Saturday, December 12, 2009

Long Island Man Charged In Vacant Home Hijacking Rental Scam; Suspect Pocketed Over $10K From Tenant On House He Didn't Own, DA Says

In Nassau County, New York, the Long Island Press reports:
  • Not only did Ozell Neely collect $2,200 a month in rent on a house Nassau prosecutors contend he didn’t own, but they say he also tried to evict a tenant when the woman stopped paying in a dispute over whether promised repairs had been made. [...] Neely, the 47-year-old operator of Welcome Home Realty in Queens, was arrested Tuesday on burglary, grand larceny and other charges after prosecutors say he rented out the abandoned home in Baldwin that he didn’t own. He faces a maximum of seven years in prison if convicted.(1)

For more, see DA: Baldwin Man Rented Out Home He Didn’t Own.

(1) According to the story, Nassau County District Attorney Kathleen Rice said that Neely took a prospective tenant to the boarded-up home in September 2008. Reportedly, despite the house having no refrigerator, no running water and warped doors, the tenant agreed to pay $2,200 a month in rent, as long as Neely repaired the damages, prosecutors said. Neely collected more than $10,000 over the next few months, but in April 2009, the tenant stopped paying rent, claiming Neely had reneged on the repairs, prosecutors said. KappaPhonyLandlordScam

Landlord Accused Of Hate Crime After Former Tenant Moves Out Of Apartment Upon Learning Unit Was In Foreclosure

In Palm Beach Gardens, Florida, WPTV-TV Channel 5 reports:
  • Palm Beach Gardens Police have arrested 32-year-old Anthony Schell on charges of stalking, criminal use of public record information and criminal mischief. In addition, there's sufficient evidence, say investigators, to show Schell "evidenced prejudice" while committing the crimes, to label them “hate crimes” based on the victim's religion.


  • The victim, Jodi Kahn, had discovered and reported that someone had spray painted an obscene message [on her front door] making reference to her Jewish religion. [...] Kahn believed that her former landlord, Schell, was responsible because the two were in the middle of a civil dispute.

  • Kahn, say police, had stopped paying rent and moved out of the apartment she was renting from Schell in the same complex after she'd learned the unit was in foreclosure. When initially interviewed, detectives say Schell denied any knowledge of the incidents, but did admit to the ongoing problems with Kahn regarding her lease.(1)

For more, see Hate-crime arrest made in PB Gardens case.

(1) The story goes on to report the police version of what followed that led up to the arrest of Schell:

Investigators say Kahn also described other events that had occurred, including the distribution to Kahn’s parents, neighbors, landlord, employer and others - material that painted her in a poor light. Kahn also reported that on November 11, 2009, her Mezuzah, an exterior door ornament used by some people of the Jewish faith, was removed, broken and the pieces were left in front of her apartment door. Then, on November 17, 2009, she reported a swastika was written with black marker on her front door.

During the investigation, detectives say they learned that an unknown person was passing out flyers with derogatory information about the Kahn and was doing so around the victim’s place of employment. They determined the person who admitted to handing out the flyers had also spray painted the words on Kahn’s door, and told police he did so at the request of Schell, who was his employer. Police say that person also told them Schell had driven him to the victim’s apartment and wrote on a piece of paper what to paint on the door, telling him that he was playing a joke on someone. Schell’s employee, say investigators, is a recent immigrant who does not read English well and so they believe he may not have understood the meaning of the words. The employee said he did what Schell asked because he was afraid of losing his job if he did not.

Louisiana Chinese Drywall Victims Get State Hotline; Urged To Register

In New Orleans, Louisiana, The Times Picayune reports:

For more, see Contaminated drywall victims get state hotline.

(1) According to the story, people can register online at or by calling 1.866.684.1713 Monday through Friday from 7 a.m. to 7 p.m. and Saturday, 8 a.m. to 5 p.m.

Wells Fargo To Ante Up $25K To Help Fund Care For Animals In Recently Foreclosed Farm

In Glocester, Rhode Island, The Providence Journal reports:
  • A fund to support the animals left uncared for after Bonniedale Farm was foreclosed upon will receive a donation of $25,000 from Wells Fargo Bank. [...] An agreement hammered out in Superior Court Thursday morning gave the Rhode Island Society for Prevention of Cruelty to Animals the authority to care for and take control of the animals left after the former owner, Daniel J. MacKenzie, was evicted from the farm on Monday. He filed a lawsuit on Tuesday to get a restraining order that would force American Home Mortgage Services, the company that foreclosed upon his home, to provide food and water for the 136 animals left on the farm, a number that later dwindled to 55. Students from the University of Rhode Island's veterinary care program stepped up to care for the animals while the matter went to court.

For more, see: Wells Fargo to donate $25,000 to Bonniedale Farm fund.

See also, Agreement allows RISPCA to rescue ‘foreclosed’ animals in Glocester:

  • MacKenzie Thursday turned over to his attorney, Guy Settipane, a check for $42,600 in donations that MacKenzie collected to be forwarded to the RISPCA. The Bonniedale Farm Fund at the society will accept donations from anyone wanting to help care for the rescued animals. Any donations should be made directly to the RISPCA and designated for that fund.

Friday, December 11, 2009

Kiboshed Lender Defies Court Order? Bills Homeowner For $474K+ Two Weeks After Long Island Judge Wipes Out Loan In Foreclosure For "Repugnant" Conduct

In Suffolk County, New York, Newsday reports:
  • The state Supreme Court justice who last month lashed out at a bank's dealings with an East Patchogue family facing foreclosure and canceled the mortgage on the home has ordered the bank and the homeowners back to court, records show.

  • Justice Jeffrey Spinner wants the parties to return to discuss a recent letter from IndyMac Mortgage Services that says $474,936.78 still is owed, according to legal documents obtained by Newsday. Spinner's unusual decision to cancel the mortgage generated much attention. His ruling said the lender - a division of OneWest Bank, FSB - was "harsh, repugnant, shocking and repulsive" in proceedings where the homeowners attempted to work out a loan modification.

  • This week, Spinner ordered that a conference be held Dec. 18 in Riverhead to explore "at length" the bank's letter, which was dated two weeks after his initial ruling. Homeowners Diana Yano-Horoski and husband Gregory Horoski could not be reached Thursday. After the first decision, Gregory Horoski told Newsday he was stunned that the decision essentially gave them the house outright, but that he worried the bank would appeal and prevail.

  • Spinner's latest order notes that the letter came after he "barred, prohibited and foreclosed" the bank from taking any action to enforce the mortgage and adjustable rate note on the Oakland Street house.

Source: Judge orders parties back to court in mortgage case (requires paid subscription to Newsday; if no subscription, try here).

