Saturday, July 18, 2009

Florida Judge Refuses To Halt Foreclosure Sale Despite Lender's Willingness To Work Out Loan, Says Homeowner

In Volusia County, Florida, WFTV-TV Channel 9 reports:
  • President Obama helped create the federal loan modification program so families could stay in their houses. However, a Volusia County father, who took advantage of the plan, lost his house to a bank Thursday morning. The man said he blames a local judge. Thursday morning a home in foreclosure was scheduled to be sold on the courthouse steps, even though the man who owned it worked out a way to pay his lender and stop it from happening. Jerry Gomez sent a cancelled check to his lender, which has already been cashed. Gomez made a last minute, desperate appeal to save his home, [...]. Judge John Doyle answered the plea with a stamp and a signature, denying Gomez's request.


  • Gomez's home went into foreclosure last year. His loan payment ballooned and his painting business died. Gomez, however, had new hope when he was accepted into the Federal Loan Modification Program. [...] "This should not happen. He's been approved. The lender wants to stop it," loan consultant Jan Brinsley said. Brinsely said Gomez did everything right. But an email from his lender's attorney claims Volusia County judges won't allow them to ask for foreclosures to stop. When Gomez tried to stop it himself, complete with proof of his new loan agreements, Judge Doyle didn't think it was enough. "The lender worked with him. The lender wants to stop the foreclosure and the judge refuses to do it," Brinsely said.

For the story, see Judge Denies Father's Request To Save Home.

Non-Profit Fair Housing Group Files Suit Against Publisher Of Allegedly Discriminatory Classified Ads Against Families With Children

According to a press release from the National Fair Housing Alliance:

  • It is illegal to discriminate against families with children in housing. In their lawsuit, NFHA and FHCCC allege that American Classifieds published discriminatory housing advertisements in violation of the federal Fair Housing Act and California’s Fair Housing and Employment Act. NFHA filed the lawsuit after a year-long investigation that uncovered over 60 discriminatory advertisements in 17 of the states where American Classifieds does business.


  • Since 1996, American Classifieds has resolved similar discrimination complaints in Boise, Idaho, Louisville, Kentucky, and Merritt Island, Florida for publishing illegal housing advertisements. Yet that has not stopped the company from continuing to print them.

For the entire press release, see American Classifieds Sued for Discriminating Against Families with Children (National Fair Housing Alliance Investigation Uncovers Advertisements Discriminating Against Families with Children, Other Protected Groups in 17 States).

For more on this case from the National Fair Housing Alliance:

Tenants Pocket Thousands In $ettlements In Fair Housing Discrimination Lawsuits Brought By Massachusetts AG

From the Office of the Massachusetts Attorney General:
  • AG Obtains Court Order Requiring Malden Landlords to De-Lead Rental Apartment in Settlement of Housing Discrimination Case: Attorney General Martha Coakley obtained a consent judgment against Wai On Chan and Qi Ling Huang-Chan, the owners of a three-bedroom rental property in Malden, resolving claims that they discriminated against a prospective tenant by allegedly refusing to rent to a prospective tenant with a child under the age of six years old because it would have required the landlords to abate any lead paint in the rental unit. [...] According to the complaint, the Chans refused to show their rental unit once they learned that the prospective tenants had an infant daughter. Under Massachusetts law, it is illegal to refuse to rent to a prospective tenant with young children due to the presence of lead paint. In addition to deleading the rental unit, the settlement requires the Chans to pay $1,000 to the victims.

  • AG Reaches Settlement Against Realty Company and Landlord for Allegedly Discriminating Against Two Women and 2-Year Old: Attorney General Martha Coakley’s Office obtained a consent judgment against Dorchester-based At Home Real Estate, Inc. (“At Home”), Edward Denney and Watershed Properties, Inc. (“Watershed”), resolving claims that the real estate company, landlord and property owner discriminated against two African-American women [with a two-year old child] by refusing to rent them an apartment because the defendants wanted to avoid their obligation to de-lead the apartment under Massachusetts lead paint laws. The consent judgment, entered yesterday by Judge Charles T. Spurlock in Suffolk Superior Court, requires the defendants to attend fair housing training, pay $7,500 to the victims, and for the property owner to de-lead the property.

  • AG Reaches $10,000 Settlement with Two Brookline Real Estate Brokers for Discriminating Against a Family with Young Children: Attorney General Martha Coakley’s Office obtained a consent judgment against Geoffrey Wells, doing business as (d/b/a) Harvard Real Estate of Brookline, and one of his employees, David Ravalli, accused of violating state antidiscrimination and lead paint laws by refusing to show a property to a family because they had young children. The judgment, [...] requires the brokers to pay the family $10,000 and prohibits them from discriminating against any person who seeks or applies for housing because they have children or otherwise discriminating against any person in violation of state and federal fair housing laws.

  • AG Sues Brighton Realty Company for Housing Discrimination: Attorney General Martha Coakley’s Office has filed a housing discrimination complaint against City Realty Group, Inc. (“City Realty”), a Brighton-based real estate company, and one of its real estate agents for refusing to rent an apartment to a tester from the Boston Fair Housing Commission who represented that she was looking for an apartment for herself and her three-year-old child. The complaint, [...] alleges that City Realty violated state antidiscrimination and consumer protection laws by refusing to rent to a prospective tenant with a child because it would have created an obligation to abate lead paint hazards in the rental unit. [...] The Attorney General’s Office is seeking an order prohibiting City Realty from engaging in housing discrimination, compensatory and punitive damages on behalf of the victim, and attorneys’ fees and costs.

  • AG Sues East Boston Landlord for Discriminating Against Family: Attorney General Martha Coakley’s Office has filed a housing discrimination complaint against Russell Tremaine, the owner of a three-unit building in East Boston, for refusing to rent an apartment to a couple and their infant daughter. The complaint, [...] alleges that Tremaine violated state anti-discrimination and consumer protection laws by refusing to rent to a family with a child because he wanted to avoid the obligation to abate lead hazards in the rental unit. [...] Under Massachusetts law, it is illegal to refuse to rent to a prospective tenant with young children due to the presence of lead paint in the rental unit. It is also illegal to discriminate against renters because of their familial status or because they have children. The Attorney General’s Office is seeking an order prohibiting Tremaine from engaging in housing discrimination, compensatory and punitive damages on behalf of the victims, civil penalties, and attorney’s fees and costs.

  • AG Reaches Settlement with Real Estate Company to Resolve Discrimination Claim: Attorney General Martha Coakley’s Office has reached a settlement with a Brockton real estate company in response to a tenant’s claim of discrimination and retaliation. The Assurance of Discontinuance filed in Plymouth Superior Court against Churchill Forge Properties, Inc., and its employee Joyce Levine, alleges that the real estate company and the employee violated state anti-discrimination laws by retaliating against an African-American tenant when he contacted the Massachusetts Commission Against Discrimination (MCAD). Churchill Forge, which is headquartered in Newton, Massachusetts, manages several rental properties across the Commonwealth. [...] “It is against the law for anyone to retaliate against a person who exercises his or her right to make an allegation of discrimination,” said Attorney General Martha Coakley. “If people do not feel free to speak out when they believe they have experienced discrimination, then the Commonwealth cannot effectively fight against discrimination.” [...] The Assurance of Discontinuance requires that Churchill Forge and its employees agree to abide by federal and state fair housing and anti-discrimination laws; [...] notify the Civil Rights Division of any discrimination complaints in the next five years; and pay $11,000 to the tenant. These obligations apply to all of the properties that Churchill Forge manages and operates across the Commonwealth.

  • AG Obtains Consent Judgment Against Boston Realty Company Resolving Allegations of Discrimination: Attorney General Martha Coakley’s Office has obtained a consent judgment against a Boston realty company and one of its owners, resolving allegations that they violated Massachusetts antidiscrimination laws by asking a prospective tenant about her national origin. [...] Dakota Enterprises and Lehrer will pay $8,000 to the prospective tenant and her husband, and $500 to the Commonwealth’s Local Consumer Aid Fund.

