Saturday, July 11, 2009

Sentencing Phase Finally Begins In Maryland Equity Stripping, Straw Buyer, Sale Leaseback Foreclosure Rescue Scam; 1st Of 10 Defendants Gets 10 Years

From the Office of the U.S. Attorney (Maryland):
  • U.S. District Judge Roger W. Titus sentenced Kurt Fordham, age 39, of Ft. Washington, Maryland, [Friday] to 10 years in prison, followed by five years of supervised release for conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Titus also ordered Fordham to pay restitution of $13,131,287.63, and forfeit three residential properties in Oxon Hill, Capitol Heights and Laurel, Maryland, and three vehicles.(1)

For the entire press release, see Metropolitan Money Store Conspirator Sentenced to 10 Years in Prison in over $35 Million Mortgage Fraud Scheme (Fordham Personally Responsible for Over $13.5 Million in Losses to Mortgage Lenders and Used Over $800,000 of Fraudulently Obtained Proceeds to Pay for His Wedding).

Go here for other posts on the Metropolitan Money Store sale leaseback foreclosure rescue scam.

(1) Nine other defendants have pleaded guilty to the conspiracy and are facing a maximum sentence of 30 years in prison: JoyJackson, age 41, President of Metropolitan Money Store, and Jennifer McCall, age 47, both of Ft. Washington, Maryland, a chief executive officer of Metropolitan Money Store and owner of JC and JC Investments LLC; Katisha Fordham, age 35, of Washington, D.C., a loan processor at the Metropolitan Money Store; Richard Allison, age 37, of Camp Springs, Maryland, an attorney and employee of the U.S. Census Bureau; Clifford McCall, age 47, of Lanham, Maryland, president of Burroughs & Smythe Financial Services, Inc., based in Lanham and a director of the Fordham & Fordham Investment Group, Ltd., a foreclosure consulting and credit servicing business based in Lanham and Greenbelt, Maryland; Carlisha Dixon, age 31, of Hyattsville, Maryland, vice president and a director of Burroughs & Smythe Financial Services, Inc.; Chandra Jones, age 31, of Lanham, Maryland, the daughter of co-defendants Jennifer and Clifford McCall; Ronald Aaron Chapman, Jr., age 34, of Washington, D.C., a loan officer at MMS; and Wilbur Ballesteros, age 33, of Lanham, Maryland, a licensed real estate agent, and closing agent on more than 60 straw buyer properties.

NYC Controller Urges All Brooklyn Residents To "Make Out A Will ASAP!" To Avoid Risk Of Getting Fleeced By Public Administrator's Office

In Brooklyn, New York, the New York Daily News reports:
  • Brooklyn's scandal-plagued court system gets a new black eye in a scathing audit that found the borough's public administrator's office riddled with "mismanagement and laziness." The city controller's office uncovered shoddy recordkeeping, suspicious real estate deals and auctions run by a shadowy company that vanished when auditors started asking questions.

  • "From the time my auditors began this audit, there seemed to be one startling revelation after another with regard to the lack of detail paid to the process of distributing and accounting for the estates of the deceased," Controller William Thompson said.

  • Surrogate judges in each borough appoint a public administrator to oversee the estates of people who die without wills. Thompson's auditors found a "culture of mismanagement and laziness" in Brooklyn's public administrator office. Things were such a mess that Thompson urged all Brooklyn residents to "make out a will as soon as possible" - avoiding the risk of being bilked by the office.

For more, including descriptions of a couple of fishy-smelling deals involving real estate owned by deceased property owners, see Audit reveals shady shenanigans in Brooklyn courts.


For an example of what happened to one alleged victim of the Brooklyn public administrator's office, see:


It appears that the Brooklyn office of the public administrator should be getting used to allegations of the "grave robbing" ripoffs of the dead, the near-dead, and others who are otherwise incapacitated, based on an April 8, 2006 story in the New York Daily News (see B'KLYN TOMB-RAID PROBE: EX-JUDGE FOCUS IN THEFTS FROM VICS WITH NO WILLS):

  • A WIDE-RANGING SECRET PROBE of the Brooklyn public administrator's office, its booted surrogate judge and contractors hired by the office has uncovered brazen thefts from the assets of people who died without wills, the Daily News has learned.


Based on the following excerpt from a June 29, 1988 story in The New York Times, shenanigans in the office of the public administrator may have been taking place for decades. See 3 in Surrogate's Office Charged With Thefts:

  • Three investigators from the Brooklyn and Bronx Public Administrators' offices were arrested yesterday and charged with falsifying public records and stealing valuables from rooms they believed had been occupied by people who died without leaving a will. The arrests ended an elaborate two-year sting investigation into the city's Public Administrators' offices, said the city Investigations Commissioner, Kevin B. Frawley, who conducted the inquiry with State Attorney General Robert Abrams and State Comptroller Edward V. Regan. An inspector for the Queens Public Administrator's office was arrested in March. The city's Public Administrators' offices handle the estates of people who have died without leaving a properly executed will.(1)


According to a June 1, 2009 Daily News story, the Bronx public administrator's office hasn't been so hot lately, either. See Audit Court invested Bronx estate cash illegally.

Go here for other posts on the escapades of public administrators' / public guardians' offices when taking over the assets of the dead and incapacitated.

(1) For other stories involving the Brooklyn Public Administrator's office, see:

  • New York Daily News (August 18, 2002): WRINGING OUT THE DEAD IN BROOKLYN (If there's no will, court grabs big hunk of estate),
  • New York Daily News (May 29, 2002): Spitzer to probe legal fees (Eying payouts to Brooklyn Surrogate Court counselor),
  • New York Daily News (May 15, 2002): B'KLYN COURT PANEL CLOSED TO THE NEWS (The oversight commission for state Surrogate Court administrators marked its first meeting in five years yesterday by barring a Daily News reporter from the session),
  • New York Daily News (May 9, 2006): L.I. LAND SALE SCANDAL. COURT OKD AUCTION OF DEEDED SITE (Officials in Brooklyn Surrogate's Court improperly sold off a piece of East End real estate - never notifying the property's rightful owners, the Daily News has learned),
  • New York Daily News (December 16, 2008): AG seeking payback on estate fees (Attorney General Andrew Cuomo is seeking to reopen 170 estates of deceased people in order to reimburse heirs who were gouged by a greedy Brooklyn lawyer, the Daily News has learned. Legal papers were filed yesterday in Surrogate's Court to recover exorbitant legal fees charged by Louis Rosenthal, former counsel to the Brooklyn public administrator),
  • New York Times (February 3, 1988): Wider Inquiry Into Stealing From the Dead (New York State and city investigators, expanding their inquiry into thefts of property from the dead, seized accounting records yesterday from Public Administrators' offices in Brooklyn, Queens and the Bronx),
  • New York Law Journal (July 1, 2005): Judge Loses Seat After Showing 'Shocking Disregard' for Law (New York state's high court finds actions constituted removable misconduct). daily eagle retired judge

NYC Controller: Bronx Public Admisistrator's Office Plays Fast & Loose With Dead People's Property

In The Bronx, New York, the New York Daily News reports:
  • Bronx court officials broke the law by investing $21 million in risky securities with money from the estates of dead people, a new audit charges. City Controller William Thompson charged the public administrator's office in Bronx Surrogate's Court violated state law three years ago, when it placed 30% ofthe cash it was holding for heirs with a brokerage firm to buy exotic securities said to be "safe as cash."

