Saturday, August 23, 2008

Budget-Friendly Help Used In Tackling Vacant Home, Code Violation Problems

The cities of Ormond Beach, Florida and Lodi, California have begun resorting to low-cost help in the form of volunteer retirees and police cadets in an attempt to mitigate some of the neighborhood problems frequently associated with foreclosed homes.

  • Ormond Beach, Florida: There are two dozen new sets of eyes looking for code violations around the city. On Aug. 8, Ormond Beach kicked off a neighborhood improvement volunteer program that empowers 24 unpaid workers to report sightings of tall grass and abandoned vehicles. "This program will provide Neighborhood Improvement Division staff much-needed assistance and allow them to concentrate their efforts on other types of code violations," reads a memo on the program. The volunteers, all retirees, went through a one-day training program, said Joanne Naumann, the city's Neighborhood Improvement Division manager. [...] The volunteers are especially appreciated with an increasing number of foreclosures in Ormond Beach producing more code violations, Naumann said. For more, see Code violators warned: Beware (Volunteers cruising neighborhood streets).

  • Lodi, California: [A]t one point, community improvement officers were backlogged by about 700 calls from residents concerned about empty homes. So Police Lt. Steve Carillo, who oversees the volunteer cadets, suggested enlisting their help. [...] Community improvement officers had been checking on complaints from neighbors, but now cadets can do that without taking the officers' time, Lt. Chris Piombo said. Cadets, who are in their teens and early 20s, can count the time toward their monthly service hours, while getting some experience on the streets. For more, see Lodi Police Cadets helping with problem of vacant homes. ForeclosuresDestroyNeighborhoodsApple

Use Of Vegas Condo Development For Overnight Rentals Leaves Unit Owners Up The Creek

In Las Vegas, Nevada, the Las Vegas Review-Journal reports:
  • The Meridian, a luxury condominium property just east of the Strip, owes approximately $568,000 in [unremitted room] taxes for operating an illegal hotel, according to preliminary results of an audit by Clark County's business license department. [...] The unauthorized hotel operation -- which the county shut down in July -- led to [property management employee] Rebekah DeSmet's court appearance Tuesday on two misdemeanor charges for zoning and licensing infractions.


  • When the Meridian's hotel ceased, the well went dry for unit owners who were leasing out their units through a rental program affiliated with American Invsco. They have received no rent checks since June. Many unit owners counted on the rental income to cover the cost of their Meridian mortgages. About 80 of the 678 units at the upscale property are now in foreclosure, [former condo association president Michael] Mackenzie estimated Monday.


  • About 400 of the Meridian's estimated 450 owners are in some degree of financial distress "now or soon," according to Scott Oelke, a real estate agent who owns a unit at the Meridian.

For more, see Meridian said to have run illegal hotel (Audit suggests condo property owes taxes for illicitly offering overnight rentals).

Builders Bail Out Of Bakersfield

In Kern County, California, The Bakersfield Californian reports:
  • Two major builders have abandoned housing projects near northeast Bakersfield’s City in the Hills development. A third is halting construction at an Arvin site it recently said was going forward. [...] In the northeast, Centex Homes and KB Home have stopped construction at a pair of contiguous tracts immediately west of City in the Hills.


  • Unfinished tract walls, utility hookups and tiers of graded lots stretched into the distance south and west of the unpainted [Centex] model units. [...] A county tract map recorded last September indicates the 48-acre site is slated for at least 99 homes.


  • Immediately east of the Centex site, KB Home’s partially constructed Olympia neighborhood is home to an abandoned construction trailer. [...] Neat green lawns abut empty brown lots. In all, 174 houses are planned for 40 acres, tract maps show. Property records indicate the empty lots are owned by GMAC Model Home Finance LLC, a Minneapolis-based financial company.


  • In Arvin, meanwhile, K. Hovnanian Homes has apparently stopped new construction at its Azul and Brisa neighborhoods. [...] About 128 of the tract’s planned 325 homes have been built.


  • Another national builder with a [Bakersfield] presence, Atlanta-headquartered Beazer Homes, formally pulled out of Fresno in June, as well as recently leaving Colorado.
    Kern County property records indicate the company owns more than 225 lots here in at least three tracts, though the company’s Web site shows only one active neighborhood in Bakersfield. A spokeswoman at Beazer’s regional office in Valencia did not return a message left Thursday afternoon asking about the company’s plans for its Bakersfield holdings.

For more, see Three more major builders halt housing projects.

For a sample of Kern County stories on building projects going under, see:

  • Three major defaults posted in northeast Bakersfield (A trio of large developments in northeast Bakersfield have defaulted — two of them from the master developer of the City in the Hills project, county records show, continuing a string of such troubles in Kern. More than $26 million was past due on the three loans),
  • Another day, another default in Wasco (A 10th housing development has defaulted in Wasco, the city of 24,300 — including a state prison population of nearly 6,000 — that touts itself as the “rose capital of the nation”),
  • McAllister Ranch slated for the auction block (The unfinished McAllister Ranch development is headed to the auction block Aug. 22, something that could make Lehman Commercial Paper Inc. landlord of three square miles of dust, curbs and an unkempt Greg Norman-designed golf course in southwest Bakersfield. The developer of the 6,000-home community defaulted on a $235 million loan from New Jersey-based Lehman in April.). unfinished development

Omaha Cops Bust Marijuana Grow House In Foreclosure; Score 400+ Plants In Raid

In Omaha, Nebraska, KETV Channel 7 reports:
  • Omaha police arrested two men in what they called a major marijuana-growing operation at a home near 120th and Douglas streets. Police said they seized more than 400 plants during a raid at the home. [...] “They had reports of people going in and out of the house at night, which they weren’t supposed to be,” said Omaha Police Department spokesman Michael Pecha. He said officers needed to use the powers of a real estate inspection to unlock the case. “We went into the house to change the locks because it was undergoing foreclosure procedures,” he said. Holed up behind the windows, officers found marijuana plants covering the entire home, from fresh saplings to hydroponic plants that were fully grown.

Reportedly, narcotics officers came out with three truckloads of grow lights, fans, sophisticated water filtration systems and other items.

For more, see Police Raid Marijuana Grow House (Officers Seize 421 Plants, Make 2 Arrests). Go here for video coverage of the story.

Go here and go here for other posts on Marijuana Grow Houses. pot grow ops beta

Moogy The Pot-Bellied Pig Left Homeless By Foreclosure; Seeks New Sty

In Fort Lauderdale, Florida, WFOR-TV Channel 4 reports:
  • Moogy is about three years old and housetrained. His former owners [were] foreclosed on their South Florida home and could no longer keep him. Michelle Frier, adoption supervisor at the Wildlife Care Center, said "They were heartbroken - to have to give him up, and I think, he was heartbroken to be back here because he's back in the barn."

  • In October 2005, the same animal rescue center found him on the side of the road in Plantation, Florida, when he was six months old. A month went by when a young couple, recently engaged, came in and adopted him, where he took on the role of an indoor pet. But along came the American housing crisis, and the couple's loss of their home meant the loss of their pig. So the black Vietnamese Pot-Bellied Pig is up for adoption at The SPCA Wildlife Care Center in Fort Lauderdale for a small adoption of $50.

For the story, see Foreclosure Finds One Pot-Bellied Pig In A Crisis.

For the video, see Moogy Oinks For A Loving home.