Supremes To Decide Whether Attorney Screw-Up When Pursuing Foreclosure Action Is Defensible As "Bona Fide Error" Under FDCPA

Inside ARM reports:
  • In June 2009, the U.S. Supreme Court accepted a writ of certiorari to consider whether 15 U.S.C. Section 1692k(c) of the Fair Debt Collection Practices Act (FDCPA), otherwise known as the bona fide error defense, applies to mistakes of law. The Supreme Court accepted review of Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, in which the Sixth Circuit Court of Appeals concluded the bona fide error defense available under Section 1692k(c) of the FDCPA applies to mistakes of law. After setting the brief scheduling order, on Nov. 2, 2009, the Court scheduled oral arguments in the case for Jan. 13, 2010.(1)


  • In Jerman, the defendant law firm filed a complaint seeking foreclosure of real property owned by the consumer plaintiff. The complaint included a validation notice that provided the debt would be assumed valid unless the consumer disputed the debt in writing within 30 days. The plaintiff filed a complaint alleging the defendant violated the FDCPA because it compelled consumers to dispute the debt in writing when the FDCPA imposes no such requirement.

For more, see U.S. Supreme Court Oral Arguments Scheduled for FDCPA Case (The U.S. Supreme Court will hold oral arguments on Jan. 13, 2010, to decide whether the bona fide defense under the Fair Debt Collection Practices Act applies to mistakes of law).

(1) The case docket is available on the Supreme Court's Web site. The argument calendar states the case will be heard at 11 a.m.

All briefs are available here (from the homeowner, debt collector, as well as amici (ie. friends of the court)), courtesy of the American Bar Association. Friend of the court briefs in support of the homeowner's position have been filed by the U.S. Department of Justice and the Federal Trade Commission (go here), the Office of New York Attorney General Andrew M. Cuomo, as lead counsel for 21 state attorneys general (go here), and Public Citizen Litigation Group, as lead counsel for various consumer advocacy groups (go here). A number of credit and collection industry trade associations have also submitted amicus briefs supporting the debt collector's position.

Legally Blind Siblings Duped By Relative Into Signing Home Mortgage Now Face Foreclosure

In Boston, Massachusetts, The Bay State Banner reports:
  • Hildreth Brewington, 69, and his sister Vanita Brewington, 59, both of whom are legally blind, have lived in a two-family home near Codman Square since they bought the property 14 years ago. In 2007 they found out their home was in foreclosure—even though they sent in monthly mortgage payments. To their knowledge, they had never missed a payment.

  • Baffled at first, they pieced together the puzzle. They had been deceived two years earlier by another family member into signing papers for a second mortgage on the house. Unaware that the monthly mortgage bill had shot up from $1,000 to $2,100 — notices from the bank were sent to the niece’s house — the Brewingtons had continued making their accustomed payments. “We were paying the $1,000 and [the bank] was accepting it,” said Hildreth Brewington. “Then in April [2007] they sent it back, because they were planning on foreclosing on us.”


  • The Brewingtons have little hope of recovering any money from the relative that initiated the second-mortgage process. She spent the loan money “living high off the hog,” according to Brewington, and has since lost her own house to foreclosure.

For the story, see Protest to support Dot family's foreclosure fight. DeedContraTheft

Missouri AG "Zero Tolerance Policy" Against Loan Modification Rackets Continues By Tagging Florida Firm With Civil Suit

From the Office of the Missouri Attorney General:
  • Attorney General Chris Koster said today he is suing a Florida company that took money from distressed Missouri homeowners without providing any meaningful mortgage-modification service. Koster joined the Federal Trade Commission and the state of Iowa in taking legal action against the company. This represents the eighth lawsuit against a fraudulent mortgage business since Koster began his campaign against mortgage fraud in April.

  • "This Attorney General's office has instituted a zero tolerance policy for any mortgage modification firm that preys on and cheats desperate homeowners," Koster said. "Our office will use all its powers to investigate and prosecute businesses involved in these foreclosure rescue schemes to defraud Missouri consumers."

  • Koster said First Universal Lending, LLC, is based in Palm Beach Gardens, Florida, but transacts business throughout Missouri.(1)

For the Missouri AG press release, see Attorney General Koster sues foreclosure consultant (Continues Zero Tolerance Campaign).

(1) He said the company markets its services to homeowners who are having difficulty paying their mortgages or facing foreclosure, promising them lower house payments or lower interest rates. In reality, the company appears to do little or nothing for most of its customers. In addition, company representatives told some clients to stop making mortgage payments while the modification process was proceeding, which harms consumers by injuring their credit rating and resulting in higher late fees, penalties, and interest payments, as well as increased likelihood of foreclosure. Koster said the business required people to pay up-front fees before they would provide any services, which is illegal for mortgage modification companies in Missouri.

Abandoned Homes In "Legal Limbo" Hinder Real Estate Recovery In Weaker Markets: Fed

Reuters reports:
  • The recovery of many U.S. low income areas remains stymied as lenders decide completing some foreclosures simply isn't worth the cost, casting many properties into "legal limbo," Federal Reserve Governor Elizabeth Duke said on Wednesday. [...] "Many community organizations have been frustrated by the difficulties of working with mortgage lenders and servicers, and these problems are even more exaggerated in weaker market cities," Duke said in prepared remarks.


  • In some neighborhoods, lenders do not even complete foreclosures because the cost of the process exceeds the value of the home, Duke said. "Anecdotal evidence suggests that these 'toxic titles' have placed significant numbers of properties in a difficult state of legal limbo," she said.

For the story, see Fed's Duke: "toxic titles" foiling housing recovery.

See also, The Washington Independent: The Fed Is (Finally) Talking About Toxic Titles.

Thursday, December 10, 2009

Philly Feds: Two Lawyers Among Five Who Ran Bogus Sale Leaseback, Equity Stripping Racket Clipping 35 Homeowners Of $14.6M; Civil Suit Pending

In Philadelphia, Pennsylvania, The Intelligencer reports:
  • Doylestown Township Supervisor Jeffrey Bennett and his law partner, Stephen Doherty, were indicted in U.S. District Court Tuesday for reportedly skimming equity from the homes of owners facing foreclosure in a mortgage fraud scheme.(1) The 15-count indictment accuses the attorneys at Doylestown Township's Bennett & Doherty, P.C., plus three others of conspiring to obtain fraudulent mortgages totaling $14.6 million for at least 35 struggling homeowners. The mortgages funded a scheme that generated cash for the defendants but often cost victims their homes, according to the indictment.


  • Bennett, Doherty and the McCuskers were previously named in a Bucks County civil suit brought by 11 homeowners who claimed to have been swindled out of houses they owned in Haycock, Hilltown, Newtown Township, Plumstead, Richland, Solebury and other towns. The homeowners' attorney - Stuart Eisenberg of Warminster's McCullough & Eisenberg PC - said he hadn't read the indictment Tuesday afternoon, but he hopes his civil case will be able to continue in light of the criminal charges. "This has been going on for too long for my clients," Eisenberg said. "I need to push forward. My clients have been terribly hurt."(2)


  • The criminal indictment claims the scheme [...] included purchase and sales agreements with forged signatures, forged lease agreements, documents misstating the borrower's creditworthiness, and paperwork that failed to mention that the new owner was relying on the financially distressed former owners to pay part of the new mortgages.

