Saturday, July 25, 2009

Unwitting Prospective Buyer Gets Caught Up In Controversial Short Sale Flipping Attempt Involving Vacant Home In Foreclosure

In DeWitt, Michigan, columnist John Schneider of the Lansing State Journal recounts the story of a local woman who got screwed over in an attempt to buy a vacant home in foreclosure from a local real estate operator, himself attempting to acquire the property through a short sale, to be followed by an immediate "flip" of the home at a higher price to the woman (all without the apparent knowledge of the lender that was being asked to approve the short sale).
  • Reeling from a traumatic divorce-in-progress, Christina Thelen moved, with her three children, into her aunt's basement. That was in February. In March, things started looking up for Thelen when she made an offer on a three-bedroom ranch in foreclosure on Rambler Road in DeWitt. The vacant house had been on the market since August. The price had dropped, in increments, from $159,000 to $128,900 - with no takers. Thelen offered $118,000, or so she thought.

  • Responding to my inquiry Wednesday, Bank of America's Jumana Bauwens said bank records indicate the offer was only $74,000 - and was rejected. When I told Thelen that Wednesday, she was shocked. "I can understand why they would reject that," she said.


  • Working through a company that specializes in short sales - EZ Home Ownership Realty of Grand Ledge - the agent representing the seller, Steve Osmar of the RE/MAX office in Delta Township, was informed that Countrywide, the mortgage holder at the time (later acquired by Bank of America) had verbally accepted the deal. Jerry Ballard of EZ Home Ownership told me Wednesday that Countrywide had, indeed, OK'd his offer verbally. However, Bauwens said a verbal acceptance would run contrary to standard practice.

  • As for the difference between the $118,000 Thelen was willing to pay and the $74,000 EZ Home Ownership offered, when I asked Ballard about it, he didn't have immediate access to his records, so he couldn't confirm the $74,000 figure. He did say, however, that the difference between what a buyer is willing to pay [him] and the offer his company gets a bank to accept represents various fees and expenses, plus his profit. Listing the various agents involved, Ballard said, "None of us is a charity."

  • Based on the belief there was a verbal acceptance - plus the fact that Thelen was, as Osmar put it, in a "housing crisis" (her and her three kids living in a basement) - Osmar drew up a lease agreement that allowed Thelen and her kids to move into the Rambler Road home the final week of May. "This home meant so much to us," she said. Thelen expected to close on the house in June, and began fixing it up. She painted, repaired the air conditioning, rehung kitchen cabinet doors, spread mulch ... About $1,200 worth, she figured.

  • On Father's Day, Thelen got the bad news: The deal had fallen through. She and her children would have to vacate the house.

For the story, see Short sale stumble gives would-be homeowner 'short end'.

For other posts involving similar types of short sale flipping deals as the one described above, see:

NYC Woman Busted For Clipping $50K In Upfront Rent Deposits From Low Income Residents Seeking Help In Obtaining Affordable Section 8 Rentals, Say Cops

In New York City, the New York Post reports:
  • A slick-talking woman posing as a real-estate agent conned about $50,000 from low-income residents looking for affordable housing in Manhattan and The Bronx, cops said [Wednesday]. Josie Almonte, 32, a blond-haired beauty with a sophisticated look, would approach her victims promising to help them expedite their applications for Section 8 housing, sources said. She would ask them for a rent deposit up front to put down on an apartment, then never file their application and keep the money, the sources said. She was busted Monday.


Lender Reverses Position After Media Applies Heat; Now Agrees To Waive $9K Prepayment Penalty For SW Florida Couple Nearing Foreclosure

In Charlotte County, Florida, WINK News reports:
  • Punished for paying a mortgage early? That's what one Charlotte County couple says happened with their lender, but now WINK News Call for Action helps that couple avoid foreclosure. [...] Janice and Rick Brooks could no longer afford their Charlotte County home, so they put it up for sale. [Now] it will officially sell, and they'll settle their debt with their lender. But that almost didn't happen. "We would literally have been out that door with no where to live or we would have been stuck in here, forced into foreclosure," Janice Brooks says.

  • That's because they owed the bank an additional $9,000 -- a penalty for paying their mortgage before it's due. The Brooks say they were punished for always paying on time. "(The lender) said if I had been 90 days in [arrears], they would be more apt to waive the penalty because it would show that we're in a hardship case," Janice Brooks says. The Brooks begged to have that penalty waived in lieu of the alternative -- foreclosure. "They denied us four times. Four times," Janice Brooks says.

  • That's when WINK News got involved -- calling and sending emails to their mortgage company, wanting to know why it would rather a homeowner go into foreclosure than accept a payment that covered all of the debt -- minus that pre-payment penalty, that under contract, the lender could -- and in this case -- did choose to waive. [...] The couple says no one from their mortgage company would return their calls until WINK News started asking questions.

For the story, see WINK News saves family from foreclosure.

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

Feds, State AGs Go On Attack Against Debt Settlement & Collection Firms Engaged In Allegedly Fraudulent Activities

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum [last week] announced that a settlement has been reached in a case brought by Chase Card Services against affiliated Hess Kennedy companies which engaged in fraudulent debt settlement activities. Under the settlement approved earlier this week, Chase will release the credit card debt of approximately 13,000 consumers nationwide, including over 900 Florida residents, who contracted with the Hess Kennedy companies for the fraudulent services. Laura Hess and the Hess Kennedy Companies are currently in Receivership as a result of a lawsuit filed by the Attorney General’s Office in February 2008.

For the entire Florida AG press release, see Third Agreement Reached in Hess Kennedy Debt Settlement Case.


From the Office of the Texas Attorney General:

  • Texas Attorney General Greg Abbott [earlier this month] charged a Houston-based credit repair firm with violating the Texas Deceptive Trade Practices Act. The state’s enforcement action names Jubilee Financial Solutions LP, also known as The Credit Card Solution (TCCS) - a self-proclaimed “debt invalidation” business - its parent company, Jubilee Financial Management LLC, and the companies’ owner, Robert Mitchell Lindsey. [...] Marketing materials obtained by state investigators shows the defendants claimed their “debt invalidation” program can eliminate customers’ debt in as little as 12 to 18 months by relying upon federal consumer protection laws. In videos on the defendants’ Web site, Lindsey claims that TCCS has “gotten rid of $150 million of credit card debt.”

For the entire Texas AG press release, see Texas Attorney General Abbott Charges Houston “Debt Invalidation” Firm with Unlawful Conduct.

For the Texas AG's lawsuit, see State of Texas v. Jubilee Financial Solutions LP, dba The Credit Card Solution, et al.


From the Office of the Ohio Attorney General:

  • Ohio Attorney General Richard Cordray [last week] filed a lawsuit against Solon-based National Enterprise Systems, Inc. (NES) for harassing Ohioans. The collection agency is accused of using egregious methods in attempts to collect alleged debt from Ohio consumers. "Everyone has the right to be treated fairly under Ohio law, regardless of possible debt owed," Attorney General Cordray said. "More than 200 consumers filed complaints with my office saying NES used threats, harassment and deception to collect debts. These practices are unacceptable and will not be tolerated." [...] The [Ohio AG's] investigation revealed a pattern of illegal practices, such as calling and harassing consumers' coworkers and family members, calling before 8 a.m. and after 9 p.m., using a busive language, attempting to collect debts consumers did not owe, failing to verify debts and making unauthorized withdrawals from consumers' bank accounts.

For the entire Ohio AG press release, see Cordray Takes on Ohio Debt Collector for Harassment.


From the Office of the West Virginia Attorney General:

  • A Braxton County woman authorized an Ohio collection agency to charge $5,000.00 to her credit card because the company was threatening to have her daughter arrested at work. The same collection agency told the father of a Kanawha County woman that his daughter would be "arrested for fraud of the federal government" unless she made an immediate payment of $5,000.00 toward a student loan. Such strong-arm collection tactics are effective, but much like holding a gun to someone’s head, they are illegal. It is precisely this type of conduct that Attorney General McGraw seeks to stop by filing a lawsuit today against the company that allegedly made these threats to several West Virginians, National Enterprise Systems, Inc. ("NES") of Solon, Ohio. McGraw’s complaint alleged a wide range of other unlawful conduct, including adding unlawful collection fees to tuition owed by students to West Virginia colleges and universities.

