Saturday, August 15, 2015

NC AG To Financially Struggling Homeowners, Wanna-Be Homebuyers: Beware Of Being Baited By Roadside 'Bandit Signs' Advertising "We Buy Homes" Or "Rent-To-Own" Deals; Offers May Be Nothing More Than Cover For Rent-Skimming Racket

From the Office of the North Carolina Attorney General:
  • Scammers are trying to take advantage of struggling families by promising to buy homes for quick cash.

    These scammers send postcards and put out signs proclaiming, “We buy homes!” But rather than buying houses as advertised, most of these companies will try to convince you to sign over control of your home. The company then leases the property out to a new tenant. As a result, you lose rights to your home but remain on the hook for mortgage payments.

    Homebuyers or tenants can also be hit hard by these scams, which can advertise homes in deceptive rent-to-own agreements for big upfront fees.

    Before you reply to a “we buy homes” ad, remember:

    These companies aren’t likely to pay cash for your home or help secure a fast payoff of your current mortgage.

    Beware of anyone who asks you to sign over the title to your home based only on their promises to sell your property.

    If you’re struggling to pay your mortgage, speak with your lender directly. You can also contact the State Home Foreclosure Prevention Project for help at 1-888-442-8188.

    Prospective tenants and buyers should never pay money upfront before signing a lease or contract. Work with a real estate or leasing agent you trust.

    In rent-to-own agreements, always confirm that the person you’re signing the contract with is the owner of the home.

    If you think you’ve experienced a “we buy homes” scam or have questions about mortgage help you’ve heard advertised, please contact our Consumer Protection Division at 1-877-5-NO-SCAM or online at

Homebuyer Who Bought Home On Deferred Payment Plan, Then Lost It To Foreclosure A Year Later Cites Violations Of Anti-Predatory Lending Laws In Lawsuit Against Seller

In Beaumont, Texas, The Southeast Texas Record reports:
  • A Liberty County resident filed a lawsuit against the business which both sold her a home in 2013 and subsequently foreclosed on it the following year, citing infringement of anti-predatory lending legislation.

    Selena Hernandez filed a complaint against Precab Inc. in the Beaumont Division of the Eastern District of Texas on July 13, claiming violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2008 in January 2014

    According to the suit, Hernandez, who was unemployed at the time, purchased real property from the defendant on or about May 30, 2013, for a purchase price of $93,500. The suit states that the seller also acted as the financer for the transaction and that the plaintiff made a 10 percent down payment of $9,350.

    The suit states that the terms of financing were 10 years at 12 percent interest. Documents filed indicate that the defendant failed to use a residential mortgage loan originator as required by Texas law and neglected to follow the Dodd-Frank Act, which requires lenders to verify that borrowers have the ability to repay the loan.

    The complaint states that Precab exercised its Deed of Trust on Jan. 7, 2014, causing foreclosure of the property and sale at auction; repurchased the property to become owner once again, and has failed to engage in communication in an effort to avoid litigation.

    Hernandez seeks compensation for damages, pre- and post-judgment interest, attorney’s fees, expenses, and costs. The plaintiff is represented by Ricardo Guerra of the Law Offices of Rick Guerra in Spring.

Buying A Home On A Land Contract (Or Any Other Form Of Seller Financing), First Speak To A Competent Lawyer Before Moving Forward

From a recent post from Michigan State University Extension:
  • Unable to qualify for a mortgage? If you have suffered through a foreclosure, bankruptcy or other money crisis you may be struggling to qualify for a loan. With time and a plan you may be able to build up your credit again, but what if you do not have time? What if you are unable to find an adequate rental home?

    One alternative may be to purchase a home using a land contract. However, you should know that a land contract is a legal document governed by general contract law with certain statutory requirements, e.g. to be in writing. As is the case with any legal transaction, you are encouraged to seek legal advice from a competent attorney before proceeding with a land contract.

    Nevertheless, a land contract can be a legitimate alternative to conventional financing. The seller, often called the land contract vendor agrees with the buyer, the land contract vendee, to sell the home according to mutually agreed terms and conditions. The parties to a typical land contract usually agree on a purchase price, down payment, monthly payments including interest and a balloon payment of the balance due with interest (total amount due all “ballooned up” and due by a deadline) sometimes only a few years into the contract. The hope is that the purchaser will be able to receive conventional financing by the time the balloon payment is due. Although the actual title to the home does not transfer to the purchaser until the debt is paid off, equitable title or the purchaser’s right to obtain actual title along with typical landowner rights does pass with the execution of the contract.

