Saturday, September 05, 2009

Bad Timing Leaves Central Florida Residents Without Financing On Newly Constructed Homes As Lower Values Lead Lenders To Back Out Of Loan Commitments

In Central Florida, The Tampa Tribune reports:
  • Every day, Mary McCarthy must drive past the finished dream home in her front yard to the mobile home where she has lived for 20 years. The new home was finished in February, but she can't move in. The home is not legally hers, though it sits on her property. The best she can do is open the front door and feel the rush of the air conditioning that she is paying for so mold won't grow inside.


  • McCarthy's empty home is a symbol of poor timing amid the worst mortgage crisis in decades. As property values plummet, those caught midway through new home construction learn an awful fact: They can't find a lender willing to give them a loan. The three-bedroom, 1,800-square-foot home is in limbo. Just before the closing, the lender backed out, saying the home was no longer worth the original loan amount.(1) The builder hasn't been paid and has sued the lender. McCarthy can't find another lender willing to give her a loan and now faces liens on the one-acre property.


  • All this sounds familiar to Carol Robinson of Ocala. She, too, decided to build a home on land where she lives in a mobile home. When her lender, Ocala National Bank, shut its doors in January, the lender that took over did not want her construction loan. Instead of going through a builder, Robinson had hired subcontractors to do all the work, one part of the home at a time. The home is now 60 percent complete, and she doesn't have the money to finish it.

For the story, see Dream of new home turns into a nightmare.

(1) Reportedly, as home values continue to fall, lenders increasingly are deciding not to fund loans for new homes - even those that are partially or completely finished - because they're worth so much less than the originally agreed upon loan amounts.

Home Interior Ruined After Roofers Begin, Stop Repairs On Wrong House, Leaving Premises Open To Elements, Says Suit

In Galveston, Texas, The Southeast Texas Record reports:
  • A Tiki Island man claims workers started roof repairs on his house by mistake while he was out of town, and then left his home exposed to the elements when they learned of their error. Paul Rice is suing Kevin Mitchell of Montgomery, doing business as South Texas RES-COM, and Galveston Flooring Co. in Galveston County District Court for wrongfully performing repairs to the roof of his house.


  • [T]he suit claims the workers did not go to their client's home, but to Rice's house by mistake. "Galveston Flooring's employees began said work on the wrong home - that owned by plaintiff, Paul Rice, while he was out of town," the original petition says. Rice says by that the time Galveston Flooring realized it had made a mistake, a large section of his roof had been stripped of shingles but did nothing to rectify the error. He claims the un-shingled roof allowed water and debris to enter his home, ruining the interior.

For the story, see Suit claims roofers worked on wrong house then left job unfinished.

Arizona AG Files Suit Against California-Based Alleged "Property Tax Reduction" Racket

From the Office of the Arizona Attorney General:
  • Attorney General Terry Goddard [...] announced that he has filed a lawsuit and obtained a temporary restraining order to stop the perpetrators of an alleged fraud that claimed a homeowner’s property qualified for a "property tax reduction review." The official-looking advertisement appeared to be an attempt to scam homeowners who were looking to reduce their property tax bill.(1) [...] Goddard’s office and county assessors across Arizona have received hundreds of complaints regarding the solicitation since they became aware of it at the beginning of [August]. The offer, which requests a $189 processing fee, is not affiliated with any government entity. According to court documents, the document attempts to appear official and contains a "notice number" and deadline for prompt processing.

For the entire Arizona AG press release, see Terry Goddard Files Lawsuit to Stop Alleged Property Tax Scam.

For more from the Arizona AG:

(1) The lawsuit names Property Tax Review Board, Inc., a Granada Hill, Calif.-based company; Property Tax Review Board’s President and CEO Michael McConville, of Simi Valley, Calif., and Carmen Mercer, of Tombstone, owner of the Post Office box included in the solicitation.

Florida Woman Sick Over Living In "Chinese Drywall Prison;" Sunk Life Savings Into Now-Worthless House; Safer To Live In Car, Says Doc

In Port St. Lucie, Florida, WPTV-TV Channel 5 reports:
  • Gloria Berson loved her house. She had the kitchen she always wanted and big plans to turn it into her private paradise. "It was our dream home," she says. Then things started getting weird. The AC blew and the pipes turned black. The TV started losing its color. The jewelry and silverware turned splotchy. All symptoms that the 26-hundred square feet of drywall in this home came courtesy of China.

  • "We're stuck in a beautiful toxic house," says Berson. Then she started getting sick. She has nose bleeds and she's constantly tired and she wonders what her house is doing to her while she sleeps. "Nobody knows what the long term side-effects are going to be. It could be brain tumor, heart attack. Who knows what it's going to do to me."

  • Berson is currently fighting with her insurance company, but they told her they'd never heard of Chinese drywall prior to her claim. She's also involved in a class action lawsuit against her home builder and the drywall manufacturers. That suit however could take years. The problem for Berson is she's got nowhere to go. Before she was laid off, she'd sunk her life savings into the place. Now, it's worth nothing. She can't sell it. She can't afford to leave it. All that's left for her is foreclosure, but even then, she'll be homeless. That leaves her with few options, except for the advice her own doctor gave her. "He said you'd be safer living in your car. I'm thinking about it."

Source: This prison made of drywall.

Man Faces Charges Of Ripping Off Senior After Promising To Help Him Get Out Of Reverse Mortgage

In Kansas City, Missouri, the Kansas City Star reports:
  • Police have arrested a man accused of cheating a senior citizen out of $4,000. Anthony C. Washington faces charges of forgery, theft and financial exploitation of the elderly. Washington allegedly promised to help a 78-year-old man out of a reverse mortgage but instead stole his checks and cash. Officers arrested Washington Friday when he appeared for a hearing at the Jackson County Courthouse. His bond has been set at $150,000.

Source: Man arrested in alleged theft from elderly.

Friday, September 04, 2009

Home To HUD Regional Office Falls To Foreclosure; Can Eviction Of Federal Housing Agency Be Next?

In Atlanta, Georgia, The Atlanta Journal Constitution reports:
  • In another troubling sign for commercial real estate, a downtown office tower housing the Atlanta HUD office was sold at a foreclosure auction this week for $7 million. [...] The Atlanta regional office of the U.S. Department of Housing and Urban Development is the sole occupant of the 17-story Marietta Street building. HUD’s mission includes overseeing programs to help homeowners avoid foreclosure. A HUD Atlanta spokesman said more than 400 people work in the building. “There has been no interruption to the operation,” said Joseph Phillips. “We are continuing to operate as usual.”

For the story, see Atlanta HUD office building sold at foreclosure auction.

Ex-Cowboy "Hitting Machine" Hit With Indictment With Eight Others In Alleged Straw Buyer Mortgage Scam Involving $20M+ In Fraudulently Obtained Loans

In Dallas, Texas, The Dallas Morning News reports:
  • Former Dallas Cowboys linebacker Eugene Lockhart Jr., known in his playing days as Mean Gene the Hitting Machine, was arrested Thursday after being indicted on charges related to an alleged mortgage fraud scheme, federal prosecutors said. Lockhart, 48, and eight others(1) allegedly arranged approximately 54 home closings that resulted in the funding of $20.5 million in fraudulent loans between 2001 and 2005, according to the indictment. The indictment detailed transactions in Murphy, Rowlett, Plano and McKinney in which it said the defendants profited by arranging mortgages based on inflated sale prices.

For more, see Former Cowboy Eugene Lockhart Jr. indicted in suspected mortgage fraud scheme.

For the U.S. Attorney (Dallas, Texas) press release, see Former Dallas Cowboys Football Player, Eugene Lockhart, And Eight Others, Charged In Mortgage Fraud Scheme (Federal Indictment Charges Conspiracy, Bank Fraud and Wire Fraud).

(1) The other eight defendants named in the indictment are: Lendell Beacham, 50, of DeSoto, Texas; William Randolph Tisdale, Jr., 45, formerly of Dallas, but currently serving a federal sentence on unrelated charges; Hubert Jones, III, 39, of Garland, Texas; Patricia Ortega Suarez, 55, of Dallas; Suzette Switzer Hinds, 45, of Dallas; Michael Anthony Caldwell, 49, of Arlington, Texas; Donna Lois Kneeland, 45, of Grand Prairie, Texas; and Bryan J. Moorman, 67, of Mesquite, Texas.

Ex-Met, Phillie "Nailed" With Accusation By Creditor Of "Foreclosure Stripping" Home

In Los Angeles, California, Bloomberg News reports:
  • Lenny Dykstra, who helped the New York Mets win the World Series in 1986, was accused of taking goods from his home including a $40,000 French stove two weeks before a bankruptcy judge appointed a trustee to oversee his finances. Fixtures and furniture were “removed and presumably sold” by the former Major League Baseball All-Star, who filed for bankruptcy in July, according to court papers filed by the mortgage lender Index Investors LLC, a creditor in the case.


  • Dykstra was “apparently in the process of stripping furnishings, fixtures and equipment from the estate property,” Index Investors said in an Aug. 19 court memorandum, “doubtlessly to fuel his lifestyle at the expense of his creditors.”


  • He filed for bankruptcy to stop Index Investors from holding “a scheduled illegal foreclosure sale,” he said. The lender subsequently asked the court to let it start foreclosing, and to convert Dykstra’s Chapter 11 proceedings to a Chapter 7 liquidation.


  • Dykstra, 46, known as “Nails” by fans for his aggressive playing style, became an entrepreneur after injuries ended his career, opening a chain of car washes, a subscription Web site that offered stock picks and The Players Club.

For more, see Ex-Met Dykstra Accused of Taking $40,000 French Stove. foreclosure fixture stripping apple

Sarasota House Flipper Faces Grand Theft Charge In Alleged "Foreclosure Stripping" Incident

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • Mark P. Riley, one of the Sarasota area's most successful property flippers, was arrested Friday, accused of gutting a home that he could no longer afford. Riley, 48, and his domestic partner, Richard Waid, 49, were arrested on charges of grand theft related to the disappearance of appliances from their former Lakewood Ranch home.

  • For years during the real estate boom, Riley and Waid traded in million-dollar houses and condos and drove a $300,000 Mercedes. But when the real estate market cooled and Riley and Waid stopped paying their mortgages, they gutted their home and left the bank to foreclose on a multimillion-dollar house stripped bare, according to a Manatee County Sheriff's Office incident report.(1)

For the story, see Housing flipper facing charges (One of the Sarasota area's most successful property flippers is accused of gutting a home that he could no longer afford).

Go here for Mark Riley arrest report.

(1) Officials with First Bank of Florida, which bought the house out of foreclosure, discovered the items missing in April. Granite counter tops and cabinets had been taken from the kitchen. In the bathrooms, toilets were stripped from the floor. Ceiling fans, a wet bar and a kitchen island were missing. Thieves took doorknobs off doors, tore the trim off the walls and walked away with the carpet. Bank officials filed an incident report in April saying about $150,000 in appliances and other items were stolen. The men were arrested Friday.

Phoenix-Area Authorities Get Serious About "Foreclosure Stripping" As Probes, Prosecutions Begin To Pile Up

In Phoenix, Arizona, KNXV-TV Channel 15 reports:
  • Maricopa County Attorney Andrew Thomas announced Tuesday that there has been a significant increase in the number of people charged with gutting vacant or foreclosed homes in Maricopa County. The act, known as “home stripping,” has been on the rise in neighborhoods and dramatically reduces property values, according to Thomas. Multiple cases of home stripping are currently undergoing prosecution and some have led to hefty jail time.(1) [...] "The real estate market is tough enough without neighborhoods having to contend with this new form of blight,” says Thomas. “These prosecutions are important to hold these offenders accountable and to protect property owners in the affected neighborhoods."

Source: County attorney cracks down on 'home stripping' crimes.

(1) Alonzo Patterson, 48, was arrested in February after police reportedly caught him stealing copper piping out of a vacant Phoenix home and intending to sell it as scrap. Patterson was convicted on charges of burglary and possession of burglary tools in July and was sentenced to about 10 years in prison. Police reportedly caught Phillip Mora, 33, after he stripped copper wires and tubing from an empty home in Phoenix. According to authorities, Mora caused more than $14,000 in damage to the home and is facing charges of burglary and aggravated damage. Mark Sydnor, 54, was arrested in April by the FBI Mortgage Task Force after he was reportedly accused of selling countertops, cabinets, and plumbing fixtures on Craigslist from a foreclosed Scottsdale home. According to authorities, Sydnor told undercover police that he frequently removed and sold items from homes and gave the homeowner two-thirds of the proceeds. Sydnor pleaded guilty to defrauding a secured creditor and awaits sentencing. Realtor Kailash Bhatt, 43, was also arrested by the FBI in April and charged with defrauding a secured creditor and theft. Bhatt allegedly sold kitchen fixtures from an Anthem home on Craigslist. And Randolph Guzman, 42, was arrested in April, charged with theft, after offering two air conditioning units on Craigslist from a home in foreclosure in Surprise. Guzman allegedly told the FBI that the house was in foreclosure and he was trying to recoup his losses.T homas said these are only the tip of the iceberg when it comes to the piling amount of cases involving home stripping. foreclosure fixture stripping apple

South Carolina Woman Faces Charges Of Using Relative's Social Security Number To Obtain Credit; Victim Finds Out When Rejected For Home Loan

In Greenwood, South Carolina, The Index Journal reports:
  • Greenwood woman is charged with stealing a relative’s identity and using her Social Security number to make several large purchases and racked up more than $29,500 in debt. Dixie Lee Nelson, 53, [...] is charged with identity theft and financial transaction card forgery.

  • According to the police report, Nelson’s relative went to apply for a home loan on July 31 and was told she already had things in her name and she had a poor credit score. After further research, the victim found out Nelson had “gotten credit at a number of places and was buying a house, car and had a credit card.” Nelson used her own name, but the victim’s Social Security number. One of the fraudulent accounts was $5,973 and the other was $23,535.

Source: Woman faces identity theft, forgery charges.

California AG Obtains $1M Judgment Against "Fast Cash" Lender Accused Of Loan Shark Tactics

From the Office of the California Attorney General:
  • Attorney General Edmund G. Brown Jr. [...] forced CashCall, Inc., an Anaheim-based fast-money lender, to stop using "loan shark tactics" in collecting debt, including abusive calls at all hours of the day and night and empty threats of law enforcement action.(1) The court-ordered judgment also forces CashCall to stop misleading consumers with deceptive advertising and pay $1 million in civil penalties and legal expenses. CashCall used former child actor Gary Coleman as its television spokesman. "CashCall preyed on consumers desperate for cash, charging triple digit interest rates and using loan shark tactics to collect on their debts," Brown said. "This judgment forces CashCall to stop harassing its customers and should serve as a warning to consumers to be wary of fast-money lenders."

For the entire Cailfornia AG press release, see Brown Forces Predatory Lender to End Illegal and Abusive Debt Collection Practices.

For the lawsuit & judgment, see:

(1) Brown contends that CashCall used illegal and abusive debt collection practices when customers were unable to make on-time payments, in violation of California Business and Professions Code Section 17200. These practices included:

  • Making excessive and verbally abusive telephone calls at all hours of the day and night;
  • Causing borrowers to incur bank fees by repeatedly trying to collect payments despite knowing there were insufficient funds in the borrowers' accounts;
  • Threatening to initiate law enforcement and wage garnishment proceedings against borrowers without any basis for doing so;
  • Improperly discussing private financial information with borrowers' friends, colleagues and neighbors;
  • Failing to honor borrowers' requests to cancel automatic withdrawals from checking accounts; and
  • Continuing to contact borrowers by phone after receiving requests to only contact them in writing.

Thursday, September 03, 2009

Posing As Cops, Threatening Arrest Or Physical Harm, Abuse & Humiliation All In A Day's Work For Debt Collection Group, Says NY AG In Lawsuit

From the Office of the New York Attorney General:
  • Attorney General Andrew M. Cuomo [...] announced that his office has filed a lawsuit seeking to shut down a Buffalo-based debt collection operation consisting of 13 debt collection companies run by Buffalo residents Omar Smith, Narvell Benning and Keith Marshall (collectively, the "Benning-Smith Group”).(1) [...] According to the more than 850 consumer complaints filed with the Office of the Attorney General, the Federal Trade Commission and the Better Business Bureau, the Benning-Smith Group's employees violated state and federal law by routinely posing as law enforcement officials and threatening to arrest or to physically harm consumers unless they made arrangements to pay the company immediately. Additionally, the Benning-Smith Group made abuse and humiliation a trademark of their collection practices by verbally abusing consumers and, in some instances, sexually harassing them. To date, the Attorney General’s investigation has identified more than a thousand instances in which the Benning-Smith Group breached state and federal statutes.(2)

For the New York AG press release, see Attorney General Cuomo Sues To Shut Down Buffalo-Based Debt Collection Operation That Illegally Harassed And Threatened Consumers Nationwide (Employees Used Verbal Abuse and Sexual Harassment to Intimidate Consumers Into Paying Debts; Latest Action in Cuomo's Ongoing Probe into Unlawful Debt Collection Practices).


For another story on debt collectors using threats of criminal prosecution to collect debts, see Public Citizen: California Court Approves Class-Action Lawsuit Against Debt Collector Accused of Abusive Tactics (Suit Says Company Wrongly Threatened Consumers With Criminal Prosecution):

  • ACCS [American Corrective Counseling Services, Inc.] uses its contract with local prosecutors to send out letters on official stationary, threatening consumers who have written bad checks with criminal prosecution or jail unless they pay collection fees. Many of these consumers were threatened with criminal charges, even though no prosecutor had reviewed their cases and ACCS, as a private debt collector, lacks the authority to make such threats. Go here to read the documents in the case.(3)


(1) According to the NY AG, the Benning-Smith Group operated under several names, including: Abrams, Burke & Associates; Benning and Smith Acquisitions, Inc.; Brady and Caruso, LLC;;, LLC; Fredericks, Goldstein & Zoe; Graham, Noble & Associates Bookkeeping; Graham, Noble & Associates LLC; Graham, Beagle & Associates LLC; Kingman, Cole and Associates, LCC; Marshall and Ziolkowski Enterprise, LLC; Marshall Ziolkowski Acquisitions, LLC; Lansky, Goldstein, Zoe; OLS Payment Services; and University Debt Collection.

(2) According to the press release, Attorney General Cuomo’s investigation revealed that collectors regularly demanded payment for non-existent debts or substantially inflated the amount owed on an actual debt. Using their false law enforcement identities, collectors coerced and cajoled terrified consumers into agreeing to make payments. Frightened at the prospect of arrest and humiliation, consumers authorized withdrawals from their checking accounts, sent Western Union moneygrams and/or money orders out of fear. In one instance, a Benning-Smith collector kept repeating the name of a consumer’s daughter, describing various sexual things he would do to her unless the debt was paid. Another collector told a female consumer that if both she and her husband would engage in sexual acts with him, he would pay their debt himself. Collectors routinely called consumers “drunks,” “scumbags,” “deadbeats,” and, in one instance, “a low-life piece of trash.”

(3) Public Citizen Litigation Group, attorney for the debtor, describes this case as one that "challenges arrangements under which local prosecutors rent their name and authority to private debt collectors, who use false threats of prosecution to coerce people who have written bad checks to pay various fees. The fees are then split between the debt collectors and the prosecutors."

Vacant Land Affinity Fraud Fleeces 1,000+ Miami-Area Haitians Out Of $10.6M, Say Feds; Bogus Deeds, Closing Docs Used To Make Phony Sales Look Legit

In Miami, Florida, the South Florida Business Journal reports on a recent federal indictment in an alleged affinity fraud targeting members of the local Haitian community:
  • Three South Floridians have been indicted in a land scheme that authorities say defrauded more than 1,000 mostly Haitian victims out of some $10.6 million. Daniel Stephen, 42, of Miami Shores; Clotilde Jean, 43, of Miramar; and Patricia DePons, 53, of Miami Shores, were charged with conspiracy to commit mail fraud and mail fraud for their participation in a scheme to sell vacant land, according to a news release from the acting U.S. attorney for the Southern District of Florida. The case involved the sale of property in North Florida and Georgia by First Loan Solution, a company owned and operated by Stephen and his partner, Jean.

  • According to the indictment, Stephen, Jean and other First Loan Solution employees sold land to members of the Haitian community in Miami-Dade County using advertisements on Haitian radio, leaflets in the community, bus trips to North Florida and direct solicitations of the buyers. In some cases, neither Stephen nor First Solution owned the land that was being sold. In other cases, buyers were told they were purchasing individual parcels of land on which they could build when, in fact, they were purchasing land with other buyers through a limited liability company, and could not build individually on the property, according to the news release.

  • DePons is alleged to have conducted the closings on the sales, and collected money from the buyers. At the closings, DePons allegedly issued fraudulent warranty deeds and closing [statements]. The buyers never received title to the land nor, in most cases, refunds.

Source: South Floridians charged in land scam.

For the U.S. Attorney press release, see Three Charged In Multi-Million Dollar Vacant Land Fraud Scheme.

Cook County Sheriff Faces Federal Suit For Slowdown In Tenant Evictions; Local Landlord Feels Squeezed By Lenient Approach To Booting Problem Renters

In Cook County, Illinois, NBC Chicago reports:
  • What made him a star has now made him a defendant. With so many rental properties in foreclosure last year, Cook County Sheriff Tom Dart for a time halted evictions. It was his contention that many tenants who had been paying their rent were being unfairly removed from their homes, when it was, in fact, their landlords who had not been paying mortgages and were the real culprits. That firm stance led Time Magazine to honor Dart as a "leader and revolutionary," but Lyons landlord Mike Slinkman says the pace at which tenants are now being evicted is wreaking havoc on his business.


  • Slinkman is so serious that he and his father plan to file a federal lawsuit Wednesday claiming what Dart and a Cook County Judge have done to his business is unconstituitional, that apartment evicitions have slowed to a crawl and that the Judge's order to halt evictions in bad weather has been taken to an extreme.

  • "It's running us out of business," Slinkman said. "We're on the brink of not making it, in large part because we can't get our product back." Slinkman and his father own 50 buildings -- roughly 700 units -- in Cook County, but right now they say that so many of their tenants are behind in rent that their cash flow is down $20K to $25K per month.

  • The apartment owners claim the overcrowded apartment of one deadbeat tenant at their property in Lyons and a BBQ held in the lviing room at another building in Justice are also jeopardizing the the lives of the rest of their tenants.

For the story, see Landlord: Pace of Evictions Wreaking Havoc on Business (Property manager to sue Cook County Sheriff Tom Dart).

In a related story, see The Southtown Star: Too much compassion exists in Cook County (Landlord Mike Slinkman claims that Cook County Sheriff Tom Dart's political grandstanding is threatening to put him out of business).

Texas AG Seeks $4.6M From "Debt Settlement" Outfit For Allegedly Ripping Off Consumers, Violating State Registration & Bond Requirements

From the Office of the Texas Attorney General:
  • Texas Attorney General Greg Abbott [...] took legal action to recover $4.6 million that a bankrupt “debt settlement” company wrongly withheld from its clients in Texas and other states. In June, Debt Relief USA Inc. of Addison filed for bankruptcy protection in the Northern District of Texas. As a result, more than 2,500 financially distressed customers did not receive the debt relief they were promised. In fact, debtors’ problems were exacerbated by the bankruptcy because some of Debt Relief USA’s clients received no assistance and are now being pursued by collection companies.

For the entire Texas AG press release, see Attorney General Abbott Pursues Restitution for Texans from ‘Debt Settlement’ Company in Bankruptcy Court (Bankrupt Debt Relief USA said to hold $4.6 million in client funds).

For the Texas AG lawsuit, see State of Texas v. Debt Relief USA Inc.

Wednesday, September 02, 2009

Moderate Income Housing Plans For Half-Finished, Half-Empty Condo Projects Cluttering NYC Skyline Face Complications

In New York City, The New York Times reports:
  • As a rising number of half-finished and half-empty condo projects clutter the skyline, state and city officials have begun developing programs to turn hundreds of these apartments into moderate-income housing. But those efforts have proved far from easy. With budgets tighter than ever, there are few financial incentives to entice developers and lenders. And there are the practical challenges of selling apartments to buyers for far less than what their neighbors paid, not least among them possible complications for market-rent buyers, whose mortgages often depend on the building’s financial status.

For more, see City Seeks to Turn Stalled Projects Into Moderate-Income Housing.

Florida Judge Removes Himself From Foreclosure Case After Making Intemperate Remarks To Lender's Attorney Who Missed Several Court Hearings

In Volusia County, Florida, the Daytona Beach News Journal reports:
  • Tensions over how some lawyers from far and wide are handling large numbers of foreclosures for banks came to a head in DeLand on Monday when a veteran judge removed himself from a case after complaints about his comments [to bank attorney Farzad Milani].(1) Circuit Judge John Doyle, who has been hearing a growing number of foreclosures in West Volusia since he was assigned the mortgage dispute cases in January, was asked to step aside from [one] case [...].


  • The judge explained Monday about 20 percent of those losing their homes were showing up in court, but some attorneys representing the banks weren't. The result would be canceled or delayed hearings. [...] Like other local judges, Doyle was allowing attorneys representing banks from across the state the option to "appear" by telephone, but sometimes they wouldn't answer his calls. [...] He said many of the firms representing banks, which he called "foreclosure mills," hire young attorneys fresh out of law school who handle cases for a flat fee. "They are being trained that it's not a big deal to miss a hearing," the judge said. "Well it is, and if you miss one, relief will be granted against your client."

  • After the incident with Milani last month, the judge decided to stop allowing hearings by telephone in the 3,000 pending foreclosure cases before him. [...] Milani missed several hearings and could not be reached by phone when called, Doyle said. "He was the fellow that broke the camel's back." [...] It will be up to another judge to decide whether Milani should be held in contempt for not showing in court.

For the story, see Judge steps down in foreclosure case.

(1) At an earlier hearing, the judge told attorney Farzad Milani, who was representing the bank, "that he would not do his work while (Milani) sits in his office in Fort Lauderdale smoking his Cohiba cigars and drinking his lattes," according to court records. Doyle also told Milani, according to motion for the judge's recusal filed in court, that he was going to "make an example of him and do whatever he could to have him disbarred." Attorneys for Milani said the judge made "inferences of a racial or ethnic bias" against Milani.

Daughter, Son-In-Law Convicted Of Scamming Alzheimer's-Afflicted Widowed Mom Into Borrowing $350K Against Home & Using It Towards Luxury Home Purchase

In Clackamas County, Oregon, The Oregonian reports:
  • Ask Clara Philpot how she's doing, and she'll answer with a beaming smile and a hearty "Fantastic." Ask the 87-year-old who is president or the name of the dog napping in her lap and she can't say. Philpot, who was diagnosed with Alzheimer's disease in 2002, also can't explain how or why she borrowed almost $1 million to finance a luxury home in Sherwood and immediately deeded half to Gayla and Jeff Ross, a daughter and son-in-law who took care of her.(1) After looking at the evidence, however, a Clackamas County jury took less than two hours to find Gayla Ross guilty of aggravated theft and first-degree criminal mistreatment.

  • Ross now faces prison. She will be sentenced Sept. 8 along with her husband, Jeff Ross, a former Washington County sheriff's deputy who was convicted of first-degree criminal mistreatment. Philpot's net worth now is zero -- she gets by on Social Security -- and she could soon be homeless. The debt on the Molalla house she and her husband bought 43 years ago, and once owned free and clear, now exceeds the property's value, and she hasn't made a mortgage payment for two years.

For more, see Stealing from mom and dad in Oregon (if link expires, try here).

For story update, see King City woman gets prison time for bilking elderly mother (A King City woman convicted of taking her elderly mother's money was sentenced Tuesday in Clackamas County Circuit Court to 16 months in prison and ordered to pay more than $441,000 in restitution) (if link expires, try here).

(1) Under Gayla Ross' direction, Clara Philpot took out a $352,000 mortgage on her Molalla home. Ross used that money as a down payment on a home in Sherwood and obtained a $609,000 mortgage in Philpot's name, the story states. The day after the deal closed, Philpot reportedly transferred a 50 percent interest to the Rosses. Legally, Philpot had sole responsibility for mortgage payments that exceeded $5,600 a month -- more than four times her monthly income. Within a week, one of Philpot's relatives anonymously notified state welfare workers about the deals, and the Sherwood house was lost to foreclosure. FinancialAbuseOfElderlyAlpha

Lenders, Mortgage Servicers Flout Local Health & Safety Ordinances When Dealing With Foreclosed Homes, Say Housing Advocates

The Washington Independent reports:
  • As bank-owned foreclosed properties pile up across the country, from abandoned houses in hard-hit neighborhoods to empty big box retail stores in failed strip malls, the fight over holding someone responsible for the brick and mortar mess left behind by the mortgage crisis continues to heat up. More than two years into the crisis, local authorities still are slapping banks, servicers and speculators with fines ranging from $30,000 to even $90,000 for ignoring orders to take care of foreclosed and vacant properties under their control.


  • Some of the same servicers the Obama Administration is urging to complete more loan modifications [...] are walking away entirely from vandalized homes, or failing to fix broken windows, get rid of junked cars, clear trash, repair damaged roofs and gutters, or even demolish a condemned house, all of which can be violations of local housing codes. And housing courts keep hearing persistent arguments from servicers that they’re merely temporary custodians who can’t alienate investors by spending money to bring properties up to code.

  • They may think it’s unfair, but the law provides that if you have ownership of a property, you take care of it,” said Cleveland Housing Court Judge Raymond Pianka,(1) who regularly fines lenders $5,000 a day for properties that don’t comply with city codes. “There’s no provision to exempt corporations. I’m not going to treat them any differently than the individual property owners who come into my courtroom in wheelchairs and walkers.”(2)


  • From my experience, servicing of properties in the inner city, particularly in African-American neighborhoods is either non-existent or erratic,” said Kermit Lind, a Cleveland State University law professor who specializes in housing and foreclosure issues. And, he added, “servicers have testified under oath that they receive instructions to stop maintaining properties and walk away. Servicers have complained that they cannot afford to bring their properties up to code and still make money selling them, and that their investors will not allow them to comply with local laws.” Lind had little sympathy for the plight of servicers, noting archly that “any reasonable person should see that compliance with local building and housing codes protecting the health, safety and welfare of taxpaying neighbors should be subordinated to the duties and responsibilities of servicing and pooling agreements concocted on Wall Street.”

For more, see Lenders, Servicers Fight Anti-Blight and Property Laws (Housing Advocates Say Industry Is Skirting Health and Safety Ordinances, While Taking Taxpayer Money).

(1) Go here for other posts on Judge Pianka's hammering of deadbeat lenders and mortgage servicers in Cleveland Housing Court.

(2) Reportedly, Judge Pianka said some banks and servicers finally are catching on, showing up in his courtroom to answer to violations and repair properties. He’ll often forgive the big fines if a firm cleans up its property. (Court records show Pianka reduced a $30,000 fine for U.S. Bank to $3,000, after the bank brought a house into compliance.) But a recent court docket also gave a glimpse of continuing disputes, from the speculator from Dubai, who bought six properties, sight unseen, off Craigslist, and hasn’t fixed them up, to a real estate company that purchased REO worth only $1,000, and already has racked up $50,000 in fines. BetaVacantForeclosure

Tuesday, September 01, 2009

Relatives Charged w/ Selling Home From Out From Under Elderly Oregon Widow; Used POA To Pocket $235K Sale Proceeds, Cash Out Bank Accounts, Annuities

In Portland, Oregon, The Oregonian reports:
  • Shortly after two women gained power of attorney from a dying 83-year-old relative, they took all of her possessions and sold her house of 56 years, police said. The pair pocketed the $235,000 from the house sale and cleaned out the elderly woman's bank accounts and savings, sharing the money among themselves and family members, police and prosecutors say.(1) They also arranged and pre-paid for her funeral. However, Evelyn Roth made an amazing recovery and had no idea what her relatives were up to.

  • Now the two suspects, Roth's cousin Virginia Ann Kuehn, 66, and her niece Kathleen Sue Jingling, 53, face a 35-count felony indictment charging them with first-degree criminal mistreatment, aggravated theft and first-degree theft. They've pleaded not guilty. [...] "They robbed me blind," Roth said. "Everything was for money, just to get money, money, money. That's not the way it should be." Roth said she pursued criminal charges because she's lost her savings and all her possessions to relatives who betrayed her trust.

For more, see Dying woman recovers, says relatives "robbed me blind" (if link expires, try here).

(1) Police said the two women cleaned out $35,000 in Evelyn Roth's checking account and also cashed her two annuities totaling $88,000. FinancialAbuseOfElderlyAlpha

Two Sentenced For Roles In Theft Of $126M In Client Funds Held In Connection With Real Estate Tax Free Exchange Transactions

From the U.S. Department of Justice:
  • Two former employees of Edward H. Okun, who was sentenced to 100 years in prison on Aug. 4, 2009, after a three-week jury trial, were sentenced [...] for their roles in a scheme to defraud and obtain approximately $126 million in client funds held by The 1031 Tax Group LLP (1031TG).


  • According to the plea agreement and statement of facts, [Lara] Coleman and others(1) used 1031TG and its subsidiaries in a scheme to obtain millions of dollars of client funds by false pretenses. [...] In the plea agreement and statement of facts, Coleman admitted that 1031TG falsely represented that it would hold client funds solely to complete the clients' [Section] 1031 exchanges.(2) Coleman admitted that after obtaining clients’ exchange proceeds with that false promise, she and others misappropriated approximately $132 million in client funds to support the lavish lifestyle of the owner of 1031TG, pay operating expenses for the owner’s various companies, invest in commercial real estate and purchase additional qualified intermediary companies to obtain access to additional client funds. In addition, Coleman admitted that she lied to federal investigators about statements she made in 2006 to internal attorneys for Investment Properties of America about the amount of money she and others had misappropriated.

For the Justice Department press release, see Two Virginia Residents Sentenced for Their Role in Scheme to Defraud Clients of Funds Allegedly Held in Trust.

(1) Coleman was sentenced to 10 years in prison and ordered to pay full restitution. In addition, Robert D. Field II was sentenced to five years in prison and was ordered to pay full restitution for his participation in the conspiracy.

(2) Section 1031 of the Internal Revenue Code allows investment property owners to defer the capital gains tax that would otherwise be due on properties sold, if the proceeds are used to purchase new property in a specified time frame. To facilitate such exchanges, investment property owners deposit the proceeds from the sale of their property with qualified intermediaries and sign exchange agreements, which include various promises by the qualified intermediaries to clients regarding the safekeeping of exchange funds in trust. EscrowRipOffKappa

Nebraska Couple Loses Home After Being Duped By Nationwide Loan Modification Racket

In Lincoln, Nebraska, the Lincoln Journal Star reports:
  • One night in February, [Denise and Kevin Barret] saw a television ad for the Federal Loan Modification Law Center, a very official-sounding entity that promised it could reduce homeowners' payments while saving their homes from foreclosure. So the Barrets called the number and were told that for an initial payment of $995 the company could renegotiate the couple's delinquent mortgage and get them a better interest rate and more affordable payments. It sounded like a good deal, and the company at the time had a reasonable rating with the Better Business Bureau, Denise Barret said. So the Barrets signed up.


  • While purporting to be helping the Barrets, the Federal Loan Modification Law Center was racking up complaints all over the country. In April, the Federal Trade Commission filed a federal lawsuit against the company, alleging it misrepresented that it could obtain a loan modification or stop foreclosure in all cases. The complaint also alleged that the company falsely claimed in radio and TV ads to be affiliated with the federal government.(1)

  • Nabile "Bill" Anz, managing attorney for Federal Loan Modification and one of the people named in the FTC's complaint, told the Orange County Register in April that the company may have been aggressive, but it had obeyed the law. Since then, Anz seems to have changed his tune. On Aug. 4 he voluntarily resigned from the California State Bar Association, with charges pending against him.

  • According to a news release, the bar filed an application in July to have Anz declared "involuntarily inactive," alleging he failed to perform for clients of the Federal Loan Modification Law Center and failed to refund fees to clients of the business. The news release said Anz admitted the misconduct that was alleged in the application. Some states have also taken action against Anz and his company.

For more, see Caught in foreclosure relief scam, a couple loses their home.

(1) Go here for links to the FTC press release and some of the relevant court documents filed in the lawsuit against Federal Loan Modification Law Center. Reportedly, Mike Cameron, an attorney with the Nebraska Department of Banking and Finance, said the department has fielded a couple of complaints about the Federal Loan Modification Law Center. Cameron said that because the company is already the subject of an FTC investigation, he refers complaints to the federal government.

Monday, August 31, 2009

Central Florida Legal Aid Office Scores $84K In AG Cash To Fund Foreclosure Defense Effort For The Poor

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum and The Florida Bar Foundation today awarded $84,000 to the Legal Aid Society of the Orange County Bar Association, Inc. to be used for a new foreclosure defense assistance program.(1) The program is funded by money obtained by the Attorney General through a settlement with Countrywide Financial. A total of $4 million will be available over two years to fund additional lawyer and paralegal positions devoted to providing free assistance to homeowners facing foreclosures who cannot afford legal defense. “With these funds, we can provide direct legal assistance to Central Florida homeowners trying to save their homes,” said Attorney General McCollum.

For more, see McCollum: Orange County Legal Aid to Get $84,000 Through Mortgage Foreclosure Defense Fund.

(1) Orange County, Florida residents who need legal assistance to avoid foreclosure may contact the Orange County Bar Association's Legal Aid Society at 407-841-8310 or visit the website at Assistance is also available in several languages, including Spanish and Creole.

Brooklyn Foreclosure Intervention Seminar: Settlement Conferences & Advanced Foreclosure Defense Techniques

In Brooklyn, New York, the Brooklyn Daily Eagle announces:
  • Thurs. Sept. 10, CLE: Foreclosure Intervention: Settlement Conferences & Advanced Foreclosure Defense Techniques, 6-8 p.m.: Speakers: Jaime Lathrop, director, and Jennifer Sinton, deputy director, both of South Brooklyn Legal Services' Foreclosure Prevention Project. Approved for (2) CLE credits toward Professional Practice. Free for attorneys who accept a pro bono assignment through the Volunteer Brooklyn Bar Association's Volunteer Lawyers Project before April 5, 2010. Held at the Brooklyn Bar Association, 123 Remsen St. For information or to register, contact Jessica Spiegel, pro bono coordinator: (718) 624-3894 x4.

  • Tues. Sept. 22, Public Education Foreclosure Program, 6 p.m.: Free and open to the public. Sponsored by the Brooklyn Bar Foundation. Held at the Brooklyn Bar Association, 123 Remsen St. For information, see the BBA’s web site:

Source: Upcoming Events in the Legal Community: August 31, 2009.

More On The City Of Baltimore v. Wells Fargo "Ghetto Loans" Predatory Lending Case

In a recent interview with Democracy Now!, Wells Fargo whistleblower and ex-subprime loan officer and sales manager Elizabeth Jacobson speaks out on some of the predatory lending practices allegedly engaged in by her former employer.(1)

I) On the incentives for Wells Fargo loan officers to allegedly bulldoze every would-be borrower into a subprime loan:
  • I was at Wells Fargo for nine years, and I originated loans. Wells Fargo had two separate divisions: the prime division and the subprime division. And you could not originate prime loans if you were in the subprime division. So that’s what I did for nine years at Wells Fargo, is originate the subprime loans.

  • In the beginning years at Wells Fargo when I started, there was no filter system. So, if you had somebody come into your office and you could sell them a subprime loan, even if they qualified for a prime loan, that’s what you did. The compensation worked out that you had a huge incentive to put people into a subprime loan. Even the prime loan officers would make as much money on a [...] subprime loan, referring it over to the subprime division, that they would make doing a prime loan. So there was an incentive for the prime loan officers to refer the business to the subprime side.

II) On her company training putting borrowers into exploding adjustable rate mortgages:

  • Well, when I was hired by Wells Fargo, I had never worked in the mortgage industry at all. I had been a paralegal. So I took everything that Wells Fargo was telling me, that this is the way things were done. I didn’t question the fact that we were putting people in a 55 percent debt-to-income ratio and that we were only qualifying them based on the two years at the lower interest rate. The whole goal was, every two years you’re going to refinance that loan. So, it was sold as a two-year loan. These people were never intended to be in the loan for thirty years.

III) On her experience on the question of allegedly seeking the assistance of African American churches in Baltimore to target their members for subprime loans:

  • A lot of this was information that I would receive on conference calls as a sales manager. And people on the call, the management there, would encourage the loan officers, the subprime loan officers, to go into Baltimore city and target the churches, the African American churches, to get a relationship going with the minister or the reverend at the church and try to get that person to schedule some sort of meeting. They would call it a “wealth-building seminar” to get the parishioners of the church to attend. And any loan that was funded by Wells Fargo, whether a purchase or a refinance, $350 would then be donated to the church. And so, that was the incentive for the church to want to have these seminars there.

  • But what would happen is the only loan officers that would attend these seminars were generally the subprime loan officers. And on these conference calls, at one point, somebody made a joke who happened to be a white loan officer and said, “Well, will I be able to go to these seminars?” And they were told right there on the conference call, unless you were of color, you could not attend these conferences, these wealth-building conferences. So it seemed me—Wells Fargo didn’t come right out and say this; this is just what I saw—is that they wanted the African American Wells Fargo loan officers to sell loans to the African American community.

IV) On her resignation from her position as sales manager and top producer in the subprime division at Wells Fargo (originating approximately $55 million a year in subprime loans):

  • I happened to see a news report with the CFO of Wells Fargo, and he was questioned about the subprime division and denied at that point that Wells Fargo even had a subprime division. So here he is, the chief financial officer, where the subprime loans were supposed to be paying for the fixed costs of the company, and he’s denying that Wells Fargo even did subprime loans. That was just the final straw of total disillusionment, and then I put my resignation in.

For the transcript of the interview, and link to view the television interview, see Former Wells Fargo Subprime Loan Officer: Bank Targeted Black Churches as Part of Predatory Subprime Lending Scheme.

(1) Earlier this summer, Jacobson filed a sworn affidavit with a federal court in support of the city of Baltimore’s lawsuit against Wells Fargo for pushing high-interest, subprime loans onto African Americans in Baltimore and the Maryland suburbs, leading hundreds into foreclosure. She and another whistleblower allege Wells Fargo targeted African Americans for subprime loans and routinely steered customers qualified for prime loans toward subprime loans.

The Federal lawsuit and earlier media reports on the Baltimore City predatory lending action against Wells Fargo indicate that Jacobson and fellow whistleblower Tony Paschal allege, in sworn affidavits filed in Federal court, that:

  • Wells' "Subprime managers joked that Prince George's County was the 'subprime capitol of Maryland'" (see Jacobson Declaration, at paragraph 26), Wells' loan officers targeted black ZIP codes (see Paschal Declaration, at paragraph 10) and churches (see Jacobson Declaration, at paragraph 27), used software to “translate” marketing materials into African-American vernacular (see Paschal Declaration, at paragraph 11), referred to subprime loans in minority communities as “ghetto loans” and to borrowers as “mud people” (see Paschal Declaration, at paragraph 8), use of the words "nigger" in referring to African Americans and "'hoods" and "slums" in speaking on how African Americans live (see Paschal Declaration, at paragraph 16; see also Paschal Declaration - Exhibits B and C for email exchange in which Tony Paschal addresses these points with two Wells Fargo higher-ups - one supervisor actually acknowledged in one of the emails the use of the racial slur), and loan officers joked that, in making these subprime loans, they were “riding the stagecoach to Hell” (see Jacobson Declaration, at paragraph 31).

For the Federal lawsuit (including affidavits, evidence, and other court filings ) and earlier media reports, see:

New York Times Profiles Brooklyn Trial Judge Known For Holding Lenders' Feet To The Fire When Seeking Mortgage Foreclosure

The New York Times recently ran a profile on Brooklyn, New York trial judge Arthur M. Schack, a jurist who has developed a reputation for being a thorn in the side of those foreclosing lenders and their attorneys who, in cases over which he presides, persist on filing court papers that are filled with errors and omissions, and who otherwise come to court unprepared to prove that they actually own the promissory note secured by the mortgage they seek to foreclose.
  • [Justice Schack] has tossed out 46 of the 102 foreclosure motions that have come before him in the last two years. And his often scathing decisions, peppered with allusions to the Croesus-like wealth of bank presidents, have attracted the respectful attention of judges and lawyers from Florida to Ohio to California. At recent judicial conferences in Chicago and Arizona, several panelists praised his rulings as a possible national model.


  • Justice Schack, like a handful of state and federal judges, has taken a magnifying glass to the mortgage industry. In the gilded haste of the past decade, bankers handed out millions of mortgages — with terms good, bad and exotically ugly — then repackaged those loans for sale to investors from Connecticut to Singapore. Sloppiness reigned. So many papers have been lost, signatures misplaced and documents dated inaccurately that it is often not clear which bank owns the mortgage. Justice Schack’s take is straightforward, and sends a tremor through some bank suites: If a bank cannot prove ownership, it cannot foreclose.

For more, see A ‘Little Judge’ Who Rejects Foreclosures, Brooklyn Style.

In a somewhat related story, see New York Magazine: Brooklyn Judge’s Influences Include Obscure Bruce Willis Movies.

For an earlier post on Justice Schack, with links to over 30 of his court rulings in which he bounced unprepared foreclosing lenders and their lawyers out of his courtroom, see Brooklyn Trial Judge Nixes "Rubber Stamp Method" Of Adjudicating Foreclosures; Lenders, Lawyers Lacking Legal Standing To Bring Actions Get Bounced.

Enabling "Buy & Bail" Scams, Breaking Into Foreclosed Homes All In A Day's Work For Las Vegas Real Estate Agents??? Everybody's Doing It, Says One

In Las Vegas, Nevada, the Las Vegas Sun reports:
  • A Las Vegas real estate agent who landed a prominent role in a Time magazine cover story is being scrutinized by state licensing officials because of her comments, has left her employer and is lying low. The story by Joel Stein in the Aug. 24 issue, “Less Vegas,” is a high-spirited and high-altitude view of the troubles facing Las Vegas, which he calls both “our most American city” and “an entire city of John Dillingers.

  • In the story, Brooke Boemio — “a bouncy, sweet, recently remarried 31-year-old mom” — is cast as one of the Dillingers. She helps Stein break into a foreclosed home and brags about helping clients who are underwater on their mortgages buy a second house on the cheap and stop making payments on their first mortgages, pressuring the bank into selling the houses for a loss.

  • Everybody’s doing it, she says in the story. In fact, she said, she did it herself. Since the story appeared, Boemio and her employer have, in the words of Coldwell Banker Wardley Real Estate President Jeff Sommers, “parted ways.”


  • The buy-and-bail tactics described in the story, he said, are serious allegations and “really just in direct opposition to everything in our policies.” [...] When the story was published, it referenced a video on Time’s Web site titled “Breaking and Entering,” of Stein and Boemio entering an unoccupied home on the west side of town. Since then, the video has been removed from the Web site for what Time spokeswoman Betsy Burton described as “some sensitivity with various issues.”

For more, see Unflattering Time magazine story puts agent in hot water (Since bragging to magazine about unethical practices she’s off job, under scrutiny).

For the Time magazine article, see Less Vegas: The Casino Town Bets on a Comeback (the description of the above referenced scams begins on page 2 of the story).

For more on "Buy & Bail" real estate scams, see:

South Florida Landlord To Cough Up $200K+ In Settlement With Feds Over Civil Charges Of Race Discrimination In Apartment Rentals

From the U.S. Department of Justice:
  • The Justice Department [Thursday] announced an agreement with the owner of College Square Apartments, in Davie, Fla., to settle allegations of discrimination against African Americans. Under the consent decree, approved [Thursday] in U.S. District Court in Miami, the defendants must pay a total of up to $140,000 to victims of discrimination(1) and a civil penalty of $74,000 to the government.

  • The lawsuit, filed in August 2008 and later amended, alleged that the property manager at the time, Don Murroni, acting under the direction of Craig Forman, the president and sole shareholder of C.F. Enterprises, falsely told African Americans that no apartments were available and discouraged African Americans from applying. Murroni also allegedly offered to waive the application fee or other costs for white applicants, and told white testers that a selling point of College Square Apartments was the absence of black tenants. The allegations were based on evidence obtained through the Department’s fair housing testing unit, where individuals present as potential renters to gather information about possible discriminatory practices. [Thursday's] settlement resolves the government’s claims against C.F. Enterprises and Craig Forman.(1)

For the entire Justice Department press release, see Justice Department Settles Race Discrimination Allegations Against Davie, Florida, Apartment Complex.

(1) Individuals who believe that they may have been victims of housing discrimination at College Square Apartments should call the U.S. Justice Department at 1-800-896-7743 extension 992.

Cuyahoga Prosecutor Indicts 1st 12 In Alleged $14M+ Cleveland-Area Mortgage Fraud Operation

In Cleveland, Ohio, WKYC-TV Channel 3 reports:
  • The first 12 defendants(1) in a $14.7 million mortgage fraud case were indicted by the Cuyahoga County Prosecutor on offenses involving homes located at 615 North Main Street in Chagrin Falls, 2105 Woodstock Road in Gates Mills, Port Clinton and Toledo, among others. These defendants, including individuals from Wickliffe, Chesterland and Mayfield Village, were indicted on mortgage fraud offenses including engaging in a pattern of corrupt activity, a first degree felony, according to Cuyahoga County Prosecutor Bill Mason's office.(2)


  • According to Mason's office, these twelve defendants and three companies -- The Equator Group, Century 21 Homestar Realty, and Homestar Title Agency -- were indicted for engaging in a pattern of corrupt activity that secured $14,766,515 in fraudulent loans used to purchase seven homes in Cuyahoga, Ottawa and Lucas counties. [...] Six of the seven houses fell into foreclosure.

For more, see Prosecutor: 12 indicted in $14 million mortgage fraud case.

(1) The defendants include: Deborah Brazalovics, 56, of Wickiffe; Paul Brazalovics, 33, of Wickliffe; Anthony Geraci, 39, of Mayfield Village; Richard Kilfoyle, 50, of Chesterland; William Werner, 39, of Cleveland; Andrew Fishman, 35, of Hollywood, FL; James Trungale, 40, of Austin, TX; Diane Marciel, 48, of Woodland Hills, CA; Susan Alt, 56, of Santa Monica, CA; Joanne Schmidt, 56, and her husband, Howard Schmidt, 56, both of Agoura Hills, CA; and Charlotte Gill, 38, of Southwest Harbor, ME.

(2) Reportedly, the investigation was conducted by the Cuyahoga County Mortgage Fraud Task Force operating under authorization of Ohio Attorney General Richard Cordray and Ohio's Organized Crime Investigations Commission.

Sunday, August 30, 2009

Florida Closing Agent Admits Pocketing Client's Refi Proceeds, Leaving Retiree Facing Foreclosure; Scammer Moved To State After NY Fraud Conviction

In Archer, Florida, The Wall Street Journal reports:
  • Last summer, Lawrence Ford jumped into the fast-growing market for so-called reverse mortgages. The retired auto mechanic and horse trainer used the money he received to pay off his existing $70,000 mortgage and "piddled away" the remaining $24,000 on things like restaurant meals for his four girlfriends, he says. Or so Mr. Ford thought. Last month, the owner of the Orlando, Fla., title company that handled his loan admitted to stealing more than $1 million from several reverse-mortgage holders, including Mr. Ford. Bank of America Home Loans, a unit of Bank of America Corp., says the title agent never sent it the money required to pay off Mr. Ford's mortgage. As a result, Mr. Ford says, the bank recently threatened to foreclose on his seven-acre ranch in Archer, Fla. "That will put me on the streets with my cars and horses and tools," says the 68-year-old Mr. Ford. Bank of America, which says there is no immediate danger of foreclosure, adds that it is working with Mr. Ford "to find a home-retention solution."


  • Before moving to Orlando in 2008, Garry Martin, 37, the title agent on Mr. Ford's reverse mortgage, was convicted of mortgage fraud in New York. In Florida, Mr. Martin orchestrated about 10 reverse-mortgage schemes,(1) pocketing about $1 million, prosecutors say. As title agent, Mr. Martin was obligated to distribute funds from his victims' reverse mortgages to retire their conventional mortgage loans. But according to prosecutors, he kept much of the money. To prevent his victims from catching on, he arranged for their monthly mortgage statements to be mailed to an address he controlled. The scheme unraveled when the banks contacted the victims about their missed mortgage payments.

  • Mr. Martin, who pleaded guilty to stealing over $5 million from more than 50 victims of mortgage-related frauds, faces up to 20 years in prison. His attorney declined to comment. Mr. Ford, meanwhile, fears he may be running out of options. Unless the bank agrees to modify his loan, he says, "I don't see a way out."

For the story, see Mortgage Fraud: A Classic Crime's Latest Twists (As 'Reverse' Loans Grow More Popular, Scams Put Older Adults at Risk).

(1) Referring to this ripoff as a "reverse mortgage scheme" is somewhat misleading. What was done in this case was simply nothing more than a flat out theft of escrow funds by a corrupt closing agent, where the refinancing proceeds that were derived just happened to come from a reverse mortgage. There is nothing inherent about a reverse mortgage that makes pulling off this scam any easier than if a conventional mortgage was involved. EscrowRipOffKappa

Iowa Woman Fights Foreclosure Claiming Estranged Hubby Forged Her Signature On Loan Documents; Files Quiet Title Action In Attempt To Void Mortgage

In Hamilton County, Iowa, The Daily Freeman Journal reports:
  • Diana Messerly claims she didn't sign most of the loan documents that First State Bank of Webster City holds against her home, implying in a countersuit to the bank's foreclosure measures that her estranged husband, Doug Messerly, forged her signature on at least five separate occasions. She's also is claiming, in a suit filed in the Iowa District Court for Hamilton County, that Linda Cormaney, a First State Bank vice president and notary, notarized the loan documents against the Messerly home [...] even though they had not been signed by Diana Messerly in Cormaney's presence.


  • But, perhaps more importantly, Messerly's countersuit also seeks an action of quiet title to end the dispute over who has a right to the property - First State Bank, which holds mortgage liens that amount to nearly $200,000 against the $170,790 home and property, or Diana Messerly, who lives there. An action of quiet title in Diana Messerly's favor would "quiet" any challenges or claims to her right to the title of the home and property, effectively freeing her - forever - of any claims against it.(1)

For more, see Accountant’s estranged wife fights foreclosure (Diana Messerly’s countersuit claims she didn’t sign loans against her home).

(1) In a separate matter, the article reports that a settlement is imminent in a lawsuit filed this spring in Webster County alleging Messerly, a former Webster City accountant, forged longtime client Margaret Stark's signature to documents selling off $260,000 in her investments, which he then deposited into his personal bank account at First State Bank, according to an attorney for the bank. DeedContraTheft

"Greek" Alumni Seek To Void Dubious Sale Leaseback Of College Fraternity House Now Facing Imminent Foreclosure; Criminal Probe Possible

In Springfield, Missouri, the Springfield News Leader reports:
  • Seven months after a group of Alpha Gamma Sigma alumni sued over what they said was the illegal sale of their fraternity house, the property is threatened with foreclosure. Should that come true, the eight students in the house must find a new place to live. It would also mean the 38-year-old organization would lose its place on the Greek Row. [... T]he agriculture fraternity's house is set for a trustee sale Tuesday, said Leland Gannaway, an attorney for Citizens National Bank of Springfield. The bank has loaned nearly $200,000 on the house. Officials at Missouri State University said they'll find space for the eight fraternity members should they be evicted.


  • Meanwhile, the Springfield Police Department is looking into the matter. "Based on preliminary reports, we believe there is enough information to start a criminal investigation," Lt. David Millsap said.

  • The disputes apparently stem from a 2005 sale of the house to two individuals, who at the time were on the board of directors of Alpha Gamma Sigma of Springfield, Inc. The corporation owned and managed the assets of the fraternity. [... Charles] Marshall, then the president of Alpha Gamma Sigma of Springfield Inc., said no formal vote was taken [approving the sale]. Interested members agreed to the sale over phone calls.

  • Other alumni, nearly four years later, now argue the sale was invalid because the deal was not authorized by the corporation's board of directors, according to the petition they have filed in the Greene County Circuit Court. Since the sale, Marshall said he and [co-owner Robert] Ferber remodeled the property and leased it [back] to the fraternity. County records show the duo soon refinanced the initial note with a $120,000 loan from Citizens National Bank and, in 2006, borrowed another $78,895 against the fraternity house from the same bank.

For more, see Fraternity house faced with foreclosure.

For story update (9-2-2009), see Bank buys fraternity house at auction (Members will be able to work out lease arrangement).

Feds Convict Ex-NYS Trial Judge For Attempting To Put A $10K Squeeze On Attorney With Cases Pending Before Him

From the U.S. Department of Justice:
  • Former New York State Supreme Court Justice Thomas J. Spargo was convicted [Thursday] by a federal jury in Albany, N.Y., of attempted extortion and soliciting a bribe. Spargo, 66, was convicted following a three-day jury trial. Evidenced introduced at trial showed that on Nov. 13, 2003, Spargo solicited a $10,000 payment from an attorney with cases pending before him in Ulster County, while Spargo was serving as a state supreme court justice. The trial evidence showed that when the attorney declined to pay the money, Spargo increased the pressure by a second solicitation communicated through an associate.

  • According to evidence presented at trial, on Dec. 19, 2003, Spargo directly told the attorney in a telephone conversation that he and another judge close to him had been assigned to handle cases in Ulster County, including the attorney’s personal divorce case. According to the evidence at trial, the attorney felt that if he did not pay the money, both the cases handled by his law firm and his personal divorce proceeding would be in jeopardy.

For the entire Justice Department press release, see Former New York State Supreme Court Justice Thomas J. Spargo Convicted of Attempted Extortion and Bribery.

Recording Artist Sues Lender In Attempt To Fend Off Foreclosure; Says WaMu Reps Put Bogus Info In Loan Application, Tricked Couple Into Signing

In Kaua'i, Hawaii, The Honolulu Advertiser reports:
  • A singer who gained popularity in the late 1960s with the song "Hello It's Me" has filed a lawsuit here against a Washington-based bank, asking a judge to stop the financial institution from foreclosing on his Kaua'i home. Todd Rundgren filed the complaint Wednesday in state Circuit Court and alleged that representatives from Washington Mutual misled him and his wife, Michele, when the couple refinanced a loan on their property in Kilauea. The lawsuit, filed by attorney Gary Dubin, lists as defendants Washington Mutual Bank and JP Morgan Chase, which acquired WaMu in September 2008. The Rundgrens are asking for a temporary restraining order to halt foreclosure actions, as well as an undetermined amount in damages and attorneys fees.


  • The Rundgrens allege they refinanced a mortgage on their Kaua'i home in February 2008 for $3 million. But they said WaMu representatives created a false loan application that exaggerated their gross monthly income and then tricked them into signing the application. [... Dubin] acknowledged that the Rundgrens did not read the mortgage document at the time they signed it, but he said very few people do. "I can tell you this: I never read mine either," he said. "The clients who come to see me, the single word they always use is 'trust.' They trust the loan broker who was so nice to them. They trust that it was a big-looking company."

For the story, see Singer sues bank in foreclosure (Rundgren suit stems from $3M Kauai home refinancing).