal Charges; Allegedly Engaged In More Equity Stripping Scams While Awaiting Trial

After being released on bond and awaiting trial (originally scheduled for November 13, 2007) on criminal charges relating to an alleged foreclosure rescue, equity stripping scam that allegedly victimized more than 100 homeowners by stripping them of at least $12 million in home equity, Southern California foreclosure rescue operator Maria Juarez (aka Maria G. Juarez), has been charged again for allegedly engaging in additional equity stripping scams of homeowners facing foreclosure.

She was initially charged back in 2006 by being added as a defendant in a grand jury indictment that was originally handed up in 2005. She was facing charges along with the following four confederates (all from California): Martha Rodriguez, of Downey, Edward Seung Ok, of Torrance, Cynthia Valenzuela, of Downey, Vladimir Stefanovic, of Lancaster. By the summer of this year, her four confederates had agreed to plea guilty and were awaiting sentencing, pending Juarez' November 13 trial (presumably, they were all cooperating with prosecutors and prepared to testify against her).

A superceding indictment adding additional equity stripping charges against Juarez involving transactions occurring after she was released on bond was filed on November 1. Needless to say, she is now in the custody of the U.S. Marshal and is being held with no bail; her November 13 trial has also been postponed. Go here for earlier posts with links to media reports & FBI press releases relating to the initial charges.

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.).

Metropolitan Grapevine / POS Metro Dream Homes Receivership Website

(original post - 11-15-07)
A website has been established by Invotex, Inc., the company who has been appointed by a Maryland state court as the Temporary Receiver to communicate information to the public regarding the Metropolitan Grapevine / POS Dream Homes fiasco. Go here for the POS DH LLC et al in Receivership website.

If you are an investor who has been screwed out of money, you can go here to file an Investor Proof of Claim. Go here for the Instructions for the Proof of Claim.

The receiver is currently attempting to recover the vehicles owned by POS Dream Homes. Anyone with information on the whereabouts of the vehicles owned by POS Dream Homes and used by the individuals associated with it and the related companies is being asked to contact the POS Receiver (this link includes the list of the POS Dream Homes vehicles being sought - includes description, make, model, tag and VIN numbers, and last known location).

Go here for a copy of the latest court Order Freezing Assets And Appointing A Temporary Receiver (11-14-2007). For a list of all the entities covered by the receivership, go to Exhibit A on pages 7-8 of this Order. The list of real property and bank accounts frozen by this order is also in Exhibit A, on page 9.

For earlier court orders and related documents, as well as any and all information currently being made available to the public by the POS Receiver, visit the POS Receiver website.

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

Florida Attorney Disbarred For Swiping $110K From Dead Client; Criminal Charges Pending

In Florida, the St. Petersburg Times reports:
  • The Florida Supreme Court recently disbarred attorney Angelo Cappelli, 37, a former Republican state House candidate from St. Petersburg who is facing charges of grand theft and perjury. Cappelli was one of eight attorneys disbarred statewide by the court, according to the Florida Bar. [...] Cappelli, a wealth and investment adviser at SunTrust Bank, was considered a hot political newcomer.


  • St. Petersburg police arrested Cappelli in August, alleging that he stole $110,500 from the trust account of a deceased SunTrust client. Cappelli's attorney Frank Louderback recently said SunTrust has been reimbursed.

For more, see High court disbars former candidate.

See Theft Of Escrow Funds I and Theft Of Escrow Funds II for other stories of trust account / escrow account theft of funds. sneaky slick escrow agents beta

Iranian National Sentenced In Texas Home Flipping Scam

The Austin American-Statesman reports that Firooz Deljavan, the leader of a sprawling Austin-area real estate scheme that prosecutors say defrauded banks of millions of dollars, was sentenced in a Texas Federal Court Tuesday to five years in prison for conspiracy to commit money laundering and conspiracy to commit bank, wire and mail fraud. According to the story:
  • Deljavan, 56, was the lead defendant among 25 real estate professionals and buyers indicted in 2004. They were accused of submitting fraudulent documents in buying dozens of homes in the Austin area, misrepresenting the value with bogus appraisals and then selling the houses to associates who had secured about $15 million in mortgages. [...] Deljavan's lawyer, Gerardo Montalvo of Houston, said that his client's plea saved the government money in avoiding a trial.


  • Deljavan, an Iranian citizen, fled Austin with his wife, Rosemary Rios, and his brother after the FBI and IRS began investigating them in 2004. Deljavan and Rios were extradited to Austin last year after they were arrested at a border crossing between Turkey and Iran. Turkish authorities refused to extradite Deljavan's brother, a Turkish citizen. Rios pleaded guilty this year to making a false statement to obtain a real estate loan and was sentenced to time served. In addition to Deljavan's brother, one other defendant in the case is a fugitive. One defendant committed suicide after he was indicted, and charges against another were dismissed.

Of the 21 others involved, all were previously sentenced; the two longest sentences assessed were for two years.

For more, see Austin real estate exec gets 5 years in house-flipping scheme (Sentencing guidelines had suggested minimum of 21-plus years).

Oregon Cops Charge Phony Landlord In Rent Scam; Used Craigslist to Lure Victims

In Portland, Oregon, KGW-TV Channel 8 reports:
  • Portland Police arrested a woman for scamming people out of rent or real estate money in a Craigslist scam. Detectives charged 33-year-old Lynne Sisto Tuesday for theft and aggravated theft. She had previously faced similar charges. Investigators said Sisto would contact people looking for places to live through the Web site, and pass herself off as the property owner. Then police said she would get deposit or rent money before the victims realized what had happened.