    There are risks and advantages to both the seller and the purchaser. The seller has the advantage of reclaiming possession of the home if the purchaser fails to perform or defaults on the deal. In addition, the seller earns interest, and since equitable title has passed to the purchaser, the seller is not responsible for repairs and maintenance normally inherent with being a landlord.

    The purchaser has the responsibility of maintaining the home and has the risk of losing all of her payments made in the event of default and forfeiture of the land contract. However, since the financing is being done by the seller, the purchaser may be able to qualify even with bad credit as long as she has enough for the down payment.

    All of these details must be in writing, and there are potential scams to avoid.(1) Again, seek competent legal counsel before proceeding with a land contract. While in the lawyer’s office, you may want to inquire about a lease with the option to purchase the property. This is an alternative to a land contract that may fit your circumstances even better. The Michigan Foreclosure Taskforce has put together a good summary of land contracts as well.(2)
Source: Buying on a land contract instead of a mortgage (Unable to qualify for a traditional mortgage due to a foreclosure? Bankruptcy or low credit score? A land contract may give you the option to purchase a home after foreclosure).

(1) Go here for earlier posts on contract for deed ripoffs and land contract scams.
(2) Michigan Foreclosure Task Force: Michigan Land Contract Guide.

Friday, August 14, 2015

The Orgy Of Waste & Corruption Continues In The Brooklyn Public Administrator's Office As City Comptroller Urges Introduction Of Real Oversight, Real Accountability

In Brooklyn, New York, the New York Post reports:
  • Rest in peace? Easier said than done.

    The Brooklyn office that handles estates of the deceased is sitting on $7.5 million in unclaimed funds from cases that date back dozens of years — including one account that’s still open from 1934, an audit found.

    Comptroller Scott Stringer said the Brooklyn Public Administrator’s office had 457 open estate files as of late 2014 that ranged from 14 to 80 years old.

    The case from 1934 still remarkably contained $12,384.64 in undispersed funds stemming from the sale of two properties.

    The Brooklyn Public Administrator’s office also had no idea to which estates a total of $91,299 in bank account funds belonged – depriving unknown kin of their rightful inheritances.

    Auditors found similar deficiencies in the office of the Bronx Public Administrator, where a database listed an astounding 19,877 open estate cases in late 2013. But a subsequent review in of hard-copy files in early 2014 identified just 1,157 open accounts.

    The Public Administrators offices in both Brooklyn and the Bronx have been in a state of disarray for far too long, leaving the assets of estate beneficiaries at a very real risk of fraud and waste,” said Stringer.(1)

    In its response, the office of Brooklyn Public Administrator Richard Buckheit, who only took the helm last year, said the age-old estates and other problems stemmed from longstanding issues with the office.

    “Identifying these estates, determining who is entitled to the remaining funds and then distributing the remaining funds is a long term project that will take a significant period of time to correct,” the office wrote, adding that the fixes were well underway.

    Bronx Public Administrator Frank Randazzo said many of the supposed problems identified by the comptroller were administrative in nature only, so that they had no practical implication on the office’s work.

    But comptroller officials countered that the disarray and rule-breaking at both offices opened the door to corruption and made external oversight all but impossible.

    “It’s long past time to introduce real oversight and real accountability, and fix this very serious problem,” said Stringer. “New Yorkers deserve a lot better.”
Source: Office managing estates of deceased sits on unclaimed $7.5M.

Go here for earlier posts on the orgy of corruption in the Brooklyn Public Administrator's Office.

(1) For recent examples of the antics that go on in the Brooklyn & Bronx Public Administrator's offices, see:

Thursday, August 13, 2015

Co-Owner Of Troubled NYC Development Project Buys Out Its $44.4 Million Mortgage, Then Begins Foreclosing On Itself In Effort To Financially Squeeze Out Unwanted Partners & Snatch Site For Itself

In New York City, the New York Daily News reports:
  • A Chinese private equity firm with plans to build a gleaming 47-story condo and hotel tower on an empty lot near Hudson Yards is now making moves to force the foreclosure of that very same site.

    Kuafu Properties, which has been arguing with its partners over finances and negative publicity, has made the unusual move, through an affiliate, of acquiring a $44.4 million loan granted to the project by banking giant UBS and is now filing to foreclose on itself and its partners, citing a loan maturity default, the Daily News has learned.

    If successful, Kuafu could force a public auction of the property and then potentially submit its own bid to purchase it for a second time - without its current partners, Blackhouse Development and Siras Development.

