Saturday, September 27, 2008

Explosion Flattens Vacant Minneapolis 4-Plex In Foreclosure; Copper Pipe Theft Triggered Gas Leak, Says Local Utility

In Minneapolis, Minnesota, WCCO-TV Channel 4 reports:
  • Two signs of a struggling economy combined to create an explosion that rocked a North Minneapolis neighborhood. The blast flattened a 4-plex in the 2400 block of Golden Valley Road on Sunday. The building was in foreclosure and vacant, and CenterPoint Energy said a copper pipe theft led to the explosion. "It was probably somebody over there trying to steal copper and pull copper over there that set the gas leak off, that was my first think I thought," said Jackie Jackson, who manages the apartments across the street. She reported problems to police, and the building was boarded up, but that didn't stop the copper thieves -- or the explosion.


  • CenterPoint Energy said it's seeing more copper thefts and more related accidents. The company asked neighbors to be particularly aware of the smell, sight or sound of natural gas. "If you can smell it in your house or when you're walking in the area get a safe distance away where you can no longer smell it and then call CenterPoint Energy to report it, because any spark could ignite," said CenterPoint spokesperson Becca Virden. The problem is affecting neighborhoods across the Twin Cities.

For more, see Bad Economy, Vacant Homes And Copper Thefts (read story) (watch WCCO-TV video).

For other stories on stolen copper, see Copper Thefts I and Copper Thefts II. copper metal theft yak

Pittsburgh-Area Cops Suspect Dog Fighting Operation As 14 Pit Bulls Found Abandoned In Home In Foreclosure

In Penn Hills, Pennsylvania, the Pittsburgh Review Tribune reports:
  • More than a dozen pit bulls were found Thursday in an abandoned Penn Hills house that authorities believe was being used for the breeding and training of dogfighting animals. "There are some elements that lead us to believe these animals are being used for dogfighting," said Kathy Hecker, a humane investigations officer for Ohio Township-based Animal Friends, mentioning wounds on several of the dogs, the presence of sticks used to pry apart fighting animals and blood splatters on the walls.

  • Lt. Jack Kearney of the Allegheny County Sheriff's Department said deputies found an older-model submachine gun inside the house in an isolated area of Lawndale Street, a dead-end street near the border with Homewood. Hecker said nine adult dogs -- two with fresh wounds and several with "significant scars" -- and five nursing puppies were found in dirty cages inside the house.


  • Kearney said a deputy who went to the house Monday to serve mortgage foreclosure papers heard whining dogs inside but did not have authority to enter through the locked gate.

For more, see Dogfighting pit bulls rescued from Penn Hills house.

Indiana Non-Profit Assists Low-Income, Elderly Homeowners Fight Foreclosure

In South Bend, Indiana, WSBT-TV Channel 22 reports:
  • There is free legal help available to low-income and elderly homeowners in Indiana who have defaulted on their mortgage and are facing a lawsuit. [...] "The ones we tend to take are the ones that are three months or more behind in their mortgage payment — where the lawsuit has been filed or a judgment has been entered — that's when we enter the process," said Joe Zielinski with Indiana Legal Services.(1)

  • Zielinski says there are three common defenses used to fight a foreclosure lawsuit:
    1. A company sues you for payment but they don't actually own your mortgage.
    2. The mortgage company stops accepting your payments after you miss one time.
    3. Improper fee charges.

Source: Free legal help available to homeowners facing foreclosure.

(1) Indiana Legal Services covers homeowners in St. Joseph, Elkhart, Lagrange, LaPorte, Marshall and Starke counties.

Memphis-Area Non-Profit Assists Poor, Elderly In Foreclosure Fight; Limited Rescources Forces Firm To Turn Away Many In Need

In Memphis, Tennessee, Commercial Appeal reports:
  • [T]his year Memphis Area Legal Services launched its Home Preservation Project, which was created to strengthen our organization's fight against the home foreclosure crisis. This project provides free services to those at risk of losing their homes because of trouble meeting mortgage obligations. Memphis Area Legal Services attorneys work closely with trained foreclosure counselors to restructure loans in order to allow some homeowners to successfully pay their mortgages and retain their homes. Our staff also works to educate the poor and elderly about how to identify and avoid predatory lenders.

  • Memphis Area Legal Services 16 attorneys provide advice and assistance to more than 3,000 eligible clients a year -- clients whose problems range beyond mortgage lending issues into other legal problems such as domestic violence and consumer fraud. Yet because of limited financial resources, we must turn down more than half of the people who seek legal help from our organization. That means many of the elderly and working poor in our community are left to face critical legal issues alone, without access to a lawyer, and thus, without equal access to justice.

For more, see Foreclosure catastrophe needs your help (Mid-South residents have volunteered to help Gulf Coast storm victims, but a similarly devastating disaster is quietly happening here and now).

Two Downstate New York Non-Profits Score $545K In Grant Money To Fight Foreclosure

In Westchester County, New York, the news blog of The Journal News reports:
  • Westchester Residential Opportunities Inc. and Legal Services of the Hudson Valley have recieved a $545,000 grant to help homeowners struggling in a weak housing market. The groups said they will use the grant to provide area homeowners with counseling and legal services as they seek to avoid foreclosure. The grant money originated from the New York State Housing Trust Fund Corp.


