Saturday, August 07, 2010

End Draws Near In 17-Unit Building In F'closure; Water Shutoff Due To Unpaid Bill, Vacate Order For Health, Safety Issues Spell Eviction For Renters

In Daytona Beach, Florida, The Daytona Beach News Journal reports:
  • The worry on Shawn Ackerman's face spoke volumes as he sat outside his second-floor, riverfront apartment. After eight years in Unit 17 of Riverside Apartments, 245 N. Halifax Ave., Ackerman, 38, and his roommate, Sherrie Copeland, 52, said they may soon find themselves homeless. As of 12:30 p.m. Wednesday, the city's Water Utilities Department shut off the tap over an overdue amount of $4,292 on the water bill.

  • This is the latest in a string of problems at the 17-apartment complex including foreclosure and an order by the city's code enforcement board to vacate the building.


  • "The landlord has not paid the water bill," [Daytona Beach spokeswoman Susan Cerbone] said. But that is the least of the owners' worries. Cerbone said the property is accumulating city code enforcement fines of $1,000 per day -- so far $27,000 --since July 8 for a variety of code violations including health and safety issues.

For more, see Tenants face eviction over code enforcement fight.

20 Families Get Boot From Building In F'closure After Getting 24 Hours Notice; Village Officials Say Premises Unsafe, Uninhabitable; Landlords Go AWOL

In Maywood, Illinois, WLS-TV Channel 7 reports:
  • The village of Maywood has condemned a building as unfit for occupancy, forcing its residents to move out of their homes. About 20 families were given 24 hours notice that they must vacate their homes in the 1800-block of 5th Avenue. Flood damage is said to be only part of the reason the building is condemned. Residents say there have been problems for months and didn't realize the extent of the damage. They are devastated and angry and even the children are sad.


  • The building has been determined to be unsafe and uninhabitable. There is no fire alarm system, no power and no hot water. Some of the conditions are the result of recent flooding. Village officials say they are mostly due to poor management and maintenance.

  • "The fire alarm system isn't working. Some of the residents didn't have electricity, no hot water. The basement was flooded. Property maintenance issues," said David Flowers, Village of Maywood. "The building is not safe and we just wanted to avoid any disasters."

  • The building is in foreclosure. Many residents are looking for the building's previous owners who appear to be nowhere in sight.

For the story, see Residents displaced from condemned building.

Transitional Rental Housing Facility In Foreclosure To Shut Down; 14 Families Get Two Weeks Notice Before Having To Face The Boot

In Valparaiso, Indiana, the Post Tribune reports:
  • Fewer than half of Spring Valley Shelter's 14 families could attend [last week's] meeting about their future. One woman fought tears, and some bit their nails. Told that Spring Valley will shut down in two weeks and Friday was the employees' last day, they had one question.

  • "As of right now, what are our options?" asked Krystal Smith, who is pregnant with her third child and whose roofer husband was laid off. There's no certain answer, but the families will be helped by Darrell Franklin, the only Christian Community Action employee left, and staff from Housing Opportunities.

  • Franklin said alternatives that might break up families were never considered. However, moving all 14 families to the same place would overwhelm the resources of agencies helping, so the families will be moved in different directions.

  • Some residents questioned the two weeks because in foreclosures on rental units, there's a 90-day period. "It is our understanding that tenant law does not apply to Spring Valley," Franklin said.

For the story, see Spring Valley residents in shock, tears.

Atlanta's Largest Homeless Shelter Faces Foreclosure; Advocates Claim Legal Action's A Conspiracy To Rid Hundreds Of Residents From Downtown Area

In Atlanta, Georgia, National Public Radio reports:
  • The homeless problem in Atlanta may soon get worse. The city's largest homeless shelter has been foreclosed on because the group running it is deep in debt. Some say the foreclosure is a conspiracy to rid downtown Atlanta of homeless men, while others claim the shelter is a steady source of crime and civic frustration.

For more, see Atlanta Homeless Shelter Faces Eviction (Atlanta's largest homeless shelter is going into foreclosure, which may force hundreds of homeless men back on to the streets. Some say the foreclosure is a conspiracy).

60 Families Residing In Tacoma Mobile Home Park Face The Boot As Park Owner Facing Foreclosure Fails To Cure Safety, Health Violations

In Tacoma, Washington, The News Tribune reports:
  • They say they pay their rent on time and take pride in their community, but about 60 low-income families in Lakewood may still be out on the streets later this year. The city has identified a litany of safety and health violations at the Fir Acres Mobile Home Park, which is currently in foreclosure, on the 12600 block of Bridgeport Way Southwest. The city plans to evict the tenants at the end of August unless someone emerges with a plan to address the concerns and the money to pay for the work.


  • Fir Acres tenants and the city say the fault lies with the property owner, SLI Associates LLC, for allowing the property to fall into disrepair. Almost all the tenants own their homes and rent their spaces. “It’s like we’re being punished for their mess-up,” said River MystDragon, who has lived at the park for six years.


  • If the tenants are evicted, she said, they may end up in publicly funded housing – or, more likely, homeless. “Most families have invested in their homes and are proud of the fact they’re homeowners,” said [the tenants’ lawyer, Ishbel] Dickens of Columbia Legal Services, which provides legal assistance to low-income people. “They’re trying to be responsible homeowners and responsible parents and yet they’re going to potentially lose their only asset through no fault of their own. The city needs to take that into consideration.”

For more, see Lakewood family: ‘We have nowhere to go' (They say they pay their rent on time and take pride in their community, but about 60 low-income families in Lakewood may still be out on the streets later this year).

Friday, August 06, 2010

Atlanta Man Gets 39 Months In Attempt To Use Stolen IDs, Fictious Buyers, Phony Short Sales To Screw FDIC Out Of $2.2M

In Atlanta, Georgia, The Atlanta Journal Constitution reports:
  • An Atlanta man who took out millions of dollars in illicit loans from the now-failed Omni National Bank was sentenced [] to more than three years in prison as part of a federal investigation. Brent Merriell, 38, was sentenced to 39 months for making false statements to the Federal Deposit Insurance Corp. and for aggravated identity theft. He also faces five years of supervised release as part of U. S. District Judge Jack T. Camp’s order.