For more, see Supervisor, law partner indicted in scheme (Fellow Doylestown Township supervisors called on Jeffrey Bennett to resign his post).

For the Federal indictment, see U.S. v. McCusker, et al.

(1) Also indicted were: Ed McCusker, who ran the now-defunct Axxium Mortgage Inc. of Upper Makefield; his wife, Jacqueline McCusker; and Mount Laurel mortgage broker John Alford Bariana. All five are charged with mail fraud, wire fraud and conspiracy to commit money laundering, according to the indictment. Doherty also is charged with bankruptcy fraud. The defendants will be formally notified of the charges against them later this week, and U.S. Attorney Michael L. Levy said he expects them to voluntarily appear for processing, the story states.

(2) For an earlier Intelligencer story on the civil case filed against this alleged foreclosure rescue racket, see Suit claims 9 are victims of mortgage scheme. foreclosure rescue

Vegas Class Action Seeks To Stop BofA Foreclosures; Cites Lender's Lack Of Good Faith Negotiations In Loan Mods, Despite Grabbing Gov't TARP Cash

In Las Vegas, Nevada, KVBC-TV Channel 3 reports:
  • As more homeowners find they aren't having any luck trying to work with their lenders, one local attorney is filing suit against one of the largest lenders of all: Bank of America. [...] The suit was filed on behalf of homeowners facing foreclosure who say there has been no progress made with regard to negotiations with their lender. And, as the president has discussed, there are actual laws in the books requiring lenders to negotiate with homeowners.

  • However, throughout Southern Nevada, many insist it's simply not happening. "And that's why what we're calling for in this lawsuit," explains attorney Matthew Q. Callister. "(It) is an automatic stay of any further Bank of America foreclosures until such time as every Southern Nevadan avails himself of his right under federal law to have that fundamental 'good faith' negotiation."(1)

For more, see Local attorney files suit against Bank of America.

(1) According to the story, the class-action suit against Bank of America represents about 30 people so far; it alleges that the bank has failed to act in accordance with a section of the government's Making Home Affordable program, saying the lender has "refused to evaluate loans" and "failed to suspend foreclosure proceedings." Callister says Bank of America accepted TARP funds and now refuses to do what was required as part of the acceptance. loan modification

Wells Fargo Farm Foreclosure Leaves 100+ Thirsty, Unfed Animals In Limbo After Owner Gets Boot

In Glocester, Rhode Island, The Providence Journal reports:
  • The evicted owner of Bonniedale Farms, upset with the way 136 animals on his farm have been treated since he was forced off the property Monday by Wells Fargo Bank, plans to go before a Superior Court judge [...] to get a restraining order to force the bank or its agents to provide food, water and care for the animals left behind.


  • [T]he lawyer [for evicted owner Dan MacKenzie] said [McKenzie's] main concern was for the animals — including cats, dogs, chickens, pigs, horses, sheep, goats and others — that he said had been left to fend for themselves despite assurances by Wells Fargo that it had arranged to have the Rhode Island Society for Prevention of Cruelty to Animals take care of them. Tuesday, RISPCA president Dr. Ernest Finocchio confirmed some of MacKenzie’s fears, saying that the bank said it didn’t want the organization’s help. When he visited the site Tuesday, he said that at least some of the animals — eight horses and two 800-pound pigs — had not been given any water even though he had been told that they had.

For more, see Glocester farmer, evicted in foreclosure, seeks to compel care for animals.

See also, WBZ-TV Channel 38: Farm Foreclosure Leaves 150 Animals In Limbo.

For story update, see SPCA to direct care for Glocester farm animals:

  • After nearly an hour in a Superior Court judge's chambers Wednesday, lawyers for both sides in the eviction of Bonniedale Farm's former owner hammered out an agreement for how the farm's animals will be cared for in the next 24 hours. The agreement is for Dr. Ernest Finocchio, president of the Rhode Island Society for the Prevention of Cruelty to Animals, to examine the animals and determine the care they need. Lawyers for Wells Fargo Bank, which now owns the farm, and former owner Dan MacKenzie have agreed to abide by whatever Finocchio determines the animals need in the next 24 hours, lawyers for both sides said in open court after meeting with the judge.

Kansas AG Joins Nationwide "Operation Stolen Hope" - Tags Two Loan Modification Outfits With Suits Alleging Pocketing Upfront Fees, Breaking Promises

From the Office of the Kansas Attorney General:
  • [Kansas Attorney General Steve] Six recently filed two [...] lawsuits against [loan] modification companies. He alleges that these companies find consumers that are in trouble with their mortgage payments and contact them directly, either through internet advertisements or by phone. Despite promising to negotiate lower rates for the consumers, they either do nothing at all or provide services the consumers could obtain for no cost. The companies being sued are Home Loan Modification Advisors in California and Infinity Funding Group in New York.

For the Kansas AG press release, see AG Six continues fight to stop mortgage, foreclosure fraud.

Wednesday, December 09, 2009

MERS Takes Another Hit As Appellate Panel Affirms Bankruptcy Court Ruling That It Lacked Standing To Bring Foreclosure Action

In Las Vegas, Nevada, the Las Vegas Review Journal reports:
  • Homeowners struggling to avoid foreclosure got some good news [...]. U.S. District Judge Kent Dawson upheld a bankruptcy court ruling that makes it harder for lenders to foreclose on home mortgages. The case, heard by a panel of federal judges in November, concerned whether Mortgage Electronic Registration Systems Inc. could foreclose on residences on behalf of lenders.

  • The electronic system records the ownership of residential mortgages for the mortgage banking industry. Dawson said the company could not foreclose on a home, because it did not provide evidence that it held the note on the residence and didn’t show that it was an agent of the lender.(1)

For more, see Ruling may help homeowners trying to avoid foreclosure.

For Judge Dawson's ruling, see Mortgage Electronic Registration System, Inc. V. Chong, et al.

(1) According to the story, the case started in bankruptcy court two years ago. Mortgage Electronic Registration Systems Inc. was unable to show that it had possession of the note. On March 31, 2009, U.S. Bankruptcy Judge Linda B. Riegle ruled in bankruptcy trustee Lenard Schwartzer favor, saying the electronic system was not a “real party in interest” in the foreclosure action. The decision was appealed to federal court.

In his decision Tuesday affirming Riegle's ruling, U.S. District Judge Dawson (sitting in an appellate capacity) found that the Mortagage Electronic Registration must at least provide evidence that it was a representative of the mortgage loan holder, which it failed to do. “Since MERS provided no evidence that it was the agent or nominee for the current owner of the beneficial interest in the note, it has failed to meet its burden of establishing that it is a real party in interest with standing,” Dawson said, affirming the bankruptcy court ruling.