  • AG Obtains Consent Judgment Against Cambridge Landlord for Discriminating Against Section 8 Recipient: Attorney General Martha Coakley’s Office obtained a consent judgment against Brian Keefe and JBK Associates, LLC, the owners of a two-unit apartment building in Cambridge who were accused of violating state antidiscrimination laws by refusing to rent an apartment to an individual who participates in the Section 8 program. The judgment, [...] requires Keefe and JBK Associates to pay the victim $3,000 and prohibits them from discriminating against any person who seeks or applies for housing because they have a Section 8 voucher or otherwise discriminate against any person in violation of state and federal fair housing laws.

  • Attorney General Martha Coakley Obtains Jury Verdict in Housing Discrimination Case: A Suffolk Superior Court Jury returned a verdict [...] against Hakim DeFreitas of Dorchester ordering him to pay $8,200 in restitution for discriminating against a prospective tenant who would have used a Section 8 housing voucher to pay her rent. “The Section 8 program provides invaluable assistance to thousands of low income tenants in Massachusetts. This assistance is of particular importance during these economic times as we face critical housing needs and the strain on families is particularly great,” said Attorney General Martha Coakley. “Landlords in Massachusetts should understand that discrimination against prospective tenants that receive public assistance is against the law and will not be tolerated.” The complaint, [...] alleged that DeFreitas screened out applicants with Section 8 vouchers when he tried to find a tenant to rent a home he owned in Dorchester. Under Massachusetts law, it is illegal to discriminate against housing applicants because they receive public assistance, such as assistance through the Section 8 program. It also is illegal to print or publish a housing advertisement that says that Section 8 will not be accepted, or otherwise to make a discriminatory statement about Section 8 in connection with the rental of a home.

  • AG Obtains Consent Judgment Against Property Management Company and Condominium Association in Housing Discrimination Case: Attorney General Martha Coakley’s Office has obtained a consent judgment against Property Management of Andover, Inc., and Royal Oaks Condominium Association, resolving claims that the companies discriminated against a disabled condominium owner by refusing to provide him with a reasonable accommodation. [...] According to the complaint, [...] the condominium owner was diagnosed with melanoma, a type of skin cancer, in 2002 and received treatment in 2002-2006 for basal cell carcinomas. He continued to receive treatment for his condition and was advised by his doctor to utilize sun-protective devices, including an awning for his deck, which he then paid for and installed. The complaint alleged that after the owner submitted medical documentation to the defendants that demonstrated his need for sun protection, the defendants threatened to remove the awning and assess fees against him. The complaint alleged that by refusing to permit the owner to install an awning to accommodate his disability, the defendants violated state antidiscrimination law. In addition to barring the company from future acts of discrimination, the consent judgment requires Property Management of Andover, Inc., to [...] make a payment of $2000 to the condominium owner; [...] and report any discrimination complaint that it receives to the Attorney General’s Office for the next four years. In addition, the consent judgment permits the condominium owner to maintain an awning while he resides at the unit.

  • AG Obtains Judgment Against Brockton Property Owner and Landlord in Housing Discrimination Case: Attorney General Martha Coakley’s Office has obtained a consent judgment against a Brockton property owner and landlord, accused of unlawfully discriminating against a former tenant by refusing to participate in the Section 8 housing subsidy program. [...] The consent judgment resolves a complaint [...] alleging that the defendants discriminated against a tenant by refusing to accept her Section 8 housing subsidy and by refusing to make certain repairs to the tenant’s apartment, as required by the Section 8 program. Under Massachusetts law, it is illegal to discriminate against housing applicants because they receive public assistance.

City Of Bridgeport Withdraws Foreclosure Suit After Homeowner Forks Over $50 In Back Taxes

In Bridgeport, Connecticut, The Connecticut Post reports:
  • The city has withdrawn its foreclosure case against a man who owed $51.69 in back taxes. Castro Jean-Gilles paid the charge and the city agreed to drop the case. [...] In May, a Superior Court judge granted the city's foreclosure action and ordered Jean-Gilles's Harral Avenue home sold in December to satisfy the back taxes as well as the $2,705 in lawyer fees and foreclosure costs. Court records show that prior to the foreclosure ruling, nearly $3,000 in back taxes were paid on the house, leaving a balance of $51.69. Jean-Gilles told the Connecticut Post that his bank had been paying his taxes and that he had reported this to the city tax collector's office. However, the foreclosure case went forward.

For more, see City withdraws $51.69 foreclosure case.

Arizona Feds Indict Contractor For Attempting To Use $5M+ In Counterfeit Checks To Buy Real Estate, Pay Expenses

From the Office of the U.S. Attorney (Arizona):
  • A federal grand jury returned a 34-count indictment yesterday against Frank Anteri, 44, of Anthem and Peoria, Ariz., and the president of defunct WC Contractors, Inc., charging him with bank fraud, mail fraud and the making and possession of counterfeit securities. [...] The indictment alleges that Anteri attempted to negotiate over $5,000,000 in counterfeit official bank checks and counterfeit company checks. Anteri used the counterfeit checks in attempts to purchase real estate and in the payment of his business and personal expenses. Anteri also deposited counterfeit checks into bank accounts he controlled and wrote checks against the bogus deposits he made.

For the U.S. Attorney press release, see Former Contractor From Phoenix Area Charged With $5 Million In Fraud.

Arizona Cop Faces Charges Of Ripping Off Foreclosed Home

In Florence, Arizona, The Arizona Republic reports:
  • Pinal County Sheriff's deputies arrested one of their own [last week] on suspicion of burglary and theft. Deputy Ian Quick, 33, is accused of stealing livestock corral panels worth more than $2,000 from a property in Florence. On June 10, deputies were called to the 27000 block of North Aladdin Road on a report of a burglary in progress. There, they encountered Quick, who said the former property owner gave him permission to take the panels in exchange for services rendered.


  • The former property owner, however, said differently. Lt. Tamatha Villar said the victim discovered the missing corral panels Wednesday and filed a report with the Sheriff's Office. The victim told deputies she moved to Oklahoma following the foreclosure of her property but made arrangements with the bank to retrieve some items left behind, including the corral panels, Villar said. A criminal investigation determined Quick did not have permission to be on the property, nor did he have permission to retrieve the panels, according to a Sheriff's Office statement.

Source: Pinal County Sheriff's deputy arrested in theft case. foreclosure fixture stripping apple

Friday, July 17, 2009

N. Virginia Real Estate Agent Charged In Scam Involving $50M+ In Fraudulently Obtained Loans, 100+ Homebuyers; Suspect May Have Left Country, Say Cops

In Loudoun County, Virginia, the Loudoun Independent reports:
  • An Ashburn real estate agent stands accused to profiting from falsifying financial documents to enable clients to qualify for homes they could not afford. Real estate agent Diane Atari, an Ashburn native, has been indicted by the Grand Jury of Loudoun County for ten counts of False Statement to Obtain Credit, one count of Racketeering and one count of Money Laundering. Atari, 42, is accused of fraudulently fixing clients’ credit and inflating their income on financial records – enabling them to be approved for higher credit so these clients could buy homes they could not otherwise afford. Many of the clients were unable to satisfy the high monthly payments and were later forced into foreclosure.

  • Atari allegedly obtained more than $1 million in commissions through this scheme and took advantage of more than 100 potential homebuyers, most of whom had bad credit. The total loss on the fraudulently obtained mortgages is estimated to be more than $50 million, said Kraig Troxell, public information officer for the Loudoun County Sheriff’s Office. The long-term effect is going to be huge, investigators said.


  • Authorities believe Atari left the country last week and is possibly in Jordan, where her ex-husband has family. Local law enforcement has contacted INTERPOL to assist in locating Atari. Investigators have not made direct contact with Atari since she broke the lease on her house five months ago.

For more, see Real Estate Agent Indicted for Falsifying Credit Documents (Over 50 Million May Have Been Lost).

For the Loudoun County Sheriff's Office press release, see Loudoun Woman Indicted In $50 Million Mortgage Fraud Scheme.

