Saturday, February 02, 2008

Erie, Pa. Federal Mortgage Fraud Probe Yields More Charges; New Arrest

In Erie, Pennsylvania, the Erie Times News reports:
  • A second key figure in the ongoing federal investigation into suspected mortgage fraud in the city of Erie looks to be poised to plead guilty to fraud and money-laundering charges. The U.S. Attorney's Office in Erie on Thursday filed criminal charges against Frank Kartesz II. Kartesz, 39, of Harborcreek Township, is accused of one count each of mail fraud and criminal conspiracy to commit mail fraud, wire fraud and bank fraud. The government alleges Kartesz was part of a scheme in which he and others bought run-down houses and sold them at artificially inflated prices. Most of the buyers were low-income people who knew little about the home-buying process.


  • Kartesz is the second person charged in the federal probe so far. His business partner in K&D Enterprises, Robert L. Dodsworth, pleaded guilty to fraud charges in November. [...] Most of the sales under investigation occurred in low-income Erie neighborhoods, and most of the financing was arranged through subprime mortgages.
For more, see New arrest in fraud case.

Go here for earlier posts on this Federal mortgage fraud probe.

Straw Buyer/"Cash Back" Mortgage Fraud Suspect Survives Suicide Attempt; Gets 5 Years In Federal Pen

In Minneapolis, Minnesota, the Pioneer Press reports:
  • The co-owner of LHS Mortgage Inc., the defunct Burnsville brokerage at the heart of a major Twin Cities mortgage fraud scheme, was sentenced Thursday to five years in prison. Ronald Joseph, 49, of Prior Lake, is the fourth and last person to be sentenced in connection with a large fraud operation involving straw homebuyers, sham loan documents with inflated sale prices and kickback payouts to various players. [...] The LHS scandal gained wider attention last year when a closing agent, Jill Lehn, 40, also of Prior Lake, was arrested and then wrote an article entitled "Tips On How To Ruin Your Life" as a cautionary tale. Lehn and two other defendants in the LHS Mortgage scheme already have been sentenced.

  • In court Thursday, Joseph discussed his recent suicide attempt with U.S. District Court Judge Donovan Frank. According to his attorney, Joseph Friedberg, his client was so despondent over his actions that he drank antifreeze while out on bail about a month ago so that his wife and children could collect on a $1 million life insurance policy. Friedberg said he intervened.
For more, see Mortgage scheme leads to jail (LHS co-owner Joseph gets 5 years for homebuying fraud operation).

See also:

For earlier posts on this story, go here , and go here.

Homeowner/Victims Get Payment Extension In Wraparound Mortgage, Pennsylvania Ponzi Scheme

In Lancaster County, Pennsylvanis, Lancaster Online reports:
  • At the urging of state and federal officials, 14 lenders have agreed to continue accepting lower payments from victims of the Personal Financial Management mortgage scam. The original deal reached in October by the lenders and attorneys for the victims was to expire at midnight Thursday. But the state Banking Department announced late Thursday afternoon that 13 lenders had agreed to extend the relief through May. [...] A 14th lender[...] agreed to extend the relief through February. While that's only about half of the 27 lenders involved, those participating lenders are dealing with four-fifths of the victims — 650 of 811."This agreement gives homeowners time to work out permanent solutions," said Secretary of Banking Steve Kaplan in a prepared statement.
For more, see Deal extended in mortgage scam.

Go here and go here for other posts and links to earlier media reports on the Pennsylvania wrap around mortgage Ponzi scheme involving companies operated by WesleySnyder.

Seniors Tapping Home Equity With Reverse Mortgages On Upswing

The Florida Times-Union ran a story recently on the increase in senior citizens using reverse mortgages to access the accumulated equity in their homes. For those seniors considering a reverse mortgage, you may want to check out Mortgages work in reverse (Homeowners who take out loans based on their equity are multiplying).

For other posts related to reverse mortgages and potential pitfalls to avoid when getting one, go here , and go here. reverse mortgage yak

Friday, February 01, 2008

Oregon Cop Targeting Foreclosure Rescue Operators; Calls Scams "Aggravated Theft"

In Portland, Oregon, Willamette Week reports:

  • Detective Liz Cruthers, who investigates white-collar crimes for the Portland Police Bureau, says she’s spending much of her time learning the intricacies of what law enforcement officials term “mortgage rescue fraud” and chasing down the perpetrators.

  • Cruthers says many “foreclosure consultants” are, in fact, scammers trying to dupe panicked homeowners out of the equity in their homes. “My contention is that ‘mortgage rescue’ is really aggravated theft,” says Cruthers. “What these people are doing is a crime.” She has helped lawmakers prepare a bill for the upcoming legislative session that would shut down one of the most common scams—vultures who assume a delinquent home loan and rent the property back to the original homeowner.

Reportedly, the Oregon Legislature will be taking up a bill addressing foreclosure rescue when its monthlong session begins Feb. 4.

  • Shane Jackson, a lobbyist for the Oregon Coalition of Mortgage Originators, says his group and others in the lending industry favor the bill because it cracks down on rescue scams.

