Saturday, January 19, 2008

Indictment Of Financially Strapped Texas Sup. Court Justice In Home Torching Dismissed; Subprime Mortgage Recently In Foreclosure; Grand Jury Outraged

In Houston Texas, The Associated Press reports:
  • The highest reaches of the Texas judicial system were consumed Friday by a real-life legal thriller that could be titled "The Runaway Grand Jury." A grand jury indicted a Texas Supreme Court justice Thursday on arson-related charges. But on Friday the district attorney's office that brought the case to the grand jury in the first place dropped the charges, angering members of the panel and drawing allegations of political backscratching. Harris County District Attorney Chuck Rosenthal, who is himself embroiled in a scandal involving inappropriate e-mails found on his office computer, said there was insufficient evidence to support the charges against Justice David Medina, a fellow Republican.


  • [Medina's] wife, Francisca, was accused of setting a fire last summer that destroyed the couple's suburban Houston house and damaged a neighbor's residence. Her husband was charged with evidence tampering in the June 28 blaze, which caused nearly $1 million in damages.
  • The fire marshal's office has said the fire at the Medinas' home in Spring, north of Houston, was not electrical or accidental. A dog detected an accelerant at the scene. Investigators became suspicious after discovering a mortgage company sued in June 2006 to foreclose on the $300,000 home. The lawsuit, filed after the family missed payments for five months, was settled in December 2006. [Medina's attorney] has acknowledged the family had financial problems. They owed nearly $1,900 in fees to a homeowners association and also let the insurance policy on the house lapse, meaning losses from the fire were not covered.

For more, see Texas Thriller: the Runaway Grand Jury (if link expires, try here).

See also, Dismissing of case against Texas justice outrages some grand jurors:

  • I’ve just never seen anything like the vigor with which these two defendants were defended by the Harris County district attorney’s office,” the assistant foreman, Jeffrey Dorrell, told The Chronicle. “It was theater of the absurd. We knew before we handed the indictment down that the district attorney was going to refuse to prosecute.”

The Houston Chronicle reports that the fire also damaged two adjacent homes, and describes Medina's mortgage that went into foreclosure as a subprime adjustable rate mortgage. See Medina attorney asks judge to sanction 2 grand jury members:

  • Medina and his wife purchased the home in the Olde Oaks subdivision in 1992, according to appraisal district records. Loan documents show he took out an adjustable rate home equity loan in 2003 for $288,000, equal to the home's full appraised value at the time. The interest rate was high — almost 10 percent — and was to adjust upward to a cap of almost 16 percent in December 2005. His previous monthly note of about $2,500 could have jumped considerably.

For a subsequent column in the Southeast Texas Record on this story, see A Judicial Career Up in Flames? The Strange Case of David Medina.

For other stories on fires & foreclosures, go here , go here , and go here. foreclosure arson xerox

Criminal Prosecutions Of Home Improvement & Repair Contractors

The following links are to recent stories involving home repair and improvement prosecutions and the criminal charges involved:

Connecticut - Police said Angelo Cassarino, a 38-year-old Babylon, New York man accused of bilking an elderly woman out of $1,851 during a home improvement project, was arrested on a warrant that charged him with second-degree larceny and second-degree reckless endangerment. Police said Cassarino did not properly secure a liner in the woman's chimney on Valley Circle, which could have blocked ventilation and cause a buildup of carbon monoxide in her house. Piping on the job also was smaller than it should have been, police said. About $8,800 in repairs are needed to fix the job, police said. See $1,800 Bilking (3rd story from top).

Massachusetts - William D. Chappell, of Worcester, who was hired to (1) install a new roof, and (2) rebuild a deck and paint the exterior of a house in Shrewsbury, was arrested for receiving over $11,000 for both jobs, and allegedly did not complete either job. He was charged with a violation of the Massachusetts home improvement contract statute; he is also wanted for a New York State probation violation for "grand larceny pertaining to the same type of contractor fraud scheme.” See City man held in home improvement case.

New York - Todd Clifford, of Webster, and who defrauded customers by taking money for work he didn't finish was sentenced to 6 to 12 years in prison, after pleading guilty to third- and fourth-degree larceny. See Contractor Gets 6 to 12 Years for Defrauding Customers.

Illinois - A DuPage County grand jury indicted Lubos Dubravsky, of Schiller Park, on felony charges of suspicion he defrauded a Naperville woman who hired him to install hardwood flooring, according to court records. He is charged with theft and home repair fraud. Authorities allege Dubravsky accepted a $3,000 down payment from the woman, but failed to provide any work. See Man accused of theft, fraud (3rd story from top).

Delaware - Delaware State Police detectives have obtained an arrest warrant for Donald J. Schulze (T/A Affordable Construction Inc.), of Millsboro, charging him with felony theft and home improvement fraud. The victim paid Schulze $11,345.77 to repair her mobile home that had been damaged by fire. Schulze allegedly received the money and only completed $2,000.00 worth of work on the property. See Police searching for Millsboro man.

Maryland - Kevin Robinson was sentenced to six months in jail after prosecutors said he accepted $23,000 for a contracting job he never completed. Prosecutors said Robinson took the money and didn't do the work. Robinson was sentenced after pleading guilty to failing to put money in an escrow account. Prosecutors said this may have been the first conviction in Maryland under the law involving contractor escrow accounts. See Man Sentenced To Jail In Contractor Scam (Prosecutors Say Man Took Money For Job He Didn't Complete).

Kentucky - Louisville Metro Police arrested Willie S. Baldon, of Louisville, for allegedly scamming an 86-year-old woman out of thousands of dollars in a home repair scheme. Police say he was paid for work that was never completed. He allegedly received $6,697.97 but no repairs were made to the woman's home. Baldon has been charged with exploiting an elderly person and three counts of theft by deception, according to his arrest citation. The department's crimes-against-seniors unit was involved in the investigation. See Police charge man with bilking elderly woman over home repairs (Nearly $7,000 paid; work never began).

California - Palm Springs Police Detectives are looking for help located a mother and son team wanted for 38 counts of Financial Elder Abuse and Contractor Fraud. An extraditable warrant has been issued for the arrest of Mary Agnes Stewart, 62, and her son, Joseph Cunningham, 44, for allegedly defrauding an elderly Palm Springs couple of approximately $800,000 over a four-month period by contracting to do remodeling work in the couple's Las Palmas area home. According to reports, they allegedly required the victims to pay large quantities of money in installments. They started demolition of the couple's home, and then fled without providing any materials or construction work. See Palm Springs Police Search for Elder Abuse Suspects.

For other posts on contractors accused of stiffing customers, go here and go here. contractors stiff subs customers zeta

Lawyers, Judges, Bribes & The State Of Mississippi

Anyone interested in a story involving high-powered attorneys allegedly attempting to buy off judges in the State of Mississippi, you can check out:
  1. Federal Indictment - U.S. v. Dickie Scruggs, Zach Scruggs, Sidney Backstrom, Steve Patterson, Tim Balducci,
  2. Scruggs case at a glance (The Jackson Clarion Ledger),
  3. Prosecutor: Miss. judge told ruling could earn federal bench bid (Herald Tribume),
  4. Another lawyer pleads guilty (Court papers filed point to Scruggs) (The Jackson Clarion Ledger),
  5. Former Miss. auditor pleads guilty in judicial bribery attempt in which top lawyer charged,
  6. Scruggs scandal update: Information in Langston plea,
  7. Scruggs Nation, Day 48: center for news updates.
Lawyer Tim Balducci has already pleaded guilty to the bribery charges described in the indictment. He admitted he approached Lafayette County Circuit Judge Henry Lackey in March about taking a bribe in a $26 million legal-fees dispute involving litigation on behalf of Hurricane Katrina victims. Lackey contacted authorities and began cooperating with the FBI. Eventually, Balducci told authorities he gave the judge a $40,000 bribe to rule in Scruggs' favor. The others named in the indictment have all pleaded not guilty.