  • The investments turned sour and were worth nothing for much of last year. That temporarily put taxpayers on the hook for paying the heirs their due. The risky investment was outlined in a July Daily News report. Thompson's audit confirmed The News' findings and said the investment decision reflected overall sloppy management that plagued the office.

  • Public administrators in each borough manage millions of dollars from estates of people who die without wills. Thompson found "a severe lack of management" in the Bronx. [...] Meanwhile, politically connected lawyers like Michael Lippman, then the administrator's general counsel, earned $2.1 million in fees on the auction-rate securities deals made through a broker.

For more, see Audit: Court invested Bronx estate cash illegally.

Based on the following excerpt from a June 29, 1988 story in The New York Times, shenanigans in the office of the public administrator could potentially have been taking place for decades. See 3 in Surrogate's Office Charged With Thefts:

  • Three investigators from the Brooklyn and Bronx Public Administrators' offices were arrested yesterday and charged with falsifying public records and stealing valuables from rooms they believed had been occupied by people who died without leaving a will. The arrests ended an elaborate two-year sting investigation into the city's Public Administrators' offices, said the city Investigations Commissioner, Kevin B. Frawley, who conducted the inquiry with State Attorney General Robert Abrams and State Comptroller Edward V. Regan. An inspector for the Queens Public Administrator's office was arrested in March. The city's Public Administrators' offices handle the estates of people who have died without leaving a properly executed will.

Go here for other posts on the escapades of public administrators' / public guardians' offices when taking over the assets of the dead and incapacitated. daily eagle retired judge

The BC Public Guardian's Office: A Ruthless Organization Abusing The Rights Of The Very People It Claims To Protect?

In Vancouver, British Columbia, CBC News reports:
  • When Winifred Hall entered her friend Sheila Scholnick's home in Vancouver's west side after she was locked out, the place looked as though there had been a burglary. "The house had been ransacked," the elderly B.C. woman told CBC News, her voice shaking.


  • The culprits: British Columbia's Public Guardian and Trustee, a provincial agency set up to protect the financial and legal affairs of those declared mentally incapable of handling it themselves. While the public guardian is supposed to protect society's most vulnerable citizens, Hall and several others are describing it as a ruthless organization abusing the rights of the very people it claims to protect.

  • It was late 2007 when Hall came home to padlocks on the door of the Blenheim Street house where she had lived with the owner and her late friend, Sheila Scholnick, for the past two years. The public guardian allowed her briefly back into the building to retrieve her belongings, but that was all.


  • For about six months before being turfed from the home, Hall had Scholnick's enduring power of attorney after Scholnick was admitted to a nursing home following a fall in May 2007. With that enduring power of attorney, she had the ability to act in her friend's name even when Scholnick lost decision-making capacity, but that right was nullified by the public guardian when it assumed control of the elderly woman's finances. In fact, it was Hall who called the public guardian, concerned that Scholnick was being swindled by a man who had begun visiting Scholnick at the nursing home. She alleges the man manipulated Scholnick into withdrawing money from her debit account to give to him.


  • Hall hoped the agency would freeze Scholnick's account to keep it from happening again. But instead, the Public Guardian took control of Scholnick's affairs, emptying all but $50 out of her accounts and informing Hall that her power of attorney had been revoked.

For the entire story, see B.C. public guardian accused of abusing rights (Last months of elderly woman's life made miserable by agency: friends).

Go here for other posts on the escapades of public administrators' / public guardians' offices when taking over the assets of the dead, the near dead, and those incapacitated to the point where they can't care for themselves. daily eagle retired judge

Judge Refuses To Reduce 14-Year Sentence For Disbarred Attorney Guilty Of Looting $1.7M+ In Clients' Escrow Funds; Laments Inability To Increase Term

In Central Florida, the St. Petersburg Times reports:
  • Disbarred Clearwater lawyer Richard Da Fonte, who asked a judge to reconsider his 14-year sentence for stealing more than $1.7 million from clients, has been denied his request for shortened prison time. "I think the defense is very lucky that the law is that I cannot increase the sentence,'' Pinellas-Pasco Circuit Judge Joseph A. Bulone said Friday.

For more, see Prison term of disbarred lawyer Richard Da Fonte sticks.

Go here for other posts on disbarred lawyer Richard Da Fonte.

(1) If a Florida attorney is representing you and screws you out of money or property through dishonest conduct and you seek some financial reimbursement for the screwing over, go to The Florida Bar's Clients' Security Fund for more information. For other states and Canada, see:

Court Rules Against Bank In Attempt To Make Closing Attorney Pay For Fraud Committed By Woman Borrowing $180K Secured By Home Belonging To Another

In Wellington, New Zealand, The National Business Review reports:
  • Westpac Bank has failed to persuade the Supreme Court to reverse a decision in lower courts that a solicitor should be liable for a mortgage fraud which cost it $180,000. The Supreme Court today dismissed an appeal by Westpac and ordered it to pay solicitor Alan John Clark $15,000 costs, plus "reasonable disbursements."

  • Associate Judge Anthony Christiansen, in the High Court, rejected a Westpac bid for summary judgment against Mr Clark, and said he considered Westpac's loss may have been a result of "slack lending practices". His decision was upheld by the Appeal Court, and Westpac took its case to the Supreme Court, where it also lost.

  • The bank was caught out by a "clever imposter" who impersonated Marie Antoinette Fenech, and used a false passport to obtain a $180,400 mortgage on her Remuera house. The same conwoman apparently used similar tactics at three other banks and three other lawyers.

For more, see Westpac fails in bid to recover cash from fraud. DeedContraTheft

Friday, July 10, 2009

Arizona AG Files Suit In Alleged Straw Buyer Scheme Coupled With "No Qualifying" Rent To Own Program Leaving Investors, Tenants, Banks Holding The Bag

From the Office of the Arizona Attorney General:
  • Attorney General Terry Goddard has filed a consumer fraud lawsuit against numerous Tucson real estate professionals and businesses(1) alleging a sophisticated, multi-million-dollar real estate fraud scheme. The lawsuit, filed in Pima County Superior Court, alleges that the defendants engaged in a sophisticated system of fraud that led to the filing of foreclosure notices on more than 130 homes and caused substantial harm to investors, lenders and rent-to-own homebuyers.


  • The complaint states that the defendants participated in a scheme that used deceptive tactics to entice under-qualified, novice investors into purchasing homes and then sold them to rent-to-own buyers. However, investigators say the scheme was designed to fail because it targeted rent-to-own homebuyers with credit problems and ignored whether they could qualify to purchase the homes.(2)

Among the Arizona AG's allegations are that the operators:

  • deceived more than 130 investors with assurances of a legitimate and "worry free" investment system requiring little or no capital investment and virtually no involvement in the transaction or in the subsequent management of the investment,

  • defrauded and deceived lenders in order to fraudulently obtain the financing for the millions of dollars of "investment" properties purchased by the consumer-investors,

  • offered the investment homes purchased by investors as legitimate rent-to-own opportunities with the offer of "no qualifying" and the promise of easy home ownership; and that the rent-to-own scheme deceptively targeted unqualified or under-qualified consumers and relied on a high turnover to obtain new "down-payments" as profit. Out of hundreds of rent-to-own transactions, apparently only one consumer out of 270 or more was able to buy a home in the fraudulent rent-to-own system. The rent-to-own purchasers were clipped for upfont money of $1,500 to $10,000 on rent-to-own homes they could not ultimately qualify for. Despite promises of "no qualifying," consumers still needed financing but could not repair their credit or qualify for financing to buy the home.(3)

For more, see Goddard Files Suit Against Massive Real Estate Fraud Scheme.

