Saturday, February 09, 2013

Dispute, Confusion Over Code Enforcement Repair Orders Lead To Wrecking Ball Treatment For Recently-Purchased Fixer-Upper, Leaving Vet Out $10K Purchase Price Plus Sweat Equity

In Akron, Ohio, the Akron Beacon Journal reports:
  • In 34 minutes, Larry Modic’s house was down. A worker operating a huge excavator from Ray Bertolini Construction Co. demolished the Akron house Tuesday morning and was scheduled to tear the house next door down, as well.
  • Modic, 57, who has an apartment in Lakewood, was trying to establish residency in Akron. He bought the brick house near Summit Lake in May for $10,000 and said he was unaware that the city housing division had cited the home for repair issues and issued orders to repair the problems. He spent weekends in the 1925 home, trying to fix it up.

    The demolition came after the city won a court fight last week. Modic had threatened violence during his ordeal with the city about code violations. Akron police took him into custody in January and transported him to a local mental health facility. He then was transferred to the Louis Stokes Cleveland VA Medical Center’s Wade Park facility.

    Police found four loaded rifles, a loaded handgun, two boxes of ammunition and a flak jacket in the house. Modic has not been charged with any crimes related to the threats.

    Volunteers helped him remove his personal belongings over the weekend.

    The two homes knocked down Tuesday were among 650 vacant or abandoned homes that are to be torn down in the city this year, said Abraham L. Wescott, Jr., development manager of the city’s Department of Planning and Urban Development.
  • Modic attended a June meeting of the Housing Appeals Board and was given 30 days to make repairs. At the July meeting, he received 60 more days to make repairs. But at the September meeting, which Modic did not attend, the board voted to condemn the home. Modic failed to appeal the decision within 30 days as required by law.

    Attorney Warner Mendenhall filed a suit on Modic’s behalf last week in an attempt to block demolition, but Summit County Common Pleas Judge Paul Gallagher ruled against Modic and allowed the demolition to go forward.

    Other issues addressed in the lawsuit by Mendenhall over the city’s demolition process are still to be heard and decided in court. Akron officials have said they are researching the possibility that the city will file a third-party lawsuit against the seller of the property to Modic.

Outside Pressure Causes Bankster To Come Clean, Admit Escrow Screw-Up That Wrongly Triggered Loan Default & Subsequent Foreclosure Sale On 91-Year-Old Widow/Veteran's Home

In Pasadena, Texas, KTRK-TV Channel 13 reports:
  • Severina Wilson is a 91-year-old widow, and a veteran of both World War ll and Korea. And through no fault of her own, she was about to lose her Pasadena home.

    On Friday, widow and veteran was to be evicted from her home but she had done nothing to lose it. Proving it was another matter, until some lawyers with hearts and a bank willing to correct the mistake intervened.

    Wilson has seen a lot in her life. She served in the Army during World War II and during the Korean War, she was assigned to the Marines. What she never expected to see was a foreclosure notice. "And I got the letter the house had been sold," she explained to Eyewitness News.

    Last year, Chase Bank refused Mrs. Wilson's mortgage payments because there was an escrow problem -- and not of her making. Her proof of insurance was never passed on by the branch bank to the mortgage division. That triggered a default, so her home was sold to Fannie Mae, and she can't take surprises. "I have a heart condition and they say if I get too stressed, I could have a heart attack," Mrs. Wilson said.
  • Chase Bank issued a statement Tuesday afternoon saying, "We have resolved Mrs. Wilson's mortgage situation so she can stay in her home permanently."

Indiana AG Petition For Emergency License Suspension Targets C. Indiana Real Estate Agent Named In Dozens Of Complaints Over Allegations Of Screwing Over Customers

In Indianapolis, Indiana, WXIN-TV Channel 59 reports:
  • The real estate license of a Central Indiana realtor and business owner has been suspended, but the suspension could only be temporary. Now, one of his alleged victims spoke to Fox59 about her experience in hopes of warning others.

    “He told me to just come to his office and fill out an application, that it wouldn’t be a problem, that he could put me in a home,” said Bille Rackemann. However, Rackemann said all David Garden, owner of Garden Homes Realty and Star Homes, Inc., did was take her money.

    She said she paid first month’s rent for a home on Alabama Street, but when moving day came, he told her the house wasn’t ready. “I actually went by (and saw) the people and stuff still in there,” Rackemann said.

    She said he continued to make excuses about why the home wasn’t ready and why she couldn’t move in. Rackemann said she doesn’t think Garden ever intended to rent the home to her. When she asked for a refund on the rent, she said she was told they’d already cashed the check.

    “He likes to use bible terms and Christianity a lot to try to pull people in to make himself sound God-like, so people think he’s an honest man and they want to do business with him and he’s the complete opposite,” Rackemann said.

    That’s one of dozens of complaints about David Garden and his businesses.

    The Indiana Attorney General’s Office has been investigating Garden for about a year.

    Deputy Attorney General, Gabrielle Owens said their petition for emergency license suspension involved 30 counts with complaints, ranging from earnest money issues to allegations of him attempting to commit mortgage fraud.

    “We also had allegations regarding abuse of the bankruptcy system and having folks file for bankruptcy in order to abuse the automatic stay provisions of the bankruptcy process to forestall the foreclosure,” Owens said.

Friday, February 08, 2013

Antitrust Feds Score 27th Guilty Plea In Ongoing Probe Targeting R/E Operators Running N. California Foreclosure Sale Bid-Rigging Rackets

From the U.S. Department of Justice (Washington, D.C.):
  • A Northern California real estate investor has agreed to plead guilty for his role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

    Felony charges were filed today in the U.S. District Court for the Northern District of California in San Francisco against Gilbert Chung of Burlingame, Calif. Chung is the 27th individual to plead guilty or agree to plead guilty as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

    According to court documents, Chung conspired with others not to bid against one another, but instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in San Francisco and San Mateo counties, Calif. Chung was also charged with conspiring to use the mail to carry out schemes to fraudulently acquire title to selected properties sold at public auctions, to make and receive payoffs and to divert to co-conspirators money that would have otherwise gone to mortgage holders and others.

