Saturday, May 17, 2008

Minnesota City Temporarily Slams Brakes On New Rentals

In Columbia Heights, Minnesota, the Minneapolis Star Tribune reports:
  • As more and more foreclosed single-family homes are becoming rental properties, cities are scrambling to deal with all the new "for rent" signs. But one city, Columbia Heights, has simply said, enough. For the next six months, new landlords won't be able to rent their properties because the city has stopped handing out rental licenses.

For more, see Facing foreclosure? Don't count on becoming a landlord (Columbia Heights is putting a six-month halt on new rental applications. Says The city has enough, the mayor says).

Las Vegas Firm Offers Security Services For Vacant Homes / Foreclosures Targeted By Squatters

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:
  • Firefighters still don't know what caused the fire at the old Alystra Casino in Henderson Tuesday night. Businesses in the area tell Eyewitness News it was a well known hang out for vagrants and teens. In fact, these squatters are blamed for destroying unoccupied properties and foreclosed homes across the valley. Now the business community sees a marketing opportunity to deal with the problem.


  • [John] Labaum is part of new business the popped up in the wake of the foreclosure crisis. He calls it Squatter Alert. "We go through -- secure the front doors, the garage doors," he said. Labaum's startup company offers security services for foreclosed homes and vacant properties. Instead of a fence or tape, the owners call up Labaum to drive by their properties and keep an eye on things.

For more, see Squatter Alert Seeks to Protect Businesses' Vacant Buildings.

Another Home In Foreclosure Goes Up In Smoke

In Northampton County, Pennsylvania, The Allentown Morning Call reports:
  • A house headed for a mortgage foreclosure sale in two weeks was destroyed by a fire in Wind Gap early Wednesday morning. Borough police, firefighters and a state police fire marshal were looking for the homeowner, Nelson Tittle, and they spent hours sifting through his charred modular home [...] to make certain he was not killed. Shortly before noon, Police Chief Craig Armitage said searchers had not found him.


  • Armitage said the cause of the fire has not been determined by state police Fire Marshal Michael Booke. ''As of right now, I'm still marking it as under investigation,'' he said. ''I can't say where he's going to turn up or what his status is.''

For more, see Home headed to foreclosure charred (Fire officials seeking cause of Wind Gap blaze. Resident missing).

Unpaid Self-Storage Bills Causing Many Already Hit With Foreclosure To Lose Their "Stuff"

The New York Times reports:
  • The foreclosure crisis is hitting yet another American locale: the self-storage center. As they lose their homes, people are turning to these humble cinderblock and sheet-metal boxes to store their stuff. But some people cannot keep up with their storage bills any better than they could handle their mortgage payments, and storage companies are auctioning off their property for a pittance.

For more, see Losing a Home, Then Losing All Out of Storage.

Spokane Lawyer Disbarred For Allegedly Looting Trust Accounts Belonging To Kids, Nieces, Nephews; Claims Cash Used In Failed Realty Investments

In Washington State, the Spokesman Review reports:
  • A Spokane businessman, attorney and West Valley School Board member has been disbarred for emptying the trust accounts set up by his grandfather for the education of his nieces, nephews and his own three children. Robert N. Dompier, 53, took over $47,000 from the accounts in what investigators believe was an effort to rescue his failing real estate investments. Dompier agreed to waive a Washington State Bar Association hearing – where he could have presented evidence in his defense – and stipulate to his disbarment without admitting to the charges laid out by the bar disciplinary committee.

For more, see Spokane Valley lawyer disbarred.

Go here for the Stipulation to disbar and the Disbarment order.

Connecticut Insurance Agent Accused Of Ripping Off Elderly Of Nest Eggs

In Waterbury, Connecticut, WFSB-TV Channel 3 reports:
  • A Waterbury couple claims that their insurance agent and financial advisor stole their life savings. Michael and Elizabeth Santopietro said that they trusted Tom Cipriano to help them invest their funds, but said that he took the money and spent it. The I-Team uncovered allegations that Watertown's Cipriano has taken hundreds of thousands of dollars from elderly investors.


  • The I-Team uncovered a lawsuit filed by the estate of Elizabeth Karas-Bartolini. The suit claims that the cancer patient was convinced to make a $25,000 investment loan to Cipriano in 2006. Her lawyer said that she died without collecting any of the promised $500 monthly payments.

  • Donato Mancini said that Cipriano convinced him to empty his IRA in return for a promise of 12 percent interest. He said he hasn't seen his money since. Mancini's attorney called Cipriano "immoral, oppressive and unscrupulous."

  • [Cipriano's attorney, Alfred] Morrocco said that all of the loans were financial transactions among friends, although when the I-Team pressed, he admitted that he didn't know how Cipriano knew any of the people who loaned him money.

  • That question is answered in the lawsuit filed by 92-year-old James Frawley and his 91-year-old wife, Eleanor. They said they had never heard of Cipriano when he called out of the blue and convinced them to loan him money.

For more, see Insurance Agent Accused Of Stealing Nest Eggs (I-Team Uncovers Years Of Allegations).

For story update, see Attorney General Picks Up I-Team Report (Blumenthal Launches Investigation Into Financial Adviser).

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

Friday, May 16, 2008

Foreclosure Services Firm Targets Wrong Home; Locks Changed, Valuables Missing, Home In Disarray

In Stockton, California, KXTV Channel 10 reports:

  • Ruth Anderson came home to a mess after work recently. Somebody had turned her condo unit upside down, taking valuables and leaving the place in disrepair. "It was horrible. They took everything they needed or wanted," said Anderson. She called police. At first, Anderson couldn't get in because locks were changed and a notice left behind. The notice said her unit had been purchased by a bank at a foreclosure auction. "I'm not in foreclosure, I bought my home outright years ago," Anderson said.

  • She was right. A company representing Homecoming Financial entered the wrong unit. It was supposed to inspect and re-key unit number 232. Instead went to unit 2 where Ruth Anderson lives. Field Asset Services (FAS), a national company working with banks to prepare foreclosed homes for sale, admitted fault, yet could not explain why valuables were taken from Anderson's condo. An investigation is underway. FAS is now trying to work with Anderson to settle her claim. Calls to FAS in Austin, Texas were not returned to News10 on Thursday.