For other posts on foreclosure pets, go here, go here, and go here. ForeclosurePetsAlpha

Indiana Couple Charged With Squatting In Vacant Home Facing Foreclosure

In West Lafayette, Indiana, the Journal & Courier reports:
  • A husband and wife accused of setting up a methamphetamine lab in a vacant Lafayette duplex last May have been arrested again - this time found living in a West Lafayette residence. Heather M. Lowe, 32, and James A. Lowe, 40, were arrested Monday on suspicion of receiving stolen property. They are being held in the Tippecanoe County Jail, each on a $100,000 surety bond. Sgt. Cindy Marion of the West Lafayette Police Department said the Lowes are believed to have been living at 4525 Joshua Court for about three weeks.


  • The owners have moved out of state, and the home is in foreclosure, she said. "They had been living there as a family," Marion said, explaining that the Lowes moved in furniture and other belongings. "They were living there as though they owned or rented the home." [...] Marion said neighbors noticed the family moving in but were not suspicious. She said police spoke Tuesday with the legal owners, who confirmed that the Lowes were never told they could move in.

For the story, see Couple accused of squatting in foreclosed home.

Go here for posts on squatters in foreclosed homes. squatter foreclosure zebra

Friday, August 22, 2008

Two Charged In Alleged Scam Involving Foreclosed Homes Advertised For Rent On Craigslist; Suspects Pocketed $16K+, Say Prosecutors

In Carlsbad, California, the San Diego Union Tribune reports:
  • In what may be yet another wrinkle in the collapse of the housing market, prosecutors allege that Alexander Braslavsky, 34, and Anthony Patrick Marshall, 38, posted ads on Craigslist for five foreclosed homes in Carlsbad, Corona and Stanton and rented them to [unwitting prosepctive tenants].

  • The two Orange County men pleaded not guilty Monday in Vista Superior Court to four counts of felony grand theft, one count of felony conspiracy, and one count of felony attempted grand theft. Prosecutors say the pair took in about $16,500.


  • [Prospective tenant Linda] Smith, 44, said she discovered she had been swindled when she tried to turn on the utilities and was told someone had just bought the house at auction.(1) The news “steamrolled” her. [...] Carlsbad police weren't optimistic about recovering Smith's money. All Smith had was a cell phone number and a handwritten receipt. But Smith fought back anyway. She went on Craigslist and posted a notice identical to the one she had clicked on for the same Carlsbad house, explaining how she had been ripped off. A man from Huntington Beach, who was planning to meet two men about a rental house on Sierra Morena Avenue in Carlsbad, became suspicious and contacted her. Smith called police, who showed up at the meeting instead.

For more, see Would-be renter says she lost $4,500 in scheme.

Go here and go here for other posts on tenant victims of rent hoaxes.

(1) According to the story, there were red flags she ignored in her eagerness. The men never asked to check her credit, didn't know where the valves for the sprinklers or gas were and didn't give her a copy of the lease. unwitting tenant rent scam yacht

Seattle Developer Faces 20 Felony Charges For Allegedly Pocketing $600K In Downpayments On Projects That Remain Unfinished

In Seattle, Washington, the Seattle Post Intelligencer reports:
  • A South Seattle developer accused of defrauding investors pleaded not guilty Monday to 20 felony charges filed against him. Laurance Anthone, owner of MA Quik Construction, stands accused of bilking investors out of about $600,000 by selling space in prospective projects that were never completed. On Aug. 5, King County prosecutors charged Anthone with 10 counts of securities fraud and 10 counts of first-degree theft, all felonies.

  • Anthone, 44, of Federal Way, previously faced civil suits from several of his investors, who accused him in six separate schemes occurring from early 2003 to August 2005. In most instances, investors said Anthone took down payment, then refused to return the money when construction failed to commence. So far, the plaintiffs have been awarded $607,000 in damages through the civil actions.

For more, see South Seattle developer denies bilking investors (20 felony charges filed against Anthone).

For other posts on builders/contractors allegedly stiffing their customers, go here, go here, and go here. contractors stiff subs customers yelbow

California DA's Office Has Hands Full With Foreclosure Fraud Cases

In Southern California, The San Bernardino Sun reports:
  • Over the past few years, the real-estate fraud unit of the San Bernardino County District Attorney's Office has seen a 40 percent year-over-year increase in residents reporting they were fraud victims. The unit's most-recent buzz: foreclosure fraud investigations.

  • Lately, investigators are dealing with foreclosed homeowners saying they were lured by schemers who promised foreclosure relief for a price tag of $2,000, $3,000 or even more. "Our attention is directed there because the times demand it," said Larry Roberts, lead deputy district attorney. "But we're easily distracted by the overwhelming amount of (other) cases coming in over the last year."

  • From July 2007 to July 2008, the unit received almost 460 formal complaints from county residents saying they were duped by mortgage fraud or foreclosure fraud schemes. For the small 10-person DA's division, the task is daunting. It usually takes three to six months before investigators can determine whether a complaint can be turned into a case. "We have 139 cases sitting here, waiting to be investigated," Roberts said. "It continues to increase."

Source: DA's Office sees uptick in foreclosure fraud investigations.

Oshkosh Man Pleads Not Guilty To Six Felony Charges Of Screwing Elderly Investors In Phony Distressed Property Investment Operation

In Winnebago County, Wisconsin, the Milwaukee Journal Sentinel reports:
  • A 49-year-old Oshkosh man will stand trial in Winnebago County on charges that he bilked elderly investors in connection with a real estate scheme. The man, Mark H. Brenner, on Wednesday waived his right to a preliminary hearing and entered a not guilty plea to six felonies. According to Wisconsin Attorney General J. B. Van Hollen, Brenner told investors that he ran a business buying distressed properties, fixing them up and selling them for a profit. He promised investors large returns on their money but actually bought no houses and used the money instead for living expenses, authorities said.

For more, see Oshkosh man to stand trial in real estate scheme.

For Wisconsin Attorney General press release, see Jury Trial Set For Oshkosh Man Charged In Securities Scheme.

Thursday, August 21, 2008

Two Charged In Alleged Foreclosure Rescue Scam Involving $4M+ In Fraudulently Obtained Loans, Say Minnesota Feds

In Minneapolis, Minnesota, the Minneapolis Star Tribune reports:
  • An Associated Bank employee and a real estate company owner from Minnetonka were charged Wednesday by a federal grand jury in a conspiracy to defraud the bank on at least 21 loans totaling more than $4 million. Eric Richard Krahnke, 50, of Ramsey, and Michael Ian Striker, 55, of Minnetonka, jointly face one count of conspiracy and 21 counts of bank fraud. Each man also faces one of two separate counts of money laundering related to the alleged conspiracy.


  • Between March and October 2003, the indictment says, Striker submitted 21 loan applications through Krahnke that contained false or misleading information; the applications overstated his and U.S. Equities' finances. Striker also allegedly submitted inflated appraisals to justify loan amounts exceeding the true market value of the properties.

According to the indictment:

  • In the case of many of these Loans, the properties were not vacant rehab properties [as was represented to the lender], but rather were homes that financially-distressed individual homeowners were were still living in. The homeowners had conveyed their title to Striker, or businesses that Striker was working with, under a contractual agreement whereby they re-purchased the residence on a contract for deed. At the same time these homeowners thought that Striker was helping them to stay in their homes, Striker was falsely representing to the bank an intention to rehab and re-sell these properties.(1)

For more, see:

(1) Indictment, paragraph 7(g).