    The department said Chung conspired with others to rig bids and commit mail fraud at public real estate foreclosure auctions in San Francisco and San Mateo counties beginning as early as January 2010 and continuing until about December 2010.

    “The conspirators went to great lengths to suppress competition and prices at these foreclosure auctions,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division will continue to vigorously enforce the antitrust laws and to prosecute those who violate them at the expense of distressed homeowners.”

    The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at San Francisco and San Mateo County public foreclosure auctions at non-competitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.

    “Today’s charges are another example of our resolve to bring to justice those who engaged in fraudulent bid rigging and anticompetitive practices at foreclosure auctions,” said FBI Special Agent in Charge David J. Johnson of the San Francisco Field Office. “We continue our partnership with the Antitrust Division in aggressively pursuing individuals who participate in these criminal acts.”

    A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.

    The charges today are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties, Calif.

    These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Field Office at 415-436-6660, visit or call the FBI tip line at 415-553-7400.
For the Justice Department press release, see Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (Investigation Has Yielded 27 Plea Agreements to Date).

Ex-County Treasurer Cops Guilty Plea, Forfeits Entire Public Pension Over Role In Bid-Rigging Racket Involving Pay-To-Pay Scheme Rewarding Political Contributors With High-Rate Liens, Preferred Seating At Tax Auctions

From the Office of the U.S. Attorney (East St. Louis, Illinois):
  • The former treasurer of Madison County, Illinois, pled guilty in US District Court on February 5, 2013, to violating the Sherman Antitrust Act, the United States Attorney for the Southern District of Illinois [...] announced []. Fred Bathon, 58, was convicted of structuring Madison County property tax sales in a way that increased prices and rewarded campaign contributors.

    The charges allege that at Illinois tax lien auctions, investors bid to purchase tax lien certificates issued against delinquent tax payers. Investors are supposed to compete to purchase these tax liens by bidding on the interest rate the property owner will be required to pay prior to redeeming the tax lien filed on the owner's property.

    The bid opens at no more than the statutory maximum of 18% and through a competitive bidding process can be driven as low as 0 percent. The bidder offering the least penalty percentage rate, i.e., the bidder who is willing to allow the owner to redeem his property for the smallest penalty, is allowed to purchase the tax lien.

    As such, competitive bidding benefits financially distressed homeowners by reducing the amount of money that they have to pay to save their home from foreclosure; however, that same system reduces the profit made by tax buyers. Tax buyers prefer to receive high interest rates, which correspond to higher profits.

    It was revealed in Court today that for the tax sales conducted in 2005-2008, Bathon structured the tax sales in a way that eliminated competitive bidding and allowed the tax buyers to engage in price fixing by only bidding the statutory maximum interest rate of 18%.

    In addition to awarding properties at non-competitive interest rates, Bathon also used a seating chart to ensure that his largest campaign contributors were recognized by the auctioneer as the winning bidder.

    By 2007 and 2008, the bid rigging and price fixing was so pervasive that distressed homeowners were charged the statutory maximum interest rate on nearly every property tax lien sold. During the tax auction occurring November 14-15, 2007, 2,549 out of 2,574 property tax liens were awarded to bidders for the statutory maximum interest rate of 18%, which represented 99.03% of the property tax liens auctioned. During the tax auction occurring November 13-14, 2008, 2,290 out of 2,364 property tax liens were awarded to bidders for the statutory maximum interest rate of 18%, which represented 96.86% of the property tax liens auctioned.

    US Attorney Wigginton said, “This crime exploited financially-distressed homeowners who were at risk of losing their homes for the financial gain of political contributors. This type of pay-to-play politics is intolerable and will be aggressively prosecuted. It is time that those involved in politics learn that public office is a public trust that should never be manipulated to reward friends and supporters. I want to make it clear that not only is this particular investigation far from finished, but that I will continue to investigate violators wherever they are found. Note that today’s charge is a charge of conspiracy. By its very nature, conspiracy involves more than one person.”

    A violation of the Sherman Antitrust Act is punishable by up to 10 years imprisonment and a $1,000,000 fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than the statutory maximum. However, the United States Sentencing Guidelines must be applied to the case and considered by the Court during sentencing. Sentencing has been scheduled for May 17, 2013.

    Under Illinois law, Bathon will also forfeit his entire public pension as a result of his conviction. The Illinois Pension Code provides that “[n]one of the benefits herein provided for shall be paid to any person who is convicted of any felony relating to or arising out of or in connection with his or her service as a member.” This provision of Illinois law is oftentimes referred to as the “Ryan Rule,” following the Illinois Supreme Court’s decision in Ryan v. Bd. of Trustees of Gen. Assembly Ret. Sys., 236 Ill. 2d 315, 924 N.E.2d 970 (2010), which determined former Governor George Ryan forfeited all of his public pension benefits following his conviction on federal corruption charges. The state pension forfeiture provision reaches all public pension benefits, including those earned while serving in public positions with no connection or nexus to the federal conviction.

Maryland Lawmakers Smack Shamless Colleague Over His Failed Efforts To Pass Law That Would Have Enabled Him To Reinstate R/E License Lost When Found Liable For Screwing Over Homeowners In Foreclosure

In Annapolis, Maryland, The Washington Post reports:
  • Maryland’s House of Delegates on Tuesday voted overwhelmingly to reprimand one of its own for working to insert language in a bill last year that would have directly benefited the lawmaker’s business as a real estate broker.

    Anne Arundel County Del. Tony McConkey “drafted, offered, lobbied and voted fora provision that would have allowed him to reinstate his Maryland real-estate license while he still owes one of the state’s largest fines on record for having preyed on homeowners in foreclosure, according to a legislative ethics report released Monday.

    McConkey is still a practicing real-estate broker in the District. His maneuvering on the bill, first reported last year by The Washington Post, also would have cut interest charges and processing fees that could have saved McConkey and a small handful of other delinquent Maryland brokers tens of thousands of dollars.

    The House voted 127-3 to adopt a resolution of reprimand, an admonishment just one step below the censure last year of veteran Prince George’s legislator Ulysses Currie for his failure to disclose outside consulting payments that became the subject of a federal investigation.

    Like Currie (D) before him, McConkey was asked to make a public apology. But unlike Currie’s somber tone, McConkey’s on Tuesday took on a combative one that colleagues on both sides of the aisle derided as something less than repentant.