To see the damage left in the propery owner's home, see Foreclosure Targets Wrong Home (watch video) (read story) (links no longer available).

Go here for other posts on foreclosure services companies who have improperly change locks, remove belongings, etc. ForeclosureLockOuts

Fort Myers Homeowner Accuses Friend Of Obtaining Deed By Deception In Foreclosure Rescue

In Fort Myers, Florida, The News Press reports:
  • Just like 13,571 other mortgages in Lee County, Valerie Hamilton's was behind. But Hamilton thought she was in luck when her friend of 22 years, Beverly Harris, said Harris' husband Robert could help Hamilton avoid foreclosure. Robert Harris said the first step would be to take Hamilton's ex-husband's name off the deed. So he took Hamilton to an attorney, where she signed a form to start that process.

  • According to Lee County Clerk records, the same day that Hamilton signed an agreement for legal services, she also signed a quit claim deed for her east Fort Myers home. "I was signing to get my husband's name off. ... Never did anyone say, 'You're quit claiming the house to the Harrises," Hamilton said. But three days after her ex-husband's name was taken off the deed, the Harrises filed a quit claim.

  • Hamilton said she came home from work to find her belongings in the yard and men inside doing renovation work. Hamilton said Beverly Harris said she was sorry, but that the Harrises owned her house.

For more. see Beware mortgage ‘rescuers’.

Condo Associations Struggling To Pay Bills In Some Markets

The New York Times reports on the struggles that condo associations are having paying the bills in some parts of the country. The problems of two buildings in Miami, Florida are described in this story, which reinforces the fact that for condo owners, a neighbor's financial problem may well become your financial problem.

In one glassy new Miami tower:
  • [N]early one in six residents in the 43-story building is battling foreclosure and their contributions to the building association are shrinking. Each of the remaining owners has had to chip in an extra $1,000 assessment and $50 more a month for cable and Internet. That is on top of [the unit owners'] $450 monthly maintenance fee. Even though [they pay] more, [the] building has broken washers and dryers and unusable exercise equipment, and [the] hallway is spotted with mold.

In another building:

  • [T]he 38 foreclosures in [the] 244-unit building and the unpaid dues nearly cost the residents running water because the building could not pay its bills. The building abruptly stopped repairing its ceiling lobby and left its wiring and ducts exposed when the board ran out of money.

For more, see Collateral Foreclosure Damage for Condo Owner.

In a related story, see The Wall Street Journal: As Dues Dry Up, The Neighbors Pay (if link expires, try here).

NJ Couple Face State Charges In Alleged Foreclosure Investment Scam; Seven Bilked Out Of $1.2M, Says Prosecutor

In Monmouth County, New Jersey, The Star Ledger reports:
  • A Long Branch husband and wife have been indicted on 26 counts of theft by deception, tax evasion and other charges in connection with a $1.2 million investment scam and other illegal activities, authorities said today. A Monmouth County grand jury returned the indictment Monday against Larry Kushner, 56, and his wife, Jacqueline Kushner, 43, Monmouth County Prosecutor Luis Valentin said.


  • An investigation by the prosecutor's office and state tax officials showed Larry Kushner bilked seven investors out of $1.2 million from 2000 through 2005, Valentin said. Larry Kushner told investors the money they invested in his company, Foreclosure 911, would be used to purchase foreclosed properties in New Jersey, Pennsylvania or Delaware, the prosecutor said. Instead, he used their money for personal expenses, including several trips for himself and his family to Florida and Israel. Jacqueline Kushner served as president of Foreclosure 911, and much of the stolen money was diverted directly to her, Valentin added.

For more, see:

Disbarred Attorney Charged With Pocketing Clients' Escrow Money From Real Estate Closings

From the Monmouth County, New Jersey Prosecutor's Office:
  • On May 5, 2008, a Monmouth County Grand Jury returned a one count indictment charging Gary Edelson, 47, of Red Bank, N.J., with second degree Misapplication of Entrusted Property.

  • A criminal investigation conducted by the Monmouth County Prosecutor's Office revealed that between August 2003 and November 2005, Edelson, an attorney, failed to properly disburse over $200,000 in funds he held in escrow from fifteen separate real estate closings. On September 27, 2006, the New Jersey Supreme Court ordered Edelson's disbarment from the bar of the State of New Jersey. Additionally, over $170,000 in claims have been paid from the New Jersey Lawyers' Fund for Client Protection.

  • Monmouth County Prosecutor Luis A. Valentin stated, "Edelson violated the fiduciary duty he owed his clients. As a result, he has forfeited his privilege to practice law in the State of New Jersey and he now faces serious criminal charges."

For more, see Former Red Bank Lawyer Indicted for Misapplication of Over $200,000 from Client Funds.

If a New Jersey attorney is representing you and screws you out of money or property through dishonest conduct, go to the New Jersey Supreme Court's Lawyers' Fund for Client Protection for more information.

For other states and Canada, see:

Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. sneaky slick escrow agents gamma

Riverside County Approves Ordinance Requiring Mortgage Lender Registration, Maintenance Of Homes In Default

In Southern California, The Press Enterprise reports:
  • Riverside County supervisors unanimously approved an emergency ordinance Tuesday requiring financial institutions to maintain homes that have fallen into foreclosure. Supervisor Marion Ashley was not present at Tuesday's meeting. Jay Orr, head of county code enforcement, said his office would work with the assessor to identify major lenders in the county, notifying them that they must register properties in default with the county. County supervisors said neighborhoods with homes in foreclosure are seeing declining property values and criminal activity in the empty homes. The ordinance went into effect immediately.

Source: Foreclosed homes must be maintained.

Thursday, May 15, 2008

Federal Judge Allows Shareholder Suit Against Countrywide To Continue

The New York Times reports:
  • Directors and officers of Countrywide Financial, the beleaguered mortgage lender, must answer shareholder accusations of insider trading and an overall failure to monitor lending practices that led to the company’s collapse, a federal judge in California has ruled. Rejecting the arguments of Countrywide executives and directors that they were unaware of lax loan operations that led to ballooning defaults, Judge Mariana R. Pfaelzer of Federal District Court in Los Angeles ruled Tuesday that she found confidential witness accounts in the shareholder complaint to be credible and that they suggested “a widespread company culture that encouraged employees to push mortgages through without regard to underwriting standards.”