Two Escrow Agents Among Four Copping Pleas In Straw Buyer Scam Involving $15M+ In Fraudulently Obtained Home Loans

In Houston, Texas, The Associated Press reports:
  • Four people have pleaded guilty to an elaborate mortgage fraud scheme that involved millions of dollars in illegally obtained loan proceeds, federal prosecutors said Tuesday. The loans totaling more than $15 million were for residential properties in Fort Bend, Galveston, Harris and Montgomery counties and most of the homes ultimately were placed in foreclosure.

  • Carlos Paul Gonzalez, 38, and Machell Halstead, 42, each pleaded guilty Monday to conspiring to commit mail and wire fraud during a scheme to defraud mortgage lenders, U.S. Attorney Don DeGabrielle said in a news release. Jannice Bonner, 39, pleaded guilty in April and Russell Browder, 41, pleaded guilty in June to the same charges.(1) [...] Prosecutors said Browder and Gonzalez paid Bonner and Halstead, escrow agents, for their help in the scheme.

For the story, see 4 convicted in $15 million loan scheme in Houston.

(1) Prosecutors said Gonzalez and Browder operated a scheme from 2002 to Nov. 1, 2005, and recruited people with high credit scores to act as borrowers to obtain mortgage loans and purchase homes. The scheme involved preparing loan applications for the borrowers using fabricated documents and later forging signatures on warranty deeds that indicated the property was being sold to companies that had been set up by Browder and Gonzalez.

Controversy Over New Washington Law Regulating Foreclosure Rescue Deals Has State AG, Lawmaker Pointing Fingers

In Seattle, Washington, Seattle Weekly reports:
  • Since the [Washington State] Distressed Property Law took effect on June 12, it has facilitated zero lawsuits but much finger-pointing. The law, designed to quash nefarious foreclosure-rescue schemes, has realtors uncomfortable because, they say, it burdens them with undue liability. Meanwhile, Attorney General Rob McKenna, who once declared ownership of the bill, now disavows it, instead siding with the realtors (see "Home Flipper," SW, July 23).


  • [Sen. Brian Weinstein (D-Mercer Island), one of the bill's sponsors] claims the attorney general's office was involved in every phase of crafting the final law.

For more, see McKenna Called Out on Controversial Foreclosure Bill (The attorney general says he wasn’t part of the bill’s changes. Rep. Weinstein begs to differ).

For tutorials and other information on the new law regulating foreclosure rescue transactions in Washington State, see What You Need To Know About Washington State's New Distressed Property Law HB2791 (available online courtesy of the Washington Association of REALTORS®).

Murrieta To Begin Foreclosure Proceedings Against Financial Institutions For Stiffing City On Real Estate Taxes Due On Lender-Owned Homes

In Murrieta, California, The Californian reports:
  • The city will initiate foreclosure proceedings on as many as 400 homes, the City Council decided Tuesday. The city's move is not intended to take away people's homes but, rather, is an attempt by the city to help people stay in them, officials said. The majority of the 400 homes are owned by financial institutions that are taking their time in paying property taxes to the county and various assessments that belong to the city. For the estimated 5 percent of the properties owned by individuals, city officials say the move is one that puts the city into the position of being able to work with homeowners and help them catch up on the bills they owe the city without losing their homes.

For more, see MURRIETA: City moves to deal with tax delinquency (Move is first step in allowing payment plans).

Stockton Ordinance Makes Lenders Responsible For Pre-Foreclosure Vacant Home Maintenance Under Threat Of Fines Up To $1K/Day

In Stockton, California, The Stockton Record reports:
  • In an effort to fix the brown yards, broken windows and general disrepair of Stockton's spate of foreclosed homes, the City Council voted Tuesday to require banks and other property owners from out of town to hire contractors to maintain the vacant homes they own.


  • The council's 7-0 adoption of an abandoned and vacant property ordinance is intended to pressure banks and other property owners to maintain houses that are vacant but in early stages of foreclosure, sometimes several months before a foreclosure is final, Deputy City Attorney DeAnna Solina said.(1)


  • The ordinance adopted Tuesday defines an owner as anyone who has a mortgage or deed of trust on a property, City Attorney Ren Nosky said. [...] Property owners who fail to maintain vacant lots, houses or commercial buildings face daily fines of as much as $1,000. [...] A handful of other California agencies, including Riverside County and Chula Vista, have adopted similar ordinances.

For more, see Owners of vacant homes ordered to keep properties clean.

(1) According to the story, Leland Chan, senior vice president and general counsel of the California Bankers Association, has previously said the association is concerned about the legal consequences of requiring lenders - organizations that have rights as lien holders but have yet to obtain control of a vacant house - to maintain properties. The requirements could expose a lender to liability for trespass, for example, he said. ForeclosuresDestroyNeighborhoodsApple

Foreclosure Network of New York City Formed By Local Lawyer Groups In Support Of The Cause Of Financially Strapped Homeowners

In New York City, the New York Law Journal reports:
  • A trio of bar groups yesterday announced the formation of the Bar Association Foreclosure Network of New York City, a cooperative pro bono effort by lawyers in three boroughs. The network will address a "citywide crisis" in mortgage foreclosures by providing a central resource for information and training in the cause of helping homeowners, according to Jeannie Costello, executive director of the Brooklyn Bar Association's Volunteer Lawyers Project. The New York City Association Justice Center and the Queens County Bar Association are the other participants. The network is an outgrowth of a city bar project in May in conjunction with the Federal Reserve Bank of New York, in which some 125 lawyers were recruited to counsel New Yorkers facing loss of their homes due to the subprime mortgage crisis.

Source: NYC Bar Groups Band Together for Pro Bono Effort.

See also, Brooklyn Daily Eagle: Brooklyn Bar and City Lawyers Create Network For Foreclosure Flood.

Foreclosure Crisis Has South Florida Legal Services Firm Operating At Full Capacity; May Begin Turning Away Clients In Foreclosure

In Fort Lauderdale, Florida, WFOR-TV Channel 4 reports:
  • Legal Aid [Service] of Broward County has spent years as a lifeline for thousands of people needing legal help and dealing with foreclosures. But, the very thing Legal Aid has been fighting may become the latest victim of the continuing foreclosure disaster.

  • "Given the volume of foreclosures and the number of people seeking help, it's just becoming ever more impossible to provide legal services to the people that need it," said attorney George Castrataro,(1) who works with Legal Aid. "We haven't seen an increase in funding since this foreclosure event started, yet the number of folks requiring assistance quadrupled, if not even more."(2) The problem Legal Aid faces comes at a bad time for homeowners in Broward County. The latest number showed 27,000 foreclosure actions have been filed in the first six months of 2008.

For the story, see Foreclosure Hurt Legal Aid Agencies (Legal Aid of Broward County is having to get selective of the cases they can help) (read story) (watch video).

For Florida homeowners who fear they may soon be unable to make their mortgage payments or have already missed payments and need help getting an attorney free of charge, try Florida Attorneys Saving Homes toll-free hotline, (866) 607-2187.

(1) According to the story, Castrataro says Legal Aid receives around 250 calls a week from poor and indigent people who need help fighting foreclosure. But, with the manpower and funding problems the agency faces, the agency will have to be more selective.

(2) The situation is just as tough for legal services firms in Northern & Central Florida. See:

Indianapolis Unveils Map Of Foreclosures Throughout The City

In Indianapolis, Indiana, WTHR-TV Channel 13 reports:
  • [T]he city is using a new tool to document foreclosed, vacant and abandoned homes [...]. For the first time, the city has a map showing all the foreclosed homes in Indianapolis. Blue and red dots represent properties that have been foreclosed on in the last two years. City leaders say the map confirms the correlation between empty homes and rising crime. But they were surprised to find that the trend was spread out across the county and not limited to inner city areas.