For more, see Rescue Me (A Portland Cop is targeting foreclosure vultures. Next week, the Legislature will, too).

Go here for Portland Police Bureau's Fraud detail.

Go here and go here for other posts on deed theft by forgery, swindle, etc. deed theft yahtzee

Loan Officer Cops Plea In Equity Stripping Of Unwitting Elderly Couple's Home

(Original post 1-31-08)
In Cumberland County, Pennsylvania, The Patriot News reports:
  • Former midstate banker Constantine "Dean" Gekas' scheme to cheat an elderly West Shore couple out of their home fell apart in a Cumberland County courtroom Monday. Moments before he was to be tried on fraud charges, Gekas pleaded guilty to theft by unlawful taking and two counts of false swearing in exchange for a 2-year probation sentence. The plea deal struck with Senior Assistant District Attorney Daniel Sodus also requires Gekas, 44, [...], to sign over the East Pennsboro Twp. home he tried to steal from the late Chester and Lois Jasek. Sodus said the deal is designed to make the Jasek estate financially whole.


  • Investigators said the Jaseks unwittingly signed the deed to their home over to Gekas [...] in July 2004 when he provided them with a $103,000 personal loan. At the time, the value of the Jaseks' home [...] was conservatively estimated at $260,000, Sodus said.

  • Sodus said the fraud began when the Jaseks sought a bill consolidation loan through Integrity Bancorp Mortgage Co., where Gekas was a loan officer. Their loan request was approved, Sodus said, but Gekas told the couple it had been denied. Gekas then told them he could provide a loan, Sodus said. He said that while closing on that loan, Gekas had [Mr. & Mrs.] Jasek, who were in their late 70s and early 80s, respectively, sign the deed over to him. Only later did the Jaseks, who had to pay $500 a month on the loan, realize Gekas owned their house, Sodus said.

  • Investigators said [Mr.] Jasek sent Gekas a $103,000 check to try to pay off the loan in April 2005, but Gekas refused to accept it. The Jaseks stopped making the loan payments, and Gekas filed a landlord-tenant action to evict them.

  • Sodus said the false swearing charges are based on statements Gekas made during hearings on that civil complaint [...] during which he denied trying to deceive the Jaseks. The plea deal requires Gekas to sign over the house to a third party to be chosen by the district attorney's office, who will sell the property, Sodus said.

  • He said Gekas, who said he now works for a financial firm in Scottsdale, Ariz., will receive $98,000 from the sale to satisfy some liens against the house. Defense lawyer George Matangos said Gekas must pay off an additional $60,000 in liens. All remaining sale proceeds will go to the Jasek estate, which is pursuing a lawsuit against Gekas, Sodus said.

Reportedly, between the time of the July, 2004 scam and the time of Gekas' sentencing, the elderly Mr. and Mrs. Jasek passed away. For the story, see Man takes deal for probation in house theft (no longer available online).

See also, Former banker pleads guilty in fraud case.

For more on Dean Gekas, see (March 2. 2008) Council approves plan for luxury apartments (no longer available online):

  • In May 2006, the council approved a $2.5 million plan for five 4,000-square-foot town homes that project developers Constantine "Dean" Gekas and Scott Kuhn expected to sell in the $650,000 price range. But then Gekas, formerly of Wormleysburg, was charged with defrauding an elderly couple of their West Shore home. In January, Gekas pleaded guilty to theft by unlawful taking and two counts of false swearing in Cumberland County Court. He was sentenced to 2 years' probation.

Editor's Note:

According to the story, Gekas still has to fork over $60K as part of his criminal case. Since he is now on probation, and reportedly working for a "financial firm" and living in Arizona, a state with many elderly retirees, let's keep our fingers crossed and hope this guy doesn't scam another elderly couple to come up with the $60K.

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

Go here and go here for other posts on deed theft by forgery, swindle, etc. deed theft yahtzee whale foreclosure rescue

Abrupt Shutdown Of Property Management Firm Triggers Police Probe Into Possible Embezzlement; Tenants & Landlords Left In Lurch

In Montpelier, Vermont, The Times Argus reports:
  • Many tenants, landlords and contractors who worked with a Montpelier property management company under police investigation said Tuesday they saw problems going back as far as eight months ago. A series of interviews and e-mails received this week has revealed that Parkside Property Management, which oversaw and managed scores of properties in Vermont and New Hampshire that included low- to moderate-income tenants on fixed incomes and sometimes disability payments, stopped paying bills, wrote checks that bounced, neglected basic maintenance on many of its properties and became increasingly more difficult to reach – by phone, e-mail or in person – up until it closed its doors abruptly fewer than two weeks ago.

  • Members of the local law enforcement community are trying to determine why the four-year-old company closed, and who is responsible for a crisis that has put many absentee landlords, some located as far away as South Carolina, Texas and Florida, into the hot seat to find alternate means of collecting rents and tending to tenants.

  • Montpelier police have opened an embezzlement investigation, and have named a suspect employed at Parkside, James Pumpelly of Barre. Police have declined to comment on the specifics of the investigation. However, no arrests have been made, and so far no charges have been filed.