    “I do humbly apologize, with great regret, that the ethics committee found that I acted improperly,” McConkey, said, “Not to provide an excuse, but if the body would indulge me, two minutes, just to provide an explanation...”

    McConkey, who had admitted “lobbying hard” for the bill to lawmakers investigating his actions, then went on to claim that colleagues had approved the measure with little interference from him. “People thought it was a good amendment,” he said. McConkey also suggested the legislature’s chief ethics adviser had cleared him of any wrongdoing.

    McConkey’s defense of what the legislative ethics committee had ruled indefensible left many lawmakers slack-jawed and prompted Baltimore Del. Shawn Tarrant (D) to walk off the House floor while McConkey was still speaking. “Does that sound like an apology?” he asked a colleague before getting up from his chair.

    The remarks also drew a terse rebuttal from Del. Brian K. McHale (D-Baltimore), co-chair of the ethics committee.

    “I feel compelled to address that,” McHale said. “Anyone with a clear mind… would have clearly known…that it was an act of misconduct to have presented that amendment and to have lobbied both houses to have it passed ... I would not want anyone to anyhow misinterpret the advice that the ethics counsel gave.”

    Three Republicans voted against the reprimand, including Del. Don Dwyer (R-Anne Arundel). Dwyer was the only lawmaker to speak on the resolution. He dryly said he was “honored that we all care so much about our oath that we’re going to do this to our fellow member.”

    Afterward Dwyer said he was not defending McConkey but voted no “to point out the hypocrisy ... We have lawyers who regularly pass legislation in their name, that they financially benefit from. It’s hypocrisy to do this selectively when we ought to be calling people out on a regular basis.”

    The other two no votes were Del. Glen Glass (R-Cecil) and Del. Neil Parrott (R-Washington). An aide to Glass said he felt there was not enough information to vote yes. Parrott did not immediately return a call seeking comment.

    Speaking to a reporter afterward, McConkey appeared bewildered at the House’s displeasure, and questioned the process by which he was investigated by colleagues. “They’re very secretive. It’s like the college of cardinals,” he said.

    In 2010, McConkey was ordered to pay $75,000 for what an administrative law judge called “fraudulent and unethical” behavior in real estate transactions. In one instance, the state found that McConkey promised to help a woman keep her home, then didn’t return her calls, bought her property in foreclosure and sought to evict her.

    Under the measure inserted into the bill last year by McConkey, he and others could have entered long-term payment plans to replenish a state fund used to compensate consumers who suffer financial losses as a result of actions by Maryland real estate professionals. Three of McConkey’s clients were each paid the maximum $25,000 from the fund,(1) making his debt to the state fund the largest of any real estate licensee in the five years preceding the 2010 decision.

    At the time McConkey sought to pass the measure last year, the Maryland Real Estate Commission said it had no evidence McConkey had paid any of the balance due.

    Under an agreement with the state, his license to sell homes in Maryland was suspended for one year. But commission officials said he would need to pay the entire amount due before seeking reinstatement of his license.

    McConkey’s measure would have halved the 12 percent interest rate on his debt to the state, and eliminated another 16-percent charge for processing the fee. It also would have allowed McConkey to regain his license if he began a payment plan.

    The measure was tucked into a bill that lawmakers said had to pass. Without it, the Real Estate Commission, which licenses the state’s 41,000 real estate brokers and other industry professionals, would have ceased to exist.

    Sen. Edward R. Reilly (R-Anne Arundel) filed the complaint last April after he said McConkey cursed at him in a heated exchange urging him to support the measure.

    Reilly said he took no pleasure in the result.

    “I’m never pleased with this kind of thing. This is a black mark on the entire General Assembly. The public has a poor attitude about elected officials in general, and this just supports the stereotype.”(2)
Source: Md. lawmaker reprimanded for bill that would have helped his real-estate practice.

(1) The Maryland Real Estate Commission Guaranty Fund is a special fund that, with limitations, compensates victims of ripoffs committed by Maryland-licensed real estate professionals..

(2) For more on McConkey, the reportedly twice-suspended real estate agent, once-disbarred lawyer, sale leaseback peddler and current member of the Maryland state legislature, see:

Thursday, February 07, 2013

Feds Tag Major Securities Rating Service For Disregarding Its Own Standards When Giving High Grades To Crappy Mortgage Bonds That Eventually Imploded, Leaving Unwitting Investors Holding The Bag

The Wall Street Journal reports:
  • The Justice Department sued Standard & Poor's Ratings Services late Monday, alleging the firm ignored its own standards to rate mortgage bonds that imploded in the financial crisis and cost investors billions.

    The civil charges by U.S. Attorney General Eric Holder against the New York company, one of the bond-rating industry's three giants, are the first federal enforcement action against a credit-rating firm over the crisis. Several state attorneys general are likely to join.

    S&P said in a statement earlier Monday that the government suit would be "entirely without factual or legal merit," and denied wrongdoing.

    After The Wall Street Journal reported Monday afternoon that the government intended to launch the civil case, S&P confirmed the expected lawsuit and said the rating firm was being punished unfairly by the U.S. government for "failing to predict" the housing meltdown or financial crisis.

    The two sides have discussed a possible settlement for about four months, according to people close to the negotiations, but S&P balked over concerns that a deal could sink the company.

    The government was seeking penalties of more than $1 billion, another person close to the talks said, which would be the biggest sanction imposed on a firm related for its actions in the crisis.

    S&P officials also were rattled that the government was pushing the company to admit wrongdoing that could leave it more vulnerable to pending or new lawsuits by investors.
For more, see U.S. Sues S&P Over Ratings (Justice Department Says Endorsements of Risky Mortgage Bonds Fueled Crisis).

For the lawsuit, see U.S. v. McGraw-Hill Companies, Inc., et al.

Florida Bar Seeks Discipline Against Ex-King Of Now-Defunct Foreclosure Mill

In West Palm Beach, Florida, The Palm Beach Post reports:
  • The Florida Bar is seeking disciplinary action against Florida foreclosure baron David J. Stern, whose massive law firm collapsed in 2011 amid allegations that it mishandled the cases of the nation’s largest mortgage holders by filing forged and fraudulent court documents.