  • The city wants to make banks more responsible for their foreclosed properties and get them involved in taking care of the properties as well as working with homeowners before they are forced into foreclosure in the first place.

For the story, see City continues abandoned homes fight.

Go here for the map of Indianapolis foreclosures.

Wednesday, August 20, 2008

Feds Announce Mortgage Modification Program For IndyMac Home Loans

CNNMoney reports:
  • Six weeks after taking over mortgage lender IndyMac Bank, the FDIC announced a plan on Wednesday to automatically modify some of the bank's most troubled borrowers to keep them in their homes. The Federal Deposit Insurance Corp. said it will start sending out letters this week to thousands of borrowers most seriously delinquent on their loans. The goal of the modifications: to provide borrowers with affordable payments while minimizing the risk of foreclosure and loss for investors in securities backed by the loans.

For more, see Distressed IndyMac borrowers to get relief (FDIC offers plan to systematically modify loans for homeowners most at risk of foreclosure).

2nd Suspect Goes Down In Alleged Minneapolis Flipping Scam Involving 20+ Homes

In Hennepin County, Minnesota, the Minneapolis Star Tribune reports:
  • A Twin Cities mortgage broker charged in connection with a $4.9 million mortgage fraud scheme involving dozens of homes in Minneapolis and one in Golden Valley pleaded guilty today to one count of racketeering just minutes before he was to go to trial, said Hennepin County Prosecutor Tom Fabel.

  • Donald Walthall, 40, of Anoka, was charged in late 2007 with one count of racketeering and 24 counts of theft by swindle, according to a criminal complaint filed in Hennepin County District Court. He pleaded guilty to one count of racketeering and accepted a 6-year prison sentence,(1) Fabel said. "He concluded that the guilt and overwhelming evidence was true," Fabel said. "He feared that if he might get a longer sentence if he went to trial."

For the story, see Broker implicated in mortgage fraud scheme pleads guilty.

Go here for earlier posts, and any available updates, on the alleged Universal Mortgage straw buyer, home flipping scams.

(1) According to the story, as president of president of Universal Mortgage Inc., a Brooklyn Park firm that also went by Superior Mortgage, Walthall led the scheme in which associates recruited straw buyers to buy Universal-owned properties at inflated prices. Walthall allegedly falsified employment histories, incomes, borrower's net worth and their intentions to live in the homes to secure larger-than-necessary loans, then took a kickback for himself. He earned $20,000 to $80,000 each time a buyer bought a Universal-owned property, Hennepin County Prosecutor Tom Fabel said.

Monterey DA Charges Three In Alleged Upfront Fee Foreclosure Rescue, Refinance Scam

In Monterey County, California, The Salinas Californian reports:
  • [T]he Monterey County District Attorney's Real Estate Prosecution Unit has filed multiple felony charges alleging that three suspects targeted and defrauded financially distressed homeowners through a Monterey County “foreclosure rescue” scam between Feb. 10 and June 15 of this year. The complaint charges Monterey County residents Maria de Lourdes Ponce and Fabian Olivarez Casillas and Santa Cruz County resident Melissa Garcia with criminal conspiracy.(1)


  • The suspects allegedly promised that they could negotiate with lenders to either lower monthly mortgage payments or refinance home mortgages and that such services required an advance fee of as much as $2,800.(2) Clients were assured that the advance fee was a “loan processing charge” and “fully refundable” if the loan negotiation failed.


  • The criminal investigation commenced on June 6, after the Gonzales Police Department received a report from an alleged victim of the foreclosure rescue scam. By July 17, the Gonzales Police Department had obtained statements from more than 35 victims and additional witnesses and executed a search warrant on Maria de Lourdes Ponce’s home.

For more, see DA charges 3 in Monterey County foreclosure scams; more than 30 victims involved.

See also, KSBW-TV Channel 8: Gonzales Woman Arrested For Mortgage Fraud (Police: Woman Charged Homeowners Thousands) (read story) (watch video).

(1) According to the story, Ponce, who was arrested by Gonzales Police Department on Aug. 15, faces 11 other felony counts, including residential burglary and elder abuse, 9 counts of grand theft, and 3 misdemeanor counts. Garcia is currently in custody in Santa Cruz County, where she faces prosecution on charges of forgery, elder abuse and multiple counts of felony grand theft in a similar foreclosure fraud scheme. A warrant has been issued for the arrest of Fabian Casillas.

(2) Collecting upfront fees in California is prohibited under Section 2945.4(a) of the California Civil Code.

Profile Of A Refinancing Scam Artist

In Southern California, The Orange County Register ran a two-part story profiling James Matthew Osborn, aka Jimmy Osborne, a mortgage salesman who was sentenced on April 18, 2008, to 10 years in prison for stealing more than $550,000 from homeowners who were looking to refinance:
  • Osborn, 45, was a mortgage salesman. He would later admit in court that between 2003 and 2007, he stole more than $500,000 from people who were seeking to refinance their home loans. He caused 10 families to lose their homes to foreclosure, prosecutors said.
For more, see:
  • Portrait of a scam artist (Ten families lost their homes because of the mortgage fraud Jimmy Osborn perpetuated. A persistent victim fought back);
  • Chasing down a smooth operator (Jimmy Osborn was a criminal who took advantage of a system that offers little protection for mortgage borrowers).

NY Court Denies Tenant Eviction After Foreclosure Sale; Failure To Name, Serve All Occupants As Parties In Foreclosure Action Fatal To Removal Attempt

A February, 2008 lower court decision in Nassau County, New York addressed a situation involving the attempted eviction of four occupants in a home, the title to which was acquired by a mortgage lender in a foreclosure sale that foreclosed the ownership interest of the last owner of record, one Angello Bernard. The court described the four occupants as follows:
  • [Kesha] Springer(1) resides in the Premises with her mother, Lecreta Springer, her sister, Cherryann Dalrymple and Cherryann Dalrymple's twelve year old son. She avers that she has lived in the Premises since 1997.(2) The Premises were previously owned by her parents. When Kesha's father died, her mother had trouble making the mortgage payments. To avoid foreclosure, Lecreta Springer transferred the property to Bernard, who refinanced the property.(3) Although Bernard owned the property, Lecreta Springer made the mortgage payments. Lecreta Springer was again unable to make the mortgage payments and the Property was foreclosed. Lecreta Springer and Kesha have been negotiating with the Bank to purchase premises but have been unable to do so.

In denying the foreclosing lender's motion for a writ of assistance to evict the occupants after the foreclosure sale, the court said:

  • While a writ of assistance may be issued evicting [Kesha] Springer and Bernard from the property, a writ cannot be issued terminating the occupancy of Lecreta Springer, Cherryann Dalrymple or her son. Lecreta Springer, Cherryann Dalrymple and her son were not named or served as parties in the foreclosure action.(4)

The occupants were represented by attorney Lawrence S. Lefkowitz, Hempstead, New York.

For more, including the court's discussion of the New York law it applied in reaching its decision in this case, see MERS, Inc. v Bernard, 2008 NY Slip Op 50308(U) [18 Misc 3d 1134(A)]; February 19, 2008, Supreme Court, Nassau County.

(1) Along with Angello Bernard, Kesha Springer was named as a defendant in the foreclosure action and served with the foreclosure complaint.