According to the television report, police estimate that victims were scammed out of over $100,000. Go here to view KGW-TV Channel 8 video report.

To read online report, see Woman accused of elaborate Craigslist house sale scam.

See also, Woman Posing As Landlord Arrested Again (KPTV Channel 12).

Go here for other stories on prospective tenants being scammed out of rent money when looking to rent a home. unwitting tenant rent scam zebra

$20M+ Escrow / Check Kiting Scam Lands NY Attorney Ten Year Prison Sentence

In Westchester County, New York, The Journal News reports:
  • Anthony Bellettieri thought he could make the numbers add up. The Harrison real estate lawyer played the float between his firm's two accounts, writing checks in an amount that gave the appearance that the more than $20 million he stole was still there. He gambled he could beat the system. But there was one number Bellettieri didn't take into account in the scheme: 60. That's how many victims have come forward to say they lost the money they entrusted to Bellettieri, money that turned up gone when the scheme went belly up.
  • One of Bellettieri's victims sat with more than 20 friends and family members during the sentencing. Another victim, 81-year-old Michael Williams of Harrison, also was in court. He lost $200,000 he was supposed to get when he refinanced his home to help his grandson buy a house. His daughter, Deborah Annunziata, told [Federal District Court Judge Charles] Brieant the theft has had a terrible impact on her family. "We're just devastated by all this," she said.


  • Bellettieri took advantage of a printing mistake on checks issued to the firm for two accounts, one of which was a funding account, the other an escrow account. Money was supposed to be released from the escrow account to the funding account for closings. As one account was credited, the other was supposed to be debited, making for a zero-sum transaction. But the printing mistake caused a two-day hiccup in the debiting, giving the appearance that the accounts were flush when they were actually empty. Bellettieri wrote $15 million to $18 million worth of checks daily to keep up that appearance, according to the suit.

For more, see White Plains real estate lawyer gets 10 years for $22 million fraud.

See also, Real estate lawyer gets 10 years for fraud (Mid-Hudson News).

For other posts on theft of escrow money, go here and go here. sneaky slick escrow agents beta

Thursday, November 15, 2007

"Wild West" Lending Practices Blamed For Cleveland-Area Foreclosure Problems

In Cleveland / Cuyahoga County, Ohio, CNNMoney reports:
  • As the Treasurer of Cuyahoga County in Ohio, Jim Rokakis spends a lot of his time trying to deal with Cleveland's foreclosure crisis. When asked recently just how bad it is, Rokakis unfurled a six-foot by four-foot Cleveland city plot map. Each lot was covered with dots of red ink where foreclosed homes filled the plots. From a few feet away, the map looked heavily freckled, while some neighborhoods nearly melted together in crimson masses.


  • According to Rokakis, Cleveland got hammered because lax governmental oversight from the state allowed Wild-West lending. "No one was watching," he said. "There was no sheriff in town. The state legislature was dominated by banking interests."

For more, see Where Cleveland went wrong (It's too easy to blame the city's housing collapse on Rust-belt economics. How bad government and greed made it one of the nation's foreclosure capitals) (if link expires, try here).

See also, Mortgage fraud task force opens command center in Cleveland ("Federal, state and Cuyahoga County agencies will fill the office with seven full-time and six part-time staff, county Prosecutor Bill Mason said. Investigators will collaborate on cases that may number in the thousands and involve hundreds of millions of dollars. [...] Mason's office already has charged more than 140 people in cases involving more than 200 properties and $37.5 million in loans.").

Wisconsin Legislature Hears Testimony On Proposed Foreclosure Rescue Statute

The Associated Press reports:

  • Some Wisconsin homeowners desperate to keep their houses have fallen prey to scam artists who falsely promise to help them avoid foreclosure, [Wisconsin] lawmakers said Tuesday. The salesmen use deceptive practices to convince homeowners to transfer ownership of their properties, which they refinance and sell for a profit, lawmakers and victims' advocates said. They testified during a public hearing in favor of a bill that would create new regulations governing so-called foreclosure rescues.

  • Typically, those transactions involve a homeowner facing foreclosure transferring the property to an investor in exchange for assurances he can continue to live there under a rent-to-own agreement. The investor pays off the amount owed in foreclosure.


  • In written testimony, Louise Kirk said she faced foreclosure on her Milwaukee home after her husband had open heart surgery and lung cancer. She responded to a flier from a woman who promised help selling the home. The woman insisted she be granted power of attorney and Kirk agreed. The woman then sold the house without telling Kirk and made tens of thousands of dollars in profit, said Kirk, whose husband died around the same time. "My nerves were shattered with the death of my husband, but the fact that there was money taken from me, took me over the edge," Kirk wrote.

  • Backed by the Legal Aid Society of Milwaukee, Kirk sued the woman last month in Milwaukee County Circuit Court for fraud. Legal Aid Society lawyer Catherine Doyle said another one of her clients agreed to a transaction in which she would rent her home from an investor for one year and then buy it. She still could not afford the home after one year because of high fees and rent charged by the investor, who sold it at a $50,000 profit.

  • "She got nothing," Doyle said. Of her clients, she said: "When they find out how much money these people have taken from them, it is a devastating moment."
For more, see Wisconsin lawmakers say desperate homeowners are being swindled.

Go here for other posts on the Legal Aid Society of Milwaukee.

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.).

Secret Service Investigating Central Florida Foreclosure Rescue Operator; Resident Loses Home To Scam

In Osceola County, Florida, Central Florida News 13 (Orlando) reports:
  • The Secret Service is now investigating a possible case of mortgage fraud that possibly includes hundreds of local homeowners. Teodoro Flores lost his home in Poinciana Wednesday. It all surrounds a company called 4 Solutions. It's accused of attracting families in Central Florida and throughout the state posing as a foreclosure prevention company and running away with people's money.