    Grievance committees found probable cause to pursue punishment in 17 cases stemming from formal complaints made by homeowners, defense attorneys, judges and a bank representative.

    It’s the first attempt by the Bar to hold Stern accountable for actions that occurred at his so-called “foreclosure mill,” which grew quickly following the real estate crash to more than 1,500 employees and more than 140,00 cases statewide. Ten probable cause findings were approved Jan. 25 with seven more following on Friday.

    Stern’s company closed in March 2011 after losing most of its clients, including federal mortgage backers Fannie Mae and Freddie Mac, as concerns about robo-signing hit lenders and law firms nationwide.

    The allegations against Stern where probable cause was found include notary fraud, backdating documents, misleading the court, failing to appear before the Fifth District Court of Appeal, failure of his attorneys to appear at hearings, and the inability of a Michigan-based bank to get clear title to a property because a lawsuit notice was never withdrawn from official records.

Massachusetts AG Tags Developer In Suit Alleging It Pocketed $200K+ In Buyer Deposits, Then Failed To Deliver Homes Or Return Downpayments

In Boston, Massachusetts, the Boston Business Journal reports:
  • A Foxborough real estate developer who fell on hard times after the economic downturn has been sued for allegedly taking — and then refusing to return — more than $200,000 in down payments for new homes in Sharon that were never provided, according to Attorney General Martha Coakley.

    The AG's office has obtained a restraining order in Suffolk Superior Court against Michael Intoccia and his companies including Bella Estates Realty Trust, MTI Realty and Intoccia Builders Corp., prohibiting them from accepting future deposits for new homes unless the deposits are put into escrow.

    The order also freezes assets enough to pay a possible court judgment, and requires the defendants to disclose records that might reveal the existence of other consumers who paid deposits but never received a new home.

    The lawsuit seeks more than $200,000 in restitution for five homebuyers who paid for single-family homes in the Bella Estates development in Sharon. Coakley’s office is also seeking statutory penalties and a further injunction preventing the defendants from taking unsecured deposits.

    Intoccia operates a development business in Norfolk County through a network of companies that were involved in the planning, marketing, and construction of the Bella Estates development that was to consist of 29 single-family house lots, according to the complaint. The defendants allegedly solicited buyers and took deposits of up to $55,300 per residence, Coakley said.
  • According to the AG's complaint, Intoccia and his companies also allegedly made false promises to promptly build homes when they knew that construction was prevented by permitting issues, and in some cases took multiple deposits for the same lot. Homebuyers suffered additional expenses for moving, temporary housing, appliances and fixtures for houses that were never built.

    The defendants allegedly held consumers’ deposits long after the final deadlines for closing passed and in some cases more than two years after the deposit was paid. The complaint alleges that the defendants allowed many lots in Bella Estates to fall into foreclosure.

Wednesday, February 06, 2013

Maine Supremes Smack Title Insurer For Stiffing Policy-Holding Homeowner On Its Duty To Defend Against Neighbor's Title Challenge Relating To Alleged 'View' Easement

From US Law:
  • [Homeowner] purchased title insurance for a condominium unit she had recently purchased. [Homeowner]'s neighbor subsequently initiated a lawsuit against [Homeowner] alleging that [Homeowner]'s property was subject to a view easement.

    [Homeowner] tendered the complaint to her title insurance company (Insurer) requesting a defense pursuant to her title insurance policy. Commonwealth denied [Homeowner]'s request based on certain exclusions in the policy.

    [Homeowner] sued Insurer alleging a breach of contract and requesting a declaratory judgment that Insurer had a duty to defend [Homeowner] against her neighbor's complaint. The superior court granted Insurer's motion for summary judgment, finding that the policy specifically excluded the view easement from coverage.

    The Supreme Court vacated the judgment, holding that due to the broad nature of the duty to defend and the law's requirement that insurance-policy interpretation be focused on the insured, Insurer had a duty to defend [Homeowner] in the underlying litigation.
Source: Opinion Summary - Cox v. Commonwealth Land Title Ins. Co.

Fro the ruling, see Cox v. Commonwealth Land Title Ins. Co.

Contract For Deed Real Estate Deals: 1st Step On Road To Disaster For Wanna-Be Homebuyers?

From an op-ed column in the Minneapolis Star Tribune:
  • A Robbinsdale woman faced foreclosure even though she had faithfully made payments. She had purchased her house under a contract-for-deed arrangement, but the seller went bankrupt and didn't pay his lender. So the woman lost her home, the payments she had made and the $25,000 she had put down on the property.

    That example -- and dozens of others across the metro area -- bring renewed power to the "buyer beware'' adage. And they demonstrate why more must be done to protect consumers from shady contract-for-deed real-estate deals.

    In a Star Tribune investigation published earlier this week, reporter Jeffrey Meitrodt tracked hundreds of questionable property transactions. In examining 1,330 deals over the past five years, he found that many of the homes were sold for highly inflated prices, with high interest rates and other terms that almost guaranteed that buyers would default. Hundreds of deals occurred without housing inspections that would have revealed code violations and safety hazards.

    Contract sales typically occur as private agreements with no bank, appraisals or lawyers involved. The seller acts as the bank by financing the sale and collecting payments. If the seller still has a mortgage on the property, then he or she must continue to make the payments.

    Traditional property transactions take months to complete and involve title searches, credit checks, truth-in-housing appraisals and inspections. But contract sales can be done with little or no oversight.

    In fairness, not all of these transactions are bad deals. Historically, they have been used between friends, relatives, neighbors, or longtime renters and landlords to help transfer home ownership. And the Greater Metropolitan Housing Corp. nonprofit has successfully used the process to help lower-income people successfully buy homes and stabilize struggling neighborhoods.

    Yet in recent years, these agreements have morphed into big business for some landlords and real-estate investors. In Hennepin and Ramsey counties, registered contract sales grew from 539 in 2007 to 841 in 2012 -- not including transactions that were never formally registered.

    Housing advocates call the deceptive contract deals yet another form of predatory lending that take advantage of lower-income, less-experienced buyers and renters. Ron Elwood, supervising attorney with the Minnesota Legal Services Advocacy Project, said that when the mortgage crisis prompted a government crackdown and tighter lending, some unscrupulous landlords and sellers moved into the contract-for-deed business.