For more, see Montpelier property management firm, under probe by police, had extensive problems.

Next Two Years' Foreclosures To Remain Higher Than Usual, Treasury Official Tells Senate

Reuters news service reports:
  • Treasury Undersecretary Robert Steel said on Thursday that foreclosure rates on American homes will be higher than usual for the next two years as will the number of homeowners facing hardship. In prepared remarks to the Senate Banking Committee, Steel noted the risks a housing downturn poses to growth, but said the U.S. economy was basically strong.

For more, see Foreclosures to stay high: Treasury's Steel.

Super Bowl Bailing Out Some Arizona Homeowners Facing Foreclosure?

Conde Nast reports on how some Arizona homeowners are looking to this Sunday's Super Bowl being played in Glendale, Arizona as a way to help relieve current financial burdens:
  • Hoping to stave off foreclosure or losses, some in the Phoenix area are renting out homes for high prices—or whatever they can get. [...] Searching for a bailout, [Phoenix-area homeowner Danielle] Sullivan found a website that promised to rent her house to cash-flush Super Bowl fans. A week later she held a check for $3,200—four nights’ rent for a place twenty miles away from the University of Phoenix stadium in Glendale, Arizona, where the big game will be played Sunday.
Not all property owners have had the same luck, however:
  • It’s not a way out, but a way to stop some of the bleeding,” [investor Mike Roberts] says. Roberts began asking $10,000 for [a] rental, then lowered it to $7,000 with no results. Now, he says, he’ll let it go for a mere $3,500. But by midweek, he hadn’t even had one call on the property. “I can’t sustain too much more. If I don’t get it rented we’re looking at just a few months.”

For more, see Arizona Homeowners Eye Super Bowl as Lifeline.

Pittsburgh-Area Firehouse Faces Foreclosure; Threatens Shutdown

In Carnegie, Pennsylvania, the Pittsburgh Post Gazette published another story on the continuing financial problems facing the Carnegie Volunteer Fire and Rescue Bureau:
  • From the onset of last Thursday's town hall meeting, Carnegie Council President Bob Kollar made it clear that the session's purpose was to figure out how to save the financially troubled Carnegie Volunteer Fire and Rescue Bureau. However, after three intense hours it was clear there are no easy answers and a lot of exasperation on all sides.

  • Three months behind on its mortgage and facing an annual payment on a pumper truck, fire and rescue bureau officials have threatened to close unless the borough comes through with an infusion of money. The firemen, who asked for a dedicated fire protection tax of up to two mills in summer 2006, contend they've been ignored. At the meeting, they stood along the rear wall of the room in a show of unity.

For more, see Carnegie desperately seeking funds to help fire, rescue bureau survive.

Go here for earlier posts on the Carnegie, Pa. Fire and Rescue Bureau.

Add Horses To The List Of Those Losing Their Homes To Foreclosure

In Minnesota, the Minneapolis Star Tribune reports:
  • The ever-worsening story of foreclosures in America now counts among its victims the family dog, the pet cat and even the farmer's horse. [...] "I'm getting skinny horses in here that people have walked away from," said Drew Fitzpatrick, director of the Minnesota Hooved Animal Rescue Foundation, based in Zimmerman, Minn. It used to be that for every abandoned horse there was a story of mental illness, divorce or cancer of its owner, said Fitzpatrick. "Now it's bankruptcy and ARM foreclosure. Rural America is really starting to get punched."


  • The problem has been exceedingly acute for horse owners, who were already facing high feed costs because of rising commodity prices and the recent elimination of horse slaughterhouses in America. That market -- a federal ban recently closed the last three such slaughterhouses in the United States -- once provided horse owners with an option that paid about $600 per horse, when there was nowhere else to turn. Reports have cropped up of horses wandering the Florida Everglades and coal mines in Kentucky, where owners too poor to care for them have set them free to forage on their own. A horse owner recently euthanized more than 80 horses, most of them Shetland ponies, in Grey Eagle, Minn., northwest of St. Cloud, because of rising feed costs and her own poor health. [...] Fitzpatrick, of the Hooved Animal Rescue Foundation, said she took a call this week from the sheriff in Morrison County in central Minnesota, who reported a herd of horses running free in the area. "He just said it looks like another foreclosure," she said.

For more, see Four walls no more for 4-legged friends (As more Minnesotans lose their homes to foreclosure, many are finding they're also forced to give up their pets and livestock).

See also, Pioneer Press: All the Dying Horses: Neglect cases soaring in Minnesota (Horse neglect and starvation are on the rise in Minnesota, the result of a suddenly sour economy. Some experts call it the Hobby Horse Syndrome. Drew Fitzpatrick, who devotes her life to rescuing the animals, is less polite) (when this link expires, try here) for the same story).

For more on foreclosures and family pets, go here, and go here. petsII and foreclosures

Thursday, January 31, 2008

Current FBI Subprime Probe Of 14 Firms May Expand

Reuters news service reports:
  • The FBI's investigation of 14 corporations in a crackdown on improper subprime lending could expand to other companies, but the complex probes may take some time before any charges are brought, a federal law enforcement official said on Wednesday. "Like any white-collar crime investigation, these are very complicated, time-consuming investigations involving the examination of numerous records and interviews of various people. They don't happen in a short period of time," the FBI official said. FBI officials told a briefing on Tuesday the investigations covered corporations across the financial services industry, ranging from mortgage lenders and investment banks to developers and subprime lenders.