For the West Virginia AG press release, see Attorney General McGraw Sues Ohio Collection Agency, National Enterprise Systems; Asks Court to Stop Firm from Making Unlawful Threats.


From the Office of the Washington State Attorney General:

  • Attorney General Rob McKenna [...] praised the Federal Trade Commission for tackling a Tacoma company that preyed on financially strapped consumers. He urged consumers to take advantage of low-cost credit counseling services. “When you’re drowning in debt, you’re desperate,” McKenna said. “But if you’re not careful, your chosen rescuer may toss you an anvil instead of a life preserver.” [...] Mutual Consolidated Savings in Tacoma was sued by the FTC for allegedly using robo-calls to aggressively target consumers then charging fees of $690 to $899 while providing little help. The FTC froze the assets of the company’s owners. “Mutual Consolidated Savings has been the source of numerous consumer complaints,” McKenna said. “The Federal Trade Commission’s move to shut down its Tacoma call center means that fewer consumers will be misled by the company’s promises to bail them out of debt.”

For the entire Washington State AG press release, see McKenna warns consumers about debt-relief scams (Attorney General praises FTC for shutting down Tacoma company).


(1) According to the Florida AG, the lawsuit against Laura Hess was filed by the Attorney General’s Economic Crimes Division and named Hess’s Broward County law firm and several other Florida-based companies she controlled. The lawsuit accused Hess of signing thousands of credit card debtors up for debt management services and claiming the law firm would provide legal services to cancel debts for pennies on the dollar. Representatives of Hess allegedly told consumers that the companies had audited the consumers’ accounts and found numerous violations under the Fair Credit Billing Act, then sent notices to creditors disputing all charges. Consumers were falsely told that once these notices were issued, the consumers did not have to pay creditors and creditors could not sue or otherwise take action against them. This deception led to lawsuits and other actions against several debtors.

Friday, July 24, 2009

“We Want To Send People To Jail!” Says Prosecutor Referring To Loan Modification Scams; Cites "Lawyer Renting" As Attempt By Some To Avoid State Law

In Southern California, the Orange County Register reports:
  • The Orange County District Attorney has expanded efforts to combat foreclosure rescue scams and other real estate fraud cases, as the worst housing downturn in decades results in thousands of potential victims. Elizabeth Henderson, assistant DA, said 30% of the cases handled by the office’s major fraud unit are tied to real estate, up from an average 10% in past years. The DA has two prosecutors, two investigators and a paralegal focused just on real estate fraud, she said.


  • We want to send people to jail,” she said. The issue is not just that someone might lose $2,000 or more [for a purported loan modification], but that his or her house proceeds to foreclosure while waiting for help that never comes, Henderson said. Defrauding just one person could translate to a maximum penalty of three years in prison for grand theft, she said. Subsequent victims could add eight months to a sentence per person. Loan mod scammers could be committing other crimes, such as fraud, practicing without a license, and breaking rules tied to call centers.

  • Henderson said former subprime salespeople are now selling loan modifications — or promises to help a homeowner avoid foreclosure by getting a bank to lower his monthly payments. Such companies sometimes have no intention of helping anyone, she said.


  • To avoid having to get a real estate license to do loan mods, some companies are “renting” lawyers, she said. Attorneys can negotiate loan mods without a real estate license or a pre-approval from the Department of Real Estate. But the lawyer may just be a front who never touches a loan file, she said.(1)

For more, see District Attorney steps up real-estate fraud investigations.

(1) For those attorneys who have yet to "receive the memo", see ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications, an advisory of the Committee on Professional Responsibility and Conduct of the State Bar of California setting forth prohibited activities by attorneys when associating with loan modification firms.

California Woman Faces Grand Theft, Forgery-Related Charges For Allegedly Impersonating Another In Buying, Financing Home With $917K Loan

From the Office of the San Bernardino County, California District Attorney:
  • On July 15, 2009, Investigators with the San Bernardino County District Attorney's Real Estate Fraud Unit arrested Anita Mendoza, 44, of Chino Hills, for eight felony counts including grand theft, forgery, and filing forged documents with the County Recorder’s Office. In 2006, Mendoza allegedly forged the victim’s signature on a Grant Deed and Deeds of Trust. Two loans, totaling $917,000, were taken out in the victim's name for the purchase of a Chino Hills residence. The victim had no knowledge of these loans until months later when she was contacted by the lending institution for lack of payment. Mendoza was booked into the West Valley Detention Center and bail was set at $1,147,000.

For the San Bernardino County DA press release, see Chino Hills Woman Arrested for Real Estate Fraud.

Last Minute Closing Delays Hit Foreclosed Home Buyers As Some Lenders Drag Their Feet When Recording Legal Title To Repossessed Collateral

In Central Ohio, The Columbus Dispatch reports:
  • Stacee Maurer thought she'd found her perfect first home: a three-bedroom Cape Cod off High Street north of Graceland Shopping Center. On May 22, she signed a contract to pay $93,000 for the foreclosed property -- almost $30,000 less than it had sold for in 2006. Then she landed where a growing number of central Ohio homebuyers are landing: in foreclosure limbo.

  • Shortly before she was scheduled to close on the home, Maurer, 24, learned the deal was delayed because the deed transferring the property to the bank hadn't been recorded. In late June, she moved into her parents' home, where she has been waiting -- and is now hoping to close today.

  • Real-estate agents, title companies and others who deal with foreclosed properties say Maurer's situation is increasingly common. Eighteen months or more can pass between the time a foreclosure notice is filed and a home is resold, they say. But now, delays are occurring even after the bank repossesses the property, holding up or crushing deals that would put homes in new buyers' hands.(1)

For more, see Growing number of buyers stuck in limbo.

(1) One local Realtor reportedly observed: "What used to take two weeks is taking 12 to 15 weeks," said Bob Pritchard, a Coldwell Banker King Thompson agent who deals in foreclosed properties in central Ohio. "We have been getting extensions on the close-by dates left and right," he said. "You get buyers who are financing and get a rate locked in, they can't close for 30 days and then it may be at a higher rate. It's costing the buyers more to buy the property, and some are just walking away."

Vacationing Campers Threatened With Utilities Shutoffs, Face The Boot As New Hampshire Campsite Falls Into Foreclosure

In Webster, New Hampshire, The Associated Press reports:
  • Renters at a Webster, N.H., campground told by the owner that electrical power would be shut off have gotten a temporary court order to keep electricity flowing to their homes. A notice posted last week by Cold Brook Campground owner Tina Shindlewig said electricity would be cut off Tuesday and that residents wouldn’t be able to stay because there would be no water or sewage service. It also said there would be a foreclosure sale on Aug. 18. Campers already had paid between $2,300 and $3,000 each for their campsites for the season. Some campers went to court Monday and won a request for a temporary order to keep utilities going and maintain access to their campsites. A hearing on the order has been scheduled for Aug. 18.

Source: NH campground residents fight eviction notice.

See also, Concord Monitor: Camp owner: plenty of notice (She went to every campsite, she says).

Nassau County DA "Stings" Unlicensed Long Island Contractors; Some Accused Of Pocketing Upfront Homeowner Deposits & Failing To Deliver

In Nassau County, New York, the New York Post reports:
  • Nearly four dozen unlicensed Long Island contractors were more skilled at pulling in thousands of dollars for jobs -- than actually doing the work, officials said today. Nassau DA Kathleen Rice announced the results of a 5-week investigation, including the running of a "Sting House" to lure a dozen unlicensed contractors in and capture them on video. Rice said 42 poeple were charged in the larger investigation, including four charged with felonies for never starting -- let alone finishing -- work homeowners had already paid for. [...] One of the arrested contractors, John Napolitano, 47, of Hicksville, was charged with defrauding four homeowners out of a total of $113,000 for ripping apart their homes and never completing renovations.(1)


For the Nassau County DA press release, see 42 Unlicensed Contractors Nabbed in Countywide Enforcement Sweep (Four charged with felonies after investigation discovers theft and shoddy craftsmanship; 12 busted in undercover house sting).