    In that case, it would have to outbid potential competitors.

    Kuafu officially filed to foreclose on the property, at 462-470 11th Ave. and 554 W. 38th St., July 10 in State Supreme Court, according to public documents.

    When contacted by the Daily News, Kuafu said it had moved to acquire the loan after learning that UBS had been approached by other investors looking to buy it in a bid to gain control of the property.

    "After learning that 'loan to own' investors were attempting to purchase the UBS mortgage loan, an affiliate of Kuafu acquired the loan at par and is now proceeding with a foreclosure process that will be conducted so as to maximize value for all investors," said a spokesman for Kuafu.

    He declined to comment further on Kuafu’s plans.

    Kuafu and its partners had plans to build a massive, 380,000-square-foot residential and hotel project known as Hudson Rise but the project stalled after the partners began to clash. Kuafu claims that Blackhouse CEO Sean Ludwick spooked the investment community after press reports that he’d allegedly drawn lewd illustrations on murals in his ex-girlfriend’s apartment.

    It also claimed that Ludwick had shown questionable financial judgement and that Siras had gone behind its back to ink an exclusive arrangement for brokerage Compass to sell the apartments without its knowledge.

    Spokespersons for Blackhouse and Siras didn’t immediately respond to requests for comment.

Calculating Deficiency Judgment When Loan Collateral Is Sold At Auction For "Materially Less" Than Its Fair Market Value

The National Law Review reports:
  • When a lender forecloses on a parcel of property, it is not unusual for the property to sell for an amount that is less than the amount owed. In that instance, the lender often seeks a judgment for the difference or the deficiency. In Tennessee, a statute directs that the deficiency judgment shall be the total amount of the debt less the fair market value of the property at the time of the sale. (Tenn. Code Ann. Section 35-5-118.)

    The sale price at the foreclosure is presumed to be the fair market value absent fraud or irregularity in the sale process. But, the debtor can overcome that presumption by showing that the sale price is “materially less” than the fair market value of the property.

    In Cutshaw v. Hensley, No. E2014-01561-COA-R3-CV (Tenn. Ct. App. July 29, 2015), the court of appeals held that a price at the foreclosure sale that was 78% less than the fair market value of the property was “materially less.” That conclusion is not surprising. The court of appeals found that the fair market value was the price that the lender (who purchased the property at the foreclosure sale) sold the property 49 days later.

    Generally, Tennessee courts have held that the purchase price received after the foreclosure sale is not determinative of fair market value on the date of sale. In this case, however, the court noted: (a) the absence of an appraisal, (b) the short period of time that elapsed, and (c) the lender’s admission that no significant changes to the property were made during the interim period. These factors made the subsequent sale price relevant and determinative.

    So, when conducting a foreclosure sale, a lender should obtain an appraisal of the property contemporaneously with the sale if the lender wishes to obtain a deficiency judgment.

Sheriff Faces Ethics Charges For Buying Home At His Own Sheriff's Sale Auction; His Department Had Seized Premises Three Months Earlier

In Vermilion Parish, Louisiana, KATC-TV Channel 3 reports:
  • The Louisiana Board of Ethics voted last week to file charges against Vermilion Parish Sheriff Michael Couvillon for his purchase of a home his department seized and then he bought at his own Sheriff sale auction.

    Back in May 2014, a KATC investigation into the sale found that Couvillon may have violated state ethics law that that prohibits public servants from entering into contracts and transactions with the agencies they serve.

    The home was seized by the Vermilion Parish Sheriff's deputies in November 2013. The notice of seizure, issued under Couvillon's authority, set an auction date for February 2014.

    Last assessed at $106,000, the home sold for $58,000 when Couvillon purchased the home at the auction through a representative, where he was one of only two bids.
For more, see Ethics board files charges against Vermilion sheriff following KATC Investigation.

See also, Corruption Accusation Over Sheriff's New Home; Sheriff Defends Purchase (A Vermilion parish woman is calling foul over the sale of her foreclosed home. It's a sale that could cause potential ethical and legal problems for one elected official in Vermilion Parish).