  • [FBI spokesman Bill] Carter said the FBI around the country has 34 mortgage fraud task forces and working groups that include other federal agencies and state and local law enforcement officials.

For more, see FBI's subprime crackdown may expand to more firms.

See also, The New York Times: F.B.I. Opens Subprime Inquiry.

California Legislature Nixes Proposed Foreclosure Bill

In California, The Associated Press reports:
  • California's state senate narrowly defeated a bill Wednesday that targeted the growing problem of foreclosed homes sitting vacant for months, drawing squatters and creating blight. Lenders would have been fined $1,000 a day for not maintaining vacant properties, and they would have had to give four months' notice before mortgage payment increases of 10 percent or more. "The purpose of this bill is very simple: to keep people in their homes," said the bill's sponsor, Don Perata, a Democrat from Oakland and the Senate leader.


For more, see California Foreclosure Bill Fails.

Feds vs. NY AG: Lending Fraud Probe Turf Battle Emerging?

The Wall Street Journal reports:
  • Tensions are beginning to rise between state and federal authorities as the number of agencies investigating mortgage fraud continues to grow. New York Attorney General Andrew Cuomo is in a tussle with the Office of Federal Housing Enterprise Oversight, the federal regulator that oversees mortgage giants Fannie Mae and Freddie Mac. Their dispute is over who should be the investigating allegations of fraudulent appraisals and mortgage fraud.

  • The interaction of state and federal oversight has long been a political hot potato. Friction is expected to increase as rising number of participants -- including the Justice Department and Securities and Exchange Commission -- probe the mortgage area.
For more, see Tensions Rise in Lending Probes (subscription may be required - if no subscription, go here). OFHEO

Another Subpoena For Countrywide; Florida AG Probes Servicing Practices, Possibly "Sticking People" In Bankruptcy, Lending Practices

The Wall Street Journal reports:
  • Countrywide Financial Corp. confirmed yesterday that it received a subpoena from the Florida attorney general seeking information on its business practices. The subpoena adds to the problems for the Calabasas, Calif., lender, which has drawn the ire of bankruptcy judges, borrowers and consumer groups for months. Florida Attorney General Bill McCollum is seeking information on how Countrywide handles borrower payments as well as materials related to sales practices and standards for making loans. Mr. McCollum is also investigating whether Countrywide has charged excessive fees to borrowers in the foreclosure process. In an interview, he noted that even bankruptcy judges have flagged these fees and expressed concern that Countrywide "may be sticking people at the end of the process."

For more, see Subpoena Deepens Countrywide's Woes (subscription required; if no subscription, try here, then click link for story, then "refresh" browser if needed).

Wednesday, January 30, 2008

NJ Legislator Seeks Subpoena Power To Probe Foreclosure Rescue Industry

In New Jersey, reports:
  • Assemblyman Neil M. Cohen [yesterday] announced the introduction of legislation that would give an Assembly panel subpoena powers to investigate the largely unregulated and potentially exploitative foreclosure consultant industry that has cropped up in the wake of the nation's subprime mortgage lending meltdown. "We will need these broad powers to get to the bottom of what's happening in New Jersey's foreclosure consultant industry," said Cohen (D-Union), chairman of the Assembly Financial Institutions and Insurance Committee. "It's very likely that shysters and scam artists are bilking New Jersey homeowners on the brink of foreclosure out of their hard-earned equity."

For more, see Cohen Seeks Subpoena Power to Investigate Foreclosure Consultants (Measure Would Aid Assembly Financial Institutions and Insurance Committee In Thorough Examination of Largely Unregulated Industry).

Go here to view the pending state foreclosure rescue legislation (which is a reintroduction of a bill from the last legislative session), New Jersey Assembly Bill A281 - Foreclosure Rescue Fraud Prevention Act.

Massachusetts Lawyers Claim Foreclosure Rescue Regs Forcing Them To Turn Away Certain Cases

Massachusetts Lawyers Weekly reports:
  • Lawyers complain that a new [Massachusetts] regulation designed to protect property owners from corrupt foreclosure-rescue schemes is unfairly preventing them from representing clients in need of their services. Until [Massachusetts] Attorney General Martha Coakley clarifies whether her office truly intended to bar lawyers from accepting retainers in certain foreclosure cases, a number of practitioners told Lawyers Weekly they begrudgingly will continue to turn away would-be clients. "There aren't too many lawyers out there who are going to take on a case if they can't accept an advance fee from a potential client," said Peter T. Clark of Mansfield. "This is a big problem right now because, right or wrong, that's how a lot of lawyers who do not want to face significant sanctions are reading these regulations."

For more, see Lawyers: unclear foreclosure regs forcing them to turn down business (Claim that new rule bars acceptance of retainers in certain types of cases).