  • Mr. Merriell used stolen identities, created fictitious buyers, and negotiated phony short sale deals for properties, all in an effort to defraud FDIC of millions of dollars he owed on mortgages,” said U.S. Attorney Sally Quillian Yates. Merriell pleaded guilty in March.

  • According to a news release, Merriell faced foreclosure on 14 properties subject to Omni mortgages. After Omni failed and was taken over by regulators, Merriell asked the FDIC to forgive $2.2 million in loan payments, and instead allow him to “short sell” the houses at steep discounts. The seven new buyers, however, were phony, federal prosecutors say.

Source: Man sentenced in Omni National Bank scheme.

For the U.S. Attorney (Atlanta) press release, see Atlanta Man Sentenced to Prison for Fraud Related to Failed Omni National Bank (Defendant Used Stolen Identities for Short Sale “Buyers” When He Sought Forgiveness of $2.2 Million in Loans).

Foreclosure Limbo Leads To "Free" Temporary Housing For Some Delinquent Borrowers

In Northern California, the San Jose Mercury News reports:
  • Tens of thousands of Bay Area homeowners are trapped in a bizarre real estate limbo, living in houses but no longer paying for them, waiting and wondering if someone will help them — or throw them out. Some are victims of their own economic circumstances, unable to afford their mortgage and expecting to lose their homes if they can't get a break from their bank. Others are opportunists, choosing not to spend on a house worth less than they owe. Instead, they can live rent-free until their lender makes a move.

  • The limbo phenomenon is a radical departure from previous real estate crashes, when there were far fewer troubled loans and banks moved speedily on those who fell behind on payments. Now many lenders simply can't keep up, and others appear reluctant to flood a weakened market with foreclosed homes.

For more, see Many Bay Area homeowners in real estate limbo.

Another Lender Changes Its Tune When Local Media Intervenes On Behalf Of Screwed-Over Homeowner Seeking Loan Modification

In Douglasville, Georgia, WXIA-TV Channel 11 reports:
  • For Marci Williams, a single mother of two, it was a long day at the Neighborhood Assistance refinancing event at the World Congress Center but it was worth it. "I got there at 3 a.m. and after nine hours I was seen," Williams said. "I left with a 2 percent interest rate on my home." She had a signed contract with her lender, Bank of America.

  • Then 35 days later, the bottom fell out. "My loan was approved in the beginning of June and about 35 days later I received this letter saying it would be rescinded. In addition, I had to pay some monies and if I didn't pay, my home would go into foreclosure in September," she said. Williams says she tried numerous times to reach Bank of America, but she says she got no response. "It could have been the end for me but for my kids. Probably would have done the worst, but my kids just kept me going. I had to fight for them," Williams said.

  • Reaching a dead-end, she turned to the 11Alive Help Desk. 11Alive's Bill Liss contacted Bank of America in Charlotte, determined not to let the house go into foreclosure. The bank responded quickly and decisively. It honored the contract. "Because of you (11Alive), I am here in my house with the 2 percent that Bank of America gave me, and then rescinded. You made it right by being in my home and standing by me," Williams said. Standing by what was right.

Source: Bank Rescinds Refinance, Threatens Foreclosure.

State Lawmaker Among Many Bagged By Central Florida County Appraisers For Illegal Homestead Exemption Claim

In Hillsborough County, Florida, The Tampa Tribune reports:
  • If you know somebody claiming an illegal homestead exemption, Hillsborough County wants to hear from you. The appraiser's office has rolled out an online reporting site to make tattling on double-dippers quick and easy.


  • So far in 2010, the county has placed 240 liens on homes for homestead abuse, representing just more than a million dollars, according to [Hillsborough County Property Appraiser Rob] Turner. Turner said after an anonymous online report is filed, county investigators will handle the rest of the investigation. [...] Those caught are required to repay the taxes back as far as 10 years. The state also tacks on a 50 percent interest penalty, which retroactively accrues at 15 percent.

  • State lawmaker Janet Cruz is one of the most high-profile and costly cases. The county hit her with $32,000 in back taxes and fines this year after appraisers discovered she wrongly claimed a homestead at 4114 Empedrado St. in Tampa. Cruz repaid the taxes in full. "Nobody should get special treatment, including me," she said.

  • Turner said so far his office has received more than 300 anonymous online reports of exemption abuse since online reporting began in February. Sixty people lost exemptions as a result, and 235 more are under investigation.(1)

For the story, see Appraiser fights homestead fraud.

In a related story, see Orlando Sentinel: Who's that talking to neighbor? Investigators hunt homestead tax cheats.

(1) See Office of the Inspector General, Miami-Dade County press release for an example of a case that lead to criminal charges that resulted in connection with making bogus tax exemption claims under the state homestead law.

Those in Florida interested in legally renting out their homes without losing/relinquishing their homestead tax exemption garnted under Article should be made aware of two exceptions in the statute, which I refer to as the "roommate" exception, and the "U.S. Armed Forces Servicemember" exception.

See Section 196.061, Florida Statutes treats the rental of an entire dwelling (as opposed to the rental of only a portion of the dwelling) previously claimed to be a homestead for tax purposes as an abandonment of said dwelling as a homestead. Accordingly, one taking in roommates need not be concerned with losing their tax exemption by reason of renting out a portion of the dwelling. This homestead abandonment statute also does not apply to U.S. Armed Forces Servicemembers.

  • 196.061 Rental of homestead to constitute abandonment.--The rental of an entire dwelling previously claimed to be a homestead for tax purposes shall constitute the abandonment of said dwelling as a homestead, and said abandonment shall continue until such dwelling is physically occupied by the owner thereof. However, such abandonment of such homestead after January 1 of any year shall not affect the homestead exemption for tax purposes for that particular year so long as this provision is not used for 2 consecutive years. The provisions of this section shall not apply to a member of the Armed Forces of the United States whose service in such forces is the result of a mandatory obligation imposed by the federal Selective Service Act or who volunteers for service as a member of the Armed Forces of the United States.