Wednesday, August 12, 2015

Elder Law Attorney Faces 4-12 Years After Admitting Handiwork In Ripping Off $797K From Vulnerable Clients

From the Office of the Queens County, New York District Attorney:
  • Queens District Attorney Richard A. Brown [] announced that a Great Neck, Long Island, attorney has admitted to stealing more than $797,000 in funds that belonged to clients over a four year period.(1)

    District Attorney Brown said, “The defendant has admitted to breaching her fiduciary duty and unjustly enriching herself at the expense of her clients. Under the terms of the guilty plea in which she admitted her guilt, the defendant will sign a confession of judgment to begin the process of making her victims financially whole and faces the prospect of serious prison time. This is a fair and reasonable resolution to the case.”

    The District Attorney – who was appointed a special prosecutor in the case at the request of the Nassau County District Attorney’s Office – identified the defendant as Martha Brosius, 52, of Great Neck, New York. Brosius, an Elder Law attorney who maintained offices in Great Neck and Manhattan, appeared yesterday before Acting Supreme Court Justice Helene F. Gugerty and pleaded guilty to two counts of second-degree grand larceny and one count of scheme to defraud.

    Justice Gugerty set sentencing for August 12, 2015, and indicated that she would cap any prison term at four to twelve years. At that time, Brosius also will sign a confession of judgment for $797,000.

    District Attorney Brown said that, in pleading guilty, Brosius admitted to stealing more than $797,000 in funds from clients – including a 77-year-old man deemed incapacitated under the mental hygiene law and for whom Brosius had been appointed as a guardian and two brothers who hired Brosius to handle their father’s estate and sell his residence in order to set up a Special Needs or Supplemental Needs Trust for their disabled sister, who was the sole inheritor of their father’s estate.
Source: Long Island Attorney Admits To Embezzling $797,000 In Funds From Clients (Will Sign Confession Of Judgment; Faces Up To 4 to 12 Years In Prison).

(1) Clients found to have been victimized by any alleged trust fund theft may be able to seek some reimbursement for being screwed over by turning to the The Lawyers’ Fund For Client Protection Of the State of New York, which manages and distribute money collected from annual dues paid by members of the state bar to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the bar acting as an attorney or a fiduciary.

See generally:
  • N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;

    Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.
For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

Elderly Attorney Ends Career By Getting Pinched For Allegedly Duping Disabled, Cancer-Stricken, Foreclosed Client Out Of Approximately $200K Of Surplus/Equity Proceeds From Foreclosure Sales; Local DA Probe Piggybacks Off State Bar Investigation; Disbarment Proceedings Pending

In Oakdale, California, The Modesto Bee reports:
  • Oakdale attorney James Arthur Fonda, whose disbarment is pending, was arrested [...] and charged with stealing up to $210,000 of a client’s money.

    Fonda, 70, wrote 163 checks to himself from the client’s account from 2009 to 2012, cashed them and used the money on groceries, gas, rental payments and business payroll, an arrest warrant affidavit says. The client suspects Fonda also bought a Jaguar and paid for a trip to Paris for his wife and gave a Christmas bonus to his secretary, the document says.

    “The only explanation I can make as to why I did it,” Fonda reportedly said under oath in a California State Bar deposition, “is those (moral) principles and that knowledge didn’t outweigh the ego of not wanting to admit that I couldn’t meet my bills and expenses.”

    Fonda admitted fault in the bar investigation and agreed to repay the client $184,100, according to a bar enforcement document.(1) A State Bar Court judge on July 24 said Fonda should be disbarred and the recommendation is on its way to the California Supreme Court.

    The arrest warrant affidavit suggests that the Stanislaus County District Attorney’s Office is basing its prosecution on the State Bar investigation.

    Fonda’s client had inherited two San Jose homes and lost them in foreclosure but realized $486,706 in equity proceeds at public auction, the bar investigator found. The client was going through a divorce, and Fonda persuaded him to put the money in a trust account controlled by Fonda to keep the man’s wife from getting it, the affidavit says.

    The client is disabled and has cancer, and Fonda’s actions caused him significant harm, the bar enforcement document says.

    The checks to Fonda were marked for “advance fees,” but he ultimately admitted to the State Bar that he did nothing to earn them, the affidavit says. The bar investigator shared her findings with the District Attorney’s Office in June and fraud investigator Glenn Gulley interviewed Fonda’s client and his caretaker in July, leading to Fonda’s arrest.

    Fonda had been privately reproved in 2003 for abandoning two family law clients and committing a trust account violation, and was publicly reproved in 2009 for taking a woman’s divorce case but failing to perform, enforcement documents say.

    Fonda faces a felony grand theft charge with an enhancement of engaging in a pattern of fraud resulting in a loss of more than $100,000. He was arrested [] in Oakdale and remained at the Stanislaus County jail in the late afternoon. Bail was set at $20,000.
Source: Oakdale attorney accused of stealing client’s money.