For a report on Judge Riegle's March 31 ruling in the bankruptcy court, see Las Vegas Business Press: Judge's ruling deals blow to national mortgage servicer. For Judge Riegle's ruling itself, see In re Mitchell. EpsilonMissingDocsMtg

Sentencing Wraps Up In "Money Store" Scam Prosecution; Bogus Sale Leasebacks Used To Strip Equity From Unwitting Homeowners Seeking Foreclosure Help

From the Office of the U.S. Attorney (Greenbelt, Maryland):
  • U.S. District Judge Roger W. Titus sentenced Jennifer McCall, age 48, the Chief Executive Officer of the Metropolitan Money Store, of Fort Washington, Maryland, to 135 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, [...].(1) Judge Titus also entered a judgement ordering McCall to pay restitution of $16,880,884.86. Judge Titus also sentenced co-conspirator Wilbur Ballesteros,(2) age 34, of Lanham, Maryland to 63 months in prison, followed by five years of supervised release and sentenced Ronald Aaron Chapman, Jr.,(3) age 35, of Washington, D.C., to seven days in prison, 10 months of home detention with electronic monitoring and five years of supervised release. Both men previously pleaded guilty to conspiracy to commit mail and wire fraud for their roles in the scheme. Judge Titus also entered judgements ordering that Ballesteros and Chapman pay restitution of $16,859,950 and $268,279.66, respectively.(4)

For the entire U.S. Attorney press release, see CEO of Metropolitan Money Store Sentenced to over 11 Years in Prison and Two Other Conspirators Sentenced in $37 Million Mortgage Fraud Scheme.

(1) McCall was originally scheduled for sentencing on November 16. That court date was marked by an incident in which her son, Raymond V. Jones, allegedly called federal prosecutor James Crowell a “coward” and “mother f*cker” and then threatened to kill him, before he jumped over the barrier dividing the gallery and the courtroom well and hit Crowell in the head, according to court documents. Crowell’s head was swollen after the alleged attack, the court records said. For a report on this incident, see MainJustice: Court Records: Man Punches, Threatens To Kill AUSA (requires free registration; alternatively, try here - then click link for the story). Read the criminal complaint against Jones here and a court motion, which describes his alleged attack on the federal prosecutor in greater detail, here.

(2) Ballesteros, a licensed real estate agent who served as a closing agent on more than 60 straw buyer properties, pocketed more than $100,000 in kickback payments to process real estate closings quickly, according to the U.S. Attorney's office.

(3) Chapman, hired to work as a loan officer, pocketed at least $66,000 in commissions that he was aware were probably the proceeds of fraud, but he deliberately avoided learning the truth as to the fraudulent nature of the funds, according to the U.S. Attorney's office.

(4) Ten defendants, including a lawyer, mortgage broker, real estate agent, loan processor and company officers have pleaded guilty in this scheme, according to the U.S. Attorney's office. In addition to the three defendants named above, the other seven are:

  • Joy Jackson, age 41, of Fort Washington, Maryland, and President of the Metropolitan Money Store - 151 months in prison;
  • Kurt Fordham (Jackson’s husband), age 39, of Fort Washington, Maryland - 10 years in prison;
  • Richard Allison, age 38, of Camp Springs, Maryland, an attorney - 18 months in prison;
  • Carlisha Dixon, age 32, of Hyattsville, Maryland - five months in prison and five months home detention;
  • Clifford McCall (Jennifer McCall’s husband), age 48, of Lanham, Maryland - four years in prison;
  • Chandra Jones (Jennifer McCall’s daughter), age 31, of Lanham, Maryland, - 33 months in prison;
  • Katisha Fordham (Kurt Fordham’s sister), 1 day in prison, followed by five months home detention and five months supervised release. foreclosure rescue equity stripping

Georgia Regulator Issues Cease & Desist Orders To Four Upfront Fee Loan Modification Companies

From the Georgia Department of Banking and Finance:
  • Georgia Banking Commissioner Robert Braswell [...] joined federal and state officials to crack down on loan modification and foreclosure relief scams, by the issuance of Cease and Desist Orders against individuals and companies who advertised unlicensed loan modification services to take hard-earned money from distressed Georgia homeowners.(1)

For the entire press release, see Georgia Cases Part of National 'Operation Stolen Hope'.

(1) The following firms were issued cease & desist orders, with links to the related press releases and C & D orders:

Illinois AG Lawsuits Targeting Alleged Loan Modification Fraud Operators Now Totals 31 With Three Recent Cases

From the Office of the Illinois Attorney General:
  • Attorney General Lisa Madigan [...] announced three lawsuits against mortgage rescue fraud schemes operating in Illinois as part of a national crackdown with the Federal Trade Commission (FTC) and the U.S. Department of Justice.(1) [...] With these new filings, Madigan has brought lawsuits against 31 mortgage rescue fraud schemes. To date, the Attorney General’s lawsuits have resulted in judgments in nine cases for more than $1.2 million in restitution for homeowners.

For the entire Illinois AG press release, see Madigan Continues To Crack Down On Mortgage Rescue Fraud (Illinois Attorney General Files Three New Lawsuits, Joins Federal Trade Commission, U.S. Department of Justice in Move to Protect At-Risk Homeowners Nationwide).

(1) Madigan filed complaints in Cook County Circuit Court against the following defendants:

  • Loan Mod One, LLC, which has offices in Las Vegas, Nev., and West Dundee, Ill.;
  • Freedom Mortgage Team, Inc., of Chicago, and Nevrus Mehmeti;
  • Living Modifications Corp., of Schaumburg, Ill., and its owner, Tomasz Tomczyk.

SF To Consider Expanding Rent Regulation Coverage To All Residences; Renting Out House To Tenant Could Become Iffy Proposition For Homeowners

In San Francisco, California, the San Francsico Chronicle reports:
  • San Francisco's Board of Supervisors is getting ready to vote on a proposal that would make it difficult and costly - in some cases, impossible - for property owners who have rented out their homes to move back into them.

  • At issue is a proposal by Supervisor John Avalos that would extend certain eviction protections to tenants living in residences built after 1979. Avalos and tenants' rights advocates characterize the proposal, which is expected to come up for a key committee hearing today, as a matter of fairness for tenants living in relatively modern buildings, which are not covered by the city's most stringent rent regulations. They suggest it could be particularly helpful to tenants in condominiums that are facing foreclosure.

For more, see Landlords could be locked out.

For story update, see S.F. tenants' victory likely to be short-lived:

  • Tenant advocates got a win at the San Francisco Board of Supervisors Tuesday with initial approval of a plan to extend eviction protections to rental housing built within the past 30 years - but the victory is expected to be short-lived. Mayor Gavin Newsom plans to veto the legislation, according to spokesman Joe Arellano, and the board, which voted 7-4, was one vote shy of securing a veto-proof majority.