Hawaii Lawmakers Considering Foreclosure Rescue Legislation

In Honolulu, Hawaii, KHNL-TV Channel 8 reports:
  • Homeowners facing foreclosure are susceptible to scams that promise to rescue their home. A new bill would provide some protection. But state officials are warning people the best protection is to stay alert and aware. [...] Stephen Levins at the Department of Commerce and Consumer Affairs says, "There's a real problem in Hawaii with people trying to steal equity out of homeowners. They generally target people facing foreclosure." [...] Lawmakers are hearing a bill (House Bill 3104 and Senate Bill 3026) that would help protect consumers.

For more, see New Bill Would Protect Against Mortgage Fraud.

To view the pending companion bills, see:

Oregon Couple, Others Victimized In "Craigslist" Rent Scam

KPTV Channel 12 in Oregon reports:
  • An Oregon City couple said a Clackamas mortgage company scammed them out of their hard-earned cash. And the company has received other complaints as well. Lynn and Ed King-Wohlhuter said they found an advertisement on, claiming a Clackamas company was willing to buy homes and allow perspective buyers with poor credit to buy the homes back on lease options. The couple said they borrowed $3,000 after the company’s representative said he would buy them a house in Georgia so they could be closer to family. But the couple said after paying the money, the company’s owner refused to return their calls and never made good on the deal. They said they may now lose everything.
For more, see Couple Claims Mortgage Company Scammed Them Of Thousands.

Go here for other posts on tenant victims of rent scams. unwitting tenant rent scam zebra

Real Estate Agent's Alleged Disclosure Failure Lands In Litigation

The NBC Today Show ran a story on, and an in-studio interview with, a California homebuyer last Friday who is suing her real estate agent for the agent's alleged failure to disclose market value information during the homebuying process that, according to the homebuyer, resulted in overpaying in the purchase of her home by as much as $105,000.

While NBC appears to sell this story as a lawsuit based on buyer's remorse, it seems clear to me that the reality is that the lawsuit is based, at a minimum, on the alleged professional negligence on the part of the real estate agent for failing to meet the legal duties he/she has to the buyer. Typically, the real estate agent has an obligation to disclose to the homebuyer upon first substantive contact whether he/she (the agent) will be representing the homebuyer (as a Buyer's agent - with heightened legal duties to the buyer), or the seller (as a Seller's agent - with lessened legal duties to the buyer) in the real estate transaction.

In this case, it appears (as too often happens) that there may have been some confusion as to what capacity in which the real estate agent was operating. If the agent was operating as a Buyer's agent, and the allegations in the lawsuit prove true, he/she may have a serious problem.

For more, see Home buyer who overpaid sues real estate agent (With housing boom going bust, will more purchasers follow suit?) (Go here to watch video).

For a related story, see Real Estate Agents' "Well-Kept Secret" Creates Havoc For Homebuyers.

Real Estate Agents' "Well-Kept Secret" Creates Havoc For Homebuyers

A 2007 article appearing in International Real Estate Digest reports on the potential financial loss homebuyers face when retaining the services of the wrong real estate agent:

  • When Joel Stern of Silver Spring, Maryland was ready to buy a new home he did not know about a well-kept secret in the real estate industry, a secret that can wreak financial and emotional havoc on a home buyer at the most crucial point of his real estate transaction. The secret is that only one out of every three agents provides the mandatory disclosure form that spells out whom the agent represents in the transaction at first meeting or early in the process.

  • Two thirds of the agents defy their state laws, which generally require them to provide disclosure, in writing, at their first substantive meeting with a potential client. The general counsel for National Association of Realtors, Laurie Janik, said she was 'so extremely disappointed' in the findings from research the association undertook in 2005 to learn just how the agents were performing in the marketplace.
Syndicated real estate columnist Kennth R. Harney has pointed out in a past article on Mr. Stern's situation that:

  • When agents fail to provide the written disclosures mandated by most states, clients may be misled into paying too much, foregoing contractual protections such as contingency clauses, and generally ending up dissatisfied with the outcome of the transaction. Some buyers or sellers end up angry enough to sue.
In Mr. Stern's case, he reportedly found out two weeks after receiving an accepted purchase offer that the Buyer's agent he thought he had was actually working for the seller on the home he chose to purchase. He only found out when his brother, with 40+ years experience in commercial real estate, looked over the paperwork and found that the agent waited until the contract signing to declare her status on the legally required printed agency disclosure form as a seller's agent, according to the story. Further, it turns out that the contract Stern signed was for a home listed by his buyer's agent boss (who also happened to be the agent that Stern had his then-current home listed for sale with), and waived his contingency to sell his own home first, the story states.

Stern currently has a lawsuit pending in a Maryland appeals court against brokerage firm Weichert Realtors as well as the agents involved in which he seeks the return of a $34,000 deposit that he lost in the deal, and $300,000 in punitive damages.

For more, see The Well-kept Secret That Harms Home Buyers.

See also, Kenneth R. Harney: Agents Falling Short On Disclosure.