(1) According to the Nasau County DA, one homeowner had her entire kitchen demolished when Napolitano stopped work and didn’t refund her any money.

Thursday, July 23, 2009

Canadian Cops Nab Fugitive California Couple Accused Of Running Loan Mod Scam; Now Await Extradition In Toronto After Fleeing San Jose Police

In Toronto, Canada, the San Jose Mercury News reports:
  • A San Jose couple suspected of operating a fraudulent real estate home loan modification business have been arrested in Toronto following a six-month investigation. San Jose police say Amir Rashidifar, 25, and Mary Delvecchio, 28, opened their business, Legal Support Services, in September and offered to modify real estate loans for homeowners facing default and foreclosure. Police say the pair ran an elaborate operation and charged victims $3,000 to $4,000 to modify a loan, but the loans were not modified. So far, San Jose police have identified 129 victims.

  • The investigation started in late January after employees of Legal Support Services and 15 victims told police that Rashidifar and Delvecchio had been operating a fraudulent home loan business. Rashidifar and Delvecchio convinced victims that Legal Support Services was working in tandem with knowledgeable and experienced real estate attorneys in the loan modification business, according to officer Jermaine Thomas, a police spokesman. A police investigation into Legal Support Services, [...] revealed that Rashidifar and Delvecchio were not working with licensed attorneys, Thomas said.

  • In February, Rashidifar and Delvecchio fled the South Bay after learning of the police investigation, according to Thomas. Police determined that Rashidifar and Delvecchio went to Canada on May 26 and opened a new, fraudulent real estate loan modification business using false identities. San Jose police coordinated its investigation with the Royal Canadian Mounted Police (RCMP), the RCMP Immigration Task Force and Canadian Border Services, who located and arrested Rashidifar and Delvecchio on July 10 at their residence in Toronto. Rashidifar and Delvecchio are awaiting extradition proceedings in Canada and will be returned to the United States to face criminal charges in Santa Clara County.

Source: San Jose couple suspected of real estate loan fraud arrested in Canada.

See also KPIX-TV Channel 5: SJ: Couple Suspected Of Running Fraudulent Loan Modification Company Arrested in Canada.

Long Island Attorney Swipes $73K+ Of Client's Money Given As Deposit In Real Estate Transaction, Says Nassau DA

From the Office of the Nassau County, New York District Attorney:
  • Nassau County District Attorney Kathleen Rice announced [...] the arrest of a Plainview attorney who has been charged with stealing more than $73,000 from a couple he was representing in the sale of a piece of property. [...] The Plainview attorney, Stuart Gorman, 55, has been charged with Grand Larceny in the Second Degree. [...] Rice said that on or around October 1, 2008, Gorman was hired by a Brooklyn couple to represent them in the sale of a piece of property in Dyker Heights. Gorman was given a check by the buyer for $73,500 as a down payment on the purchase price. Instead of giving the check to the sellers of the property, Gorman deposited the check into his escrow account and then used the money for personal and business expenses.(1)

For the Nassau County DA press release, see DA Charges Two Men in Separate Cases of Lawyer Misconduct (Theft of real estate proceeds leads to felony charges for Plainview lawyer; Merrick man falsely claims to be attorney, costs ‘client’ $200K).

(1) If the charges prove true that attorney Gorman screwed his clients out of their money, The Lawyers’ Fund For Client Protection Of the State of New York may find itself on the hook for the loss, provided the clients who got screwed apply for reimbursement from the fund within two years after they discover their loss.

For those clients screwed out of their money and property by reason of the dishonest conduct of their attorneys in other states and Canada, see:

Homeowner Invokes TILA, State Lending Law In Attempt To Void Home Improvement Loan Gone Bad

In St. Clair County, Illinois, The St. Clair Record reports:
  • A woman with learning disabilities claims she should not have to repay a loan for more than $45,000 she took out more than two and a half years ago because she was not fully explained the terms of the loan. In a complaint she filed on July 10 in St. Clair County Circuit Court, Anita Oglesby also claims the neighbors who promised to make necessary repairs to her home with the loan money failed to complete the work.

The story recites, in detail, the allegations contained in the lawsuit. Assuming the allegations are true, this story illustrates how the seemingly benign process of getting a simple loan to finance some needed home improvements can go haywire when bad actors get involved, ultimately leaving the homeowner behind the eight-ball (saddled with a high-interest, adjustable rate loan and a shoddy, incomplete home improvement job, while leaving the home in jeopardy of foreclosure). In this suit, Ms. Oglesby is reportedly asserting violations of the Federal Truth In Lending Act, and the Illinois High Risk Home Loan Act in her attempt to void the transaction.(1)

The non-profit law firm Land of Lincoln Legal Assistance Foundation in East St. Louis will be representing her.

For the story, see Woman sues to rescind ARM home loan.

(1) In the 10-count suit, Oglesby is reportedly asking the court to rescind her loan transaction; to order the defendants to terminate any security interest in her home and to declare any security interests void; to award her statutory damages of twice the financial charge, not to exceed $4,000, for their failure to rescind the loan; to order the right to retain proceeds vested in Oglesby; to enjoin the defendants from instituting foreclosure proceedings on Oglesby's property; and to enjoin the defendant who arranged the allegedly toxic financing from arranging any more loans in Illinois without an Illinois mortgage broker license. In addition, Oglesby is seeking actual damages and other relief the court deems just. UndoMortgageLoans TILAdelta

Aussie Legal Non-Profit Helps Vulnerable Senior Beat Bank In Foreclosure; Son's Manipulation Resulted In Improper Mortgaging Of Family Home For $200K

In Sydney, New South Wales, The Sydney Morning Herald reports:
  • AN INTELLECTUALLY disabled pensioner has won a court battle to stave off foreclosure in a case said to have broad implications for consumers who offer their home as security for a business loan. The lawsuit concerns Wollongong man Patrick Ford, whose son - identified as "Scott" - manipulated him to put a $200,000 mortgage on the family home to buy a cleaning business. When the business collapsed and the son absconded, the lender pursued Mr Ford, who cannot read or write. The NSW Court of Appeal agreed this month that Mr Ford did not have to repay the loan, other than about $25,000.

  • "[The decision] reinforces that lenders can't get around consumer protection laws by the use of business-purpose declarations and that lenders have obligations to inquire into the circumstances of people to whom they're lending," said Alan Kirkland, the chief executive of Legal Aid NSW, which represented Mr Ford.


  • Katherine Lane, the principal solicitor at the Consumer Credit Legal Centre, said the various institutions were "recklessly indifferent" to Mr Ford's ability to repay the loan. "They're all interested in their own commission."

  • Mr Ford's sister, Ann Watkinson, said the ordeal had been exhausting. "We had sheriffs coming all the time," she said, recounting one visit at 4am. "We'd get a couple of hours sleep, then be awake, crying." [...] Despite the victory, she said the family would have to sell Mr Ford's home to pay expenses. The family hopes there will be enough money to move Mr Ford, 64, to a retirement village.

For the story, see Pensioner fends off lenders in court win.

For the appellate court ruling, which reversed an unfavorable lower court decision, see Patrick John Ford by his Tutor Beatrice Ann Watkinson v Perpetual Trustees Victoria Limited [2009] NSWCA 186 (8 July 2009).

For more on real estate conveyances that are void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.