But see, Karayiannakis v. Nikolits, 23 So. 3d 844; 2009 Fla. App. LEXIS 19251; 34 Fla. L. Weekly D 2534 (Fla. App. 4th DCA 2009) (homestead exemption for property tax valuation purposes held not applicable to entire 5-unit apartment building where property owner lived in one of the units and rented the other four units to tenants);

And, Haddock v. Carmody, 1 So. 3d 1133; 2009 Fla. App. LEXIS 354; 34 Fla. L. Weekly D 207 (Fla. App. 1st DCA 2009) (property owners not entitled to the tax exemption for homestead property where, in renting their condominium unit to others, they "carved-out" of the rental aggreement two closets for storing personal items that they maintained under lock & key and was not accessible to the tenants, in an attempt to fall within the "roommate" exception contained in Section 196.061, Florida Statutes).

Note that the foregoing only applies to homestead exemption determinations under Article VII, Section 6 of the Florida Constitution (relating to property tax exemptions for homestead property), and not to exemptions from forced sale for homestead property under Article X, Section 4, Florida Constitution.

Thursday, August 05, 2010

Attorney Accused Of Running Upfront Fee Loan Modification Racket Gets Booted From Legal Profession

The Florida Bar recently issued its quarterly "gossip sheet," in which it announced that the Florida Supreme Court in recent court orders disciplined 27 attorneys, disbarring eight and suspending 17. Among those attorneys getting the boot was:
  • Rudolph C. Campbell, Lutz, disbarred effective 30 days from a June 3 court order. (Admitted to practice: 1998) Further, Campbell shall pay restitution of $1,500 to one client. Campbell used his law firm as a loan modification and foreclosure assistance business. He charged up-front fees to homeowners, in violation of the Foreclosure Rescue Fraud Prevention Act, Florida Statute, 501.1377; he used deceptive advertising and he failed to respond in writing to an inquiry from The Florida Bar.

For the entire press release, see Supreme Court Disciplines 27 Attorneys.

Alleged Loan Modification Scammer Hit With 11 Felony Theft Charges; Accused Of Ripping Off 100+ Denver-Area Homeowners Out Of $300K+ In Upfront Fees

In Denver, Colorado, KMGH-TV Channel 7 reports:
  • More than 100 homeowners in the metro area are out $2,500, and some have lost their homes. Investigators said it is all because of a company that promised to modify home loans, but instead stole homeowners' money.


  • Santiago Pineda, has been arrested and charged with 11 counts of felony theft. Pineda, along with two other employees, worked with American Mortgage Consultants, also referred to as American Mortgage Counselors.

  • According to the Ramirez family, he told them he would help them modify their loan in order to avoid foreclosure, in exchange for $2,500 up front. During the process, the Ramirez' said Pineda told them not to contact their bank or even let them know they were dealing with AMC.


  • [Denver District Attorney Prosecutor Joe] Morales said AMC stole more than $300,000 from more than 100 families over the last two years. "We have not been able to determine that anything they were doing was legitimate," said Morales.

For the story, see DA: 100+ Scammed By Fake Mortgage Company (Mortgage Company Pretended To Modify Home Loans).

Cleveland Housing Judge Invites Homeowners Living Near Blighted Houses To Submit Restitution Claims Against Absentee Property Owners

In Cleveland, Ohio, The Plain Dealer reports:
  • Cleveland Housing Court Judge Raymond Pianka is ratcheting up the costs for absentee property owners who spread the damage from the foreclosure crisis. They will have to pay neighbors for economic losses caused by their neglect. Pianka plans to hold his first restitution hearings on the issue this month. The move comes as Cleveland's lone housing judge contends with the fallout from the foreclosure mess.


  • A troubling number of homes have become vacant, neglected commodities bought and sold -- often by out-of-state companies -- for dirt-cheap prices and left to languish. That can undermine safety and nearby property values.


  • In prior rulings involving companies that dealt in distressed properties and routinely defied local law, Pianka levied substantial fines. His aim: to deter illegal practices and make fines more than just a cost of doing business. Now he is broadening the lens on financial liability.

  • To be sure, restitution is not new -- nor is holding property owners responsible for nuisance conditions. But Pianka's strategy is considered unique because he has determined that neighbors could be victims under state law and he's giving them the chance to make a financial claim as part of the prosecution of another property owner.


  • Pianka declined to comment because the cases are pending. But the judge has sent letters to potential victims telling them they have a right to present their claims in court. Owners who live near the property and can show they suffered economic loss as a direct result of the defendant's criminal failure to maintain the property may be eligible for restitution under state law.

  • For instance, a person may be able to recover costs associated with maintaining the cited property to lessen its impact on their property, such as for mowing the lawn or picking up garbage. And former owners who sold their nearby home during a certain time period and can show that the property lost value because of the condition of the house in question may seek restitution. The companies can challenge any claims, with the victim having the burden of proving the amount of the claim.

For more, see Cleveland Housing Judge Raymond Pianka requiring negligent property owners to pay victim restitution to neighbors.

Federal Appeals Court Affirms Lower Court Dismissal Of Cleveland Civil Suit Alleging Subprime Loan Peddlers Created A Public Nuisance

In Cleveland, Ohio, The Plain Dealer reports:
  • A federal appeals court has ruled that Cleveland's attempt to punish banks for bankrolling subprime loans has no merit, leaving the city with little hope of ever collecting millions of dollars in damages related to the foreclosure crisis. The 6th Circuit U.S. Court of Appeals rejected arguments that the city's lawsuit should go to trial.

  • A U.S. District Court judge dismissed the same lawsuit in May 2009, stating that the city could not prove that the banks were directly responsible for blight, crime and other problems foreclosures had caused in Cleveland. Law Director Robert Triozzi said Tuesday that the 3-0 ruling by the three-judge panel was disappointing. He said the city plans to ask the entire 6th Circuit to hear the appeal.

For more, see Cleveland loses appeal in nuisance lawsuit vs. financiers of subprime loans.