Coincidentally, indicted high-powered attorney Dickie Scruggs is the brother-in-law of recently retired Mississippi U.S. Senator Trent Lott. knuckleheaded judges zeta

Friday, January 18, 2008

Indiana AG Tags Foreclosure Rescue Operator With Civil Lawsuit; Alleges Violations Of State Credit Service Organization, Deceptive Consumer Sales Acts

The Office of the Indiana Attorney General announces:

  • Indiana Attorney General Steve Carter has filed a lawsuit against Indianapolis-based Capital Foreclosure, Inc. seeking nearly $20,000 in restitution for customers and an injunction to halt the company and its operators from illegal practices. “Some people lost their homes after placing their trust with this company,” Carter said. “The company exploited the vulnerability of its customers who faced foreclosure.” Nearly 20 people sought “Foreclosure Rescue” and credit counseling services from Capital Foreclosure and its operators, Eriq Brye, Kenneth Brye and Sallie Brye. Individuals paid fees and other costs that ranged from $40 to as high as $4,100.

The AG's lawsuit alleges the following violations of Indiana’s Credit Service Organization Act:

  • Failure to obtain a $10,000 surety bond,
  • Failing to provide legally required disclosures on contracts,
  • Failure to provide two copies of a Notice of Cancellation form for buyers.

The AG's lawsuit also alleges the following violations, among others, of Indiana's Deceptive Consumer Sales Act:

  • Promising a full money-back guarantee and then failing to give the refund when failing to stop foreclosure,
  • Representing having the characteristics of experienced consultants with in-depth industry knowledge on how to avoid and stop foreclosure.

For more, see Indiana AG News Release: Attorney General Steve Carter Says Foreclosure Rescue Company Left Customers Out in the Cold.

For a copy of the lawsuit, see State of Indiana v. Capital Foreclosure, Inc., et al.

See also, WRTV Channel 6 report: State: 'Foreclosure Rescue' Company Ripped Off Hoosiers (State Seeks Restitution, Fines).

Las Vegas-Area Cops Charge Escrow Agent In $500K+ Theft; Announce A Ramping Up Of "Rescue" Scam Investigations; Undercover Stings In The Offing

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:
  • A local escrow officer was arrested after Metro Fraud investigators say she pocketed more than $500,000 in escrow funds. Metro says this latest case is just the tip of the iceberg in what they believe will be a deluge of mortgage fraud cases in the weeks and months ahead. [...] Police arrested Sheila Katherine Williams on Tuesday for her alleged role in a scheme to steal $568,000 from a valley lending institution.

In a news conference held Wednesday, Metro Fraud investigators announced that they are seeing more desparate homeowners being victimized in foreclosure rescue scams where they unwittingly sign over the deed to their homes to a con artist who promises to take over the house payments but fails to do so.

  • Metro says they're currently cross training all of its fraud investigators to handle potential mortgage fraud. And the department even plans to conduct its own undercover sting operations to crack down on the fraud scam artists who target homeowners and businesses in financial distress.
For more, see Metro Targeting Real Estate Fraud (read story) (watch video).

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

Foreclosure Rescue Bill Introduced In Virginia Legislature

In Richmond, Virginia, The Virginian-Pilot reports:
  • Del. Sal R. Iaquinto, R-Virginia Beach, has introduced a bill he said will provide more protection to people at risk of losing their homes to foreclosure. HB 947 would require companies or people that offer assistance to homeowners under threat of foreclosure to clearly disclose their services. The bill would also give homeowners a three-day period to rescind contracts with foreclosure-aid entities. Iaquinto said these companies often take advantage of desperate homeowners by getting them to sign over ownership of their homes under the guise of helping them avoid foreclosure. “We’re not going to stop the process,” he said. “People just need to know what’s going on.”

Source: Bill seeks to protect homeowners in foreclosures.

Go here for more on HB 947 (summary as introduced) (full text).

For a competing foreclosure rescue proposed law introduced by Del. G. Glenn Oder, see HB 408 (summary and status report) (full text).

March 13, 2008 update:

Go here for the current version of HB 408 (summary and status report) (full text), which, as of 3-13-2008, has been passed by the House and Senate and awaits the Governor's signature.

Home Repair Contractor Gets 13 Months For Pocketing Insurance Proceeds, FEMA Funds & Failing To Perform Hurricane Repairs

In Norfolk, Virginia, The Virginian Pilot reports:
  • A former home-repair contractor convicted last year of mail fraud was sentenced in federal court [last] Friday to a year and a month in prison - a fraction of the prison time that the Justice Department asked the court to impose. The contractor, Richard C. Pirozzi of southern Maryland, defrauded scores of Hampton Roads homeowners in 2003 after they suffered damages from Hurricane Isabel, a jury determined in June. Pirozzi's company, National Restoration Specialists Inc. of Bowie, Md., collected insurance and Federal Emergency Management Agency payments from victims but failed in many cases to make the needed repairs, prosecutors reiterated during [last] Friday's hearing.

For more, see Home-repair contractor gets 13 months in prison for fraud.

Ex-Appraiser Gets 18 Months For Submitting Inflated Appraisals

In Forsyth County, Georgia, Appen Newspapers reports:
  • A Decatur man will spend 18 months in federal prison and must pay $4.7 million in restitution for his part in a mortgage fraud scheme involving fraudulent appraisals for 15 homes in the Greenleaf subdivision in Forsyth County. Darryl L. Cooper, 27, received a reduced sentence, which includes three years of supervised release, from U.S. District Judge Thomas W. Thrash Jr. because of his cooperation in the investigation. He pleaded guilty Nov. 7, 2007 to one count on a charge of mortgage fraud conspiracy. The appraisals supported $4.7 million in fraudulent loans for purchases in the names of out-of state "investors" of incomplete homes from builder/coconspirator Jeffery Alan Teague. Cooper was recruited by Teague to prepare $5 million in appraisal valuations for 15 complete houses, when none of the houses had been completed. A California lender relied on Cooper's fraudulent appraisals to make $4.7 million in mortgage loans secured by these properties, which had no value. Many of the borrower/purchasers from California, New York and Florida also relied on the Cooper appraisals, rather than inspecting the properties before closing on their loans.

For more, see Decatur man must pay for Forsyth County mortgage fraud.

For FBI Press Release, see Appraiser Sentenced To Prison In Mortgage Fraud (Submitted Fraudulent Appraisals On Incomplete Houses In Forsyth County).

400 Guilty Verdicts In $190M California Fraud Trial Targeting Mostly Elderly Investors

In Riverside County, California, The Press-Enterprise reports:
  • Prosecutors will seek the maximum prison term of 117 years for the president and sole officer of D.W. Heath & Associates, who was convicted this week of bilking 1,600 mostly elderly investors. Daniel W. Heath received the final verdicts Friday, with jurors finding him guilty of 400 of 401 criminal counts, including securities fraud, selling securities without a license, theft from the elderly and grand theft. The verdicts were read over two days in the $190 million investment fraud trial involving his shuttered company. [...] "There are (sellers) out there who think that if investors complain, the worst they can face is civil suits, but we made it clear that you will face criminal charges," Deputy District Attorney Michael Quesnel said.

For more, see Heath investment fraud trial ends in 400 guilty verdicts, one not guilty (read story) (watch video).