  • Westchester Residential Opportunities, with offices in White Plains and Mount Vernon, is one of the largest housing counseling agencies in the lower Hudson Valley region. Legal Services of the Hudson Valley is a provider of free civil legal services to low-income residents in the region. It operates Westchester offices in White Plains, Yonkers and Mount Vernon.

Source: Groups receive grant to help homeowners.

Friday, September 26, 2008

D.C.: The Place to Be for Tenants of Foreclosed Buildings

In Washington, D.C., a story Washington City Paper's housing blog serves as a reminder that, in the District, tenants in foreclosed homes have strong protections:
  • The District has some of the strongest foreclosure-protection laws in the country, according to Joel Cohn, Legislative Director for the [D.C.] Office of the Tenant Advocate. Under D.C. law, there are specific reasons why a tenant can be evicted.

  • "Those are the exclusive reasons in the District," says Cohn "and foreclosure isn't one of them." They [can] maintain their tenancy on exactly the same terms as before … Tenants have the right to stay as long as they pay rent. They also can demand that the landlord fix any housing code violations.

  • From May to July of this year, tenants from ten different foreclosed D.C. properties contacted Cohn's office asking about their rights. It's a smart call to make: Banks commonly tell unsuspecting tenants that they have to move out, in violation of D.C. statute, says Cohn. Some tenants seeking legal aid have already left their buildings, and in that case, it's usually too late do anything.

  • "The name of the game is getting notice to the bank, which might be ignorant in good faith, though it's up to the bank's attorneys to know the local housing laws," says Cohn. "So, I don't think there is such a thing as good faith failure to know the law."

For more, see D.C.: The Place to Be for Tenants of Foreclosed Buildings.

If you are a tenant in a foreclosed home located in the District of Columbia, see Office of the Tenant Advocate: DC Law Protects Tenants During Foreclosures for information on how to deal with the threat of eviction. equity skimming unwittingly digamma

Reuters On The Philadelphia Plan For Reducing Foreclosures

In Philadelphia, Pennsylvania, Reuters reports:
  • With the U.S. financial system in crisis due to surging mortgage defaults, a Philadelphia program designed to reduce foreclosure sales may provide a national model to keep people in their homes. The program, based not on bailouts but reconciliation between borrowers and lenders, has been able to prevent at least temporarily the disposal of many of the properties in its purview. The first such city-sponsored plan in the United States, it has also saved banks money because it is cheaper to renegotiate than foreclose.

  • Launched by city government and the Philadelphia Court of Common Pleas in June, the plan requires owner-occupied properties scheduled for sheriff's sale to be submitted to a conciliation conference of borrowers, lenders and the court before they can be sold.


  • Mike McKeever, an attorney who represents lenders in the Philadelphia program, said banks have cooperated because restructuring a loan or forgiving some arrears is cheaper than foreclosure. "We are in favor of it," McKeever said. "It has brought both parties to the table." Mayor [Michael] Nutter said the program is protecting neighborhoods from falling property values, which typically happens when a house is abandoned. The city provided $2 million for the program and will provide more next year, he said.

For the story, see Philadelphia pilot is model in U.S. housing crisis.

Go here for other posts on the Philadelphia Residential Mortgage Foreclosure Diversion Pilot Program.

Abandoned Construction Project Leaves Buyers With Partial Homes, Full Payments; Law Enforcement Probes Into Possible Criminal Activity

In Winter Park, Colorado, Sky Hi Daily News reports:

  • Three townhome buildings in Winter Park Ranch are the subject of another abandoned construction project associated with American Dreams Seminars, or ADS Builders Inc. of Broomfield. Four of six units in The Hills at Winter Park Ranch are in foreclosure, with the remaining two teetering, according to county records. One owner, Alice Antolin of Northern California, said she owes New Frontier Bank in Greeley $425,000 with interest for one side of a townhome duplex that was never completed.


  • Construction on the project since has been rescued by a contractor hired by the bank, which intends to finish the project. But home buyers are stuck. “Our good standing credit is ruined,” Antolin said.


  • The Sheriff’s office is looking into possible criminal activity that occurred in-state regarding the sales of lots and incomplete construction of homes abandoned by ADS in Rocky Mountain Estates, leaving many investors with loan payments on homes that are far from complete.

For more, see Winter Park — Buyers left with partial homes, full payments.

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

FHA Issues Rules To Curtail "Buy & Bail" Home Purchases

Inman News reports:

  • Not wanting to be involved in financing "buy and bail" home purchases, the Federal Housing Administration will no longer count rental income when home buyers choose to vacate, rather than sell, their principal residence. Home buyers seeking to rent out their existing home and buy another with an FHA-backed mortgage must now demonstrate they have sufficient income to pay both mortgages. The FHA won't allow lenders to count rental income for the home being vacated unless borrowers have a 25 percent equity stake or can prove they are relocating for employment and obtain a one-year lease on the home being vacated.