(1) The bar enforcement document also provides that if the California State Bar's Client Security Fund has reimbursed the victim for all or any portion of the principal amount, Fonda must pay restitution to the Client Security Fund of the amount paid plus applicable interest and costs in accordance with California Business and Professions Code section 6140.5.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

Florida Attorney Voluntarily Surrenders Bar Ticket Amidst Multiple Probes Into His Role In "Mass Joinder" Mortgage Rescue Swindle That Scammed At Least 1,000 Homeowners Out Of $4.7 Million

In Tampa, Florida, the Tampa Bay Times reports:
  • A Tampa lawyer who helped swindle homeowners out of $4.7 million during the mortgage crisis has had his law license revoked by the state Supreme Court.

    In July of 2014, the attorneys general for Florida and Connecticut filed a federal lawsuit alleging lawyer Ian S. Berger, along with several others, had scammed struggling homeowners by promising them they would receive loan modifications if they signed on to "mass joinder" lawsuits against their lenders.

    At least 1,000 borrowers did. For this privilege, the firms typically charged them $6,000 in fees, plus an extra $500 a month in "maintenance" costs.

    The firms did file lawsuits against the banks but, according to the complaint, they never applied for or obtained the hoped-for loan modifications. The groups made "no attempt to delay or stop foreclosure," for their clients.

    In addition to targeting Berger and his Tampa firm, The Berger Law Group, the lawsuit named two other firms — Tampa-based Resolution Law Center and another Florida company called Litigation Law.

    Last December, Berger settled, agreeing to pay $215,000 as an individual as well as about $1.1 million from his law firm.

    Facing multiple investigations into his actions by the Florida Bar, he voluntarily petitioned Florida's Supreme Court to revoke his law license, a request the court granted. He will have the option to reapply for a license in five years.

    In an email to the Tampa Bay Times, Berger, 37, said he had been led astray by the Resolution Law Group.

    "I was led to believe the original lawsuit had merit and had only the best intentions from the beginning," he wrote. "I did the honorable thing by voluntarily surrendering my license. When I am able, I plan on compensating those that have been inadvertently harmed."

Homebuyer's Lawyer Found Liable For Negligence In Connection w/ Crappy Title Search Delegated Out To & Performed By Another Attorney; SC Supremes: 'Delegation Of Task ≠ Delegation Of Liability'

From an opinion summary from US Law:
  • Amber Johnson filed suit against her closing attorney, Stanley Alexander, arguing he breached his duty of care by failing to discover the house Johnson purchased had been sold at a tax sale the previous year. The trial court granted partial summary judgment in favor of Johnson as to Alexander's liability.

    On appeal, the court of appeals held Alexander could not be held liable as a matter of law simply because the attorney he hired to perform the title work may have been negligent. Instead, the court determined the relevant inquiry was "whether Alexander acted with reasonable care in relying on [another attorney's] title search"; accordingly, it reversed and remanded.

    The Supreme Court reversed the court of appeals: even absent Alexander's admissions, the Court found it was error to equate delegation of a task with delegation of liability. The Court therefore agreed with Johnson that an attorney was liable for negligence in tasks he delegates absent some express limitation of his representation.

    Applying this standard to the facts, the Court found the grant of summary judgment was proper because there was no genuine issue of material fact as to liability. The case was remanded back to the trial court for a determination of damages.
Source: Opinion Summary - Johnson v. Alexander.

For the court ruling, see Johnson v. Alexander, No. 27553 (N.C. July 29, 2015).

Tuesday, August 11, 2015

Western Union Subsidiary Agrees To Fork Over $38M+ In Restitution, Penalties To Settle Charges That It Peddled Bi-Weekly Mortgage Payment Program That Deceptively Promised Homeowners Ten$ Of Thousand$ In Interest Savings Through Accelerated Loan Payments

From Public Citizen's Consumer Law & Policy Blog:

The Consumer Financial Protection Bureau acted [] against Paymap Inc.(1) and LoanCare, LLC for deceiving consumers with advertisements for a mortgage payment program that promised tens of thousands of dollars in interest savings from more frequent mortgage payments. Under the terms of the orders, Paymap will return $33.4 million in fees to consumers and pay a $5 million civil penalty to the CFPB, and LoanCare will pay a $100,000 civil penalty.