For more, see Judge Says Countrywide Officers Must Face Suit by Shareholders.

Schumer Asks FTC To Join Countrywide Probe

In Washington, D.C., USA Today reports:
  • A top Senate Democrat on Wednesday asked the Federal Trade Commission to join other government and court agencies investigating Countrywide Financial, (CFC) the nation's largest home mortgage lender. Sen. Charles Schumer, D-N.Y., chairman of the Senate Subcommittee on Administrative Oversight and the Courts, made the request based on what he called "an emerging pattern of apparent misconduct" in Countrywide's treatment of borrowers who seek bankruptcy-court protection.

For more, see Senator wants FTC to join Countrywide investigation.

Feds File Civil, Criminal Charges Against Promoters In Alleged "Ponzi-Like, Foreclosure Reinstatement" Scam

In Los Angeles, California, the U.S. Securities & Exchange Commission announces:
  • The Securities and Exchange Commission [Wednesday] filed securities fraud charges against the promoters of an $18 million real estate investment scheme targeting the African-American community in the Los Angeles area and other locations in Nevada and Georgia.

  • The SEC's complaint, filed in U.S. District Court in Los Angeles, charges Jeanetta M. Standefor, a 40-year-old resident of Altadena, Calif., and her Pasadena, Calif.-based company Accelerated Funding Group (AFG) for operating a fraudulent "foreclosure reinstatement" scheme that attracted more than 600 investors between 2005 and 2007. The scheme purported to use investors' funds to cure defaults on distressed properties owned by others. The SEC alleges that while soliciting investor money and promising returns of up to 50 percent within 30 to 45 days, Standefor and AFG were instead operating a Ponzi-like scheme that used money from new investors to pay previous investors. Standefor also used more than $1.9 million of investor funds for personal expenses such as her lavish wedding and honeymoon, cars, jewelry, tickets to entertainment events, and home renovations. Standefor and AFG also misused investor funds to pay $121,000 in "consulting fees" to Standefor's husband, Darrell R. Dansby.

  • In a related action [...], the U.S. Attorney's Office for the Central District of California announced that Standefor was arrested by special agents with the Federal Bureau of Investigation on criminal charges related to the AFG offering. [Tuesday], a federal grand jury in Los Angeles returned an 11-count indictment charging Standefor with wire fraud, mail fraud, and money laundering.

For more, see SEC, U.S. Attorney Charge Promoters of Real Estate Scheme Targeting African-American Community.

Brooklyn Feds File Indictment In Alleged $44M Fannie Ripoff Of Refi Proceeds

The U.S Attorney's Office In Brooklyn, New York announced last week the filing of an indictment charging Leib Pinter and Barry Goldstein, two former principals of Brooklyn-based mortgage lender, Olympia Mortgage Corporation, with conspiracy, wire fraud, and bank fraud. From the press release:
  • The indictment charges two fraudulent schemes. In the first, Pinter is charged with fraud in connection with the theft of $44 million of payoff proceeds for refinanced mortgage loans funded by Fannie Mae and serviced by Olympia. In the second, Goldstein is charged with fraud in connection with Olympia’s sale of a portfolio of non-performing mortgage loans to Credit Suisse First Boston using falsified loan histories.

For more, see Two Former Principals Of Olympia Mortgage Indicted On Conspiracy, Wire Fraud, And Bank Fraud Charges.

Unwitting Buyer Of Home Used As Meth Lab Wins Lawsuit Against Broker, Seller; Court Orders Rescission, Damages, Attorney Fees

In Tacoma, Washington, a state appeals court recently affirmed damages and court costs on against a real estate agent and brokerage firm for selling real property contaminated by the operation of an illegal meth lab without disclosing that fact to an unwitting home-buying couple, but reduced the award to damages assigned to the home seller for the cost of the mortgage.

A husband and wife purchased an area home and moved in with their family. Unbeknownst to them, the home had recently been the site of a police enforcement action, in which both a meth lab operation and marijuana grow house operation were broken up. The occupants in the house, tenants who were renting the home, were arrested. The owner (home seller) and the real estate agent who eventually sold the home to the home-buying couple were aware of the incident prior to the sale.

Subsequent to moving into the home, the couple's son informed his parents that he learned from someone in the community that the home had been a known drug house. After confirming this fact with police, the couple contacted the local health department, which apparently had no record of any report that the home had been used to manufacture methamphetamine.

Upon determining that the home was contaminated, the health department prohibited use of the property, stated that the couple was financially responsible for the cost of remediation, directed that a certified decontamination contractor would have to perform the remediation, and that use of the property was subject to criminal charges. The couple ultimately sued the home seller, real estate agent, and the real estate brokerage employing the agent.

At the end of the lawsuit, which spanned about two years, the home seller was required to take back ownership of the home, refund the purchase price, pay the accumulated unpaid interest on the couple's unpaid mortgage, late fees and related foreclosure costs incurred by them, who were unable to keep up the mortgage payments after the health department declared the home uninhabitable and ordered the family to vacate the premises. They were also awarded actual and punitive damages.

Among the actual damages incurred by the couple was the loss of all of their personal belongings, including clothing, bedding, furniture, keepsakes, and other necessities as the health department told them they could not remove their personal property from the house because of the risk of cross-contamination. They were also awarded damages for loss of income, damage to credit rating, emotional distress, and litigation expenses.

In addition, the couple's attorney, who represented them on a contingency fee basis, was awarded a legal fee of approximately $140,000, a charge to be imposed on the losing defendants (ie. the home seller, real estate agent, and real estate brokerage firm) in the lawsuit. The fee was based on 800+ hours logged in by the attorney in litigating the case over a 24 month period, and reflected the application of a contingency fee risk multiplier of 1.2.

For all the facts in the case, as set forth in the court decision, see Bloor v. Fritz, et al., No. 35740-2, Wash. App. Ct., Div. II; April 1, 2008 - courtesy of, free registration may be required).

In a related story, see The National Law Journal: Meth Lab Residue in Homes Triggers Litigation (Lawsuits over contaminated homes focus on failure to disclose issue).