SWAT Team Called In After Washington Man Allegedly Hijacks Home In Foreclosure While Owners Are Away

In Shoreline, Washington, KOMO-TV Channel 4 reports:
  • Sharon and Doug Larson were on their way back from the Oregon coast last week when neighbors told them a stranger had hijacked their house. Neighbors called 911 when James Vanvolkenburg moved into the Larson's home Friday night, claiming the house belonged to him. Police officers who arrived said Vanvolkenburg's name was on the tax records, so they let him stay. "He's there with this woman and their dog and my belongings, sleeping in my bed," Sharon said. With help from her sister, Sharon went to the courthouse Monday morning and discovered that Vanvolkenburg may have tried to take advantage a foreclosure proceeding against her house. Vanvolkenburg allegedly submitted his name six months ago as the taxpayer of record. The county treasurer's office told her that all Vanvolkenburg did was fill out a form asking for tax statements on the house.


  • A SWAT team searched the home Monday evening but Vanvolkenburg was not inside. He left behind his dog and two trailers still parked on the property. [...] The county said they receive about 21,000 taxpayer change of address requests each year and they've never had anything like this happen before.

For the story, see SWAT team called to save hijacked house.

Landlords Abandon Overleveraged NYC Buildings; Predatory Investors, Unrealistic Profit Projections, Shoddy Lending Practices Leave Tenants In Limbo

In New York City, The New York Times reports:
  • As property owners run into trouble paying their mortgages, neighborhoods around New York City have been witnessing a disturbing consequence: Small and large apartment buildings are being abandoned in a state of disrepair, leaving tenants in limbo without basic services or even landlords.


  • Many of these landlords, particularly those who bought in recent years when the real estate market was at its peak, are struggling to make mortgage payments, let alone pump thousands of dollars into buildings for repairs. Elected officials and tenant advocates place much of the blame for the distress of multifamily apartment buildings not on landlords, but on the lenders who financed many of those now in default, saying the loans for the properties were based on shoddy lending practices and unrealistic projections of rising rents.(2)


  • Many of these overleveraged buildings [...] are made up of low-income tenants in rent-regulated or subsidized apartments. International developers and private equity firms have borrowed hundreds of millions of dollars to buy buildings with rent-regulated units in the belief that they could profit by replacing existing residents with higher-paying ones, a trend tenant advocates call predatory equity.

For more, see Struggling Landlords Leaving Repairs Undone.

(1) The concern is that the poor conditions created by overleveraged buildings not only threaten tenants’ health and safety, but risk destabilizing entire blocks.

(2) A recent New York Post article (see REALTY BUBBLE) reports that 120 properties in Manhattan worth nearly $8 billion are considered "troubled," according to data from Real Capital Analytics. They include 84 apartment buildings, 24 office buildings, eight development sites, two hotels, two retail properties and one industrial building. The outer boroughs and Long Island combined have 78 troubled assets worth $1.7 billion, of which the four New York City boroughs account for $376.8 million. RentSigmaSkimming schumer bronx

Rent Skimming Landlord Facing Foreclosure Arrested For Stealing Electricity; Utility Shutoff Leaves Two Dozen Tenants Temporarily Homeless

In Pinellas County, Florida, Newschannel 8 reports:
  • A Pinellas County landlord was arrested [last week], accused of stealing electricity from apartments he owns in Clearwater. Lawrence Ayers, 42, of [...] Safety Harbor, was booked into the Pinellas County Jail on a grand theft charge. Ayers dropped out of sight after Progress Energy cut off power to eight residential rental units he owns on Westminister Avenue June 25th. [...] A week before, code inspectors had condemned apartments Ayers owns on Meridian Avenue in Oldsmar because of similar electrical problems. That's where a Pinellas County Sheriff's deputy caught up with him [...].(1)

For more, see Landlord arrested, accused of stealing electricity.

Go here for earlier posts on this story.

(1) Reportedly, cutting the power left as many as two dozen tenants from the Oldsmar and Clearwater rentals temporarily homeless. Most of the people there also had no water because Ayers had rigged a shallow well water pump as their only supply of water for drinking and bathing, according to authorities. Inspectors said the water was not fit for drinking. It had a bright orange color, and tenants said it smelled horribly. Code inspectors cited Ayers for numerous violations. He faces fines of as much as $5,000 a day and has a hearing scheduled Monday on the code violations. Ayers has 11 pending foreclosure actions against his rental properties and his home in Safety Harbor, according to code enforcement officials. RentSigmaSkimming

Cuyahoga County Treasurer To Overseas eBay Real Estate Speculator: "Next Time, Try Las Vegas"

In Cleveland, Ohio, The Plain Dealer reports on British real estate speculator Dr. Sheo Prasad who, despite living in England, purchased distressed Cleveland real estate on eBay:
  • On May 30, Prasad sent an e-mail to Cuyahoga County Treasurer Jim Rokakis concerning a six-unit apartment building that Prasad owned on East 107th Street. "This property is currently being managed by my Property manager who is repairing it," Prasad wrote. "She just informed me the property has been demolished." That news shocked the doc, who had paid $5,834 for the building.

  • Rokakis offered cold comfort: "I am sorry for your plight . . . but I feel even more sympathy for the citizens . . . who have watched their neighborhoods crumble as speculators . . . try to make a quick profit. The exchange rate between our countries is quite favorable for U.K. citizens right now -- you would have had more luck flying to Las Vegas and trying the gaming tables there. Buying homes on eBay is a really bad bet."


  • In August 2008, three months before Prasad bought it, the city condemned the property. Since no corrective action was taken, the building was razed on April 24, 2009. The demolition cost the city $14,500. Prasad will be getting the bill soon.

For the story, see British speculator on Cleveland building ends up with a lot of nothing.

Thursday, July 16, 2009

Nationwide Loan Modification Scam Sweep Begins As FTC Announces Coordinated Effort Of 25 Federal, State Agencies Involving 189 Legal Actions

The Federal Trade Commission announced yesterday:
  • Federal Trade Commission Chairman Jon Leibowitz, joined by California Attorney General Jerry Brown, [Wednesday] announced Operation Loan Lies, a coordinated national law enforcement effort to crack down on mortgage modification scams. The operation involves 189 actions by 25 federal and state agencies(1) against defendants who deceptively marketed foreclosure rescue and mortgage modification services. The FTC actions, which affect consumers throughout the nation, are being announced in southern California, where the scams originated.

    These con artists see the high foreclosure rates as an opportunity to prey on people in distress,” FTC Chairman Jon Leibowitz said. “They promise to rescue homeowners in troubled financial waters, but after they take their money they throw them an anchor instead of a lifeline. People facing foreclosure should avoid any company or individual that requires a fee in advance, guarantees to stop a foreclosure or modify a loan, or advises the homeowner to stop paying the mortgage company.”

    The FTC announced four lawsuits,(2) bringing to 14 the number of mortgage foreclosure rescue and loan modification scam cases the Commission has brought since April. Twenty-three state attorneys general and other agencies are participating in the operation, taking action against 178 companies engaged in these types of deception. The FTC also announced a settlement in a lawsuit filed last November.


  • The FTC also released “Real People. Real Stories,” a three-and-a-half minute video about keeping your home. It features people targeted by foreclosure rescue scammers sharing lessons learned from their experiences. The FTC is distributing the video, and a version in Spanish, to more than 5,000 housing counseling and consumer protection organizations around the country, and posting them at and

For the entire FTC press release, see Federal and State Agencies Target Mortgage Foreclosure Rescue and Loan Modification Scams (FTC Leads “Operation Loan Lies” to Stop Fraud and Help Distressed Homeowners).