  • The new rules are intended to prevent the practice known as "buy and bail," where the buyer purchases a more affordable dwelling with the intention to cease making payments on the previous mortgage, FHA said in a letter spelling out the new guidance for lenders.


  • The new rules took effect Sept. 19, and are temporary pending a determination whether a permanent rule change is needed. The rules apply only to a principal residence being vacated in favor of another principal residence, and not to existing rental properties disclosed on the loan application and confirmed by tax returns, FHA said.

For the story, see FHA limits 'buy and bail' purchases.

Go here for other posts on "Buy and Bail" method of ditching unwanted mortgages & "upside down" homes. BuyAndBail

Thursday, September 25, 2008

Mortgage Lending Industry Dodges Bullet As Federal Appeals Court Strips Homeowners Of Class Action Status In Truth In Lending Lawsuit

Reuters reports:
  • A lawsuit brought by a Wisconsin couple who accused a bank of deceptive lending practices and wanted to cancel their home loan has been stripped of class-action status in a victory for U.S. banks. In a 2-to-1 decision, a panel of the U.S. Court of Appeals for the 7th Circuit on Wednesday overturned a lower court ruling that had allowed other borrowers to join Susan and Bryan Andrews as plaintiffs against Chevy Chase Bank FSB.

In its ruling, the 7th Circuit U.S Court of Appeals indicated that it joins two other federal appellate courts(1) in refusing to certify a class action for claims seeking the remedy of rescission under
the Truth in Lending Act, 15 U.S.C. § 1635.

For more, see U.S. court sides with bank in mortgage loan case.

For the court ruling, see Andrews v. Chevy Chase Bank (7th Cir., 9-24-08).

For earlier stories on the Chevy Chase, option ARM class action lawsuit, see:

(1) see McKenna v. First Horizon Home Loan Corp., 475 F.3d 418 (1st Cir. 2007); James v. Home Constr. Co. of Mobile, Inc., 621 F.2d 727 (5th Cir. 1980). UndoMortgageLoans TILAdelta

Arizona AG, HomeVestors Franchisee Settle Charges Of Alleged Foreclosure Rescue Fraud; Operator To Fork Over $350K To Approximately 100 Consumers

From the Arizona Attorney General's office:
  • Attorney General Terry Goddard [Tuesday] announced a settlement with Harvest Properties Inc. of Tucson, resolving a consumer fraud lawsuit that alleged foreclosure rescue fraud and mortgage fraud by the company and its owners. [...] The settlement, which comes in the form of a consent judgment and does not constitute an admission of wrongdoing, requires Harvest and its owners and managers to pay $350,000 in restitution to approximately 100 consumers.


  • Friday’s settlement with Harvest Properties, Inc., along with its owners and managers, Colin Sterling Reilly, Robert Harrington Reilly and Jill Lynae Reilly, resolves allegations that Harvest engaged in a foreclosure and credit rescue scheme that employed deceptive practices to buy foreclosed homes at discounted prices.

For more, including the allegations set forth in the Arizona AG's complaint, as well as additional terms contained in the setlement, see Terry Goddard Announces Foreclosure Rescue Fraud Settlement.

See also:

Non-Profit Law Firm Helps 84-Year Old Foreclosed Woman Illegally Locked Out Of Home Temporarily Regain Possession Of Premises

In Visalia, California, The Fresno Bee reports:
  • Floy Mae Bryant, 84, returned Tuesday to the home she lost in foreclosure, but this time she had a lawyer and a locksmith in tow. The locksmith attacked the door locks and, for the first time since May, Bryant stepped inside her home [...] in Visalia.

  • "It feels like home. I love it," the retired phone company operator said as she looked around at bare walls and carpet. Then she started to cry. "It's been hard, just hard." In reality, though, it's not her home anymore. It belongs to the Federal National Mortgage Association (Fannie Mae), which took legal ownership in April after Bryant fell behind on her house payments and the home was foreclosed on. But now, on the advice of her lawyers, she is moving back in.

  • "It forces their hand a little more" said lawyer Suzanne Swenk from Central California Legal Services, which is assisting Senior Legal Hotline of Sacramento. Swenk said the home was sold out from under Bryant to Fannie Mae in April, and in May the locks were changed by a real estate agent before Bryant had fully moved out. That's illegal, Swenk said. No proper legal paperwork was obtained to require her to move, she said.

  • Swenk is negotiating with Fannie Mae to let Bryant have the home back on terms she can afford, which would include Fannie Mae getting $185,000, but less than the full amount owed. "We're hoping they help her," Swenk said. "The sole purpose of Fannie Mae is to help homeowners."

For more, see Visalia woman retakes home (Foreclosed upon and locked out, senior citizen fights back).

See also, KFSN-TV Channel 30: Visalia Woman's Mortgage Lending Nightmare.