Go here and go here for other posts on home-based methamphetamine labs. meth lab yak

More Bellyaching Over NY AG's Appraisal Code; Differing Perspectives Of Those With Significant Economic Interests "Not Surprising," Says Cuomo

In Albany, New York, The Albany Times Union reports:
  • New York Attorney General Andrew Cuomo is rocking the home appraisal industry -- and not just in his home state. Cuomo has successfully pushed a "home valuation code of conduct" that will apply nationally and could affect the price paid for real estate. Independent appraisers say it will affect them, too. "This is the straw that broke the camel's back," said Bob La Belle, owner of La Belle Appraisal Group in Clifton Park. "It's not economically feasible for me to stay in business anymore."


  • Cuomo trumpets the agreement as a triumph for consumers. Reaction from the banking and mortgage industries has been strongly negative. And earlier this month, the federal Office of Thrift Supervision said the process leading to the agreement was "flawed" because it did not allow for input from lenders or federal regulators.

  • Groups like the American Bankers Association and the Mortgage Bankers Association have even accused Cuomo of a power grab that allows New York "to unlawfully exercise authority that resides exclusively in the federal government."

  • Cuomo, though, said reaction to the code has been overwhelmingly positive, and says the reaction from industry was predictable. "The agreements with Fannie Mae and Freddie Mac ... are groundbreaking and require real structural change in the industry," Cuomo said in a statement. "So it is not surprising that current industry participants, many of whom have significant economic interests of their own at stake, have differing perspectives."

For more, see Appraiser: Cuomo plan for code is too costly (Effort to end inflated values for home loans also draws criticism from bankers, mortgage lenders).

Go here for other posts on the NY AG's appraisal code of conduct agreed to and accepted by Fannie Mae & Freddie Mac.

Foreclosure Evictions Resulting In "Tidal Wave Of Displaced Tenants" In Southern California

In Southern California, The Orange County Register reports:
  • [W]hat began as a trickle last year is rapidly turning into a tidal wave of displaced tenants as Orange County foreclosures hit new records. [...] Brenda Magana, a housing specialist at the Fair Housing Council of Orange County, says the problem is snowballing. "Last year we were seeing three or four tenants (facing foreclosure) a month," she says. "Now we're seeing three or four a day."
  • [California] Tenants do have some rights in these cases. A lender who foreclosed cannot require a tenant to move within 72 hours, say[s local real estate attorney Jon] Janecek. That three-day notice only applies to the former property owner. [California] Tenants must get at least 30 days to move.

  • Don Readinger, a broker and manager of two South County real estate offices and who manages 100 rental properties, says the biggest problem is with out-of-state lenders who don't know the 30-day notice requirement under California law. "They try to intimidate the existing tenants," says Readinger, who is president of the Orange County Association of Realtors.

For more, see House/condo renters latest victims of foreclosure crisis (People renting homes, condos and townhouses find themselves out on the street after the owners fail to pay the mortgage).

For other posts involving the problems tenants face in homes in foreclosure, go here, go here, go here, go here, go here, and go here. equity skimming unwittingly digamma

Wednesday, May 14, 2008

FBI: Pace Of Reported Mortgage Fraud Quickening

The Associated Press reports:

  • The sinking housing market is fertile ground for mortgage fraud, the FBI warns in a new report. The agency said Tuesday that reports of suspected mortgage fraud rose 31% to 46,717 from 35,617 in the previous fiscal year ending Oct. 31. In the first half of fiscal 2008, there were more than 33,000 such reports, quickening the pace of mortgage fraud for this fiscal year, an FBI spokesman said.

For more, see FBI warns of escalating mortgage fraud.

From the FBI, see:

Criminal Charges Against Foreclosure Rescue Operator Dropped; Case Based On Wrongly Obtained Evidence, Says Judge

In Washington State, The Bellingham Herald reports:
  • Criminal charges have been dropped against a Bellingham couple who were charged with felonies in April 2007 in connection with what state investigators called a “foreclosure rescue scheme.” In a criminal filing, the Washington Attorney General’s Office had accused Peter and Julia Torkild of theft, forgery, money-laundering and use of proceeds of criminal profiteering. The Torkilds have maintained they are innocent.

  • Skagit County Superior Court Judge David Needy ruled that the Washington Department of Financial Institutions had exceeded its legal authority in using its civil regulatory powers to collect evidence in the case. Needy then threw out that evidence. Assistant Attorney General Scott Marlow, who acted as prosecutor, said Needy’s ruling eliminated the evidence that formed the basis of the criminal case. “With the suppression of that evidence, we were unable to proceed with the criminal charges,” Marlow said.


  • The Torkilds entered not-guilty pleas in the criminal case, and have also denied wrongdoing in a civil lawsuit related to the same matter. In the civil case, the court has rejected plaintiffs Darcee and John Johnston’s efforts to get back the title to the home, but the Johnstons still seek civil damages in their pending lawsuit.


  • David Allen, the Seattle attorney who represented Peter Torkild in the criminal case, said state investigators erred in using their regulatory subpoena powers instead of going to a judge to get a search warrant in the case.

For more, see Mortgage charges against Bellingham couple are dropped (Skagit judge says evidence was wrongly obtained).

Go here for criminal prosecutions of foreclosure rescue operators.

Chicago Foreclosure Rescue Operator Gets 30 Months In Federal Prison

In Chicago, Illinois, the Chicago Tribune reports:
  • U.S. District Judge Charles Kocoras was impressed by the bearing of the tall, trim man in a suit who stood before him two months ago pleading guilty to mortgage fraud. [Last week], Kocoras told Evans he had been looking for reasons to be lenient. But instead, the judge imposed a fairly stiff sentence of 30 months in prison after studying a probation officer's report on Evans' life and prospects for rehabilitation.


  • Evans began approaching homeowners who were in danger of losing their houses to foreclosure with a fake rescue scheme. If the homeowners temporarily transferred their homes to a third person, Evans told them, they could get back on their feet financially and take back the property. Instead, Evans sold their homes and pocketed most of the proceeds, according to his plea agreement.