For the Arizona AG lawsuit, see State of Arizona v. AZI Rent2Own LLC., et al.

(1) The defendants named in the lawsuit are:

  • Andrew Silverstein, former Re/Max All Executives real estate agent,
  • Anthony Zandonatti, owner of AZI Rent2Own and owner of,
  • AZI Rent2Own, LLC (d.b.a. Arizona Investments),
  • VinLan Ventures, LLC (d.b.a. Re/Max All Executives),
  • Vince Volpe, designated broker of Re/Max All Executives,
  • Tucson Mortgage, LLC (d.b.a.Tucson Mortgage),
  • William "Bill" Anastapolous, owner of Tucson Mortgage,
  • WGA Enterprises, LLC,
  • Thomas Piazza, Tucson Mortgage loan officer,
  • Amaury Leon, Infinity Funding loan officer,
  • Darren Breen, Red House Lending loan officer,
  • Dave Klein, former Tucson Mortgage loan originator.

(2) Regulators in Arkansas and Missouri recently invoked state securities laws to shut down a similar operation. See:

(3) If any of the allegations are even close to being true, the operators are going to have a tough time vigorously defending themselves in this civil lawsuit without opening themselves up to the exposure of possible criminal charges from the Arizona Feds. Invoking their "right to remain silent" and having their attorneys attempt to quickly reach a settlement acceptable to the Arizona AG may be the preferred route for them to take if they hope to have any chance of keeping the local Feds from showing up at their front door. A case like this illustrates the kind of leverage a state attorney general has when bringing a civil lawsuit of this type, knowing that the allegations can very easily be "copied & pasted" into a Federal indictment (ie. mail fraud, wire fraud, conspiracy, etc.) if the local Feds so choose. rent to own lease purchase option scams yellowstone

Tenants In Foreclosed Boarding House To Fight Off Eviction; Say New Law Prohibits Landlord From Giving Them The Boot

In Hyannis, Massachusetts, the Cape Cod Times reports:
  • A group of tenants who received eviction notices last week at a local lodging house may be among the state's first to find protection under a federal foreclosure law signed this spring by President Barack Obama. As many as a dozen tenants in six rental units at Park Square Village, a 36-unit boardinghouse on Main Street in Hyannis, received eviction notices Friday threatening legal action if they did not vacate their units within seven days.

  • The notices, issued by new property owner Bass River Properties of West Dennis, offer no reason behind the evictions. But with a stated July 11 deadline, they may be in violation of the new foreclosure law, which requires property owners who come into land through foreclosure to honor all existing leases and to provide a 90-day window for any month-to-month tenants,(1) experts say.

For more, see Cape evictions test new federal law.

(1) See Section 702(a)(2) of the Protecting Tenants at Foreclosure Act of 2009. RentSigmaSkimming

Detroit Feds Indict Five In Alleged Straw Buyer Scam Involving Fraudulent Short Sales Of Luxury Condos

In Detroit, Michigan, Crain's Detroit Business reports:
  • Terrence Berg, the U.S. attorney for the Eastern District of Michigan, announced the unsealing Wednesday afternoon of a felony complaint involving the fraudulent short sale of luxury condominiums at the Harbortown development on the Detroit River.

  • The complaint alleges that Edward Tate, Craig Covert, Richard Allen, Richard Watts and Louis Lynch conspired to commit wire fraud involving unqualified straw buyers and false loan applications. It is alleged that Tate, 27, masterminded the scheme, which involved an unnamed real estate developer who defaulted on a loan from the Bank of America.

  • As part of the work-out plan with the bank, the developer was allowed to sell the condos at a drastically reduced price in what is termed a short sale. The complaint alleges that Allen, Watts and Lynch were the straw buyers, who were in prison for such crimes as murder and attempted rape at the time the loan applications claimed they were suitably employed. It is alleged that Covert was paid to recruit straw buyers. All five were arrested Wednesday. In addition to arrests, a search warrant was executed at Pure Title Agency L.L.C. in Farmington Hills.

Source: U.S. attorney charges suspects with mortgage fraud at Harbortown project.

For the U.S. Attorney press release, see Seven Charged In Two Separate Mortgage Fraud Schemes.

Builder Cops Plea In Real Estate Investment Scam Allegedly Using Fraudulently Obtained Loans To Unload New Homes On Unwitting Out-Of-Town Investors

In Central Florida, the Ocala Star Banner reports:
  • An Ocala home builder pleaded guilty to one count of organized scheme to defraud Monday for his role in a real estate scam in which dozens of members of Miami's Cuban community were duped into signing falsified loan documents toward purchasing new homes in Marion Oaks. As part of his plea, Jerry Hart of Big Sun Valley Homes Inc. will likely receive five years of probation and testify against Ocala developer Edward Albart, the last remaining among six defendants(1) whose case is still open - and the man whom statewide prosecutors believe to be at the center of the scheme.


  • Between April 2000 and July 2001, approximately 24 individuals were talked into buying the Ocala homes with the promise that they wouldn't have to pay any closing costs. They were told that the homes, which had not yet been built by Hart's company, would first be rented out for several months, then transferred to their ownership, after which they could rent out the property as they pleased. Several of the victims, who testified through a Spanish-speaking translator during a hearing Monday, said they thought they were making a business investment, even though they did not live in Ocala.

For more, see Ocala home builder pleads guilty to scam (Felony charges dropped in exchange for testimony against accused mastermind).

(1) Reportedly, real estate agent Maria Victoria Marrero, whose ties to Miami's Cuban community enabled her to convince scores of non-English speaking inhabitants to sign falsified contracts, entered a plea deal with prosecutors. Gregory F. Pillon and Darryl Pillon, who worked at Friendship Title Company, reportedly also entered into plea deals. Charges against a sixth defendant, Margarita A. Aranegui-Lindsey, were eventually dropped.

Loan Servicer Coughs Up $674K+ In Refunds After Allegedly Beating Baltimore Borrowers Out Of Improperly Imposed Prepayment Penalties

In Baltimore, Maryland, the Baltimore Business Journal reports:
  • Ocwen Loan Servicing, one of the U.S.’s largest servicers of residential mortgage loans, has voluntarily refunded $674,137 to more than 180 Maryland borrowers after a state examination found violations of Maryland law restricting the imposition of prepayment penalties.

For more, see Ocwen Loan Servicing refunds $674K to Md. mortgage borrowers.

Lender's Refusal To Waive $9K Prepayment Penalty May Force SW Florida Couple Into Foreclosure

In Charlotte County, Florida, WINK News reports:
  • A family is facing foreclosure, even though they're trying to pay off their mortgage. [...] A couple that has cut every expense to make their bills and keep their home may [lose] it even though they're paying on time. Rick and Janice Brooks say they made a bargain to sell to avoid foreclosing on their home. [...] They thought they found their way out -- a buyer who could satisfy all of their mortgage debt. "$221,892 is what everyone will get once this is all over," Brooks says.