For recent court cases involving real estate agents being successfully sued (or successfully reversed an unfavorable ruling) in connection with a breach of fiduciary duty and/or failure to satisfy a variety of disclosure requirements, see:

For a related story, see Real Estate Agent's Alleged Disclosure Failure Lands In Litigation.

Tuesday, January 29, 2008

Investors Beat Out Of $6M, Company Looted, Say SW Florida Suits

In Lee County, Florida, The News Press reports:
  • Real estate agent Samir Cabrera sold a piece of land on Daniels Parkway to a group of investors minutes after he bought it himself in April 2006, cheating the investors out of $6 million and then looting what was left until the property was in foreclosure, two lawsuits allege.They paint a picture of self-dealing, a phony promissory note and fraudulent business practices at the height of the real estate boom in Lee County. But Cabrera’s lawyer says his client did nothing wrong and the deal went sour only because the real estate market turned bad. The case is coming to a head as the two sides spar over whether Cabrera and the companies he controls should be able to go forward with a deal to sell what’s left of the property.

For more, see Lawsuits allege fraud in land deal gone bad (Investors cheated of millions, they say) (if link expires, try here).

To view one of the lawsuits, see Mengle v. Cabrera GP, LLC.

Go here for earlier posts on Samir Cabrera.

Subprime Resets Crushing Southern California Towns

In Southern California, North County Times reports on the tough times two towns are going through as a result of mortgage foreclosures flooding the area. Reportedly, one out of every 17 homes in in the northeast section of the city of Oceanside entered foreclosure last year. 30 miles northeast and across the Riverside County line in the city of Murrieta, one of every nine homes entered the foreclosure process last year.
  • Many of the foreclosed families here said they were sent into foreclosure when their subprime loans graduated from the initial "teaser" rate -- a low interest rate generally offered for only the first two or three years of a 30-year mortgage -- to a higher adjustable interest rate.

For more, see Foreclosure mess emptying Oceanside neighborhoods, hurting those who've stayed.

Alleged $1.28M Mobile Home Investment Swindle Nothing More Than Unrepaid Loans, Says Fraud Suspect

In Bartow, Florida, The Ledger reports:
  • Pamela Akins Pitts admits she owes a few people money from some failed mobile home sales deals. But she says she does not owe the $1.28 million for which she has been charged with defrauding nine people."These people were my friends," said she recently during an interview in the Polk County Jail. [...] Arrested Dec. 21, Pitts, 48, is sitting in jail facing charges of scheming to defraud more than $100,000, three counts of grand theft over $100,000, two counts of grand theft over $20,000, grand theft over $300, and violation of Florida's money laundering act.

For more, see No Fraud, Just Loans, She Says.

Inflating Sales Prices & Home Values Gets Pennsylvania Mortgage Broker 37 Months

In Pittsburgh, Pennsylvania, The Associated Press reports:
  • A mortgage broker who prosecutors say cost lenders between $400,000 and $1 million was sentenced to more than three years in federal prison. William D. Edgar, 49, of Verona, operated America's Mortgage Outlet in Monroeville. Besides serving 37 months in prison, U.S. District Judge Gary Lancaster ordered Edgar to pay $174,000 in restitution. He pleaded guilty to conspiracy and bank and wire fraud last year and has already repaid $90,000.
For more, see W. Pa. mortgage broker sentenced in scam.

Monday, January 28, 2008

CBS News "60 Minutes" On The Subprime "House Of Cards"

CBS News' 60 Minutes ran a story last night on the problems in the housing and financial markets that are reverberating throughout the country. The story begins:

  • It was another nervous week for the world's financial markets and for Wall Street. In the last six months, Americans have seen their investments shrink, their property values plummet, and the country edge closer towards a recession. At the heart of the problem is something called the subprime mortgage crisis, which began last summer and continues to ricochet through the economy. It sounds complicated, but it's really fairly simple. Banks lent hundreds of billions of dollars to homebuyers who can't pay them back. Wall Street took the risky debt, dressed it up as fancy securities, and sold it around the world as safe investments. It sounds like a shell game or Ponzi scheme; in some ways it was, a house of cards rife with corruption, greed, and negligence.

The story is set in Stockton, California, referred to as "the foreclosure capital of America."

For more, see House Of Cards: The Mortgage Mess (read transcript) (watch video).

Go here to watch Steve Kroft's Reporter's Notebook for his observations on this story.

NY AG Slaps Subpoena On Mortgage Quality Control Reviewer; Firm To Cooperate, Gets Limited Immunity From Prosecution

The New York Times reports:
  • A company that analyzed the quality of thousands of home loans for investment banks has agreed to provide evidence to New York state prosecutors that the banks had detailed information about the risks posed by ill-fated subprime mortgages. Investigators are looking at whether that information, which could have prevented the collapse of securities backed by those loans, was deliberately withheld from investors.

  • Clayton Holdings, a company based in Connecticut that vetted home loans for many investment banks, has agreed to provide important documents and the testimony of its officials to the New York attorney general, Andrew M. Cuomo, in exchange for immunity from civil and criminal prosecution in the state.