According to the television report, Flores unwittingly signed over title to the home in a transaction orchestrated by the Tampa-based 4 Solutions in a sale-leaseback scam. After coming home from work recently, he found all of his belongings out on the street, a result of a foreclosure eviction. In addition to the Tampa office of the U.S. Secret Service, the local Tampa cops are also investigating 4 Solutions.

Go here to watch television coverage on this story.

To read the online story, see Home Lost In Foreclosure Scheme.

Go here for 4 Solutions website (no longer online).

Go here for other posts on 4Solutions.

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.).

North Jersey House Flipping Operator Cops Plea To Federal Conspiracy Charge

In Newark, New Jersey, the Herald News reports:

  • A Bergen County real estate magnate who for years exploited unsuspecting Paterson homebuyers while bribing low-level city employees, pleaded guilty Wednesday to conspiracy to commit money laundering. Michael Eliasof, of Mahwah, agreed to a plea deal with federal prosecutors in U.S. District Court for overseeing a wide-ranging, house-flipping scheme between 2002 and 2005 that undermined an already shaky Paterson housing market. Eliasof, who at one time was a major operator in Paterson's Section 8 program, was charged with taking between $1 million and $2.5 million in illegal proceeds from the sale of overvalued properties to buyers not qualified to purchase them.

  • The circle of professionals Eliasof worked with included Garfield Municipal Judge William C. Colacino Jr., who was the closing attorney for dozens of deals Eliasof lined up with inexperienced buyers. Colacino was not in court Wednesday and has not been indicted. He declined to comment Wednesday.

  • Eliasof and 10 co-conspirators, including mortgage brokers, loan officers and appraisers, artificially inflated the values of properties throughout Paterson. They then falsified loan applications and income levels for those buyers whom Eliasof lured in with "no money-down" deals, according to the federal charges.

For more, see Magnate guilty in housing scheme.

See also:

Go here for other posts on this ongoing investigation.

Wednesday, November 14, 2007

Miami Condo The Poster Child For Cash Back Mortgage Fraud Scams

In Miami, Florida, Reuters reports:
  • At first glance, the 43-story building in Miami's international banking district seems little different from other high-rise condominiums overlooking the turquoise waters of Biscayne Bay. But the 643-unit condo known as the Club at Brickell is a leader in mortgage foreclosures and it appears also to stand at ground zero in a blizzard of fraud that may lie behind many of the failed loans threatening to bury the U.S. property market.
  • The Club at Brickell has the highest current number of foreclosure proceedings involving any single south Florida property. [...] Doug Dewitt, a real estate broker contracted to work with several lenders on the valuation and disposal of foreclosed properties, said nearly 70 percent of the sales or closings at the Club over the last 18 months were questionable. That works out to more than 200 possibly shady deals in a single building, he said. The dubious transactions all fit a pattern that [Glenn Theobald, head of a mortgage fraud task force formed in south Florida's Miami-Dade County ] said should trigger "bells and whistles" for law enforcement anywhere -- time and time again properties that failed to sell for months when listed at around $450,000 were pulled from the market and then suddenly sold for more than $800,000.

For more, see Miami condo at ground zero in mortgage fraud.

See also, Buying In Brickell? Proceed At Own Risk (Report Says Brickell Condo Ground Zero For Mortgage Fraud, Foreclosures).

Go here for other posts related to the Miami condo market problem.

Erie, Pennsylvania Mortgage Fraud Scam Alleged In Both Criminal & Civil Proceedings

In Erie, Pennsylvania, the Erie Times-News reports that last Friday, mortgage broker Frank Conti, who used to head the local office of Regal Financial Services, was at the center of a series of claims that one of his customers -- Eloise Woodsbey, made in a civil case filed in Erie Federal Court. Woodsbey claims that she was defrauded when she bought her home in 2004.

Earlier on Friday, Regal Financial Services was mentioned in court documents outlining a federal criminal case against Erie home redeveloper Robert L. Dodsworth, who is accused of helping to run a mortgage fraud scheme. Conti has not been charged in the criminal case, and he has said he did nothing wrong in the civil case. According to the story:

  • Court filings in the Dodsworth and Woodsbey cases claim Conti or Regal Financial, which also has an office in Pittsburgh, participated in mortgage transactions that have led to allegations of fraud. Both cases will unfold in U.S. District Court in Erie in the coming weeks. Dodsworth, 60, the owner of RLD Enterprises, is scheduled to appear at a plea hearing on Nov. 19, and court records indicate he plans to plead guilty to the felonies of money laundering and conspiracy to commit mail fraud, wire fraud and bank fraud.


  • Woodsbey's house ... was one of nearly 200 properties that became the focus of the FBI and Internal Revenue Service as agents investigated the suspected fraud scheme. And Woodsbey's civil suit makes claims similar to the allegations the U.S. Attorney's Office in Erie is making against Dodsworth.

  • In the criminal case, the government is alleging Dodsworth and other "unnamed co-conspirators" manipulated financial records to make prospective homeowners, many of them unsophisticated and poor, eligible for mortgages they otherwise would have been unable to afford between January 2003 and March 2006. The criminal information filed against Dodsworth alleges he and the others artificially inflated customers' bank accounts.

Representing Woodsbey in her civil case is Margaret Schuetz, of the nonprofit Community Justice Project in Pittsburgh.

For more, see Suit names mortgage broker (Man headed office also mentioned in criminal housing fraud case).

For story update, see:

Go here for other posts related to this story.