Go here for other posts on foreclosure screw ups involving improperly changed locks, removal of belongings, etc. ForeclosureLockOuts

Bankruptcy Judge Orders Victim To Pay Back Thief; Convicted Builder Entitled To Recover Restitution Paid To Ripped Off Customer

In New Haven, Connecticut, The Associated Press reports:

  • Mark Poveromo feels ripped off twice over. A judge ordered him to repay money he collected from a builder convicted of stealing from him - and told him to kick in the thief's attorney fees and court costs, too.


  • The case began in 2006, when Poveromo hired Mark R. Koch of Illinois for an $80,000 project to construct a building for his pet food business in Thomaston, Conn. Poveromo paid $39,500 up front, but Koch never did any work, according to court documents.

  • Poveromo filed a criminal complaint, and Koch was convicted in Connecticut of first-degree larceny in April 2007 and ordered to pay restitution. Koch paid $25,000 and began monthly payments to Poveromo on the balance, but that's when the law turned on Poveromo.

  • Two months before his conviction, Koch filed for bankruptcy protection in St. Louis, halting any monetary claims against him. [...] Koch then filed a complaint to the bankruptcy court accusing Poveromo of intentionally violating the stay on claims by having him arrested to collect on his debt. Judge Charles Rendlen III agreed with the builder. In a ruling filed in December, and without hearing from Poveromo, Rendlen noted "the highly suspect timing" of Koch's arrest and conviction after filing for bankruptcy.


  • Poveromo said he reluctantly accepted a settlement reached a few weeks ago in which he was able to keep the nearly $28,000 Koch had given him but did not collect on the balance he was owed based on what the Connecticut court had ordered.

For more, see Bankruptcy judge orders victim to pay back thief. contractors stiff subs customers yelbow

Countrywide Plaintiffs Seek To Keep Suits Separate reports:
  • Six plaintiffs, including Calif. Attorney General Jerry Brown, will ask a federal panel on Thursday to keep their individual lawsuits against Countrywide Financial Corp. untangled and out of a single federal court. Lawyers for Brown, the state of Illinois, the city of San Diego and plaintiffs in three private class actions say their claims against the troubled mortgage lender would be better heard in local courts close to regional foreclosure hot spots.

For more, see Tough Talk on Countrywide Mortgage Suits.

Wednesday, September 24, 2008

Wall Street Bailout: What Are The Rules?

For an interesting, and rather humorous view of what the rules are for the currently contemplated Wall Street mortgage bailout being kicked around by Congress, as presented by Congresswoman Marcy Kaptur (D-Ohio) on the floor of the House of Representatives, see Let's Play "WALL STREET BAILOUT" The Rules Are... (A C-Span video; posted on YouTube by

Thanks to Mike Dillon at for the heads-up on the video.

Mortgage Broker / Closing Agent Cops Plea To Pocketing Escrow Funds Meant For Payoff Of Existing Lien Holders

In Palm Beach County, Florida, WPEC-TV Channel 12 reports:
  • Defendant John Mohan, 38, of Delray Beach, pled guilty to one-count of wire fraud in connection with a scheme to misappropriate more than $1.2 million in client funds purportedly held in escrow for authorized real estate transactions and related expenses.


  • Mohan was a mortgage broker and closing agent who assisted buyers in real estate transactions, according to court documents. As the closing agent, Mohan would collect funds from buyers and lenders, and would represent to the parties engaged in the transaction that these funds were being held in escrow to be disbursed for various specified purposes, including the satisfaction of pre-existing mortgages. In fact, Mohan misappropriated the escrowed funds for his personal use and to make additional personal investments. Over the course of the scheme, Mohan misappropriated more than $1.2 million in client funds. In an effort conceal the fraud and prevent immediate foreclosure of the property, Mohan would sometimes make some payments on the homeowner's original mortgage.

Source: Delray Beach mortgage broker pleads guilty to fraud.

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

Homeowners With Frozen/Terminated HELOCs May Have Cause Of Action

The Sarasota Herald Tribune reports:
  • Some of the millions of homeowners who have seen their home-equity lines of credit (HELOC) sharply curtailed, or even completely jerked out from under them, may have a legitimate gripe with their lenders. While banks certainly have the right to reduce, suspend or even terminate revolving lines of credit in which the borrower's home serves as collateral, they can't do so willy-nilly. There are several consumer-protection laws that must be followed. And even when the law is on their side, banks are required to reinstate credit lines when the reasons for the reduction or suspension no longer exist.


  • [T]wo exceptions to [the law] are obvious and straightforward. Lie to get the loan or miss a couple of payments, and the line of credit can be yanked.

  • But a third exception -- when actions adversely affect the property pledged as collateral or the creditor's security interest in the property -- is somewhat more ambiguous and is worth exploring in detail, especially by borrowers who think they've been treated unfairly.

For more, see Some home-equity lines of credit can't be rescinded.

Go here for other posts on Frozen HELOCs.

Minneapolis Neighborhood Gets Favorable Settlement With Mortgage Company In "Careless Lending" Lawsuit

In Minneapolis, Minnesota, the Minneapolis Star Tribune reports:
  • A north Minneapolis neighborhood that filed a groundbreaking careless-lending lawsuit against mortgage giant CitiMortgage has forced the lender to eat more than $200,000. The Hawthorne neighborhood has bought for just $18,900 a fire-damaged house on which CitiMortgage held a $235,000 mortgage.