(2) It is important to note that the occupants were living in, and were in possession of, the home prior to the commencement of the foreclosure action. The court's decision in this case may very well have been different had the occupants moved in after the commencement of the action, or more precisely, after the recording of the lis pendens once the action was initiated.

(3) I wonder if this was an equity stripping, foreclosure rescue scam???

(4) Apparently, the fact that one of the home's occupants was only 12 years old was no bar to his due process right to be named as a party in the foreclosure action and be served with the lawsuit. Presumably, if there were more minor children living in the household, they, too, would have been entitled to their due process right to be named and served in the foreclosure action, regardless of age. I wonder how many attorneys for foreclosing lenders ever bother naming and serving any occupants who are minors.

The fact that the foreclosing lender named "John Doe" & "Jane Doe" to designate any of the home's occupants as additional defendants in the foreclosure action was apparently, at least in this court's view, insufficient to cut off their occupancy rights in the home after completion of the foreclosure. For more on the use of "John & Jane Doe" alias when naming unknown tenants in foreclosure actions, see yesterday's post, Failure To Name Tenant In Home Foreclosure Action Thwarts Subsequent Eviction Attempt; Use Of "John Doe" Alias Ruled Ineffective Absent Due Diligence. (I can't help wondering how often some attorneys representing foreclosing mortgage lenders mindlessly utilize the "John & Jane Doe" mechanism to name unknown tenants & occupants without exercising any diligence in attempting to ascertain their actual names - maybe as often as they mindlessly use "lost note affidavits" in cases where they don't have physical possession of the actual promissory note). TenantRentSkimmingAlpha foreclosure faulty notice ScrewUpProcessServing

Deferred, Unfunded Maintenance A "Ticking Time Bomb" For Condo Associations; Tanking Real Estate Market, Unit Foreclosures Complicate Problem

The San Diego Union Tribune reports:
  • Dilapidated stairways, rickety decks, leaky roofs, moldy walls and corroded sewer pipes. These are the sort of structural headaches confronting scores of homeowner associations as costly repairs to older complexes drain their communal treasuries. After years of deferred maintenance, compounded by tightfisted members' unwillingness to pay higher monthly fees, condominium associations are facing a looming financial crisis, condo experts say.


  • Deferred and unfunded maintenance is a ticking time bomb because so many homeowner associations are unprepared for it,” longtime condo attorney Erik Basil said. “What sometimes happens is association members don't want to contemplate having to write a $1,000 or $5,000 check, so they pretend there's nothing wrong, and that's what has occurred for the last 10 years.”

  • The problems associated with stalled repairs have worried Conlon's association for some time and are being complicated by the slide in home values and the credit meltdown.

For more, see Postponed repair work catching up with condos.

Cincinnati Struggles In Getting A Handle On Its Abandoned Properties; Imposing Vacant Building Fees Yields Ineffective Results

In Cincinnati, Ohio, the Business Courier of Cincinnati reports:
  • [T]here could be as many as 4,500 vacant buildings in Cincinnati, based on a recent computer search of addresses where Greater Cincinnati Water Works service has been shut off for at least six months. But only 1,614 of those properties are subject to licensing fees, and fewer than half have actually paid the fees since 2006.

  • That’s not what city leaders expected when they beefed up the fee structure and requirements for Vacated Building Maintenance Licenses, or VBMLs, in 2006. The ordinance was designed to get vacant buildings put back into productive use or demolished, if necessary, as quickly as possible by spelling out standards for building owners to meet and charging them fees if the buildings remain vacant. The longer the building sits vacant, the higher the fee.


  • About 544 property owners [...] have paid $628,000 in VBML fees since the revamped ordinance took effect.(1) City contractors have demolished more than 220 problem properties. And hundreds more building owners are working their way through the licensing process, some making interim repairs to stabilize roofs and prevent break-ins. But at this pace, it could take the city decades to make its way through its vacant-building stockpile.

For more, see An ordinance aimed at seizing the potential of Cincinnati’s thousands of vacant buildings is falling short.

Go here, Go here, Go here, and Go here for other posts on vacant homes leaving their mark on neighborhoods.

(1) Reportedly, one property owner described in the story pays a $3,500 annual license fee for a vacant home he plans on fixing up and moving into. ForeclosuresDestroyNeighborhoodsApple

Tuesday, August 19, 2008

Minnesota AG Targets Two More Upfront Fee Foreclosure Rescue Operators In Civil Suits

In St. Paul, Minnesota, My Fox TV Channel 9 reports:
  • Two more out-of-state mortgage “foreclosure consultants” have been hit with lawsuits from Minnesota Attorney General Lori Swanson. A total of 10 companies have now been sued by Swanson over similar allegations. The lawsuit,(1) filed Monday, allege a Florida and New Jersey company each used websites, targeted mailings and phone calls to solicit at-risk homeowners with assurance their company could stop the foreclosure process and save their home. The lawsuits are against Florida-based Law & Associates, LLC,(2) and New Jersey-based Davis Mitigation, Inc, which also conducts business as Davis Foreclosure Assistance) in N.J., New York and Florida.


  • A 2004 Minnesota law bars “foreclosure consultants” from charging any compensation until after the foreclosure consultant has “fully performed each and every service the foreclosure consultant contracted to perform or represented he or she would perform.”

For more, see Minnesota Atty. Gen. Sues 2 More 'Foreclosure Consultants'.

See also, Minneapolis Star Tribune: State sues two firms that asked cash for foreclosure assistance (The attorney general says some companies claiming to help in a foreclosure do anything but).

(1) According to the story, the suits allege the companies unlawfully charged customers up-front fees of up to $1790 before any services were performed, failed to include required safeguards in their contracts with Minnesota homeowners and failed to deliver promised services.

(2) This firm is also being hammered by the Florida AG in State of Florida v. Law & Associates, et al., alleging an upfront fee foreclosure rescue operation.

Failure To Name Tenant In Home Foreclosure Action Thwarts Subsequent Eviction Attempt; Use Of "John Doe" Alias Ruled Ineffective Absent Due Diligence

Last month, a Nassau County, New York trial court ruled that, under the specific facts of the case, the failure by a mortgage lender to name a tenant as a defendant in a home foreclosure proceeding kept the tenant from being subsequently evicted after the foreclosure sale. In addressing the lender's failure to name the tenant in the foreclosure action, the court made these observations (citations footnoted for ease of reading):
  • [T]he respondent [tenant] was not properly named as a party in the foreclosure proceedings [...]. "In order to cut off the interest of an occupant of the premises, the occupant must be named as a party in the foreclosure proceedings."(1) The respondent was not named in the foreclosure proceedings and therefore her rights were "not affected by the judgment of foreclosure and sale."(2)

  • The respondent, as the sole tenant, is a necessary party to the foreclosure proceeding (see 78 NY Jur. 2d Mortgages §588). As a necessary party who was not named in the foreclosure proceeding, the respondent's rights were "unaffected by the judgment and sale, and the foreclosure sale may be considered void as to the omitted party."(3) Thus, a tenant or occupant who was not named as a party in the foreclosure action retains his or her possessory rights and a right of redemption.(4)


  • The foreclosure action has a designation for "John Doe" so as to include any unknown persons. The fact that the respondent [tenant], as a necessary party, was not named or served in the foreclosure proceeding would not be remedied, even if she, as an unknown person, were considered to be a "John Doe." CPLR 1024 [of the New York statute] permits a plaintiff to proceed against an unknown party but would be inapplicable in regard to the respondent. "Before naming a party as a "John or Jane Doe", the plaintiff must establish that it has made a genuine effort to ascertain the name of the party but has been unable to do so."(5) If the plaintiff knew or could have discovered the actual names of the parties named as "John or Jane Doe" with the exercise of due diligence, then the summons naming such parties as unknowns is jurisdictionally defective.(6)

Representing the tenant was the non-profit firm Nassau/Suffolk Law Services Committee, Hempstead, New York.