Six Indicted In Alleged $14M Mortgage Fraud Scam

The Kansas City Star reports:

  • A federal grand jury in Kansas has charged six Kansas City area individuals in a $14 million mortgage fraud that preyed on low-income homebuyers. The indictment described a scheme that relied on false real estate appraisals that inflated the value of homes, so banks would lend more money than property was worth. The indictment said the additional funds ended up in defendants’ accounts.

  • The indictment names Wildor Washington Jr., 37, of Leawood; Maurice Ragland, 33, of Lee’s Summit; Victoria Bennett, 34, of Leawood; Kara E. Robinson-Franks, 37, of Grandview; Scott Alexander, 69, of Merriam; and Terrence Cole, 41, of Kansas City, Kan.


  • The defendants owned or worked for several businesses involved in the alleged scheme: Heritage Financial Investments, Legacy Enterprises, B&L Custom Development, Liberty Escrow, TERM Appraisers, the Real Estate Group, JTF Enterprises and Atlantic Mortgage.
  • The fraud’s targets were homebuyers with low incomes or little knowledge about real estate, according to the indictment. It said these homebuyers were unaware of the fraudulent information in the loan applications.


  • The group validated the fraud by stealing the identities of legitimate real estate appraisers, according to the charges. They found appraisers’ license numbers on the Internet and forged signatures, or in some cases “cut and paste” legitimate signatures onto false appraisals, the indictment said. The fraud also relied on nonexistent appraisers whose identities the group created.

For more, see Six area individuals charged in $14 million mortgage fraud scheme.

Inside Edition Investigates Florida Upfront Fee Foreclosure Rescue Operator

Tonight, the syndicated television show Inside Edition will run an investigative report on a Clearwater, Florida foreclosure rescue operator that is accused of shortchanging customers. The show alleges Foreclosure Assistance Solutions, or F.A.S, charged homeowners more than $1,000 apiece but failed in some cases to salvage homes from foreclosure. F.A.S. disputes the allegations and points to its many satisfied customers. Go here to watch the promo for tonight's show (no longer available online).

Go here to find out where Inside Edition is showing in your area (no longer available online).

Go here for a partial transcript of the Inside Edition investigative report (no longer available online).

Use Caution When Tapping Into 401(k) To Make Mortgage Payments

The Baltimore Sun reports:

  • Some companies that manage 401(k)s for employers report an increase in loans or hardship withdrawals from plans this year. Principal Financial, for instance, says hardship withdrawals to stave off eviction or foreclosure doubled in August from July. Baltimore's T. Rowe Price Associates reports a 9 percent increase in loans over a year ago. And Hewitt Associates has seen a "marginal uptick' in loans in recent months. With loans - unlike hardship withdrawals - workers don't have to say why they want the money. So it's hard to say how many desperate homeowners are using their savings this way. But David Wray, president of the Profit Sharing/401(k) Council of America, has no doubt that the uptick in loans is tied to the mortgage mess. Workers are just starting to deal with rate resets on mortgages and home equity loans, Wray says.


  • But dipping into retirement accounts should be the last resort. Even then, do it only if you're sure that your housing troubles are short-term. If they're not, you could end up losing your house and your retirement.


  • When loans are permitted, you can borrow up to half the balance but no more than $50,000. You generally get five years to repay through payroll deductions. [...] Leave or lose your job before the loan is repaid, and you might have to repay it immediately. If you can't, the loan is considered a distribution. You will owe regular income tax on the money and possibly a 10 percent penalty for early withdrawal. (The penalty usually applies if you take money out before age 59 1/2 , but the age limit is 55 if you're leaving your employer.)
For more, see Using 401(k) for mortgage payment can worsen plight (if link expires, try here).

See also:

Tuesday, November 13, 2007

Pennsylvania Feds Charge Erie Man With Fraud Conspiracy, Money Laundering Regarding Fraudulently Obtained Home Mortgages

In Erie, Pennsylvania, the Erie Times-News reports on the legal trouble of local businessman Robert L. Dodsworth and R.L.D. Enterprises. According to the story:
  • Dodsworth, 60, is the president of RLD Enterprises, [a] home-redevelopment firm in Erie. He was charged Friday with felony conspiracy and money laundering in relation to an ongoing federal investigation into suspected mortgage fraud. Dodsworth is the first person charged in the probe, which includes a grand jury. [...] Court records indicate Dodsworth -- one of the probe's main figures -- intends to plead guilty at a hearing scheduled for U.S. District Court in Erie on Nov. 19. The government alleges Dodsworth worked with "unnamed co-conspirators," indicating others could be charged.


  • The FBI, Internal Revenue Service and other agencies since the summer of 2004 have been probing whether the sale of nearly 200 city of Erie properties involved inflated appraisals or other fraudulent information that led buyers to pay far more than market value for their homes. Many of the homebuyers have either lost their homes to foreclosure or have fallen behind on payments, according to documents and interviews.

Said one of Dodsworth's alleged victims, "I know it sounds vindictive, but I hope he goes to jail. I'm still upset with everything I had to go through, but I'm glad that finally something's being done about all this. The FBI didn't forget about us."

For more, see 'I hope he goes to jail' (Homebuyers say dealings with businessman charged in mortgage fraud probe seemed 'fishy').

For an earlier story, see Fraud case: Plea close (Erie businessman faces charges in three-year federal probe of suspected mortgage scams).

Go here for other posts related to this story.

More On NY AG Suit Alleging Puffed Up Appraisals

Syndicated columnist Kenneth Harney recently wrote a piece on the lawsuit brought by New York Attorney General Andrew M. Cuomo against First American Corp. and its appraisal management subsidiary, eAppraiseIT, alleging the practice of illegally inflated real estate appraisals. Highlights from the column:
  • Cuomo's suit, which rattled mortgage lenders, appraisers and settlement service companies nationwide, accused First American and eAppraiseIT of knuckling under to illegal pressure from Washington Mutual, the giant Seattle lender, to hit the numbers needed to close loan deals.