  • The [Hawthorne Area Community Council] attorney, Mark Ireland, said the legal challenge was the first he's aware of in the Twin Cities where a neighborhood has proactively forced a lender to pay attention to neighborhood impact of its lending rather than passively suffering increasing blight.


  • The case had the potential to set a precedent in Minnesota. Nationally, lenders can be sued for "improvident lending" in cases involving credit card debt or loans to someone who is mentally incompetent. The Hawthorne neighborhood sued to extend that to mortgage lending. The settlement means there's no such precedent.

For more, see Hawthorne scores in the fight against blight (A Minneapolis neighborhood's unusual settlement with a lender over a blighted property now gives it the chance to rehab a slew of homes).

For the earlier story announcing the start of the lawsuit, see Neighbors sue lender over house left vacant (A north Minneapolis neighborhood aims to hold a lender accountable for alleged careless lending with action that could break new legal ground). ForeclosuresDestroyNeighborhoodsApple

WaMu: The Preferred Lender For Alleged Southern California Flipping Operation?

In Southern California, the The Orange County Register chronicles how Washington Mutual was used by a Southern California real estate group to ostensibly finance a house flipping operation:
  • [R]ecords show that Washington Mutual, America's largest savings and loan and one of its most precariously perched lending institutions, financed at least 43 mortgages worth $24.5 million on properties bought and sold by members of the Soni family(1) since early 2007.


  • The Soni family's transactions with WaMu, which took place from early 2007 through March of this year, indicate that Washington Mutual continued making risky loans long after its underwriting standards were supposedly tightened, said James Barth, a senior finance fellow at the Milken Institute in Santa Monica.


  • Home prices in Santa Ana peaked in 2006 and have fallen more than 40 percent since. While those prices were plummeting, members of the Sonis' family never sold for a loss. A Register analysis of 22 Santa Ana properties flipped by the family in the past two years shows a total gain on sale of $3.7 million.


  • In the past two years, Soni family members took out a total 14 mortgages with Wells Fargo, Countrywide Home Loans, Downey Savings & Loan, J.P. Morgan Chase Bank and HSBC Mortgage Corp. But Washington Mutual was their preferred lender, with triple that number of loans.

For more, see WaMu loaned millions to OC home flippers with a history of fraud (Troubled lender's mortgages helped family of real estate traders make millions as the market collapsed).

(1) According to the story, in August 2003 (before the current alleged flipping operation), an Orange County Superior Court jury found Vijay and Supriti Soni guilty of forgery, falsifying real estate documents, identity theft and grand theft. Vijay Soni was sentenced to a year in jail. He also surrendered his real estate license. Supriti Soni was convicted on 19 counts in the case and sentenced to three years in prison.

Tuesday, September 23, 2008

Chicago Homeowner, Local Non-Profit Fight To Save Home Allegedly Stolen In Equity Stripping, Foreclosure Rescue Ripoff

MSNBC's The Red Tape Chronicles recently ran a story on foreclosure fraud and short sale fraud. Included in the report is the story of Chicago, Illinois homeowner Angela Carter, 55, who alleges in a lawsuit that she was ripped off of close to $100,000 in an equity stripping, foreclosure rescue scam by a company named Second Chance Program and is fighting to keep her home:
  • Here is Carter’s version of events: After signing a flurry of paperwork, she signed title of the house over to Second Chance, selling her house for $140,000 with the understanding that she would pay the firm rent and could repurchase the house a year later for $180,000. But almost immediately after signing the deal, Carter said, Second Chance took out a second loan on the property based on her untapped equity and pocketed close to $100,000 -- a common scheme called "equity skimming."

  • I had no idea what the building was worth,” she said. “And I had no idea they were buying my house. All along I thought they were giving me a loan.” Two years later, Second Chance sent Carter an eviction notice.

  • With the help of Chicago's nonprofit Home Ownership Preservation Project [of the Legal Assistance Foundation of Metropolitan Chicago], she was able to temporarily block the eviction. Now, the two parties are fighting in state court about who holds the rights to the home. Earlier this month, Carter spent a week in court pleading her case. Now she faces a long wait to find out if she'll get to keep her house and what will happen to the $100,000 in equity her family earned from living there for nearly five decades. "I have no idea how it's going to turn out," she said. "It's like living with a question mark over your head.”

For more, see Millions At Risk Of Foreclosure Fraud.

FTC Settles Foreclosure Rescue Claims With Four Texas Defendants & Their Companies

The Federal Trade Commission announced this week:
  • [F]our Texas defendants and their companies(1) have agreed to settle FTC charges that they deceived homeowners facing foreclosure by falsely claiming they could prevent foreclosure in return for an up-front fee ranging from $500 to $1,200. The settlements bar them from further law violations and require them to pay more than $137,000 in redress for affected consumers.