  • But, that doesn't account for an additional $9,000 they now owe the bank -- a penalty for paying their mortgage before it's due. Something neither of them realized they were contractually obligated to do. "It's not like we're asking them to forgive any part of our loan," Janice Brooks says. "We're asking them to waive an unjust fee that was given at a more economically sound time. It's not stable now." They've already borrowed money from family. Now, everything in their Charlotte County home is for sale since it looks like their lender won't budge on the fees.


  • Rick and Janice have just one week to try to get their lender to waive the penalty fee. If not, they say they'll have to cancel the contract on their home, which could result in a lawsuit.

For the story, see Penalized for paying mortgage on time?

Foreclosure Rescue, Loan Modification Scams Gain Increased Attention From FBI

The Washington Post reports:
  • Nationwide, the number of mortgage fraud suspicious-activity reports referred to law enforcement increased 36 percent over 2007, [according to the just released FBI's 2008 Mortgage Fraud Report]. And the government's economic stimulus programs could fuel further increases, according to the FBI [...].

The FBI report points out that fraud involving foreclosure rescue and loan-modification schemes are "emerging as recent vulnerabilities."

  • Perpetrators solicit homeowners with mail flyers offering to help them stop the foreclosure process on their homes. Homeowners are falsely told that their mortgages would be renegotiated, their monthly payments would be reduced, and delinquent loan amounts would be renegotiated. ... Perpetrators require an up-front fee ranging from $1,500 to $5,000 from homeowners. ... Perpetrators often request that the victim homeowners stop payments and communication with their lender. When victims receive delinquency and foreclosure notices, the perpetrators convince them that the loan was renegotiated, but that the lender needs a good faith payment to secure the new account.

Source: Mortgage Fraud Rising.

Go here for the FBI's 2008 Mortgage Fraud Report.

Thursday, July 09, 2009

NYC Announces Program To Turn Unsold, Unfinished Condo Complexes Into Affordable Rental Housing

In New York City, The Wall Street Journal reports:
  • New York City announced Wednesday a pilot program to turn empty or stalled condominium developments into affordable housing, an idea consumer advocates have been pushing for years. The program, which aims to convert as many as 400 units, is designed to provide grants to real-estate developers and lenders to subsidize the completion of developments if the owners agree to turn the building into rental units for middle-income families, which in New York means an income of up to $126,720 for a family of four.(1)


  • Other cities will be watching New York's effort closely as they deal with rising numbers of developments that are heading into foreclosure. Housing advocates say that several cities are considering similar programs using funds from a federal grant program designed to restore abandoned homes and complexes.

For more, see New York City Seeks to Turn Condos Into Affordable Housing.

(1) The program is designed to speed along the completion of developments such as 23 Caton Place, a 107-unit luxury condo complex in Brooklyn that stands unfinished after the developer filed for bankruptcy and the lender moved to foreclose on the project.

Manhattan DA Bags 25 Suspects In $100M+ "Cash Back" Metro NYC Mortgage Scam; 13 Charged w/ Multiple Felonies, Dozen Others Waive Indictment, Cop Pleas

From the Office of the Manhattan District Attorney:
  • Manhattan District Attorney Robert M. Morgenthau announced [Wednesday] the indictment of 13 individuals and a mortgage origination company(1) for perpetrating over $100 million in mortgage fraud over a four-year period in the New York City metropolitan area. In addition, 12 individuals have already waived indictment and pleaded guilty to felonies relating to their participation in the mortgage fraud scheme.(2)

  • The indictment charges 13 individuals and the mortgage company, AFG FINANCIAL GROUP, INC., with enterprise corruption, grand larceny, scheme to defraud and conspiracy involving 19 fraudulent mortgage transactions. The defendants include the principals and a number of employees of the mortgage company, as well as bank employees, appraisers, and three attorneys. Two other attorneys are among the defendants who already pleaded guilty.


  • The 10-month investigation leading to today’s indictment revealed that AFG Financial Group (AFG), along with a network of co-conspirators and accomplices, located distressed residential real estate properties in New York City and surrounding counties. They then engaged in a fraudulent scheme to steal millions of dollars from lending banks in Manhattan and elsewhere using sham sales of those properties. The conspirators caused the banks to front millions of dollars to finance purchases of the properties. They then walked away with most of the cash, leaving behind over-valued properties and worthless mortgage papers.


  • At the sham real estate closings, AFG brought in lawyers to play the roles of legal counsel for buyers, sellers and banks. Instead of looking after their clients’ interests, these lawyers made sure that the closings went smoothly, that no one asked any questions, and that the principals of AFG received the lion’s share of the funds obtained from the defrauded banks. Defendants MARC ZIROGIANNIS and FRED LAX generally represented the banks. In so doing, they betrayed their clients and caused their client’s funds to be stolen. ZIROGIANNIS and LAX also ran title companies that were employed as part of the scheme.

Go here for the entire Manhattan DA press release.

For the indictment, see People v. AFG Financial Group, Inc., et al.

(1) Indicted Defendants:

  • AFG FINANCIAL GROUP, INC., AARON HAND, Oyster Bay Cove, New York, EUGENE CULBREATH, Valley Stream, New York, ERIC SHIELDS, Media, Pennsylvania, MATTHEW MCDERMOTT, Merrick, New York, MARC ZIROGIANNIS, Levittown, New York, KENNETH LAW, Pelham, New York, KATHLEEN SCANLON, Baldwin, New York, JEFFREY PHELAN, Smithtown, New York, JERRY STRKLJA, Astoria, New York, MARILYN MATEO, Bronx, New York, DARLITA BOSTIC, ALLYSON HINDS, Middle Island, New York, RAJMOHAN AUTAR, Queens Village, New York.

(2) Convicted Defendants:


Maine Regulators Issue Cease & Desist Orders To Fifteen Out-Of-State Loan Modification Firms Accused Of Pocketing Upfront Fees, Failing To Deliver

From the Maine Bureau of Consumer Credit Protection:
  • State regulators [Tuesday] issued orders directing 15 separate foreclosure rescue companies to cease doing business with Maine consumers.(1) The companies, all located out of state, enticed consumers with radio, television and internet advertisements promising to help the consumers avoid foreclosure but then took the consumers’ advance fees and did nothing to assist the consumers.

  • Many debt management companies comply with the law and become licensed and bonded for the protection of consumers,” said Will Lund, Superintendent of Consumer Credit Protection. “These 15 companies, on the other hand, made false promises and then took money from desperate folks who could least afford to lose those funds.” The companies took a collective $36,000 in advance fees from 30 Maine households, but have not saved a single home in the State from foreclosure nor reduced a single debt for a Mainer, said Lund. Further, he said, the companies have ignored all communications from state regulators. “It’s heartbreaking to talk to consumers who have sent their last $495, $995 or $1,495 to a company that does nothing to help them,” said David Stolt, Chief Field Investigator for the Bureau.

For the entire press release, see State Regulators Order Foreclosure Rescue Companies to Cease Doing Business in Maine.

(1) The list of firms nailed by Maine regulators, which contains some of the "usual suspects," follows (with links to the corresponding cease & desist orders):

Schwarzenegger Squeezed By Lenders, Servicers To Demand Rule Prohibiting California Attorneys From Accepting Retainers For Loan Mod Negotiations???