  • Washington Mutual was not named as a defendant in the complaint because, as a federally regulated bank, it is buffered from certain state legal attacks. In a statement, Washington Mutual said it was both "surprised and disappointed by the allegations," and has suspended business with eAppraiseIT pending its own investigation of the matter.


  • Frank Gregoire, chairman of the Florida Real Estate Appraisal Board and a St. Petersburg appraiser, said "every appraiser deals with this stuff every day," routinely confronting threats of nonpayment and blacklisting if he or she refuses to play the game. Perry "Pat" Turner, an appraiser in the Richmond, Va., area, said pressure to inflate values is so widespread that "it amounts to organized fraud by loan officers based on their need to generate fees and close deals, and then pass the loans on to Wall Street," where they get packaged into the mortgage bonds that are now experiencing heavy default rates and losses to investors. "And they all think they're never going to get caught," said Turner.

For more, see Banks bullying appraisers to boost values bad news (San Francisco Chronicle).

To view the New York AG's lawsuit, see Cuomo vs. First American Corporation and First American eAppraiseIT.

Go here to view E-Mail Excerpts in eAppraiseIT Case.

Go here for other posts on the NY AG's investigation of First American / eAppraiseIT. Cuomo OFHEO Fannie Mae Freddie Mac

Court Hammers Contractor In Dispute With Homeowners; Results In Free Home Improvements & More

The following is based on a report written by the late Bob Bruss, real estate author, broker, and attorney, on California state law regulating home improvement contractors:

Two homeowners hired a home improvement contractor to do remodeling work at their residence. They paid him approximately $27,000. Later, the contractor sued them for an additional $11,000. The homeowners countersued for fraud, claiming that the contractor underreported his payroll to his workers' compensation insurer which resulted in an automatic suspension of his California state contractor's license, according to state law.

Because his ostensibly valid contractor's license was treated as having automatically lapsed because he underreported his payroll to his workers' comp insurer, the contractor was legally considered to be unlicensed at the time he performed the improvements on his customers' home. Accordingly, the court decided that not only was he not entitled to the $11,000 he sued for, he was also not entitled to the $27,000 that the homeowners had already paid him and was ordered to refund it to them. In addition, the contractor was also ordered to pay the homeowners $10,000 in punitive damages, plus $90,000 for the homeowners' attorney fees and $7,000 in court costs.

According to the judge:
  • "The importance of deterring unlicensed persons from engaging in the contracting business outweighs any harshness between the parties."

To view the Bob Bruss report, see Unlicensed remodeler makes costly mistake.

To view the California appeals court decision, see Wright v. Issak, 58 Cal.Rptr. 3d 1 (Cal. App. Ct., 6th Dist., March 20, 2007) (Court decision available online courtesy of


The text of the actual court decision describes the nature of the payroll underreporting resulting in the temporary invalidation of the home improvement contractor's license as follows:

  • "[the contractor] reported, under penalty of perjury, a payroll of $312 while having an actual payroll of $135,000. [State Compensation Insurance Fund records] show that [the contractor] reported zero or next to zero payroll for every payroll period between his initial application for workers' compensation insurance in May 2002 and the end of 2004. [The contractor's] underreporting was not inadvertent. It was his pattern and practice from the first moment he applied for workers' compensation insurance."

By bringing a lawsuit against the homeowner inspite of his self-created "achilles' heel" of illegally (and grossly) underreporting his payroll to his workers' comp insurer, the contractor in this case also appears to have violated the long-standing cautionary advisory, "Be careful who you pick a fight with." I wonder how many other "licensed" contractors have a similar "achilles' heel."

NY AG's Lawsuit May Shed Light Into Consumer Ripoffs When Obtaining Home Mortgages

A recently filed civil lawsuit by the New York State Attorney General's Office against First American Corporation and its real estate appraisal subsidiary, eAppraiseIt, charges them with allegedly allowing national mortgage lender Washington Mutual Inc. into strong-arming them into knowingly issuing inflated residential real estate appraisals in connection with home mortgage loans.

The following excerpt from the lawsuit may shed light for some into how so many consumers looking for home financing to either purchase or refinance a home were blatantly ripped off by the bad actors in the home mortgage and related industries.
  • Most people interested in purchasing or refinancing a home (“borrowers”) seek a financial institution (a “lender”) to lend them money on the most favorable repayment terms available. Traditionally the lender, as part of agreeing to loan the funds, wanted to ensure that the borrower was able to repay the loan and that the loan was adequately collateralized in case the borrower defaulted. The borrower and the lender had a common interest in accurately valuing the underlying collateral because both wanted to be sure the borrower was not paying too much for the property and would be able to meet the repayment terms, or that – in the event of default and foreclosure – the property value could support the loan.

  • Today, the landscape of the mortgage industry is quite different from this traditional model. Rather than holding the mortgage loans, lenders now regularly sell these mortgages in the financial markets, either directly or to investment banks or Government Sponsored Enterprises (“GSEs”), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”). The loans are then pooled together, securitized, and sold to the general public as mortgage backed securities. The money that the lender receives for the sale of the mortgage loans or bonds is then used to finance new mortgages, increasing the lender’s profits and aiding its stock price. Today, the vast majority of mortgage loans are sold to investment banks or GSEs, leaving the original lender holding far fewer mortgages in its portfolio.