  • According to the Commission’s complaint, in numerous instances, the defendants did not prevent foreclosure for their clients; rather, they often ensured foreclosure by not taking promised actions or taking only minimal steps not calculated to prevent foreclosure. The defendants also increased the threat of foreclosure by inducing consumers to wait passively for weeks rather than contact the lender and explore possible options. In addition, they allegedly did not honor their promise to fully refund all fees if they could not stop foreclosure, which resulted in consumers sometimes losing the fees and their homes.

For more, see FTC Acts Against Two Family-Owned Mortgage Foreclosure ‘Rescue’ Operations.

For more on this case from the FTC, see:

(1) According to the FTC press release, the defendants, all based in Texas, are Elias H. Taylor and his companies, National Hometeam Solutions, LLC, National Financial Solutions, LLC, and Elant, LLC; Everard Taylor and his company, Evalan Services, LLC; Emanuel Taylor and his company, United Financial Solutions, LLC; and Edwin P. Taylor, Sr., and his company, Nationwide Foreclosure Services, LLC.

Another Tale Of A Victim In A Foreclosure Rescue, Sale Leaseback Deal

In Seattle, Washington, The Seattle Times reports on the story of a local couple who got screwed over in a foreclosure rescue, sale leaseback transaction that ultimately resulted in their eviction when their lease payments became unaffordable.

For more, see State cracks down on foreclosure scams (Families facing foreclosure on their homes are at their most vulnerable. A new state law and heightened oversight by the Washington Attorney General's office should offer distressed homeowners greater protection against scammers).

Mass AG: Mortgage Industry Has Failed To Live Up To Their Promises Of Avoiding Foreclosures By Achieving Loan Modifications

In Boston, Massachusetts, the state Attorney General's office announced last week:

  • [Last week], Massachusetts Attorney General Martha Coakley submitted testimony to the U.S. House Financial Services Committee regarding her office’s findings and observations with regard to the lack of progress in securing mortgage loan modifications for homeowners who are struggling to make payments and facing foreclosure.


  • Based upon our experiences here in Massachusetts, lenders, holders and servicers have not lived up to their very public promises of avoiding foreclosures by achieving loan modifications,” said Attorney General Coakley. “We appreciate Congressman Frank’s and his Committee’s diligent attention to this issue and hope that they will hold the industry’s feet to the fire at today’s hearing. We have been very active at the state level in urging the mortgage industry to take meaningful action to decrease the number of foreclosures, but we need Congress’ continued help in effectuating real change.”


  • In recent months, the Attorney General’s Office has reviewed 144 loan modification documents, reflecting all loan modifications filed in 14 counties. The office found that: (1) Not one of the 144 loan modifications reduced the principal mortgage balance of Massachusetts; and (2) Virtually none of the 144 loan modifications reduced the monthly payments for Massachusetts homeowners, so the distressed loans are no more affordable after “modification” than before.

For more, see AG Martha Coakley Reports to Congress on Mortgage Industry’s Lack of Action on Loan Modifications.

For AG Coakley's prepared testimony to the U.S. House Financial Services Committee, see Lenders and Servicers’ Promises of Loan Modifcations in Massachusetts are Not Matched by Meaningful Actions That Promote Sustainable Loans.

More On Mortgage Lenders' Lack Of Legal Standing To Foreclose

In New York City, The Village Voice reported earlier this month:

  • [A] series of startling court decisions nationwide have ruled against subprime lenders attempting to foreclose on borrowers after failing to legally establish ownership of the loans in question because they had been 'transferred' multiple times.


  • More and more Judges have demonstrated they are not willing to foreclose on a mortgage when they can't determine where it originated, or who actually owns the loan.


  • [Josh Zinner, co-director of NEDAP, New York Economic Development Advocacy Project] said that after the recent spate of publicity subprime garnered, courts are becoming more open to hearing about abuses in the lending system.

For more, see Fighting Foreclosure: Subprime Borrowers Battle (and Beat) Lenders in Court.

Monday, September 22, 2008

Mortgage Servicer Agrees To $28M Payment To Settle FTC Charges Alleging Unlawful Practices

The Federal Trade Commission announced earlier this month:
  • The Bear Stearns Companies, LLC and its subsidiary, EMC Mortgage Corporation, have agreed to pay $28 million to settle Federal Trade Commission charges that they engaged in unlawful practices in servicing consumers’ home mortgage loans. The companies allegedly misrepresented the amounts borrowers owed, charged unauthorized fees, such as late fees, property inspection fees, and loan modification fees, and engaged in unlawful and abusive collection practices. Under the proposed settlement they will stop the alleged illegal practices and institute a data integrity program to ensure the accuracy and completeness of consumers’ loan information.

For more, see Bear Stearns and EMC Mortgage to Pay $28 Million to Settle FTC Charges of Unlawful Mortgage Servicing and Debt Collection Practices.

For the relevant court documents, see:

See also, Bear Stearns provided fuel for subprime boom (Bear Stearns was a major funding source for hundreds of thousands of subprime and exotic mortgages, providing the jet fuel to the boom).