(1) The 25 Federal & state agencies are:

  • U.S. Federal Trade Commission,
  • U.S. Attorney's Office for the Central District of California (Los Angeles),
  • Arizona Attorney General's Office,
  • California Department of Justice,
  • California Department of Real Estate,
  • State Bar of California,
  • Colorado Attorney General's Office,
  • Idaho Attorney General's Office,
  • Illinois Attorney General's Office,
  • Iowa Department of Justice,
  • Kansas Attorney General's Office,
  • Maine Attorney General's Office,
  • Maine Department of Professional and Financial Regulation, Bureau of Consumer Protection,
  • Maryland Department of Labor, Licensing, and Regulation, Office of the Commissioner of Financial Regulation,
  • Massachusetts Attorney General's Office,
  • Michigan Attorney General's Office,
  • Missouri Attorney General's Office,
  • New Jersey Attorney General's Office,
  • New Jersey Department of Banking and Insurance,
  • New Mexico Attorney General's Office, Consumer Protection Division,
  • North Carolina Department of Justice,
  • Ohio Attorney General's Office,
  • Oregon Department of Justice,
  • Texas Attorney General's Office,
  • Washington Attorney General's Office.

(2) The four lawsuits (with links to the FTC complaints) filed by the FTC target three California firms:

  • Aliso Viejo-based Lucas Law Center (other defendants: Future Financial Services, LLC, Paul Jeffrey Lucas, Christopher Francis Betts, and Frank Sullivan),
  • Orange-based U.S. Foreclosure Relief Corp. (firm used eight aliases – U.S. Foreclosure Relief, Lighthouse Services, Pacific Shore Financial, California Foreclosure Specialists, H.E. Service Company, Safe Harbor, Pomery & Associates, and Homeowners Legal Assistance. Other defendants are George Escalante, Cesar Lopez, and Adrian Pomery, Esq.), and
  • Santa Ana-based Loss Mitigation Services Inc., (other defendants: Synergy Financial Management Corporation (d/b/a Direct Lender), Dean Shafer, Bernadette Perry, and Tony Perry),

and Coeur d'Alene, Idaho-based Apply2Save Inc. (other defendants: Sleeping Giant Media Works, Inc., and Derek Oberholtzer).

In addition to these cases, the FTC reached a settlement with Foreclosure Solutions, LLC and Timothy Buckley (Plaintiff's Complaint, Settlement/Stipulated Final Judgment) who claimed that, for a fee often exceeding $1,000, they would stop foreclosure (see press release dated April 29, 2008).

Lenders' Foreclosure Sale Cancellations An Attempt To Slow Growing Stockpile Of Repossessed Inventory, Leaving Abandoned Homes In Legal Limbo

In Central Florida, the Sarasota Herald Tribune reports:
  • Across Florida, tens of thousands of foreclosed homes are being left in limbo, between homeowners who have abandoned them and banks that have not yet taken possession of them. Over the past year, banks and other lenders have canceled up to 50 percent of foreclosure sales in some parts of the state, adding to a growing stockpile of unclaimed homes.


  • Pushing foreclosures through quickly used to be in the bank's best interest, so the home could be resold and the bank could recoup the equity in it. Now, depressed housing prices mean few investors snapping up the properties at auction. And banks put off the foreclosure sales in many cases because once they take the property, they become liable for taxes, fees and maintenance, say some analysts and industry watchers. [... A]s long as the foreclosure is pending -- and the foreclosure sale has not taken place -- the banks' ledgers show the mortgage as an asset. And the bank keeps the money it would otherwise spend on maintenance and taxes.


  • Foreclosure sales are set by a judge but can be canceled by the lender for any number of reasons. And once it is put off one time, the case does not go back to court unless the bank wants it to.

For more, see Lenders' latest foreclosure strategy: waiting (Banks know that once they take empty property, it's their liability).

Go here for other posts on homes being left in legal limbo (when a lender intentionally delays completion of a foreclosure to avoid taking title to the repossessed collateral, or fails to record its deed after foreclosure sale). responsibility code violations foreclosure

"Now It's The Lenders Who Are Doing The Walking" - Milwaukee Feels The Sting Of Homes In Foreclosure Being Left In Legal Limbo

In Milwaukee, Wisconsin, the Milwaukee Journal Sentinel reports:
  • For years, lenders complained about debtors who left the keys on the kitchen table and skipped town, leaving it to the bank to file for foreclosure and eventually take title by buying it at a sheriff's sale. The latest twist: Now it's the lenders who are doing the walking, often without telling the borrowers, who may believe erroneously they have already lost title.(1)

  • "This is just the meanest and nastiest thing (lenders) could do," said Catherine Doyle, chief staff attorney at the Milwaukee Legal Aid Society. "Even more profound is the terrible damage to the community. All of us are going to have to bail them out." City officials, lawyers and community activists say they've seen an increase in lender walkaways, although they can't estimate how large the problem is.

  • The Journal Sentinel found more than $400,000 in back taxes, fees and demolition costs owed on nearly three dozen properties that lenders foreclosed on in the past two years but didn't complete the process. Three more have been condemned and are scheduled to be bulldozed at an estimated cost of up to $15,000 each.

For more, see Lenders abandoning foreclosed properties (‘Walkaway’ properties quickly deteriorate, dragging down borrowers and neighborhoods).

Go here for other posts on homes being left in legal limbo (when a lender intentionally delays completion of a foreclosure to avoid taking title to the repossessed collateral, or fails to record its deed after foreclosure sale.

(1) In that scenario, the neighborhoods and taxpayers may lose, say city officials and neighborhood activists. "The debtor is gone, the lender is gone and here, Mr. Mayor, you've got this attractive nuisance in your neighborhood," Mayor Tom Barrett said. "Then I get a call from my fire department, and they're telling me we've got too many homes that are attractive nuisances, as they say, for arson or prostitution or drug trafficking. The current situation is a lose, lose, lose situation." responsibility code violations foreclosure

Failure To Inspect For Meth Contamination Could Create Future Financial, Health Havoc For Homebuyers

The New York Times reports:
  • The spacious home where the newly wed Rhonda and Jason Holt began their family in 2005 was plagued by mysterious illnesses. The Holts’ three babies were ghostlike and listless, with breathing problems that called for respirators, repeated trips to the emergency room and, for the middle child, Anna, the heaviest dose of steroids a toddler can take. Ms. Holt, a nurse, developed migraines. She and her husband, a factory worker, had kidney ailments.(1)

  • It was not until February, more than five years after they moved in, that the couple discovered the root of their troubles: their house, across the road from a cornfield in this town some 70 miles south of Nashville, was contaminated with high levels of methamphetamine left by the previous occupant, who had been dragged from the attic by the police. The Holts’ next realization was almost as devastating: it was up to them to spend the $30,000 or more that cleanup would require.

  • With meth lab seizures on the rise nationally for the first time since 2003, similar cases are playing out in several states, drawing attention to the problem of meth contamination, which can permeate drywall, carpets, insulation and air ducts, causing respiratory ailments and other health problems.


  • Meth contamination can bring financial ruin to families like that of Francisca Rodriguez. The family dog began having seizures nine days after the Rodriguezes moved into their home in Grapevine, Tex., near Dallas, and their 6-year-old son developed a breathing problem similar to asthma, said Ms. Rodriguez, 35, a stay-at-home mother of three. After learning from neighbors that the three-bedroom ranch-style home had been a known “drug house,” the family had it tested. The air ducts had meth levels more than 100 times higher than the most commonly cited limit beyond which cleanup is typically required. [...] They moved out, throwing away most of their possessions because they could not be cleaned, and are letting the house go into foreclosure. “It makes you crazy,” Ms. Rodriguez said. “Our credit is ruined, we won’t be able to buy another house, somebody exposed my kids to meth, and my dog died.”

For the story, see Illnesses Afflict Homes With a Criminal Past.

Go here, Go here and go here for other posts on home-based methamphetamine labs.

(1) Some of the health problems associated with living in a meth-contaminated home appear to be similar to those currently being attributed to the "Chinese drywall" problem being experienced in some parts of the country. meth lab yak

Title Company's Failure To Discover Lien Leaves First Time Homeowner Facing Foreclosure Over Prior Owner's Debt

In Highlands Ranch, Colorado, KDVR-TV Channel 31 reports:
  • Brandi Hager just bought her first home 6 months ago, made every payment, but now she's facing foreclosure over someone else's debt. "I haven't been sleeping. I haven't been able to take my mind off of it." Brandi just found there's a $9,000 lien on her property that belongs to the previous homeowner, and unless she pays it, her family could lose their home. The mortgage company, Sterling Mortgage, says it thought the property was free and clear or any liens or debts or the company wouldn't have sold it to her. Sterling Mortgage says the title company, National Real Estate services, should have found the lien and notified Brandi before the sale.