A press release issued by three California consumer advocates(1) announces:
  • The lending industry and loan servicing lobbyists have successfully pressured Governor Schwarzenegger to demand that language be included in SB 94 that would prohibit attorneys from accepting retainers for loan modification negotiations with their loan servicers.(2) The language, if adopted, will prevent homeowners from seeking legal representation to save their home from foreclosure.

For the rest of the press release, see Lending Industry Attacks California Homeowner's Rights to Legal Representation (California Governor Arnold Schwarzenegger told the legislature over the weekend that he would not sign AB 94, a law that would protect homeowners from mortgage modification companies, unless they included a clause that would prohibit attorneys from accepting retainers for performing legal services to prevent foreclosures).

(1) Martin Andelman, of mandelmanmatters on; Alan Jablonski, a Long Beach, CA based consumer rights attorney, J. Arthur Roberts, a bankruptcy attorney located in Newport Beach, CA.

(2) Reportedly, the language proposed is as follows, according to Martin Andelman:

  • "5) Prohibits persons including attorneys, until January 1, 2013, who negotiates, attempts to negotiate, arranges, attempts to arrange, or otherwise offers to perform a mortgage loan modification or other compensation paid by the borrower to do any of the following:
    a) Claim, demand, charge, collect, or receive any compensation until after the licensee has fully performed each and every service the licensee contracted to perform or represented that he/she would perform."

Cleveland Housing Judge Continues Hammering Wells Fargo In Its Attempts To Dump Dilapidated Foreclosed Home Inventory

In Cleveland, Ohio, a recent op-ed column in the The Plain Dealer states:
  • Cleveland Housing Court Judge Ray Pianka continues to impress with his proactive approach to fighting the foreclosure crisis. His decision last week to compel Wells Fargo Bank to post $1 million bond if it wants to rehab and sell distressed properties it owns in the city shows the kind of creative tactic required to protect the interests of Cleveland and its residents. Along with posting the bond -- which would cover the cost of demolition should Wells Fargo fail to meet its obligations -- the bank must list all of the properties it owns in the city, and board up and secure any homes that are vacant.

  • Pianka's order supersedes an earlier one requiring that the San Francisco-based bank rehab or demolish all substandard holdings and prove that properties listed for less than $40,000 are up to code. Wells Fargo appealed that decision.

For the column, see Requiring Wells Fargo to post bond on distressed properties makes sense for Cleveland.

In a related story, see The Washington Independent: Banks and the Blight They Leave Behind: It’s Not Just Cleveland Anymore. BetaVacantForeclosure

More On Lien Stripping Of Wholly Unsecured 2nd Mortgages Encumbering Underwater Homes In Chapter 13 Bankruptcy Proceedings

White Plains, New York bankruptcy attorney Jeffrey M. Binder writes the following in the Poughkeepsie Journal on lien stripping of "wholly unsecured" second mortgages on underwater homes(1) in Chapter 13 proceedings in Federal bankruptcy court:
  • During the lien stripping process you are required to file a Chapter 13 Bankruptcy and it can only be filed if your property value is less than the balance owed on your first mortgage which has to be less than one million dollars. You must arrange and pay for an appraisal of your property.

  • For example, if your home is worth $500,000 and your first mortgage payoff balance is $525,000, you have no equity. If you have a second mortgage loan balance of $50,000, this second loan is a wholly unsecured mortgage and you can strip the lien in a Chapter 13 case. The lien now becomes an unsecured debt just like a credit card debt which can be wiped out after a period of time. If, however, the home is worth $530,000, you cannot strip off the second lien because it is merely undersecured, not wholly unsecured.

  • Chapter 13 lien stripping is ideal for the large pool of borrowers who took out 80/20 loans or HELOCs where the 2nd lien is completely underwater. If such a lien is stripped, it can be treated as an unsecured debt in the Chapter 13 payment plan and paid a fraction over 5 years. (The actual percentage paid depends on several factors, including the value of the homeowner's assets and disposable income.) Homeowners don't have to fall behind on payments to be eligible for lien stripping.

For more, see Learn the Secrets of Lien Stripping ... and Save Your House!

See also: Cramdowns & Lien Stripping Of Home Mortgages Under Existing Bankruptcy Law.

(1) Underwater home = property that is worth less than the amount owed on the existing mortgage(s) encumbering the real estate; also referred to as property with "negative equity."

Southern California Loan Modification Scam Used Complicated Money Trail With $1M+ Flowing Into Mexico, Says State AG

In Southern California, the Los Angeles Times reports on an alleged loan modification scam which, according to authorities, is among the most sophisticated operating in California, that stymied investigators with a thicket of bank accounts, 1-800 numbers and wire transfers to Mexico until they finally busted the operation in October.
  • The California attorney general's office had been fielding complaints for months from homeowners who had fallen victim to what one prosecutor termed a "brilliant scheme." Representatives of this operation allegedly induced homeowners to send them as many as three consecutive mortgage payments. More than $1 million flowed through a series of bank accounts, much of it eventually crossing the border to banks in Mexico, according to the attorney general's office.

  • In some cases, people lost their homes because they did nothing to head off foreclosure, believing they had made a deal with their bank. Despite there being hundreds of victims, investigators found the trail confusing. The operation did not register its phone lines in its own name. Instead, investigators said, its 800-numbers ran through Internet phone companies. It was the same with the bank accounts.

  • [Investigators] began working backward from the accounts where checks were deposited and postal boxes where victims sent their money. They determined that much of the money seemed to go to Juan Jose Perez and Isuara Hernandez, a married couple with three children who had recently lived in San Bernardino County. On Oct. 27, the attorney general's office filed a 39-count complaint charging Hernandez, Perez and several associates with grand theft, money-laundering and conspiracy.(1) Five of Hernandez and Perez's associates pleaded guilty;(2) but Hernandez and Perez, who authorities say are the ringleaders, have eluded capture. Investigators suspect they went to Mexico.

For the story, see In California, mortgage scammers find easy pickings (As foreclosures climb, so does fraud by schemers preying on desperate homeowners hoping to modify their loans. State investigators have 750 open cases -- up from just 10 a year ago).

(1) See California AG press release: Attorney General Brown Breaks Up Foreclosure Scam Ring.

(2) See California AG press release: Attorney General Brown Sends Perpetrators of Loan Modification Fraud to Prison.

Freddie Video To Help Struggling Borrowers Gather Necessary Documents When Seeking Loan Modifications From Mortgage Servicers

The Washington Business Journal reports:
  • With so many homes headed to foreclosure Freddie Mac has posted a new video on YouTube to show late-paying borrowers how to speed their efforts to get their mortgage loans modified. The video, which runs two minutes, shows borrowers which documents they need to make more effective calls to loan servicers.

  • McLean-based Freddie Mac says having the right documents at hand can cut the time needed to determine their eligibility and process their application for a loan modification under President Barack Obama's Making Home Affordable program or Freddie Mac's other workout initiatives. Available in English and Spanish versions, the new Freddie Mac video — "Stop Foreclosure: Documents Your Lender Needs to Help You" — can be seen at Freddie Mac's channel on YouTube.

Source: Freddie Mac turns to YouTube to help delinquent borrowers.

Go here for the English and Spanish versions of the new Freddie Mac video, "Stop Foreclosure: Documents Your Lender Needs to Help You."