  • This reconfiguration of the way that mortgages are held has transformed the incentives in the industry. Specifically, it has the effect of making the lender less vigilant against risky loans since any risk is quickly transferred to the purchasers of the loans. Moreover, as the lender does not hold many of its loans in its portfolio, the lender’s interest in ensuring the accuracy of the appraisal backing the loan is severely diminished. Even worse, because lenders’ profits are determined by the quantity of loans they successfully close, and not the quality of those loans, there is an incentive for a lender to pressure appraisers to reach values that will allow the loan to close, whether or not the appraisal accurately reflects the home value.

  • Further jeopardizing the process, mortgage brokers and the lenders’ loan production staff (also known as “loan origination staff”) are almost always paid on commission. Thus, the income of these individuals depends on whether a loan closes and on the size of the loan. Accordingly, brokers and loan production staff have strong personal incentives to pressure appraisers to value a home at the maximum possible amount, so that loans will close and generate maximum commissions. For these reasons, mortgage brokers and lenders frequently subject real estate appraisers to intense pressure to change values in appraisal reports.

  • The investment banks and GSEs also have an interest in inflating (or at least in not questioning) the value of the pooled loans. The values of these loans serve as a basis for the value of their securities. As such, the higher the value of the loans closed, the greater the value for which the securities are sold on the secondary market.

  • Thus, the only parties under the current system who want an accurate appraisal are the borrowers and the investors in the asset-backed securities market. Neither of these parties, however, has any contact with, or control over, the appraisal process.

(from the New York AG's lawsuit, Cuomo vs. First American Corporation and First American eAppraiseIT, paragraphs 12-17).


As has been observed by others, it appears that the current foreclosure mess revolves around the fact that the home lending business, which was once dominated by "bankers" (with a focus on "loan quality") appears to be now dominated by "salespeople" (with little concern about anything other than "loan quantity").

For a recent story on inflated appraisals, see Banks bullying appraisers to boost values bad news (Kenneth Harney syndicated article). Cuomo OFHEO Fannie Mae Freddie Mac

Monday, November 12, 2007

Alleged Pennsylvania Ponzi Scheme Head Pleads Guilty Of Swindling 800+ Victims Out Of Millions

(original post -11-10-07; last modified 11-16-07)
In Harrisburg, Pennsylvania, Lancaster Online reports:

  • Wesley A. Snyder pleaded guilty in U.S. District Court in Harrisburg Friday to a mail-fraud scheme that defrauded more than 800 mortgage customers, including about 300 in Lancaster County. An evidentiary hearing was canceled Thursday because Snyder's lawyer worked out a plea agreement with the U.S. Attorney for the Middle District of Pennsylvania. The agreement requires Snyder to make restitution to his victims, which the court stipulates to be somewhere between $15 million and $32 million.


  • Authorities said that since 1988 Snyder took in more than $65 million from 811 purchasers of his "wraparound" mortgages but forwarded only $39 million to the banks and other institutions that provided the financing. [...] Snyder's wraparound mortgages were essentially second contracts tied to larger mortgages he brokered in their names with outside banks.

For more, see Snyder pleads guilty to mail fraud (Owner of bankrupt mortgage business admits to fraud involving more than 800 customers and faces paying up to $32 million in restitution).

Go here for an illustration of how the refi / wraparound mortgage scam works.

See also:

Go here and go here for other posts and links to earlier media reports on the Pennsylvania Ponzi scheme involving Wesley Snyder, OPFM, Image Masters.

Charles Head Nationwide Foreclosure Rescue Scam Nicks Arizona

The Arizona Republic reports:
  • Seven Arizona properties are part of a "foreclosure rescue" mortgage scam that snared hundreds of victims in 27 states, according to an Internal Revenue Service warrant. An IRS search warrant obtained by the Asbury Park Press of New Jersey lists 256 affected properties stretching from Maine to Hawaii. The warrant identified 106 homeowners as victims, so luckily Arizona wasn't this scam's main focus. The FBI has sent letters to homeowners and investors about the scam. Those letters identify Charles Head, who ran, as the focus of the investigation.Three of the Valley properties named as part of the investigation are in Phoenix. Two of the homes are in Mesa. One is in Cave Creek, and the other is in Litchfield Park.

From: The Arizona Republic - Foreclosure Scam (2nd story from top).

Go here for other posts on foreclosure rescue operator Charles Head, Head Financial, Funding Foreclosure and related companies.

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.).

South Florida Condo Converters Unable To Unload Unsold Inventory; Units Reverting Back To Rentals

Regarding condo buyers who not too long ago thought investing in a unit in a converted rental building might be a good idea, the South Florida Sun Sentinel reports:
  • Stephen Mahaffee became one of those new buyers. He had been renting a one-bedroom apartment ... for about 10 years when he got word the building was being converted to condos. So in January he made his move and paid $199,900 for a two-bedroom unit. Less than a year later, he's one of only 18 owners in the 164-unit complex that Bankers Holding Group reluctantly decided to turn back into a mostly rental property. The emerging trend of going from rentals to condos and — when the units don't sell — back to rentals again is what South Florida real estate experts are calling "conversion reversions." Since 2006, about 6,059 units that were once for sale in Broward and Palm Beach counties have been switched back to rentals, according to Jack McCabe, a Deerfield Beach real estate analyst. "The condo-conversions sales market has absolutely fallen off the table," said McCabe.

For more, see Slow housing market spurs condo 'conversion reversions' (With no buyers, market forced to change units back to rentals) (story also available here).

Credit Card Skimming On The Rise

Some straw buyer, mortgage fraud scams have incorporated identity theft into the mix, whereby straw buyers who are in on the scam from the get-go use stolen identities to illegally obtain mortgage loans.