    Elwood said some of his clients thought they were signing new rental forms and learned later that they were contracts used to help the building owners "get around'' city housing code requirements for rental properties.
For the op-ed column, see Editorial: Risky housing deals need more scrutiny (Too many contract-for-deed property buyers are victimized).

See also Contract for deed can be house of horror for buyers (High-risk housing often is sold on such contracts, with little or no oversight).

Dilapidated Homes Sold By County Officials At Tax Foreclosure Sales Are Subsequently Being Demolished By Order Of Local City Officials, Leaving Unwitting Homebuyers Caught In Middle

In Jackson, Michigan, MLive reports:
  • Terrence Hill had spent months working on a new home he thought he'd bought in a Jackson County tax foreclosure sale in September.

    He'd sunk $3,000 in the home on Maple Avenue — putting on a new roof, installing brand new carpeting and putting up new drywall. Just new windows would have completed the home, which he planned to rent out.

    On Friday, Jan., 18, Hill discovered the city had turned utilities off and claimed the home was on its demolition list. Just three days later, he headed over to the property, only to see a crane tearing down the home he'd worked on for four months. “I just couldn’t believe it,” he said. “I was shocked.”

    Hill isn't alone in his confusion.

    Homeowners who think they are helping the city tackle blight by purchasing foreclosed homes are finding themselves in a much different fight.

    Several homeowners who say they've bought houses in a Jackson County tax sale are seeing their new homes demolished, or scheduled to be knocked down.
  • Although the properties have been purchased from the county, city officials say the structures on them are governed by city housing codes and state building codes.

    Buyers also only purchase the deed to a property at tax auctions, this allows the city to demolish them, even if the property is sold by the county, officials said.

Tuesday, February 05, 2013

FTC Issues New Report On Zombie Debt Buyers, Their Structure & Practices

From The Consumerist:
  • In spite of the many rules imposed on the debt collection industry, it still generates, by far, the largest number of complaints to the Federal Trade Commission each year. That’s why the agency recently completed a lengthy investigation into debt-buyers and why they do such a bad job.

    Specifically, the FTC wanted to know why debt-buyers, the companies that snatch up old debt from other companies for pennies on the dollar, seem to constantly be contacting the wrong people and/or using incorrect information about the debt.

Florida Lawyer Gets Bar Boot For Role In Nationwide Loan Modification, Foreclosure Defense Racket

In Fort Lauderdale, Florida, the South Florida Business Journal reports:
  • Fort Lauderdale attorney William Timothy O’Toole was permanently disbarred recently as part of the Florida Bar and Florida Supreme Court’s attorney discipline actions.

    In 2011, the Bar said it had received 20 complaints about O’Toole. In a petition for emergency suspension at the time, O’Toole was accused of allowing non-lawyers to improperly solicit clients on his behalf for loan modifications and foreclosure defense on a nationwide basis, despite the fact he can only practice law in Florida.

    He was alleged to have been splitting fees with non-lawyers, a violation of Bar rules. The Bar announced O’Toole’s disbarment in a monthly release that included discipline actions for five other attorneys in Florida in December and January.

    O’Toole’s permanent disbarment took effect on a Jan. 24 court order. He was found in contempt for failing to comply with a May 22 disbarment order, that might have allowed his reinstatement at some point if he had complied with conditions of the order. But the Bar said in a news release that O’Toole failed to comply with providing a sworn affidavit with names of people who had received a copy of his disbarment order.

Career Lowlife Gets 12+ Years For Role In Effort To Swipe Cape Cod Man's $2.8M+ Waterfront Property

From the Office of the U.S. Attorney (Boston, Massachusetts):
  • A New York man was sentenced [] in connection with a scheme to defraud a Massachusetts man of his Hyannis waterfront property.

    Michael Howard Clott, aka Michael Howard, 60, was sentenced [...] to 152 months, followed by 36 months of supervised release, forfeiture of $1,269,168 and ordered to pay $1,425 in restitution. In November 2012, Clott pleaded guilty to three counts of mail fraud and three counts of wire fraud.

    From December 2009 through April 2010, Clott spent several months on Cape Cod engaged in a scheme to defraud a Massachusetts man of a property he valued at more than $2.8 million.

    During this period Clott was a fugitive from a federal criminal case against him in New York. Clott used the alias “Michael Howard,” and represented to others that he was an attorney and financial executive who specialized in purchasing, repairing and marketing bank-owned real estate when, in fact, Clott was none of those things.

    Clott, however, persuaded a local real estate broker to sell a client’s property for half the asking price, then give the sale proceeds to Clott who would use his purported financial expertise to generate an after-tax benefit for the client equivalent to the client’s asking price.

    Instead of using the proceeds for the client’s benefit, Clott manipulated others to unwittingly assist in negotiating the proceeds check to enable him to deposit the funds in an account for Clott’s personal benefit. However, Clott’s scheme was discovered and the funds were secured before Clott could further disburse or conceal them.

    During the past 30 years, Clott has either been engaged in significant fraud schemes, or been serving time in prison for those schemes.

    Most recently, Clott was sentenced by the Southern District of New York to 259 months in prison which he will serve concurrent to his sentence in the District of Massachusetts.
For the U.S. Attorney press release, see New York Man Sentenced for Cape Cod Property Fraud Scheme.

Monday, February 04, 2013

Recent California High Court Decision Involving Loan Modifications Resets State Law On Parol Evidence When Trying To Establish Fraud When Entering Into Written Contracts

In Fresno, California, The Business Journal reports:
  • It’s rare that a legal case originating in the San Joaquin Valley makes it as far as the state Supreme Court. It’s even more rare that the case sets a precedent changing a decades-old law for years to come.(1)

    That’s exactly what happened this month when the seven-judge Supreme Court of California ruled in favor of limiting fraud liability in contract cases and overturning a provision that has protected defendants for the last 78 years.

    At issue was an agreement signed between River Island Cold Storage of Dinuba and the company’s lenders, the Fresno-Madera Production Credit Association, to restructure more than $775,000 in debt.

    According to the deal inked in March 2007, Lance and Pamela Workman, who own River Island Cold Storage, agreed make specified payments and a pledge of eight separate parcels of land as additional collateral. In return, the credit association promised it would take no enforcement action on the debt for three months.