Wednesday, July 08, 2009

10-Week Program Seeks To Steer Pennsylvanians In Financial Difficulties In The Right Direction For Assistance

In Philadelphia, Pennsylvania, the Philadelphia Inquirer reports on the Get Help Now, Pennsylvania program, a program announced last month that offers consumers in foreclosure, bankruptcy and other difficulties face-to-face sessions with lawyers, bankers and other professionals at Drexel University and 19 other locations around Pennsylvania from 1 to 6 p.m. Tuesdays and Thursdays during the next two months. Volunteers will meet with those seeking help and provide information on the right place to turn. For information, call 1-888-799-4557. Go here for the locations througout the state.

For more, see Hit hard times? New state effort may help.

Ex-Ohio AG Resurfaces In Cleveland Lending A Hand In Attempt To Retake Home Lost In Foreclosure; Says Void Judgment Means "No Sale"

In Cleveland, Ohio, The Wall Street Journal Law blog reports:
  • When we last brought you word of Marc Dann, he was resigning as Ohio’s attorney general amid a sexual harrassment scandal. Where is he now? Turns out the former “Mortgage Cop,” as he was dubbed in this 2007 WSJ profile [requires subscription; those without a subscription, go here, then click the link for the full story], is back on the beat. What’s more, he hooked up with Cleveland activist Richard Davet, the pro se litigant whose 11-year foreclosure battle is the subject of this WSJ Page One story [those without a subscription, go here, then click link for the story]. (For prior LB posts on Davet click here and here.) Dann is trying to help Davet take back ownership of his six-bedroom home in the Cleveland suburb of Beachwood, from which he was evicted more than two years ago.


  • As a pro se litigant, Davet held off foreclosure for 11 years but eventually lost. On July 2, Dann helped Davet file this complaint against the owners of Davet’s former home, saying they entered the home “in reliance on a void ab initio judgment of foreclosure.” Translation: the Ohio state court that ruled in favor of foreclosure had no standing to hear the case.

  • The defendant in Davet’s suit, Paul Mikhli, a dentist who bought Davet’s home, once told the Law Blog he was “a little nervous” about the nonstop litigation over the house. Should Mr. Davet succeed, Mikhli told us, title insurance should cover his expenses.


  • Dann, who now operates a solo firm in Cleveland, mostly does legal work for unions but also has four pro bono foreclosure-defense cases. He wouldn’t say whether Davet’s case is one of those four, but he did say the case is Property Law 101: “When a court doesn’t have jurisdiction, there can be no judgment.”(1)

For the full story, see Former Ohio AG Marc Dann Reprising Mortgage Cop Role.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) For some recent case law addressing the connection between a party in a court action not having the legal standing to bring a lawsuit and a court not having jurisdiction to entertain the lawsuit, see Subject Matter Jurisdiction, Lack Of Standing & Void Judgments. EpsilonMissingDocsMtg

Federal Judge Orders Return Of $29M+ In Real Estate Investment Scam Thet Left Investors In Financial Ruin

In Southern California, The Press Enterprise reports:
  • Three Murrieta businessmen must return more than $29 million they obtained in an investment scheme that allowed them to live high but drove their investors to financial ruin, a federal judge ruled Monday. Central District Court Judge Virginia A. Phillips issued a 43-page ruling that accepted the findings of the Securities and Exchange Commission, which filed a lawsuit in February 2008.(1)

  • The ruling in the civil case found that, between 2004 and 2007 the defendants, James B. Duncan, Hendrix Montecastro and Maurice McLeod engaged in illegal practices ranging from selling unregistered securities to misrepresenting how the money they raised would be used.


  • Many of the investors who were promised they would become millionaires in three years, instead lost their houses in foreclosure, the SEC said. Montecastro said, during a deposition, "I sold them a dream. ... They bought into the dream," according to the complaint.

For more, see Riverside judge orders businessmen to repay $29 million to scam victims.

(1) In addition to the SEC civil lawsuit, the defendants have been sued by a group of the investors and are under criminal investigation by the Riverside District Attorney and possibly by state and federal law enforcement agencies.

Kansas AG Files Five Lawuits Against Outfits Allegedly Running Loan Modification & "Foreclosure Redemption Rights" Scams

From the Office of the Kansas Attorney General:
  • Attorney General Steve Six is taking legal action to stop those who are preying on Kansans facing foreclosure or other financial difficulties. [Tuesday] Six launched Operation Homestead by filing five lawsuits, extending help to Countrywide customers, and increasing educational resources available to consumers.

  • The lawsuits are aimed at businesses the attorney general alleges are defrauding Kansans by running redemption rights(1) and loan modification(2) scams. In several of the cases, the consumers lost their homes and ended up much worse financially than they were before. Six said the lawsuits send a strong message that his office will not tolerate mortgage fraud in Kansas.

For the entire press release, see Operation Homestead: AG Six goes after mortgage fraud and scams targeting Kansans (Six sues five companies, extends assistance to Countrywide customers, increases education on foreclosure).

(1) According to the press release, two of the defendants operate "Redemption Rights Scam," Six said. After a homeowner loses a home to foreclosure, the companies approach the homeowner and buy their rights to redeem the home, lease the house back to the homeowner, and then when the homeowner can't afford to buy the house back, they sell the house for a profit of more than $20,000. The companies Apple Asset, LLC, in Overland Park, and Rush Properties, LLC, in Olathe.

(2) According to the press release, three defendants allegedly operate loan modification scams, Six said. The companies offer to negotiate modifications to the homeowner's mortgage for a sizable fee. However, the extent of the service that the company provides is to mail in documents on behalf of the consumer. The companies are Kirkland Young in Florida, ABS Saveco in Georgia, and Helping Hands Support Services in California.

New State Law Allows Minnesota Homeowners In Foreclosure To Pay Off Back Payments Over Five Month Period In Exchange For Reduced Redemption Period

In St. Paul, Minnesota, Minnesota Public Radio reports:
  • Struggling homeowners now have another chance to save their homes from foreclosure. A new Minnesota law makes it possible to delay the sheriff's sale - giving people behind on their mortgage payments more time to pay back what they owe. Until now, homeowners in foreclosure had one option - pay off the entire mortgage within six months or say goodbye.

  • The new law gives homeowners another one: to postpone the sheriff's sale by five months. The new law says homeowners who pay back what they owe during the five months can reinstate their mortgage and cancel a sheriff's sale. [...] There is one tradeoff for delaying the sale: people who don't catch up in time get just five weeks [reduced from six months] at the end of the process to redeem their house.

For the story, see New law gives homeowners more time to escape foreclosure.

License Now Required For Loan Modification & Foreclosure Consultants Working With Nevada Homeowners; New Law Closes Loophole

In Las Vegas, Nevada, the Las Vegas Review Journal reports:
  • The Nevada Legislature this year showed it wants to regulate the loan-modification business when it passed Assembly Bill 152. The bill [...] requires both mortgage modification and foreclosure consultants to obtain state licenses.

  • An earlier law required foreclosure consultants to obtain licenses, but some operators argued that they did not need a license until the client's home went into foreclosure, said Bill Uffelman, chief executive officer of the Nevada Bankers Association. The new law appears to close that loophole by requiring consultants for loan modifications and foreclosures to obtain licenses from the Mortgage Lending Division.

For the story, see Scams prompt call for licensure in mortgage-modification business.