The CFPB found that Paymap and LoanCare violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against deceptive acts and practices. Specifically, the Bureau found that consumers were:
  • Lured with deceptive promises of savings: Paymap made claims on its website such as, “The average customer will achieve over $33,000 in interest savings” using the Equity Accelerator Program. However, Paymap had no factual basis to support this claim. Moreover, only a tiny percentage, if any, of its customers achieved that amount of interest savings.
  • Misled about when their payments would be applied: Paymap and LoanCare told consumers in their direct mail solicitations that enrolling in the Equity Accelerator Program would change the consumers’ payoff schedule to “every 2 weeks.” Although Paymap makes more frequent withdrawals from consumers’ accounts in the Equity Accelerator Program, it does not actually make more frequent payments on consumers’ mortgages. Instead, Paymap holds the collected payments in custodial accounts, and then pays consumers’ mortgages on their original monthly schedule. Consumers are charged a transaction fee with every withdrawal. Any interest savings that consumers may achieve through the Equity Accelerator Program is because they make a higher annual mortgage payment in the Program, using the same payment schedule as before enrollment.
The CFPB press release is here. The consent orders are here and here.

Source: CFPB Acts Against Mortgage Payment Company For Deceptive Ads.

(1) According to one of the consent orders, Paymap is a wholly-owned subsidiary of The Western Union Company, the financial services and communications company founded in the mid-19th century that originally made its name by peddling telegrams.

Bankster Agrees To Cough Up $1.6M In Damages, Penalties To Settle Charges That It Generally Jerked Around Some Homeowners On Loan Modifications, Forcing Them To Waive Legal Rights To Obtain Repayment Plan

DSNews reports:
  • The Consumer Financial Protection Bureau (CFPB) [] announced a consent order against Fort Worth, Texas-based mortgage servicer Residential Credit Solutions for allegedly blocking borrowers' efforts to prevent foreclosure on their homes.

    The CFPB ordered Residential Credit Solutions to pay $1.5 million in redress to consumers and fined the servicer an additional $100,000 civil penalty. The Bureau said an investigation revealed that Residential failed to honor loan modifications transferred from other servicers, treated consumers as if they were in default when in fact they were not, falsely claimed consumers had extra money in escrow and were due a refund, and forced consumers to waive their rights to obtain a repayment plan.

Monday, August 10, 2015

California Man Cops Plea To Three Felonies For Role In Operating Loan Modification Racket That Clipped Five Homeowners Out Of $29K In Upfront Fees While Not Providing Actual Services

In Oxnard, California, the Ventura County Star reports:
  • An Oxnard man pleaded guilty [] to three felony charges in connection with a fraudulent loan modification company he operated in Thousand Oaks, the Ventura County District Attorney's Office said.

    Michael McDevitt, 33, operated the company called Scovis Law Group throughout 2010 and 2011 in which time the business was represented as an expert in the field of loan modifications, prosecutors said. However, the company illegally collected up-front fees for the services, the District Attorney's Office said.

    McDevitt and his agents gave false representations to victims regarded purported loan modifications while collecting these fees, prosecutors said. The five victims named in the case received no actual services and lost about $29,000, the District Attorney's Office said.

    Throughout the investigation it was discovered that McDevitt did not disclose $67,818 in taxable income for 2009 or the $718,197 in taxable income for 2010, prosecutors said.

    McDevitt pleaded guilty to felony grand theft, tax evasion and foreclosure consultant fraud, the District Attorney's Office said. He is expected to receive 16 months in state prison and was scheduled to be sentenced at 8:30 a.m. Sept. 3, prosecutors said.

Sales Rep Who Peddled Bogus Loan Modifications Cops Guilty Plea for Role In Ripoff That Screwed 500+ Struggling Homeowners Throughout U.S. Out Of At Least $2.3 Million

From the Office of the U.S. Attorney (New York City):
  • Preet Bharara, the United States Attorney for the Southern District of New York, announced that JONATHAN LYONS, a former sales representative at a company purporting to provide mortgage modification services, pled guilty [] in Manhattan federal court for his role in a multimillion-dollar scheme that victimized more than 500 financially struggling homeowners across the country.


    According to the allegations contained in the Indictment and related Informations, the plea agreements, and statements made in court proceedings:

    From approximately January 2009 to June 2011, LYONS and his co-conspirators perpetrated a scheme to defraud homeowners who were in danger of losing their homes because they could not afford to pay their residential mortgages. Through a company located in Long Island, New York (“Company-1”), and its successor companies (the “Mortgage Modification Companies”), LYONS, his co-conspirators, and other employees falsely promised to help financially struggling residential mortgage holders refinance their mortgages for lower interest rates and monthly payments.