  • To get mortgage loans on the houses, Evans dummied up tax returns, W-2 forms and employment histories. Mortgage companies lent Evans' straw buyers a total of $245,000 on two properties. They failed to make payments, and the properties went into foreclosure. In both cases, the homeowners lost their houses.

  • It wasn't the only time Evans had done that. In 2002, Evans orchestrated the transfer and sale of a home owned by David Shank, a 46-year-old mentally disabled man. Shank's home was mortgaged for $94,000, and Evans' real estate company pocketed $65,000 of that.The home went into foreclosure, and Shank was forced to relocate to a group home. After an 18-month legal battle, the Cook County Public Guardian forced Evans to repay the $65,000.

For more, see Mortgage fraud case ends in 30-month sentence.

Go here for criminal prosecutions of foreclosure rescue operators.

Parishioner Steals Brooklyn Church In Increasingly Prevalent Deed Scam, Say Prosecutors

In East New York, Brooklyn, The New York Daily News reports:
  • A con-man parishioner stole his Brooklyn church and sold it to a developer in a deed scam that's become increasingly prevalent citywide, the Daily News has learned. The Free Mission Action Movement Church, founded in 1979, sits on four adjacent lots on Sutter Ave. in East New York. The $1 million property, church included, was stolen by Derrick Jones, 43, who easily managed to get the City Register to record forged deeds. He used two notaries public and one of the nation's biggest title companies to add touches of legitimacy to his scam.
  • Deed forgery to sell property or obtain fraudulent mortgages is sharply increasing, prosecutors in Manhattan, Brooklyn, the Bronx and Queens say. [...] "All you need is notarized signatures on a deed form," said Richard Farrell, a prosecutor in the Brooklyn district attorney's office who specializes in real estate fraud. "Once that deed is filed, you can obtain a mortgage on the property, you can rent it, you can sell it, whatever. There are hundreds of cases of deed fraud in the city every year."
For more, see Scammer stole his Brooklyn church.

See also:

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

Notary Could Be Liable For $330K In Alleged Fraudulent Home Sale; Accused Of Screwing Up Administration Of Oath On POAs

In New York City, the New York Law Journal reports:
  • A notary public may be liable for $330,000 in a fraud case for not asking two persons whose signatures he notarized to swear to their bona fides, a Supreme Court justice in Queens has ruled. In denying the notary's motion for summary judgment, Queens Justice Orin R. Kitzes [...] ruled that the notary could be held liable for failing to ask those individuals whose powers of attorneys he notarized "do you swear or affirm that the signatures you have affixed to this document are true?" The notary, Nigel Chamblin, and his employer, People Service Corp., are being sued in connection with the alleged fraudulent sale of a home in Queens for $330,000.


  • Michael Brown, the founder of the New York State Notary Association, which has 11,000 notaries as members, said "98 percent of notaries in New York state do not administer the oath legally." In order for a notarization to be valid, he explained, the notary must ask the signer to attest to the validity of his signature and the signer must answer in the affirmative. There is even a term for the failure to do so, he added: "slipshod administration of an oath."

For more, see Signature Verification at Issue; Claim Against Notary Proceeds (if link expires, try here).

Cities' Suits Targeting Foreclosing Lenders To Recover Costs Of Blighted Neighborhoods

The National Law Journal recently reported (at
  • [C]ities now dealing with scores of abandoned, foreclosed homes have started suing banks and mortgage companies to recoup their costs, while other cities are hauling lenders before code enforcement boards and county courts to force them to maintain abandoned properties. The innovative legal tactics are designed to recoup the city's lost property taxes as well as the cost of fire departments, police, code enforcement or even demolition -- any city services needed to clean up or deal with the foreclosed properties.

  • Cleveland; Baltimore; Buffalo, N.Y.; and Minneapolis, Minn., have all filed lawsuits against lenders or developers based on the devastating effects foreclosures have wreaked on their communities.


  • [B]altimore took the unusual approach of filing suit in federal court under alleged Fair Housing Act violations. [...] John Relman, a Washington attorney, was hired by the city of Baltimore to file suit against Wells Fargo. He has received inquiries from other cities and expects more foreclosure suits to be filed in the future. "You can look at almost any of the major cities and see significant foreclosure trends, stretching across the country," said Relman of Relman & Dane. "Any city that has racially segregated housing patterns and high levels of foreclosure could wind up suing -- cities across the Midwest, cities in California. It's almost everywhere."

For more, see Empty Homes Spur Cities' Suits (Banks, lenders sued to recover costs) (if link expires, try here).neighborhood destruction from foreclosures zach

Tuesday, May 13, 2008

Beverly Hills Flipper Cops Plea In Alleged Mortgage Scam Involving $137M In Fraudulently Obtained Lehman Loans

In Southern California, The Associated Press reports:
  • A real estate developer pleaded guilty Friday to a mortgage fraud scheme that involved buying houses in some of Southern California's most ritzy neighborhoods and selling them to fake buyers at inflated prices. Charles Elliott Fitzgerald, 47, pleaded guilty to conspiracy to commit bank fraud and loan fraud, running a continuing financial crimes enterprise, money laundering, obstruction of justice and three counts of bank fraud.


  • Fitzgerald and his business partner, Mark Alan Abrams, bought homes in neighborhoods like Beverly Hills, Bel Air, Malibu, La Jolla and Carmel, and then used fraudulent appraisal information to resell them for inflated amounts to fake buyers who purchased the properties with loans, prosecutors said. Fitzgerald and Abrams recruited the borrowers, repeatedly lied about the homes' value and ran escrow companies to promote the scheme, said Assistant U.S. Attorney Jeremy Matz.

  • Over three years, Lehman Brothers Bank funded 80 loans worth $137 million—$50 million more than what was actually needed to pay for the homes, Matz said. Fitzgerald and Abrams reaped millions of dollars from the inflated loans and passed kickbacks on to their associates through commissions, prosecutors said.

For the story, see SoCal developer pleads guilty to mortgage fraud scheme.

For earlier stories on Fitzgerald, see:

Increase In Delinquencies Leaving Condo / Homeowner Associations Holding The Bag As Foreclosing Lenders Join The "Stiff" List

The Wall Street Journal reports:

  • [A] growing number of homeowner and condominium associations across the country are raising their fees or putting the brakes on clubhouse improvements, new landscaping and other shared neighborhood amenities. The kitty is so low for some that essential services, such as building maintenance, electricity, trash removal and repairs have been cut.