For the court decision, see Countrywide Home Loans, Inc. v Williams; 2008 NY Slip Op 51319(U) [20 Misc 3d 1111(A)]; July 1, 2008, District Court Of Nassau County, First District.

(1) Mers, Inc. v. Bernard, 18 Misc 3d 1134(A) [SCt, Nassau County 2008] (citing Douglas v. Kohart, 196 App Div 84 [2d Dept 1921]; and Krotchka v. Green, 121 Misc 2d 471 [Yonkers City Ct, 1983]).

(2) Id. (Citing Polish National Alliance of Brooklyn, U.S.A. v. White Eagle Hall Co., Inc., 98 AD2d 400 [2d Dept, 1983] and Empire Savings Bank v. The Tower Co., 54 AD2d 574 [2d Dept, 1976].

(3) 6820 Ridge Realty, L.L.C. v. Goldman, 263 AD2d 22, 26 [2d Dept, 1999] (see Si Bank & Trust v. Sheriff of the City of New York, 300 AD2d 667, [2d Dept, 2000]).

(4) Id.; and Davis v. Cole, 193 Misc 2d 380 [SCt NY, 2002].

(5) Mers, Inc. supra, citing Tucker v. Lorieo, 291 AD2d 261 [1st Dept, 2002] and Porter v. Kingsbrook OB/GYN Associates, P.C., 209 AD2d 497 [2d Dept, 1994].

(6) Id. citing ABCKO Industries, Inc. V. Lennon, 52 AD2d 435 [1st Dept, 1976]. TenantRentSkimmingAlpha foreclosure faulty notice ScrewUpProcessServing

NC Governor Signs Three Bills Affecting Foreclosures, Loan Servicers; Eliminating YSPs

In Raleigh, North Carolina, The Associated Press reports:
  • North Carolina's governor signed three bills Monday to help home foreclosure filings, including one that requires lenders to provide 45 days notice before a foreclosure is filed. Gov. Mike Easley signed a bill establishing the North Carolina Foreclosure Prevention Project, under which both homeowners and the state's bank commissioner must receive 45 days notice before a foreclosure is filed. The law also allows the bank commissioner to extend any foreclosure filing notice by 30 days. The state would use that time to negotiate with the homeowner and mortgage holder on a loan interest rate and payments.


  • Another bill eliminates rate spread premiums - also known as yield spread premiums - which go to mortgage brokers. [...] The third bill signed by Easley requires individuals and companies serving loans in North Carolina to register and make reports to the bank commissioner.

For more, see NC governor signs bills to curb home foreclosures.

Active Duty Guardsman Sues Lender Over Allegedly Illegal Foreclosure; Loses Home While In Iraq Despite Legal Protection Under SCRA

In Michigan, National Public Radio reports:

  • [Army National Guard Sgt. James] Hurley and his family had been living in a three-bedroom manufactured home on Michigan's Paw Paw River. But they fell behind on the mortgage, and their lender began foreclosure proceedings in 2004. While Hurley was in Iraq serving as an Army mechanic, the lender sold the house and evicted Hurley's wife and children. Hurley says he learned about it after the fact during one of his occasional phone conversations with his wife.


  • Now, the Hurleys are suing several parties involved with the foreclosure — including Deutsche Bank and Saxon Mortgage. The family says it should have been protected from foreclosure by a long-standing federal law known as the Servicemembers Civil Relief Act — what lawyers call the SCRA.


  • "Military people need to have certain protections when they're off trying to serve us in a war," said Matt Cooper, the Hurleys' lawyer. "One of the rights under the SCRA is that you can't foreclose on them." [...] "It looks to me like the bank screwed up badly and needs to make things right," federal judge Nancy Edmunds said during a February hearing.

For more, see Lenders, Service Members Clash Over Law.

For copy of the original civil lawsuit filed in Detroit Federal Court, see Complaint - Hurley vs. Deutsche Bank National Trust, et al.

Go here for other posts on the Servicemembers Civil Relief Act.

Tenants Get Boot After Unwittingly Renting Home In Foreclosure From Non-Owner

In Philadelphia, Pennsylvania, a column in the Philadelphia Daily News reports:
  • THE 'SPACIOUS' one-bedroom apartment listed in the Internet ad sounded perfect for Sherry Murphy and her 13-year-old daughter. [...] Seemed like a bargain at $130 a week. So she moved in and paid the first week's rent to a man named Kenneth Dixon, who she thought was the owner. She wasn't the first. At least five other tenants were living there and Dixon collected their rents personally every week. And then the Department of Licenses and Inspections issued a seven-page violation report and ordered the property shut down. The tenants had read about the place in an ad Dixon ran on Craigslist.


  • Dixon never owned the property. Anthony Johnson, whose wife, Dolores, is listed on the deed as the owner, says that they had no idea that Dixon had turned the place into a rooming house. [...] Johnson said that he had fallen behind five months on the $4,700-a-month mortgage by May. He said he was moving out of the house when Dixon appeared. [...] "He told me he helped people in distress. It was a blessing." They agreed that Dixon would buy the distressed property, freeing the Johnsons from foreclosure. But the lease-purchase arrangement fell through because of liens that had been levied against the property before Dixon got involved. Instead, Johnson said, Dixon agreed to pay the mortage and live in the property until the judgment was cleared and the sale could be arranged.

For more, see She thought she'd found a home, but it was all a house of cards.

Go here and go here for other posts on tenant victims of rent hoaxes. unwitting tenant rent scam yacht

Monday, August 18, 2008

Massachusetts Couple Sue Foreclosure Rescue Operator For Allegedly Swindling Them Out Of Home In Equity Stripping, Sale Leaseback Deal

In Auburn, Massachusetts, the Worcester Telegram & Gazette News reports:
  • An Auburn couple have sued several people — including one who tried to flee the country with $1.3 million and has pleaded guilty to wire fraud in an unrelated case — of swindling them out of the title to their home. Auburn Fire Lt. Francis X. Hartnett, 35, and Kim M. Carville, 34, have been together for 12 years. [...] Last month, Mr. Hartnett and Ms. Carville say, they found out they lost title to their house two years ago. Mr. Hartnett and Ms. Carville contend the title was stolen by Stuart Brown, Trisha Graham and Allen J. Seymour, who was arrested Feb. 8 in Florida trying to flee the country on a private jet with $1.3 million hidden in his luggage.(1)


  • On July 24, Superior Court Judge Peter W. Agnes Jr. granted restraining orders against Wachovia Bank, the present holder of the delinquent mortgage, from foreclosing, and against Ms. Graham and Mr. Brown from collecting rent, coming to the property and evicting the couple and their two boys from the premises. “The ball is in their court now,” [the homeowners' lawyer, Margaret M.] Melican said. “They have to answer the suit within 20 days of having been served.”

For more, see Tricked out of home deed, couple say (Lawsuit says scammers preyed on their distress).

(1) According to the story: (a) On July 22, Mr. Seymour pleaded guilty to wire fraud and interstate transportation of property stolen or taken by fraud; (b) He recently was named by Assistant Attorney General Andrew Doherty as the mastermind behind an alleged mortgage fraud scheme in an investigation involving as many as 60 properties in Worcester County.