    Despite the defendants’ claims, however, the Mortgage Modification Companies delivered little or no service to their customers, diverting most, if not all, of the customers’ payments to the Mortgage Modification Companies’ owners and employees rather than using those funds to assist customers in procuring mortgage modifications. Through their scheme, the Mortgage Modification Companies obtained at least $2.3 million from more than 500 homeowners throughout the United States.

SC Feds Squeeze Guilty Plea Out Of Scammer For Clipping Homeowners Seeking Loan Modifications For Upfront Fees, Then Never Successfully Negotiating Satisfactory Payment Plans For Victims

From the Office of the U.S. Attorney (Florence, South Carolina):
  • United States Attorney Bill Nettles stated [[ that Shayne Harrison Smith, age 47, of Myrtle Beach, South Carolina has entered a guilty plea in federal court in Florence, to Wire Fraud, a violation of 18 U.S.C. § 1343.

    Information presented at the change of plea hearing established that Mr. Smith was involved in a “mortgage rescue scheme.” He convinced distressed home owners that he could negotiate better terms of repayment with their lenders. Mr. Smith required the victims to pay him fees which he used for his own benefit. He encouraged some of the home owners to cease communicating with their lenders and stop making payments to the lenders, because he would take care of everything. Mr. Smith never successfully renegotiated any of the mortgages.

Sunday, August 09, 2015

Bay State AG Scores Win In Obtaining $625K+ Judgment Against Attorney Who Pocketed Illegal Upfront Fees Peddling Bogus Loan Modifications To Spanish, Portuguese-Speaking Homeowners

From the Office of the Massachusetts Attorney General:
  • A Revere attorney and his two businesses have been ordered to pay more than $625,000 for targeting homeowners with deceptive advertisements and demanding thousands in illegal advance fees for mortgage modification and foreclosure relief services they failed to deliver, Attorney General Maura Healey announced [].


    The final judgment, issued by Suffolk Superior Court Judge Paul Wilson against David Zak and his businesses Zak Law Offices, P.C., and Loan Modification Group, Inc., finds defendants liable under the state’s Consumer Protection Act. The court found that the defendants preyed upon at-risk homeowners throughout Massachusetts who were facing the imminent loss of their homes, took unlawful advance fees based on deceptive guarantees that mortgage loans could be modified to prevent foreclosures.

    The judgment requires the defendants to pay more than $625,000, including $400,000 in civil penalties, more than $68,000 in attorney’s fees and costs, and $157,000 in consumer restitution for approximately 65 former clients(1) who complained to the AG’s Office about the deceptive practices and unlawful advance fees.

    As found by the Superior Court, the defendants targeted Spanish and Portuguese-speaking homeowners with misleading radio advertisements guaranteeing dramatic loan modifications and legal representation to avoid foreclosure. The defendants failed to disclose in the advertisements that there was no guarantee of success, when in fact they had failed to obtain the promised modifications for most of their clients.

    On the basis of these false promises, and in violation of Massachusetts law, the defendants demanded non-refundable advance fees of $5,000 or more from distressed homeowners – when foreclosure relief services were available for free elsewhere – only to fail to deliver on their promises, leaving homeowners even more at risk of foreclosure.

    Under the terms of the judgment, Zak and his companies are enjoined from engaging in deceptive advertising or soliciting, arranging or accepting advance fees for mortgage assistance or foreclosure-relief services.
Source: Revere Attorney Ordered to Pay More Than $625,000 for Unfair and Deceptive Foreclosure Relief Services (David Zak Targeted Homeowners with Deceptive Advertising and Charged Thousands in Illegal Advance Fees; Ordered to Cease Practices and Pay Civil Penalties and Consumer Restitution).

(1) In an effort to seek some reimbursement for being screwed over, the victims here might try turning to the Massachusetts Clients' Security Board of the Supreme Judicial Court, which manages and distribute money collected from annual dues paid by members of the bar to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the bar acting as an attorney or a fiduciary.

For similar "attorney ripoff reimbursement funds" that cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

Head Of NYS Fund That Repays Victimized Clients Of Thieving-Lawyer Escrow Ripoffs Calls For Statewide System For Disbarring, Criminally Prosecuting Pilferers; Fund Coughs Up About $6 Million Annually

In Albany, New York, The Associated Press reports:
  • The New York fund that repays cheated law clients called [] for a statewide system for disbarring and prosecuting attorneys who steal from their clients.