  • Eric Glazer, an attorney at Glazer & Associates P.A., in Hallandale, Fla., says nearly all of the 200 condominium associations his firm represents in South Florida are short of revenue due to delinquent association fees. Five years ago, those associations grappled with only a handful of nonpaying residents, he says.

  • Mr. Glazer and other housing experts say a growing number of banks aren't paying association dues on properties on which they have foreclosed and now own. Colin Hendrick, president of the Carlisle on the Ocean Condominium Units Association Inc. in Surfside, Fla., has filed six lawsuits since December against banks that failed to pay dues on foreclosed units.

For more, see As Dues Dry Up, The Neighbors Pay (if link expires, try here).

Law Firm Seeks To Score $1.8M In Legal Fees From Lawsuit Loser In Pro Bono Civil Rights Case

The National Law Journal reported earlier this year (at
  • A Seattle school district that lost a case before the U.S. Supreme Court is arguing that its opposing counsel, Davis Wright Tremaine, should not be entitled to nearly $1.8 million in attorney fees because it took the case pro bono. It is the second high-profile case in a year challenging fees collected by firms in pro bono cases.


  • In arguing against the fees, the school district has raised the increasingly contentious issue of whether large law firms that successfully represent clients on a pro bono basis are entitled to seek substantial legal fees from the defendant.


  • Davis Wright Tremaine isn't alone in facing questions about fees in pro bono cases. Last year, a federal judge awarded nearly $1 million in attorney fees, costs and prejudgment interest to Skadden, Arps, Slate, Meagher & Flom in a case involving workers at a restaurant in New York's Chinatown. Chan v. Triple 8 Palace, No. 1:03-cv-06048 (S.D.N.Y.). The New York firm took the case pro bono in an attempt to collect unpaid tips on behalf of the workers. The firm succeeded. But its request for attorney fees turned heads, especially since the workers received about $700,000.


  • Seeking legal fees in pro bono cases isn't new, said Esther Lardent, president of the Pro Bono Institute at Georgetown University Law Center. Her group encourages firms to seek legal fees in pro bono cases -- if nothing else, to serve as a deterrent to others, she said. But she acknowledged that, in recent years, as more large firms with higher fees take on major public interest cases, attorney fee awards have skyrocketed.

For more, see Pro Bono Case Triggers a Fee Fight (Two recent instances of large firms collecting large fees in pro bono cases point to an increasingly controversial issue).

For the earlier story on Skadden Arps' $1 million pro bono fee award, see New York Law Journal: NY BigLaw Leader Scores $1 Million Fee in Pro Bono Case.

Strict Ordinance Targeting Vacant Foreclosures Keeping Lenders On Their Toes

In Southern California, KFMB-TV Channel 8 reports on the strict new ordinance recently passed by the City of Chula Vista that requires mortgage lenders to register and maintain vacant homes that are in foreclosure. Reportedly, unkept foreclosed properties are no longer a big problem in Chula Vista:
  • "[O]ur ordinance in Chula Vista the one we wrote says we're not going to let it get to the point of disrepair, if it's in default, and it's vacant you have to maintain it to the neighborhood standard," [code enforcement manager Doug] Leeper said. He says the ordinance targets out of town lenders. [...] "Our ordinance says if you're out of the area you have to hire somebody locally to maintain this property and keep it secured," Leeper said. And if the property isn't maintained, the city has the right to do it and charge the lender or in most cases fine or penalize them.

  • "We can fine them up to $1,000 a day per violation per property to a total of $100,000," Leeper said. Leeper says that usually gets the lenders' attention. Chula Vista's foreclosure ordinance has gained national attention. Cities all around the country want to know more about the program.

For more, see Foreclosed Houses Make For Bad Neighbors.

Stockton-Area Residents Begging Out Of Jury Duty On The Increase, Citing Fear Of Foreclosure, Job Loss

In San Joaquin County, California, the Stockton Record reports:
  • [A}ttorneys who work at the downtown Stockton courthouse and rely on local residents to decide court cases say more potential jurors these days are begging out of their duty. They tell heartrending woes of losing their jobs and they fear home foreclosures. There is no hard data to directly corollate the slumping economy to a rise in juror hardships, yet national studies rank Stockton as Ground Zero for the mortgage crisis. This year, about 800 San Joaquin County homeowners each month received foreclosure notices. Attorneys describe jurors as the canary in the coal mine of the local economy, offering a glimpse into the tough times people are experiencing these days.

For more, see Tough time to fill S.J. juries (Officials say more asking out of service for financial reasons).

Monday, May 12, 2008

Ohio Feds Indict Cincinnati Cop In Alleged Sale Leaseback, Foreclosure Rescue Straw Buyer Scam; Allegedly Steals $200K Insurance Benefits From Widow

In Cincinnati, Ohio, WLWT-TV Channel 5 reports:
  • A federal grand jury indicted a Cincinnati police officer Thursday on fraud and other charges in connection with an alleged foreclosure scheme. Adrian Mitchell is accused of forging signatures, falsifying documents and taking out fraudulent loans for several hundred thousand. An arrest warrant was issued Wednesday for Mitchell, who investigators said preyed on homeowners facing foreclosure.

  • According to authorities, Mitchell bought the homes and rented them back to the previous owners. In one case, investigators said, Mitchell attempted to evict a Springfield Township couple from their home after they fell behind on their rent. Mitchell discovered the husband had hanged himself in the home’s basement and then forged life insurance documents, investigators said, which allowed him to collect nearly $200,000 in benefits intended for the man’s widow.

Source: Police Officer Indicted On Federal Fraud Charges.

See also:

To view the federal grand jury charges, see Indictment - U.S. v. Mitchell.

For story update (2-12-09), see Feds Drop Most Charges Against Cincy Cop/Foreclosure Rescue Operator Accused Of Preying On People Facing Foreclosure.