(1) According to the story, the city's sweeping rent control laws of 1979 included provisions that allowed evictions only when a landlord could establish "just cause," which includes nonpayment of rent, illegal activity in the residence and other breaches of lease. Owners who want to move into their own homes must pay relocation benefits of $5,000 per adult tenant - and an additional $3,300 to households with children, the story states. Even then, a challenge to the landlord's "just cause" can reportedly add thousands of dollars in legal fees or settlement costs - or, if the tenant is elderly, disabled or catastrophically ill, he or she might not be able to be evicted at all. "In San Francisco, it's easier for a camel to pass through the eye of a needle than for a homeowner to move into his home," said Bart Murphy, a rent board commissioner. But, reportedly, those rules only apply to units that existed when the 1979 rules were passed.

Tuesday, December 08, 2009

NYC Judge Unfreezes Delinquent Homeowner's Bank Account Amidst "Sewer Service" Allegations Against Law Firm For Lender Holding Underwater 2nd Mortgage

In Staten Island, New York, the Staten Island Advance reports:
  • A new foreclosure tactic, whereby lenders or debt collectors holding second mortgages freeze bank accounts or garnish pay checks of already struggling homeowners, is emerging and making it even more difficult for people to hold onto their homes.(1)


  • George Apolinaris of Graniteville said his longtime companion, Maria Gil, got an unwelcome surprise when Ms. Gil tried to withdraw some money for groceries from two small bank accounts totaling $6,000 that the two maintained. The accounts were frozen and in the red for $250,000 -- twice the $126,000 owed on their second mortgage. Apolinaris said the couple never received any notice about the court action that froze the bank accounts. "They claim they handed a notice to somebody, but we don't know who it is," Apolinaris said.

  • Robert Brown, an attorney specializing in foreclosure and predatory lending cases, argued successfully in court that Ms. Gil had not been properly notified of judgment proceedings by attorneys for lender Citimortgage. In court papers, Brown noted that the lender's debt collection law firm, Forster and Garbus, had been cited by state Attorney General Andrew Cuomo for problems in serving legal papers to defendants in civil suits, also known as "sewer service."(2)

  • Last week, state Supreme Court Justice Judith McMahon sided with Brown and vacated the judgment, effectively unfreezing the couple's small bank accounts. Brown now plans to make a counterclaim under predatory lending laws. He said the couple had fallen behind on their first mortgage but foreclosure proceedings had not yet begun.

For the story, see Homeowners are getting hit a second time.

(1) According to the story, Josh Zinner of the Neighborhood Economic Development Advocacy Project in Manhattan said some lenders or trusts for banks that went out of business are selling off second mortgages today to debt collectors for pennies on the dollars. Those debt collectors are then going after the homeowners' bank accounts or pay checks to recoup whatever money they can. "The backdrop to that is there are real fundamental problems in the debt buyer industry," said Zinner. "The combination of the second mortgage problem with all the abuses in the debt collection industry is toxic, and could really create havoc for homeowners who are trying to avoid foreclosure on their primary mortgage."

(2) See 35 Law Firms Named In Suit Seeking To Void 100,000+ Money Judgments; 20+ Add'l Firms Currently In NY AG's Crosshairs In Ongoing "Sewer Service" Probe.

For more on New York's "sewer service" problem, see:

Full Speed Ahead For Zombie Debt Purchasers, Despite Lacking Proof Of Actual Debtor Or Debt, Significant Paperwork

Scripps Howard News Service reports:
  • For decades, credit-card companies and other firms would eventually give up after attempting to collect from deadbeat customers. Now, companies are packaging and selling many of those overdue accounts for pennies on the dollar to debt collectors. The collectors then aggressively pursue the debtors to repay, or they turn around and resell those same debts to other collection firms. This secondary debt market has mushroomed in recent years into a $60 billion industry. But the explosive growth has been accompanied by concerns over the business practices of the debt collectors.

  • Government officials and consumer watchdogs question the industry's often-shoddy recordkeeping, and say overly aggressive collectors sometimes break the law when going after old debts. "There are people who are attempting to get debt from consumers when they have no proof who the actual consumer is, no proof about the actual debt or the actual contract that incurred the debt, yet that has not stopped the debt-collection industry from going full steam ahead," says Ira Rheingold, executive director of the National Association of Consumer Advocates.

For more, see Bad Debts Have Become Big Business.

In a related story, see What Consumers Can Do When Debt Collectors Call.

Expired Statute Of Limitations Saves Homeowner $45K+; Stale Debt Too Old To Be Enforced, Says Judge About 30+ Year Old HOA Claim

In Ellicott City, Maryland, The Baltimore Sun reports:
  • Sometimes it pays to be stubborn. For more than 33 years, Joseph and Shirley Poteet ignored annual Columbia Association bills and later threats of possible foreclosure for not paying the community's unofficial property tax fees that accumulated to more than $45,000. Now, a Circuit Court judge has thrown out the homeowners' association claim as too old to be enforced.


  • Since the association lawsuit came 35 years after the first property fee notice, Circuit Judge Alfred L. Brennan agreed with the Poteets' lawyers in an Oct. 14 ruling that says the long-pending claim far exceeded the three-year statute of limitations. The homeowners association has appealed the case to the Court of Special Appeals.


  • "I just cannot understand why Columbia Association would have waited from '73 to '06 or whatever, to bring such an action," Brennan said during the hearing, according to a transcript. "I find that the [three-year] statute of limitations does apply in this case, very definitely," the judge said.

For the underlying facts in this story, see Statute of limitations saves couple from some $45,000 in fees (Columbia Association says it's appealing the ruling).

KC Legal Aid Pushes To Fight Off Illegal Foreclosure Evictions As Lenders Continue Ignoring Federal Tenant Protection Law

In Kansas City, Missouri, The Pitch reports:
  • Word on the street [...] is that some lenders aren't complying with the new law [that requires lenders who foreclose on rental properties to give their tenants at least 90 days to move out -- or even longer, in some cases].(1) It was designed to protect renters, but lenders can still get away with unlawful evictions if renters aren't aware of their rights.

  • [Executive Director of Legal Aid of Western Missouri(2) Gregg] Lombardi sent out an e-mail this week to the heads of charitable organizations all over Kansas City, asking that they encourage people who think they may be unlawfully forced out of foreclosed rental properties to call Legal Aid for help. "We are eager to take on cases to stop these unlawful evictions," Lombardi wrote in the email.

For the story, see Legal Aid is looking for renters facing eviction from foreclosed properties.

(1) The new federal law requires lenders taking title to foreclosed homes respect any existing tenant leases, and provide at least 90 days notice when vacating month-to-month renters. See Section 702(a)(2) of the Protecting Tenants at Foreclosure Act of 2009.

(2) Legal Aid of Western Missouri is a non-profit law firm providing essential legal services to low-income citizens living below the poverty level in a 40 county area in western Missouri.