For the court ruling, see City of Cleveland v. Ameriquest Mortgage Securities, Inc., et al., No. 09-3608 (6th Cir. July 27, 2010).

Wednesday, August 04, 2010

More On Alleged South Florida Bogus Foreclosure Document Manufacturing Foreclosure Mill

Mother Jones recently ran a profile on South Florida foreclosure mill operated by attorney David J. Stern and the alleged manufacturing and backdating of bogus foreclosure documents that this firm his accused of engaging in.(1) An excerpt:
  • LATE ONE NIGHT IN February 2009, Ariane Ice sat poring over records on the website of Florida's Palm Beach County. She'd been at it for weeks, forsaking sleep to sift through thousands of legal documents. She and her husband, Tom, an attorney, ran a boutique foreclosure defense firm called Ice Legal. (Slogan: "Your home is your castle. Defend it.") Now they were up against one of Florida's biggest foreclosure law firms: Founded by multimillionaire attorney David J. Stern, it controlled one-fifth of the state's booming market in foreclosure-related services. Ice had a strong hunch that Stern's operation was up to something, and that night she found her smoking gun.


  • A Florida notary's stamp is valid for four years, and its expiration date is visible on the imprint. But here in front of Ice were dozens of assignments notarized with stamps that hadn't even existed until months—in some cases nearly a year—after the foreclosures were filed. Which meant Stern's people were foreclosing first and doing their legal paperwork later. In effect, it also meant they were lying to the court—an act that could get a lawyer disbarred or even prosecuted. "There's no question that it's pervasive," says Tom Ice of the backdated documents—nearly two dozen of which were verified by Mother Jones. "We've found tons of them."


  • But the Ices had uncovered what looked like a pattern, so Tom booked a deposition with Stern's top deputy, Cheryl Samons, and confronted her with the backdated documents—including two from cases her firm had filed against Ice Legal's clients. Samons, whose counsel was present, insisted that the filings were just a mistake. She refused to elaborate, so the Ices moved to depose the notaries and other Stern employees whose names were on the evidence. On the eve of those depositions, however, the firm dropped foreclosure proceedings against the Ices' clients.

  • It was a bittersweet victory: The Ices had won their cases, but Stern's practices remained under wraps. "This was done to cover up fraud," Tom fumes. "It was done precisely so they could try to hit a reset button and keep us from getting the real goods."

For the entire story, see EXCLUSIVE: Fannie and Freddie's Foreclosure Barons (How the federal housing agencies and bailed-out banks are helping shady lawyers make millions by pushing families out of their homes).

Thanks to Mike Dillon of for the heads-up on the story.

(1) Mother Jones has made the following documents available online in connection with allegations made against this operation:

Countrywide To Cough Up $600M To Settle Shareholder Lawsuits Alleging Failure To Disclose Loose Lending Standards

In Los Angeles, California, USA Today reports:
  • Countrywide Financial will pay $600 million to end shareholder lawsuits alleging that it misled investors, in the largest settlement to emerge so far from the subprime mortgage meltdown. The agreement has received preliminary approval from a U.S. District judge in Los Angeles, and a final approval and hearing is scheduled Nov. 15. Countrywide's accounting firm, KPMG, also agreed to pay $24 million. The defendants admitted no wrongdoing in the agreement. The proposed settlement was first announced in May. "We haven't heard of any larger settlement being reported," says Joel Bernstein, lawyer for the lead plaintiffs, the New York state and city pension funds.

  • The lawsuits claimed that Countrywide, once the USA's largest mortgage lender, loosened its lending standards during the housing boom and made loans that entailed greater risks than disclosed to shareholders. Countrywide was near collapse when Bank of America acquired it in July 2008.

For more, see Countrywide to pay $600 million to settle lawsuits.

S. Florida Foreclosure Mill Faces Civil RICO Charges In Suit Seeking Class Action Status; Allegations Include Manufacturing Phony Mortgage Assignments

In Fort Lauderdale, Florida, The Palm Beach Post reports:
  • Florida's purported largest foreclosure law firm filed thousands of documents to take people's homes that contained deceptive and intentionally ambiguous information, according to a proposed class action lawsuit.

  • The suit, filed last month in U.S. District Court, Southern District of Florida, says David J. Stern and his Plantation-based legal team violated the Racketeer Influenced and Corrupt Organizations Act by generating fraudulent mortgage assignments when pursuing foreclosures. An assignment is held by the entity that has the right to receive mortgage payments.

  • Stern's practice, which the lawsuit claims filed up to 7,000 new foreclosure cases in Florida every month last year, is also alleged to have pursued foreclosures for lenders that didn't own the debt on the homes. "There really is no proper plaintiff to sue and foreclose and that's what this charade is designed to cover," said Fort Lauderdale Attorney Kenneth Eric Trent, who is seeking class action status and filed the suit on behalf of Oakland Park resident Ignacio Damian Figueroa. "There is no real holder of the note and the mortgage anymore because they broke it up and sold it to 10, 12, 20 people."


  • Tracking the true owner of the debt sometimes can be a challenge. When pressed for proof of debt ownership, Trent said Stern's office would create an assignment signed by a Stern employee instead of a representative of the lender attempting to foreclose. "The assignments were meaningless shells designed to pull the wool over the eyes of the judiciary and ease the burden upon the unknown real parties of interest," the lawsuit states.


  • Trent also named the Mortgage Electronic Registration Service Corp. as a defendant. The private entity, known as MERS, was created by banks in 1995 to track mortgage ownership electronically and reduce paper documents. Trent says MERS helps hide the identity of loan ownership and that it conspired with Stern to "confuse everyone as to who owned what."


  • West Palm Beach foreclosure defense Attorney Thomas Ice found 21 examples last year of assignments from Stern's office that had been executed with a date before the notary's commission was issued. In a deposition, a Stern employee agreed with Ice that "sloppiness" was to blame for the irregularity.

For the story, see Lawsuit claims that Florida's largest foreclosure firm faked documents.

For the lawsuit, see Figueroa v. Merscorp, et al.