Go here, go here, and go here for posts on questionable mortgage servicing practices. questionable mortgage servicing practices tactics xero

Hawaii Feds Charge 6th Suspect In Alleged Foreclosure Rescue Scam; Loan Officer, Two Others Agree To Plead Guilty This Week

In Honolulu, Hawaii, the Star Bulletin reports:
  • Federal prosecutors have charged a sixth defendant in a mortgage fraud case that displaced two families on Oahu. Paula Galacgac is the unindicted co-conspirator named as P.G. in an indictment returned by a federal grand jury in May charging five others with crimes related to mortgage fraud. Prosecutors charged her Friday and she has agreed to plead guilty this week. Two other defendants, Albert Alimoot and Evan Koizumi, are scheduled to plead guilty [today] before a federal magistrate judge.


  • Galacgac was a loan officer with a mortgage broker company. She identified properties occupied by individuals facing foreclosure and otherwise having financial difficulty, according to court documents. She, along with John Mendoza, Antonio Alcantara Jr., Ira Altwegg, Alimoot and Koizumi, are accused of convincing troubled property owners that they could sell their properties to so-called "straw purchasers" without having to move out.

  • The straw purchasers didn't intend to occupy the homes but filled out false loan applications to obtain loans they never intended to repay, according to the indictment.

For the story, see Defendant No. 6 joins mortgage fraud case.

For story updates, see:

  • 2 plead guilty in mortgage fraud (Alimoot, 47, and Koizumi, 40, pleaded guilty in federal court to conspiring to commit wire fraud and mail fraud and to make false statements on loan applications as part of their roles in a mortgage fraud scheme),
  • Third guilty plea in loan fraud (Paula Galacgac faces five years in prison when she is sentenced for the mortgage scam).

To view the original indictment, see U.S. v. Mendoza, et. al.

The Call Grows For The Right To Legal Counsel In Civil Cases?

The National Law Journal reports:
  • Through litigation and legislation, a growing number of private and public interest lawyers across the country are pushing to secure those with low incomes the right to counsel in civil matters, including foreclosures, evictions and child custody cases. Legal aid groups are under-funded and overworked, they argue, and pro bono services aren't enough to fill the gap for the millions who go unrepresented.


  • On the litigation front, attorneys are asking the Ohio Supreme Court to rule that an elderly, low-income couple facing loss of their home through foreclosure has a state constitutional right to counsel at state expense. Hill v. Myers, No. 08-1141. [...] On the legislative front, [... i]n New York City, a proposed bill is pending that would give low-income seniors the right to an attorney in eviction cases and foreclosures.


  • In 2006, the ABA [American Bar Association] adopted a resolution urging governments to provide lawyers in civil cases where "basic human needs are at stake, such as those involving shelter, sustenance, safety, health or child custody."

For more, see Suits, Legislation Over a Civil Right to Counsel Grow Across U.S.

Homeowners To Expect Pain When Unloading A Home In A Short Sale

A recent story in The New York Times describes the last-minute surprise sprung on a homeowner who was trying to unload a home, the value of which was less than the loan balance, and who was seeking to consummate a short sale:
  • [R]eluctantly, banks are agreeing to let some short sales go through. But instead of writing off the unpaid portion of the debt, they want homeowners to sign a note promising to pay some or all of the balance due. This was the situation confronting Mike and Linda Kelly, who needed to sell their house in the foreclosure-plagued Central Valley of California when Mr. Kelly got a new job 75 miles away.

  • The Kellys owe $300,000 on their house, which has a pool in the back, crepe myrtle bushes in front and, because Mr. Kelly is a ham radio buff, a 40-foot antenna above it. But the best offer they could get gave the bank $220,000.

  • CitiMortgage said it would approve a sale at that price, but at the last minute told the Kellys they needed to pay $166 a month for the next 20 years, a total of $40,000. “When you are ready to participate in the loss, feel free to call me,” a Citi loss mitigation specialist, April Easter, wrote to them in an e-mail message.

For the story, see The Pain of Selling a Home for Less Than the Loan. (may require free registration; if no registration, try here, then click link for the story).

Sunday, September 21, 2008

Massachusetts AG Pursues Efforts Against Housing Discrimination

Massachusetts Attorney General Martha Coakley's Office has recently issued news releases in connection with its efforts targeting housing discrimination:

  • AG Martha Coakley Sues Malden Landlords for Housing Discrimination (filed a housing discrimination complaint that alleges that landlord violated state antidiscrimination laws by refusing to rent to prospective tenants with a child under the age of six years old because it would have created an obligation to abate lead paint in the rental unit),

More On Philadelphia's Mortgage Foreclosure Diversion Pilot Program

In Philadelphia, Pennsylvania, a recent column in the Philadelphia Inquirer contains this excerpt on the city Court of Common Pleas' Mortgage Foreclosure Diversion Pilot Program:
  • But amid the crisis, Philadelphia - unlike Wall Street - has made one very smart investment. With help from the new Mortgage Foreclosure Diversion Pilot Program, created by the Court of Common Pleas in partnership with the Nutter administration, City Council, the Philadelphia Sheriff's Office and the Association of Community Organizations for Reform Now (ACORN), homeowners can finally have a chance at a little peace of mind.