  • The Clayton agreement is the latest development in Mr. Cuomo’s efforts to uncover abuses in the mortgage business. In November, he sued a subsidiary of First American, a real estate services company, accusing it of inflating appraisals in an effort to secure business from Washington Mutual, the nation’s largest thrift.

For more, see Loan Reviewer Aiding Inquiry Into Big Banks. Cuomo OFHEO Fannie Mae Freddie Mac

Minneapolis-Area Community Sues Foreclosing Lender Over Vacant Home/Neighborhood Eyesore

The Minneapolis Star Tribune reports:
  • A north Minneapolis neighborhood is taking on mortgage giant CitiMortgage in a test case attempting to make careless lending an act for which lenders can be held liable in Minnesota. The lawsuit filed Wednesday for the Hawthorne neighborhood reflects a growing national effort to hold lenders legally responsible for the damage caused by shaky loans that go to foreclosure.


  • In Hawthorne, the lawsuit alleges that CitiMortgage used "negligent and improvident lending practices" to finance the purchase last March of a two-story white frame house on 31st Avenue. N. The neighborhood wants to buy the house from CitiMortgage for a redevelopment project but said it can't get a response. Meanwhile, the lawsuit alleges, the property has become a neighborhood eyesore that has attracted housing tags and 911 calls. It is seeking damages, a monitored alarm system and compliance with the city housing code.

Reportedly, CitiMortgage bought back the property at an October sheriff's auction, but since that time, the house has remained empty, and the police have responded to calls for burglaries and a fire at the premises. The housing tags were for unmowed grass and weeds and rubbish.

For more, see Neighbors sue lender over house left vacant (A north Minneapolis neighborhood aims to hold a lender accountable for alleged careless lending with action that could break new legal ground).

Chicago $29M Condo Conversion/Straw Buyer/Mortgage Fraud Scam Gets Broker Nine Years

The Chicago Sun Times reports:
  • Mohammad "Mike" Taghie Kakvand, the ringleader in a mortgage scheme that resulted in abandoned, crime-ridden Chicago apartment buildings, was sentenced Tuesday to nine years in prison. Kakvand bought 33 apartment buildings in Rogers Park and on Chicago's South Side between 1997 and 2004, but didn't renovate them. Units were sold as rehabbed condos at inflated prices, using straw buyers who defaulted on $29 million in loans. The plot displaced renters, and left decaying buildings prone to squatters, drug dealers, fire and water damage.


  • "The damages caused not only to the lending institutions, but to the community, are immeasurable," said U.S. District Judge William Hibbler, who ordered Kakvand to pay $8.4 million in restitution.

For more, see Slumlord gets 9 yrs. ('I know many people were harmed,' Kakvand tells judge).

See also, Broker in mortgage scam gets 9 years.

Renters Face Eviction Despite Making All Payments; Evidence Points To Possible Rent Skimming, Lease Option Scam

In Shelby, Tennessee, the Shelby Times-Gazette reports:
  • Several Shelbyville families [...] are suddenly faced with losing the roofs over their heads -- even though they have been making their house payments on time. The families claim they have been victimized by several individuals from Murfreesboro who are purchasing properties from American Value Homes and setting up two-year leases with purchase option agreements. They claim they were led to believe that the money they were paying was going toward the purchase price of their homes. But instead, the money was apparently not paid to the finance companies and the homes that the families are living in are now being placed in foreclosure and auctioned off by banks.

  • What makes matters worse for the families is that they say none were ever informed about the foreclosures. They only learned of their situation when auction notices were published by the Times-Gazette, or when the bank told the occupants they had seven days to get out.

For more, see Fraud claimed in home deals.

For other posts involving rent skimming (aka equity skimming) and lease/option scams, see Tenants Unwittingly Renting Homes In Foreclosure I , II , III , and IV; and "Rent To Own" Scams I. equity skimming unwittingly gamma rent to own lease purchase option scams zebra

Sunday, January 27, 2008

New Hampshire Foreclosures Driving Increase In Consumer Bankruptcy Filings, Say Local Attorneys

In New Hampsrire, The Union Leader reports:

  • Personal bankruptcy filings in New Hampshire jumped significantly last year, and bankruptcy attorneys say the mortgage crisis is driving much of that increase. [...] Richard Gaudreau, a Salem attorney who specializes in consumer bankruptcy law, said the mortgage crisis is driving the increases in both Chapter 7 and Chapter 13 bankruptcy filings. [...] Gaudreau said he's been turning away clients. "I don't have the staff or the time to handle everybody who needs to file," he said. [...] Concord attorney Mary Stewart is also handling more Chapter 13 bankruptcies. "It's because of housing," she said. "They're in default on their mortgages and they're trying to catch up. It's people who have paid their bills all their lives, and they're humiliated to be sitting in my office. It's not deadbeats. It's happening to people who never thought they would be here."


  • Peter Wright is the director of the Consumer and Commercial Law Clinic at Franklin Pierce Law Center in Concord, which offers free legal help for low-income individuals. "We are seeing an unusually high number of requests for bankruptcy to help the client avoid foreclosure," he said. [...] Londonderry attorney Nancy Michels said most bankruptcy cases she's currently handling are mortgage-related; some people are "just walking away" from their homes.