In a related story, see Daily Business Review: Homeowner files fraud suit against firm, lawyer:

  • An unrelated class action suit filed in 2007, which claims Stern’s firm overcharged borrowers, is pending in Palm Beach Circuit Court. Judge Thomas Barkdull recently certified the case as a class action. The suit claims the firm charged excessive fees to borrowers being foreclosed by Wells Fargo, a Stern client. The lead plaintiff is Loren Banner, who sought to pay the bank the money he owed and get his mortgage reinstated. Stern’s firm sent him a reinstatement letter that included charges for services his firm didn’t provide, according to the suit.

Attorney Accused In Civil Suit Of Milking Deceased Client's Estate; Damages Estimated At $6M+

In Annapolis, Maryland, The Capital reports:
  • When Robert Blackburn Hewitt died of a heart attack in 2007, the Arnold resident's longtime attorney estimated his estate at almost $4.7 million. He told Hewitt's widow that she and her two sons "would never have to want anything," according to a lawsuit filed in Circuit Court.

  • But two years later, that same attorney, Steven B. Preller, turned around and told Tina Hewitt Sargent she was broke and facing foreclosure on an investment property she didn't know she owned.

  • Attorneys for Sargent and her sons, Robert Brett Hewitt and Ryan Hewitt, now claim Preller entered into at least six "self-dealing" business transactions over the past three years to reduce the estate "to nothing more than a series of empty investments" while lining his own pockets and the pockets of his friends and family. They put the damages at more than $6 million. [...] No criminal charges have been filed against Preller, a partner with Preller, Fastow & Klein, LLC in Windsor Mill.


  • The family learned last year that within weeks of Hewitt's death, Preller allegedly began orchestrating self-serving business transactions. They argued Preller did not have the legal right "to sell or otherwise transfer any money or other assets" from the estate.

  • The lawsuit acknowledged that Sargent and her oldest son signed off on some of the deals, but argued those signatures were provided without "informed consent." "Ms. Sargent and Robert Brett Hewitt signed various documents in reliance of defendant Preller's false misrepresentation that these documents were ordinary documents that had to be signed to 'settle your late husband's estate,' " the lawsuit said.

For more, see Widow, sons sue attorney to reclaim millions (Claims he stole from her late husband's estate).

Woman Recovers Title To Home As Judge Invalidates Deed In Lieu Unwittingly Signed When Obtaining Loan

In Philadelphia, Pennsylvania, The Philadelphia Inquirer reports:
  • When federal securities officials closed Robert Stinson Jr.'s real estate investment firm - Life's Good Inc. - for alleged investment fraud in June, they said it had no "significant" property holdings. There was no way they could have known how much the house at 1200 S. Ruby St. in Southwest Philadelphia meant to Joan Porterfield. She had inherited the house from her mother, but lost it to Life's Good after mortgaging it in September 2007 for $25,000.

  • "On the papers they filed at City Hall, it shows like I gave them my property," even though she had no intention of doing so, Porterfield said. Porterfield, 47, has since won a judge's order to have the Ruby Street house put back in her name. But she remains shaken by the ordeal, choking back tears as she talks about the small rowhouse as the only thing she has left from her mother.


  • In the packet of loan documents Porterfield signed for the mortgage on 1200 S. Ruby St. was a deed in lieu of foreclosure, which allowed Life's Good to take the house without going through foreclosure. Life's Good did so in November 2008. [...] Fortunately for Porterfield, her attorney argued successfully in court that the deed in lieu of foreclosure for 1200 S. Ruby St. should be invalidated because Life's Good did not register it within 90 days of its signing, as required by Pennsylvania law, according to court documents. Porterfield said she still owed her attorney $3,618. "That's why I don't have the deed right now. He needs his money," she said.

For the story, see Despite mortgage fraud, woman gets her house back.

Illinois Steps In To Stop Niece From Selling 100-Year Old Aunt's Farm Out From Under Her As State Probes Dubious Land Transactions

In Will County, Illinois, the SouthtownStar reports:
  • State officials have told the niece of a 100-year-old Monee woman known as "Aunt Aggie" to stop trying to sell the woman's 70-acre farm. A cease and desist order was issued against Bridget Gruzdis and her firm, Phoenix Horizon LLC, to immediately stop marketing and attempting to sell the home of Agnes Albinger.


  • For the past few months, the SouthtownStar has chronicled Aunt Aggie's struggle to stay on her farm. Aunt Aggie's niece formed Phoenix Horizon and engaged in a series of transactions with her aunt that resulted in the farm being subdivided and annexed to the village for commercial development in 2003. The state, after learning of transactions between Aunt Aggie and her niece through news reports, launched an investigation into why the farm was at risk for foreclosure.


  • Phoenix Horizon annexed the land to the village of Monee in 2003 with hopes of developing hotels and shopping centers. Gruzdis borrowed $700,000 against the property but paid back only $49 before the bank filed for foreclosure in 2006.(1)

  • The Monee police launched an investigation into whether Aunt Aggie knew what she was doing when she was signing transactions with Phoenix over the past decade. They turned over their findings to the Will County state's attorney's office. The state's attorney's financial crimes prosecutor is still investigating, Will County state's attorney's office spokesman Chuck Pelkie said Thursday.

  • Aunt Aggie, who turns 101 in August, has farmed the Monee property since 1949. Her husband died in 1956, and Aunt Aggie is well known in her community for raising as many as 40 foster children over the course of nearly five decades. On May 3, Gruzdis sent Aunt Aggie an eviction notice giving her 30 days to vacate the farm - a threat that was never carried out. Jim Armstrong is a longtime friend of Aunt Aggie's who acted as a whistleblower by alerting the media to Aggie's predicament.

For the story, see State to Aunt Aggie's niece: Stop right there (Woman blocked from trying to sell centenarian's property).

In a follow-up story, see In summer heat, Aunt Aggie finds strength.

For another story on an Illinois property owner falling victim in a real estate equity ripoff, see Blind Victim Of Sale Leaseback, Equity Stripping Scam Peddled As A Refinance Now Faces The Boot, Despite "Successful" Civil Prosecution By Illinois AG.