Tuesday, July 07, 2009

California AG Accuses Loan Modification Firm, Attorney Of Filing Phony Lawsuits To String Homeowners Along, Collect Upfront & Monthly Fees

From the Office of the California Attorney General:
  • Attorney General Edmund G. Brown Jr. [Monday] sued a foreclosure consultant and an attorney -- Paul Noe Jr. and Mitchell Roth - who conned 2,000 desperate homeowners into paying exorbitant fees for "phony lawsuits" to forestall foreclosure proceedings.(1) These lawsuits were filed and abandoned, even though homeowners were charged $1,800 in upfront fees, at least $1,200 per month and contingency fees of up to 80 percent of their home's value.

  • "Noe and Roth ripped off homeowners desperate for help by charging unconscionable fees for phony lawsuits," Brown said. "Instead of aggressively pursuing the lawsuits, Noe and Roth strung them along so they could continue to rake in fees."(2)


  • After filing the lawsuits, Roth did virtually nothing to advance the cases. He often failed to make required court filings, respond to legal motions, comply with court deadlines, or appear at court hearings. Instead, Roth's firm simply tried to extend the lawsuits as long as possible in order to collect additional monthly fees.

  • Under the terms of the agreement, United First charged homeowners approximately $1,800 in upfront fees, plus at least $1,200 per month. If the case was settled, homeowners were required to pay 50 percent of the cash value of the settlement. For example, if United First won a $100,000 reduction of the mortgage debt, the homeowner would have to pay United First a fee of $50,000. If United First completely eliminated the homeowner's debt, the homeowner would be required to pay the company 80 percent of the value of the home.

For the entire California AG press release, see Brown Sues Foreclosure Consultant and Attorney Who Conned Homeowners into Paying Thousands for Phony Lawsuits.

For the California AG's lawsuit, see People v. United First, Inc., et al.

Go here for other posts related to this operation.

(1) Brown's lawsuit contends that Noe, Roth and United First:

  • Violated California's credit counseling and foreclosure consultant laws, Civil Code sections 1789 and 2945;
  • Inserted unconscionable terms in contracts;
  • Engaged in improper running and capping, meaning that Roth improperly partnered with United First, Inc. and Noe, who were not lawyers, to generate business for his law firm violating Section 6150-6156 of the California Business and Professions Code, and
  • Violated Section 17500 of the California Business and Professions Code.

(2) In addition to the current hot water this pair is in, Paul Noe Jr. was convicted of wire fraud in 1989 and the subject of a California Department of Insurance Cease and Desist Order in 2004; and Mitchell Roth resigned from the California State Bar in late May 2009, after the State Bar closed his law firm (see SF Weekly: State Bar Takes Over 'Son of Super Swindler' Law Firm -- 2,000 Con Jobs Too Late).

Brooklyn Feds Charge Title Agency Owner With Ripping Off $1.7M In Escrow Account Funds, Failing To Record Mortgages & Deeds In Real Estate Deals

From the Office of the U.S. Attorney (Brooklyn, New York):
  • [Last week] in federal court in Brooklyn, Jonathan Boxman, an owner and operator of real estate title insurance companies, was charged with defrauding clients of title companies he controlled of more than $1.7 million. According to the criminal complaint, Boxman stole money that was entrusted to those companies and used it to pay operating expenses associated with his failing businesses.


  • According to the complaint, Boxman controlled Titledge Insurance Company of New York, a real estate title insurance company licensed by the State of New York, and various other title abstract companies(1) and agents. [...] Through his companies and bank accounts, Boxman received fees for the recording of mortgages and deeds, which, in turn, he was supposed to remit to the county where the deed or mortgage was recorded.


  • However, instead of paying the fees to the counties, Boxman allegedly transferred the money to accounts he controlled and used it to pay his companies’ operating expenses and to cover thefts from prior victims of his scheme. The complaint charges that between January 2006 and December 2008, Boxman stole over $1.7 million in recording taxes, other fees, and monies held in escrow, and that as a result of his scheme several mortgages and deeds were never recorded.

For more, see Title Insurance Company Owner/Operator Charged In $1.7M Fraud Scheme.

Go here, Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds.

(1) A title abstract company or agent performs title searches and other functions on behalf of a title insurance company, including issuing title insurance policies in the title insurance company's name, recording mortgages and deeds, and holding money in escrow. EscrowRipOffKappa

Staten Island DA Charges Title Agency Owners With Looting Real Estate Escrow Account, Illegally Pocketing $1M+ In Funds Belonging To Others

From the Office of the Richmond County, New York District Attorney:
  • Richmond County District Attorney Daniel M. Donovan, Jr. today announced that Joseph DeVito and his wife, Mary Ann Palladino-DeVito [...] have been arraigned on an indictment alleging that from 2002-2004 they embezzled over $1 million from homeowners seeking to clear titles, as well as their franchise’s parent company.


  • The defendants, [...] are accused of a top count of Grand Larceny in the 1st Degree, a Class B felony, punishable by a maximum penalty of up to 25 years in prison. District Attorney Donovan stated, "As part of this mortgage fraud scheme, these defendants are alleged to have victimized new homeowners and their franchiser by accepting payment for mortgage fees, mortgage taxes, customer fees, real property filing fees, and escrow account funds and then misappropriating the funds for their own purposes. They are also alleged to have failed to file any tax returns to the State of the New York, depriving our state of essential funds for services such as healthcare and education." The District Attorney further stated that the defendants were franchisees of Fidelity National Title, a Jacksonville, Florida based title insurance company.

For the Staten Island DA's press release, see D.A. Donovan: Two Former S.I. Residents Accused of $1 Million Real Estate Title Fraud, Tax Evasion (Joseph Devito, 39, & Mary Ann Palladino-DeVito, 41, Accused of Embezzling Over $1 Million from Customers & Title Insurance Company, Face up to 25Years in Prison).

For the indictment, see People v. Palladino, Devito.

Go here, Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. EscrowRipOffKappa

Columbus Man Suspected In "Cash Back," Ponzi, Affinity Real Estate Scam Feels The Heat Of Criminal Probe; Trusting Acquaintances Left Holding The Bag

In Columbus, Ohio, The Columbus Dispatch reports:
  • A thief used a pen and paper to steal nearly $1.5 million from a group of well-educated, upper-middle-class Columbus professionals. [...] One man became rich; the others were left nearly penniless. [...] Somnath Ganguly, 47, remains free. But the Delaware County resident faces mounting legal troubles, including civil lawsuits and criminal investigations for the real-estate deals he orchestrated during the past four years. Local investors pray that justice will be done.


  • Columbus and Westerville police both have sent cases to the Franklin County prosecutor's office detailing fraud and forgery. "He is just a complete thief, that's the bottom line," said Sgt. Harold Hansen, of Columbus' economic crimes unit.


  • The investors all are professionals: scientists, doctors and computer experts. They also are members of Columbus' Bengali community who say they were taken by a fellow native of the Bengal region of India. [...] All now say they were conned and betrayed. They said Ganguly gained their trust first by becoming a friend and then by giving them big returns on early investments. In true Ponzi-scheme fashion, those big returns came from the pockets of other investors.

For more, see Investor nightmare (Trusting professionals unwittingly buy into a housing deal that leaves them in financial ruin, and they want answers).