For more, see Family could lose home over title company's mistake. title insurance legal issues

Homeowners Running "Everything Must Go" Foreclosure Stripping Sales May Face Criminal Liability In Colorado

In Aurora, Colorado, KUSA-TV Channel 9 reports:
  • The "everything must go" sales are back and experts say they cost other homeowners money. The sales involve homeowners selling everything inside just days before it goes into foreclosure. 9Wants to Know found a woman selling fixtures in a condominium [...] Thursday morning. The Internet classified site Craigslist listed a sale at 10091 East Carolina Drive in Aurora.

  • Experts say these sales cost banks money because they have to pay to install new fixtures in the homes before they resell them. Those repair costs are passed along to other borrowers. At Thursday's sale, our undercover cameras found plenty to choose from. Colorful price tags offered the refrigerator, the kitchen cabinets, the overhead microwave and the range. Items such as cabinets are traditionally considered part of a home.


  • While a house does belong to a homeowner until it goes on the foreclosure auction block, there is a state law that says it's illegal to defraud a creditor. "If you sell fixtures out of your foreclosed upon house, you can be sued. You can be charged with a felony or multiple felonies. It's not a good idea," [9NEWS legal analyst Scott] Robinson said. A class three felony carries a maximum of 12 years in prison. A person who strips a home ahead of foreclosure could also be charged with criminal mischief and theft, according to Denver District Attorney Spokeswoman Lynn Kimbrough. She says prosecutors will look at any case brought to them by police. People buying the merchandise will likely not be charged as long as they did not know they were buying items considered stolen. However, even if they paid for the items, buyers could be required to return them.

For more, see House stripping continues as foreclosures loom.

For another recent post on this issue, see Arizona Crackdown On Foreclosure Stripping Continues As Homeowner Indicted On Charges Of Defrauding A Secure Creditor, Criminal Damage.

Go here for other posts on pre-foreclosure homeowner fixture stripping. foreclosure fixture stripping apple

Wednesday, July 15, 2009

Recruiting Drive For Philadelphia Lawyers To Provide Pro Bono Representation To Local Homeowners Facing Foreclosure Continues

In Philadelphia, Pennsylvania, WPVI-TV Channel 6 reports on a local non-profit legal agency tasked with recruiting local attorneys to represent financially strapped homeowners through the Philadelphia Residential Mortgage Foreclosure Diversion Program:
  • Stefanie Seldin of Philadelphia VIP told Action News that there are 300 lawyers mostly from small to medium-sized and solo firms. A non-profit legal agency, Philadelphia VIP specially trains lawyers to help low-income folks in the program. Sledin adds, though, that the problem is "to sustain the program we really need to hit the large law firms." But many of those firms have lawyers who represent the lenders. "If you have 300 lawyers in a firm and 10 of them represent Citi - those other 290 could not participate in this program until now," Sledin says.

  • Now, Citi has agreed to waive conflicts of interest for law firms who participate in the foreclosure diversion program. Citi says it's a win-win: It has loans that are being paid back again, and homeowners get to avoid a lot of anguish.


  • Philadelphia VIP always has a big table set up at the conciliation conferences. You'll get matched up with a free lawyer on-the-spot. By the way, Citi is also giving a grant to Philadelphia VIP to help them recruit and train these volunteer lawyers.

For the story, see Free legal help for homeowners (Free legal help could now be more accessible to thousands of Philadelphia homeowners).

Arizona AG Tags Upfront Fee Loan Mod Firm With Civil Suit, Alleging Violations Of State Consumer Fraud, Consumer Services Acts

From the Office of the Arizona Attorney General:
  • Attorney General Terry Goddard has filed a lawsuit against a Phoenix-based mortgage loan modification company, Santoya Financial Company, LLC and its owners, Thomas Montoya and Robert Sanchez, for engaging in deceptive practices.

The lawsuit alleges that Santoya’s actions violated the Arizona Consumer Fraud Act(1) and the Arizona Credit Services Act,(2) by:

  • Falsely representing the company as being endorsed by HUD,
  • Falsely representing that it and an allied company, Partners in Charity, were approved by HUD to provided foreclosure avoidance counseling to consumers,
  • Failing to disclose the limited nature of its services, which was simply collecting and forwarding clients’ information to independent entities for whom Santoya had no responsibility and who had not complied with Arizona law regulating loan modifications in this state,
  • Failing to provide consumers with information statements and contracts required by law,
  • Charging clients upfront fees [upfront fee of $1,199 plus the equivalent of one month’s mortgage payment, according to the lawsuit] without having obtained a surety bond.

The Arizona AG is seeking full restitution to the screwed over homeowners, civil penalties of up to $10,000 per violation of law, and reimbursement of investigative and litigation costs.

For the Arizona AG press release, see Goddard Sues Mortgage Loan Modification Company for Deceptive Practices.

For the lawsuit, see State of Arizona v. Santoya Financial Company, LLC.

(1) Title 44: Sections 44-1521 through 44-1534, Arizona Revised Statutes.

(2) Title 44: Sections 44-1701 through 44-1712, Arizona Revised Statutes.

Shaky Loan Modifications That Turn Into Questionable Short Sales?

A new form of foreclosure rescue involving purported loan modification services coupled with questionable short sale arrangements has arrived on the scene and possibly gaining in popularity, according to DESPERATE HOMEOWNERS: Loan Mod Scammers Step In When Loan Servicers Refuse To Provide Help, a recently issued report by the National Consumer Law Center:
  • Information is beginning to surface about a new variety of foreclosure rescue involving the sale of a house that is upside down (that is, more is owed on the house than is worth). Indeed, some loan modification websites tout their expertise in short sales.


  • In one version of a short sale scam, the realtor and the buyer collude to conceal the full price of the sale from the lender so that they can pocket the difference, often by using option contracts and back-to-back closings.(1) This version is aimed primarily at defrauding the lender, though the homeowner is also hurt by an artificially low sales price, either by being liable on a deficiency or by paying taxes on a higher forgiven balance.(2)

  • In another version of a short sale scam, the buyer takes over the mortgage without satisfying the due-on-sale clause and the sale is concealed from the lender.(3) The owner of a We Buy Houses franchise explained at trial that these deals work when the homeowner is only 10% to 15% upside down, because the home is sold to a buyer who cannot qualify for a regular loan and so is willing to pay a premium above fair market value to avoid a credit check. Depending on how the transaction works, the homeowner may be out cash, lose the home, and still end up with a foreclosure on the credit report.


  • These transactions may begin as traditional loan modification contracts, in which the homeowner pays a fee in the hopes of saving the home. The rescuer may then pressure the homeowner into agreeing to the sale—and into paying a sales commission to the rescuer. Thus, the homeowner has to pay two fees, loses the home, may still have her credit blemished by a foreclosure if the new buyer defaults, and may be exposed to liability for violating the contract.

For more, see What Else Are They Selling? Loan Mods That Turn Into Questionable Short Sales? (begins at page 17 of the report).

See also ATIF Refuses To Issue Title Insurance On Controversial Short Sale Deals Involving Simultaneous Investor "Flips" - involving the recent decision by title insurance underwriter Attorneys' Title Insurance Fund to refuse to issue title insurance policies on deals made using the controversial method for closing flips of short sales (possibly recognizing the potentially fraudulent nature of these transactions).

(1) Also known as "flipping."

(2) The NCLC report cites three media reports indicating the existence of this scam. See Nick & Cindy Davis, Sellers Beware of Short Sale Scams (Apr. 21, 2009); Bill Gassett, Short Sale Scammers We Buy Houses (Aug. 14 2008); New "short sale" scam taking root?, St. Petersburg Times (April 22, 2008).