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

Seniors Strike Back With Class Action Targeting Living Trust Peddlers

In Miller County, Arkansas, The Southeast Texas Record reports:
  • A number of Texarkana residents have filed suit against sellers of living trust documents in a class action accusing the salesmen of exploiting senior citizens. [...] The living trust sellers are facing allegations of "masquerading as qualified financial advisers, estate planners, lawyers, and paralegals" to "exploit and prey" upon senior citizens with the creation and selling of "unnecessary and often useless" living trusts. [...] Defendants are accused of fraud, unauthorized practice of law, negligence, breach of fiduciary duty and conspiracy. The suit alleges that the defendants created and sold the living trusts as part of a scheme to gain access to senior citizens' financial information in order to sell annuities and other financial products.

  • According to the original complaint, the scheme begins with advertisements that persuade senior citizens to attend a free lunch or dinner. At these meetings, the "unlicensed" living trust defendants conduct presentations and distribute materials that misrepresent the impact of probate fees and estate taxes in order to create fear that the senior citizens need to buy a trust to prevent heirs from losing their estate.

For more, see Seniors file class action against sellers of living trusts.

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

Thursday, January 17, 2008

Foreclosure Rescue Scams, Reverse Mortgage Fraud To Increase, Says FBI

A recent USA Today article reports on the FBI and their work in pursuing mortgage and real estate scams. Included in the story is this except regarding scams involving foreclosure rescue and reverse mortgages:
  • The FBI expects more foreclosure scams as criminals prey on growing numbers of people desperate to keep their homes while interest rates balloon on adjustable rate mortgages, [FBI financial crimes section chief Sharon] Ormsby says. She also expects increasing fraud in "reverse mortgages," in which homeowners 62 or older can take out a loan against the equity in their home. Unlike a traditional home-equity loan, the borrower doesn't pay back a reverse mortgage until they sell the home.


  • In [one type of] scam, people posing as "foreclosure rescue" experts persuade homeowners with bad credit to sign over their deeds to a third person who can get a second mortgage against the home. The "expert" pockets the cash and defaults on the loan. A New York grand jury charged six people with fraud last month for allegedly stealing more than 80 homes in this way.

For more, see FBI: Housing scams more than double.

Countrywide Stops Automatic Drafts, Then Forecloses On Homeowner, Says Lawsuit

In Beaumont, Texas, The Southeast Texas Record reports:
  • There seems to be no relief in sight for Countrywide Home Loans, as a West End couple has just filed a new lawsuit alleging that the lender stopped automatically withdrawing loan funds and wrongly foreclosed on their home. Brian and Ahli Sparkman assert Countrywide had been automatically drafting their mortgage payment from their bank account for one full year, then for reasons unknown, stopped and foreclosed on them.

Reportedly, the lawsuit alleges that Countrywide's failure to automatically withdraw the monthly mortgage payments after agreeing that it would do so (and having done so for a year) constitutes a misrepresentation under the Texas Deceptive Trade Practices Act (Tex. Bus. & Com. Code §§17.41—63).

For more, see Beaumont couple claims Countrywide wrongly foreclosed on home.

For more on the Texas statute, see The Texas Deceptive Trade Practices Act: Still Alive And Well.

Montana Woman Gets 5 Years For Stealing Bank CDs, Home Sale Proceeds From 80+ Year Old Mother

In Billings, Montana, The Billings Gazette reports:
  • A Billings woman who admitted to stealing $300,000 from her elderly mother in a bankruptcy fraud scheme will serve the maximum five years in federal prison. "I would just like to apologize and ask forgiveness from God and everyone," an emotional Nancy Florence Short, 63, said Friday. [...] Short pleaded guilty in July to concealing assets and making false statements in a scheme that started in 2001 with bankruptcy filings in Montana. Prosecutors said Short converted $300,000 in certificates of deposit from her mother without authorization and took $22,780 from the sale of her mother's house in Texas, knowing that the money was intended for her mother's care.


  • When Short placed her mother in [an assisted care facility], she isolated her by diverting her mail and denying access to her car, [U.S. District Judge Richard] Cebull said. Short also gave the staff a false medical history of her mother by saying she suffered from Alzheimer's and was paranoid. When Short's mother discovered the theft, the staff and police initially didn't believe her allegations because of the supposed Alzheimer's, Cebull said. Short was the victim's only contact outside [the care facility], he said.

For more, see Woman gets 5 years in bankruptcy fraud.

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

Broward Cops Collar Contractor On New Charges; Pocketed Deposits, Failed To Complete Work

In Broward County, Florida, The Miami Herald reports:
  • An unlicensed contractor on probation for ripping off dozens of homeowners in Miami-Dade County is being accused of ripping off another dozen new homeowners in Broward. John T. Pluto, 45, [...] was arrested Friday in Hollywood by the Economic Crimes Unit of the Broward Sheriff's Office on charges that he defrauded at least 14 Broward residents who needed concrete work at their homes in 2006. Pluto faces one count of organized scheme to defraud, a first-degree felony. He is being held at BSO's Main Jail in Fort Lauderdale without bond.

  • BSO spokesman Mike Jachles said Pluto cheated local homeowners out of $50,000. Pluto's system, according to authorities: He would enter into contracts, begin some of the work, and become hard to reach after pocketing their deposits -- often totaling 50 percent of the final price.

For more, see Accused of new scams, contractor held in Broward (A contractor already in trouble for scamming homeowners in Miami-Dade is suspected of conducting a similar scheme in Broward) (if link expires, try here).

Go here for other posts on contractor arrests by Broward Sheriff's Office.

Poisonous Spiders Force Indiana Family From Home; Insurer Refuses To Indemnify

In Anderson, Indiana, The Anderson Herald Bulletin reports:

  • It’s every arachnophobe’s or homeowner’s nightmare: The home you just bought already has tenants — hundreds of poisonous brown recluse spiders. That was the reality for Chad Cook, his pregnant wife and their 1- and 3-year-old children in April 2005, when they moved into their home at 906 Whitmore St. in Anderson and discovered the poisonous arachnids had infested their home.


  • The infestation sparked a lawsuit when the spiders couldn’t be done away with. Allstate, the insurer for the Cooks, wouldn’t compensate the family for its uninhabitable home. The family also sued for compensation for punitive damages, financial losses, emotional distress and the covered value of the home and its contents under the insurance policy, $187,000. The ensuing legal battle between the family and Allstate, which dragged on for more than two years, is only now drawing to a close. The Cooks, unable to live in their own home or remove most of their possessions, had to rely on assistance from friends, family and Good Samaritans through their church. All the while, the family continued to pay the mortgage on the home.

For more, see Brown recluse spiders cause family to flee home, file lawsuit.

For earlier media reports (WRTV Channel 6) on this story, see:

Wednesday, January 16, 2008

San Diego Landmark Embroiled In Litigation Between Developer, Residents; Mortgage Holders Face Grim Prospects

In another condo quagmire story, reports on the unfolding saga of a California landmark building on the edge of downtown San Diego that was once a hotel, but was rehabbed and converted into condos a couple of years back. A dispute between the developer and its residents involving alleged construction defects stemming from the rehab and failure to disclose certain material facts are the prime contributors to the problem. Plummeting prices of the residential units in the building causing owners to lose their home equity and mortgage holders to eat hundreds of thousands of dollars from resulting foreclosures is another contributor to this mess.
  • The red neon letters spell EL CORTEZ when they're all working, launching a beacon from the stately white building atop its namesake hill on the edge of downtown San Diego. But when the letters are on the fritz, as they are now, they flash and blink, muddling the sign's message and portending another: all is not right with the landmark.


  • The building is mired in litigation between homeowners and the developers. The homeowners association and individuals in various suits are suing over construction defects, parking agreements, HOA reserves, disclosures on property tax agreements and the building planned for next door. And of the five units in the building currently for sale, four are being sold for about half of their original selling price by lenders who repossessed them. The other is listed for less than is owed on the mortgage.