Go here for other posts on foreclosures and suicide. suicide homeowner foreclosure zeta

New Florida Law Treats All Foreclosure Rescue Deals Containing A Buyback Right As An Equitable Mortgage Unless Otherwise Rebutted

The Florida legislature recently passed a statute regulating foreclosure rescue transactions. One key provision is contained in Florida Statute Sec. 501.1377(6) which creates a rebuttable presumption that any foreclosure rescue transaction involving a lease option or other repurchase agreement is an equitable mortgage. Below is the provision in its entirety (begins at line 345 of the bill):
  • (6) REBUTTABLE PRESUMPTION.--Any foreclosure-rescue transaction involving a lease option or other repurchase agreement creates a rebuttable presumption, solely between the equity purchaser and the homeowner, that the transaction is a loan transaction and the conveyance from the homeowner to the equity purchaser is a mortgage under s. 697.01. Unless the lease option or other repurchase agreement, or a memorandum of the lease option or other repurchase agreement, is recorded in accordance with s. 695.01, the presumption created under this subsection shall not apply against creditors or subsequent purchasers for a valuable consideration and without notice.

[Editor's Note: The reference to "creditors or subsequent purchasers for a valuable consideration and without notice" is a reference to bona fide purchasers / encumbrancers.]

This rebuttable presumption could affect the following legal issues commonly involved in foreclosure rescue conveyances: usury, bonafide purchaser, and tenant evictions.


Because of the rebuttable presumption that the conveyance is an equitable mortgage, it appears that usury claims by the financially distressed homeowner against a foreclosure rescue operator could be much easier to bring in a lawsuit since the statute clearly places the burden of demonstrating that the so-called "rescue" arrangement was a "true sale" (as opposed to a "financing/refinancing arrangement") on the foreclosure rescue operator. Put simply, the law treats the deal as a secured loan unless established otherwise.

Florida arguably has among the toughest usury statutes in the country. Florida's civil usury statute (where interest exceeds 18% per year) generally requires a forfeiture of the right to collect interest on the loan and requires the creditior to pay a penalty of double the amount of interest actualy reserved or collected (see Florida Statute Section 687.04).

Its criminal usury statutes (where interest exceeds 25% per annum) generally makes the entire amount of money advanced by the operator an unenforceable loan, and triggers those penalties commonly associated with misdemeanor (over 25% but not more than 45%) and felony (over 45%) crimes (see Florida Statute Section 687.071).

Based on the Florida case law on equitable mortgage, it appears that a foreclosure rescue operator in Florida could be hard-pressed to sucessfully rebut the statute's presumption.

Bona Fide Purchaser and Tenant Evictions:

For observations on how this rebuttable presumption in the new law may affect issues regarding the doctrine of bona fide purchaser, as well as tenant evictions in the context of a typical foreclosure rescue, see the longer version of this post at Florida Foreclosure Rescue Conveyances With Buyback Right To Be Treated As Equitable Mortgages Unless Established Otherwise.

Pittsburgh Tenants Face Eviction As Landlord In Foreclosure Flees Country; Rent-To-Own Agreement Turns Out To Be Bogus

In Pittsburgh, Pennsylvania, KDKA-TV Channel 2 reports:
  • A real estate tycoon who promised to revitalize a number of local neighborhoods has taken off to Brazil while many of his tenants are about to be kicked out into the streets because his properties are in foreclosure. Bernardo Katz, a former Brazilian opera singer, built a multi-million dollar real estate empire in our area, but now he's returned to his home country leaving the banks and his tenants holding the bag.


  • This week, 17 of Katz's properties went up for sheriff sale, including a home in Bethel Park where Eileen and Paul Karras thought they were building equity. Instead, Karras says their rent-to-own agreement with Katz turned out to be a fraud.

Reportedly, Katz is under investigation by the Federal Mortgage Fraud Task Force which includes the FBI, IRS and the U.S. Attorney's office. No charges have been filed to date.

For more, see Tycoon Flees To Brazil, Leaves Renters In Lurch.

For more on problems with "Rent To Own" and Lease / Option real estate deals, go here and go here. rent to own lease purchase option scams yellowstone equity skimming unwittingly digamma

Federal Reserve, NYC Bar To Launch Pro Bono Initiative Geared To Consumer Representation In Bankruptcy, Home Foreclosure, Eviction Matters

In New York City, the New York Law Journal reports (appearing at NY
  • A unique partnership between the federal government and the New York City Bar Association is the latest of several initiatives by which attorneys are volunteering to help individuals caught in the kind of financial distress registered by record numbers of bankruptcy filings, home foreclosures, evictions and debt recovery litigation. Set to launch next month is the Lawyers Foreclosure Intervention Network, a two-year pilot project developed by the Federal Reserve Bank of New York to be administered by the City Bar Justice Center.


  • Lawyers interested in volunteering service to the financially distressed may go through a learning process of their own on June 19 during a full day's workshops at Fordham University School of Law. The workshops, co-sponsored by County Lawyers and the Feerick Center for Social Justice at Fordham Law, aim to develop strategies for pro bono lawyers in helping New Yorkers "stabilize and improve their financial health, build wealth ... and be better protected against deceptive and abusive practices" by credit card companies and other lenders, according to a program statement.

For more, see Federal Reserve Joins Bankruptcy Pro Bono Efforts.

Go here for:

In Defense Of A Housing Bailout Plan

A recent article by The Associated Press offers a defense for the housing aid package that recently was passed by the U.S. House of Representatives and that the White House is currently threatening to veto:
  • A government-backed mortgage bailout is needed, and it must be done right away. Before shouting about all the reasons why taxpayers shouldn't rescue the profligate who took on more debt than they could handle, think about this: New research estimates 1 in 33 subprime borrowers will foreclose on their homes in the next two years. That means the mortgage rot could be on the street where you live. And it could spread to your schools, to your hospitals and to the roads that you drive on. This is one of those times when doing the right thing isn't necessarily fair, but it needs to be done for the greater good.

For more, see Arguments in defense of a housing bailout backed by the government.

Sunday, May 11, 2008

Las Vegas Alleged Straw Buyer Scam Bust Triggered By Foreclosure Rescue Investigation

In Nevada, the Las Vegas Review Journal reports:
  • A mortgage scam spawned during the Southern Nevada housing boom led to the arrest Thursday of three defendants and pursuit of a fourth, the attorney general's office said Friday. Many of the 33 counts in the criminal complaint revolve around "straw man" schemes.