(3) The NCLC report cites an article appearing on several real estate investing websites which explains how the due on sale clause is avoided. "The game for us is how to transfer ownership to the property without getting caught by the lender." Attorney William Bronchick, There's No "Due on Sale" Jail (an article which pre-dates the foreclosure crisis and the loan modification explosion).

Fire Damage, Code Violations, Growing Fines, Unresolved Insurance Claim, 50+ Apts. In Foreclosure May Spell Doom For 182-Unit C. Florida Condo Complex

In Titusville, Florida, Florida Today reports:
  • Code violations keep racking up at Bay Towers Apartments, the fire-scarred riverfront complex facing a crippling cash crunch. The south tower remains condemned after a May 2008 fire. Since Feb. 6, Titusville officials have fined the property’s South Florida owners up to $1,400 per day for damaged elevators, stairwells, plumbing and other problems. As of today— 159 days later — these ongoing fines total $222,600.


  • Bay Towers Development LLC unsuccessfully targeted the aging 182-unit complex for an apartment-to-condominium conversion during the real estate boom. [Registered agent Bernie] Feldman estimated that the fire wreaked $5 million in damages, but the complex’s insurance company only paid about a quarter of that. He said his company cannot bring the building into code compliance without this additional money. An insurance-claim appeal remains unresolved, he said.

  • Making matters worse, Feldman said 104 units were sold before the fire — and more than 50 have slipped into foreclosure. He said the condominium association faces tremendous financial problems.(1)

For more, see Titusville condo owners face fines for violations.

(1) According to the story, one of the remaining condominium owners is a Boca Raton resident who paid $180,000 for a two-bedroom unit in the south tower in September 2006. Testifying before the code board, he called the Bay Towers situation “ludicrous,” “a quagmire,” “just ridiculous” and “fraudulent from top to bottom.” He used the condominium as a weekend destination until the fire struck. Three days after the blaze, Titusville building officials declared the structure unsuitable for human habitation. “They need to fix this. I want to get inside my condo. Fourteen months have gone by,” he said. “I see my mortgage payment leave my bank account, for what? For nothing. I can’t use what I rightfully own. It’s maddening now,” he said.

Indiana Man Gets One Year Home Confinement In Flipping Scam That Left Homes In Foreclosure, Unwitting Investors Holding The Bag

From the Office of the U.S. Attorney (Indianapolis, Indiana):
  • Marvin G. Hampton, 66, Noblesville, Indiana, was sentenced to 12 months home confinement months [last week ...] following his guilty plea to mortgage fraud, announced Timothy M. Morrison, United States Attorney for the Southern District of Indiana.(1)


  • Between 2003 and 2005, Hampton operated a real estate company, Glen Mar Land & Home Corp. Hampton’s company purchased distressed homes in economically disadvantaged neighborhoods for between $5,000 and $30,000. Hampton then performed a minimal number of repairs, and sold the properties for between $60,000 -$70,000. Hampton recruited individuals as investors to purchase the properties. He promised to pay the down payments and gave the investors $1,500 incentive fee to purchase the homes. Hampton set the prices instead of the prices being arms length transactions. None of these facts were disclosed to the lenders. As additional enticements to the investors, Hampton also promised them that he would find renters and make up missed payments for the first six months. Nearly all the properties are now in foreclosure. Hampton walked away with an average of $20,000 profit on each property.

For the press release, see Noblesville man sentenced for mortgage fraud.

(1) The sentence reportedly also includes one year supervised release following Hampton’s time in home confinement, and an order requiring Hampton to make restitution in the amountof $262,424.76, to three victim lending institutions.

Ex-Twin Cities Loan Officer Taken Down By Jury Verdict Finding Guilt To 17 Counts In Mortgage Fraud Racket

In Hennepin County, Minnesota, the Minneapolis Star Tribune reports:
  • A former loan officer at a Twin Cities mortgage company was convicted [last week] of 17 counts of theft by swindle and two counts of racketeering for his role in a sprawling scheme involving homes in north Minneapolis, Brooklyn Center and Golden Valley. After a seven-week trial and deliberations over two days, a Hennepin County District Court jury found Marlon Pratt guilty on all counts. Pratt, a former loan officer for Universal Mortgage Inc., showed little reaction as Judge Steven Lange read the verdicts.(1)

For more, see Jury convicts former Twin Cities loan officer in mortage fraud case (Marlon Pratt was accused of inflating the prices of homes on loan applications and taking kickbacks. Five others have been convicted or pleaded guilty in the scheme).

Go here for other posts on the Twin Cities' area Universal Mortgage straw buyer, home flipping scams.

(1) According to the story, five other men already have been convicted or pleaded guilty for their roles in the fraud perpetrated by Universal Mortgage. The scheme involved falsifying employment histories, incomes, net worths and buyers' intentions to live in the homes. All the homes ended up in foreclosure. Assistant Hennepin County Attorneys Kirstin Canski and Tom Fabel argued that Pratt received $700,000 in kickbacks for inflating numbers on $3.2 million in loans made for 17 homes.

Tuesday, July 14, 2009

BofA Moves Against Judge For Refusing To Boot Ailing Elderly Couple Onto Street Following Foreclosure Of Dilapidated Bungalow Over Unpaid $7K HELOC

In Grand Rapids, Michigan, The Michigan Messenger reports:

  • Bank of America is suing a Grand Rapids District Judge Michael Christensen for allowing an ailing, elderly couple to remain in their foreclosed home until the couple can move, the Grand Rapids Press is reporting. The couple purchased the house in 1976, for $12,000 and had paid it off. However they took out a line of credit, and ended up defaulting on nearly $7,000 of that credit line. In Nov. the judge ruled they had to go, but in April he set aside that ruling, giving the couple another three months.(1)

For more, see Bank suing Grand Rapids judge for allowing elderly, ailing couple to remain in foreclosed home.

For The Grand Rapids Press story, see Grand Rapids judge tells bank to let ailing couple stay in foreclosed home until they are able to move.

(1) For story updates, see The Grand Rapids Press:

Nevada Governor Signs Emergency Regulations Imposing Tougher Controls In Fight Against Foreclosure & Loan Modification Scams

In Carson City, Nevada, the Las Vegas Sun reports:
  • Gov. Jim Gibbons has signed emergency regulations to allow the state to impose tougher controls to stop foreclosure and loan modification scams. The regulations permit the state Division of Mortgage Lending to license loan modification and foreclosure consultant companies and their agents. [...] The state will be able to charge $750 for an application for a company and $100 additional for each branch office. And there will be a $500 a year fee for a company. An agent application fee is $185. The division must adopt permanent regulations by Aug. 27.

Source: Regulations allow controls on loan modification industry.

Connecticut's Voluntary Foreclosure Mediation Program Now Mandatory

In Hartford, Connecticut, the Hartford Courant reports:
  • As mortgage delinquencies continue to mount in Connecticut, the governor has signed three bills to help homeowners struggling with mortgage payments — including making participation in the state's foreclosure mediation program mandatory as of July 1. Gov. M. Jodi Rell said the legislation is aimed at homeowners who have lost their jobs, have taken a cut in pay or were victims of abusive lending practices — not those who bought more house than they could afford.

For more, see Rell Signs 3 Bills To Help Homeowners With Mortgage Payments.

See also The Connecticut Post: New law makes mortgage meltdown help mandatory.

Missouri AG To Testify At Senate Hearing On Growing Complaints Of Mortgage, Debt Repair Fraud

In Jefferson City, Missouri, The Associated Press reports:
  • Missouri Attorney General Chris Koster is scheduled to testify before a U.S. Senate committee(1) about growing complaints of mortgage and debt repair fraud. [...] Koster said he planned to outline the growing number of complaints his office has received about fraudulent schemes to help people with mortgage or debt problems. In the past few months, Missouri has filed suit against seven companies offering mortgage refinancing, foreclosure relief or debt settlement services.

Source: Mo. AG Koster to testify about fraud complaints before U.S. Senate Commerce Committee.

Go here for AG Koster’s prepared statement.

(1) The Senate hearing, The Economy and Fraud: Protecting Consumers During Downward Economic Times, is scheduled for Tuesday, July 14, 2009, 10:00 AM.