(1) According to the story, an unusual aspect of the case is the number of financial institutions - a mortgage broker, a loan wholesaler, a mortgage aggregator, an insurer and a trustee - that did not investigate whether the illiterate pensioner understood what he was signing or if he was capable of running a business. FinancialAbuseOfElderlyAlpha DeedContraTheft

Builder Pocketed Customer Deposits, Failed To Build Homes Or Provide Refunds While Stiffing Subs, Says Maryland AG In Civil Suit

From the Office of the Maryland Attorney General:
  • Attorney General Douglas F. Gansler announced [...] that the Home Builder Registration Unit of the Consumer Protection Division has filed charges against Altieri Enterprises, Inc. t/a Altieri Homes, Athlone, LLC of Columbia, Altieri Homes at Castle in the Woods, LLC, R & L Livezey, LLC, and Milltown, LLC of Columbia for failing to comply with Maryland’s Home Builder Registration Act, New Home Deposits Act, Consumer Protection Act, and Custom Home Protection Act.

  • The Home Builder Registration Unit suspended the registration of Athlone, LLC and charged each company and their principals, Greig Altieri, Daren Altieri, Frank Altieri, Todd Altieri, and Wendy Altieri with accepting payments from consumers in Howard and Harford counties and then failing to construct the homes, pay subcontractors, or refund payments made by consumers. The companies also failed to disclose to the Home Builder Registration Unit lawsuits filed by consumers and subcontractors concerning the companies’ building activities.

For the Maryland AG press release, see Attorney General Gansler Files Charges Against Altieri Homes and Associated Companies (Homebuilder Allegedly Accepted Deposits and Failed to Build Homes).

Wednesday, July 22, 2009

Sarasota Title Agent Dodges Hot Water; Remains In Good Standing Despite Admitting To Screwing Around With Escrow Funds Resulting In Six-Figure Losses

In Central Florida, the Sarasota Herald Tribune reports:
  • As the closing agent on the [real estate] deal, it was Sarasota title agent Lisa Rotolo's job to make sure the [existing mortgage] loan got repaid. Instead, in 2004 Rotolo partially paid off the old loan and handed her clients $100,000, according to a 2008 foreclosure case filed in Sarasota County's circuit court. During testimony in the case, Rotolo conceded that she directed money to her clients and then filed documents incorrectly stating the old mortgage had been repaid. Bank officials did not realize what she had done until early 2008, when her clients, Jonathan Glucker and his wife, Heather Kabobel, stopped making payments and another lender foreclosed on the property, claiming it had first rights to sell the house and recoup its losses.


  • Last year, Rotolo was named in a suit filed by David Oriente in Sarasota County's circuit court. Oriente alleged that Rotolo allowed [real estate agent Craig] Adams [see The king of the Sarasota flip] to take $400,000 out of an escrow fund that was supposed to be used for buying properties. Adams used the money to pay off an old debt and kept $50,000, the lawsuit states. [...] Circuit Court Judge Bob McDonald awarded Oriente's company more than $471,000 in damages in December 2008 after Adams failed to respond to the lawsuit.


  • Today, Rotolo's company, Diamond Title, has closed. But Rotolo still has her Florida license to operate as a title agent. No one, including the bank officials suing her, has filed a complaint against her, according to a spokeswoman for the Department of Revenue, the state agency that oversees Rotolo's profession. Rotolo remains a committee chair for the Sarasota Association of Realtors, a trade group that promotes itself as a watchdog over local real estate agents.

For the story, see Title agent closed 100 Adams deals. EscrowRipOffKappa

Florida AG Continues Loan Modification Scam Sweep w/ Civil Suits Against Group Accused Of Making Automated Robo-Calls Using President "O's" Voice

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum [Tuesday] announced that his office has filed a lawsuit against four related South Florida companies that allegedly charge up-front fees for loan modification services to homeowners facing foreclosure. FHA All Day.Com and owner Jason Vitulano, as well as three other affiliated companies,(1) purportedly collect up to $1 million in up-front fees on a monthly basis. The companies were allegedly soliciting hundreds of consumers nationwide via the internet and though telemarketing robo-calls which illegally used President Obama’s voice.

    An investigation conducted by members of the Attorney General’s Economic Crimes Division, working as part of the Attorney General’s Mortgage Fraud Task Force, indicated that Vitulano and his companies were charging up-front fees as high as $5,000 for foreclosure-related loan modification services. Vitulano also allegedly claimed to have an attorney on staff available to assist homeowners, but investigators believe no attorneys are currently working on any of the loan modification files. Consumers who complained to the Attorney General’s Office also reported that the companies have not performed the promised services and that they were unable to contact the companies or get refunds. The Attorney General’s Office has received over 300 complaints about Vitulano and his related companies.

For the entire Florida AG press release, see McCollum Files Lawsuit Against 4 South Florida Companies for Foreclosure Rescue Fraud (Company director allegedly ran boiler-room telemarketing operation using the President’s voice to target victims).

For the Florda AG's lawsuit, see State of Florida v. FHA All Inc., et al.

Go here to file a complaint against FHA ALL and its affiliates.

(1) The three affiliated companies are: Safety Financial Services, Inc., Housing Assistance Law Center, and Housing Assistance Now.

Loan Modification Firm Targeted By Florida AG Coughs Up $500K In Partial Restitution Payments; Says It's Now Tapped Out

From the Office of the Florida Attorney General:
  • To date, [now-defunct loan modification firm] Lincoln Lending [LLC] has distributed approximately $500,000 in restitution payments. They are currently claiming that funds available for restitution have been exhausted. The OAG is in the process of investigating whether additional funds exist for a continuation of the restitution process. In the event that additional funds are discovered and secured, we will seek a court order requiring the continuation of these payments. Consumers who have filed complaints with the Office of the Attorney General concerning Lincoln Lending, and consumers who have filed affidavits concerning their transactions with Lincoln Lending are not required to take any additional actions at this time.

For more, see Status update concerning Lincoln Lending.

"Loan Modification Industry Is Teeming With Confidence Men & Charlatans!" Says California AG In Announcing Suits Against Five Operators

From the Office of the California Attorney General:
  • As part of a massive federal-state crackdown on loan modification scams, Attorney General Edmund G. Brown Jr. at a press conference [last week] announced the filing of legal action against 21 individuals and 14 companies who ripped off thousands of homeowners desperately seeking mortgage relief. Brown is demanding millions in civil penalties, restitution for victims and permanent injunctions to keep the companies and defendants from offering mortgage-relief services.

  • "The loan modification industry is teeming with confidence men and charlatans, who rip off desperate homeowners facing foreclosure," Brown said. "Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn't provide an ounce of relief." Brown filed five lawsuits(1) as part of "Operation Loan Lies," a nationwide sweep of sham loan modification consultants, [...].

For the California AG press release, see Brown Sues 21 Individuals and 14 Companies Who Ripped Off Homeowners Desperate for Mortgage Relief.

(1) The California AG's Office filed five civil lawsuits against the following operators:

  • Home Relief Services LLC (other defendants: THE DIENER LAW FIRM, GOLDEN STATE FUNDING, INC., PAYMENT RELIEF SERVICES, INC., CHRISTOPHER L. DIENER, KATHLEEN MARRERO-DAVIS, TERENCE GREEN SR., STEFANO MARRERO, MAYA BURRELL MARRERO, RONALD C. SPECTER, KENNETH BUHLER. AG Brown seeks $10 million in civil penalties, full restitution for victims, and a permanent injunction),

  • RMR Group Loss Mitigation LLC (other defendants: LIVING WATER LENDING, INC., SHIPPEY & ASSOCIATES, P.C., MICHAEL SCOTT ARMENDARIZ, RUBEN CURIEL, RICARDO HAAG, KARLA C. SHIPPEY, ARTHUR S. ALDRIDGE. AG Brown sekks $7.5 million in civil penalties, full restitution for victims, and a permanent injunction),

  • U.S. Foreclosure Relief Corp. (other defendants: GEORGE ESCALANTE, CESAR LOPEZ, trading and doing business as H.E. Service Company, and ADRIAN POMERY, ESQ., trading and doing business as Pomery & Associates),


Court Voids Delinquent Mortgage & Subsequent Forced Sale Of Property Earlier Conveyed By Forged Deed; Lender Called A "Mortgagee/Buyer In Bad Faith"

In Quezon City, The Philippines, the Manila Buletin reported that a Court of Appeals affirmed a lower court ruling voiding a foreclosure sale where the property owner who lost the title to a 5-unit building by forced sale originally acquired her interest by forging the true owner's name on a deed, and who then subsequently used the property as collateral for a loan from the private lender who ultimately initiated the foreclosure action.