One technique for stealing identities which appears to be on the rise is credit card skimming. An entry in Wikipedia (as of 11-12-07) contains the following description of credit card skimming:
  • Skimming is the theft of credit card information used in an otherwise legitimate transaction. It is typically an "inside job" by a dishonest employee of a legitimate merchant, and can be as simple as photocopying of receipts. More imaginative routes are possible; an episode of The Sopranos showed how a compromised magnetic stripe reader could store account information for later use. Common scenarios for skimming are restaurants or bars where the skimmer has possession of the victim's credit card out of their immediate view. The skimmer will typically use a small keypad to unobtrusively transcribe the 3 or 4 digit Card Security Code which is not present on the magnetic strip. Many instances of skimming have been reported where the perpetrator has put a device over the card slot of a public cash machine (Automated teller machine), which reads the magnetic strip as the user unknowingly passes their card through it. These devices are often used in conjunction with a pinhole camera to read the user's PIN at the same time.
WTVJ-TV Channel 6 in Miami, Florida recently ran a credit card skimming story reporting that "what started at restaurants, police records show, is now being found in fast food outlets, hotels, and grocery store ATM machines." The story describes one recent case in which an 18 year old drive-through cashier at a McDonald's was arrested in September for skimming 100 credit cards, police say, before he was stopped. Police say he admitted he did it.

To watch the report and see how easy it is for an employee of a local merchant to literally "swipe" an unsuspecting customer's I.D. information off the magnetic strip from a credit card, see Who's Swiping Your Card? (NBC 6 Investigates Credit Card Skimming).

Go here for additional footage of NBC 6 reporter Jeff Burnside talking about his investigation, "Who's Swiping Your Card?"

Go here to read the online story.

For another story on credit card skimming, see:
  • Authorities indicted 13 in alleged identity theft ring - Alleged New York City I.D theft ring accused of hiring waiters and waitresses to steal credit card info from restaurant customers by use of small skimming devices; ring accused of making millions of dollars of credit card charges, over 1000 victims identified.

Sunday, November 11, 2007

New Hampshire "Sleeping Judge" Admits Helping Hubby Stiff State Bar

In Dover, New Hampshire, SeacoastOnline reports:
  • Superior Court Judge Patricia Coffey admitted violating judicial conduct code by hiding her husband's assets in a trust to avoid paying $75,000 in fees related to his disbarment from practicing law. Coffey's admission was released Wednesday by the state Judicial Conduct Committee, which also scheduled a Dec. 10 hearing to decide what discipline will be imposed upon her. The JCC reports its options include a private reprimand or public censure.


  • The JCC reports Judge Coffey and her husband, John, ultimately paid the $75,000 in disbarment fees, but only after an investigation was launched. The investigation resulted in the discovery of their real estate trusts which were established within days of the disbarment proceedings, according to the JCC. Coffey's admission follows scandals alleging she slept on the bench during multiple court proceedings and her husband's disbarment for bilking an elderly woman out of a half-million dollars in Rye real estate.

  • The sleeping allegations came to light soon after a Sept. 26, 2006 jury poll was published by the N.H. public defenders office, quoting seven of 13 jurors who found Candia's Donald Spinner guilty of sexual assault. Two jurors said they saw Coffey sleeping on the bench during the trial. Juror Donna Kolber-Simonds, told a public defender's office interviewer "she noticed that the judge kept falling asleep during the trial," while fellow juror, Mary Fortuna, told the same interviewer the jury "got a kick out of Coffey nodding off."

For more, see Judge cooked the books (Hid husband's assets to save $75K).

For other current and past media reports on Judge Coffey, see:

For earlier post, see New Hampshire "Sleeping Judge" Accused Of Helping Hubby Hide Assets From Creditors. naughty judges

Virginia Judge Booted From Bench For "Coin Flipping" Approach to Decision Making (& Other Antics)

In Richmond, Virginia, The Associated Press recently reported:
  • A judge who ordered a woman to drop her pants and decided a custody dispute by flipping a coin was removed from the bench by the Virginia Supreme Court on [Nov. 2]. The decision against Juvenile and Domestic Relations Court Judge James Michael Shull of Gate City was unanimous. "Unless our citizens can trust that judges will fairly resolve the disputes brought before our courts, and treat all litigants with dignity, our courts will lose the public's respect and confidence upon which our legal system depends," Justice Barbara Milano Keenan wrote.


  • The justices could have merely censured Shull, but they noted that he had appeared before the Judicial Inquiry and Review Commission in 2004 for allegedly calling a teenager a "mama's boy" and a "wuss" and advising a woman to marry her abusive boyfriend. That complaint was dismissed with an admonition to Shull to chalk it up as a learning experience.

For more, see Judge booted for flipping coin to decide (if link expires, try here).

Go here to view the Virginia Supreme Court ruling booting Judge Schull from the bench.


For an opposing point of view, see In Defense of Judge James Michael Shull - Part I, Part II, and Part III. naughty judges

Sleeping On The Bench: Conduct To Be Condemned Or "Harmless Error" ???

Let me start by saying that this post is not about poor, down-on-their-luck homeless people looking to catch a few winks on the bench in a neighborhood park or at a bus stop.

The blog, Bits Of News, recently ran a piece on a subject that I found quite interesting - the issue of trial judges who, in the course of presiding over a court proceeding and without formally calling for a recess and retiring to their chambers, take an occasional nap in plain view of those in the courtroom. Included in the story is a description of the presiding judge in a criminal trial who reportedly was seen by the jury nodding off during parts of the proceeding. The trial ended in a conviction of the defendant and, despite the judge's reported nap-taking tendencies, was upheld on appeal. For more, see When Justice Sleeps: The Law on Snoozing at the Bench.