NBA Owner "Clipped" For $2.7M+ In Settlement Of Race/Etnicity-Based Fair Housing Allegations; Discriminated Tenants To Share In $2.625M Pot

From the U.S. Department of Justice:
  • The Justice Department announced [last month] the largest monetary payment ever obtained by the department in the settlement of a case alleging housing discrimination in the rental of apartments. Los Angeles apartment owner Donald T. Sterling(1) has agreed to pay $2.725 million to settle allegations that he discriminated against African-Americans, Hispanics and families with children at apartment buildings he controls in Los Angeles.(2) [...] Among other things, the suit alleged that the defendants discriminated against non-Korean tenants and prospective tenants at buildings the defendants owned in the Koreatown area of Los Angeles.(3)


  • The settlement would also resolve two related lawsuits filed by former tenants at one of the properties. The two families, an African-American family and an interracial married couple with bi-racial children, alleged that the defendants demolished the private yards that had been part of their apartment and took other actions against them because of their race.

  • The settlement, which is memorialized in a proposed consent order that the parties have submitted to the court for approval, would require the defendants to pay a $100,000 civil penalty to the United States. Under the settlement, the defendants would also pay $2.625 million into a fund that would be used to pay monetary damages to persons who were harmed by the defendants’ discriminatory practices, including the tenants in the two related lawsuits discussed above. Any money left over would go to further fair housing education or enforcement in Los Angeles.

For the USDOJ press release, see Justice Department Obtains Record $2.725 Million Settlement of Housing Discrimination Lawsuit.

(1) Donald T. Sterling is the current owner of the National Basketball Association's Los Angeles Clippers. For more on Sterling, see:

(2) The defendants, who manage their apartments under the name Beverly Hills Properties, own and manage approximately 119 apartment buildings comprising over 5,000 apartments in Los Angeles County, according to the DOJ press release.

(3) According to the DOJ press release, the United States presented evidence that:

  • the defendants’ employees prepared internal reports that identified the race of tenants at properties the defendants purchased in Koreatown, and
  • the defendants made statements to employees at Koreatown buildings indicating that African-Americans and Hispanics were not desirable tenants.

The United States also presented expert analysis in court filings showing that the defendants rented to far fewer Hispanics and African-Americans in Koreatown which than would be expected based on income and other demographic characteristics, according to the press release.

Monday, December 07, 2009

Newport Beach Man Probed In Alleged Loan Modification Ripoff; Clipped Approximately 50 Homeowners Out Of $175K+, Say Cops

In Newport Beach, California, CBS 2/KCAL-TV Channel 9 report:
  • Police say a Newport Beach man ripped off distressed homeowners with loan modification businesses that did nothing to help his customers save their homes. Larry Ervan Gunter, 34, is accused of taking money from homeowners having trouble making their mortgage payments and promising to work out better terms on their loans, but never doing anything on their behalf, Sgt. Evan Sailor said.

  • Gunter owns Help Modify Now, 4665 MacArthur Court, Suite 100, and Consumer Resource Law Center, 301 Shipyard Way. Gunter's companies charge homeowners at risk of foreclosure $1,500 to $3,500 to start a loan-modification process, Sailor said. About 50 customers told police that once they made their initial payment, they never heard back from anyone at the companies and all attempts to contact them were unsuccessful. The victims lost more than $175,000, Sailor said. Gunter was arrested Tuesday on a probation violation, Sailor said. Newport Beach police are working with the Orange County District Attorney's office to determine what charges should be filed. Anyone else who believes they are victims can call Detective Bob Watts at (949) 644-3799 or (800) 550-NBPD.

Source: Newport Beach Man Accused Of Loan Mod Fraud.

Foreclosure Rescue Operator Gets 30 Months In Equity Stripping Mortgage Scam; Bogus Sale Leasebacks Left Investors Holding The Bag, Homeowners Booted

In Edmond, Oklahoma, The Edmond Sun reports:
  • An Edmond man was sentenced Wednesday to serve 30 months in prison for money laundering, stemming from a mortgage fraud scheme. Phillip Neill Seibel, 39, of Edmond, was sentenced by U.S. District Judge David Russell, who ordered Seibel to pay $770,037.31 in restitution and serve three years of supervised release after completing his sentence.


  • A licensed mortgage broker, Seibel formed Homesavers in April 2007. The company had an Oklahoma City address. Homesavers contacted homeowners facing foreclosure and told them they could remain in their homes while they worked to improve their credit, according to court records and court proceedings.(1)

For the story, see Edmond man sentenced in fraud.

(1) According to the story, the company also promised to find investors to buy homes and to let people remain in their homes and begin paying “rent.” Seibel’s company reportedly promised to use those payments to pay mortgages, and said sellers could rebuy the homes for a fixed price once their credit improved. The company promised the potential investors their only role would be to buy the homes. It would coordinate all rent payments with the sellers and ensure mortgages were paid on time, the story states. Homesavers then assisted the investors in obtaining financing to buy the homes, and regularly submitted false documents on the investors’ behalf to mortgage companies and assisted investors in submitting false documents to the mortgage companies. At closing, Seibel’s company would arrange to receive the equity checks directly and, without permission, endorse the sellers’ names and deposit the checks into a company bank account. The story states that Homesavers did not make the mortgage payments on the homes as promised, but repeatedly assured sellers falsely that mortgage payments were being made. Most of the homes were reportedly foreclosed upon, and the sellers lost all equity in their homes, according to the court document.

Arizona, Feds Join Forces In Battle Against Loan Modification Rackets; More Criminal Prosecutions Possible, Says State AG

In Phoenix, Arizona, The Arizona Republic reports:
  • Arizona's top prosecutor is partnering with federal regulators to stop more loan modification scams aimed at struggling homeowners. Attorney General Terry Goddard said his office and federal prosecutors plan to work together to go after the firms that market help to homeowners facing foreclosure but instead "cheat homeowners out of their last bit of cash." "This joint effort and sharing of information on loan modification scams could result in more criminal prosecutions," Goddard said. "There are a lot of cases and complaints in the pipeline. We have never had this level of cooperation."

For more, see Arizona unites with feds to target home loan schemes (Officials broaden reach to fight loan-modification scam artists).

Mortgage Firm Faces "Appraisal Shopping" Allegations In Ohio AG Civil Suit; State Settles Similar Claims Against Three Others For $160K+

From the Office of the Ohio Attorney General:
  • In an ongoing effort to hold the mortgage industry accountable for its part in the foreclosure crisis, Ohio Attorney General Richard Cordray [...] filed a lawsuit against Weststar Mortgage, Inc. In the lawsuit, Cordray charges the Washington D.C. area home appraisal company with improperly influencing Ohio appraisals.

  • According to the complaint filed in the Court of Common Pleas of Belmont County, Weststar violated Ohio law through a series of actions including using pre-printed “estimated value” forms for appraisals and shopping for a higher appraisal amount on behalf of clients. “Appraisal influence is a damaging practice that often goes undetected until it’s too late,” said Cordray. “With this case, we advance one more step in cleaning up the destructive actions that led to the foreclosure crisis.”(1)

For the Ohio AG press release, see Cordray Holds Home Appraisal Industry Accountable.