  • The investigation started when a consumer told the attorney general's Bureau of Consumer Protection that he didn't get a promised refund of advance fees for foreclosure protection services, Kelleher said. The attorney general's criminal division obtained a search warrant for offices used by Jeffrey Tye Brown, who ran DB Financial Group.

  • Brown was charged on March 27 with two counts of theft, two counts of deceptive trade practices and one count of forgery. The charges said that Brown charged one couple $999 in foreclosure prevention fees and a second couple $750, but Brown failed to provide any services. Brown has disappeared and is believed to be in the Philippines, [assistant chief deputy attorney general and mortgage fraud task force chief John] Kelleher said.

  • The new charges against Brown and three others include theft by misrepresentation, forgery, making false statements to obtain credit and racketeering. [...] Attorney general's senior investigator Isabel Camp and investigator Shelley Neiman on Thursday arrested Cindy Birkland, 38, owner of Sapphire Mortgage; Bryan Sears, 46, a general contractor who did business as Searco; and Searco employee Claudia Koziol, 59.

For more, see Three arrested, fourth sought in mortgage fraud (Many of 33 counts involved purported 'straw man' schemes).

Miami-Area Affordable Housing Developer Cops Plea To Theft Of $700K+ In County Funds; Agrees To Squeal In Related Probes

In Miami, Florida, The Miami Herald reports:
  • Oscar Rivero, the developer at the center of Miami-Dade County's affordable-housing scandal, was sentenced to 21 months in prison on Friday after admitting he used more than $700,000 from a county loan to buy a house for himself in South Miami. After a judge refused a request to dismiss the charges against him, Rivero pleaded guilty to one count of theft and also agreed to provide evidence to prosecutors in other corruption probes. Rivero's sentence could be reduced, depending on how much reliable information he turns over.

  • Rivero, 38, was one of several developers who received millions of dollars in up-front loans from the Miami-Dade Housing Agency but failed to build any homes. Police arrested him in August 2006, a month after his housing deals were exposed in The Miami Herald's House of Lies investigation.


  • The county loaned him about $806,000 in November 2004 to finance a 54-unit apartment complex for low-income residents in Little Havana. The apartments were never built. Just two weeks after receiving the county loan, Rivero withdrew $711,000 of that money to purchase [a] South Miami house and to install a pool and appliances. He and his family lived in the home while they built a sprawling 11,000-square-foot Mediterranean-revival estate with an elevator, wine cellar and billiard room.

For more, see Dade developer Rivero gets 21 months in jail (In a plea deal, developer Oscar Rivero admitted using $711,000 from a Miami-Dade affordable-housing loan to buy a home for himself and install a swimming pool) (if link expires, try here).

Go here for The Miami Herald's House of Lies investigation, a year-long probe that exposed a series of ill-fated government deals that played out under the noses of county leaders, enriching well-connected developers at the expense of the community's coveted funds for affordable housing, effectively stealing from the poor.

Albany-Area Pair Get Two Years In Cash Back Mortgage Scam

In Albany, New York, North Country Gazette reports that Matthew J. Kupic and Francis T. Disonell, both 38 and of Clifton Park, NY, were sentenced in Federal court last week to prison for two years and ordered to make restitution in the amount of $887,311 to victim banks for their participation in a mortgage and tax fraud scheme. Each was also ordered to forfeit over $600,000 in the fraudulent mortgage proceeds that they obtained from the mortgage fraud scheme. From the story:
  • As part of the scheme, sales contracts and other documents submitted to mortgage lenders contained forged signatures and other false statements. For some real estate transactions, Kupic and Disonell created and utilized “Repair Rebate Agreements” which identified future upgrades to the subject properties that purportedly were going to be completed by the buyers with loan proceeds.

  • Prosecutors said the duo knew these upgrades would never be completed and, in fact, they never were completed. Repair Rebate Agreements were merely a mechanism the defendants used to get loan funds to the buyer, themselves, and third parties without making any disclosure of the disbursements to the lenders. Kupic and Disonell also arranged for multiple purchases with the same buyer, to take place close in time – often on the same day – so that subsequent lenders did not learn of the buyer’s recent loans and liabilities.

For more, see Two Sentenced For Mortgage, Tax Fraud Scheme.

Water Shut-Off Forces Tenants Out Of Another Ocala Aparment Complex

In Florida, the Ocala Star Banner reports:
  • Another northwest Ocala housing complex sits dry and abandoned. Signs of hurried relocation were scattered everywhere Monday, when water service was cut to an unnamed, 16-unit subdivision along Northwest 12th Street and Northwest 13th Street. [...] Looters have stripped copper wire and plumbing fixtures from several units, but there won't be anyone there to miss the materials. The city resolved to cut water and sewer service to the community after property owners neglected to respond to a 90-day disconnection warning resulting from an exorbitant outstanding water bill, said Jim Simon, director of community programs for the city of Ocala.


  • Water will not run through the community again, and it will remain uninhabitable until property owners place individual meters on each of the units. Lack of running water creates sanitation issues, thus residents are not permitted to occupy such facilities.

For more, see Late water bills force complex to empty (Owners must put individual meters at each home).

Abandoned Atlanta Apartment Complex Left In Foreclosure; Tenants Face Water Shut Offs, Eviction

In Atlanta, Georgia, WSB-TV Channel 2 reports:
  • Residents worry about rodents and scavengers at a local apartment complex that is covered in trash and overgrown weeds. The water will soon be shut off at a northwest Atlanta apartment complex now in foreclosure. But people still live there and say their home has now become a trash-filled mess and a haven for thieves.

  • Mary Robinson watches as her once proud apartment complex falls apart around her in piles and piles of trash. The Maple Creek Apartments on Bolton Road are being slowly dismantled by scavengers. The scavengers are so bold Channel 2 caught them on tape driving away with stolen water heaters still full of water.

For more, see Atlanta Apartment Complex Covered In Trash. (read story) (watch video).

For other posts involving the problems tenants face in rented homes in foreclosure, go here, go here, go here, go here, go here, and go here. equity skimming unwittingly digamma