Title Underwriter Refuses To Defend Against Forgery Claim Made By Countrywide; Says Lender's Recklessness Brought On Its Own Problems

In Chicago, Illinois, the Chicago Tribune reports:
  • It could be the tip of an iceberg. Ticor Title, one of the largest title insurance firms in the country, is suing Countrywide Home Loans, the nation's largest home lender, saying it shouldn't have to pay out on a title policy because of Countrywide's gross negligence. The suit, filed last month in Cook County Chancery Court, concerns just one Chicago mortgage made by Countrywide in 2007, but the implications are enormous, say real estate and title insurance experts.


  • The case that Ticor has drawn a line in the sand over concerns a $360,000 first mortgage on a graystone Victorian in the Kenwood neighborhood on the South Side. The story of that loan was told in a front-page Tribune story in February,(1) several weeks after a clothed, mummified male corpse was discovered in the boarded-up house by a real estate speculator who had purchased the property from Countrywide in a foreclosure auction.

  • The corpse was later identified as Randy Johnson, who had grown up in the house and continued to live there until he disappeared in late 2005. The gruesome discovery prompted Cook County Public Administrator Michael Bender to look into the case. Bender's staff quickly determined the backdated deed that had transferred the home from Johnson's deceased mother, Arrellia Johnson, to a woman named Rhonda Evans was a fake, and not all that hard to spot.(2)


  • Three months after the fraudulent deed was recorded, Evans sold the house to Donald Franklin of Harvey for $450,000. Franklin borrowed the entire amount in two simultaneous mortgages from Countrywide. The public administrator, who handles the affairs of people with assets who die without wills, moved to intervene in Countrywide's foreclosure case and asked the court to restore the property's title to Arrellia Johnson's heirs. Four days later, Countrywide asked its title insurer, Ticor, to represent its interest in the case. Ticor refused.(3)

Reportedly, as these two titans battle it out in court, the home of the late Arrellia Johnson sits vacant, boarded up, with a leaky roof, and is likely to stay that way until the title dispute is cleared up. Further, the estate's legal bills reportedly continue to accumulate as every court date requires the presence of an attorney from the public administrator's office - bills ultimately to be paid out of the late Ms. Johnson's estate when it is settled.

For more, see Title firm ready to do battle (Suit over Chicago house could set up national showdown).

(1) For the February Chicago Tribune story, see This house was a steal (How fraud led to this property changing hands 3 times as son of owner sat dead inside).

(2) According to the story: Arrellia Johnson's name was spelled two ways and the alleged 1996 warranty deed was created on the stationery of Recorder of Deeds Eugene Moore, who did not take office until 1999. Another warning sign: The deed was notarized by Mae Evans, who is the mother of Rhonda Evans.

(3) Reportedly, in the suit, Ticor argues Countrywide was "reckless and grossly negligent in its underwriting of the Franklin mortgage." That carelessness is the only cause of any loss suffered by the lender, Ticor alleges. Its claims go further: Ticor alleges that Countrywide "adopted corporate policies that resulted in the abandonment of proper underwriting standards as part of its effort to increase market share, and in the short term, profits."

Civil Lawsuits Focus Spotlight On Augusta-Area Real Estate Operator; Questionable Transactions Resulted In 40+ Foreclosures

In Augusta, Georgia, The Augusta Chronicle, reports on local real estate operator, S.D.A. & Associates and its owner Regina Preetorius. Some of the firm's customers have filed lawsuits against them alleging that questionable transactions have resulted in the loss of their homes, and others claim that they invested money with the firm and the money is now unaccounted for:
  • Three lawsuits have been filed against Ms. Preetorius accusing her of fraud and racketeering, and a number of people The Augusta Chronicle talked to who had dealings with S.D.A. say they, too, will be contacting attorneys.

  • HERE'S WHY: According to the lawsuits and those who talked with The Chronicle , instead of helping people catch up with mortgages or sell their homes, Ms. Preetorius treated the property as her own and obtained second and third mortgages on the houses. Investors gave S.D.A. money in exchange for security deeds on the properties. The investors' security deeds are worthless, however, if the original mortgage lender forecloses and the equity in the house can only pay off that loan. And when the original mortgage lender forecloses, anyone living in the home is evicted.


  • In S.D.A.'s wake are more than 40 foreclosures, 12 involving Ms. Preetorius or her various business entities,(1) and about a dozen people who went bankrupt. By the time Ms. Preetorious and her husband filed for Chapter 7 bankruptcy Aug. 4, she had been involved in the transfer of properties with a combined fair market value of more than $10.6 million. She had also persuaded investors to give her nearly $3.7 million in exchange for security deeds on properties.

For more, including the reported details of the allegations in some of the lawsuits, see Suits question real estate transactions (Owners say mortgage relief offers ended with foreclosures).

Go here for other posts and updates on this story.

(1) According to the story: Ms. Preetorious has had several businesses: Southeastern Holding Group, R.M.P. Holding Group, S.M.B. Holding Group, A.C.B. Holding Group, D.T.B. Holding Group, Preetoria Inc., and Omega Holding Group. The only business still licensed is S.D.A.

Creative Homebuyer Incentives Offered By Builders On The FBI Radar Screen

The Wall Street Journal reports:
  • When home sales began to slow at the start of the downturn, home builders offered buyers incentives -- instead of reducing prices -- to stimulate demand. The incentives included cars, tuition and credit-card payments, and even cash. Now, federal investigators are questioning whether some of those incentives misled lenders and caused them to write mortgages that were artificially inflated, contributing to today's home-price crash.

  • Using incentives to sell homes has long been a marketing tool for builders. When properly disclosed and structured, the practice is legal. But the Federal Bureau of Investigation is looking into allegations that home builders, brokers and appraisers defrauded lenders by not disclosing unusually large incentives to buyers, which could have added as much as $100,000 to the price of a home.(1)

Reportedly, some builders continue to make generous offers.(2)

For more, see FBI Probes Unusual Incentives for Home Buyers (Investigators Ask Whether Payments Misled Lenders).

(1) According to the story: In the Las Vegas division of Dallas-based Centex Corp., the home builder paid off car loans, credit-card bills and mortgage payments on existing homes to entice new buyers on homes priced between $350,000 and $550,000. Those payments weren't always disclosed to lenders. "You weren't buying a house. You were buying a package," says Dana Ellis, who worked as an escrow manager for Centex from 2004 to 2006. To qualify, Centex required the buyer to use the company's in-house mortgage unit to originate the loan, and the loan application included an incentive "addendum" that listed the incentives but wasn't always sent to the lender. "They weren't disclosing any of this. That was on separate paper that was pulled," she says. Centex says that the program was confined to about 50 sales and was shut down in June 2006, about six months after it began.

(2) According to the story: Wagner Homes Inc., a local home builder, advertises in big capital letters at the top of a flyer "$130,000 commission any way you like it!" for homes in developments like "Dawn Day Fusion," a northwest Las Vegas subdivision that offers homes with Asian-inspired architectural flourishes. New homes listed there in mid-July for $530,000 even though similar model homes in that development sold for $400,000 two years ago. "A fee that high has got to raise a bunch of flags," says Kenneth LoBene, HUD's Las Vegas field director, because builders typically reduce the price of the home rather than offer such large incentives and because homes in that subdivision have sold for as little as $240,000 in foreclosure auctions. Representatives of Wagner Homes didn't return calls seeking comment.