(1) With some exceptions, under Illinois law, a lender looking to take real estate as collateral for a loan generally has a duty to inquire into the rights and equities of anyone in open possession of the premises who is not the owner of record. Failure to do so could leave the lender's security interest subordinate to any legal rights and equities the party in possession who is not the owner of record can establish.

See Ambrosius v. Katz, 2 Ill. 2d 173; 117 N.E.2d 69; 1954 Ill. LEXIS 321 (Ill. 1954) (bold text is my emphasis, not in the original text):

  • A purchaser is bound to inquire of the person in possession by what tenure he holds and what interest he claims in the premises. It is well settled that whatever is sufficient to put a party on inquiry is notice of all facts which pursuit of such inquiry would disclose, and without such inquiry no one can claim to be an innocent purchaser as against him whose possession raises the inquiry. (Bryant v. Lakeside Galleries, Inc. 402 Ill. 466; Miller v. Bullington, 381 Ill. 238.)

  • This rule protects a grantor whose grant was induced by fraud, but who, remaining in possession, can show such possession as notice of his equity against a subsequent grantee. (White v. White, 89 Ill. 460; Ronan v. Bluhm, 173 Ill. 277.) The purchaser cannot excuse himself by merely obtaining information as to how possession was obtained or inquiring of the grantor or of other persons as to the rights of the person in possession, but he is bound to inquire of the person in possession by what tenure he holds and what interest he claims. Open possession is sufficient to charge such purchaser with notice of all legal and equitable claims of the occupant. German-American Nat. Bank v. Martin, 277 Ill. 629.

See also, Bullard v. Turner, 357 Ill. 279, 192 N.E. 223 (Ill. 1934) (bold text is my emphasis, not in the original text):

  • Under the system of recording the evidences of title to real estate in force in this State, the actual occupancy of land is equivalent to the record of the instrument under which the occupant claims so far as notice to subsequent purchasers and incumbrancers is concerned. McDonnell v. Holden, 352 Ill. 362; Garlick v. Imgruet, 340 id. 136; Moore v. Machinery Sales Co. 297 id. 564; Merchants and Farmers State Bank v. Dawdy, 230 id. 199; Coari v. Olsen, 91 id. 273.

  • A purchaser or incumbrancer is bound to inquire of a person in possession of real estate by what right he holds possession and what interest he claims; and in case the purchaser or incumbrancer fails to make such inquiry, the law charges him with constructive notice of all those facts which he would have ascertained respecting the claim or title of the person in possession had inquiry been made of him. (Nelson v. Joshel, 305 Ill. 420; Williams v. Brown, 14 id. 200; White v. White, 89 id. 460; Coari v. Olsen, 91 id. 273; Ford v. Marcall, 107 id. 136; Tillotson v. Mitchell, 111 id. 518; Rock Island and Peoria Railway Co. v. Dimick, 144 id. 628; German-American Nat. Bank v. Martin, 277 id. 629; Moore v. Machinery Sales Co. 297 id. 564).

The foregoing principles were applied by a Federal court in Chicago last year in Davis v. Elite Mortg. Servs., 592 F. Supp. 2d 1052 (USDC D. Ill., East. Div. 2009), in the context of a foreclosure rescue scam. The Court found that the mortgage lender that unwittingly financed the scam was not entitled to the protection accorded to a bona fide purchaser, saying that, despite the lack of evidence that the lender had any actual knowledge of the scam, it had constructive notice of any claim the screwed-over homeowner can establish in the property by reason of his open, exclusive possession thereof.

For more on the duty to inquire of persons in possession in real estate transactions in Illinois, see Illinois Bona Fide Purchaser, Possession, Duty Of Inquiry (Illinois Supreme Court cases), and Illinois Bona Fide Purchaser, Possession, Duty Of Inquiry - State Appellate Cases, Federal Cases.

For more on this duty to inquire in other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Tuesday, August 03, 2010

Pennsylvania Joins Baltimore, Memphis With Pending Lawsuit Accusing Alleged "Ghetto Loans" Peddler With Reverse Redlining In Philly Neighborhoods

In Philadelphia, Pennsylvania, Philadelphia Weekly reports:
  • The Pennsylvania Human Relations Commission filed a complaint against Wells Fargo Bank early this month, claiming that the bank used reverse redlining in Philadelphia neighborhoods. In other words, Wells Fargo is accused of exploiting poor, African-American residents by allowing an abundant of sub-prime loans in densely black-populated neighborhoods that ultimately caused thousands of vacant properties.


  • Philadelphia joins Baltimore and Memphis, cities that also have filed similar suits against the bank for racial discrimination.

For more, see PA Human Relations Commission Alleges ‘Reverse Redlining’ Against Wells Fargo.

For the lawsuit, see Commonwealth of Pennsylvania v. Wells Fargo Bank, N.A.

Go here for earlier posts on the "ghetto loans" allegations made against Wells Fargo.

Media Report Probes Into Minister's Activities Involving Dubious Loan Modification Services

In Atlanta, Georgia, MyFox Atlanta reports:
  • Some thought a minister who modifies mortgages would be a godsend. A FOX 5 I-Team investigation found that while one man had a Bible in one hand, the other one was in people's wallets. The I-Team's Dana Fowle went undercover to hear just what Mike Surgent and Trinity Corporation is preaching.

  • One of the first things Surgent does when you go to his office looking for help to save your home from foreclosure is to ask you to call him Uncle Mike. He then tells you about his religious conversation. But Uncle Mike wraps it up by asking for a lot of money.

For more, see I-Team: Trinity Corporation.

For a follow-up stories, see:

Technicality Leads To Dismissal Of Criminal Case Against Ex-Homeowner Accused Of Stripping $1M In Fixtures From Foreclosed Home; DA To Refile Charges

In Southern California, North County Times reports:
  • Suzy Brown, who was accused of stripping $1 million worth of property from the bank-foreclosed home her Encinitas neighbors dubbed the "monster house," won a legal victory Thursday when a judge dismissed criminal charges against her on a technicality. Brown, 45, was facing one charge of grand theft and one charge of felony vandalism for allegedly taking truckloads of lavish fixtures when she moved out of the bank-owned mansion in March 2009.