Builder/Lender To Cough Up Million$ In Settlement With Feds Over Fraud Allegations That It Screwed Over Homebuyers In Loan Application Process

In Charlotte, North Carolina, The Charlotte Observer reports:
  • Federal investigators [last week] filed mortgage and accounting fraud charges against Beazer Homes USA, but the homebuilder will escape prosecution because it agreed to pay $50 million to victims and accepted responsibility for its actions. The charges, entered in U.S. District Court in Charlotte, relate to Beazer's participation in a scheme designed to fraudulently increase its mortgage company's profits and sell homes, as well as an accounting scheme designed to "smooth earnings." As a result, authorities said, homebuyers defaulted on their loans, and neighborhoods plagued with foreclosures watched home values plummet.(1)


  • Under the agreement with the U.S. Attorney's office, the homebuilder accepts responsibility for fraudulent practices and will pay $10 million immediately toward restitution for victimized homebuyers, plus additional money up to a total of $50 million as the company recovers financially. The U.S. Attorney's office has agreed not to prosecute the company as long as it satisfies its obligations in the next five years.

For more, see Beazer agrees to pay victims $50 million.

For the U.S. Department of Justice press release, see United States Settles False Claims Act Allegations Against National Home Builder and Mortgage Lender:

  • Beazer Homes USA Inc. has agreed to pay the United States $5 million dollars, plus contingent payments of up to $48 million dollars to be shared with victimized private homeowners, to resolve allegations that it, and Beazer Mortgage Corp., were involved in fraudulent mortgage origination activities in connection with federally insured mortgages.

(1) According to the Department of Justice, the settlement resolves allegations that when Beazer Mortgage Corp. made Federal Housing Administration (FHA) insured mortgage loans for the purchase of homes built by Beazer Homes USA Inc., the companies fraudulently and improperly:

  • required purchasers to pay "interest discount points" at closing, but then kept the cash and failed to reduce interest rates;
  • provided cash "gifts" to home purchasers through certain charities, so purchasers could come up with minimum required down payments, with assurances the "gifts" would not have to be repaid, and then increased home purchase prices to offset the amount of the gifts;
  • obscured which of its branches made defaulting mortgage loans to avoid FHA detection of excessive default rates; and
  • ignored "stated income" requirements in making loans to unqualified purchasers.

Monday, July 06, 2009

Housekeeping Note

The links to Massachusetts Bankruptcy Judge Rosenthal's rulings referred to in "Bankruptcy Judge Hammers Mass. Money Lender Accused Of Predatory Practices By Piling Up Loan Charges, Wrestling Property Ownership Away From Borrowers" posted earlier today have been fixed.

If anyone continues to have a problem accessing these rulings, drop me a line at and I'll email them to you. Sorry for the inconvenience.

Free SoCal Legal Clinics To Advise Homeowners Facing Foreclosure

In Orange County, California, KPCC Radio 89.3 FM reports:
  • Starting this week, some struggling Orange County homeowners are eligible for free help. KPCC's Susan Valot says a series of legal clinics that starts tomorrow is geared toward Asian-Americans.

  • The Asian Pacific American Legal Center will host three free clinics – two this month and one next month.(1) They're for homeowners who face foreclosure or who might be victims of predatory lending. Attorneys will review each case, explain the property owner’s legal rights and offer advice about "short" sales, loan modification, and defending against eviction.

Source: Struggling OC homeowners to get free legal advice.

(1) Reportedly, Vietnamese, Korean, and Mandarin translators will be on hand at the Garden Grove clinics. You have to call the Asian Pacific American Legal Center to make an appointment.

Central Florida Judges Hit With Federal Suit Over Implementation Of "Rocket Docket" Foreclosure Hearings

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • Gregory Dixon and Maria Goldberg expect to lose their homes to foreclosure, so they have not appeared in court or tried to defend themselves. But they also think the way the judicial system handles uncontested foreclosure cases such as theirs violates the constitutional rights of all Sarasota and Manatee county residents, and they are asking a federal judge to step in.

  • Their lawsuit against 12th Circuit Chief Judge Lee Haworth and two judges handling foreclosure cases argues that the courts should review cases to prevent lenders from taking homes based on incomplete or incorrect information. Their attorney, Richard Kessler, says judges have a responsibility to verify documents filed by lenders, and not doing so violates foreclosure defendants' rights to due process in court.(1)


  • Kessler's lawsuit argues that a new "rocket docket," where up to 250 uncontested foreclosures are heard in one day to help unclog the congested court system, only accelerates the problem. But, judges say, it is the defendants' job to challenge the documents being used by lenders to take their property.

For the story, see Homeowners contend courts must review documents.

For earlier stories on Sarasota's foreclosure "rocket docket," see:

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) Reportedly, Kessler conducted a study of 180 Sarasota County cases and found only one in four had complete paperwork. EpsilonMissingDocsMtg

Title Insurer's Lack Of Action On Subcontractors' Mechanics Liens Filed Against Bankrupt Developer Leaves Recent Homebuyers In Refinancing Limbo

In Woodstock, Illinois, the Chicago Sun Times reports:
  • Woodstock resident Deborah Sinnett's taste of the American dream has turned sour big-time, and she blames bankrupt Streamwood-based home builder Kirk Homes. Since Sinnett moved into her $355,000 Kirk home in December, 11 liens have been placed against the property by companies claiming they weren't paid by Kirk.(1) She faces the threat of foreclosure because of the liens, according to a local attorney. But her title insurance should cover her.

  • Sinnett said the liens also have complicated her plans to refinance at lower rates. Kirk says she's protected. But the title insurer, First American Title Insurance Co., hasn't taken court action to remove the liens, and Sinnett doesn't know how long the liens will remain on her property. It could be a couple of years, according to state law.


  • Sinnett said she received the first lien notice shortly before Christmas. She contacted First American Title and was told by letter that her title is insured, but "because there has been no action taken by the lien claimants to enforce their claims through a court proceeding, there is no action for First American to take at this time." [...] First American declined to comment on Sinnett's case, but said it "stands behind its policies of title insurance." But the company indicated Sinnett and others could be in for a long wait.(2)(3)

For more, see Kirk Homes bankruptcy leaves homeowners in limbo (STUCK IN MIDDLE: With Kirk Homes in bankruptcy, many homeowners can't refinance because of contractors' claims).

For more on homeowners left in the lurch due to actions by builders/contractors, go here, go here, go here, go here, and go here.

Go here for other posts involving legal issues related to title insurance.

(1) Reportedly, Sinnett's situation isn't unique as builders across the country fold or file Chapter 11 bankruptcy.

(2) Reportedly, Sinnett shared documents showing liens totaling more than $140,000. "It's costing us hundreds of dollars per month to not be able to refinance. No mortgage company wants to talk with us about refinancing with all those liens," she said.

(3) If faced with a lien on your home, attorney Mark Nora, vice chair of the Chicago Bar Association's real property committee, provides this advice in the article:

  • Homeowners can "make demand" on the title insurer to take appropriate action to discharge the lien. The insurance policy will specify how soon a homeowner must make that demand.
  • Alternately, homeowners can demand in court that the filer of a lien either file a lawsuit to enforce the lien or be barred from proceeding with one.
  • Those in the process of building a home can require in the contract proof that subcontractors are being paid as work has been completed and lien waivers to prevent those companies from filing liens on the property related to that work.
  • Work with a qualified attorney, make sure you have title insurance from a company with sufficient reserves to handle claims and read the fine print. title insurance legal issues StiffingContractorsTheta