(1) In addition to this lawsuit, three other companies accused of attempting to influence Ohio home appraisals have recently settled lawsuits with the state, resulting in a combined total of more than $150,000 in restitution and civil penalties, according to the Ohio AG press release:

  • Cordray settled with First Ohio Banc and Lending to resolve a lawsuit alleging the company engaged in unfair and deceptive home appraisal practices including deceptive advertising violations. In the agreed entry, First Ohio agreed to pay the state $52,400, which includes restitution to consumers;
  • In another agreement, Fiserv Lending Solutions, based in Connecticut agreed to pay $95,000 to the state, which is the largest undue influence settlement in Ohio to date;
  • In September, Cordray entered into a similar agreement with Nations Lending, which agreed to pay the state $15,000 and will keep all appraisal records for three years.

Fannie, Freddie Seek To Have Big Lenders Eat Bad Home Loans; Poor Underwriting Drives Mortgage Finance Giants' Recovery Efforts Over Debt Gone Sour

Dow Jones Newswires reports:
  • As home loans sour at a rapid clip, mortgage finance giants Fannie Mae and Freddie Mac are aggressively bouncing back defectively underwritten loans to lenders. The result: higher loan-loss reserves for the lenders and new headwind for banks trying to escape the housing downturn.

  • For lenders such as Wells Fargo & Co., Bank of America Corp., J.P. Morgan Chase & Co. and Citigroup Inc., which are among the largest sellers of mortgages to Fannie and Freddie, this could mean buying back souring loans at a loss. Banks are already on the hook for mortgages residing on their books. But Fannie and Freddie are seeking to hold them accountable as well for what they say are improperly underwritten mortgages sold to them in the past.(1)

For more, see Headwind For Lenders As Fannie, Freddie Bounce Back Loans.

(1) Reportedly, lenders are also pushing back and refusing some repurchase requests. Moreover, lenders don't have strict disclosure rules for these mortgage buybacks or the reserves to pay for them, so it's difficult for shareholders to estimate the potential exposure of a company, the story states. In most cases, investors holding these loans can force the lender to take the mortgages back, and recover the unpaid principal on them, if they were underwritten improperly. For instance, lenders would have to buy back loans from investors if borrowers lied about their income or misstated that the property is their primary residence, the story states. Other reasons a loan may be put back: a fraudulent home appraisal or inadequate documentation.

Sunday, December 06, 2009

Arizona Resident Fights Back To Undo Mortgage Unwittingly Signed Shortly After Coming Out Of Coma

In Maricopa County, Arizona, reports:
  • Rancho El Dorado resident Nichole Italiano sits in her home surrounded by mountains of paperwork. For the past six months she has gathered data, collected testimony and spent hours at a downtown Phoenix law office preparing a mortgage fraud case revolving around a broker having her sign loan documents a few weeks after coming out of a coma. Her unusual story began several years ago, though even today, it’s no closer to being resolved.

For the rest of the story, see Maricopa resident fights to win back her life.

Debt Collector's Use Of 1st Amendment To Get Default Judgment Against Mentally Disabled Debtor Without Giving Proper Notice Slammed By Alaska Supremes

Public Citizen, a national, nonprofit consumer advocacy organization, recently announced:
  • The Alaska Supreme Court ruled [last month] that debt collectors who employ unfair or deceptive tactics during collection lawsuits are not shielded by the First Amendment.(1)


  • The case arose out of an attempt by a collection agency to sue Robin Pepper, a mentally disabled woman, without providing her with proper notice. The agency sent papers to a nonexistent address, misrepresented to the court that Pepper was competent, and tried to get a default judgment against her.

  • Pepper, represented by Alaska Legal Services,(2) then brought a separate lawsuit, alleging that the collection agency’s practices violated the Unfair Trade Practices Act. The collection agency asked the court to dismiss Pepper’s case on the theory that its litigation conduct was protected by the First Amendment, which provides a right of access to the courts. The lower court agreed and dismissed Pepper’s case. Alaska Legal Services asked Public Citizen to handle the case on appeal.(3)

  • The Alaska Supreme Court broadly rejected the debt collector’s immunity defense, ruling that the First Amendment’s petition clause does not extend to conduct that was unfair, deceptive, and in violation of the Unfair Trade Practices Act. Quoting Public Citizen’s brief, the court ruled that debt collectors have “no legitimate interest in pursuing collection litigation without notifying debtors, or in seeking to default incompetent debtors without notice to their lawyers or guardians.”(4)(5)

For Public Citizen's press release, see Debt collectors drubbed by Alaska high court (Constitution Does Not Shield Abusive Tactics by Debt Collectors, Alaska Supreme Court Rules).

For the ruling of the Alaska Supreme Court, see Pepper v. Routh Crabtree, APC, Supreme Court No. S-13042, No. 6437, 2009 Alas. LEXIS 160 (November 20, 2009).

(1) According to the press release, this case is the first ruling on the issue by any court nationwide. Debt collection firms have raised a constitutional defense, based on the right to petition the courts, in a series of consumer cases. This ruling overturns a lower-court decision that had ruled in favor of a collection agency.

(2) Alaska Legal Services is a private, nonprofit law firm that provides free civil legal assistance to low-income Alaskans.

(3) Also appearing in this lawsuit, as "friends of the court" on behalf of the consumer, were the National Association of Consumer Advocates and the National Consumer Law Center.

(4)The Alaska Supreme Court’s ruling sends the message that debt collection companies can’t get away with abusive tactics simply by hiring lawyers,” said Deepak Gupta, the Public Citizen attorney who argued the case. “The court rejected a dangerous new immunity defense that would have created a gaping hole in consumer protection law.”

(5) Had the court ruled in the debt collection agency's favor, collectors would be in a position to slap judgment liens against any real estate owned by defaulting debtors and force the sale of those properties (subject to any applicable state or federal homestead exemption protections), as well as garnish the wages and seize the bank accounts belonging to these unwitting victims. For more on debt collectors and their attorneys obtaining default judgments against unwitting consumers by failing to serve proper notice of the lawsuit on them (ie. "sewer service"), see Justice Disserved: A Preliminary Analysis of the Exceptionally Low Appearance Rate by Defendants in Lawsuits Filed in the Civil Court of the City of New York.

Michigan AG Charges Alleged Ponzi Scheme Operator With Peddling Bogus Foreclosed & Distressed Property Investment Opportunities

From the Office of the Michigan Attorney General:
  • Attorney General Mike Cox [...] announced the early morning arrest of a Grosse Ile woman accused of defrauding dozens of people in a massive real-estate Ponzi scheme. Rita Gosselin, 58, is charged with racketeering and multiple counts of obtaining money under false pretenses for orchestrating numerous fraudulent real estate investments and stealing hundreds of thousands of dollars from Michigan families.