  • However, Superior Court Judge Aaron Katz ruled Thursday after a preliminary hearing at the Vista Courthouse that Eacret failed to prove that the bank ---- not Brown ---- owned the house last year when a real estate broker for Chevy Chase Bank discovered its doors, windows and 18 toilets, among other property, were missing.

For more, see Judge dismisses case against ex-owner of 'monster house'.

For story update, see Prosecutors to refile charges against ex-owner of 'monster house':

  • Prosecutors will refile charges against Suzy Brown, the woman accused of stripping $1 million worth of lavish fixtures from the foreclosed home her Encinitas neighbors dubbed the "monster house," according to a deputy district attorney. Superior Court Judge Aaron Katz dismissed felony theft and vandalism charges against Brown on Thursday after a preliminary hearing at the Vista Courthouse.

  • Katz said Deputy District Attorney Robert Eacret had shown evidence at the hearing that Brown, 45, had taken truckloads of toilets, windows and appliances from the Olivenhain mansion after she moved out in March 2009, but the judge said he had to dismiss the charges on a technicality.

Monday, August 02, 2010

Forensic Loan Audit Operation Hit With Class Action Suit; Accused By Others Of Clipping Homeowners Out Of Thousand$ With No Results

In Rancho Cordova, California, reports:
  • U.S. Loan Auditors claims it will review your loan documents to see if you're a victim of predatory lending, and will then help you go after your lender. Several customers have called [CBS 13 investigative reporter] Kurtis Ming saying they invested thousands, but got no results. Customers paid $3,000, sometimes $4,000 or more for their forensic loan audit. They say U.S. Loan Auditors looked thru their loan documents claiming what was found could stop a foreclosure, help them get a better loan, even money back from their lender.


  • A class action lawsuit (click here) filed on behalf of other former customers alleges U.S. Loan Auditors and its sister company U.S. Legal engaged in false advertising and intended to deceive customers. The complaint asks the court to stop the company from operating and require restitution to the alleged victims.

For more, see Call Kurtis: U.S. Loan Auditors Sued (Former Customers File Class Action Lawsuit, And Claim False Advertising).

For the class action complaint, see Ma, etal. v. U.S. Loan Auditors, LLC, et al.

Foreclosure Rescue Operator Gets Six Years In Sale Leaseback Scams That Ripped Off $880K From Lenders, Financially Strapped Homeowners

In Honolulu, Hawaii, KITV-TV Channel 4 reports:
  • A man who prosecutors say used religion to lure victims into a mortgage fraud scheme was sentenced to prison Thursday. John Mendoza, 59, was sentenced to six years behind bar. That's not enough says a woman who said she was lured into one of his deals, which he still claims were intended to save homes for people facing foreclosure.

  • "The only thing I can call this person is that he is a monster,” said Laura Cristo, who said Mendoza ingratiated himself by coming to her Waianae restaurant and praying with her and her family.


  • Federal prosecutor Clare Connors said Mendoza would talk distressed homeowners into selling their property in paper to his friends, on the promise they’d be able to buy the home back. Instead, Connors said, Mendoza kept hundreds of thousands in profits from refinancing the homes.


  • In court Thursday, Mendoza repeatedly mentioned his faith as he proclaimed his innocence and said he was only trying to help people. But U.S. District Judge Michael Seabright said the evidence was clear that Mendoza had used his faith to sucker in his victims, and then suck away the equity in their homes. “Mr. Mendoza operated with a clean intent to defraud, to benefit himself and hurt others.” Seabright said. “He used religion to spot and hood vulnerable victims.”

  • Despite his harsh words, Seabright sentenced Mendoza to the lower-end of federal guidelines. Mendoza will spend six years in prison. There is no parole in the federal system. After prison he will serve five years supervised release and must pay $881,514.98 in restitution to the former homeowners, one of whom recently died of cancer.


  • Mendoza told the court he plans to fire his publicly funded attorney and file an appeal. He complained that his attorney didn’t understand the sophisticated real estate transactions involved in the case. The judge replied that while the individual transactions may have been complex, taken as a whole, the jury correctly determined Mendoza’s intent was to steal the equity in the two homes and leave homeowners devastated.

For the story, see Foreclosure Fraud Defendant Gets Six Years (John Mendoza Continues To Deny Wrongdoing).

Michigan AG Files 19 Criminal Complaints Setting Forth 69 Charges Against Individuals, Firms Running Alleged Advanced-Fee Loan Modification Operations

From the Office of the Michigan Attorney General:
  • Attorney General Mike Cox [] announced the filing of 19 criminal complaints and a total of 69 charges against illegal advanced fee "foreclosure rescue" operations accused of defrauding Michigan families of thousands of dollars. Nine Michigan mortgage companies are accused of illegally charging homeowners facing foreclosure upfront fees for mortgage modification assistance.

  • The defendants claimed they would help homeowners by working with their lenders in an attempt to modify the borrower's mortgage. After paying the upfront fee, borrowers found that the companies made no real attempt to secure a modification and were subsequently unable to get their money back. Many of the victims lost their homes to foreclosure.


  • Several companies and individuals charged are accused of obtaining money through false statements to consumers. This charge is a five year felony. In addition several are accused of charging upfront fees before services were rendered, a violation of the Credit Services Protection Act, and with making misleading statements. Each of the charges carries a penalty of up to 90 days in jail and/or a fine of $1,000 in addition to the requirement that the companies make full restitution to each of their victims.

For the list of criminal defendants, and the charges attributable to each, see Cox Files Criminal Charges Against 19 for "Foreclosure Rescue" Scams.

For a story update, see Livingston Daily: Felonies dropped in mortgage-fraud case (A Howell businesswoman admitted Friday to charging customers money upfront for loan-modification services, but she denied failing to perform the services promised and denied pocketing any money).