FTC Identifies Individuals Accused Of Making Deceptive Claims Of Affiliation With Free Federal Foreclosure, Loan Modification Assistance Programs

The Federal Trade Commission recently announced:
  • A U.S. district court has ordered newly named defendants to stop making deceptive claims that they are affiliated with free federal government programs, such as Making Home Affordable.

  • On May 14, 2009, the FTC charged that Internet search ads were diverting homeowners from free counseling available through government-endorsed to Web sites that marketed loan modification services for a fee. The defendants’ identities were then unknown, and the district court on May 15, 2009, entered a temporary restraining order that barred the deceptive practices and authorized the FTC to identify the unknown defendants. The Commission has now identified several of the previously unknown parties in this case, and amended the complaint accordingly.(1)

For the FTC press release, see Court Bars False Claims of Affiliation with United States Homeowner Relief Programs.

For the amended lawsuit, see FTC v. Cantkier, et al.

(1) The amended complaint names the following advertisers that placed deceptive online ads for the Making Home Affordable program: 1) Jeffrey Altmire, 2) Sean Cantkier, 3) Michael Haller; 4) Lisa Roye, 5) Scot Lady, 6) Alan LeStourgeon, 7) Kean Lee Lim, 8) Greg Rivera, and 9) Neil Sperry. At the FTC’s request, following a preliminary injunction hearing on June 25, 2009, the U.S. District Court for the District of Columbia entered orders barring eight of the defendants – four of whom agreed to the orders – from engaging in the allegedly illegal conduct. loan modification

Consumer Advocate Calls For Ban Against Upfront Fees For Loan Mod Help Or Any Comp Unless Mortgage Workout Actually Helps Distressed Homeowners

The Cleveland Plain Dealer reports:
  • The National Consumer Law Center [NCLC] is calling for a ban on advance fees for loan modification help and a federal rule that no one can charge homeowners fees unless the loan modification actually helps homeowners avoid foreclosure. The NCLC's report was released [Friday], just ahead of the Federal Trade Commission's deadline for comments on whether the agency should take steps to declare some loan modification practices unfair and deceptive.

For more, see Consumer law group urges FTC to save homeowners from foreclosure rescue scams.

For NCLC's report, see DESPERATE HOMEOWNERS: Loan Mod Scammers Step In When Loan Servicers Refuse To Provide Help.

Defeated Bankruptcy Cramdown Proposal Being Reconsidered By Some Lawmakers In Light Of Failing Voluntary Loan Modification Program

The Washington Independent reports:
  • The Obama administration has all but abandoned it, and the Senate has already voted it down. But a proposal to allow struggling homeowners to escape foreclosure through bankruptcy got a boost [last week] from a small band of House Democrats convinced that voluntary mortgage modifications aren’t alone solving the housing crisis.

  • They have a point. Despite White House efforts to entice mortgage lenders and servicers to alter the terms of mortgage loans at their own discretion, participation in the program has been meager. As a result, hundreds-of-thousands of homeowners continue to face foreclosure months after the program took effect. That instability in the housing market has, in turn, stifled federal efforts to heal the banks and get them lending prolifically again. In the eyes of some Democratic lawmakers, the combination of trends is evidence enough that Congress needs to return to its bankruptcy proposal to save the homes that the voluntary strategy is not.

For more, see Band of House Dems Revisits Cramdown (As Foreclosure Crisis Worsens, Critics of Voluntary Loan Modification Program Speak Up).

Orlando Cops, Ex-Wife Nab Alleged ID Thief Accused Of Defrauding Non-Profit Home For The Mentally Challenged; Took Out Loan, Leaving It In Foreclosure

In Orlando, Florida, WFTV-TV Channel 9 reports:
  • Police say a man took identity theft to a whole new level. He didn't steal a person's identity. He stole it from a non-profit house that helps mentally challenged people. Police say Afries Rodriguez even took out a second mortgage on the Kat Cadogan Home for the mentally challenged. Now, Rodriguez has been captured thanks to his ex-wife, who helped his victims lure him back to Florida after he was hiding out in Georgia. [...] The house is the Kat Cadogan Home, a place where mentally-challenged adults and children can live safely. But those who run the home say Rodriguez likely destroyed it all by posing as the non-profit's president and essentially stealing its identity.


  • As smart as his scams were, his ex-wife would outsmart him. Tuesday, she lured Rodriguez to a parking lot, with a promise of lawsuit settle[ment] money, where Orlando police took him down. He's being held without bond on 19 different charges with more to come.

For more, see Man Steals Non-Profit Organization's Identity. DeedContraTheft

Mass. Man Charged In Alleged Foreclosure Rescue Scam; Allegations Include Collecting Rents From Victims' Properties, Failing To Make Mortgage Payments

In Fall River, Massachusetts, The Herald News reports:
  • City businessman Joseph Pereira is facing more larceny charges after two victims told police they were swindled in a scam that resulted in the loss of their homes. Pereira, 44, [...] has been charged with two counts each of larceny over $250 by a single scheme and unauthorized practice of law, subsequent offense.(1) [... Authorities say they were] recently approached by two alleged victims claiming Pereira said he could help the men avoid foreclosures on their properties.

In the first instance, according to authorities, a Fall River man reached an agreement with Pereira for assistance, after which he began receiving delinquency notices. He said the matter was brought to Pereira’s attention and was told it would be taken care of. But soon after, the victim learned his two properties were being foreclosed. The victim reported losing a $22,000 Harley Davidson motorcycle and an estimated $110,000 after Pereira collected rent from tenants at the Fall River property and allegedly pocketed the money.

In the second instance, according to authorities, a Rhode Island man who said that he feared losing him home said he contacted Pereira, and was told that for $2,000 cash, Pereira would take care of the mortgage problems. A short time later, the victim reported he was notified his house was going into foreclosure and that no payments had been made since he made the arrangement. The man reported losing his home and the $2,000 given to Pereira.

For the story, see Pereira arrested on new fraud charges.

(1) Reportedly, Pereira has been charged multiple times since January, including larceny by false pretense, larceny greater than $250 by single scheme, unauthorized practice of law, embezzlement, employer failing to pay wages in a timely manner and possession of ammunition without a FID card. See:

According to the story, these charges later led to a Superior Court indictment in June on 12 felony counts of larceny by a single scheme greater than $250 and one count of unauthorized practice of law. He’s also been arraigned 38 times since 1982, with 34 of those charges larceny related. He spent 15 months in jail in 1996 and 1997 for similar charges, the story states.

Monday, July 13, 2009

Chicago-Area Homeowners In Foreclosure Urged To Show Up To Court "Case Management Call" To Seek Assistance

In Chicago, Illinois, the Southwest News Herald reports:
  • Cook County Circuit Court Clerk Dorothy Brown said a recent administrative order issued by a Chancery Court judge represents a second chance for many homeowners facing foreclosures to have their cases heard in July and August, noting that some may be able to save their homes through mediation. Brown is getting the word out about Chancery Division Presiding Judge Dorothy Kinnaird’s administrative order, which provides that a “case management call” be set for the mortgage foreclosure section of all pending mortgage foreclosure cases filed prior to April 1, 2009.(1)


  • A few of the issues case management hearings will consider are: whether the necessary requirements have been met to foreclose; whether an Access to Justice attorney should be appointed; whether credit counseling is appropriate; and whether the case is appropriate for a court-ordered mediation.

For more, see Second Chance To Hear Cases Of Foreclosures.

(1) Brown especially urges people whose banks are not willing to do modifications to come to court for case management. She said people who show up for the case management hearings in July and August will automatically be given a 30- to 45-day continuance to allow them to go to the Pro Se Advice Desk for assistance with their cases. Brown noted that individuals do not need attorneys in order to come to the case management calls. Defendants may also seek to have the $188 appearance fee waived.