  • Take unit 405, a two-bedroom, two-bath condo that sold in November 2005 for $625,000. It's been repossessed by the lender and is now listed for sale with an asking price of $290,000 -- a 54 percent price reduction. Another bank-owned unit that once sold for $405,000 is now listed at $199,000. Another one, No. 304, sold in February 2006 for $699,250. Now it's listed as a bank-owned sale for $294,500 -- a 58 percent difference. And though sales have slumped countywide, buyers are especially scarce on this project. Lenders, already reviewing each deal more meticulously, are extremely averse to making mortgages on buildings in litigation. The banks selling the repossessed properties are forced to keep lowering the prices until a buyer can pay cash or work out some other deal with a lender.

Among the problems complained of by the residents of this luxury building are the defective systems that have resulted in bursting pipes and sewage back-ups, failure to disclose that a major real estate tax break was expiring - resulting in a significant hike in unit owners' maintenance charges, and the developers' plan to build a new 12-story contemporary building right next door to the eight decade old landmark - which will kill the views of the city that the building currently enjoys.

For more, see Trouble at El Cortez (In a renovated San Diego landmark, there is dysfunction among the developer and the homeowners).

"Straw Buyers" File Suit Against "Money Store" In Alleged Maryland Foreclosure Rescue Scam

(original post 1-15-08)
Two Maryland residents currently have litigation pending in a Maryland Federal Court accusing foreclosure rescue operator Metropolitan Money Store of duping them into being "straw buyers" in a foreclosure rescue, equity stripping scheme that, according to their lawsuit, purportedly:
  • "was geared to help people in the community who have homes that were about to go into foreclosure. Their specific role was to be an 'investor' by submitting their social security numbers for which they would be paid in return a $10,000 fee."

According to the lawsuit, the Plaintiffs were never told that they would be purchasing a home or would be assuming home ownership from the homeowners who were in foreclosure.

The lawsuit alleges violations of the Federal Real Estate Settlement Procedures Act ("RESPA") and the Maryland Protection of Homeowners In Foreclosure Act ("PHIFA"), negligence, restitution and unjust enrichment. The suit also seeks to void the deeds to, and the mortgages on, the subject homes that arose out of the equity stripping transactions involved.

In addition to Metropolitan Money Store, the other defendants named in the suit are:

  • Fordham and Fordham Investment Group, LTD., RTE Title & Escrow, LLC, Sussex Title LLC, Joy Jenis Jackson, Kurt Fordham, Alexander Jamil Chaudhry, Jennifer McCall, Southern Title Insurance Corp., Chicago Title Insurance Company, and Exit Powerhouse Realty.

The case, originally filed in a Maryland state court in Prince George's County in September, was transferred by the defendants to Federal Court in November. Representing the Plaintiffs are Charles M. Maynard LLC, Rockville, MD and Joe D. Watson, Rockville, MD.

To view the lawsuit, see this direct link to Law, et al. v. Metropolitan Money Store, et al. on the PACER system (approx. 1.32 MB - PACER registration required - 34 pages - $2.40).

Alternatively, you can contact me at and I'll e-mail it to you (please put "Law et al. v. Metropolitan Money Store" in the "Subject" line).

Go here for other posts on Maryland foreclosure rescue operator Metropolitan Money Store.

Mass AG Seeks Injunction Freezing 500 Fremont Foreclosures

In Massachusettts, The Boston Globe reports:
  • The Massachusetts attorney general asked a state court yesterday to block Fremont Investment & Loan from commencing foreclosure actions against 500 borrowers in Massachusetts. Attorney General Martha Coakley had previously filed suit in October accusing Fremont of predatory and unfair lending practices, and yesterday attorneys from her office told a Suffolk Superior Court judge the state wants to review each mortgage that is subject to foreclosure and try to stop proceedings on any loans they believe were made fraudulently.


  • Many Fremont loans had lower teaser rates that rose after two years, often pushing borrowers' payments beyond their ability to pay. Fremont mortgages were "a recipe for disaster," and Fremont was aware its mortgages contained "multiple layers of risk" to borrowers, [assistant attorney general Jean] Healey said. In the request for an injunction, state lawyers argued the loans were "structurally unfair" and Fremont made them without regard to borrowers' ability to pay.

For more, see State asks court to halt 500 foreclosures by Fremont.

Go here for a West Tisbury, MA lawsuit against Fremont alleging predatory practices.

Fremont, Saxon Engaged In Unfair, Deceptive, Predatory Lending Practices, Says Martha's Vineyard Lawsuit

In Massachusetts, on the island of Martha's Vineyard, the Martha's Vineyard Gazette reports:
  • The town of West Tisbury has filed a lawsuit against a mainland subprime mortgage company that loaned more than half a million dollars to an affordable homesite owner in town who had no ability to repay — and then foreclosed on the property. The lawsuit charges Saxon Mortgage Services Inc., a Texas-based lending institution, and Fremont Investment and Loan of southern California, with unfair, deceptive and predatory lending practices. Filed in Dukes County Superior Court on Dec. 20 by West Tisbury town counsel Ronald H. Rappaport, the complaint seeks to reestablish a set of protective covenants that run with the property to ensure that it will remain affordable in perpetuity.

For more, see Lawsuit Targets Subprime Bank.

Go here for a post on the Massachusetts Attorney General litigation against Fremont alleging predatory practices.

Non-Profit To Assist Some Victims Of Pennsylvania Wrap Around Mortgage Ponzi Scheme

In Lancaster County, Pennsylvania, Lancaster Online reports:
  • The United Way of Lancaster County aims to take some of the sting out of a scam that burdened hundreds of area homeowners with larger mortgage payments than they expected.The agency will set up a fund to assist the victims of Berks County-based OPFM Inc. and Image Masters. OPFM mortgage broker Wesley A. Snyder has pleaded guilty to defrauding some 800 borrowers, including more than 300 in Lancaster County. The United Way's Fraud Victims' Fund is not intended to help all borrowers. Only those in danger of losing their homes because they can't make higher mortgage payments will receive aid.

For more, see United Way steps into mortgage scam breach (Sets up fund that will help people at risk of losing their homes to mortgage broker’s misdeeds).

See also:

Go here and go here for other posts and links to other media reports on the Ponzi scheme operated by Wesley Snyder.

Lawsuit Involving Title Underwriter Revolves Around $5.1M In Missing Escrow Funds Once Held By Now-Defunct Agency

In Christian County, Missouri, the Springfield Business Journal reports:
  • A Branson development company suing a Nixa-based title agency that suddenly ceased operations in June will soon have access to internal documents subpoenaed from the agency’s underwriter. On Jan. 9, Christian County Circuit Judge Mark Orr heard from attorneys representing Branson Hills Development Co. and LandAmerica Financial Group, the Virginia-based company that underwrote title policies issued by Guaranty Title Co. LandAmerica pulled the plug on its agent after evidence of an alleged check-kiting scheme surfaced and immediately initiated an audit that found at least $5.1 million missing from Guaranty Title’s escrow accounts at area banks. The money belonged to developers, banks and builders as well as homebuyers and sellers who found themselves out of luck when Guaranty Title was shut down. The agency – co-owned by Rick Burton, Kathy Allen and Stephanie Gray – had at least nine regional offices that employed some 45 people.

The developer is seeking to hold LandAmerica responsible for the actions of Guaranty Title based on its agency agreement with the now-defunct title company. For more, see Judge OKs subpoena of Guaranty Title audits (Branson Hills attorney asserts that the underwriter is party responsible for actions of defunct title company).