    Although the Workmans failed to make the required payments as stated in the written agreement, they claimed the association’s vice president approached them prior to its signing and modified the deal.

    Under that oral agreement, which was highly contested in court for the next four years, the couple believed their loan was extended for two years in exchange for additional collateral consisting of two ranches.

    Keeping in step with the written agreement’s terms, the association recorded a notice of default after the company failed to make the required payments within the three-month forbearance.

    Although eventually paying off their debt and avoiding foreclosure proceedings, the Workmans later filed suit, seeking damages for fraud and negligent misrepresentation, and including causes of action for rescission and reformation of restructuring the agreement.

    What followed was a legal can of worms that hasn’t properly been reopened for several decades...
For more, see State Supreme Court resets precedent with local case.

For an earlier post on this case, see California Supremes: Oral Promises Not Appearing In Written Contract Admissible In Court When Trying To Prove Bankster Fraudulently Tricked Borrower Into Signing Agreement.

(1) Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Association, S190581 (January 14, 2013).

In actuality, this case dosesn't create new precedent, it merely resets the law back to the pre-1935 precedent, prior to the state high court ruling in Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258, 263 ("Pendergrass"), a ruling that apparently sidetracked California law for the last 75+ years. From the recent ruling:
  • Plaintiffs, who prevailed below, not only defend the Court of Appeal's holding but, alternatively, invite us to reconsider Pendergrass. There are good reasons for doing so.

    The Pendergrass limitation finds no support in the language of the statute codifying the parol evidence rule and the exception for evidence of fraud. It is difficult to apply.

    It conflicts with the doctrine of the Restatements, most treatises, and the majority of our sister-state jurisdictions. Furthermore, while intended to prevent fraud, the rule established in Pendergrass may actually provide a shield for fraudulent conduct.

    Finally, Pendergrass departed from established California law at the time it was decided, and neither acknowledged nor justified the abrogation.

    We now conclude that Pendergrass was ill-considered, and should be overruled.

Another Elderly Couple Gets Screwed Over By Reverse Mortgage Peddlers; Now-Widowed 91-Year Old Faces The Boot From Family Home After Being Unwittingly 'Deleted' From Loan, Title Documents

Real estate columnist Kenneth Harney writes:
  • The federal Department of Housing and Urban Development has a birthday gift for widow Jeanette Ogle that should cause any senior to think twice before signing up for a government-insured reverse mortgage.

    Later this month, on Ogle’s 92nd birthday, her home in Lake Havasu City, Ariz., is scheduled for foreclosure — not because she did something wrong. Instead, she is expected to lose her house because during a refinancing in 2007, only her husband’s name was included on the reverse mortgage documents prepared by a loan broker. This was despite the fact that both her husband’s and her names were clearly listed as co-borrowers in the documents for the mortgage being refinanced, Ogle says, and the longtime married couple wanted no change in that status.

    But under a controversial policy that is drawing national scrutiny and at least one major lawsuit, HUD — the agency that runs the reverse mortgage program — now insists that when a spouse dies, and the surviving spouse’s name is not on the loan documents, the full mortgage balance becomes due and payable. If a relative or the surviving spouse cannot purchase the house and pay off the debt, the loan may be subject to a foreclosure sale.

    Ogle, whose husband, John, died in 2010, says she cannot imagine why she is facing foreclosure. “We did everything we were supposed to do,” she says. “I signed every piece of paper, we followed the rules.” Jeanette and John assumed that the loan they initially took out in 2004 would allow them to do what advertisements for reverse mortgages consistently promise: stay in their home indefinitely, with some extra money for living expenses.

    But it’s not turning out that way.

    “I just don’t understand why they are doing this to me,” she said in an interview. “I don’t want to lose my home.”

    HUD’s reverse mortgage program, run through the Federal Housing Administration, has been big business. Promoted on TV by pitchmen such as Hollywood’s Robert Wagner and former Sen. Fred Thompson, there were 582,000 loans outstanding nationwide as of November 2011, according to the Consumer Financial Protection Bureau, which issued a critical evaluation of the program last year.

    Reverse mortgages are restricted to seniors 62 years or older. The program allows homeowners to tap into equity and pull out money for use in their retirement years. As long as they pay their property taxes and hazard insurance, generally they don’t have to repay any of the money until they move out, die or sell the house.

    The policy change on surviving spouses that has snagged Jeanette Ogle was not adopted until late 2008, more than a year after the Ogles’ refinancing. That change has been challenged in a federal lawsuit filed by AARP, the seniors advocacy group.

    On behalf of two widows and one widower — Ogle was not a plaintiff — who were threatened with foreclosure, AARP charged that HUD disregarded clear statutory language that allows surviving spouses to remain in their homes even if their name is not on the documents. In an appellate court ruling last month, U.S. Circuit Judge Laurence Silberman said that the court was “somewhat puzzled as to how HUD can justify a regulation that seems contrary to the governing statute.”(1)

    HUD had no comment on that ruling, which sent the case back to a lower court, and refused to discuss Ogle’s pending foreclosure. So did Ogle’s loan servicer, Reverse Mortgage Solutions of Spring, Texas, which initiated the foreclosure action. Fannie Mae, the federally regulated mortgage investor that owns Ogle’s loan, said the foreclosure would have to proceed because the mortgage is insured by FHA and that agency’s rules effectively require it, given the absence of Ogle’s name on the documents.

    Andrew Wilson, a Fannie Mae spokesman, says the company has a document purportedly signed by the Ogles acknowledging that their refinanced mortgage lists only John Ogle as the borrower. Jeanette Ogle says she has no recollection of signing anything of the sort. “Why would we?” she asked in an interview. Wilson says that whatever the facts, Fannie Mae is “sympathetic” toward Ogle’s plight, and will seek to delay any post-foreclosure eviction.

    Jean Constantine-Davis, AARP’s senior attorney on the surviving spouse suit, called Ogle’s circumstances “pretty horrible,” and said HUD’scurrent regulation has been devastating on surviving spouses.” AARP’s suit alleged that there are “hundreds” of elderly victims of the policy.

    Ogle’s son, Robert, has asked the Arizona state Attorney General’s Office to intervene and investigate how his mother’s name was left off the mortgage. But in the meantime, the clock is ticking toward Jeanette Ogle’s foreclosure. And her 92nd birthday.

Colo. Appeals Ct: OK For Title Insurer To Thwart Undisclosed Mortgage Holder's F'closure Attempt, Stiff It On Claim Where Payoff Funds Were Properly Paid To Authorized Servicing Agent Who Subsequently Stole The Cash; Insurer's Failure To Obtain Note, Lien Release At Closing Not Fatal

Colorado attorny Jim Flynn writes in the Colorado Springs Gazette:
  • Title insurance is a unique insurance product in that the insurance company has almost total control over the risks it insures. This is because what the title insurance company insures is the accuracy of its own search of the public records and the correctness of the closing services it provides.

    Contrast this to the company that insures, say, your car. There the insurance company has no control over people crashing into you, rocks flying through your windshield, carjackings, etc.)

    Although claims under title insurance policies are rare, when they occur, the cost of the insurance will prove to have been money well spent. A case decided in 2011 by the Colorado Court of Appeals demonstrates the point.(1)

    In this case, Brenda Armijo purchased a house from Kimberly Poladsky. Poladsky had a mortgage on the property that needed to be paid off at the closing. The mortgage was owned by a company called Dakota Lending. However, Dakota Lending had borrowed money from Citywide Bank and had used Poladsky’s mortgage as collateral for this loan. Therefore, the original of the promissory note Poladsky had signed was not held by Dakota Lending; it was locked up in a drawer at Citywide Bank.

    Dakota Lending nonetheless continued to collect the payments on the Poladsky mortgage. And Citywide had not filed anything in the real estate records showing it had an interest in this mortgage.

    At the closing of the sale from Poladsky to Armijo, Armijo paid the purchase price to the title insurance company. The title insurance company in turn paid Dakota Lending the amount still owing on the Poladsky mortgage. Dakota Lending should then have paid Citywide, obtained the original promissory note, marked the note paid and sent the note on to the title insurance company so the Poladsky mortgage could be released. Instead, Dakota Lending’s owner stole the money.

    Since Citywide hadn’t been paid and still had the original Poladsky note, it started a foreclosure against Armijo’s property. Armijo thereupon filed a claim under her title insurance policy and said: “Fix this please.” The title insurance company dutifully went into action to stop the foreclosure and Armijo’s problem was over.

    But the title insurance company’s legal work had just begun.

    The title insurance company could have simply paid Citywide what it was owed. However, its position was that Dakota Lending had acted as Citywide’s agent when it collected the payoff for the Poladsky mortgage. And a payment to an agent constitutes a payment to the principal.

    Thus, the title insurance company argued, Citywide had been paid and had no right to foreclose. The fact that its agent stole the money was Citywide’s problem, not the title insurance company’s problem. Citywide argued that, since it still had possession of the original Poladsky note, it should be protected from Dakota Lending’s fraud and it should be able to foreclose.

    Both the trial court and the Court of Appeals sided with the title insurance company and concluded that possession of an original promissory note, once a sacred concept in the law, didn’t count for much in this circumstance and the title insurance company had no duty to obtain possession of the original note before giving the mortgage payoff to Dakota Lending.

    Citywide still has a claim against the thief, but good luck with that. Since he’s in prison, his current income is quite limited.
Source: Money & the Law: The role of title insurance.

For the Colorado appeals court ruling, see Citywide Banks v. Armijo, ___ P.3d ___ (Colo. App. 10CA1458, Oct. 13, 2011) (principal may be bound by agent's actions if agent acts pursuant to either actual   or apparent authority).

(1) The background facts of the case, lifted from the appeals court ruling, are set forth below:
  • In 2003, Dakota Lending, LLC (Dakota) executed a promissory note to Bank in exchange for a revolving line of credit that allowed Dakota to borrow up to $4 million. Dakota used this line of credit to finance its business of buying, selling, and holding real estate mortgages. As security for Dakota's revolving line of credit, Bank took assignments of the promissory notes and deeds of trust that Dakota financed or acquired in its course of business.

    In 2007, Kimberly Poladsky and RE Services, LLC (collectively, RE Services) executed a promissory note (Note) payable to Jaguar Mortgage Company. The Note was secured by a deed of trust that encumbered the property at issue here. After a series of transfers Dakota acquired the Note. Dakota then assigned all of its rights and interest in the Note and accompanying deed of trust to Bank. While Bank held the Note, it allowed Dakota to service the loan and to retain for itself periodic payments made on the Note.

    In 2008, RE Services sold the property to Armijo. Title insurance was purchased from Stewart Title, which conducted the closing of the transaction. Stewart Title obtained a payoff statement from Dakota. At closing, Armijo tendered the purchase price, and Stewart Title accepted those funds as closing agent.

    Stewart Title did not demand production of the Note at closing, and did not attempt to determine the identity of the Note holder.

    Bank alleges that Stewart Title also failed to obtain a release of the deed of trust at closing.

    Stewart Title issued a check payable to Dakota for the amount listed on the payoff statement. However, Dakota never tendered the payoff funds to Bank.

    Dakota is now defunct and its managers are under criminal indictment. Bank, which still holds the Note, has declared the Note to be in default.

    Bank brought this action against Armijo to foreclose its lien on the property based on the unpaid Note balance. After a bench trial, the trial court, in a detailed and well-reasoned order, determined that Dakota was Bank's agent and had authority to receive the payoff of the Note. It therefore concluded that Bank was not entitled to foreclose on the property.

Sunday, February 03, 2013

LPS To Cough Up $127M To 46 States, D.C. To Resolve Allegations It Fraudulently Manufactured Legal Documents Used To Foreclose On Homeowners

Bloomberg reports:
  • Lender Processing Services Inc. (LPS) reached a multistate settlement to resolve claims of improper foreclosure practices, including the “robosigning” of documents used to repossess homes.

    The $127 million settlement involves 46 states and the District of Columbia, LPS said [] in a statement. The settlement also will require LPS to reform practices and correct faulty foreclosure paperwork, Illinois Attorney General Lisa Madigan said in a separate statement.