The court found that the foreclosing mortgagee, being an associate of the alleged forger, had some reason to suspect the defect in the title of the alleged forger, and accordingly, declared the lender a “mortgagee and buyer in bad faith,” which made both the mortgage and the subsequent foreclosure sale void.(1)

The court also ruled that, because the property that was mortgaged by the alleged forger was acquired by her through the execution of a forged deed, the deed was null and void, thereby making the subsequent mortgage and foreclosure sale also null and void.(2)(3)

For the story, see Man loses right to property.

(1) In denying the foreclosing lender's appeal, the Seventh (7th) Division of the Philippine Court of Appeals said:
  • where a purchaser [Editor's Note: or, in this case, the mortgage lender] neglects to make the necessary inquiries and closes his eyes to facts which should put a reasonable man on his guard as to the possibility of the existence of a defect on his vendor’s title and relying on the belief that there was no defect in the title of the vendor, purchases [or, in this case, loans money secured by] the property without making any further investigation, he cannot claim that he is a purchaser in good faith for value.”
The same rule is generally applied to real estate purchasers in the U.S. (as well as in other jurisdictions that draw on the English common law on this issue - see The Bona Fide Purchaser for Value of a Legal Estate Without Notice) who invoke the doctrine of bona fide purchaser when attempting to establish that their later-acquired, recorded interest in property is superior to someone else's earlier acquired, unrecorded interest in the same property. Go here for more on the bona fide purchaser doctrine .

(2) The Court of Appeals also reportedly said that since the deed purportedly conveying title was nullified by the lower court for being a forgery:
  • it cannot convey any right that could ripen into a valid title. Necessarily, the subsequent real estate mortgage between Suiza and Santiago was also null and void because the former is not the owner thereof and Santiago cannot be considered a mortgagee in good faith.” “In real estate mortgage contract, it is essential that the mortgagor must be the absolute owner of the property to be mortgaged; otherwise, the mortgage is void,” the Court added.

Since there is no valid real estate mortgage, there could also be no valid foreclosure or valid auction sale of the property.

(3) The bona fide purchaser doctrine typically has no application in the context of a forged deed. A purchaser who takes title to property that was earlier conveyed by a forged deed acquires no title, even if the purchaser could have otherwise established him/herself as a bona fide purchaser. However, assuming it can apply, it seems to me that either of the two legal theories invoked by the court, standing alone, would have been enough to support the voiding of the lender's mortgage and the subsequent foreclosure sale. By applying both legal theories to the same set of facts, it appears that the appeals court took a "belt & suspenders approach" to upholding the lower court decision, arguably making it more difficult for the end result to be reversed should the ruling be appealed further.

Texas Mortgage Fraud Flipper Gets 25 Years; Prosecutor Credits "Citizen Sleuth" For Key Effort In Busting Scam Ring

In McKinney, Texas, The Dallas Morning News reports:
  • Jocelyn Sapp smelled a rat. She noticed a vacant house with overgrown weeds in her McKinney neighborhood, then another and another. Sapp started sleuthing, checking county records on the deteriorating homes. The results startled her. One house, listed for sale at $437,500, had sold for $643,500. Another that had been on the market for $319,000 sold for $490,000. "I thought, could they possibly have sold for that much?" Sapp said.

  • Eventually, 11 houses on Hills Creek Drive changed hands and then went into foreclosure. That's one-tenth of the residences on the hilly, mile-long street with landscaped lawns and tall trees. [...] Sapp, a retired systems engineer, studied the transactions and saw the same names pop up again and again. Some addresses were in Florida. She didn't understand it all, but she knew something was wrong. She compiled the property records into a binder and handed it to prosecutors. That was three years ago.

  • The resulting investigation culminated last week in a 25-year prison sentence for John Barry, who was behind the mortgage fraud that led to all those sales and foreclosures, which, prosecutors said, caused millions of dollars in damage to the neighborhood. [...] Prosecutors applauded Sapp for sniffing out the scam and alerting authorities. "If not for Jocelyn Sapp's vigilance, this never would have happened," Assistant District Attorney Ben Smith said after the conviction. [...] Sapp's work, Smith said, "gave us the names of lenders and title companies we could subpoena documents from." He said, "She was instrumental in our investigation."

For the story, see Jocelyn Sapp's work helped put mortgage scammer behind bars.

See also, Man gets 25 years for mortgage fraud scheme in McKinney's Stonebridge Ranch community.

Tuesday, July 21, 2009

Two Foreclosure Rescue Operators Get Five Years Each In Scam That Stripped Homeowners Of Their Equity & Left Lenders, Straw Buyers Holding The Bag

In New York City, Courthouse News Service reports:
  • Two foreclosure profiteers in Brooklyn and the Bronx were sentenced to 5 years in federal prison for conspiracy, wire and bank fraud. Andrea Moore and Michael Irving, who ran the scam before the nationwide economic crisis hit, also must pay $1.5 million in restitution. From September 2004 to April 2005 they told homeowners facing foreclosure that they could "refinance" their debt through new and larger mortgages. They said the distressed homeowners should sell their homes to third-party straw buyers, who would pay off the old debt let the victims return in a year. But it didn't work out that way, a jury said.

  • "In some instances, Moore and Irving forged the homeowners' signatures on various documents that transferred the homes to straw buyers without the homeowners' knowledge," prosecutors said. They also submitted false financial information on the straw buyers' loan applications. The scheme netted $10 million in loans and mortgages. But "in some instances, the defendants failed to make even one payment on the loans, causing the loans to default immediately," prosecutors said. "In nearly every other case, they eventually failed to make the payments and defaulted on the loans, thereby cashing out on the properties."

  • In the end, the distressed homeowners faced eviction; the straw buyers owed hundreds of thousands of dollars to the new owners and the lenders lost money on loan defaults.

Source: Foreclosure Swindlers Get 5 Years.

For the U.S. Attorney (Manhattan) press release, see Two Members Of Foreclosure Rescue Scheme Each Sentenced To 5 Years In Prison For Engaging In Multimillion-Dollar Mortgage Fraud.

Central Florida Media Probe Identifies At Least 37 Real Estate "Flipping Groups" In Sarasota/Manatee Area Involved In $450M+ In Mortgage Defaults

In Central Florida, an investigative report by the Sarasota Herald Tribune states that it examined more than 3,000 property flips that occurred since 2000 in Sarasota and Manatee counties, interviewed over 100 investors and real estate professionals, and reviewed thousands of pages of deeds, mortgages, foreclosure filings and other public records. Among its findings were:
  • At least 37 groups of property flippers operated in Sarasota and Manatee counties. The groups bought hundreds of properties worth more than $350 million and sold them to associates for inflated prices. The flippers identified by the Herald-Tribune -- and the people who ultimately bought their properties -- have so far defaulted on more than $450 million in mortgage loans. Their defaults account for $1 in every $13 lost to foreclosure in Sarasota and Manatee counties from 2005 through 2008.


  • Most flipping circles were organized by a leader who either recruited investors on the promise of easy money or conspired with friends and associates to sell properties at inflated prices. Some of these investors did not realize they were buying properties at inflated prices; others willingly lied about sales prices to obtain mortgages that more than covered the actual purchase.

For more of its findings, see Flippers' toll: On Gulf Coast, half a billion in defaults.

To read the online profiles compiled by the Sarasota Herald Tribune of more than 100 of the local characters involved in suspicious property deals -- some of them organizers, some of them occasional participants and some of them innocent victims, see Investigation: 'Flipping' In Florida.

In related Herald Tribune stories, see:

"Equity Is No Longer The Game" - Loan Modification Scams Proliferate As Home-Snatching Equity Stripping Scams Subside

A recent report by the National Consumer Law Center makes this observation on the current state of foreclosure rescue scams:
  • Homeowners facing foreclosure have always been vulnerable to scammers, con-artists, and thieves. Whether desperate for options or frustrated by uncooperative mortgage servicers, many homeowners are attracted to slick advertisements with bold promises to rescue them from foreclosure. When property values were appreciating rapidly, foreclosure rescue scams primarily focused on obtaining title to the home and robbing homeowners of their equity.(1)

  • Today with property prices depreciating and many homes already "underwater," equity is no longer the game. Instead, rescuers have become high-volume, "loan modification specialists." The pitch by this new breed of predators is that, for a fee, which can reach several thousand dollars, they will negotiate a loan modification for a financially distressed borrower. The hitch is that the "work" performed, if any, leads nowhere, with the homeowner out money and time and closer than ever to foreclosure.

  • These loan modification companies are flourishing because mortgage loan servicers cannot or will not provide borrowers with timely and consistent information regarding their requests for loan modifications. Frustrated by the lack of responsiveness on the part of the servicers, borrowers across the country are giving loan modification companies their precious dollars with disastrous consequences.

For the NCLC report, see Desperate Homeowners: Loan Mod Scammers Step In When Loan Servicers Refuse To Provide Help (July 2009).

(1) See Dreams Foreclosed: The Rampant Theft of Americans’ Homes Through Equity Stripping Foreclosure ‘Rescue’ Scams (June 2005).

Michigan AG Files Criminal Charges Against Loan Modification Firms As Part Of "Operation Loan Lies"

Unlike most of the other participants in the the joint Federal/state law enforcement effort to eliminate loan modification scams who have brought civil lawsuits or initiated administrative proceedings (and issued cease and desist orders), the Office of the Michigan Attorney General has taken a different route by bringing criminal charges against the alleged scammers.(1) According to the Michigan AG's office:
  • Attorney General Mike Cox [...] announced that his office has filed 18 charges against four companies and one individual for committing foreclosure rescue fraud.(2) Cox also issued warnings to 17 companies regarding complaints from residents about their practices.(3) Michigan law prohibits "foreclosure rescue" companies, which provide foreclosure advice, from making misleading or false statements, or charging service fees before any service is completed.


  • The charges resulted from the Attorney General's office conducting undercover operations based on complaints from homeowners and include one count of unauthorized use of the Great Seal of the State of Michigan and 17 counts of violating Michigan's Credit Services Act (CSA). The CSA prohibits charging fees before completing services when seeking to negotiate a loan on behalf of a homeowner. The Credit Services Act carries a maximum penalty of 90 days in jail and/or $1,000 fine, and allows the Attorney General's office to seek restitution for affected consumers.

For the Michigan AG press release, see Cox Charges Five for Foreclosure Rescue Fraud.

Go here for a summary of the Federal and state actions by those participating agencies in "Operation Loan Lies."

(1) The U.S. Attorney's Office in Los Angeles is the only other government agency bringing criminal charges in the "Operation Loan Lies" effort (U.S. v. Gilfert Jackson, Case No. 2:09-cr-00538-SVW (C.D. Cal.); U.S. v. Jeff McGrue, Gerald Guidry; Case No. 2:08-cr-01318-ODW (C.D. Cal.)).

(2) Those charged include:

  • Save My Home USA of Madison Heights (Charged victims between $595 and $2,000 before completion of services and advised consumers not to communicate with their mortgage company),
  • Help4homeowners of Birmingham (Falsely claimed a 97% success rate, charged before completion of services, and its employee admitted they had no loan training),
  • Payment Doctors of Livonia (Made false claims and charged before completion of services),
  • Michigan Economic Reinstatement Program (MERP) of Livonia and owner Mark Alan Aloe of Farmington Hills (Charged victims between $360 and $3,000 before completion of services, made false claims, and used business cards with state seal but did not work for the State of Michigan. Aloe faces 90 days in jail and/or a $1,000 fine).

(3) Attorney General Cox has requested more information from the following 17 companies about their business activities:

  • AFS Loan Modification Corp, Redondo Beach, CA; Apply 2 Save, Inc./Apply2Save, Coeur D'Alene, ID; Elect Group LLC, Deerfield Beach, FL; Equity Recovery Services, Towsen, MD; Federal Home Savers, Comniack, NY; Financial Solution Center, Corona, CA; Fresh Start Home Modification, Woodbury Heights, NJ; Fresh Start Program/Fresh Start Mortgage Assistance, Fresh Start Mortgage Solutions, Mortgage Assistance Solutions, Clearwater, FL; Hope Now Modifications, LLC, Cherry Hill Twp., NJ; IMC Financial, Clearwater, FL; Kirkland Young LLC, Miami Beach, FL; National Home Loan Assistance Program, San Diego, CA; New Hope Loan Modification, Bellmawr, NJ;. Oceanview Investments, Oceanview Investment Services Corp., Fort Lauderdale, FL; Peoples First Financial, San Diego, CA; Pope & Associates Mortgage, Ontario, CA;, Galthersburg, MD.

Ex-Subprime Toxic Mortgage Peddlers Now Coming To The Rescue As Loan Modification Specialists???

The New York Times recently published a story reporting on how many of the operators of so-called loan modification firms are the same people who, only a couple of years ago, peddled the risky subprime mortgages that has gotten the now-financially distressed homowners in trouble in the first place. One of the loan modification operators featured in the article is Federal Loan Modification Law Center (aka FedMod).
  • FedMod is but one example of how many of the same people who dispensed risky mortgages during the real estate bubble have reconstituted themselves into a new industry focused on selling loan modifications. Despite making promises of relief to homeowners desperate to keep their homes, FedMod and other profit making loan modification firms often fail to deliver, according to a New York Times investigation based on interviews with scores of former employees and customers,(1) more than 650 complaints filed with the Better Business Bureau, and documents filed by the Federal Trade Commission in a lawsuit against the company.(2)

For more, see Subprime Brokers Resurface as Dubious Loan Fixers.

(1) Two of the individuals who spoke to The Times for the story commented:

  • We just changed the script and changed the product we were selling,” said Jack Soussana, who ran the Los Angeles sales office of Federal Loan Modification Law Center. The new script: You got a raw deal, and “Now, we’re able to help you out because we understand your lender.”

  • Our job was to get the money in and then we’re done,” said Paul Pejman, a former sales agent who worked out of FedMod’s two-story headquarters in Irvine, Calif. He recounted his experience, he said, because “I really feel bad.” “I had people calling me crying, and we were telling them, ‘You can pay me or you can lose your house,’ ” Mr. Pejman said. “People were giving me every dime they had, opening credit cards. But I never saw one client come out of it with a successful loan modification.” [...] “They basically told us, ‘Do whatever you need to do,’ ” he said. “ ‘It’s a sales floor. You’re here to sell.’ People would quote success rates and just pull them out of thin air. People would say 60 percent, 80 percent, 90 percent. To the average Joe in Kansas, that sounded great. But the reality is that 50 percent were immediately declined by the lender.” What shocked Mr. Pejman was how readily customers handed over their credit card numbers. Sales agents tapped into a deep vein of anxiety.

(2) Go here for links to links to the FTC press release and the relevant court documents filed against Federal Loan Modification Law Center.

Monday, July 20, 2009

Habitat-New York City's "Loan Rangers" Public Awareness Campaign Targets Financial Scams With Free Educational Workshops

Habitat For Humanity - New York City announces:
  • Habitat for Humanity – New York City invites congregations, schools and community groups to host workshops for your members about credit repair and predatory lending and foreclosure scams. Habitat-NYC will provide free workshop trainers and materials. Community groups just provide weekend or weeknight space for 30 of your members or more. For more information, or to schedule a workshop, contact Paul Benecki at or at 212-991-4000 x 338.

These workshops are part of Habitat-NYC’s Loan Rangers Public Awareness Campaign, which educates low-income New Yorkers about deceptive lending practices and better alternatives. Topics include:

Habitat-NYC Loan Rangers provide:

  • A short presentation on how a range of scams and fringe financial products work,
  • Fact sheets and flyers that explain the dangers of scams and high-cost loans,
  • Details on free and low-cost alternatives available to all New Yorkers.

For more materials and information, visit:

Source: Sponsor a Free Workshop and Help Your Community Members Save Thousands of Hard-earned Dollars!

See also, the Staten Island Advance: Staten Island D.A. partners with Habitat For Humanity to fight foreclosure fraud:

  • Partnering with Habitat For Humanity in New York City, [Staen Island District Attorney Daniel M.] Donovan's office announced [...] plans to educate the community on mortgage fraud, foreclosure rescue scams, credit card debt relief programs, tax refund anticipation loans and the "rent to own" industry [as part of the Loan Rangers Public Awareness Campaign].

NY Senator To Fannie: Stop Online Horse Trading In Delinquent Bronx Building Mortgages As Deteriorating Conditions May Force 500+ Families Onto Street

In The Bronx, New York, Crain's New York Business reports:
  • Sen. Charles Schumer will join Bronx tenants Monday to demand that Fannie Mae abandon its effort to sell distressed mortgages on a portfolio of 19 Bronx buildings via an online auction and instead work with the city to find a buyer who will fix up the rundown properties and keep them affordable. The government-sponsored entity bought the $29 million mortgage portfolio from Deutsche Bank Berkshire Mortgage in 2007 and has proposed auctioning it off through a website called DebtX—an eBay-like site that deals exclusively in the sale of distressed mortgages.

  • Many of the buildings, located in the Crotona section of the Bronx, are in states of disrepair, including 10 which have made the city’s list of worst-maintained buildings. The buildings are home to 520 families. “Allowing these buildings to be horse-traded on the open market is a sure fire way to guarantee that another speculator gobbles them up, and either continues to let the buildings rot or kicks the current tenants out on to the street” said Mr. Schumer. “We simply cannot allow that to happen.”

For more, see Fannie Mae urged to abandon Bronx mortgage auction (Sen. Schumer, housing advocates demand that Fannie Mae halt an online auction of mortgages on 19 foreclosed Bronx buildings).

(1) According to the story, a portfolio of 19 apartment buildings in 2007 was purchased for $36 million, $29 million of which was debt issued by Deutsche Bank and immediately sold to Fannie Mae. Fannie discovered the loans didn't meet their underwriting standards after they were delivered by Deutsche Bank. The buildings were subsequently abandoned by the owners when they could no longer afford to pay the overvalued mortgage. The loans went into foreclosure in March. Overleveraged NYC Buildings

First Wave In Nationwide Loan Modification Scam Eradication Effort Results In 189 Legal Actions In Coordinated Federal, State Sweep

Last week, the coordinated nationwide sweep, called "Operation Loan Lies," began with prosecutors filed 189 legal actions against loan modification firms accused of cheating homeowners desperate to adjust the terms of their currently unaffordable home loans. This sweep involves 25 government agencies, including the Federal Trade Commission, the U.S. attorney's office for the Central District of California, and 23 other agencies in 19 states. Go here for a summary of the Federal and state actions.

The following press releases were issued by some of those agencies involved in this nationwide scam eradication effort:

1) U.S. Federal Trade Commission:
2) Arizona Attorney General's Office:

3) California Department of Justice:

3) Colorado Attorney General's Office:

4) Idaho Attorney General's Office:

5) Illinois Attorney General's Office:

6) Iowa Department of Justice:

7) Kansas Attorney General's Office:

8) Maine Department of Professional and Financial Regulation, Bureau of Consumer Protection:

9) Maryland Department of Labor, Licensing, and Regulation, Office of the Commissioner of Financial Regulation:

10) Michigan Attorney General's Office:

11) Missouri Attorney General's Office:

12) New Jersey Attorney General's Office:

13) North Carolina Department of Justice:

14) Ohio Attorney General's Office:

15) Washington Attorney General's Office:

Foreclosing Lenders To Face Lawsuits For Failing To Deliver On Promises Of Loan Modification Help, Says Ohio AG

In Columbus, Ohio, The Columbus Dispatch reports:
  • Mortgage lenders who promise to work with clients facing foreclosure and fail to follow up could find themselves in court. Ohio Attorney General Richard Cordray said [Friday] that he will soon sue mortgage lenders who violate consumer-protection laws. "Many lenders are pledging to work with customers and failing to do so," Cordray said. "They're not returning calls, paperwork gets lost, payments misappropriated." He would not identify targets but said his office is looking at the 10 or 12 largest Ohio lenders.

  • "The goal of the lawsuits is compliance with their promises," Cordray said. "We want there to be accessible personnel, a reasonable process, clear steps. What we want is a change in behavior." The news came as he and other state officials, judges and representatives of nonprofit groups met in Columbus as part of a Save Our Homes Summit designed to focus on addressing the foreclosure crisis in the state.

For more, see Cordray warns mortgage lenders (Many customers not getting aid as promised, AG says).

Minnesota Real Estate Agent Gets Three Years In Alleged Foreclosure Redemption, Equity-Snatching Scam

In Hennepin County, Minnesota, the Minneapolis Star Tribune reports:
  • Michael R. Wayman Jr. was a top-tier real estate agent for ReMax before he discovered the lucrative business of redeeming properties after foreclosure to snatch their equity. [...] But somewhere Wayman's quest for profits veered into illegality, and the 35-year-old Ramsey man was sentenced Friday to just over three years in prison by Hennepin County District Judge Warren Sagstuen on 19 counts of racketeering, perjury and filing false documents. Wayman and his company also were fined $55,000 and face restitution payments to be determined later.

  • Prosecutor Tom Fabel sought a sentence of more than seven years, saying Wayman's use of false documents to redeem properties out of foreclosure constituted "massive, systemic abuse" that undermined the integrity of the public land records system.(1) But Sagstuen said Wayman's violations weren't as serious as some racketeering conduct.

For more, see Real estate agent gets prison for racketeering (The Ramsey man was convicted in May of illegalities that netted him thousands in a foreclosure redemption scheme).

(1) According to the story, under Minnesota state law, when a foreclosure occurs, a homeowner typically has six months following the sheriff's sale to redeem the property by paying off the debt owed to the foreclosing creditor. Some do so by selling the house or refinancing, but many owners lose their homes. A house may have several mortgages or other liens filed against it. The priority of those claims is determined by when they were filed with the county. If the homeowner doesn't redeem the property, a junior lienholder must do so to ensure that its debt is paid. That is done by paying off the loan, interest and certain expenses of more senior creditors. The reward is that by gaining the house, the junior creditor not only gets the money it is owed but also keeps any remaining equity in the property. People who specialize in buying up junior liens or creating new ones with the intent of gaining the equity are termed "bottom feeders" by prosecutor Tom Fabel, but what they do is legal under state law that is intended to protect junior lienholders. They can also claim certain expenses related to the property. Wayman ran afoul of the law when he was found to have falsely claimed to have paid taxes on a house he wanted to redeem or claimed expenses that were inflated or were not allowed.

Florida AG Tags Another Outfit With Lawsuit Alleging The Targeting Of Homeowners In Foreclosure With Illegal Loan Modifications

The Office of the Florida Attorney General (which apparently is not a part of the recently-announced, joint Federal/State "Operation Loan Lies" loan modification scam eradication effort) announced last week:
  • Attorney General Bill McCollum [Friday] announced his office has filed a lawsuit against a Central Florida company that allegedly charges homeowners facing foreclosure up-front fees for loan modification services.(1) According to the lawsuit filed today in Orange County, Victor Lopez & Associates and its owners are in violation of Florida’s Foreclosure Rescue Fraud Prevention Act. The company’s office is located in Orlando.

For the Florida AG press release, see Central Florida Loan Modification Company Targeting Hispanics Sued for Mortgage Fraud.

For the lawsuit, see State of Florida v. Victor Lopez & Associates, et al.

Go here to file a complaint against this outfit with the Florida Attorney General's office.(2)

Go here for a list loan modification firms being sued by the Florida AG's office and instructions on filing complaints against them.

(1) An investigation conducted by members of the Attorney General’s Economic Crimes Division, working as part of the Attorney General’s Mortgage Fraud Task Force, indicated that Victor Lopez & Associates was charging up-front fees as high as $2,295 to homeowners seeking loan modification services. Additionally, consumer complaints allege that the company has not performed the promised services and that consumers are unable to contact the company or get refunds.According to the lawsuit, Victor Lopez & Associates targeted the Hispanic community by advertising on Spanish radio and television and conducting the majority of sales transactions in Spanish, but only provided consumers with contracts in English.

(2) The Florida AG's Office is currently suing a number of other outfits, alleging illegal loan modification activity. Click on a company to see a brief description of their questionable business practices, a link to the lawsuit against the firm, and a link to an affidavit and instructions for consumers to fill-out if they have been a victim.

Maryland Home Builder Cops Plea To "Playing Fast & Loose" With Buyers' Escrow Deposits

From the Office of the Maryland Attorney General:
  • Attorney General Douglas F. Gansler announced [...] that Walter Osborne Ely, Jr., 46, and his sister and business partner Kimberly Zahrey, 44, plead guilty before Baltimore County Circuit Court Judge Vicki Ballou-Watts to 6 counts of failure to hold new home sums in escrow. The offense is a felony punishable by 15 years imprisonment and/or a $10,000 fine.

For the Maryland AG press release, see Owners of Baltimore County Home Construction Company Plead Guilty to Failing to Properly Handle New Home Deposits.

(1) According to the press release, beginning in 2002, as owners of JAE Developers based in Owings Mills, Ely and Zahrey advertised new home construction at three different sites in Baltimore County. They met with prospective buyers, entered into contracts to sell lots and build homes, and took deposits ranging from $1,000 to $5,000 with the exception of a few home buyers who deposited between $8,000 and $50,000. After each deposit was received, it was deposited in either the JAE payroll account or business account, and spent within a week to cover both personal expenses and business expenses that were not associated with the individual client’s home. Some deposits were simply withdrawn as cash. During the time period covered by the indictment, Ely and Zahrey accepted deposits totaling $226,768 from potential home buyers and did not place them into segregated escrow accounts. StiffingContractorsTheta

Sunday, July 19, 2009

Massachusetts Closing Attorney Cops Plea To Illegally Pocketing $1M+ In Real Estate Escrow Funds Earmarked For Satisfying Existing Mortgage Loans

From the Office of the U.S. Attorney (Massachusetts):
  • [R]oxbury attorney [ANDREA GOODE-JAMES, age 44,] was convicted [...] in federal court of mortgage fraud for pocketing more than $1 million in proceeds of loan closing transactions.(1) At [the] plea hearing, the prosecutor told the Court that had the case proceeded to trial the Government’s evidence would have proven that GOODE-JAMES performed closings on three different properties between 2005 and 2007, and pocketed more than $1 million in lender proceeds, rather than using those funds to pay off pre-existing mortgages as directed by the lenders. To conceal her fraud, GOODE-JAMES made some monthly payments on the pre-existing mortgage loans. She also issued title insurance commitments to the new lenders, which bound the title insurance company for title defects and misled lenders to believe that she had in fact cleared title by paying off prior loans and obtaining discharges of those mortgages.(2)

For the U.S. Attorney press release, see Roxbury Lawyer Pleads Guilty To Mortgage Fraud.

(1) Goode-James pled guilty to one count of mail fraud and three counts of wire fraud, all arising out of her scheme to defraud various mortgage lenders, a title insurance company and innocent homeowners.

(2) For those who have been screwed out of money or property through the dishonest conduct of a Massachusetts attorney in the course of providing legal representation or acting as a fiduciary, and seek some financial reimbursement for the screwing over, go to the Massachusetts Clients' Security Board Of The Supreme Judicial Court for more information. For other states and Canada, see:

California Man Faces 147 Felony Counts In Alleged Real Estate Investment/Ponzi Scheme; Parents, Friends Head List Of Victims Claiming Losses Of $5M+

In Santa Barbara, California, The Tribune reports:
  • Hard money lender Mike L. Wilson, a Santa Maria mortgage business owner with many San Luis Obispo County clients and real estate investments, was arrested at his Santa Maria home [...] on 147 felony counts. Wilson, 55, was in Santa Barbara County Jail without bail on charges including grant theft, forgery, elder abuse by embezzlement, and fraud in selling securities.(1)


  • Wilson’s arrest follows at least seven lawsuits filed against the hard money lender in Santa Barbara Superior Court since the end of March. Those suits mirror the criminal complaint, alleging losses of more than $5 million that were supposed to go toward commercial and residential investments in Santa Barbara, San Luis Obispo and Monterey Counties.

  • Most of those allegations include an alleged Ponzi scheme, in which Wilson is accused of taking money from investors, promising them that it would be invested in secured real estate, but instead using the money to pay off other investors as a way to keep the scheme going. Wilson also allegedly forged real estate documents, failed to record assignments of deeds of trusts, promised investors they were more secured with real estate deeds than they actually were, failed to tell investors their loans were in default or had been paid off, and preyed on seniors for financial gain, according to the suits.

For more, see Santa Maria hard money lender Mike Wilson arrested on fraud charges (He's set to be arraigned on 147 felony counts of embezzlement, elder abuse and other offenses).

Go here for the Santa Barbara DA press release.

(1) Among the 45 or so alleged victims named in the criminal complaint are Wilson’s parents, and friends who say they had known and trusted Wilson for many years.

Now-Disbarred Georgia Attorney Cops Plea To Phony Real Estate Investment Scam Ponzi Scheme; Accused Of Stealing $1.9M From Clients, Friends

In Atlanta, Georgia, the Fulton County Daily Report reports:
  • For nearly four years, McDonough, Ga., attorney Steven H. Ballard capitalized on his credibility as a real estate and business law attorney to bilk friends and clients of more than $2 million in what federal prosecutors say was a Ponzi scheme(1) in which Ballard siphoned more than $200,000 for his personal use. [... Last week], Ballard pleaded guilty to one count of wire fraud in a criminal information (a federal charge filed either prior to or in lieu of a grand jury indictment) that accused him of stealing $1,910,827 from 24 clients and investors in Georgia, Florida and Tennessee between September 2002 and May 2006.


  • [Federal prosecutor Gale] McKenzie said Ballard's scheme relied primarily on his ability to lure friends and clients into what he billed as real estate investment opportunities. Ballard collected thousands of dollars from investors that he claimed to have used to buy properties and then resell at a significant profit. [...] But Ballard rarely, if ever, made the promised real estate purchases, McKenzie said. Instead, he forged sales contracts, deeds, settlement statements and sellers' signatures to trick his clients into believing the promised real estate transactions had taken place. He then appropriated those funds for his personal benefit or to repay clients and investors he had already bilked and who were threatening legal action, McKenzie said.

  • [Ballard's lawyer, T. Michael] Martin said that no banks were defrauded by Ballard's phony transactions because he secured money primarily from longtime clients and friends, many of whom dipped into their retirement funds with the promise of quick, lucrative returns.(2)

For the story, see Ga. Lawyer Pleads Guilty to Ponzi Scheme Worth $2 Million (Steven Ballard's victims were friends and clients).

For the U.S. Attorney (Atlanta) press release, see Former Georgia Attorney Pleads Guilty To Multi-Million Dollar Real Estate Ponzi Scheme (Over a Dozen Victims Defrauded in Georgia, Florida & Tennessee).

(1) Named for famed swindler Charles Ponzi, a Ponzi scheme collects money from legitimate investors but pays returns on those investments only by luring in additional investors and using their contributions to pay the scheme's original participants. A Ponzi scheme eventually collapses because it requires more and more investors and an increasing flow of cash to pay returns required to sustain the fraud.

(2) For those who have been screwed out of money or property through the dishonest conduct of a Georgia attorney in the course of providing legal representation, and seek some financial reimbursement for the screwing over, go to the State Bar of Georgia Clients' Security Fund for more information. For other states and Canada, see: