Saturday, November 21, 2009

Cook County Foreclosure Court Mediation Scores $3M In Funding; Mortgage Workout Effort Based On Philadelphia Pilot Program

In Chicago, Illinois, Northwestern University's Medill Reports report:
  • The Cook County Board passed a $3 million budget amendment Thursday to fund a foreclosure prevention program. The program calls for court mediation in the presence of a judge between borrowers and lenders negotiating to modify housing loans. The measure also would help fund free legal and housing counseling as well as door-to-door outreach.

  • The court mediation program is based on a pilot program in Philadelphia that has been lauded by community organizations nationwide. Action Now, Brighton Park Neighborhood Council and other organizations have been lobbying for a similar Chicago program since last year. “It’s a huge victory and a step in the right direction that our members have worked so hard for,” said Aileen Kelleher, Action Now spokesman. [...] Funding for the amendment will come from a recent real estate sale to the Forest Preserve Department and a shift of funds from another County project.

Source: Passage of $3 million foreclosure prevention program hailed as a 'huge victory'.

Massachusetts AG, Alleged Violators Resolve Charges Of Race/Ethnicity Based Discrimination In Separate Incidents Affecting Housing Rights

From the Office of the Massachusetts Attorney General:
  • Attorney General Martha Coakley’s Office obtained a Final Consent Judgment yesterday against two Holyoke brothers, Jesse and Roman Jedrzejczyk, who are accused of harassing, threatening and intimidating their neighbors, a single mother and her two six year-old daughters. The adult victim is a political asylee to the United States who, in 2001, fled political persecution in Haiti out of fear for her life. The judgment [...] includes a civil rights injunction prohibiting the Jedrzejczyks from threatening, intimidating or coercing the victims, or anyone else in the Commonwealth, because of their actual or perceived race or ethnicity. The order also prohibits the Jedrzejczyks from knowingly coming within 10 feet of the victims. A violation of the order is a criminal offense punishable by a fine of up to $5,000 and two and a half years in a House of Correction, or if bodily injury results from such a violation, a $10,000 fine and up to ten years in State Prison.(1)

For the AG's press release, see Coakley Obtains Final Consent Judgment Against Holyoke Brothers for Harassment and Intimidation of Neighbors.


In a separate case from the Office of the Massachusetts Attorney General:

  • Attorney General Martha Coakley’s Office reached a settlement with a Dorchester property owner resolving allegations that he made racially discriminatory statements to an African American woman seeking to rent an apartment he had advertised to the public. The Assurance of Discontinuance, filed in Suffolk Superior Court, against Robert Gallo, Sr., resolves allegations that the defendant violated state and federal anti-discrimination laws and requires him to pay $25,000 to the victim.(2)

For the AG's press release, see Coakley’s Office Reaches $25,000 Settlement with Dorchester Property Owner for Allegedly Making Racially Discriminatory Statements.


(1) The AG's press release states that, according to the complaint, filed July 8, 2009, the Jedrzejczyks repeatedly and regularly harassed the victims using racial slurs and threats over the course of the past three years. The defendants’ actions caused the victim to become concerned for her personal safety after threats were made to break her windshield. In addition, a “For Sale” sign was placed in front of her house. The intimidation culminated last spring when the victim responded to racial slurs being directed at her by imploring Jesse Jedrzejczyk to leave her alone. In response, Jedrzecjcyk threatened, “I will never leave you alone until you move. If you don’t move, I’ll move you!” The Commonwealth’s lawsuit alleged the Jedrzejczyks’ bias-motivated harassment has seriously interfered with the victims’ ability to live and feel safe at home.

(2) The AG's press release states that, according to the prospective tenant’s complaint, which was filed with the Boston Fair Housing Commission and referred to the Attorney General’s Office, Gallo allegedly told the woman when she attempted to rent his apartment that he was told by neighbors to make sure he rented to the right people and that it was an influential area where only certain people lived. The complaint further alleged that Gallo told the woman that she would have no friends in the area and that he was just looking out for her safety. Testers from the Fair Housing Center of Greater Boston subsequently tested the property and were allegedly subjected to discriminatory statements, including the defendant telling the white tester:

  • "the people around here are all white"
  • "they don't want someone who is yellow or dark-skinned"
  • "I could not in good conscience have someone in here who was not white"
  • "Just don't get too much of a could get too dark and that would not work"
  • "I like you and your manners and your shade, so you are my first choice"

Massachusetts Man Gets 2 To 4 For Again Ripping Off Elderly Stepfather; Earlier Swindle Caused Victim To Lose Home To Foreclosure

In Peabody, Massachusetts, The Salem News reports:
  • Confronted by a Peabody police detective with evidence that he'd once again ripped off his elderly stepfather, Steven Fishman, 22, tried to explain himself. "It wasn't drugs or any of that," Fishman told Detective Robert Church. "It's kind of, I kind of get a thrill out of doing it."

  • Fishman pleaded guilty [...] to six counts of identity fraud and one count of felony larceny from a person over 60 and was sentenced to two to four years in state prison by Salem Superior Court Judge Timothy Feeley. That's less than half the time sought by prosecutor Marcia Slingerland, who explained to Feeley that it wasn't the first time Fishman had stolen from the 77-year-old man.

  • In fact, Fishman was on probation at the time for another series of thefts that emptied his stepfather's bank account — and cost him his home, when he could no longer make the mortgage. Despite the crimes, which forced the elderly man to move to an apartment [...], he took Fishman back in to live with him after Fishman was let out of jail in 2008. Fishman repaid his stepfather by again bleeding the elderly man's bank account dry, stealing nearly $10,000 with a series of electronic transactions that were discovered only after the victim got an overdraft notice from his bank.

For more, see Man gets 2-4 years in prison for thefts from his stepfather.

Connecticut To Clobber Foreclosed Homeowners With Real Estate Conveyance Tax?

In Hartford, Connecticut, the Hartford Courant reports:
  • Losing a property to creditors will get more painful next year: Some homeowners in foreclosure will be hit with a new tax. Foreclosures sales have been exempt from Connecticut's real estate conveyance tax for years, but the General Assembly is ending that break Jan. 1. The state is making the change to help close gaps in its budget, and cash-strapped municipalities are eager to get their share of the new revenue, too. But several state lawmakers say they're already dissatisfied with the change."I really believe that this is pouring salt into the wounds," state Rep. William Hamzy, R-Plymouth, told colleagues at a meeting of the banks committee Tuesday.(1)

For more, see Connecticut Plan To Lift Tax Exemption In Foreclosures Stirs Debate.

(1) I suspect that failure to pay the conveyance tax will result in an immediate lien against the foreclosed home, which will make it impossible for the foreclosing lender to transfer clear title to a subsequent purchaser until fully satisfied. So even if the foreclosed homeowner is legally liable for payment of the tax, it will actually be the foreclosing lender who will satisfy the lien when it unloads the property onto the next buyer in the chain of title (the lender will then probably be allowed to tack on the amount paid on account of the lien onto any deficiency balance owed by the foreclosed homeowner - at which point, it will have to wait for the homeowner to "hit the lottery" in order to get paid, assuming he/she hasn't already obtained a debt discharge by filing for bankruptcy).

$55M+ Former "Lions' Den" Sold At Auction For $583K; Judge Wonders Whether Environmental Problems The Reason For NFL Team's Lack Of Success

In Oakland County, Michigan the Detroit Free Press reports:
  • An Oakland County Circuit Court judge is to decide by Monday whether this week's sale of the Pontiac Silverdome for $583,000 to a Toronto-based developer will go through. Judge Edward Sosnick heard arguments Wednesday from an attorney representing Silver Stallion Development Corp., which hopes to block the sale to Andreas Apostolopoulos in trust for a corporation to be formed from Toronto.


  • Attorney David McGruder, representing Silver Stallion, told Sosnick that his clients had spent money on environmental studies and had deposited $100,000 in earnest money. "We've expended money, time and effort," McGruder said. Sosnick, known for his laconic courtroom wit, said: "Was the environmental problems the reason why the Lions could rarely win?" That prompted laughter in the crowded courtroom.

For more, see Judge to decide by Monday on Silverdome (Former bidder fights sale to Toronto trust).

See also, The Christian Science Monitor: New tale of Detroit’s woe: Pontiac Silverdome sold for $583,000 (Pontiac, Mich., sold the 80,300-seat Silverdome for $583,000 Wednesday. The former home of the Detroit Lions cost $55.7 million to build in 1975).

Friday, November 20, 2009

Consumer Advocate's Effort To Wipe Out Delinquent Mortgage Debt Held By Lenders Unable to Prove Right To Foreclose About To Begin In Florida

In Jacksonville, Florida, the Jacksonville Business Journal reports:
  • The house at 12920 Mt. Pleasant Road is a modest ranch-style home. The man in it is John McCampbell, a 61-year-old car mechanic who lives with his two children and fiancée. He took out a $156,000 mortgage from the now-defunct Washington Mutual, which foreclosed on his home in 2004 after he lost his job. But when the lender was unable to produce the deed to prove it had a right to foreclose, McCampbell beat the foreclosure and remains there today.

  • Now McCampbell and his Fort Caroline home are poised to make history in foreclosure defense with an experimental legal approach that would wipe out his mortgage debt and hand him a clean deed. It’s called a “quiet title,” where the court establishes a party’s title to the property to remove or “quiet” any challenges or claims to it.

  • It sounds like an impossible endeavour. But April Charney, a Jacksonville Area Legal Aid attorney, has spent the past four years teaching lawyers across the country the legal framework of this foreclosure defense. With an average of 3,000 foreclosures filed every month in Jacksonville alone, there’s no shortage of lawyers tapping her expertise.


  • Before asking the court to quiet a title, a foreclosure must be dormant for five years. That brings Charney to a critical juncture in many of her early cases where the five years is at or near its expiration. She’ll be seeking multiple quiet titles in 2010, including one for McCampbell, her client.(1)

For more, see Lawyer's foreclosure defense of 'quiet title' faces tests.

(1) A January, 2009 post (see Using Statute Of Limitations To Wipe Out Lenders' Right To Foreclose A Mortgage?) referred to a December, 2008 story reported on which alluded to Charney's intent to apply the Florida statute of limitations (see Sec. 95.11(2)(c), 95.281(1)(a), Florida Statutes) to terminate a foreclosing lender's right to foreclose when her clients' cases became ripe for such an attack:

  • Charney said that in a number of her cases, once there is no longer an ability for the loan servicer to profit, the foreclosure “just goes to sleep, and unless I’m going to pursue it, nobody’s setting hearings, nobody’s pursuing anything to get it to trial.”

  • After five years, which is the statute of limitations to enforce a contract in Florida, she can try to help her clients own their homes mortgage-free, Charney said. The first opportunity for her to help clients do that may arise next year.

  • And that legal limbo is where the lion’s share of her cases stand now, Charney said. So far this year, she has achieved two “workouts” and lost two cases. “Many, many, many” of the rest are in sleep mode or getting a single filing each year by plaintiffs’ attorneys just to keep them alive.

For the story, see 'Angel' of foreclosure defense bedevils lenders (Florida attorney trains hundreds of others to help troubled borrowers) (for the entire story on one web page, try here). EpsilonMissingDocsMtg

Stiffed Employees Sound Alarm On S. Calif. Upfront Fee Loan Modification Outfit; Offices "A Ghost Town" - Hundreds Of Homeowners May Be Left Hanging

In Mission Viejo, California, NBC Los Angeles reports:
  • Hundreds of homeowners who turned to an Orange County mortgage modification company for help may be in jeopardy themselves and don't know it. The company appears to have shut down. Company insiders say they have come forward to warn the public because they're afraid people will lose their homes.

  • Greenleaf Legal Services in Mission Viejo may bill itself as "loan modification experts," but during a recent visit, the place was a ghost town. Some offices were empty, others had stacks of client files apparently waiting to be worked on, and telephone message lights were blinking at every desk. Greenleaf clients said they're still waiting for their calls to be returned.


  • While [...] customers say they aren't getting messages returned, some employees say they're not getting paychecks. Two workers say they haven't been paid in weeks. Both asked to conceal their identities because, they say, they're going to the authorities with their concerns. One employee said, "it's been over a month," since he was last paid. And since people aren't being paid, another insider said, "What is basically happening is files are not being worked at this time." [...] According to an insider, people paid up to $1,500 to $3,500 upfront. Greenleaf clients all over the country, including more than a dozen in California, said they paid as much as $3,500 and haven't seen results.


  • Greenleaf never registered with [the California Department of Real Estate] to do modifications and never posted a $100,000 bond as required by law, according to the Attorney General's office.

For more, see Hundreds Could Lose Homes as OC Loan Company Goes Dormant (A local loan-modification company is going out of business, potentially leaving hundreds of homeowners in jeopardy of losing their homes).

Trouble Hits 200+ Would-Be NC Homebuyers As State Investigates Now-Defunct "Rent To Own" Outfit Suspected Of Pocketing Rents, Stiffing Lenders

In Raleigh, North Carolina, WTVD-TV Channel 11 reports:
  • [Sherry] Williams moved into the Raleigh home in March. Not only is it her family's home, but it's their livelihood as she runs a licensed day care out of it. She found the home through a company called Saving Carolina. "We don't have perfect credit. This was a program that helped people. We thought it was a great opportunity to own a house," said Williams.

  • Williams says it was rent to own with 100 percent owner financing available. She gave Saving Carolina $3,000 down payment and her monthly payments were $1,650 a month, which each month she says she sent to Saving Carolina. "They were handling the mortgage for the homeowner and we would send the money to them and they would send it directly where it needed to go," she explained.

  • Saving Carolina acted as the middle man. They found homeowners who wanted to rent out their home. In turn, Saving Carolina would find renters for those homes, and offer them as rent to own. Williams thought all was going well until after 6 months of making her monthly payments to Saving Carolina, she got a shocking letter in the mail from the bank. "The house was in jeopardy of being foreclosed because it was a few months behind and the owner needed to get in touch with the bank," she recalled.

  • Williams called the owner of the home. She says he told her he doesn't have the payments as Saving Carolina was supposed to be making them. So she called Saving Carolina, "have no idea where they are. The numbers have been disconnected. We're just kind of locked in - just praying the sheriff doesn't come and say you guys need to get out," said Williams. Williams isn't alone.

  • "I think it was 282 families that this has affected. I personally have seen 50 families," a former worker at Saving Carolina told ABC11. She asked not to be identified.(1) [...] Another man who also worked for Saving Carolina and also didn't want to be identified says Saving Carolina made their money by collecting rent to own payments, but didn't always send them into the mortgage company.

For more, see Troubleshooter: Rent to own.

(1) Reportedly, besides ABC11 looking into Saving Carolina, two former workers along with Williams say an investigator with the North Carolina Commissioner of Banks has interviewed them. rent to own lease purchase option scams yellowstone

Riverside County DA, Feds Announce Bust In Alleged Mortgage Fraud, Securities Scam; Losses Estimated At $140M+ Involving 249 Homes

In Riverside County, California, the Southwest Riverside News Network reports:
  • The head of an investment company described by authorities as a “con man” who bilked victims out of millions of dollars, much of it coming from real estate fraud in Murrieta and Temecula, has been charged with nearly 250 criminal counts, prosecutors announced Thursday. James Benjamin Duncan, 38, known in some circles as “James the Cash King,” has been charged with 249 felonies, including conspiracy, elder abuse, grand theft, securities fraud and identity theft, Riverside County District Attorney Rod Pacheco announced at an afternoon news conference Thursday.(1) [...] The defendants are being held in lieu of millions of dollars in bail. Before they can be released, Pacheco said, the defendants must prove their bail money was obtained legally.


  • According to a news release, the crimes include the selling of fraudulent securities leading to a loss of more than $17 million, as well as mortgage fraud leading to a loss of $124.5 million throughout Riverside County. The defendants carried out similar schemes in other areas of California and Arizona, authorities said. [... Pacheco] estimated there were 249 homes impacted in Riverside County, with the majority in Murrieta (150) and Temecula (47). Those losses cannot be measured, he said.(2)


  • In plea agreements also filed [...] in United States District Court in Los Angeles, Christopher J. Oetting, 47, of Palm Desert; Linda Brooks, 54, of Murrieta; and Steven Kayden, 51, of Cathedral City; all have agreed to plead guilty to federal charges related to their roles in one or more investment schemes.(3)

For more, see Criminal charges filed in massive Temecula and Murrieta real estate fraud case (James Benjamin Duncan, 38, known in some circles as "James the Cash King," was charged with 249 felonies).

See also, The Press Enterprise: Seven accused of defrauding Inland home investors of millions.

(1) Others reportedly involved in the case have also been charged, including Hendrix Moreno Montecastro, 37; Helen Moreno Pedrino, 47; Maurice McLeod, 37; Charlie Sung Muk Choi, 34; Cindi Gayle Kelly, 33; and Thuan Nhan Du, 33.

(2) I suspect that the criminal probe in this case evolved out of the class action civil lawsuits (and the local Southern California media reports thereon) alleging a racketeering conspiracy filed against this outfit a few years ago by some of the victims who claim to have been screwed over. See:

(3) Presumably, this trio have been declared the winners of the "race to the prosecutor's office" - whoever gets there first and rats out the other guys gets the best deal when sentences are handed out.

Unwitting Purchase Of Home Subject To Demolition Order Has Family Pleading With City For Extension Of Time To Correct Violations

In Beaumont, Texas, the Southeast Texas Record reports:
  • Three Beaumont residents have filed a request for injunctive relief against the city of Beaumont, alleging they are in danger of losing their home because the city will not grant them an extension to perform repairs. Flor Escamilla, Flor Uribe and Fernando Uribe claim they purchased a property at 2280 Laurel in Beaumont from Bruce Brosnahan on May 6. However, when they bought the house they claim they didn't realize that the city of Beaumont had notified Brosnahan that the home would be condemned because of its substandard and dangerous state, according to the complaint filed Nov. 6 in Jefferson County District Court.

  • When they did discover that the property was due to be demolished, the plaintiffs' sister and daughter appeared before Beaumont City Council to request an extension of time to repair the property, the suit states. Granting the extension, the Beaumont City Council allowed the plaintiffs until Nov. 12 to repair the property, the complaint says. Realizing that they probably could not finish the required fixes by Nov. 12, the plaintiffs requested an extension to finish the repairs. However, Beaumont City Council denied their second request because the previous owner had already been granted an extension, they claim.


  • The plaintiffs say they have already taken steps to repair the property and will continue to fix it up to Beaumont city codes if they are granted an extension. The plaintiffs are seeking a temporary restraining order that immediately orders the defendant to stop any action of demolishing the property and to be prevented from taking any bids on demolition.

For the story, see Beaumont homeowners seek TRO to stop home demolition.

Feds Bag Fugitive In Malaysia; Man Accused Of Running Utah, Colorado Home Hijacking, Rent Skimming Scams Targeting Properties In Foreclosure

In Denver, Colorado, KUSA-TV Channel 9 reports:
  • The man 9Wants to Know exposed for running one of the most sophisticated rental schemes in Colorado is under arrest after U.S. Marshals took him into custody in Malaysia and flew him to Los Angeles [...]. 9Wants to Know has learned FBI agents in Denver are now investigating his rental scheme, and plan on presenting their findings to federal prosecutors in Colorado.

  • Gordon Miller has been on the run since 2005 when Utah federal prosecutors charged him with running a very similar scheme that took money from Utah residents. He's lived in Malaysia for at least the past nine months. When 9Wants to Know showed U.S. Marshals in Utah that Miller was still running another operation in Colorado, U.S. Marshals worked with the State Department who revoked Miller's U.S. passport due to his fugitive status stemming from the 2005 case, according to Utah Supervisory Deputy U.S. Marshal Mike Wingert. Without a valid passport, the Malaysian government picked him up on immigration violations, Wingert said. U.S. Marshal Deputies then took him into custody and flew him to Los Angeles. [...] It is likely that Miller will then be brought to Utah to face his charges.

For more, see Man behind alleged rental scheme arrested in Asia.

(1) 9Wants to Know discovered Miller recently targeted Coloradans using the name Greg Castle. 9NEWS exposed how Miller/Castle searched bankruptcy records to find people having trouble paying their mortgage. He then sent letters and left phone messages to convince those homeowners they had to move out of their homes. Several homeowners told 9Wants to Know they believed the letters and voicemail messages were coming from someone working on behalf of their mortgage companies. Once homeowners moved from the homes Miller put rental ads on Craigslist.

More On Big Hit Taken By California Pension Funds On Investments In "Predatory Equity" Real Estate Deals Designed To Dodge Local Rent Control Laws

In East Palo Alto, California, The Sacramento Bee reports:
  • At the top of the real estate bubble, CalPERS [California Public Employees' Retirement System] invested $600 million in two deals that were 3,000 miles apart but linked by a common vision: Buy apartments governed by rent-control laws and turn them into cash cows. The plan failed in a flurry of litigation and bad debt. A project in East Palo Alto is in default. The second deal, in New York, is likely headed that way. CalPERS could lose most or all of its money.


  • [Advocates for tenants' rights] say the $200 billion investment fund was party to a pair of schemes to jack up rents at the expense of thousands of working-class and middle-class tenants.


  • The California State Teachers' Retirement System [CalSTRS] has written off the $100 million it invested in the New York deal. CalSTRS and CalPERS lost a combined $100 billion in the fiscal year ending June 30 and say taxpayers might have to put more money into the pension funds.

For more, see CalPERS realty deals and image take a beating.

(1) For the ruling, see Roberts v. Tishman Speyer Properties, L.P., 2009 NY Slip Op 7480; 2009 N.Y. LEXIS 3953 (October 22, 2009). Page Mill

Thursday, November 19, 2009

Nevada Law Firm Sues State Over Loan Modification Licensing & Bonding Requirements For Its Non-Attorney Employees

In Clark County, Nevada, the Las Vegas Sun reports:
  • A law firm active in Henderson and Las Vegas is suing the state over rules requiring licensing of non-attorney employees working on mortgage loan modifications.
    Cogburn Law Offices LLC filed suit last week in Clark County District Court against the Department of Business and Industry, Division of Mortgage Lending.


  • The suit says that attorneys were specifically excluded when the Nevada Legislature passed a bill this year regulating loan modification companies and firms assisting with short sales and deeds in lieu of foreclosures. But now, the Mortgage Lending Division has imposed rules requiring staff members associated with or employed by attorneys to be licensed, the suit charges. "Such regulation not only enlarges the scope of (the law), but attempts to govern and regulate the practice of law by forcing employees of an attorney to be licensed and governed by the Nevada Mortgage Lending Division," the lawsuit charges. [...] Cogburn is seeking a court declaration that its legal staff and employees are exempt from licensing, including provisions requiring they be bonded and take continuing education classes.

For more, see Law firm sues state over mortgage modification licensing.

Unwitting Renter In Home Hijacking, Rental Scam Dodges Immediate Boot; Proof Of Occupancy For 30+ Days Entitles Her To Rights As Tenant, Says Advocate

In Riverside, California, KABC-TV Channel 7 reports:
  • Rental scams are on the rise in Riverside County. Police in Moreno Valley are investigating a suspected case of felony fraud. One family lost their house and their money even though their rent was paid. It had seemed like the perfect house. Marilyn Elliott and her two children moved in last month. But on Sunday night, it all turned to chaos. "They were like, 'You need to open up the door.' And I'm like, 'What is this?'" recounted fraud victim Marilyn Elliot.

  • It was the Moreno Valley police investigating a report of squatters on the property. What a way for Marilyn Elliot to find out that the lease agreement she signed was bogus. The house was entering foreclosure and officers ordered Elliott to be out within 24 hours.


  • The Fair Housing Council [of Riverside County] ( says that many victims do not know their rights. Under the law Elliott does have temporary protection from eviction. "On a weekly basis we are flooded with calls about the same situation," said Juanita Kodera, Fair Housing Council. "If she has been in the unit over 30 days, that makes her a tenant." It took some time to prove she had been there for a month. The receipt for the $3,500 cash she paid was just a handwritten note. Now the police department says it will be up to the bank to give Elliott more time.

For the story, see Riverside renters warned of cash scams (go here for KABC-TV Channel 7 video). KappaPhonyLandlordScam

City Gives Merrill The Boot In Multi-Million $ Municipal Bond Peddling Deal Amidst Charges Of BofA's Failure To Modify Mortgages For Its Residents

In Sunrise, Florida, the South Florida Sun Sentinel reports:
  • It pays to be nice. Just ask Mayor Roger Wishner, who helped kill a multimillion-dollar city partnership with Merrill Lynch because parent company Bank of America has been accused of being mean to the little guy. Two weeks ago, city commissioners voted to hire Merrill Lynch to help sell up to $103 million in bonds. On Monday, commissioners changed their minds and went with Goldman Sachs instead. Why the change of heart? Bank of America, which acquired Merrill Lynch in January, has taken heat recently for not being very helpful to customers needing help renegotiating their mortgages to avoid foreclosure.

For the story, see Sunrise to Bank of America: Clean up your act.

See also, WFOR-TV Channel 4: Sunrise Cancels Bank Of America Deal On Bond Sales:

  • Wishner said he would be willing to work with Bank of America in the future, however, he said he first wants to see the company do more to assist homeowners. Wishner said a starting point would be to create a specific office in South Florida with a point person to help struggling homeowners.

Business As Usual In Philadelphia's Courtroom 676

In Philadelphia, Pennsylvania, The New York Times recently ran a story on the proceedings that continue to take place in City Hall Courtroom 676, the home of the city's Residential Mortgage Foreclosure Diversion Pilot Program:
  • Every Thursday morning, the courtroom on the sixth floor of the regal City Hall here is given over to the conciliation conferences. It fills up with volunteer lawyers in jogging shoes, who are representing homeowners; gray-suited corporate lawyers working for mortgage companies; and all variety of delinquent borrowers — elderly citizens leaning on canes, construction workers in coveralls, parents with bored children in tow. The lawyers exchange preliminary settlement terms, while the homeowners fill out papers and wait.

  • In some cases, deals are struck that lower monthly payments for borrowers and allow them to retain their homes. When a homeowner cannot afford the home even at modified terms, the program helps to create a graceful exit, in which the borrower accepts cash for vacating the property or signs over the deed in lieu of further payment.

For the story, see Philadelphia Gives Homeowners a Way to Stay Put.

NJ Woman Gets 2 To 5 For Pocketing Upfront Cash In Exchange For Phony Mortgage Help To Avoid Foreclosure

In Monroe County, Pennsylvania, the Pocono Record reports:
  • A New Jersey woman will be spending two to five years in state prison after she was sentenced on Tuesday for promising to help homeowners avoid foreclosure and then keeping the money she was given for their mortgages. Shirley Gail Matthews, 53, of Pemberton, N.J., told homeowners that she could negotiate with their mortgage company and help them keep their homes. She was convicted in July of keeping the money she was given and never using it to help pay mortgages. The charges were part of a lengthy history of similar charges, prosecutors said, and Matthews currently faces similar charges in Wyoming County.


  • She was found guilty by a jury in Monroe County Court of deceptive business practices, theft by deception and theft by failure to make required disposition of funds.

For more, see Woman gets prison time after mortgage scam conviction.

See also, The Allentown Morning Call: Mortgage scam ends with prison:

  • ''It's outright theft and thievery,'' Monroe County President Judge Ronald Vican told her. "It's the lowest form of disreputable conduct.'' [...] ''She's made a practice of this,'' Vican said, noting her prior theft record as he rejected her lawyer's request for a lighter sentence. ''And she's picked on people who are really vulnerable.'' foreclosure rescue loan modifcation upfront fees

Wednesday, November 18, 2009

Land Wrestled Away From Screwed Over Homeowners In New London Eminent Domain Fight To Remain Undeveloped As Corp. Giant Announces Plans To Bolt City

From an op-ed column in The Connecticut Post:
  • In a country where private property is sacred, the government's right to seize land for its own devices will always be contentious. Done in the service of building a school or a hospital, it can be defensible. Taking people's homes for the nebulous "public good" of economic development is deplorable.

  • In a case that went all the way to the U.S. Supreme Court, the residents of New London fought back against such folly. When the drug company Pfizer announced in 2001 it was opening a new research center in that city, officials began the process of acquiring nearby land for an accompanying development project. Homeowners who were to be forced out said "no." The residents lost that case, as the Supreme Court four years later ruled the government had the right to take their homes and turn the land over to a private developer,(1) all because the plan was supposed to, someday, bring jobs and tax dollars to the struggling community. It was a bad decision then and only looks worse in retrospect.

  • The news now is that Pfizer is leaving New London, closing its facility and moving its work up the street to Groton. All the grand development plans, which weren't progressing in any event, have now been shelved for good. Where people's homes once stood, only weeds grow.

For more, see Lessons learned on eminent domain.

See also:

(1) Kelo v. City of New London, 545 U.S. 469 (2005).

Feds File Civil Suit In Central Florida Against Alleged Upfront Fee Loan Modification Racket; "Attorney Renting" Among Allegations

In Tampa, Florida, Courthouse News Service reports:
  • Mortgage and "foreclosure relief" companies backed by a law firm took thousands of dollars from customers who ended up in worse shape than they started, the FTC says. It sued the Crowder Law Group dba Legal Support Services, 11 individuals, and Washington Data Resources, and Optimum Business Solutions dba Attorney Finance Services.(1) The Federal Trade Commission says the defendants steered their victims away from free programs offered by lenders and suckered them into spending thousands of dollars on programs with cheerful names such as "Fresh Start Program" or "Hope4Homeowners."


  • The agency says Washington Data Resources and Optimum Business Solutions contracted with attorneys in several states to place calls to consumers to explain the process. Other than the telephone call, the attorneys have little if any involvement with the consumers and are paid for each consumer they agree to accept as a client, the FTC says. The defendants repeatedly fail to obtain the promised loan modifications.

For more, see FTC Says Law Group Helped in Debt Scam.

For the lawsuit, see FTC v. Washington Data Resources, Inc., et al.

(1) Washington Data Resources is a Florida corporation; Optimum Business Solutions is a Nevada LLC dba Attorney Finance Services; Crowder Law Group fka Jackson, Crowder & Associates dba Legal Support Services is a Florida corporation. Also sued, and their affiliations, are Richard A. Bishop (Optimum), Brent McDaniel (Washington Data), Tyna Caldwell (Crowder Law Group), Douglas A. Crowder (Crowder Law Group), Bruce Meltzer (Crowder Law Group), and Kathleen Lewis (Optimum).

Tennessee Judge Wipes Out Half Of Homeowner's $1M+ Wrongful Foreclosure Jury Award Against BofA; Leaves Another $300K In Limbo

In Johnson City, Tennessee, the Johnson City Press reports:
  • In late July, Jesse Miltier thought he had achieved justice in a five-year battle with Bank of America, which wrongfully foreclosed on his Watauga home in 2004. He’s found out otherwise since July 31, when a jury in Carter County awarded him $1,050,000 — including punitive damages, a rarity in wrongful foreclosure suits — as BOA has fought certain aspects of the award. Monday in Jonesborough, Judge Thomas Seeley heard motions in which BOA attorneys sought to lower that award to $200,000. By the end of the hearing, $550,000 of what the jury had awarded was wiped out, and the status of another $300,000 in punitive damages was up in the air.

For more, see Plaintiff home sick by decision.

Federal Prosecutor In "Money Store" Foreclosure Rescue Scam Case Takes Punch In The Face From Supporter Of Co-Conspirator At Sentencing Hearing

In Greenbelt, Maryland, The Washington Post reports on the sentencing of Joy Jackson Fordham, a retired exotic dancer who went on to become president of the now-defunct Metropolitan Money Store, a foreclosure rescue scam operation that screwed homeowners facing foreclosure out of millions in equity in their homes by peddling bogus sale leaseback arrangements that were purportedly designed to help save their homes from being repossessed by mortgage lenders.

  • The case produced more courtroom drama Monday when Assistant U.S. Attorney James A. Crowell IV was punched in the face by a relative of Jackson's key accomplice, Jennifer McCall, witnesses said. McCall was in court to be sentenced at a separate hearing later in the day, but the hearing was postponed after she fired her lawyers. After Crowell, [...] asked that she be jailed pending sentencing, one of her relatives leapt into the well of the courtroom and punched him. The man was taken into custody, officials said.

For the story, see 12-year prison term in mortgage swindle (A Maryland woman who stole millions from Washington area homeowners trying to avoid foreclosure is a "vulture" whose case should serve as a warning to other con artists, a federal judge said yesterday before imposing a sentence of more than 12 years).

Read the criminal complaint here and a court motion, which describes the alleged attack in greater detail, here.

See also:

Media Report Shines Light On Central Florida Short Sale Flipping Duo

A recent story on the apparent emergence of short sale flipping fraud reported by the Sarasota Herald Tribune contained this excerpt on a Central Florida duo who are engaged in practices some may consider suspect:
  • The evidence that short sale flippers are finding ways to benefit from bank losses can be found in deed records filed along Florida's Gulf Coast. Some individual investors and small groups of flippers have bought dozens of properties at discount prices and resold them within days, each time for thousands of dollars in profit.

  • Since September 2008, Tampa real estate agent Joe Wright and accountant Kevin Byrne have worked together to buy more than 30 pre-foreclosure houses and condos, with Wright's brokerage as the listing agent and Byrne's company as the buyer. In each case, the men arranged a short sale and quickly resold the property at a higher price. Of their 33 deals, 22 properties resold within 24 hours of purchase. The median one-day price increase was $25,000. Byrne and Wright did not return repeated calls seeking comment.

  • Their purchases, including nine in Sarasota and Manatee counties, involved properties that ranged in value from $50,000 to $800,000. They also included four properties owned by Wright. Court filings show that all four were on the brink of foreclosure when Byrne bought them from Wright at reduced prices and resold them for a profit.

  • In one deal last year, BB&T filed a foreclosure action against Wright and moved to seize a three-bedroom house he had built on Fielder Street in Tampa. Mortgage documents show Wright had a $545,000 mortgage, but BB&T agreed to sell the house to Byrne's company for $287,000 so that it could avoid the foreclosure process. Deeds show that the same day Byrne bought Wright's house, he resold it for $425,000, $138,000 more than the bank had been paid.

  • "If a bank knows that an end buyer is going to pay $425,000, why would it agree to take $287,000?" said Sean Martin, the owner of Martin Funding in Sarasota, which provided a loan on one of Byrne's deals. "Banks don't want others to profit at their expense." Such rapid price increases are "a huge red flag," said Mark Johnson, Florida vice president and underwriting counsel for Stewart Title, which provided Byrne with title insurance.

  • While Byrne benefited from the bump in price, Wright profited in different ways. He was able to erase nearly $1.2 million in debt from his name, and his company earned commissions as the listing agent for the sales, according to Multiple Listing Service records from the Mid-Florida Region. Wright's brokerage, with its 15 agents, is now Byrne's go-to real estate agency, according to MLS records, which track the sale of properties and record the listing agent on sales. It has been the listing company on every property Byrne's companies have bought in Hillsborough, Sarasota and Manatee counties since October 2008, MLS records show.

  • In addition, Byrne has used the same title agent, Chris Rodriguez, to close all of his short sale deals, at least since November 2007. Court documents show that Rodriguez moved into the same office building as Wright at 3309 Bay to Bay Boulevard in Tampa after Wright and Byrne began working on property sales together.

For the story, see The new flipping: short sales.

Tuesday, November 17, 2009

Key Operator In "Money Store" Rescue Scam Gets 12+ Years; Targeted Homeowners In Foreclosure w/ Bogus Sale Leasebacks In Home Equity Ripoffs

From the Office of the U.S. Attorney (Greenbelt, Maryland):
  • U.S. District Judge Roger W. Titus sentenced the president of the Metropolitan Money Store, Joy Jackson, age 41, of Fort Washington, Maryland, [...] to 151 months in prison followed by five years of supervised release for conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Titus also entered a judgement ordering Jackson to pay restitution of $16,880,884.86 and to forfeit three residential properties in Oxon Hill, Capitol Heights and Laurel, Maryland and three vehicles.

  • Joy Jackson presided over a ‘money store’ that was in the business of ripping off homeowners and mortgage lenders by submitting fraudulent paperwork to support over $37 million of loans that were never intended to be repaid,” said U.S. Attorney Rod J. Rosenstein. “Instead of helping financially distressed homeowners keep their homes as promised, she secretly used the home equity to buy luxuries for herself, including furs, jewelry and over $800,000 on her wedding.”


  • Jackson and others conspired to fraudulently promise to help homeowners, who had substantial equity in their homes but were facing foreclosure because of their inability to make monthly mortgage payments, avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a year, during which time Metropolitan Money Store promised to improve the homeowners’ credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. The straw buyers were paid up to $10,000 to participate in the scheme and allow the properties to be put in their names. Jackson also served as a straw buyer on several properties in Maryland.

For the entire press release, see President of Metropolitan Money Store Sentenced to Over 12 Years in Prison for $37 Million Mortgage Fraud Scheme (Personally Responsible for Over $16 Million in Losses to Mortgage Lenders; Used Over $800,000 of Fraudulently Obtained Proceeds to Pay for Her Wedding). foreclosure rescue

Wachovia Offering Financially Strapped Homeowners Cash, Deficiency Balance Waivers, Quick Closings To Encourage Short Sales & Avoid Foreclosure?

In San Diego, California, North County Times reports:
  • Wachovia Corp. is offering its borrowers money for selling their houses short, rather than going into foreclosure. Homeowners with Wachovia mortgages who are upside down on their property can get 1 percent of the price of their short sale, with a minimum of $2,500. The incentives only kick in once the deal closes. [...] The program was originally intended to be temporary, but there's no fixed end date for it yet. A source in Wachovia's short sale unit said the program will definitely run through November, and probably beyond. The source preferred not to be named for fear of getting fired.(1)


  • Another key feature for borrowers is that Wachovia's program leaves them with no lingering mortgage debt. Across the nation, attorneys have reported that the fine print on short-sale contracts from major lenders hold borrowers responsible for the unpaid mortgage balance, and lenders have pursued collections in court after the sale. [...] The cash incentive is only one of several steps Wachovia is taking to promote and streamline short sales. The lender dramatically curtailed the amount of paperwork short sellers must provide to get a sale approved, allowing them to get a short sale closed in as little as 10 days.

For more, see Wachovia offers cash to spur homeowners into 'short sales' (Lender quietly giving $2,500 or more in incentives to avoid foreclosure).

(1) Wachovia is promoting the program quietly by inviting real estate agents to seminars run by employees from the bank's short sale unit, the story states. Reportedly, the only seminars currently available in California are taking place in the San Francisco Bay Area, but they will becoming to Southern California early next year, a Wachovia source said.

Short Sale Flipping Fraud: Use Of Inflated Appraisals, Straw Buyers, Sale Terms Undisclosed To Lenders All Indicate That Scammers Are Still At It

In Central Florida, the Sarasota Herald Tribune reports:
  • Untold millions of dollars that banks could have recovered from the sale of distressed Florida homes have instead been pocketed as profits by a new breed of property flipper. These flippers target houses on the verge of foreclosure and persuade banks and mortgage companies to accept lowball buyouts, sometimes by using questionable appraisals and not disclosing that a quick sale at a higher price has already been arranged, experts say. No one knows how widespread the scheme has become. But a national glut of short sales -- pre-foreclosure sales in which the lender agrees to let the house sell for less than the mortgage owed -- has spawned a small industry of short-sale flippers, some of whom use these questionable tactics, experts say.(1)


  • Bankers and some organizations that regulate the real estate industry have taken steps to curb the latest form of flipping.(2) But the measures, including restrictions on writing mortgages for flipped properties, have not halted questionable transactions. Experts warn the number of short sale flips is likely to continue growing nationwide.


  • [F]raud experts warn that some of the real estate flipping they see today involves the same kind of insider deals and manipulated sale prices that plagued the housing bubble. The FBI recently added short sale flipping, dubbed "flopping" by some mortgage fraud experts, to its list of recognized real estate fraud. In a June 2009 report on mortgage fraud, FBI officials described various forms of short sale flipping fraud.(3) Each type involves misrepresenting the value of a house to a lender.


  • "These people are doing exactly what they did during the run-up," said Tim Mattingly, who owns an Orlando mortgage brokerage and title agency. "They are getting inflated appraisals. They are selling to straw buyers and they are hiding terms of their deals from lenders. It's amazing that after all we've been through, these people are still at it."

For more, see The new flipping: short sales.

See also, Toronto Sun: Florida's flopping circus (The Florida town made famous by Ringling Brothers' "greatest show on earth" has become a three-ring real estate circus of flippers, floppers and amazing deals).

(1) A Herald-Tribune examination of nearly 18,000 property sales that occurred in Sarasota and Manatee counties in 2009 showed that at least 250 properties have been sold multiple times at escalating prices so far this year, the story states. Reportedly, nearly 50 of those properties were bought then resold within 24 hours, suggesting that banks were underpaid for properties that already had a buyer willing to pay more. Just the most suspicious sales, where properties flipped within a day, have cost banks $1.7 million in Sarasota and Manatee counties so far this year. On houses bought and resold within a month, the bank short sales were $3.2 million less than the houses fetched just a few days or weeks later.

(2) In a June, 2009 story (see Title insurance group's move could stymie short sale flips), The Tampa Tribune reported that the Attorneys' Title Insurance Fund ("The Fund"), an Orlando-based outfit that is a major underwriter for attorneys who write title insurance in Florida, notified its 6,000 member attorneys that it will not insure deals made with a popular – but controversial – method for closing flips of short sales being advertised on the Internet that promises to make investors lots of money with little or no work.

In Sepember, 2009, The Fund announced that it will go ahead and insure short sale flipping deals that meet certain guidelines (see The Fund Underwriting Bulletin: Short Sale Transactions - Guidelines Revised). With all the heat now being applied to these deals by federal investigators, The Fund may want to rethink its most recent announcement. For examples of federal indictments involving alleged fraud in connection with short sales, see the following U.S. Attorney press releases:

(3) See also, What Else Are They Selling? Loan Mods That Turn Into Questionable Short Sales? (begins at page 17 of the recent National Consumer Law Center report, DESPERATE HOMEOWNERS: Loan Mod Scammers Step In When Loan Servicers Refuse To Provide Help):

  • In one version of a short sale scam, the realtor and the buyer collude to conceal the full price of the sale from the lender so that they can pocket the difference, often by using option contracts and back-to-back closings. This version is aimed primarily at defrauding the lender, though the homeowner is also hurt by an artificially low sales price, either by being liable on a deficiency or by paying taxes on a higher forgiven balance.
  • In another version of a short sale scam, the buyer takes over the mortgage without satisfying the due-on-sale clause and the sale is concealed from the lender. The owner of a We Buy Houses franchise explained at trial that these deals work when the homeowner is only 10% to 15% upside down, because the home is sold to a buyer who cannot qualify for a regular loan and so is willing to pay a premium above fair market value to avoid a credit check. Depending on how the transaction works, the homeowner may be out cash, lose the home, and still end up with a foreclosure on the credit report.

For a story on a questionable arrangement that combines short sales with sale leaseback deals that give short sellers an option to repurchase their homes in the future (presumably without the knowledge of the lender and/or loan servicer approving the short sale), see Short Sales Coupled With Lease-Buyback Option A Way To Help Those Facing Foreclosure Stay In Their Homes?

Two Charged In Alleged Rent Skimming Scam; Suspects Took Control Of Property From Desperate Owners & Pocketed Rent While Letting Bills Pile Up

In St. Louis, Missouri, the St. Louis Post Dispatch reports:
  • Two men who officials said posed as wealthy real estate investors have been charged with 25 counts of stealing or other felonies. St. Louis prosecutors said that Brian Stoker, 25, and Malcolm Aldrich, 54, stole property and rent money from investors who were looking to sell troubled real estate. Stoker was arrested last week and has posted bond. Aldrich remained at large.

  • Beginning in February 2007, Brian Stoker Enterprises agreed to buy rental properties from desperate owners but then never followed through on the sales contracts, according to court documents. Meanwhile, Stoker and Aldrich took control of properties, the charges say, collected rent from tenants but never paid utility or mortgage bills. At least three owners sued Stoker to regain control of their buildings. In some cases, they said rental units were uninhabitable by the time they got the keys back. One, Dr. Abid Nisar, said he lost nearly $200,000. He has had to pay overdue bills and repair damage he blamed on Stoker. "I hope that he is put behind bars and he cannot harm anyone else," Nisar said.

For the story, see St. Louis prosecutors charge two with preying on real estate owners.

N. Miami Beach Loan Modification Outfit Skips Town With Customers' Cash; Homeowners Left Hanging

In Miami, Florida, WTVJ-TV Channel 6 reports:
  • A South Florida mortgage rescue company that once promised to save your home is accused of taking clients' cash and vanishing into thin air. Truman Foreclosure Assistance is one of several companies that sprung up in the recent housing crisis, vowing to help cut monthly payments and allow homeowners to stay put. But now customers from across the country claim the company didn't come close to living up to what it promised.

  • Customers like Kathy Sussman, from Miami, who paid $2,300 to Truman with no results. [...] Sussman wasn't in danger of losing her home but wanted a lower interest rate and a loan to renovate her home.


  • The company has seemingly vanished from their N. Miami Beach office building. The sign on their door is gone and workers at the building and customers claim they can't find anyone from Truman. And no one was answering their phones [...].

For the story, see Miami Mortgage Rescue Firm's Vanishing Act (Truman Foreclosure Assistance accused of taking money and skipping town).

Monday, November 16, 2009

Mass AG Reaches Agreement w/ Servicer To Provide Affordable Loan Mods To Qualified Borrowers, Up To $7.5K Relocation Expenses To Ineligible Homeowners

From the Office of the Massachusetts Attorney General:
  • [A]ttorney General Martha Coakley’s Office announced that it has entered into an agreement with Texas-based American Home Mortgage Servicing, Inc. (“AHMSI”) that will provide significant benefits to approximately 8,200 Massachusetts borrowers holding loans originated by Option One Mortgage Corp. (“Option One”) and H&R Block Mortgage Corp. (“H&R Block Mortgage”). Those mortgage loans are the subject of a lawsuit which the Attorney General’s Office filed in June 2008. The complaint alleges Option One and H&R Block Mortgage originated the risky subprime loans with reckless disregard for whether borrowers would be able to afford their loan payments – a practice that has contributed significantly to the foreclosure crisis in Massachusetts. Under the agreement, [...] AHMSI will be required to provide affordable loan modifications to certain borrowers who fall behind in their mortgage payments.(1)


  • The agreement is designed to remedy unfair and deceptive conduct by Option One and H&R Block Mortgage that was highlighted by the Superior Court in the injunction issued in November 2008. The injunction prohibits the defendants from initiating or advancing foreclosures on loans that are “presumptively unfair,” because they predictably led to default or foreclosure. That preliminary injunction was affirmed by the Massachusetts Appeals Court on October 28, 2009. The Attorney General’s litigation with Option One, H&R Block Mortgage, Block Financial Corp., and their parent company, H&R Block, Inc., is ongoing, and is expected to go to trial in 2010.(2)

For the entire Massachusetts AG press release, see Attorney General Coakley’s Office Reaches Affordable Loan Modification and Foreclosure Prevention Agreement with Mortgage Servicer (Purchaser Will Provide Affordable Loan Modifications to 8,000 borrowers).

(1) For delinquent borrowers who do not qualify for loan modifications, relocation payments of $3,000 to $7,500 and alternatives to foreclosure, such as deeds-in-lieu of foreclosure will be offered. The Attorney General’s lawsuit did not allege loan origination misconduct by AHMSI, and the company cooperated with the Attorney General in reaching this agreement.

(2) The lawsuit is seeking redress for the damage incurred by homeowners and Massachusetts communities as a result of the unfair and deceptive lending practices of the defendants. The lawsuit also alleges civil rights violations because the defendants' policies and practices resulted in discriminatory pricing to the detriment of black and Hispanic borrowers; disparate pricing violates antidiscrimination laws. UndoMortgageLoans TILAdelta

Expiring Statute Of Limitations To Allow Two Dozen Mortgage Fraud Suspects To Walk Free?

In Clarke County, Georgia, the Athens Banner Herald reports:
  • Prosecutors may have let too much time pass to indict nearly two dozen people arrested three and a half years ago and charged with a massive mortgage fraud scheme at a Southeastern Clarke County subdivision, some defense attorneys say.

  • A real estate professional tipped off Athens-Clarke police in spring 2005 that he suspected home sales at the Milford Hills subdivision [...] involved shady dealings; authorities rounded up suspects between April 2006 and June 2008, all on charges they violated the state's Racketeering Influenced and Corrupt Organizations Act.(1)


  • To prosecute a racketeering case, prosecutors must prove underlying crimes - like theft by deception, forgery, deceptive business practices and identity theft - each of which has a four-year statute of limitations in which the case must be prosecuted. The clock starts ticking when the alleged crime is committed. "It's our opinion the statute of limitation has already expired for most of the charges in this case, and if the state brings charges down the road, we would make the case it's too late to do so," said [Page] Pate, who represents Athens attorney C. Michael Rose, the closing attorney for many Milford Hills properties.

  • Prosecutors have five years to bring indictments for RICO crimes, but Pate said he and other attorneys would argue a racketeering case can't be made when the statute of limitations means prosecutors can't charge for the underlying crimes.


  • Although the attorney general hasn't yet sought indictments, that doesn't mean he's decided there's no case, said [Georgia Attorney General Thurbert] Baker's spokesman, Russell Willard.(2) "The matter is still open and pending," Willard said. "If we had affirmatively decided to not bring charges, we would already have closed the file." Willard refused to say whether he agrees with defense attorneys' claims that the statute of limitations for prosecution has expired.

  • Athens attorney Edward Tolley represents Brian Dupree, a former Athens businessman authorities say was at the center of the scheme to buy up Milford Hills properties, then inflate their values for resale. Tolley agreed with Pate that the statute of limitations may have passed, and if anyone's to blame for the Milford Hills fiasco, it's the banks, he said.

For more, see Time may be up on mortgage fraud cases (Attorneys point to statute of limitations).

(1) According to the story, the alleged plot, which may have netted as much as $7 million, was orchestrated by developers, real estate agents, appraisers and at least one lawyer who used fraudulent mortgage applications and property appraisals to inflate home values and defraud mortgage lenders, officials said.

(2) Initially investigated by Athens-Clarke police, this case later was taken over by the office of Georgia Attorney General Thurbert Baker, the story states.

Michigan Judge Says Failure To Modify Loan In Violation Of HAMP Is Defense To Set Aside Foreclosure & Can Be Raised In Subsequent Homeowner Eviction

In Macomb County, Michigan, Workers World reports:


  • Attorneys who work with the coalition won a significant court victory on an appeal in a foreclosure eviction case. The Macomb County Circuit Court held that a lender’s failure to modify a loan in accordance with the federal Home Affordable Modification Program can be asserted as a defense to void a foreclosure, and that this defense can be raised by homeowners in an eviction proceeding stemming from the foreclosure. This is one of the first cases in the country to affirm this right.(1)

Source: Coalition wins foreclosure victories.

(1) Despite these victories, coalition organizers report that the foreclosure and eviction crisis is intensifying, according to the story. Jerry Goldberg, a foreclosure attorney and coalition leader, noted how increasingly the government, through Fannie Mae and Freddie Mac, is the main culprit in eviction actions stemming from foreclosures.

Novice Bidders In Online Condo-Lien Foreclosure Sales Left Holding The Bag As They Unwittingly Buy Units Subject To Unpaid, Big-Balance 1st Mortgages

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • Erika Ginsberg-Klemmt and William Anderson met online, but not in a good way. Driven by the misconception that they had stumbled on a brilliant formula that would allow them to buy a Siesta Key condominium for pennies on the dollar, the two novice real estate investors began unknowingly bidding against each other on Sarasota County's new online auction Web site. Anderson ended up prevailing with a bid of $86,001 and believed that he held unencumbered title to a condo once valued at $327,000. But all Anderson really won was the right to pay off $20,000 in unpaid association dues.

  • More than a dozen investors who made similar mistakes in Sarasota and Duval counties since July are now out hundreds of thousand of dollars. Though they acknowledge that they were "suckers" and "stupid," they also question why government-run Web sites do not do more to warn novice bidders. "Okay, I'm an idiot," said Ginsberg-Klemmt, who settled in Sarasota in 2005 and began buying liens this summer after living on a sailboat with her husband for more than a decade. "But I'm not alone. Every day another sucker believes what we did."(1)

  • The fact that inexperienced investors have been burned by bidding for foreclosures on the sites calls into question whether Florida counties have rushed into this brave new world of online bidding.


  • Thanks to a law passed by the Florida Legislature in 2008, counties across the state began to look at removing the auction process from the courthouse steps. The goal was to reduce costs and allow anyone to bid on foreclosed properties remotely. The first winning bidder for a sale held for Manatee County was someone from Montana, said Craig McIntyre, vice president at, the counties' auction company.

  • "Anyone on the Internet anywhere in the world can participate," he said. "You don't need to leave home and you can bid in your pajamas." Maybe that is the problem, burned investors say. Just because you are in your PJs does not mean you can skip a title search, property inspection or other basics before buying a property. But the process makes you feel like you can.(2)

For more, see When government auctions went online, what was for sale got lost.

(1) Ginsberg-Klemmt, the winning bidder on five condo association liens in Sarasota, Manatee and Duval counties, has been hyperactive in contacting people who have made the same mistakes, urging them to fight to get their money back and to force counties to change the process, the story states.

(2) According to the story, the attorney for Sarasota County Clerk Karen Rushing's office said, "Whether it be a sale in the courthouse or online it doesn't alleviate the onus of responsibility to research it."

Southern California Man Gets 11 Years For Using Stolen I.D.s To Hijack Unwitting Homeowners' HELOC Accounts; Ripoff Netted $1M+

From the Office of the U.S. Attorney (Los Angeles):
  • An Orange County man has been sentenced to 132 months in federal prison for orchestrating two identity theft schemes in which he obtained personal information from hundreds of consumers and used the data in an attempt to fraudulently obtain approximately $1.5 million from home equity lines of credit (HELOCs) and credit cards accounts. Martin Quoc Pham, 28, of Garden Grove, was sentenced [...] by United States District Judge George H. Wu. In addition to imposing the 11-year prison term, Judge Wu ordered Pham to pay $537,973.


  • In the [HELOC] scheme, Pham and his associates used personal identifying information to take over HELOCs at JPMorgan Chase Bank. Once they had online access to the HELOCs, Pham and his co-conspirators transferred money into bank accounts they controlled. This scheme, which lasted only five months but netted well over $1 million, caused losses to the bank and to individual victims whose identities were taken over.(1)

For the U.S. Attorney press release, see Orange County Man Sentenced To 11 Years In Prison For Two Identity Theft Schemes Involving Lines Of Credit.

(1) In the second scheme, Pham and his co-conspirators used personal identifying information to encode counterfeit credit cards that were used to obtain merchandise and gift cards at WalMart stores and Sam's Clubs across Southern California.

Sunday, November 15, 2009

Staten Island DA Charges NJ Man w/ Felony Grand Larceny In Alleged Sale Leaseback, Foreclosure Rescue Ripoff That Victimized 86-Year Old Homeowner

In Staten Island, New York, the Staten Island Advance reports:
  • It was supposed to be a "mortgage rescue" operation: An 86-year-old woman and her daughter put their trust in a New Jersey accountant who promised to help keep them in their family home. Except the accountant was running a complex deed-theft scam, authorities say, and the Richmond grandmother finds herself living in a home that no longer belongs to her, still fighting to stave off the foreclosure the accountant was supposed to prevent.(1)

  • Earlier this week, District Attorney Daniel Donovan's office charged Alejandro Alonzo, 58, of North Bergen, with felony grand larceny, accusing him of orchestrating the scheme and pocketing more than $30,000 in the process. "This transaction was structured to make it look like a refinancing," said Jeff Gentes, a staff attorney with the Homeowner Defense Project of Staten Island Legal Services in St. George, who represents the original homeowner. "But in reality, they're selling their house." And Alonzo, who was supposed to have used the proceeds of the sale to make good on a year's worth of mortgage payments, instead made off with the cash, Gentes said.(2)

For more, see Grandmother at risk of losing her home (Mortgage 'savior' was a wolf in sheep's clothing, prosecutors say).

(1) Some guidance to those seeking an approach to undoing bogus sale leaseback, foreclosure rescue scams on behalf of financially strapped homeowners who have been screwed over in these equity stripping rackets can be found in a couple of 2008 Brooklyn, New York lower court rulings favorable to the scammed homeowners and obtained on their behalf by the non-profit law firm, Brooklyn Legal Services Corporation A. See Brooklyn Court Rulings Void Deeds & Subsequent Mortgages Used To Drain Home Equity In Bogus Sale Leaseback Foreclosure Rescue Scams.

(2) Criminal prosecution alone will not be of much help to the scammed homeowner in attempting to recover from this ripoff. Undoing a scam like this in order to return the scammed homeowner to her financial position before Alonzo arranged the sale leaseback, foreclosure rescue transaction that stripped her home equity will probably require the homeowner to bring a civil lawsuit in which she attempts to:

  • Void the title transfer as one procured by fraud, or recharacterize the title transfer as an equitable mortgage; and

  • Assert that the lender providing the financing for the equity stripping transaction (ie. Countrywide) was, by reason of the scammed homeowner's continued possession of her home, on notice of the scam and, accordingly, not entitled to protection of the recording statutes as a bona fide purchaser / bona fide encumbrancer (and, thereby, subjecting the lender's mortgage lien to cancellation as well - except to the extent that the loan proceeds were applied to satisfy any existing mortgages, in which case the lender would be entitled to subrogate itself to (ie. step into the shoes of) those existing mortgage holders with respect to their rights in the property).

The unavailability of bona fide purchaser protection to real estate purchasers and lenders when a seller of real estate remains in possession of the premises sold has, arguably, been best expressed by the California Supreme Court in Pell v. McElroy, 36 Cal. 268, 1868 Cal. LEXIS 186 (1868):

  • The simple, independent fact of possession is sufficient to raise a presumption of interest in the premises on behalf of the occupant. And we can discover no just or rational ground for giving to this fact less significance as notice to a party purchasing the legal title from one not in possession, in consequence of the fact that such occupant had by deed divested himself of the legal title.


  • An absolute deed divests the grantor not only of his legal title, but right of possession; and when such grantor is found in the exclusive possession of the granted premises long after the delivery of his deed, here is a fact antagonistic to the fact and legal effect of the deed; and we cannot appreciate the justice, sound reason, or policy of a rule which would authorize a subsequent purchaser, while such fact of possession continues, to give controlling prominence to the fact and legal effect of the deed, in utter disregard of the other notorious prominent antagonistic fact of exclusive possession in the original grantor. He cannot be regarded a purchaser in good faith who negligently or willfully closes his eyes to visible pertinent facts, indicating adverse interest in or incumbrances upon the estate he seeks to acquire, and indulges in possibilities or probabilities, and acts upon doubtful presumptions, when by the exercise of prudent, reasonable diligence he could fully inform himself of the real facts of the case.


  • The continued exclusive possession of a vendor after his formal conveyance of the legal title is a fact in conflict with the legal effect of his deed, and is presumptive evidence that he still retains an interest in the premises, and is sufficient to put a purchaser upon inquiry, and subject him to the general rule heretofore announced in case of the party in possession being a stranger to the title as of record.


Courts in other states have taken positions consistent with the foregoing. For example:


Life Savings & Loan Association v. Bryant, 125 Ill. App. 3d 1012, 81 Ill. Dec. 577, 467 N.E.2d 277 (1st Dist. 1984):

  • Illinois courts have uniformly held that the actual occupation of land is equivalent to the recording of the instrument under which the occupant claims interest in the property. (Bullard v. Turner (1934), 357 Ill. 279, 192 N.E. 223; Beals v. Cryer (1981), 99 Ill. App. 3d 842, 426 N.E.2d 253). The open and visible possession of land by the equitable owner is sufficient to charge a mortgagee with notice of the rights of such owner, and the mortgagee will take subject to the rights of the person in possession. Williams v. Spitzer (1903), 203 Ill. 505, 68 N.E. 49.

In re Cutty's-Gurnee, Inc., 133 B.R. 934 (USBC N.D. Ill. 1991) (applying bona fide purchaser doctrine in the context of an equitable mortgage):

  • It is clear that where a physical inspection of the property would reveal an adverse interest or where there is a party in possession other than the record title owner, the subsequent lien claimant has a duty to inquire of the possessor as to his interest and is charged with knowledge of the facts discoverable from such an inquiry or inspection. Miller, 381 Ill. at 244, 44 N.E.2d at 853; Burnex Oil Co. v. Floyd, 106 Ill. App. 2d 16, 23, 245 N.E.2d 539, 544 (1st Dist. 1969); In re Ehrlich, 59 Bankr. 646, 650 (Bankr. N.D. Ill. 1986).


Whiten v. Murray, A04A0655, 267 Ga. App. 417; 599 S.E.2d 346; 2004 Ga. App. LEXIS 671 (2004):

  • Possession of land shall constitute notice of the rights or title of the occupant. In order for the possession to have the effect of notice, it must be actual, open, visible, exclusive, and unambiguous. He who takes with notice of an equity takes subject to that equity. Notice sufficient to excite attention and put a party on inquiry shall be notice of everything to which it is afterwards found that such inquiry might have led. Ignorance of a fact, due to negligence, shall be equivalent to knowledge in fixing the rights of the parties. (Citations and punctuation omitted.) Bacote v. Wyckoff, 251 Ga. 862, 866 (2) (310 S.E.2d 520) (1984).


Stone v. Jetmar Props., LLC, A06-851, 733 N.W.2d 480; 2007 Minn. App. LEXIS 80 (Minn. App. 2007):

  • Public policy generally favors allowing a degree of reliance on the title shown in public records. See Nussbaumer v. Fetrow, 556 N.W.2d 595, 599 (Minn. App. 1996), review denied (Minn. Feb. 26, 1997) (stating policy of allowing judgment creditors to rely on record). But the reliance allowed is not absolute. A "party attempting to invoke the doctrine [of equitable estoppel] cannot be negligent and cannot have knowledge of the defect in the title." W. Concord Conservation Club, Inc. v. Chilson, 306 N.W.2d 893, 896 (Minn. 1981). A prospective purchaser is obligated to discover anyone in possession of the land at issue and to "inquire into the nature and extent of the occupant's interest." Id. As a result of this obligation, the purchaser is held to have knowledge of all the "rights of the [possessor] and also of all facts connected therewith which reasonable inquiry would have developed." Claflin v. Commercial State Bank, 487 N.W.2d 242, 248 (Minn. App. 1992), review denied (Minn. Aug. 4, 1992). "In order to have status as a bona fide purchaser the mortgagee's inquiry must be directed to the person in possession; inquiry of the mortgagor, who may have reason to conceal the truth, is not sufficient." Id.

In New York, where the Staten Island Advance story took place, the New York Court of Appeals has enunciated principles not in conflict with California's Pell v. McElroy ruling in this regard. The following excerpt from Phelan v. Brady, 119 N.Y. 587; 23 N.E. 1109; (NY 1890) captures this point:

  • At the time of the execution and delivery of the mortgage to the plaintiff, the defendant Mrs. Brady was in the actual possession of the premises under a perfectly valid but unrecorded deed. Her title must, therefore, prevail as against the plaintiff. It matters not, so far as Mrs. Brady is concerned, that the plaintiff in good faith advanced his money upon an apparently perfect record title of the defendant John E. Murphy. Nor is it of any consequence, so far as this question is concerned, whether the plaintiff was in fact ignorant of any right or claim of Mrs. Brady to the premises. It is enough that she was in possession under her deed and the contract of purchase, as that fact operated in law as notice to the plaintiff of all her rights.

  • It may be true, as has been argued by the plaintiff's counsel, that when a party takes a conveyance of property situated as this was, occupied by numerous tenants, it would be inconvenient and difficult for him to ascertain the rights or interests that are claimed by all or any of them. But this circumstance cannot change the rule. Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in possession is able to establish. Governeur v. Lynch, 2 Paige, 300; Bank of Orleans v. Flagg, 3 Barb. 318; Moyer v. Hinman, 14 N. Y. 184; Tuttle v. Jackson, 6 Wend. 213; Trustees of Union College v. Wheeler, 61 N. Y. 88, 98; Cavalli v. Allen, 57 id. 517.)

For a couple of relatively recent New York intermediate appellate court rulings referencing the effect of continued possession of an occupant on the status of a buyer or lender as a bona fide purchaser / bona fide encumbrancer, see:

  • Ward v. Ward, 503624,2008 NY Slip Op 4984; 52 A.D.3d 919; 859 N.Y.S.2d 774; 2008 N.Y. App. Div. LEXIS 4816 (App. Div. 3d Dept. 2008;
  • Doyle v. Siddo, 31 A.D.3d 697, 818 N.Y.S.2d 474, 2006 N.Y. App. Div. LEXIS 9569 (N.Y. App. Div. 2d Dep't, 2006).

For other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.