For an earlier SBJ article on this case, see Attorneys flood courtroom chasing Guaranty Title funds (Problem: Amount left behind is unclear and reportedly dwindling).

Click here for more in SBJ's ongoing coverage of Guaranty Title's collapse.

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

Texas Feds Indict 16 In Straw Buyer, Flipping Operation

In Austin, Texas, the Austin American Statesman reported last week:

  • A federal grand jury in Austin has indicted sixteen people — 11 of them from Austin — in a multimillion dollar fraudulent real estate flip-for-profit scheme, U.S. Attorney Johnny Sutton's office announced [last week]. The indictment says that the group, led by Cornelius Robinson, 47, of Austin, conspired to defraud mortgage lenders in the purchase of 25 properties in Austin and San Antonio. The defendants are accused of buying the properties and then immediately selling them to a "straw buyer," who was in on the scheme, at a higher price. "The mortgage lenders were deceived as to the true nature of the transaction and financial status of the 'straw buyer,' " who did not make subsequent mortgage payments, said a statement issued by Sutton.

Source: 16 indicted in real estate scheme (Convictions could lead to 30-year sentences).

See also, 16 indicted in Austin-area mortgage fraud scheme: Others charged were:

  1. Silvia Seelig, age 45, of Austin, who during the conspiracy, was a licensed real estate agent and an alleged straw buyer;
  2. George H. Watson, age 55, of Austin, a licensed attorney who specializes in real estate transactions. Watson served as the closing attorney on numerous real estate transactions associated described in the Indictment;
  3. James Douglas Atwood, age 51, of Austin, Cornelius Robinson’s uncle and an alleged straw buyer;
  4. Michael Breon, age 39, of Austin, an associate of Cornelius Robinson and an alleged straw buyer. Breon, a licensed loan officer and mortgage broker, was employed by several different loan origination and mortgage companies during the conspiracy;
  5. Sindu Sukumaran, age 36, wife of Michael Breon and an alleged straw buyer;
  6. Doris Ann Hill, age 40, of Austin, a personal banker employed at Wells Fargo Bank. For a fee, Hill allegedly agreed to provide a false verification of deposit to loan underwriters in relation to real estate transactions;
  7. Julius Meyers Lofton, a 45-year-old licensed real estate agent living in Austin and an alleged straw buyer;
  8. Roy Rivers, age 52 of Austin, friend of Cornelius Robinson and James Atwood and an alleged straw buyer;
  9. Danielle Guice Rosas, a 40-year-old resident of Austin and an alleged straw buyer;
  10. Stanley Ma, a 27-year-old resident of the Honolulu, Hawaii area and an alleged straw buyer;
  11. Leonard Brown, age 38, of Houston, Texas, and an alleged straw buyer who also allegedly provided a false verification of employment in association with Onyx Consulting and defendant Ma;
  12. Russell Snead, a 43-year-old resident of the Seattle, Washington area, an associate of Cornelius Robinson and an alleged straw buyer;
  13. Marlon Nathan Torres, age 45, of Hutto, Texas, an associate of Cornelius Robinson;
  14. Jeffrey Andre Wilkins, age 46, of Austin, a friend of Cornelius Robinson and an alleged straw buyer; and,
  15. Leroy Williams, a 46-year-old resident of Austin and an alleged straw buyer.

Tuesday, January 15, 2008

Another West Palm Problem With Newly Built Condos

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Cracked walls. Corroded pipes. Another abandoned home in foreclosure? Nope. It's the luxury condominium known as One City Plaza in downtown West Palm Beach, condo owners say. The building's condo association, fed up with what it claims are numerous building defects, has filed a nasty lawsuit against One City Plaza's developer, Kolter City Plaza Ltd. The association claims the upscale condominium is replete with defects including building code violations, design flaws and safety issues. How bad? Try water intrusion in the garage, roof and lobby; cracked walls in the garage, utility rooms and building exterior; and rusting metal roof trusses, according to the lawsuit, filed late last month in Palm Beach County Circuit Court.


  • One City Plaza, among the first of the new condos to open downtown, was developed by Kolter, a Canadian concern. The luxury, 350-unit building has units ranging in price from $300,000 to more than $1 million.

For more, see Land-use attorney ready for fresh start (2nd story from the top) (original story no longer available online; try here for full story reprinted on another website).

Forbes On How Lehman Had Pocket Picked Out Of $50+ Million In Southern California Mortgage Scam

Forbes magzine has an article on the ongoing criminal and civil proceedings involving a major alleged mortgage fraud scam which resulted in Lehman Brothers taking a hit out of upwards of $50 million, according to court documents. An excerpt from the story:

  • The U.S. Attorney in Los Angeles says the scam was masterminded by developers Charles Elliot Fitzgerald and Mark Alan Abrams, with help from Joseph Aram Babajian, real estate broker to such stars as Warren Beatty, Ryan Seacrest and Harrison Ford. Five people have been indicted on multiple charges of fraud and conspiracy. Between 2000 and 2003 the defendants allegedly stole tens of millions of dollars by inflating the values of homes. According to the criminal complaint, they bought real estate at fair prices, had the properties appraised at far higher amounts, borrowed those greater sums from Lehman and pocketed the difference, using the money to fund extravagant lifestyles. Five people, developer Abrams among them, have pleaded guilty to multiple felonies and await sentencing after they testify against other defendants. Babajian (pronounced Baba-zhan) and Fitzgerald have entered not guilty pleas.

For more, see Real Estate Rip-Off (How Lehman Brothers was swindled out of $50 million).

Go here for earlier posts on this story.

NY Governor To Propose Bill Stengthening Foreclosure Protections For Homeowners

In his recent State of the State speech to the legislature, New York State Governor Elliot Spitzer addressed the foreclosure rescue problem in the state, telling the legislature:
  • I will send you a bill that amends state foreclosure law to provide additional protections for homeowners. In addition, working with Attorney General Cuomo, I will submit legislation that enhances our anti-fraud laws, to ensure that those who engage in mortgage scams are punished.

Go here for the text of Gov. Spitzer's speech (courtesy of Political State Report).

Baltimore Judge Denies Title/Escrow Company Dismissal Request In State AG's Foreclosure Rescue Suit

In Baltimore, Maryland, WBAL-TV 11 News I-Team reporter Barry Simms reports that a request filed by Laurel-based Cornerstone Title and Escrow to dismiss it from a foreclosure rescue lawsuit filed by Maryland Attorney General Doug Gansler was denied yesterday by Judge Martin Welch. An excerpt from the story:
  • In July, homeowner Claretta Taylor told I-Team reporter Barry Simms about her struggle to keep her home. "I've become leery of people. I don't trust people now, especially when it comes to my finances. I scrutinize everybody," Taylor said. Taylor said that a television ad by Michael K. Lewis promised hope, so she signed up for his MKL financial diet. After scrutinizing the deals given to Taylor and about nine other homeowners facing foreclosure, Assistant Attorney General Scott Bailey filed a complaint in October.

  • The complaint accused Lewis, his brother, Ernest, and other members of his so-called African-American Business Network of stripping the equity from the properties and charging numerous undisclosed fees. The attorney general's office said it believes Cornerstone Title and Escrow, based in Laurel, is involved in the foreclosure rescue scheme. "Each of the defendants played a role in the scheme. They should be held liable for that," Bailey said.

For more, see Company Tries To Get Out Of Foreclosure Scheme Case.

Go here for other posts on Maryland foreclosure rescue operator Michael K. Lewis.

For the Maryland AG's warning on foreclosure rescue, see Foreclosure Scams: Don’t Fall Prey to a Foreclosure Shark!

Go here for a list of Maryland organizations that provide foreclosure counseling to consumers in every region of the state.

Maryland Governor Calls For Ending Foreclosure Rescue, Starting Mortgage Servicer Monthly Reporting

(original post 1-14-08)
In Landover, Maryland, The Baltimore Sun reports:
  • Gov. Martin O'Malley announced a wide-ranging plan yesterday to confront an unprecedented rise in home foreclosures and combat predatory mortgage scams, including legislation to slow the minimum time for foreclosure from 15 days to more than four months. The Democratic governor proposed new requirements for brokers and lenders to ensure that borrowers can afford the mortgages, changes to the state's foreclosure process to make it more consumer-friendly, and a ban on the conveyance of property in so-called foreclosure rescue schemes. O'Malley's administration also wants Maryland to become the second state in the nation, after California, to require that loan servicing companies file detailed monthly reports about how many loans are in default and their efforts to help borrowers by refinancing or modifying the loan terms. State officials said there is a gulf between what servicers say they are doing and the actual assistance they are providing.


  • O'Malley outlined his plan at a news conference on the front lawn of Landover resident Velma Floyd, who almost lost her first home recently in a foreclosure rescue scheme, in which troubled homeowners refinance and are instructed to temporarily sign over the title of their homes. Floyd's broker is under investigation by state regulators and therefore wasn't named. "We just want to keep our home, and we want to help others keep their homes," Floyd said.
For more, see O'Malley unveils home aid (Plan is meant to halt surge in foreclosures).

See also, O'Malley Proposes Mortgage Reforms (The Associated Press):

  • O'Malley's plan does not include new regulations for businesses that offer "Cash for Houses."

For the Maryland AG's warning on foreclosure rescue, see Foreclosure Scams: Don’t Fall Prey to a Foreclosure Shark!

Go here for a list of Maryland organizations that provide foreclosure counseling to consumers in every region of the state.

Go here if you're a Maryland resident and want to file a complaint with the state Attorney General.

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

Arizona Governor Calls For Foreclosure Rescue Regulation

The Arizona Republic reports on Arizona governor Janet Napolitano's recent State of the State address. Buried among the legislative proposals urged during her speech was the passage of an Arizona Home Equity Theft Protection Act, which would regulate foreclosure rescue operators. For the story, see Gov. focuses on schools, health care in State of State.

Go here for the text of her speech (courtesy of the Tucson Citizen), in which, among other things, she tells the legislature:
  • [Y]ou need to pass the Arizona Home Equity Theft Protection Act, to license "equity purchasers." There are some in this category who prey on vulnerable homeowners and use deceptive practices to cheat them out of their homes. Let's pass the bill and put the bad guys out of work.

Washington State AG Calls For Foreclosure Rescue Prohibition

In Washington State, a recent editorial in The Olympian comments on an agressive legislative agenda set by state Attorney General Rob McKenna for the current session of the state legislature which sets forth a number of consumer protection measures, including the prohibition of mortgage foreclosure rescue schemes. For the story, see McKenna sets bold agenda.

Oregon Legislature To Propose Laws Protecting Homeowners In Foreclosure Rescue Deals

In Salem, Oregon, reports:
  • Later this week, the [Oregon] House Consumer Protection Committee will introduce a [...] bill that will crackdown on fraudulent and abusive rescue-mortgage scams aimed at homeowners facing potential foreclosure. [...] To prevent further victimization of homeowners, Senate Democrats have endorsed three specific foreclosure reforms to be enacted in the February session: protecting homeowners from scams that promise a "rescue" from foreclosure, but actually take further equity from homeowners; a new requirement that homeowners facing foreclosure be provided with clear and understandable language about their rights and options; and new regulation of loan originators, who are currently unlicensed and free to target distressed homeowners with unsuitable refinancing offers. "Homeowners facing a foreclosure crisis need to be protected from scams," said Sen. Ben Westlund (D-Tumalo), chair of the Senate Commerce Committee. "We have an obligation to act."

For more, see Democrats Say Fairness for Homeowners Remains Focus for Senate (Legislation Introduced to Rein in Unlicensed Loan Originators).

Florida AG, Company Founded By Real Estate Seminar Guru Settle Claims Over Alleged Questionable Practices

In Florida, the South Florida Sun Sentinel reports:
  • Florida consumers could receive more than $1 million in reimbursements from a company that state regulators said misrepresented its real estate and investment seminars by promising unrealistic results. [Florida] Attorney General Bill McCollum on Thursday said the state had reached a settlement with Whitney Information Network Inc., which advertises through television infomercials such programs as "Star Trader," "Wealth Builder Workshop" and "Focus on Foreclosure."

For more, see Whitney Information Network settles with state over claims in seminars (Whitney to reimburse clients who claim they were misled).

For Florida AG news release, see Infomercial Company to Modify Business Practices, Reimburse Dissatisfied Customers (Consumers will have collectively received more than $1 million in refunds for non-productive seminars).

In a separate story on company founder Russ Whitney, The News-Press (Southwest Florida) recently reported:

  • Russ Whitney, founder of the Cape Coral-based Whitney Information Network, announced his resignation as the company's chief executive officer as of Dec. 31. Whitney, 52, will continue to serve as chairman of the board of directors and will act as an adviser to the company. His resignation was among the recommendations of an internal investigation launched after the company announced a year ago that it was under investigation by the U.S. Attorney for the Eastern District of Virginia and the Securities and Exchange Commission. Federal authorities have refused to comment on those investigations. The company notified the Securities and Exchange Commission in May that its earnings reports have been delayed by the internal investigation.

For more, see Whitney Information Network (7th blurb from the top).

Monday, January 14, 2008

One Key Player Cops Plea In Wisconsin "Body Snatcher" Mortgage Fraud Case

In Milwaukee, Wisconsin, the Milwaukee Journal-Sentinel blog reports:
  • Federal prosecutors have scored one significant promise of a guilty plea in the sprawling Michael Lock mortgage fraud case, but so far others aren't following suit. Chianti Clay, a key figure in the case, has agreed to plead guilty, according to paperwork filed last week -- the deadline for filing motions in the case. But no other plea agreements have appeared on the case file. And five defendants including Lock have filed motions (including Krista Jeray, who has former Waukesha DA Paul Bucher as her defense attorney), a good sign they are fighting the charges. There are four other defendants who didn't file motions or plea agreements (Monique Dunlap, Marcus Leonard, Ruben Fields and Nicole Brown).

  • Lock -- who headed a crew known as the "body snatchers" -- is facing a slew of other charges in state court, including homicide for which he is set to go to trial in February. Lock's federal trial has been scheduled for April.
Source: Most not taking pleas in Lock case.

It appears that of the ten defendants named in the original mortgage fraud indictment, only Clay has copped a plea to date. In addition to those named above, the additional defendants listed in the indictment are Jerhonda McCray, of the mortgage brokerage company, World Financial Mortgage, Kevin Slamann of Excell Closing Services, and Lisa Colella (fka Lisa Geiger).

See Plea Agreement - U.S. vs. Clay to view Clay's plea.

For a copy of the original indictment, see U.S. vs. Lock, McCray, Slamann, et al.

Go here for earlier posts & story updates on this case.

Disbarred Florida Attorney / Closing & Title Agency Owner Faces 54 Criminal Charges; Bond Set At $3M

(original post 1-13-08)
In Vero Beach, Florida, TC Palm reports:
  • Police arrested former attorney Ira C. Hatch Jr. late Friday and charged him with racketeering, money laundering, grand theft and operating as a money transmitter without proper registration. Officials with the Vero Beach Police Department, State Attorney's Office and local FBI office went to serve Hatch, 60, with warrants involving 54 criminal counts at his home Friday morning, but he was in Winter Park, said Vero Police Lt. Kevin Martin. Through arrangements made with his Viera-based attorney, Greg Eisenmenger, Hatch turned himself in at the police station at 4:55 p.m. He is in the county jail on $3 million bond [...] .


  • Hatch owned Coastal Escrow Services Inc. of Vero Beach and Coastal Title Services of Port St. Lucie. The companies closed over Labor Day weekend, leaving real estate companies and individuals without what police estimate is more than $4 million in deposits. [...] Officials have estimated there are at least 500 potential victims nationwide of Coastal Escrow.

For more, see Former Vero Beach attorney Hatch jailed; bond set at $3 million.

In a related story, see Hatch bail reduction request denied.

Hatch is also involved in civil litigation against his former law partner, Kevin S. Doty. For more on this story, see Former Hatch partner in Vero Beach files countersuit to recover money. (Hatch vs. Doty - Doty answer & countersuit).

Go here for earlier posts on Ira Hatch & Coastal Escrow Services.

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

NBC Nightly News On Reverse Mortgages

Last Thursday, the NBC Nightly News ran a report on reverse mortgages and featured a California senior citizen homeowner who only needed a few bucks to fix her porch, and now fears that she may be facing financial ruin as a result of a reverse mortgage she took out. Reportedly, as part of the deal in getting the reverse mortgage, the sales agent sold the 78-year old woman a long term annuity that doesn't mature until 2033, and faced a 20% penalty for trying to access that money early. She is now part of a class action lawsuit going after the sales agent, the broker, and the lender alleging elder financial abuse.

To watch the report, see Back-stabbed by reverse mortgages? (no longer available online).

See also Pitfalls to Reverse Mortgages (NBC video).

For other posts related to reverse mortgages, go here , and go here. reverse mortgage yak

Minnesota Feds Meet With 200+ Renters, Would-Be Homeowners In Parish Marketing Mess

In New Prague, Minnesota, the Pioneer Press reports:
  • Federal investigators asked for an earful from New Prague residents who could lose their homes as a result of one of the largest cases of mortgage fraud in Minnesota history. It looks like the officials got what they wanted. To make room for dozens of hurt, angry and confused renters and would-be homeowners, they borrowed a church. More than 200 residents of the Prague Estates community crowded into Holy Trinity Lutheran Church on Thursday night to meet with Assistant U.S. Attorney Joe Dixon, Senior U.S. Probation Agent Bernadette Valento and Gary Hansen, a court-appointed receiver.

  • The officials hoped to determine what kind of sentences they should seek in the case of Michael and Ardith Parish, Eagan homebuilders who used fraudulent mortgage loans to keep their company afloat. The Parishes, both in their 60s, pleaded guilty in November to playing lead roles in the mortgage scheme, which involved almost 200 homes across the metro area that are now in various stages of foreclosure. More than 100 of them are in New Prague.

For more, see New Prague / Home fraud victims vent anger to authorities (Recommended sentences for Parish mortgage scam will reflect residents' losses).

Go here for earlier posts on Minnesota homebuilder Parish Marketing and Development.

Another Newly Built South Florida Condo Quagmire Rears Its Head In WPB

In West Palm Beach, Florida, The Daily Business Review reports:
  • The Whitney, a newly built condo development in downtown West Palm Beach, has joined the growing number of developments hit with foreclosure lawsuits. California-based lender iStar FM Loans is seeking to foreclose on about 146 unsold units, or about two-thirds of the 210-unit building, which was completed in mid-2007.

Highlights from the story:

  1. The foreclosure revolves around $37 million which is allegedly due, but has not been paid,
  2. The principals behind Evernia Properties, the project developer, are first-time developers (Editor's Note: ???) Enrique Dillon, Ricardo Djmal and Ricardo Weinstein,
  3. The principals are also investors in another project under foreclosure, the Villa Mare & Yacht Club Residences in Boca Raton, a 160-unit conversion project that defaulted on a $50 million loan from Ocean Bank,
  4. Dillon, a native of Argentina who was a computer exporter and principal of several technology-related businesses before becoming involved with real estate developments (Editor's Note: ???), is chief executive officer of Evernia Properties,
  5. The current mortgage holder acquired its interest by assignment from from California-based Fremont Investment & Loan, the original project lender, only two days before its July 1, 2007 payment-in-full due date,
  6. Subcontractors have been stiffed out of payment for their services and some have filed mechanics' liens on the project,
  7. Most of the unsold units, according to the sales & marketing agent, are in contract,
  8. Reportedly, those contract purchasers who want to close on their purchases and move in can't because of "lien issues" - since Nov. 14, no units have closed at the Whitney, according to Palm Beach County public records,
  9. There are other contract purchasers who have apparently changed their mind about buying units in The Whitney; thirty-seven lawsuits from buyers seeking to back out of their contracts have been filed,
  10. Contract purchasers put down deposits of 20% of the purchase price - only half of which was required to be held in escrow; if the property is foreclosed, contract holders may find themselves out of luck with respect to the 10% that the developer pocketed.

For more, see Condo Meltdown: Lender seeks foreclosure on WPB’s new Whitney project (if link expires, see if this link works).

For story update, see (4-14-08) The Palm Beach Post: Deal in works to save condo facing liens.

Some Predict Other Cities To Follow Cleveland's Lead In Suit Against Major Lending Institutions; Wall Street Buzzing

In Cleveland, Ohio, The Cleveland Plain Dealer reports:
  • Cleveland's lawsuit against 21 investment banks is likely to inspire similar efforts from cities and even homeowners who feel they have been hurt by foreclosures. That's the prediction from attorneys and others who follow real estate and finance, given the national attention the city has received with its novel argument that the banks created a public nuisance. Two lawyers -- one who believes in the city's position, and one who does not -- each described the case Friday as "just the tip of the iceberg." The suit, filed late Thursday in Cuyahoga County Common Pleas Court, accuses the banks of encouraging irresponsible home loans that ruined entire neighborhoods. Among the banks targeted were Deutsche Bank, Goldman Sachs and Merrill Lynch. Wall Street has been buzzing since. Lawyers, lenders and civic leaders have been, too. The case even caught the attention of CNN commentator Lou Dobbs.

For more, see Cleveland's lawsuit against investment banks may prompt other cities to pursue action (Cleveland seeks retribution in foreclosure epidemic).

For a Cleveland Plain Dealer editorial on this story, see Cleveland's lawsuit against Wall Street is bold, and a little shaky (Cleveland is going after the big investment houses with a gutsy, risky suit over destructive subprime lending).

See also, The Cleveland Free Times: Payback Time (Cleveland Sues Banks Over The Foreclosure Crisis, But Takes A Legal Road Less Traveled).

For the original Cleveland Plain Dealer story, see Cleveland sues 21 investment banks over subprime mess (Big-name firms blamed in costly subprime crisis).

Squatters In Abandoned Homes A Concern For Cleveland

In Cleveland, Ohio, a recent editorial in The Cleveland Plain Dealer expresses concern about some of the problems that may arise if large numbers of the city's homeless population begin to take up residency in some of Cleveland's 10,000 abandoned dwellings.
  • On the human side, many people who are chronically homeless need help with mental illnesses or substance abuse problems, but [Executive Director of the Northeast Ohio Coalition for the Homeless, Brian] Davis' fears about outreach workers trespassing on private property to serve squatters or getting themselves tangled up with criminals mistaken for homeless people are more than valid.

  • On the property side, Cleveland already has a huge problem with abandoned homes. Even under the best circumstances, a long-abandoned house deteriorates. That process is hastened when thieves strip it of fixtures to sell as scrap, or other kinds of crime move in. Add homeless people to the problem of abandoned dwellings, and it's only a matter of time until the first structure fire. And then the first one that claims lives.

For more, see Squatters put their lives and others' property in the balance.

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

Home Repossessions Pummeling Pawtucket's Plunging Municipal Cash Flow

In Pawtucket, Rhode Island, The Providence Journal reports:
  • Investors stuck with bad loans and people losing their homes because they have fallen behind on their mortgage payments aren’t the only victims of the subprime lending crisis, according to city officials. The city, too, is being hurt by the wave of foreclosures [...] . Tax revenues have plunged because banks that foreclose on delinquent borrowers don’t have to pay taxes on the foreclosed property until it is sold to another buyer, Finance Director Ronald L. Wunschel said in an interview. By state law, Wunschel said, banks are exempt from paying property taxes until a deed is recorded indicating that the foreclosed property has been sold. At that point, all back taxes are due and payable. But, until then, the city receives no revenue from foreclosed properties, Wunschel said. As a result, he said, the recent wave of foreclosures has created a serious cash crunch for the city, contributing heavily to the nearly $1 million deficit that Pawtucket is facing in the current fiscal year.

For more, see Pawtucket hurt by foreclosures. delinquent tax problem

Sunday, January 13, 2008

Judge Jams Foreclosing Lender's Improper Grab For Excess Insurance Cash On Fire-Destroyed Home

A mortgage lender, who claimed was owed about $134,800 on a loan in default, foreclosed on a Missouri home. At the foreclosure sale, the lender was the winning bidder, entering a "credit bid" of $99,700. Unbeknownst to the lender, however, the home was destroyed by fire about one month before the foreclosure sale. A couple of months after the sale, the homeowners received the proceeds from the fire insurance policy in the form of a check from the insurance company (made out to the homeowner and the lender) for $164,400, which the homeowners promptly turned over to the bankruptcy Trustee (the homeowners had filed bankruptcy during the course of the foreclosure proceedings).

Even though it already had acquired title to the property (sans improvements) by bidding $99,700 at the sale, the lender nevertheless demanded $134,800 of the insurance proceeds, the full amount of the debt it claimed was owed to them by the homeowners (and without reduction for its $99,700 bid). Conversely, the Trustee and the homeowners claimed that the lender was only entitled to the amount of its secured debt, reduced by the "credit bid" of $99,700.

The bankruptcy judge agreed with the Trustee and the homeowners, saying that the debt owed to the lender must be reduced by the amount that it bid for the home at the foreclosure sale, and the fact that the lender was clueless that the home went up in smoke a month before the sale was the lender's tough luck. Among other things, the judge stated in his decision:
  • [T]he Bank here elected to foreclose, bidding $99,771.17 for the property, even though it could have pursued the insurance proceeds instead. It is unfortunate that the Bank did not know that the Property had been destroyed by a fire when the Bank foreclosed, but the rule of caveat emptor applies to foreclosure sales, and the Court cannot protect the Bank from the consequences of that rule or the Bank’s failure to conduct even the slightest due diligence before it bid at the foreclosure sale.

To view the Federal bankruptcy judge's entire decision, see in re Newby, Case No. 04-31294 (Bankr. W.D. Mo., 2006). foreclosure arson yak

Pittsburgh-Area Volunteer Fire Department Facing Foreclosure Seeks Operating Funds

According to media reports from Carnegie, Pennsylvania:
  • Carnegie officials will sponsor a town meeting for suggestions on what to do about the borough's Volunteer Fire and Rescue Bureau's request for a 1.5-mill fire protection tax that would give the volunteers about $400,000 annually in operating funds. [...] Fire bureau members say they are behind on their mortgage payments and facing imminent foreclosure, but borough officials are dealing with financial constraints of their own.
  • Fire Chief John Kandracs said the department needs $150,000 immediately to avoid foreclosure.

For more, see:

Go here for updated story on the Carnegie, Pa. Fire and Rescue Bureau.

Suspicious Fire Hits Salem Home In Foreclosure

In Salem, New Hampshire, The Eagle-Tribune reports:
  • A fire that left a home uninhabitable was labeled suspicious by investigators this week, and that house is set to be auctioned off later this month. Fire Marshal Jeff Emanuelson said yesterday that an investigation into the New Year's Eve blaze at 6 Meisner Drive continues. He referred all other questions to the Police Department. Deputy police Chief William Ganley also confirmed the fire has been labeled suspicious, but he would not say if there were any suspects in the case.

Reportedly, a foreclosure sale of the home is scheduled for January 25. Officials would not disclose where the current owners and family were staying. The fire killed two of the family's four dogs. For more, see Investigators: Salem fire suspicious.

For other stories on fires & foreclosures, go here , go here , and go here. foreclosure arson xerox

Weymouth Duplex Facing Foreclosure Goes Up In Smoke; Investigators Blame Filthy Furnace, Cracked Chimney

In Weymouth, Massacusetts, The Patriot Ledger reports that a local two family non-owner occupied home in foreclosure was hit by fire last week. One unit was vacant; in the other, the tenant reports that all his familiy's possessions were destroyed. Regarding the suspected cause of the fire:
  • Officials were suspicious about the fire because it broke out the day before the foreclosed building was to be sold. But Weymouth Fire Chief Robert Leary said the fire started because the burner had not been cleaned and the thermostat in the vacant unit had been left set at 75 degrees. "Anything suspicious has been ruled out,’’ Leary said. ‘‘There’s no apparent arson." Results of an investigation by personnel from the state fire marshal’s office and the Weymouth Fire Department were released Wednesday. In addition to finding that the furnace was dirty, investigators determined that a cracked chimney let fire get into several levels of the home simultaneously.

For more, see Dad, kids lose everything in fire; Furnace blamed for blaze that destroyed duplex on Sunday.

See also, WCVB-TV Channel 5 report: Arson Investigated In Home Blaze (House Was To Be Foreclosed On) (read story) (watch video). (Another issue that surfaced: the fire chief said his staff was stretched thin because of recent budget cuts. Firefighters from Quincy and Braintree were called in to help put out the fire.)

For other stories on fires & foreclosures, go here , go here , and go here. foreclosure arson xerox

More On Arson & Foreclosures

The St. Petersburg Times reported recently:
  • It's one of the most drastic consequences of the mortgage meltdown - people who burn down their homes so they can collect the insurance money and wiggle out from under their loan. The premise is hardly new - dozens of homes in New Orleans mysteriously caught fire in the weeks after Hurricane Katrina when homeowners apparently discovered they had fire, but not flood, insurance. What has fraud investigators worried now is whether the growing mortgage crisis will lead to another, far more widespread, spike in arson cases.

For more, see Call it mortgage lightning (A storm of home arson is expected as owners' loan rates reset and payments jump).

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

Jacksonville Judge Who Fired Cancer-Stricken Judicial Assistant "A No-Good Son Of A *itch!" Says Chief Judge

In Jacksonville, Florida, The Florida Times Union reports:
  • Twelve days before Christmas, Circuit Judge Aaron Bowden fired his 17-year judicial assistant, who had been on leave since August with cancer. The Jacksonville judge said he feared her prolonged illness would leave him without an assistant at a time when the state had implemented a hiring freeze.

  • But his decision left Christine Birch, 54, with no medical, life or disability insurance and has created a firestorm at the courthouse. Chief Circuit Judge Donald Moran responded by calling Bowden "a no-good son of a [*]itch," prompting Bowden to respond with a blistering e-mail defending his decision and calling Moran's criticism irresponsible, unprofessional and unseemly. Other judges' assistants were also appalled by Birch's firing. They raised money to pay her rent this month.

For more, see Judge fires his assistant, draws criticism (The woman, his aide for 17 years, has cancer and was on leave).

For other posts on some of the knuckleheaded members of our esteemed judiciary, go here and go here. knuckleheaded judges zeta