  • Between April 2007 and September of 2008, Gosselin is accused of orchestrating a real-estate investment ponzi scheme in metro-Detroit. Gosselin allegedly enticed investors with claims she was able to purchase foreclosed and distressed properties in bulk and renovate the homes to sell at a profit. Gosselin allegedly promised investors regular monthly payments. [...] Few investors received any of the payments promised and all lost some, if not all the money they invested. Gosselin's scheme may have taken in as much as half a million dollars from as many as 20 victims.

For the Michigan AG press release, see Cox Files Charges in Massive Detroit-Area Real Estate Ponzi Scheme.

New Jersey Fair Housing Advocate Shakes $30K Out Of Landlord To Settle Housing Discrimination Allegations

From the Office of the New Jersey Attorney General:
  • The Division on Civil Rights announced [...] that the owners of a Somerset County apartment complex have paid $30,000 to the Fair Housing Council of Northern Jersey to settle charges the complex engaged in racial and other types of unlawful discrimination while dealing with testers it believed were prospective tenants.(1)

For the entire NJ AG press release, see Division on Civil Rights Announces Settlement of Discrimination Complaint Involving Treatment of Testers at Apartment Complex.

For the settlement agreement and Division on Civil Rights complaint, see Fair Housing Council of Northern New Jersey v. Kimberwyck Village.

(1) According to the press release, the Fair Housing Council sent a total of nine testers into Kimberwyck Village in 2007 and 2008. A subsequent complaint filed with the Division in October 2008 charged that Kimberwyck employees showed an obvious preference toward white testers they believed were prospective tenants. Specifically, the complaint charged, Kimberwyck staffers showed white testers cleaner, more ready-for-occupancy dwellings, presented the complex’s rental terms and income requirements in the most attractive light, and in one case offered to “hold” a rental unit for a white tester.

Meanwhile, the Complaint charged, Kimberwyck employees showed African-American testers less clean and well-maintained rental units, neglected to mention certain favorable rental terms that had been mentioned to white testers and did not offers to hold rental units for them. In addition, the complaint alleged that Kimberwyck employees made disparaging remarks to testers about other minorities, including Mexicans and Indians. Specifically, one Kimberwyck employee remarked about the financial unreliability of Mexican rental applicants, and used a slur to refer to Indian tenants.

In addition to charging race-based and national-origin-based discrimination, the Fair Housing Council complaint also charged Kimberwyck with unlawfully discriminating against families. For example, testers who inquired about rental options for families with children were told that tenants with children must rent two-bedroom apartments because children were prohibited from living in one-bedroom apartments or in upstairs units. Under the settlement agreement, there is no acknowledgment of wrongdoing by Kimberwyck or Kimberwyck Associates.

Recent DOJ Actions Involving Housing Rights Violations, Alleged Housing Discrimination

The U.S. Department of Justice has recently issued the following press releases in connection with its efforts in connection with housing rights violations and alleged housing discrimination:
  • Arkansas Man Sentenced on Civil Rights Charges in Cross Burning Conspiracy: Dustin Nix of Donaldson, Ark, was sentenced [...] in federal court in Fort Smith, Ark, on federal civil rights charges related to a conspiracy to drive a woman and her children from their home because they associated with African-Americans. [...] Specifically, on June 15, 2008, Nix and the others agreed to construct a cross and burn it in front of the victims’ home. Nix and the others erected the cross in front of the victims’ home and attempted to set it on fire. [...] Nix’s co-conspirators, Jacob A. Wingo, Richard W. Robins, Clayton D. Morrison and Darren E. McKim, pleaded guilty in September 2009, for their roles in the conspiracy. Sentencing for Wingo, Robins, Morrison and McKim has been scheduled for Dec. 7, 2009. (Go here for other DOJ actions involving cross burning incidents).

  • Justice Department Obtains $131,500 in Discrimination Settlement with Chattanooga, Tennessee, Apartment Complex: The United States has reached a settlement resolving a housing discrimination lawsuit in Tennessee concerning discrimination against families with children, the Justice Department announced. Under the consent decree, [... the] defendants [...] will pay $131,500 in monetary relief to 15 identified victims and the United States. The Department’s complaint alleged that the owners, property managers, and management company violated the Fair Housing Act by refusing to rent apartments to persons with children, discouraging persons with children from renting dwellings owned and managed by the defendants, steering persons with children to another apartment complex and making statements that discriminated on the basis of familial status. [...] The Department conducted its investigation using fair-housing testers – individuals who pose as renters for purposes of gathering information about possible discriminatory practices in the rental of apartments.

  • Justice Department Resolves Lawsuit Alleging Disability-Based Housing Discrimination at 11 Multifamily Housing Complexes in Tennessee, Louisiana, Alabama and Texas: The Justice Department [...] announced a settlement of its lawsuit alleging that those involved in the design and construction of 11 multifamily housing complexes discriminated on the basis of disability. The complexes are located in four states and contain more than 800 units covered by the Fair Housing Act’s accessibility provisions. Under the settlement, which must still be approved by the U.S. District Court for the Western District of Tennessee, 11 defendants will pay all costs related to making the complexes for which they were responsible accessible to persons with disabilities and pay up to $117,000 to compensate individuals harmed by the inaccessible housing. [...] The complaint was originally filed in Memphis, after the United States Attorney received a copy of a survey conducted by the Memphis Center for Independent Living of three of the Memphis properties indicating violations of the Fair Housing Act.

  • Justice Department Lawsuit Charges Atlanta Condominium with Discrimination Against Families with Children: The Justice Department [...] filed a lawsuit against an Atlanta condominium association, as well as the owner of a unit and the real estate agent who sold it, for violating the Fair Housing Act by discriminating against families with children. The lawsuit, [...] charges that the Georgian Manor Condominium Association maintained policies discouraging families with children from living in the Georgian Manor complex [...]. It also charges that the owner of a unit in the complex refused to sell to families with children and that the real estate agents hired to sell the unit, Jennifer Sherrouse and Harry Norman Realtors, publicized the restriction. [...] This lawsuit arose as a result of a complaint filed with the U.S. Department of Housing and Urban Development (HUD) by a fair housing group.

  • Justice Department Sues Chicago Area Landlord for Refusing to Rent to African Americans: The United States has filed a lawsuit against Terence Flanagan, a Chicago area property owner and rental agent, alleging that he refused to rent properties he owned or controlled to African-Americans, in violation of the federal Fair Housing Act, the Justice Department announced. The lawsuit, [...] alleges that Flanagan refused to rent a single-family house he owns in Orland Park, Ill., to Kamal Alex Majeid, who is African-American, because of his race. The lawsuit also alleges that Flanagan asked a white tester employed by the Justice Department whether her husband was African-American and admitted to her that he did not want to rent to African-Americans. The suit further alleges that Flanagan told this tester that he had numerous other rental properties in the Chicago area. This lawsuit resulted from a complaint submitted to the Justice Department by the South Suburban Housing Center, a private suburban Chicago fair housing organization, after it was contacted by Majeid.