Central Florida Feds Expect To Bag 100+ Suspects In Upcoming Mortgage Fraud Indictments

In Central Florida, the Bradenton Herald reports:
  • Federal authorities are investigating several suspected cases of mortgage fraud in Manatee and Sarasota counties as part of a larger statewide crackdown, the Bradenton Herald has learned. Those investigations are zeroing in on organized groups and industry insiders suspected of defrauding mortgage lenders out of tens of millions of dollars during the housing boom. The cases, part of a crackdown that began in March, could result in criminal charges against more than 100 people locally and throughout Florida later this year.


  • The FBI and U.S. Attorney’s Office in Tampa confirmed the investigations Thursday but declined to discuss specifics other than to say they’re part of a concerted “surge” to combat the growing problem. “We have investigations going on throughout the (middle) district (of Florida), from Naples to Jacksonville and everywhere in between,” U.S. Attorney A. Brian Albritton said. “We’re trying to do as many cases as we can, and I expect it to be over 100 defendants.”

  • Albritton said authorities hope to file charges against most of the defendants by November. In some cases, prosecutors have already begun negotiating potential plea deals, he said. The effort already has netted its first convictions: Three people recently received prison sentences of 46 months to 22 years for a $30 million mortgage fraud scheme in Cape Coral that was investigated by the Internal Revenue Service and the FBI.

For more, see FBI investigating local mortgage fraud.

Trustees In Mortgage Securitizations May Begin Finding Themselves In The Crosshairs As "Joint Venturers" In Lawsuits Seeking To Impose Fraud Liability

The New York Times reports on the hot water facing many of those big institutions who played any part in the creation and peddling of mortgage securitized interests in toxic loans:
  • Some legal experts point to a number of cases in which plaintiffs contend that firms involved in the securitization process, like trustees hired to oversee the pools of loans backing securities, worked so closely with the lenders that they should face liability as members of a joint venture. And these experts see a rising receptiveness to this argument by some courts.(1)

Among the cases referred to in the story is current litigation brought by the Atlanta Legal Aid Society on behalf of a couple fighting foreclosure of an allegedly abusive and predatory loan. They seek punitive damages from the lender, NovaStar Mortgage Inc., as well as from the original trustee (JPMorgan Chase) and the subsequent trustee (Bank of New York Mellon).(2)

Another lawsuit referred to in the story was one targeting lender First Alliance, in which its main backer, Lehman Brothers, found itself hammered with some of the liability.(3)

A third lawsuit referred to involving the issue of liability for abusive lending going beyond the original lender resulted in a settlement after the court denied two motions to dismiss it.(4)

For the story, see Looking for the Lenders’ Little Helpers.

(1) From the story:

  • As we are unpeeling what was happening on Wall Street, we may see that Wall Street didn’t find the safety from litigation risk that it hoped to find in securitization,” said Kathleen Engel, a professor at Cleveland-Marshall College of Law at Cleveland State University. “I think there is potential for liability if borrowers can engage in discovery to see exactly how much the sponsors were shaping the practices of the lenders.”

(2) From the story:

  • We contend that the trustee has direct liability on the theory that even though they were not sitting at the loan closing table, they were involved in the securitization and profited from it,” said Sarah E. Bolling, a lawyer in the Home Defense Program at the Atlanta Legal Aid Society who represents the [homeowners]. “The prospectus had been written before the loan was closed. If this loan was not going to be assigned to a trust, it would not have been made.”

(3) From the story:

  • More than 7,500 borrowers had successfully sued First Alliance for fraud, and in 2003 a jury found that Lehman, which had lent First Alliance roughly $500 million over the years to finance its lending, “substantially assisted” it in its fraudulent activities. Lehman was ordered to pay $5.1 million, or 10 percent of damages in the case, for its role.

(4) From the story:

  • That matter turned on the language in the securitization’s pooling and servicing agreement, which provides details not only on the types of loans in a pool but also on the relationships of various parties involved in it. Diane Thompson, a lawyer with the National Consumer Law Center, said that the meaning of the agreement was that “the trustee was a joint venture with the originator and was therefore responsible for everything that happened in that joint venture.” Many such agreements, she said, create a joint venture by force of law. “Everybody I know that has tried this argument has had pretty good success. Absolutely we are going to see more of these cases.”

Onslaught Of Chapter 11 Filings Expected From Condo Associations Suffering From Decrease In Maintenance Fee Collections, Deadbeat Unit Owners?

In South Florida, the Daily Business Review reports:
  • In a move an increasing number of condo associations are expected to follow, the Maison Grande in Miami Beach has filed for bankruptcy.(1) Facing almost $1 million in claims by unsecured creditors, a troublesome recreational lease, and at least 100 unit owners [out of 502] delinquent on payments of their fees, the association filed a Chapter 11 petition last month in U.S. Bankruptcy Court in Miami. As one of the first condo association bankruptcies of the current economic crisis, “it’s definitely cutting edge,” said attorney Mark Schorr, a solo practitioner in Fort Lauderdale who represents the Maison Grande association.


  • [Attorney Robert] Kaye represents a Tamarac condo association that is considering bankruptcy. With half of its 280 unit owners delinquent on their maintenance fees, the association is in the red to the tune of $50,000 per month, he said. Kaye also represents a Palm Beach County condo association that is likely to file for bankruptcy after losing a court case against a roofing contractor. A judgment of $130,000 could grow to more than $300,000 after attorney fees and court costs are added, he said. “They can’t afford that, and 20 percent [of 120 unit owners] already are delinquent in paying fees,” Kaye said. These associations, which he declined to name — and many more — are likely to file for bankruptcy protection as they run out of funding options, he said.


  • As foreclosure filings have soared in the wake of the housing and financial market bust, they can take almost two years to complete. That means condo associations still must maintain the foreclosed units, and the remaining condo owners must pick up the tab of their non-paying neighbors. “As long as lenders are extending foreclosures into 18 months and two years, the associations are pretty well stuck because there is no cash flow and they can’t raise funds necessary to operate,” Kaye said.(2)

For more, see $1 million debt sends condo association into Chapter 11.

(1) Go here for the Maison Grande's Chapter 11 Case Management Summary, filed with the Federal Bankruptcy Court in Miami pursuant to Local Rule 2081-1(B), and which provides the facts and circumstances surrounding the filing of its bankruptcy petition.

(2) In a related story, see South Florida Sun Sentinel: Community associations confront squatters (Options are limited for associations):

  • In some cases, squatters are owners of units in foreclosure who stop paying mortgage or maintenance fees and leave their electricity, cable and water bills for the rest of the association residents to pick up while they live cost-free. In others, they are holdover renters in units or homes in foreclosure who stay put without paying a dime in rent or other fees.

$900K Real Estate Deposit Part Of $2.2M In Escrow Cash Ripped Off From Clients By NYC Attorney, Says Manhattan DA

From the Office of the Manhattan District Attorney:
  • Manhattan District Attorney Robert M. Morgenthau announced [Wednesday] the second indictment charging a lawyer with stealing settlement and escrow monies from his clients. This second indictment charges the defendant with stealing more than $1.5 million from five clients. This follows a previous indictment that was unsealed on May 19, 2009 charging the defendant with stealing $652,600 from 11 medical malpractice and personal injury clients. The total amount the defendant is charged with stealing in both indictments is $2.2 million.

  • MARC A. BERNSTEIN, 54, of Bernstein & Bernstein, LLP in Manhattan, was arrested [Wednesday] on charges of grand larceny and scheme to defraud. [...] The investigation leading to [the current] indictment, and the one preceding it, revealed that BERNSTEIN engaged in a scheme to steal from his victims, many of whom were affected by medical malpractice or injury suffered as a result of car accidents. In the typical case, BERNSTEIN negotiated a settlement on behalf of the victim, took control of the incoming settlement money and then stole it.

  • In one instance that has now given rise to charges, Bernstein, acting as an escrow agent, received $900,000 in real estate deposit money on a contract of sale for the purchase of a building in lower Manhattan and stole that money from the intended purchaser of the property.(1)

Go here for the entire Manhattan DA press release.

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

(1) For those who have been screwed out of money or property through the dishonest conduct of a New York attorney in the course of providing legal representation, and seek some financial reimbursement for the screwing over, go to the The Lawyers’ Fund For Client Protection Of the State of New York for more information. For other states and Canada, see: