Saturday, October 31, 2009

Elderly Couple "Snatched" By State Of Texas Celebrate Homecoming After One Year Of Nursing Home "Captivity" - Home Went Into Foreclosure, Car Repo'd

In Richardson, Texas, Fox 4 News reports:
  • It’s an emotional and long awaited homecoming for an elderly Richardson couple whose battle with the state for their freedom triggered a FOX 4 Investigation. Michael and Eugenia Kidd say the State of Texas has held them captive in a nursing home for months. But after a court ruling [...] the Kidds are finally saying “home sweet home.”



  • Community activist Russell Fish jumped on board when he heard about the Kidds’ story. He started a Web site for the Kidds and has organized volunteers to help. He says there is still a lot of work to do because the state has destroyed the Kidds’ finances. “We need to clean that up. Their credit is destroyed. Their house went in to foreclosure. They had their car repossessed. These are people who had done all the right things,” said Fish. “They just made the mistake of getting old.”


  • I’m really infuriated by the way it all came about,” Michael Kidd told FOX 4. “At our age, when we were retired and enjoying our retirement, and suddenly snatch a year out of our lives…for what reason? There are criminals out there that get less time in jail,” Kidd continued.

For more, see Kidds Leave Facility, Return Home.

Tenant Cops Plea To Forgery After Befriending Elderly Landlord, Then Looting Her Bank Account, Leaving Homes In Foreclosure

In Vista, California, San Diego News Network reports:
  • A woman who forged her landlord’s checks and temporarily forced the victim’s two homes into foreclosure pleaded guilty [...] to four counts of passing forged checks. Jacqueline Mastrodimos, 38, agreed to a four-year prison term when she is sentenced on March 1 by Superior Court Judge Daniel Goldstein, Deputy District Attorney Anna Winn said.

  • Authorities said Mastrodimos rented a room in 2005 in the Carlsbad home of Julie Johansen, who is in her 60s, and soon became involved in the victim’s finances.(1) The mortgage on the Dehesa Court home went unpaid from January to August 2008, and Johansen didn’t realize there was a problem until she saw a notice on her front gate that the property would be sold at auction in three weeks, police said. A Carmel Valley condominium was in foreclosure for the same reason. Johansen was able to avoid losing the properties but had to pay substantial penalties. [...] Meanwhile, Johansen still has “a horrible financial condition” because of Mastrodimos’ actions, Winn said. She is unable to open a new bank account and has seen her credit score plunge, according to the prosecutor.

For the story, see Plea deal reached in Carlsbad rental forgery.

(1) Reportedly, Mastrodimos wrote checks to herself from the victim’s account, took out credit cards in Johansen’s name and used the woman’s automated teller machine card at casinos, detectives said.

More Phony Landlord Rent Scams Promoted On Craigslist

In Chandler, Arizona, ABC 15 reports:
  • After her husband lost her job, Ava Padilla said she was looking for a solution because they couldn't afford to keep the home they were renting. [...] She said the man who posted an ad on Craigslist told her the deal was legitimate. For $500 down, her family could live rent free in a foreclosed home for 6 to 18 months. "He said pay $250 first and then you pay the other $250 once we release the keys to you," said Padilla. All he said she needed to do was find a vacant home from a list he gave her. So, in good faith, she gave him the $250 up front. After she received the list, she realized there were some problems with it because either the phone numbers were disconnected or worse, "The people were yelling and screaming, 'How did you get my number, our house is not for sale.'" Initially, she said she was scared because she had to sign a contract swearing to keep the deal secret from family and friends.

  • All of this is now part of a police report and a complaint turned in to the attorney general's office. The attorney general's office tells ABC15 this story has several serious warning signs including the secrecy, money up front and the fact they would be living in a foreclosure without a rental agreement.

Source: Foreclosure traps duping Valley families. KappaPhonyLandlordScam

Foreclosure Crisis Exacerbates Lead Based Paint Problem For Chicago Tenants With Young Children

In Chicago, Illinois, CBS 2 Chicago reports:
  • A Chicago couple says their two young boys are sick, and their own home and landlord are to blame. The problem? Lead paint. And as CBS 2's Mike Puccinelli reports, it's even worse now because of the foreclosure crisis. The foreclosure crisis is making an already bad problem even worse in Chicago. That's because many of the foreclosed properties are contaminated with lead paint. Lead abatement experts say many cash-strapped landlords have essentially stopped repairing properties. Nina Woods says that's what happened in her apartment where two of her children were poisoned with lead. She blames her landlord for failing to inform her of the lead paint problem and then failing to correct it.


  • Lead abatement assistance is available to homeowners, often free of charge. Homeowners or property owners of buildings with four units in them or less can apply for financial assistance covering up to 100 percent of the lead abatement costs.


  • In Chicago, one out of every five children screened for lead actually tests positive for an elevated level of lead in their blood. That's especially disturbing when you consider the fact that the effects of lead poisoning are irreversible.

For the story, see 1 In 5 Chicago Kids Has Elevated Lead In Blood (City Lead Abatement Program Helps Homeowners With Costs).

Property Used As Meth Lab Spells Disaster For Homebuyer; Forced To Quit Job Due To Illness, Home Now In Foreclosure

In Fort Wayne, Indiana, The Journal Gazette reports:
  • The headaches, muscle aches and breathing problems began shortly after she moved in, but Julie McCoy Sabatino was slow to blame her house for making her sick. She was shocked to realize she should: Methamphetamines had been produced in the house, just months before she bought it. Several years after the state began requiring counties to maintain records, Indiana’s accounting of its meth houses remains patchwork and incomplete. And because those public records go back only a couple of years in a state where meth has been a major problem for more than a decade, they are no help to people like McCoy Sabatino.


  • The previous owner – who had rented out the home to tenants who were arrested in connection with producing meth – said she had washed the walls of the home with bleach and other cleaners six times in an effort to properly clean it, according to a copy of the correspondence provided by McCoy Sabatino. That probably wasn’t enough, according to federal guidelines on meth-lab cleanup recently issued by the U.S. Environmental Protection Agency. The drug can seep into countertops and drywall. Most carpeting should probably be replaced. The remaining surfaces should be professionally tested for contamination, according to the guidelines. All this can come at wildly variable cost to the homeowner – from $5,000 to $150,000, the EPA report said. Property owners, even those not cooking meth themselves, typically foot the bill.

  • McCoy Sabatino said the health effects from living with meth’s ghosts forced her to quit her factory job and apply for disability benefits. [...] Three years after she bought the home, it’s gone into foreclosure. McCoy Sabatino said she couldn’t afford payments because of her family’s medical bills and her job loss. She said she doesn’t see the point in paying on a house she’s come to see as a death trap.

For the story, see Old meth lab poisons dream home (State recordkeeping largely outpaced by makers of drug).

In related stories, see:

Friday, October 30, 2009

BofA Revokes Loan Modification Agreements Despite Having Collected Timely Payments On Reworked Terms, Complaining Homeowners Tell Florida AG

In South Florida, the South Florida Sun Sentinel reports:
  • Hundreds of struggling Florida homeowners have filed complaints with Florida Attorney General Bill McCollum in the past year about failed or stalled home mortgage loan modifications with Bank of America. Angry borrowers, desperate to hold on to their homes, say they've made dozens of calls to their lender and spent months asking for a change in their loan terms, only to be denied or to learn that Bank of America revoked their loan modifications a few months after they reached a deal.

  • "I wrote letters to the governor, I called the bank every single month," said Yvonne McBride, a disabled former state worker who received a loan modification for the Sunrise home she shares with husband Herman Acosta. But the bank retracted the deal after, she said, she'd paid more than $9,200 to cover mortgage payments through next January.

For more, see Hundreds of loan modification complaints filed against Bank of America (Hundreds of complaints about Bank of America have been filed with the Florida attorney general over mortgages and stalled loan modifications. Other major lenders have few complaints).

In a related post, see South Florida Couple Files Suit Against Lender, Saying B of A Welched On Loan Modification Agreement.

Arizona Woman Dodges BofA's Foreclosure Sale Of Home Out From Under Her; Servicer Failed To Cancel Auction Despite Granting Loan Modification Deal

In Scottsdale, Arizona, KPHO-TV Channel 5 reports:
  • Debbie Obroc nearly lost her home to foreclosure, despite being granted a government loan modification. “I just can’t believe that your home could be sold out from under you,” Obrock said. Obrock said Bank of America failed to stop the foreclosure process, even after signing her up for modified payments in July. She learned her house was up for auction last week by coincidence when a neighbor saw Debbie’s home on a list of foreclosure sales and called to let her know she was about to lose her home. “I was shocked,” Obrock said. “I thought it was a mistake.”

  • Last minute calls complaining to Bank of America stopped the sale, but Obrock fears she could lose her home. “I ended up going to the trustee sale just to make sure I could see for myself my home wasn’t being sold,” she said. “I’m still extremely nervous. I can’t believe that this is the system.”(1)

For the story, see House Accidentally Put Up For Auction.

(1) One attorney called banks “blind octopus.” He said they have many tentacles that are unaware of what is going on with each other. “They don’t know what one hand is doing with another and they don’t communicate very clearly,” he said “They don’t say, ‘Oh I see you’re working on a modification so I won’t go forward with the trustee sale.’ You have to specifically request that. You have to be diligent with that.” He said homeowners should be aware that even as they continue to negotiate for a modification with their bank, the foreclosure process is moving forward. ForeclosureLockOuts

Florida AG Tags Five Debt Settlement Firms In Two Separate Lawsuits Alleging Deceptive Practices, Upfront Fee Ripoffs

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum [...] announced his office has filed two lawsuits on behalf of Florida consumers against five debt settlement-related companies.(1) According to the Attorney General’s lawsuits, the businesses promised consumers they could pay off their debts for a fraction of the amount owed, but instead collected large up-front fees and left customers with little or no money to pay creditors. “These victims were hit with a one-two punch: they paid substantial up-front fees for services not provided as promised, then ended up with increased debt, ruined credit, lawsuits, bankruptcy and more,” said Attorney General McCollum. [...] Both lawsuits petition the court for full victim restitution, injunctive relief, and civil penalties for each violation of Florida’s Deceptive and Unfair Trade Practices Act.

For the entire press release, see Attorney General McCollum Targets Debt Relief Industry Abuses (Two lawsuits filed alleging excessive fees and conduct defrauding consumers and damaging credit).

(1) One of the lawsuits was filed against Texas-based CSA-Credit Solutions of America, Inc., a self-proclaimed debt settlement industry leader. The lawsuit alleges that CSA unlawfully charges significant advance fees before completing or, in many instances, commencing performance of its debt settlement services. For the lawsuit, see State of Florida v. CSA-Credit Solutions of America, Inc.

The second lawsuit filed names Clearwater-based ADA of Tampa Bay, Inc., which does business as American Debt Arbitration. The lawsuit also names the company’s principal Glenn P. Stewart, as well as Arizona-based entities Nationwide Asset Services, Inc., Service Star, LLC, and Universal Debt Reduction, LLC. The lawsuit alleges the defendants promise to help consumers pay off their debts at significant savings, but fail to adequately disclose the true cost of their services. Also allegedly withheld from consumers is the fact that the companies collect at least the first three months’ of payments as fees, in violation of Florida law, before the consumer can start accumulating any funds for settlement and before any services begin. For the lawsuit, see State of Florida v. Nationwide Asset Services, Inc., et al.

41 State Attorneys General Join To Seek FTC Rules Amendments To Address Upfront Fee Debt Relief Ripoffs

In a recent letter to the Federal Trade Commission, 41 state Attorneys General have expressed their concerns regarding the sale of debt relief services to consumers and the complaints they've received about alleged deceptive trade practices and upfront fee ripoffs engaged in by these operators, and the need for amendments to the FTC's Telemarketing Sales Rule to address these concerns.(1)

For the letter, see Telemarketing Sales Rule - Debt Relief Amendments.

For a related report from the National Consumer Law Center, see An Investigation of Debt Settlement Companies: An Unsettling Business for Consumers.

(1) The AGs describe, in pages 2-4 of their letter to the FTC, the debt relief business models that are the cause for their concern:
  • In contrast to debt management plans in which consumers make monthly payments to creditors, the debt settlement business model generally requires that a consumer stop making regular payments to creditors. Instead, the consumer makes payments directly to the debt settlement company or into a separate account arranged by the settlement company. The consumer continues to pay into the account until the debt settlement company believes there are sufficient funds to attempt to negotiate and settle the consumer’s debts. Debt settlement companies do not disburse regular payments to consumers’ creditors. Presumably, withholding all payments from the creditor increases the company’s bargaining position. Almost all debt settlement companies charge a large portion of their fees in advance before they perform any significant services on behalf of the consumer. It is this business model which has been reported to be growing rapidly and has come under increased scrutiny by the media, regulators, consumer advocates, and federal, state and local enforcement agencies.


  • [Another] type of debt relief business [causing concern] is a relatively new breed: the debt negotiation model. These companies often represent that they can negotiate dramatic and immediate interest rate reductions on behalf of consumers and that the renegotiated credit terms will save the consumers thousands of dollars in a matter of months. Debt negotiation companies further claim that their counselors are specially trained and possess industry-insider knowledge and that consumers will not achieve similar results working directly with their credit card companies. The written agreements between debt negotiation companies and consumers, however, typically disavow the debt negotiation companies’ ability or obligation to secure reduced interest rates and merely promise to “show” consumers savings of thousands of dollars. After the consumer completes a financial profile, debt negotiation companies typically “show” the promised savings in an accelerated payment schedule. The “savings” are usually based on assumed interest rate reductions and increased monthly payments, which the debt negotiation companies’ customers usually cannot afford to pay. Like the debt settlement model, most debt negotiation companies charge all of their fees in advance, before any services are performed on behalf of the consumer.

Internet Rent Scams Target Renters Using Phony Listings Based On Legitimate Information

In Nokomis, Florida, the Sarasota Herald Tribune reports:
  • Real estate agent Nicki Conway has spent the past week trying to steer people away from a rental fraud involving a house she is working to sell. Information about the house has been posted on the Web site by someone with no connection to the property who is trying to collect money from the bogus rental listing. The site offers the low rent price of $790 a month for a three-bedroom, two-bath unit, including utilities.

  • The too-good-to-be-true terms are generating considerable attention, and Conway fears for any would-be tenants who fail to check out the property before sending money to the online scammer. "Obviously the ad is working because they're getting a big response," Conway said this week, after fielding three calls from people who saw the fraudulent posting for a house that she says would command at least $1,600 in monthly rent.

  • Similar online rental property scams that hit other parts of Florida are apparently cropping up in Sarasota County. The scammers base their fake listings, e-mails and phone calls on photos and details gleaned from legitimate sales listings.

For more, see Internet scammers take aim at renters (THE STING: Con artists are using data on real homes to create fake ad listings). KappaPhonyLandlordScam

Thursday, October 29, 2009

Nevada AG's Mortgage Fraud Task Force Raids Title & Escrow Company

In Henderson, Nevada, KLAS-TV Channel 8 reports:
  • A Henderson title and escrow office was the focus of a raid by the Nevada Attorney General's Office. Mortgage fraud investigators took over the office Tuesday morning to investigate. The office of American United Title and Escrow had a steady stream of investigators in and out of the business all day. The AG's office is not releasing any details about the investigation because charges have not been filed. Agents were seen going through paperwork in several of the offices. Also, an SUV parked in front of the office was being taken away on a tow truck.

  • The mortgage fraud task force is conducting this raid -- a group that was formed about a year ago as a response to the rise mortgage scams around the state.

For the story, see Mortgage Fraud Task Force Raids Title Company.

Suspected Colorado Home Hijacker May Be Federal Fugitive Accused Of Rent Skimming In Utah

In Parker, Colorado, KUSA-TV Channel 9 reports on an alleged rental scam involving a man who approaches homeowners facing foreclosure and allegedly cons them, under color of an official having some connection with the foreclosure action, into moving out and turning over possession of their homes to him. He then allegedly rents the home to unsuspecting tenants and milks the rent out of the home.
  • On Craigslist, 9NEWS discovered [Greg] Castle listed at least 21 homes from the metro area and several in Florida, Nevada, Arizona and Kansas. New homes continue to appear each month. Homeowner after homeowner told 9NEWS Castle convinced them to sign an "Assignment of Surrender and Possession" document they thought was the final paperwork from their banks. [...] In fine print at the bottom it says Associated Home Inspection, Castle's supposed company, has the right to take possession of the house and move new people in to "house sit" the property. Castle collects the rent, homeowners don't get a cent.


  • [O]ne of Castle's renters forwarded 9NEWS a letter from Castle with a return address for a home in Ogden, Utah. The address traced back to Gordon Miller - a man charged in 2005 with equity skimming, mail fraud and wire fraud after prosecutors say he ran a scheme very similar to what victims claim he runs now. When it came time for Miller to face a jury, he never showed up for court. U.S. Marshals now consider him a fugitive.

  • After 9Wants to Know showed United States Marshal deputies in Utah the evidence it uncovered linking Castle to Miller, deputies tell us they believe Castle and Miller are the same person. "It appears from your investigation, and what you guys have in Colorado, that he's up to his new tricks. Same thing, just different state," Supervisor Deputy U.S. Marshal Mike Wingert said. 9Wants to Know has learned when Miller was charged in 2005, the first name of one of the attorneys involved in the case was Greg and the last name of a prosecutor was Castle.

For more, see Who is Greg Castle?

For follow-up stores, see:

  • More victims of Castle rental scheme come forward: 9Wants to Know has also learned that officials in Gillette, Wyoming have joined the Parker Police Department, Arapahoe County District Attorney's office and the Colorado Attorney General's office investigating Castle. [...] 9NEWS viewers in Milliken, Greeley and Castle Rock say they too were victims of Castle's scheme. 9Wants to Know has identified homes listed by Castle in Colorado, Kansas, Florida, Arizona, Nevada and now possibly Wyoming.

  • Man accused of foreclosure scheme responds: The man 9Wants to Know exposed for running a sophisticated rental scheme won't turn himself over to authorities, but responded to our story in the comment section on KappaPhonyLandlordScam

Suspected Home Hijacking Case Once Considered "Civil Matter" Will Now Be Treated As Criminal Trespass, Say Cops

In Boise, Idaho, the Idaho Statesman reports:
  • Caroline Werner may finally get some help in getting a stranger out of her mother-in-law's house. A Boise man named David Foldesi claims he owns the house, even though Ada County officials have repeatedly told Werner and the Idaho Statesman he does not.(1) Marcella Boylan, Werner's mother-in-law, owns the Sunset Avenue home, county records and officials say. But she lives in a nursing home and suffers from Alzheimer's. She cannot sell the house because the equity is being used to pay for her health care. Werner has sole power of attorney and is Boylan's last remaining relative.

  • Initially, Boise police said it was a property dispute and therefore a civil matter. But an attorney contacted by Werner said it looked like criminal trespass, and therefore a police matter. On Wednesday, Boise police confirmed Boylan is the rightful owner and they consider it a criminal matter.(2)
For more, see Dispute over ownership of home in Boise's North End may be resolved (Boise police now agree the man who claims to own it — and has been renting it out, does not, so they can pursue criminal charges if he returns to the house).

For the initial report in this story, see Stranger rents out Boise woman's home without her permission (A Boise house belongs to a nursing-home resident, officials say, but a man profits from renting it out).

(1) According to the story, for almost two years, Foldesi has been renting out the house, which he says he owns since paying unpaid property taxes on it in 2007. He has not made any property tax payments for the property since then.

(2) Regrettably, a victim of this type of scam may sometimes need to retain an attorney to "communicate with" (ie. light a fire under) the local cops, such as in this story. I suspect that the ideal attorney to retain to communicate with police in this type of case would be an ex-prosecutor who is now in private practice - one who is experienced in the criminal justice process, well-versed in the "language of law enforcement," and one who won't allow local cops to dismiss cases like this as "civil matters." hijack

Another Foreclosure Misidentification Screw-Up Results In Pair "Cleaning Out" Wrong Home; DA Declines Prosecution - Says It's A Civil Matter

In Statesville, North Carolina, the Statesville Record & Landmark:
  • A case in which two men took items from a house and encouraged neighbors to do the same is the result of a mistaken address. That's what Statesville Police Chief Tom Anderson said happened at the home of Gene and Linda Medlin [...] in August. Two men came to the Medlin's home, which is not their primary residence, and told neighbors that they were with the IRS and were seizing the house. The two men told neighbors they were going to take some of the items, and the neighbors could have the rest. During the next several hours, on a Sunday afternoon, neighbors cleaned out the house.


  • Anderson said during the subsequent investigation it was learned that the two actually said they were working for a bank that was seizing the house. [...] Investigators questioned the man and found he was working for Citizens South Bank in Monroe and was hired to clean out a house in foreclosure. The only problem was, the house was at 532 Davis St., not East Front Street, Anderson said.

  • The man said he relied on his GPS unit, which indicated he was at the right address on both Aug. 2 and Oct. 17, and did not look at the street signs. Anderson said investigators spoke with the bank, and learned the two men were hired contractors, and the custom was to seize whatever was of value and to put anything else out to be picked up as garbage. That's the reason the two invited neighbors to take what was left. Anderson said most of Medlin's stolen property — including a John Deere lawn mower and trailer — were recovered. Some items, including a handgun, some restaurant chafing dishes, a weed trimmer and chain saw — are still missing.

  • Anderson said the case was reviewed by the district attorney's office and the decision was made not to press charges. He said the man lacked criminal intent and therefore the case is a civil matter. Any action on the case will have to be taken by the Medlins in civil court.(1)

For the story, see Wrong address: Home seizure case solved.

(1) In a 2008 story, the Nevada Supreme Court approved a damages award of over $1 million (including a punitive damages award of $968,000 - reduced from an original award of $2.5 million) to a homeowner couple who were subjected to a similar indignity resulting from a lender/mortgage servicer screw-up involving the misidentification of a home in foreclosure. See Nevada High Court OKs Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure.

For the Nevada Supreme Court ruling, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (September 11, 2008). ForeclosureLockOuts

Escrow Agent Cops Plea To $470K+ Closing Proceeds Ripoff; Insurance Premiums, Closing Costs Left Unpaid; Title Underwriter Left Picking Up The Tab

In Minneapolis, Minnesota, Minnesota Public Radio reports:
  • A Prior Lake woman pled guilty Friday to stealing more than $470,000 in a mortgage fraud scam. Roseann Wagner admitted operating a scheme to defraud mortgage lenders, borrowers, and a title insurance underwriter in 2007. Wagner, a licensed insurance agent, accepted more than $470,000 from lenders at hundreds of closings, and then pocketed the money.

  • As a result, title insurance premiums, title search costs, and recording fees on hundreds of residential mortgage transactions went unpaid. Wagner owned and operated Tri-Star Title, a title insurance agency. Tri-Star was the insurance agent for Stewart Title Guaranty Co., a Texas-based title insurance underwriting company. When Stewart Title Guaranty discovered that Wagner had stolen the funds, it absorbed the losses of the borrowers, and paid the premiums and other expenses.

  • Wagner also admitted that she failed to file a tax return or pay taxes on more than $270,000 in 2007. She owes the Internal Revenue Service at least $70,000.

For the story, see Woman pleads guilty to $470,000 mortgage fraud scam. EscrowRipOffKappa

Wednesday, October 28, 2009

Country's Largest Builder Used "One Stop Shopping" Model To Construct "House Of Cards" Scheme, Says Homeowner In Class Action Suit

In San Francisco, California, the San Francisco Chronicle reports:
  • A California homeowner filed a class-action suit against Pulte Homes on Friday alleging that the nation's largest home builder fraudulently propped up home prices and sales in a "house of cards" scheme that eventually caused values in its developments to plunge. The lawsuit, filed in U.S. District Court in Northern California, alleges that Pulte's "one-stop shopping" business model, in which it controlled sales, financing, settlement services and appraisals, allowed it to sell homes at inflated prices and give buyers mortgages they could not afford. Since Pulte Mortgage, Pulte's financing subsidiary, quickly sold its loans on Wall Street, it was not affected when buyers defaulted, the suit said.


  • Steve Berman, lead attorney in the case and managing partner of Seattle law firm Hagens Berman Sobol Shapiro, said that some of Pulte's developments became "toxic subdivisions with foreclosure signs all over the place, homes not taken care of, and no chance that the prices will go back up." Berman said Pulte lured unqualified buyers - such as the case's named plaintiff, Sodalin Kaing, who earns $21 an hour but bought a house for $518,215 - with the promise of large discounts if they used Pulte Mortgage. Kaing bought a home in the Pulte Aerial of Mossdale development in Lathrop (San Joaquin County).

  • By operating within a closed loop where it controlled all aspects of the transition, Pulte "created an amazing opportunity for itself," Berman said.(1)

For the story, see Suit accuses Pulte Homes of inflating prices.

For the lawsuit, see Kaing v. Pulte Homes, Inc., et al.

(1) According to the story, the suit is on behalf of anyone who purchased a Pulte home in California from Jan. 1, 2005 through March 1, 2007. Homeowners can learn more at Berman said he also expects to expand the case to Pulte developments in Nevada and Arizona. The story states.

Berman's firm also has class-action lawsuits pending against KB Homes and Countrywide Financial, its preferred lender, in Federal courts alleging that they conspired to drive up prices, the story states. The firm filed a lawsuit in California, and a lawsuit in Arizona.

Philly DA, Feds Probe "Dream Killer" In Suspected Rent To Own Scam Peddling Shabby Homes To City's Poorest; Victims Paid Thousand$, Now Face The Boot

In Philadelphia, Pennsylvania, the Philadelphia Daily News reports:
  • WIND and rain blew through the shell of a house on Monmouth Street. The ceilings and walls had gaping holes; the shower and broken toilet could be seen from the floor below. There was no front door, no kitchen, no heat. But to Isabel Santos, this derelict Kensington house held the promise of her first real home, her slice of the American Dream.

  • In 2002, Santos signed an "installment-sale agreement" with a Philadelphia company owned by Robert N. Coyle Sr., a real-estate mogul and self-made millionaire, widely known for peddling shabby homes to the city's poorest. Under the agreement, Santos would own the house in five years. Santos and her ex-husband sunk at least $20,000 of their own money to create a home out of rubble. But instead of a deed, Santos recently got slapped with a foreclosure notice, and she and her teenage son, Jose, could soon be on the street. That's because Coyle defaulted on a mortgage he took out on the house. Santos felt swindled.

  • So did dozens of others, the city's downtrodden, many living paycheck to paycheck, who put every last dime into fixing up homes they thought they'd own one day. Now they're just one step away from homelessness. They blame one man - Coyle, a man they call a "dream killer," a "slumlord millionaire." The Daily News has learned that Coyle, 64, is at the center of a massive fraud investigation being conducted by the Philadelphia District Attorney's Office and federal authorities.(1)(2)

For more, including a profile of Coyle and his suspected racket, see Slumlord sold them lies, many say (To tenants, he's a slumlord, a swindler, a dream-slayer; now he's the subject of a fraud investigation).

(1) Among the reported allegations hovering over Coyle are that he:

  • Promised people they could rent to own their homes, without being able to deliver on such a promise,
  • Obtained more than $15 million in bank loans on nearly 300 homes he rented out, then stopped making bank payments and padlocked his Allegheny Avenue rowhouse real-estate office in Port Richmond. The houses are now headed for sheriff's sale,
  • Forged hundreds - possibly thousands - of housing-inspection licenses that allowed him to rent the homes. Many of them had no heat or water, seeping sewage and rotted floors - violations that would've prevented Coyle from getting licenses,
  • Failed to pay the city hundreds of thousands of dollars in property and business taxes and water fees, leaving tenants without water.

(2) Reportedly, at least nine attorneys, some of whom work for nonprofit legal agencies, are fighting to stop the sheriff's sales on behalf of clients who live in Coyle's homes. They argue that their clients have ownership rights, though the banks disagree. According to the story, by law, all home-sale agreements must be in writing. But there are three exceptions: If you are in possession of the property; if you've made significant improvements; and if you've paid some or all of the purchase price for a few years and/or paid off any liens, according to Kelly J. Gastley, staff attorney at Philadelphia Volunteers for the Indigent Program (VIP). What's at stake is "enormous," said Stefanie F. Seldin, a managing attorney for VIP. "The man is evil," she said. "He's taken these folks with limited English proficiency, literacy and means, and sold them a dream. Instead, he sold them a lie." rent to own lease purchase option scams yellowstone

Rain Clouds Hover Over Big NYC Landlords, Tenants, Bondholders, Housing Agency After State High Court Ruling Declaring Stuy Town Rent Hikes Illegal

In New York City, The New York Times reports:
  • Tenants and landlords spent much of [last] Thursday struggling to figure out what the state high court’s ruling on the future of Stuyvesant Town and Peter Cooper Village meant for all types of New Yorkers.(1) Real estate moguls feared the news would cripple their industry, and tenants worried about their rents.

  • Despite the lack of clarity, the ruling by the New York Court of Appeals had an immediate chilling effect on real estate in New York: Landlords questioned whether they could raise rents, and some even went so far as to cancel plans to buy more apartments in buildings with tax subsidies.


  • While tenant groups who had spent the last several years fighting the owners of Stuyvesant Town welcomed the news, they also recognized that the ruling may complicate and extend how long it takes for current or past tenants to receive rent rebates. They also feared that conditions would deteriorate as owners deferred maintenance and repairs.


  • The problem extends beyond Stuyvesant Town to buildings in the Bronx, Brooklyn and Queens. “They’re not the only landlords who did this,” said Daniel Alpert, managing partner of Westwood Capital, a New York investment bank that was part of a tenants’ bid for Stuyvesant Town in 2006.


  • Government agencies scrambled to figure out how they would carry out changes the ruling would require. The state housing agency, the Division of Housing and Community Renewal, could be inundated with petitions from tens of thousands of tenants claiming they had been overcharged by landlords receiving tax breaks, as well as from landlords disputing the claims.

For more, see Stuyvesant Town Ruling Worries Tenants and Landlords Alike.

For the ruling, see Roberts v. Tishman Speyer Properties, L.P.

See also:

(1) Stuyvesant Town and Peter Cooper Village are a combined 56-building, 11,000-unit apartment complex in Manhattan.

Lender Backs Off From Attempt To Illegally Bully Tenant Out Of Foreclosed Home After New Jersey Public Advocate's Office Intervenes

In North Bergen, New Jersey, The Jersey Journal reports:
  • When Rosita Crooke learned her North Bergen apartment building was being foreclosed she contacted the bank. Crooke wanted to keep paying her rent, but instead the bank told her she would have to leave and that the anti-eviction law didn’t apply because of the terms of her lease. She contacted the state Public Advocate’s Office and learned she could stay in her apartment. “After the Public Advocate contacted the bank, the bank sent me a note asking me to pay the rent,” she said. “When I told the bank that I know my rights and I have a right to stay, they didn’t listen to me, but when I got the Public Advocate involved, they finally listened. More people need to know that help is available to them.”


  • The state’s anti-eviction law protects tenants whose sole reason for eviction is the building is in foreclosure or there is a new owner.(1)

For more, see Public Advocate helps North Bergen woman (if link expires, try here).


In a related story, see The Star Ledger: Protect N.J. renters from eviction from foreclosed homes:

  • The Department of the Public Advocate says its office has assisted more than 160 tenants in the state who were facing unfair eviction from properties under foreclosure. In some cases, renters were sent notices by banks or their representatives informing them they had to vacate the property. Others had utilities shut off, or were evicted by local sheriffs. [...] Meanwhile, the advocate’s office attributes the rise in eviction abuses to the economy. It says in cases of foreclosure, tenants are protected by the state’s anti-eviction laws, but many don’t realize they can’t be forced to move.


From the New Jersey Department of the Public Advocate:

(1) The New Jersey Supreme Court has ruled that the New Jersey Anti-Eviction Act protects most tenants from eviction even when the property where they live is in foreclosure or has been foreclosed. Chase Manhattan Bank v. Josephson, 135 N.J. 209 (1994). The state high court opinion in Maglies v. Estate of Guy, 193 N.J. 108; 936 A.2d 414; 2007 N.J. LEXIS 1436 (2007) gives a discussion of the breadth of tenant protection provided by the New Jersey anti-eviction law. See also: Legal Services of New Jersey's Amicus Brief filed in Maglies v. Estate of Guy. RentSigmaSkimming

Cops Identify Pair As Home Robbery Suspects; Sent By Fannie Mae To Winterize House In Foreclosure Despite Earlier Approved & Consummated Short Sale

In Novi, Michigan, reports:
  • The Novi Police Department has identified two suspects believed to be responsible for the theft of nearly $4,000 worth of jewelry and other items from a home in the Dunbarton Pines subdivision. Novi Police Chief David Molloy said the men work for Moniya Inc, a company that conducts home winterization work.(1) [...] All the property reported stolen was recovered, including the couple's 18-karat gold wedding rings.

  • The theft occurred on Sept. 9, just days before the [homeowner] couple were to be married. The woman said she left her home between 1-5 p.m. on that day, and when she returned she found a note on the door saying the home had been winterized as part of the foreclosure process and the gifts for her bridesmaids, the wedding rings and other items were gone.

  • According to the bride's mother, the foreclosure notice was a mix-up. The couple had bought the home on a short sale on Aug. 21, which was approved by GMAC, but the company failed to notify Fannie Mae that it was a fully satisfied sale. Fannie Mae was under the impression the house was still in foreclosure and subcontracted Safeguard to manage the property and winterize it. Molloy said Safeguard then contracted Moniya to winterize the home and that is when the theft occurred.(2)

Source: Police have suspects in connection with robbery of newlyweds' home.

(1) Reportedly, the suspects are both Detroit men, one 23 years old and the other 51 years old. The 23-year-old has no previous criminal history, while the other man has a history of auto theft. The Novi Police Department is in the process of forwarding its case to the Oakland County Prosecutor's Office for review, the story states.

(2) In a 2008 story, the Nevada Supreme Court approved a damages award of over $1 million (including a punitive damages award of $968,000 - reduced from an original award of $2.5 million) to a homeowner couple who were subjected to a similar indignity resulting from a lender/mortgage servicer screw-up involving the misidentification of a home in foreclosure. See Nevada High Court OKs Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure.

For the Nevada Supreme Court ruling, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (September 11, 2008). ForeclosureLockOuts

Tuesday, October 27, 2009

"Deficiency Balance Paper" Traders Keep Sour Home Loans Alive; "Dracula Blood Suckers" May Haunt Foreclosed Homeowners, Short Sellers w/ Dormant Debt

In South Florida, the Daily Business Review reports:
  • Jeff Baum is at the forefront of a real estate industry trend that is sure to cause more pain for homeowners who thought they had left their troubles behind. Baum, a principal with Green Circle Capital Group in Boca Raton, brokers the sale of nonperforming residential debt between lenders and investors. Those investors buy the debt with the intention of collecting from the former homeowners.

  • I’ve made quite a bit of my living over the last two, three years selling deficiency balance paper,” said Baum. A deficiency balance is the portion of the mortgage loan that wasn’t covered by the sale of the home. That debt becomes an unsecured note similar to other consumer debt such as credit cards.


  • After winning a foreclosure action, a lender has up to five years to ask a judge to declare a deficiency judgment [in Florida]. The judgment amount is the difference between the loan and the market value of the home on the day it sold at a foreclosure auction. [...] Judgments are good for 20 years [in Florida], and while people may be broke now, their financial situations could improve in the next two decades, said Richard Zaretsky, a West Palm Beach foreclosure defense lawyer. The dormant debt may come back to haunt them, he said.(1) [...] “Can you imagine, as people’s finances are beginning to improve — boom! — they get hit with a collection action for tens if not hundreds of thousands of dollars,” [another attorney] said. “You are going see a lot of people having to declare bankruptcy.”

For more, see Foreclosed homeowners may still have debt to pay.

(1) The practice has its critics within the lending industry, the story states. Miami-based Republic Federal Bank doesn’t sell deficiency debt, said Jim Angleton, the bank’s senior vice president. But Angleton predicts other lenders will seize the opportunity, according to the story. “As the market declines, it is going to be more in vogue: institutions trying to sell the debt and debt collectors trying to create another niche for themselves,” he said. “Those [debt collectors] are not even bottom feeders, they are subterranean feeders. They are in the Dracula mode of blood sucking.” zombie debt

Watch Out For Local Notaries Providing Document-Running, Check Pick-Up Services For Out-Of-State Loan Modification Rackets

A recent lawsuit filed by the Office of the Wisconsin Attorney General decribes how some out-of-state loan modification rackets allegedly use local notaries to get homeowners to sign up for foreclosure help and pocket upfront fees:
  • Defendant [loan modification outfit] initiates transactions with Wisconsin consumers by telephone. It represents it can assist the consumers to modify their mortgage loan. Defendant then arranges a follow-up visit by a company representative to complete the transaction. Defendant's "company representatives" are Wisconsin notaries hired by defendant to act as its agents. Since April 2009, at least four Wisconsin notaries have filed complaints with DATCP [Wisconsin Department of Agriculture, Trade, and Consumer Protection] regarding defendant's activities.

  • The notaries report receiving email solicitations from defendant where defendant offers to pay them to act as its representative by obtaining signatures from potential customers on sales agreements prepared by the defendant. The notaries also report defendant instructs them to engage in illegal activity including, but not limited to, having customers fill out only a portion of the legal documents they sign and having the notaries fail to provide copies of signed documents with the customers.

  • For example, on March 9, 2009, defendant sent Wisconsin notary Dick Brockman an email "LOAN MODIFICATION PAPERWORK - LEE." [...] In the email, defendant instructs Mr. Brockman: "Remember to have the borrowers just sign and date and only fill out their name, address, phone numbers, social security numbers and mortgage info. The rest of the application is filled out later by the processor...." Defendant further instructs the notary [...]: "DO NOT leave the "Loan Modification Application" with the client. ONLY GIVE the client the *Modification Letter & News Releases*." The news releases referred to [...] are copies of news articles regarding federal mortgage relief programs "Bush Signs Measures for Homeowners, Fannie, Freddie" and "Obama throws $75 billion lifeline to homeowners."

Source: Lawsuit: State of Wisconsin v. 21st Century Legal Services Inc., et al. (paragraphs 9-16).

In a related post on 21st Century Legal Services and their use of local notaries, see Loan Modification Outfit Accused Of Failing To Deliver Services For Strapped Homeowners Also Stiffs Its Notaries, Says One Victim.

Mortgage Servicers' Loan Modification Screw-Ups Drive Homeowners To Court Seeking Redress

The Wall Street Journal reports:
  • Some struggling homeowners are turning to the courts in a bid to force mortgage servicers to consider them for the Obama administration's foreclosure-rescue program, arguing they are eligible for help but haven't received it. The suits are the latest sign of difficulties some borrowers are having with the program, which has helped more than 500,000 people begin trial loan modifications since it was announced in February.

  • The program requires mortgage servicers to screen borrowers for eligibility for modifications before completing a foreclosure. But a growing number of borrowers say this isn't happening, or that their requests for help are improperly rejected by the servicers, which collect loan payments and work with delinquent borrowers.

  • "People are unbelievably frustrated with the way [the modification program] is working because it is so nontransparent, and because there is such a basic distrust of servicers," said Ira Rheingold, executive director of the National Association of Consumer Advocates, a group of attorneys and consumer advocates who work with homeowners facing foreclosure.

For more, see Strapped Borrowers Head to Court (Homeowners Press Mortgage Servicers to Rule They Are Eligible for Loan Modifications) (paid Wall Street Journal subscription required; if no subscription, try here, then click link for the story).

(1) Acording to the story, statistics aren't available, but attorneys say legal action tied to the rescue program is being taken in states including California, Florida, Ohio and Pennsylvania. A lawsuit seeking class-action status in U.S. District Court in Minnesota (go here for press release) wants to halt foreclosures on homeowners eligible for the rescue program until the administration puts in place certain procedural safeguards, such as creating a formal appeals process, the story states [see Advocacy Group Files Federal Suit Seeking To Halt Home Foreclosures In Minnesota; Says New Law Lacks Proper Notice & Appeal Provisions]. South Carolina Supreme Court Chief Justice Jean Toal in May reportedly issued an order requiring that all complaints seeking foreclosure state whether the loan is subject to the rescue program and, if so, why the borrower doesn't have a loan modification.

Judge Stalls Foreclosure Sale Approval; Loan Servicer Failed To Stop Legal Action Despite Agreeing To Loan Modification, Says Homeowner

In Port St. Lucie, Florida, TC Palm reports:
  • A Port St. Lucie couple whose home was bought by their mortgage bank for $100 in a foreclosure action Oct. 9 has won at least a temporary reprieve. In a hearing Wednesday, Circuit Judge Burton Connor ordered a postponement of the final sale pending an evidentiary hearing in the case. Frusner Raphael and his wife, Woline, had requested the foreclosure sale be voided, alleging their lender broke the federal government’s rules.

  • The Raphaels aren’t alone in facing a frustrating situation where the lender says they’re willing to work with the homeowner, but while a modification process is going on the lender continues with the foreclosure.(1) [...] The Raphaels contend that the lender, California-based OneWest Bank, told them on July 13 that they were pre-approved for the modification, which would take about 120 days to complete, but proceeded with the foreclosure anyway.

For more, see Lenders continue foreclosures after agreeing to housing loan modifications.

(1) Another homeowner, Jim Maurer, was approved by Countrywide for a modified fixed-rate mortgage that would lower his monthly payments by $300 starting in February. After he had made a few payments, though, he received the check for his May payment back with a letter saying the amount was not enough. After he contacted the lender, they sent him an application for a new modification, which he refused. “I don’t need another modification,” Maurer said. “I already have one. [...] Bank of America is just rolling over people.” Five months later, Maurer said he has had phone conversations and exchanged letters with people in three different Bank of America divisions, including a senior vice president in the home retention department, but still does not have confirmation the modification is in place. Since June, however, Bank of America has been cashing his checks.

Lender Changes Mind About Backing Out Of Loan Modification Promise After Homeowner Facing Foreclosure Tells Media

In Surprise, Arizona, KPHO-TV Channel 5 reports:
  • A Valley mom is thanking CBS 5 News for saving her home after her bank almost backed out of its loan modification agreement. Heather Caldwell's family was in big trouble, with their Surprise home in foreclosure. Caldwell decided to go to the Wells Fargo Home Preservation Workshop [...] hoping to modify her loan and save the family's home. "Within an hour, we were told everything was fine and we had our new payments and our new interest rate," said Caldwell. "Everything was going to be great."

  • But a week later, Caldwell got some unexpected news when she called a Wells Fargo representative to check on their loan modification. "She was pretty blunt," said Caldwell. "She told me there was nothing she can do to help. 'You've been denied. Your income doesn't meet the qualifications. That's it. You're done.'"

  • Caldwell didn't know what to do next, so she called CBS 5 News for help. Immediately, CBS 5 News placed a call to Wells Fargo's corporate office. "Within an hour, we got a call saying there had been a miscommunication and that there had been mistakes made," Caldwell said. "She said we are going to get it taken care of and get it resolved. Without CBS 5 taking the time to call them and get their attention, they never would have done anything." Wells Fargo offered the Caldwells an even better interest rate than what they were promised at the workshop -- instead of saving $325 a month, they were now looking to save close to $450.(1)

For the story, see CBS 5 Steps In To Save Family's Home (Family Gets Loan Modification They Were Promised).

(1) It seems to me that once the local media outlets get their hands on one of these loan modification screw-up stories and decide to run with it, the loan servicers fold like a cheap suit and grant quick relief to the aggrieved homeowner. The media outlets should consider setting up their own loan modification departments, given the loan servicers' apparent fear of negative publicity they get when these stories come to light.

Monday, October 26, 2009

National Foreclosure Rescue Scam Awarness Campaign Kicks Off In Los Angeles

In Los Angeles, California, Reuters reports:
  • Sun Valley, a sun-baked and struggling corner of Los Angeles, is fertile ground for mortgage rescue scams with its high proportion of subprime borrowers, Spanish speakers and a sharp drop in home values. And it is one of the first places targeted in the homeowner education campaign launched on Monday by U.S. government agencies, local leaders and housing advocates to stop scammers preying on desperate borrowers nationwide.


  • In coming weeks, the campaign will go to other hard-hit areas like Miami, Florida, and Columbus, Ohio, and it will target those groups most affected -- senior citizens, Hispanics, African Americans and Asian Americans. While tighter regulation and law enforcement are expected to reduce scamming operations, officials say they expect the best results to come from the first line of defense -- better educated borrowers.

For more, see U.S. schools homeowners to spot loan rescue scams.

Pair Charged With Torture Of Loan Modification Agents; Suspects Believed Victims Swindled Them Under Guise Of Offering Foreclosure Help, Says DA

In Los Angeles, California, Reuters reports:
  • As Los Angeles housing advocates launched a campaign warning of mortgage rescue scams, a couple hit by foreclosure are charged with torturing two loan-modification agents they suspected of fraud, authorities said on Monday. The couple, Daniel Weston and Mary Ann Parmelee, and three other people are accused of luring their two victims to an office where the men were tied up, held for hours and beaten, a spokeswoman for the Los Angeles County district attorney said.

  • Police were called after one of the victims managed to escape, said the spokeswoman, Shiara Davila-Morales. The incident occurred on Wednesday in the town of Glendale, just north of Los Angeles. Weston, Parmelee and the three other defendants each were charged with two counts of torture, two counts of false imprisonment by violence and two counts of second-degree robbery, according to a criminal complaint filed against them.

  • Weston, 52, and Parmelee, 51, both arrested last week and jailed on $1 million bond, shared a house in the suburb of La Canada-Flintridge that is in foreclosure, authorities said. "The two allegedly sought loan modification assistance from the victims but believed that nothing was being done and wanted their money back," a statement from the district attorney's office said. Davila-Morales added that the couple, according to investigators, believed they had been swindled.

For the story, see Torture charged in L.A.-area mortgage rescue case.

Cleveland Legal Aid Leads Northeast Ohio Drive For More Pro Bono Attorneys

In Northeast Ohio, The News Herald reports:
  • The Legal Aid Society of Cleveland is expected to see a 35 percent increase in demand this year from those who need fair and open access to the legal system but cannot afford an attorney. So for the first time, the American Bar Association is sponsoring a National Pro Bono Week Celebration to encourage more lawyers to give their services away for free to help those going through tough economic times.


  • There are currently 1,400 attorneys who volunteer for the organization in Northeast Ohio to supplement the work of Legal Aid's 55 staff attorneys. This week, Legal Aid is hosting a series of events in collaboration with bar associations in Ashtabula, Cuyahoga, Geauga, Lake and Lorain counties. [...] One of the main Pro Bono Week events in Lake County will be a training session for attorneys who hope to represent low-income homeowners at mediation in foreclosure cases.

For the story, see Lawyers to give services away.

NJ AG: Fugitive Pair Abused Trust In $600K+ Sale Proceeds Ripoff From Financially Unsophisticated Homeowners Facing Foreclosure

In Trenton, New Jersey, The Trentonian reports:
  • A pair of suspected frauds from Ewing charged with stealing $600,000 in a mortgage foreclosure scam that targeted poor people are fugitives of justice, New Jersey authorities said [last week] in calling on the public to turn in the pair. Wayne Betha, 39, and friend Joann Smith, 42, were indicted by a state grand jury on theft, money laundering, conspiracy and tax charges [last week] for allegedly ripping off 11 families forced to sell their homes [...].(1)


  • These defendants are charged with preying on people who had to sell their homes due to financial hardship, taking advantage of their trust and lack of financial sophistication,” said state Attorney General Anne] Milgram. “They stole from people who had little of nothing to spare.” Smith and Betha allegedly took the profit from home sales and put them in their own personal accounts for their use, deceiving the sellers into believing that they were not entitled to all of the profits from their home sale. Most of the sellers, who were not identified, were having serious financial problems and could not continue paying their mortgage.(2)

For more, see Milgram: Frauds stole $600K from the poor and are on run.

From the Office of the New Jersey Attorney General:

(1) The state attorney general alleges that the two, acting as real estate agents, stole more than $600,000 from clients who signed on to have Smith sell their homes. They’re also charged with defrauding three mortgage companies of $641,800 by falsifying the earnings of applicants for three home loans, the story states. Also indicted was their real estate company, S&B Properties Management and Maintenance, which allegedly was run from Smith's home.

(2) According to the NJ AG, the couple allegedly used a variety of schemes to fraudulently divert proceeds from the home sales into bank accounts maintained by Smith and S&B, which they allegedly used to launder the stolen funds. They represented to sellers and title companies that monies were owed to them for expenses, including property renovations and repairs that were never done and exorbitant consultant fees that they claimed the sellers had authorized. Many of the checks issued by the title companies handling the property sales were written to the home sellers, but Smith convinced the sellers to sign the checks over to her for payment of business expenses and fees. It is alleged that, in several instances, the defendants falsely indicated on HUD forms and tax forms that the sellers directly received all of the profits from the home sales.

They also omitted to tell sellers that they were agreeing in mortgage closing documents to pay large, unauthorized “seller’s concessions or seller’s assists” to the buyers. The victims were not financially sophisticated. They did not understand the details of the property closings and, because of their financial woes, were anxious to be free of the obligation of paying mortgages they could no longer afford. Smith and Betha allegedly took advantage of these facts to steal the victims’ profits from the home sales.

Minnesota Feds: Sale Buyback Foreclosure Rescue Scam Leaves Unwitting Investors, Homeowners, Lenders With $2.5M+ In Losses

In Minneapolis, Minnesota, the Star Tribune reports:
  • A Mound man who allegedly defrauded six Northwest Airlines pilots and a flight attendant out of $1.5 million in a real estate investment scheme has been indicted by a federal grand jury on conspiracy, mail fraud and tax charges. The indictment, made public Thursday, accuses Timothy Lynn Beliveau, 41, of using two firms he owned to skim the equity from distressed homeowners who had turned to his companies for help in avoiding foreclosure.(1)


  • From 2004 until July 2007, the indictment says, Beliveau conspired to "fraudulently induce" investors into buying real estate at inflated prices with borrowed money as part of a "mortgage reconveyance" program. But Believeau and an unnamed coconspirator then spent the money raised from investors for their own use. In addition, the indictment says Beliveau raised more than $1 million from real estate investors that he then used to pay personal expenses.


  • The government says Beliveau preyed on people facing foreclosure by promising to sell their homes to investors who would let them remain in the homes and repurchase them on contracts for deed while they worked to restore their credit. In fact, the process "artificially increased the purchase price of the homes and therefore made it extremely difficult for the homeowners to reacquire them," the indictment says.(2) [...] "Ultimately, the defendant's scheme occasioned losses to approximately 14 investors, the investors' mortgage lenders and 35 distressed homeowners in an amount exceeding $2.5 million," the indictment says.

For more, see Mound man indicted in real estate scheme (Timothy Beliveau is accused of preying on people whose homes were being foreclosed).

From the Office of the U.S. Attorney (Minneapolis):

For an earlier post on a 2007 story reporting on the screwing over of the Northwest Airline pilots in this story, see Foreclosure Rescue Scam Leads To Civil Lawsuits, Federal Criminal Investigation; "Pilot-Straw Buyers" Left In Hot Water & Financially Ruined.

(1) Reportedly, Beliveau owned American Alliance Mortgage Group, which had offices in Minnetonka, Plymouth, Roseville, Wayzata, Edina and Hudson, Wis., and U.S. Housing & Financial Services LLC, "which held itself out as a company that assisted distressed homeowners in foreclosures," the indictment says.

(2) Among those homeowners who were screwed over was Telsche Paulson. After her husband died and her downstairs tenants moved out, the 87-year-old fell behind on mortgage payments on the Minneapolis duplex she'd lived in for 50 years. Beliveau's company sent her a letter offering to save her home from foreclosure. Like most of the distressed homeowners who turned to Beliveau for help, Paulson ultimately lost the house. Although she won a lawsuit against Beliveau and his ex-wife, Shelley Milless, they said in court filings that they had no money left. sale leaseback

Florida AG: Foreclosure Rescue Operators Screwed Homeowners In Foreclosure Out Of $1.9M+ Using Bogus Sale Leasebacks Designed To Strip Home Equity

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum [last week] filed a lawsuit against a Miami-Dade County business, its owners and several straw buyers for their participation in an equity skimming scheme that victimized at least 20 South Florida homeowners. Xolutex, Inc., and principals Ceasar F. Tavaras and George Ibanez are named in the lawsuit, which claims the equity losses as a result of the scheme exceeded $1.9 million.(1)


  • According to the lawsuit, the defendants allegedly sought homeowners who were in various stages of foreclosure proceedings and met with them under the guise of offering foreclosure rescue and credit counseling. Homeowners were then lured into the scheme where straw buyers would purchase the homes for inflated home prices, maximizing the money they could skim from the homeowners. To facilitate the straw buyers’ ability to qualify for these loans, Xolutex and its principals allegedly helped falsify loan applications.(2) Additionally, Tavaras and Ibanez allegedly convinced the homeowners to sign documents which caused virtually all of the equity in the homes to be paid to Xolutex.


  • The Attorney General is [...] seeking [among other things] full restitution on behalf of all victimized consumers, civil penalties of $10,000 for each violation of the Florida Unfair and Deceptive Trade Practices Act.(3)

For the entire press release, see Attorney General Sues South Florida Business for Equity Skimming Scheme.

For the lawsuit, see State of Florida v. Xolutex, Inc., et al.

(1) Also named as defendants are: Paola Pino, Laura Ibanez, and Guillermo Gomez.

(2) If there is proof beyond a reasonable doubt that the operators prepared, or otherwise knew of, falsified loan applications, this would appear to be an easy case for the South Florida Feds to piggyback off of by bringing subsequent criminal charges in Federal court.

(3) Since this matter was brought by the Florida AG as a civil case (as opposed to a criminal prosecution), there is no threat of jail time for the defendants in the event the allegations against them prove true.

Rhode Island Attorney: Entire Practice Now Devoted To Putting Heat On MERS By Challenging Its Legal Standing On Behalf Of Homeowners In Foreclosure

In Providence, Rhode Island, The Providence Journal reports:
  • A Providence lawyer, George E. Babcock, said his entire practice is now devoted to challenging the legal standing of a private mortgage registration service, the Mortgage Electronic Registration Systems, Inc., known as MERS, to foreclose under Rhode Island law.(1)


  • Despite being on the losing end of an Aug. 25 decision by Providence Superior Court Judge Michael A. Silverstein, which he has appealed to the Rhode Island Supreme Court, Babcock said he is still filing “two or three” MERS lawsuits a week for clients hoping to stop foreclosure proceedings. Babcock estimates he is pursuing a total of about 100 MERS cases.

For more, see Mortgage transfers spur R.I. lawsuits.

For NBC Nightly News interview with attorney George E. Babcock (video approx. 2:16), see Lawyer Practices "Foreclosure Stoppage."

(1) Formed in 1995 by the mortgage finance industry, MERS was created to increase profits and efficiency by eliminating the need to record changes in mortgage ownership at local government property registries, the story states. MERS is a corporation that also acts as a nominee for lenders and their successors.

In a separate, unrelated lawsuit [see Homeowners In Foreclosure Being Clipped For Illegally Inflated Legal & Appraisal Fees, Says Lawsuit], the following all star lineup of mortgage lenders have been named and identified as allegedly the controlling shareholders of MERS:

  • Citigroup, Inc., the now-deceased Countrywide Financial Corporation (now owned by Bank of America), Fannie Mae & Freddie Mac (both of which are sucking wind financially, and are currently operating under the control of the Federal government), GMAC-RFC Holding Company, LLC, (doing business as GMAC Residential Funding Corporation), HSBC Finance Corporation, JP Morgan Chase & Co., the late Washington Mutual Bank (now owned by JP Morgan Chase & Co.), and alleged "ghetto loans" peddler, Wells Fargo & Company. EpsilonMissingDocsMtg

Sunday, October 25, 2009

Judge Slams Sloppy Lender Unable To Prove Note Ownership; Voids Debtor's $461K Home Loan; Docs Signed By Multiple Hat-Wearing VP Sinks Servicer, MERS

In White Plains, New York, The New York Times reports:
  • [B]anks and borrowers still do battle over foreclosures on an unlevel playing field that exists in far too many courtrooms. But some judges are starting to scrutinize the rules-don’t-matter methods used by lenders and their lawyers in the recent foreclosure wave. On occasion, lenders are even getting slapped around a bit.

  • One surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn’t proved its claim to a delinquent borrower’s home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That’s right: the mortgage debt disappeared, via a court order.(1)

  • So the ruling may put a new dynamic in play in the foreclosure mess: If the lender can’t come forward with proof of ownership, and judges don’t look kindly on that, then borrowers may have a stronger hand to play in court and, apparently, may even be able to stay in their homes mortgage-free.


  • [On behalf of his homeowner/client, Manhattan consumer bankruptcy lawyer David B. Shaev] asked for proof that U.S. Bank was indeed the holder of the note.(2) All that was provided, however, was an affidavit from Tracy Johnson, a vice president at PHH Mortgage, saying that PHH was the servicer and U.S. Bank the holder.

  • Among the filings supplied to support Ms. Johnson’s assertion was a copy of the assignment of the mortgage. But this, too, was signed by Ms. Johnson, only this time she was identified as an assistant vice president of MERS, the Mortgage Electronic Registration System.

For more, see If Lenders Say ‘The Dog Ate Your Mortgage’.

For an earlier related New York Times story, see The Mortgage Machine Backfires.

Go here for other posts on multiple corporate hat-wearing vice presidents involved in foreclosure actions.

(1) PHH appealed the judge’s ruling late last week, the story states.

(2) Reportedly, Mr. Shaev said that when he filed the case, he had simply hoped to persuade PHH to modify his client’s loan. But after months of what he described as foot-dragging by PHH and its lawyers, he asked for proof of PHH’s standing in the case. Mr. Shaev reportedly said he was shocked when the judge expunged the mortgage debt. EpsilonMissingDocsMtg

Antics Of Multiple Corporate Hat-Wearing Vice Presidents Featured In Recent Research Paper

Those facing foreclosure seeking a guide to looking up public records online in an attempt to detect possible forgeries, fabrications, and certain fraud contained in recorded, error-ridden mortgage and mortgage-related documents committed by multiple corporate hat wearing vice presidents (and their confederates) working for loan servicers and others may find a research paper recently posted on the Internet worth a look.

For more, see Foreclosure Fraud - Guide to Looking up Public Records for Fraud.

For an earlier report that featured the antics of multiple hat wearing vice presidents, see Sue First & Ask Questions Later! (A Pew Mortgage Investigations Report On the Predatory Servicing Practice of False & Forged Signatures Employed by Ocwen & Others). EpsilonMissingDocsMtg

Sacramento Feds Bust Up Massive Indoor Pot Farm Operation; Group Allegedly Used Mortgage Fraud To Finance 51 Grow Houses; Fifty Went Into Foreclosure

In Northern California, The Sacramento Bee reports:
  • Federal prosecutors announced 18 indictments Thursday in a pot cultivation and mortgage fraud scheme that purchased homes in Elk Grove and Sacramento and converted them into bustling "grow houses" for tens of thousands of marijuana plants. Nine people are in custody. Authorities are searching for other indicted suspects who may have fled from the Bay Area to China. The individuals were charged with orchestrating bogus real estate transactions to buy 51 houses in the Central Valley, then establish indoor pot-growing operations using sophisticated lighting and irrigation and stealing thousands of dollars' worth of electricity.

  • "They came into our cookie-cutter residential neighborhoods and created cookie-cutter marijuana factories," said Gordon Taylor, assistant special agent for the U.S. Drug Enforcement Administration in Sacramento. [...] Ultimately, the growers abandoned the houses. Fifty of the 51 went into foreclosure. "This organization just walked away … leaving the loan companies and the communities holding the bag," Taylor said.(1)

For more, see 18 indicted in Central Valley marijuana, mortgage scheme.

From the Office of the U.S. Attorney:

(1) Since 2006, authorities in the Sacramento region have arrested dozens of suspects in indoor marijuana growing operations. Along the way, they discovered homes totally retrofitted for marijuana production, according to the story. In the latest case, Taylor said, suspects cut into main electrical lines in Sacramento and Elk Grove, "bypassed the electric meter and created their own circuit boxes" to steal some $4,000 in electricity a month, the story states.

Central Florida "Caregiving" Pair Convicted Of Duping Senior Out Of Title To Home Gets 10 Years For Grand Theft; Ordered To Return Ownership To Victim

In New Port Richey, Florida, the St. Petersburg Times reports:
  • For four years, Eloise Mudway has waited for justice for the people who promised to be her caregivers but ended up mistreating her and stealing her home. On Thursday, the 92-year-old woman watched as a judge sent them to prison for 10 years. Joseph and Cynthia Clancy, convicted last month of grand theft of a person 65 or older, also were ordered to transfer ownership of the Hilltop Drive home back to Mudway.


  • It's still unclear what will become of the property, which went into foreclosure and is in disrepair. Because of the debt on it, Cynthia Clancy's attorney speculated that by transferring the deed back to Mudway, the mortgage holder could call the debt due. Nevertheless, Circuit Judge Shawn Crane ordered it back to Mudway, calling that the right thing to do.

For more, see Pasco couple sentenced to 10 years for stealing elderly woman's home. DeedContraTheft

Wisconsin AG Jumps Into Fray With Civil Charges Against Alleged Loan Modification Racket Currently Under FBI Probe, Targeted By Other States

In Dane County, Wisconsin, the Milwaukee Journal Sentinel reports:
  • A California company offering to help distressed homeowners lower their mortgage payments has been sued by the Wisconsin attorney general's office for violating state law. In a civil complaint filed [...] in Dane County Circuit Court, the state accuses 21st Century Legal Services Inc., of Rancho Cucamonga, Calif., of instructing notaries it used to do business in Wisconsin not leave copies of signed agreements with customers and to obtain fees in advance of providing service. Both of those actions are against the law in the state, the lawsuit alleges.

  • The lawsuit also says the company violated Wisconsin's no-call law, made misrepresentations in the course of conducting sales and failed to disclose the names of representatives making face-to-face solicitations. The lawsuit cites an instance in which 21st Century Legal Services sent a representative to the home of a Wisconsin woman in May about a loan modification. She paid $1,866.70 for the service but never heard from the firm or its representative again. Her loan was never modified and her home now is in foreclosure, the lawsuit says.

For more, see State sues company that offers help to distressed homeowners.

From the Wisconsin Department of Justice:


In a related story on 21st Century Legal Services, see NBC Los Angeles: Scam Alert: Beware of Loan Modification Fraud (21st Century Legal Services, Fidelity National Legal Services under federal investigation):

  • [T]wo ex-employees tell NBC that the majority of 21st Century clients never got their loans modified. [...] Complaints [...] caught the attention of the attorneys general in Ohio, Indiana, Arkansas and North Carolina. All four states banned 21st Century from doing business in their states. But authorities say 21st Century Legal Services changed its name to Fidelity National Legal Services and continued signing up new clients. Ex-employees say Fidelity was run out of the same office as 21st Century; was owned by the same woman, Andrea Ramirez; and even used the same ads to snare customers.