For more, see Mortgaged first, then bankrupt.

"Brisk Business" At Boston-Area Animal Shelters

In Massachusetts, The Boston Globe reports on the strain being felt by Boston-area animal shelters as home foreclosures are causing increasing numbers of people to give up their pets:
  • Across the region, dogs and cats are arriving at shelters in growing numbers, as their owners face foreclosures and head to temporary homes, such as rental units or relatives' houses, where pets are not permitted or may not be welcome.


  • In the last three months, owners displaced by foreclosures surrendered some 30 animals, including a Chihuahua this week, at the Animal Rescue League of Boston. At the Brockton MSPCA Shelter, officials estimate that half of the dozen dogs brought in for surrender this month were from foreclosed homeowners. At the Worcester Animal Rescue League, so many dogs and cats from foreclosed homes have been surrendered, including 10 cats last week, that the director created a policy that permits the animals to remain in the shelter at no cost for 90 days while their owners search for pet-friendly housing. If the owners are not able to find suitable homes in the time period, the animals go up for adoption.


  • Most troubling, shelter officials say, are pets deserted by homeowners in the upheaval of foreclosure and found later by neighbors and strangers who can't relay their medical and family histories.
For more, see Owners lose home, and pets suffer, too.

For more on foreclosures and family pets, go here, and go here. petsII and foreclosures

Cleveland Repossessions Affect More Than The Foreclosed Homeowner

In Cuyahoga County, Ohio, The Cleveland Plain Dealer blog reports:
  • The thousands of families forced out of homes are only the most obvious casualties. Next-door neighbors are stuck with the empty houses that attract scrap-metal thieves and drug dealers. And because of the blight, some of the neighbors often can't sell their own houses for enough to start over somewhere else. Municipal governments face a lose-lose scenario. Millions of dollars in property values disappear as families abandon houses. Then governments must spend millions tending the neglected properties -- mowing lawns, picking up trash and demolishing structures. Just about every institution feels a pinch. School officials fret about eroding tax bases, banks lay off hundreds of workers, and home builders scale back construction plans. Real estate agents watch sale prices plummet. A cup of coffee now sells for more than some houses.

  • More than 120 houses in Cleveland are being offered to the city for a buck apiece because the U.S. Department of Housing and Urban Development can't find other buyers.

For more, see The Foreclosure Crisis: What it means for Northeast Ohio.

Texas Real Estate Appraiser Gets 5 Years For Defrauding Lender; Ordered To Fork Over $2.3 Million

In Arlington, Texas, The Dallas Morning News reports:
  • An Arlington real estate appraiser has been sentenced to five years in prison after participating in what U.S. Attorney Richard Roper called a widespread North Texas home scam that cost Countrywide Home Loans millions of dollars. In August, Gandhi Ben Morka, 52, was found guilty on a charge of conspiracy to commit wire fraud, four counts of wire fraud and two counts of mail fraud after a weeklong trial. In addition to the five-year sentence handed down Tuesday, he must repay $2.3 million. Mr. Morka was accused of working with seven others who were indicted in May 2005 on mortgage fraud charges – Sean Cung-Kim Nguyen, Dai Quoc Nguyen, Xuyen Thi-Kim Nguyen, Tam Nguyen, Myna Tran, Hong Thanh Duong and Cuc Kim Tran. Mr. Roper's office said that most of those seven have been convicted and sentenced to prison.

For more, see Arlington real estate appraiser sentenced to 5 years for fraud (Scam cost Countrywide millions, U.S. attorney says).

Vegas-Area Cops Going Undercover To Nail Fraudsters

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:
  • As the number of home foreclosures in the valley increases, so do the number of people getting ripped off by fraudulent companies. But Thursday, Metro Fraud investigators gave new details about their plans to crackdown on companies preying on people trying to save their homes.


  • Metro Investigators [...] are sending a warning -- fraud investigators are going undercover to crackdown and protect people from this ballooning white collar-crime.
    "We've already got it set up to apply for mortgages. We are looking to go after those committing fraud and victimizing our citizens. They can expect to see us and the FBI taking them away in handcuffs," said [Metro Fraud Lt. Bob Sebby].
For more, see Metro Warns of Growing Real Estate Fraud.

Family, Friends Come Forward In Bail Out Attempt For Akron-Area Mortgage Fraud Suspect

In Akron, Ohio, the Akron Beacon Journal reports:
  • Five family members and friends of former Evergreen Corp. President David B. Willan offered their homes and property Tuesday to back a signature bond that defense lawyers are requesting for Willan's release from the Summit County Jail. Willan, 37, is charged with multiple first-degree felonies in a 147-count Summit County indictment alleging widespread Akron-area mortgage fraud. He has been held in lieu of a $3 million bond since his Dec. 19 arrest. His lawyer, William Whitaker, said at Tuesday's hearing that Willan's business was taken over in bankruptcy court and that he no longer has any assets to finance a flight from prosecution.

For more, see Family, friends offer property, homes for ex-Evergreen president's jail release.

Go here for other posts on the Akron-area 147 count mortgage fraud indictment.