For other stories of judges accused of taking occasional snoozes on the bench, see:

In defense of our robed members of the court system, a "Letter to the Editor" appears in the Utah Bar Journal, in which the writer (who identifies himself as a judge) suggests that the problem with sleeping judges may rest with the attorneys appearing before them who may be "mumbling and stumbling with mind-numbing effect" in their courtroom presentations, as well as those barristers so mesmerized by their own eloquence that they just don't know when to shut up (asking "Do you make your point and then just stop talking, or do you flog it until the judicial mind retreats to sleep in self-defense?").

The above "Letter to the Editor" was written in response to this "Letter to the Editor" (also from the Utah Bar Journal) which tries to address ways to deal with the problem of the occasional snoozing judge. naughty judges

Arsonist Facing Foreclosure Takes Plea Deal; Admits Torching Home For Insurance Cash

In Suffield, Connecticut, The Journal Inquirer reports:
  • A Suffield arsonist with dozens of prior felony convictions was sentenced Thursday to seven years in prison for torching his house for the insurance money. Michael Paul Schook had in October rejected a plea offer, but with a trial looming, he accepted the deal that also requires him to serve eight years of special parole when he's released from prison.


  • [P]olice say an ex-convict who had spent time in prison with Schook and was living with the family told authorities that Schook asked him how to set a fire that wouldn't look suspicious. That man said Schook told him he had financial difficulties, and police say a credit check revealed the house was in foreclosure, Schook's car was being repossessed, and he owed thousands to credit card companies.

For more, see Suffield man gets 7 years for burning home for insurance money.

For more on fires & foreclosures, go here and go here. foreclosure arson yak

Trial Of Accused Arsonist Facing Foreclosure Ends In Mistrial

In Marietta, Ohio, The Marietta Times reports:
  • Alleged juror misconduct brought an abrupt end Friday to the trial of Newport man accused of having his own house burned down. Testimony in the trial, in which Willard Bush, 30, ... is accused of arranging to have his house torched to collect insurance money, ended on Thursday. Jurors deliberated into the evening before requesting a break that night. Deliberations resumed Friday, but the case ended in the afternoon with Common Pleas Judge Ed Lane declaring a mistrial. “We had a report that some information reached the jury room other than what was provided through the trial, and there was some concern that it might affect the jurors’ decision,” said Assistant Washington County Prosecutor Kevin Rings.

For more, see Mistrial declared in arson case (11-3-07).

In an earlier story published during the trial, The Marietta Times reported:

  • Assistant Washington County Prosecutor Kevin Rings said it [was] suspicious that Bush bought insurance 10 days before the fire. Also, he said Bush lied on his insurance application, failing to report several past claims — including another house fire just four years earlier. Also, Rings said Bush failed to report he was facing foreclosure on the property.

For more, see Newport man’s trial out of home fire continues (11-1-07). foreclosure arson yak

Home Burns Down Three Days Before Foreclosure Sale; Homeowners Charged With Arson

In South Beloit, Illinois, the Rockford Register Star reports:
  • Three days before Dean and Jaclyn Jacobson’s house was scheduled to be sold at a foreclosure auction, it went up in flames. Now the couple are charged with arson, accused of setting the home ablaze. [...] The Jacobsons are charged with aggravated arson, a Class X felony, which carries a penalty of between six and 30 years in prison, January Smith, spokeswoman for the marshal’s office, said. The charge was upgraded to aggravated arson in this incident because a South Beloit firefighter was injured during the blaze. [...] Court records show that the Jacobsons were having trouble making payments on their home, automobile and medical expenses.

Reportedly, the home was a total loss, with damages estimated at approximately $120,000-$150,000. For more, see South Beloit couple charged with arson (if link expires, try here). foreclosure arson yak

Flue Fire Damages Home In Foreclosure; Fireplace Used For Heating After Gas Service Shut Off

In Somerset, Pennsylvania, The Tribune-Democrat reports:
  • A Somerset family had to leave home Thursday after a flue fire left it temporarily uninhabitable. Jay Patton said he filled the fireplace at his mother’s home ... with six logs Thursday morning and let them burn for an hour while he played video games. The family heats the home with a fireplace because their gas service has been shut off since last year, Patton said. The house is up for sheriff’s sale Nov. 16 after a mortgage foreclosure.


  • Greg Davis, Somerset second assistant chief, said most of the damage was contained to the walls. The fire is not considered suspicious, he said. “I would tell people that, if they are using a wood-burner, they should have their flue cleaned first,” Davis said, adding that the damage should be fairly minor, though he did not have an estimate.

For more, see Flue fire damages home in Somerset. foreclosure arson yak

Another Vacant Foreclosed Home Goes Up In Flames; Investigators Suspect Squatters

In Mansfield, Ohio, the Mansfield News Journal reports:
  • After living in the same place for 26 years, Glenna Hershberger said she was heartsick to see her former two-story home ablaze Sunday afternoon. Hershberger, 59, and her husband only recently lost the 521 Springmill St. home to foreclosure. [... According to Mansfield Fire Captain Don Yarger,] "It looked like a mattress in the living room was all burned up, so I don't know if someone was smoking on it or what happened. We're still not sure what actually caused the fire, but I'd be leaning toward vagrancy." [...] Neighborhood watch coordinator Amanda Stamfield, 33, said she suspected drug dealers had been in and out of the home since the Hershbergers moved out.

For more, see Vagrants suspected in Mansfield house fire.

Go here for posts on vacant homes, foreclosures and squatters. foreclosure arson yak squatter zebra