Sunday, August 01, 2010

Arizona Slams Outfit For Allegedly Peddling Home Refi Scam; Firm's Claims That It Would Buy Homeowners' Loans, Then Modify Terms Were Bogus, Says AG

From the Office of the Arizona Attorney General:
  • Arizona Attorney General Terry Goddard [] announced he has filed a lawsuit against The Guardian Group, LLC (“Guardian Group”) for engaging in allegedly deceptive mortgage loan reduction services that have cost more than 2,500 consumers millions of dollars. Goddard also called attention to a new state law taking effect [last week] that prohibits foreclosure consultants and mortgage “rescue” companies from charging upfront fees. The Attorney General supported passage of the law.


  • The lawsuit, filed in Maricopa County Superior Court, alleges that the Scottsdale-based Guardian Group fraudulently represented itself as providing loan reduction services to homeowners struggling to make their mortgage payments. The company charged consumers an average advance fee of $1,595 for mortgage loan refinancing services, which it rarely provided. It collected fees from more than 2,500 consumers for enrollment in its Principal Reduction Program since August 2009.

  • The company, which markets nationally, made claims it would negotiate with lenders to purchase a consumer’s note for less than face value and sell the note in an investment package to a third-party investor. Guardian Group then told the consumer that it would modify the rates and terms of the consumer’s mortgage loans and reduce the principal owed to 90 percent of current market value.

  • Guardian Group fraudulently represented to consumers that it had $5 billion allocated for its “Principal Reduction Program” because it had multiple investors prepared to purchase mortgage notes. The Attorney General’s Office learned that not one of the supposed investors actually invested money in the company.

For the Arizona AG press release, see Terry Goddard Accuses Scottsdale Mortgage Company of Deceptive Practices.

For the lawsuit, see State of Arizona v. The Guardian Group, LLC, et al.

Colorado AG Shuts Down Loan Modification Racket That Used Obama Video, FDIC Materials To Fake Affiliation With Federal Government

In Denver, Colorado, INDenver Times reports:
  • Colorado Attorney General John Suthers announced [] that his office has obtained a judgment against American Mortgage Consultants, its owner, Oliver Paul Maldonado, 37, and its principal employee, Santiago Fabian Pineda, 32, barring the company and its officers from engaging in mortgage fraud or any aspect of the mortgage business. American Mortgage Consultants, Maldonado and Pineda will be required under the consent judgment to pay a total of at least $75,000 in fines and restitution to the state.


  • According to the lawsuit, American Mortgage Consultants used deceptive advertisements to attract approximately 170 consumers to the loan modification company from January 2009 through March 2010. Maldonado also used video of President Barack Obama and materials from the Federal Deposit Insurance Corp. to give consumers the impression that the company was affiliated with the federal government. American Mortgage Consultants did little if anything to help its customers renegotiate or modify their home loans beyond shipping off their applications to an Ohio-based company.

For the story, see Suthers shuts down mortgage scammer.

For the Colorado AG press release, see Attorney General announces judgment against fraudulent loan modification company.

For the court judgment obtained by the AG's office, see State of Colorado v. American Mortgage Consultants, et al.

Non-Attorney Defendant Clipped Homeowners Out Of Upfront Fees For Bogus Legal Services, Says Colorado AG In Civil Lawsuit

From the Office of the Colorado Attorney General:
  • Colorado Attorney General John Suthers announced [] that his office has filed a lawsuit against a Denver man suspected of defrauding homeowners in foreclosure, including the elderly and disabled, by collecting upfront fees in exchange for fraudulent legal services. According to the complaint, Sherron L. Lewis, Jr., (DOB: 9/26/1956) attracted homeowners facing foreclosure through his Web site,, and mail advertising and informed consumers that they could defeat the foreclosure process and eliminate their mortgages.

  • Lewis, who is not licensed to practice law, is suspected of providing consumers with legal advice on how to combat their foreclosures through the use of frivolous lawsuits. According to the complaint, Lewis’ lawsuits, often leveled against judges, public trustees and even one of his victims, have been routinely dismissed as meritless.

  • As part of his services, Lewis is suspected of requiring his victims to pay upfront fees for his services, which is illegal under the Colorado Foreclosure Protection Act, and he has acquired an interest in his victims’ properties as part of his agreements. In some cases, Lewis has rented out properties he has acquired an interest in while he delays foreclosure through his frivolous lawsuits.

For the Colorado AG press release, see Attorney General announces lawsuit against Denver man suspected of providing fraudulent foreclosure-rescue legal services.

For the lawsuit, see State of Colorado v. Lewis, et al.

(1) According to the AG's press release, Lewis is suspected of advising a quadriplegic victim in Jefferson County to file multiple lawsuits to challenge foreclosures on his home and two other properties in one case. In another, Lewis is suspected of charging the man more than $20,000 in exchange for the “legal work” he performed for the victim. In a third case, Lewis is suspected of occupying an elderly Illinois woman’s home rent-free for more than a year. When the woman attempted to repossess her own home, Lewis filed a lawsuit against her claiming racial discrimination.

Northern California DA Has Another Ex-Homeowner In Crosshairs For Allegedly Stripping $100K In Fixtures From Now-Foreclosed Home

In Ripon, California, KXTV-TV Channel 10 reports:
  • For the second time in a week, the San Joaquin County district attorney's office is expected to charge a Ripon couple with "stripping" a house they had to leave. The large and beautiful home had nearly $100,000 worth of fixtures taken, allegedly by the previous owners.

  • "They took everything from doorbells to appliances, even furnaces in the attic," said Ray Davidson, who bought the home at auction after the foreclosure. Although the home is nearly put back together, holes remain where trees were removed, and not all the window coverings have been replaced. The district attorney's office has completed an investigation against the previous owners, and charges were expected by the end of the week.

  • This home is right around the corner from another home in Ripon that was also stripped. The couple who owned that home appeared in court last week after being charged with grand theft and extortion. [... P]rosecutor Stephen Taylor promised last week the district attorney is starting to investigate and prosecute these incidents.

For the story, see Another foreclosed upscale Ripon house stripped.