  • The program, which officials say is the first of its kind in the nation, works to reduce the number of homes threatened with sheriff's sales by connecting a judge with homeowners and lenders to attempt an affordable restructuring of their loans.


  • By any measure, the program has enjoyed success. Since its March launch, his team of community organizers - yes, community organizers - has reached out to 700 homeowners, literally going door-to-door seeking out those who might be in danger of losing their homes. Of the 140 cases that went through negotiations, 81 have settled, 53 have pending agreements, and six are still being negotiated.

For the story, see A step against foreclosures.

Michigan Man Accuses Florida Firm Of Foreclosure Rescue Ripoff

In Trinity, Florida, Tampa Bay's 10 News reports:
  • Richard Taylor found United Home Savers on the Internet to help him with his foreclosure in Wyandotte, Michigan. "For a fee, they would work with my mortgage and bank to help me get a lower rate and a lower payment for a certain amount of years," said Taylor. In April Taylor paid United Home Savers more than $1,100. He heard back from the company about a month later. "They couldn't do nothing," said Taylor. "So I says, 'If you can't do nothing for me, then I want my money back.'" But he still hasn't gotten his money back. Taylor even traveled to United Home Savers office in Largo.


  • The Federal Trade Commission filed a federal lawsuit against United Home Savers and officers Stephanie and Darin Dietschy earlier this month. A sign on the company's office in Largo says it is currently under court order by the FTC that all information in this building is frozen. Illinois Attorney General Lisa Madigan has also filed a lawsuit against United Home Savers. [...] Florida legislators recently passed a new law regulating mortgage rescue companies. Starting October 1st, they cannot accept any payment, until they provide you with a service.

For more, see Viewer wants refund from mortgage rescue company (read story) (watch Channel 10 video).

For story update, see Viewer's brother with mortgage rescue problem gets money back (Richard Taylor tells 10 News he has received $1,000 cash back from Brian Mehle, one of the directors of the mortgage relief company that took over from United Home Savers.).

From the Federal Trade Commision:

Mass. Closing Attorney Faces Charges In Alleged "Mortgage Stacking" Scheme; Pocketed Cash Owed To Lien Holders; Title Company Left Holding The Bag

From the Office of Massachusetts Attorney General Martha Coakley:
  • [Last week], a former Somerville real estate attorney was arraigned in Middlesex Superior Court in connection with allegedly making false statements on mortgage applications and associated documents and using the funds secured from the loans for his own purposes, rather than paying off existing loans as directed by the new lenders. Kevin Carey, age 48, of Middleboro, is charged with Larceny over $250 (8 counts) and Willfully Making a False Statement Regarding Financial Condition or Assets (7 counts).

  • Authorities allege that, while practicing as a real estate lawyer in Somerville and Medford, Carey engaged in a scheme called “mortgage stacking” on four residential properties he or his family members owned. The scheme allegedly involved serially refinancing the loans on these properties, without paying off the existing loans. Carey was also the agent for a New England title insurance company which allowed him to issue title insurance policies on mortgage transactions he processed. Title insurance policies protect lenders in the event that there are defects in the title of the property.(1)

For the Massachusetts AG's press release, see Former Somerville Lawyer Arraigned in Connection with Stealing Over $2 Million From Mortgage Lenders in Mortgage Stacking Scheme.

(1) According to the press release, authorities allege that on various occasions between April 2002 through September 2004, Carey performed the functions of closing attorney on mortgage loans on each of the properties involved. Authorities allege that Carey “stacked” three mortgages on a home in Medford, two mortgages each on two different properties in Everett, and one mortgage on his personal residence in Medford. Carey also allegedly falsified information on mortgage loan applications by omitting certain mortgages on the various properties, and also signed a family member’s name on false mortgage applications and closing documents he created. Authorities also allege that when he received the proceeds of the loans, Carey did not pay off the existing mortgages on these properties, but rather used the funds for his own benefit. Authorities further allege that Carey issued title insurance policies or commitments in connection with the transactions, and the lenders were therefore protected. However, ultimately the title insurance company suffered the financial loss. Authorities believe that Carey stole over $2 million dollars in this manner. sneaky slick escrow agents gamma

Indiana AG Targets Foreclosure Rescue Operator For Allegedly Taking Upfront Fee, Not Solving Mortgage Problem

In Indianapolis, Indiana, WIBC-FM Radio 93.1 reports:
  • The state says an Indianapolis company which offers to help you stave off foreclosure should be put out of business. Attorney General Steve Carter has asked for a court order barring Nationwide Foreclosure Consultants from contacting customers until it posts a required [$10,000] bond with the state. He's also suing the company for taking a [$495] payment from a Charlestown woman and allegedly doing nothing on her behalf. The suit accuses NFC of promising a money-back guarantee if the company failed to "solve (a client's) mortgage problems."


  • Carter wants a court to fine the company [$5,500] for what he contends are violations of three Indiana consumer-protection laws.

Source: State Seeks Injunction Against Foreclosure Consultant (Suit claims firm failed to deliver on services which other agencies offer for free).