In another recent story of a condominium developer using creative homebuying incentives to unload unsold inventory, see Promenade condos scarcely populated (Though sales are stalled, residents have faith luxury condos will avoid fall); the report describes a sales promotion in which the developer will pay the buyers' mortgage payments, property taxes and association fees for three years.

Sunday, August 17, 2008

"Creative" Sales Raising Suspicions In One Escondido Condo Development In Financial Trouble As Some Recent Transactions Resemble Straw Buyer Deals

In Escondido, California, North County Times reports:
  • In the middle of a historic recession for North County's housing market, one south Escondido condominium complex experienced an extraordinary burst of sales. Twelve small units in Brookhaven Condominiums, a development of two converted apartment buildings, have sold since December for $360,000 or more ---- roughly double the prices of similar condos in the neighborhood. Indeed, the dozen Brookhaven units had surged by 31 percent in value since 2006, even as the median price of condos in the area plummeted 54 percent. Neither Brookhaven's developers nor their bankers would explain this remarkable performance, despite repeated requests from the North County Times.(1)


  • "You would think that after the huge market meltdown, that banks and lenders would be paying a whole lot more attention to make sure they're appropriately pricing the collateral," said Paul Leonard, director of the California office of the Center for Responsible Lending in Sacramento. With no knowledge of the Escondido condo market, Leonard said he could not comment specifically on the Brookhaven complex, but "to the extent that I hear about transactions like this one, it's clear that there are still some problems that need to be fixed."

For more, see Surging condo prices raise questions (Facing default, developer pulls off string of high-priced sales).

(1) For another recent story of a condominium developer using creative homebuying incentives to unload unsold inventory, see Promenade condos scarcely populated (Though sales are stalled, residents have faith luxury condos will avoid fall).

  • [The developers real estate broker] said some new buyers may be eligible for a promotion in which the developer will pay the buyers' mortgage payments, property taxes and association fees for three years [claiming] "It helps keep the property value up for three years - That's the responsible thing to do. You want to keep the comparables up for sure, you don't want to hurt the property value of the building."

More Legal Protections For Chicago Tenants Facing Eviction From Homes In Foreclosure

In Chicago, Illinois, the Chicago Sun Times reports:
  • Chicago renters left in the lurch — and evicted without warning — when their landlords face foreclosures would have added protections under a mayoral plan unveiled Thursday. [...] The plan calls for City Hall to expand an emergency rental assistance program to support up to three months of rent and moving expenses for eligible tenants evicted after a landlord’s foreclosure. Pro-bono legal services provided to evicted tenants by the Lawyer’s Committee for Better Housing(1) will be expanded.

  • And the city is prepared to launch a tenant outreach program as soon as Gov. Blagojevich signs a bill on his desk that broadens the umbrella of protections for impacted renters. Among other things, the bill guarantees renters a minimum of 90 days’ notice before being thrown out of foreclosed buildings. Currently, some renters get as little as five days’ notice. The bill also requires the sealing of court records so landlords are not unfairly punished when they seek new housing or credit.

For more, see New laws to protect renters from foreclosure.

(1) According to their website, the Lawyer’s Committee for Better Housing's clients are provided an array of services by volunteer attorneys, from settlement negotiations to motion practice to full litigation, depending on the nature of their case; and the group observes that because of their efforts, the landlords’ bar is more easily persuaded to settle their evictions cases in a manner favorable to the tenant rather than continuing litigation. TenantRentSkimmingAlpha

California State Law, Local Rent Control Law Gives Strong Protections For San Francisco Tenants In Foreclosed Homes

Buried in a recent article in the San Francisco Chronicle is the following excerpt addressing the rights of San Francisco tenants in foreclosed homes that come within the scope of the city's rent control laws, as well as state law:

  • Lenders who take back properties or investors who pick up foreclosed homes generally prefer the buildings empty, because that makes them easier to sell. Under San Francisco laws, however, those aren't grounds for an eviction in a rent-controlled building.(1)

  • Unless tenants have stopped paying rent or otherwise have misbehaved, generally they can be forced out only when a new owner plans to demolish the property, has secured the necessary approvals to convert into it condominiums or plans to move in family members or him or herself, according to the city's rent ordinance. Even then, the owner typically must provide several months' notice and thousands of dollars in relocation costs.

  • In addition, new owners - a bank, a trustee or otherwise - generally become liable for the same obligations of the previous landlord, said Robert Collins, deputy director of the San Francisco Rent Board. That means that if the original lease said the landlord pays for electricity, [...] the company that bought it is responsible now.

For more, see Foreclosure's hidden victims.

(1) According to the story: State and local laws prohibit landlords from evicting tenants or shutting off utilities in most circumstances like these, but not all renters are aware of the rules, and not all of the entities that take control of properties try to learn them. "The basic problem is that the people who are acquiring these properties, they don't understand or want to understand that tenants have rights in San Francisco," said Tommi Avicolli Mecca, director of counseling programs at the Housing Rights Committee of San Francisco. "You can't just go in and tell them to leave, you can't shut off utilities, you can't call the police, you can't do any of that stuff." He and other tenant advocates and attorneys worry that many renters who aren't aware of these rules are being pressured into handing over their keys. TenantRentSkimmingAlpha

Central Florida Legal Services Firm Opens Walk-In Clinics To Address Rising Needs Of Homeowners In Foreclosure As Calls For Help Double

In Daytona Beach, Florida, the Daytona Beach News Journal reports:
  • [C]alls to the help line at [Community Legal Services of Mid-Florida](1), which is based in Daytona Beach and serves 12 counties, have doubled in the past two years to about 40,000 calls a year. The agency, which receives mostly federal dollars, is only financially able to assist about half the people. Although most of the calls are for family-law help such as domestic violence, divorce and child custody, the number of calls from people seeking housing and foreclosure help has doubled in the past year. Those calls make up 38 percent of callers. The agency started various walk-in clinics last week to help with the rising need.


  • Although there are 27 paid attorneys on staff, including about a dozen in Daytona Beach, the agency also had 96 local lawyers who donated their time and services this past year.

For more, see Homeowner's woes eased by legal agency.

(1) A nonprofit law firm that provides legal aid to low-income families, seniors and victims of domestic violence or housing discrimination.

South Jersey Bank, Non Profit to Establish Sale Leaseback Program To Rescue Homeowners In Foreclosure

In Cumberland County, New Jersey, The Press of Atlantic City reports:
  • A private bank and a local nonprofit group in Cumberland County are stepping in with a unique strategy to help people avoid losing their homes. The program, launched by Tri-County Community Action Partnership with $1 million in backing from Colonial Bank, would in some cases temporarily buy homes that are being foreclosed and sell them back to the original owners within a year when those owners are in better financial shape. The key is the potential sale and repurchase would come only after homeowners go through financial planning, debt restructuring and counseling through Tri-County, which has plenty of state-accredited expertise to offer.

For more, see Fighting foreclosures / Innovative program.

California Fair Housing Group Expands Into Murrietta; Offers Free Services To Homeowners In Foreclosure

In Murrietta, California, North County Times reports:
  • [A]fter hosting a foreclosure prevention workshop last month at which more than 350 people were given direct answers to their personal mortgage woes, Murrieta city officials invited the Fair Housing Council [of Riverside County] to set up shop locally. The council is a nonprofit advocacy group that acts as an intermediary between lenders and borrowers to negotiate terms of loans, review documents, watch for mortgage fraud scams and empower homeowners by apprising them of their rights and about free services available to them.

For more, see Fair Housing opens doors (Advocacy group to address local needs immediately).