    “LPS and its subsidiaries became a sort of document factory, literally rubber stamping thousands of foreclosures with no regard to fairness and accuracy in the process,” Madigan said.

    State attorneys general came together in 2010 to investigate claims of improper foreclosure practices by mortgage servicers, including robosigning, in which people rapidly signed documents without verifying facts. Five mortgage servicers, including JPMorgan Chase & Co. (JPM) and Bank of America Corp., last year reached a $25 billion settlement with 49 states and the federal government.

    “This settlement reflects the efforts of the states to work together to remedy the widespread abuses occurring in the residential mortgage industry in the past few years,” Florida Attorney General Pam Bondi said in a statement.

    Previous Agreements

    LPS, based in Jacksonville, Florida, said the agreement resolves a probe into document preparation, verification, signing and notarization practices. The company’s shares rose 7.5 percent to $24.08 at 2:04 p.m. in New York.

    LPS said it reached previous agreements with Missouri, Delaware and Colorado, leaving a complaint filed by Nevada as the only unresolved attorney general inquiry. LPS Chief Executive Officer Hugh Harris said the settlement is “another major step toward putting issues related to past business practices behind us.”

    The states’ investigation found an LPS subsidiary engaged in “surrogate signing,” which is the signing of documents by an unauthorized person in the name of another and notarizing those documents as if they had been signed by the proper person, Madigan said.

    New York Attorney General Eric Schneiderman said in a statement that the settlement will prohibit signatures by unauthorized people or those without first-hand knowledge of the facts attested to in foreclosure documents.

Philly Federal Judge Invokes 'Rooker-Feldman' To Boot Homeowner's F'closure Evict Challenge; Says Suit Appears To Be Improper Attempt To Invite Federal Court Review Of State Court Judgment

In Philadelphia, Pennsylvania, The Pennsylvania Record reports:
  • A U.S. District Court judge has refused to review a federal case initiated by a Philadelphia man against the city’s sheriff, acting sheriff and the attorneys who had represented a loan services company involved in an underlying case that arose from the foreclosure and subsequent ejectment of the man’s property.

    In his federal complaint, Omar Jamaladdin asserted that the federal court has jurisdiction over his case, citing various federal statutes and constitutional amendments that were allegedly violated through the defendants’ actions.

    Judge Thomas N. O’Neill, Jr., of the Eastern District of Pennsylvania, however, noted in a Jan. 29 memorandum that it appears as though the plaintiff is seeking to have the federal court review the propriety of a state court ejectment action, which the jurist stated is barred by the Rooker-Feldman doctrine that says a district court lacks subject matter jurisdiction to conduct a review in this type of case.

    “Stated another way, the Rooker-Feldman doctrine bars claims where entertaining the federal claim would be the equivalent of appellate review of the state court Order,” O’Neill wrote.(1)
  • The two lawyers had represented Aurora Loan Services in its mortgage foreclosure action filed against Jamaladdin, the plaintiff in this case, back in September 2010, the court docket sheet in the state case shows.

    The record further shows that in mid-November of this year, Philadelphia Common Pleas Court Judge Idee C. Fox denied a motion by Jamaladdin to vacate the judgment.

    In dismissing the federal action with prejudice, O’Neill wrote that it is apparent from reading the complaint that it is “nothing more than an improper attempt by plaintiff to avoid the judgment of eviction rendered by the Court of Common Pleas of Philadelphia County.” O’Neill’s ruling comes after the defendants in the federal action all filed motions for dismissal.
For the story, see Federal judge refuses to review state court action arising from foreclosure and ejectment.

For the ruling, see Jamaladdin v Dietterick, No.12-4686 (January 29, 2013).

For prior posts applying the Rooker-Feldman doctrine in foreclosure cases, see:
(1) The Rooker-Feldman doctrine applies to "cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments." Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005); see also In re Madera, 586 F.3d 228, 232 (3d Cir. 2009) ("The Rooker-Feldman doctrine is implicated when, in order to grant the federal plaintiff the relief sought, the federal court must determine that the state court judgment was erroneously entered or must take action that would render that judgment ineffectual.").

Newark Feds Bag Nine In Alleged Mortgage Fraud Racket Involving Short Sale 'Flips'

From the Office of the U.S. Attorney (Newark, New Jersey):
  • Nine people involved in a long-running, large-scale mortgage fraud scheme that caused losses of approximately $10 million were charged in two Complaints with conspiracy to commit bank fraud, U.S. Attorney Paul J. Fishman announced.

    Jose Luis Salguero Bedoya, also known as Jose Salguero, 36, of Elizabeth and Verona, N.J.; Paul Chemidlin, Jr., 41, of Morganville, N.J.; Delio Coutinho, 50, of Colonia, N.J.; Joseph DiValli, 44, of Jackson, N.J.; Christopher Ju, 26, of East Brunswick, N.J.; Carmine Fusco, 44, of East Hanover, N.J.; Jose Martins, 31, of Newark, N.J.; Yazmin Soto-Cruz, also known as Yazmin Soto, 32, of Elizabeth, N.J.; and Kenneth Sweetman, 32, of Lyndhurst and Nutley, N.J., were arrested this morning by FBI special agents.
  • According to the Complaints:

    From March 2008 to July 2012, the defendants engaged in multiple mortgage fraud conspiracies targeting at least 15 properties in and around Newark and Elizabeth, N.J. The defendants mortgage frauds took several forms, including obtaining control of properties through fraudulent “short sale” transactions, short sale flips, and identity theft. They submitted materially false mortgage loan documents to lenders in order to obtain loan proceeds, which the defendants then used for their own financial gain. The defendants also obtained money through various sales to straw buyers.

    From March 2008 to June 2010, Salguero, Coutinho, Ju, and Soto conspired with each other and others to release liens on encumbered properties via fraudulently arranged short sale transactions. This allowed the defendants to profit from new fraudulent mortgage loans obtained on the properties from other mortgage lenders.

    To complete the short sale transactions, the defendants submitted materially false closing and other documents to mortgage lenders. They submitted materially false mortgage loan applications to mortgage lenders to obtain new mortgage loans on properties in and around Elizabeth, New Jersey, including a property on Fulton Street.
For the U.S. Attorney press release, see Nine Charged In $10 Million Mortgage Fraud Scheme.