    Timothy O’Sullivan, executive director of the Lawyers Fund for Client Protection, said it’s theft when lawyers take client escrow funds for personal use, and it should be standard practice statewide for disciplinary committees to handle those cases. Punishment now can vary, ranging from a private letter of caution to censure, suspension or disbarment.(1)

    “Our trustees recommend that there should be a uniform disciplinary policy that a disciplinary committee will make a prompt referral to the local district attorney when that committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability,” O’Sullivan said. “This policy should help protect law clients and promote public confidence in our justice system.”

    Addressing the Commission on Statewide Attorney Discipline, he said the fund’s trustees have granted 8,032 awards for more than $181 million since 1982.

    The fund pays about $6 million involving about 30 lawyers annually, O’Sullivan said. There are 297,000 lawyers registered in New York.

    Attorney Peter Johnson, who presided at Tuesday’s hearing, said the commission appointed by Chief Judge Jonathan Lippman in February is reviewing current practices, including whether to recommend earlier public disclosure of disciplinary cases and consistent handling of attorney misdeeds in New York’s four judicial departments and their disciplinary committees. Other hearings are planned in Buffalo and Manhattan.

    O’Sullivan also recommended requiring lawyers in the two upstate judicial districts to adopt the downstate districts’ requirement that lawyers state at their bi-annual registrations that they have read and are in compliance with the rules for safeguarding client funds and property. The fund also advocates random audits of attorney escrow accounts.

    Johnson said it was unsettling to hear it’s not standard in New York to disbar lawyers who steal. He also questioned whether the confidentiality of the complaint process has kept lawyers from being prosecuted.

    “Our experience is that on occasion when committees have evidence of theft by lawyer injuring a client there are not referrals being made by the disciplinary committees or grievance committees to the district attorney’s office,” O’Sullivan replied. “There’s not an open line of communication in appropriate circumstances.”

    The disciplinary committees receive about 11,000 to 12,000 complaints a year, with about 90 percent unfounded, said John Caher of the commission staff.

    Benjamin Cunningham, a Bronx resident, said he filed a disciplinary complaint in the First Department against the lawyer he paid $7,000 to appeal his civil case against federal marshals over a search of his home that left him injured. The lawyer never filed a brief, his appeal was rejected, and the lawyer then billed him for $60,000, which he didn’t pay. His complaint was rejected, he said.

    David Miranda, president of the New York State Bar Association, said lawyers should have more access to complaint information to ensure their due process rights, noting many other states do that. He said unsubstantiated complaints can damage careers.
Source: N.Y. fund for cheated clients wants thieving lawyers disbarred.

See also, Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.

(1) For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

NYC Lawyer Disbarred For Continuing To Practice Law, Taking Client Money After Being Earlier Suspended For Allegedly Improperly Playing Around w/ Client Trust Funds

In New York City, The Real Deal (NYC) reports:
  • Luigi Rosabianca, a real estate attorney who once bragged that his clients sometimes “come in with suitcases,” was disbarred from practicing law on Tuesday after a court found he violated the terms of his suspension.

    Rosabianca’s law license was suspended in March when the New York Appellate Division First Department found evidence that he had mishandled client funds on multiple occasions and failed to follow proper protocols in taking out a $1.8 million personal mortgage.

    On Tuesday, the court found that Rosabianca continued to represent clients and accept payments in the weeks following his March 12 suspension. As late as April 29, he was still falsely representing himself as a licensed New York attorney on his web page.

    “The [Departmental Disciplinary Committee’s] motion to disbar respondent without further proceedings is granted based upon the uncontroverted evidence that respondent has continued to practice law in violation of this Court’s prior suspension order,” wrote Justice Peter Tom, on behalf of a unanimous panel.

    Tuesday’s order also appointed a receiver to oversee Rosabiana’s attorney trust account, in light of evidence that he made improper transfers, including transferring $1.5 million in client funds to “what was believed to be an Italian banking or investment firm.”
For the story, see Real estate lawyer Luigi Rosabianca disbarred (Attorney who specialized in foreign buyers was found to have mishandled client funds).

(1) Clients found to have been victimized by any alleged trust fund theft may be able to seek some reimbursement for being screwed over by turning to the The Lawyers’ Fund For Client Protection Of the State of New York, which manages and distribute money collected from annual dues paid by members of the state bar to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the bar acting as an attorney or a fiduciary.

See generally:
  • N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;

    Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.
For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.