Wednesday, December 31, 2008

Seton Hall Pro Bono Program Intervenes On Behalf Of Elderly Homeowner In Equity Stripping, Foreclosure Rescue Scam

In Newark, New Jersey, lawyers and law students from the Center for Social Justice (CSJ) at Seton Hall University School of Law have successfully vacated a foreclosure judgment against an elderly couple of were allegdly victims of a foreclosure rescue, equity stripping scam that resulted in a loss of approximately $400,000.00 in equity in their home by participating in a predatory lending/foreclosure rescue scam. CSJ believes the scam has been perpetrated on numerous other distressed homeowners in the area. The homeowners will now, along with CSJ, defend against the foreclosure.(1)

For the CSJ press release, see CSJ Stays Foreclosure, Charges Mortgage Scam.

(1) According to the press release, the Counterclaim filed on behalf of the elderly homeowners by CSJ against Third-Party defendants (a disbarred lawyer, a subprime lender, and others) includes, in part, a petition for relief for multiple violations of:

Reportedly also included in the countersuit are a number of common law claims. The pleading also charges that the foreclosing entity, assignee U.S. Bank:

  • Lacks standing to enforce the Note securing the Property because U.S. Bank is not a proper assignee and holder of the Note pursuant to N.J.S.A. § 12A:3-201 and Article 3 of the Uniform Commercial Code ( “UCC” );
  • Is not a “holder in due course” and therefore is vicariously liable for the Webbs’ claims and defenses against the originators of the mortgage, Credit Suisse Financial Corporation and its agent, ANM Funding, LLC;
  • Lacks standing to seek foreclosure because the mortgage was not assigned to it until after about four months the foreclosure action was filed. N.J.S.A. § 46:9-9 requires mortgage assignments to be in writing.

Unlicensed Practice Of Law Becomes An Issue With Some Loan Modification Firms

A recent story in The Washington Post raises an issue that could begin taking hold in targeting certain loan modification firms for engaging in illegal conduct when seeking out financially distressed homeowners:

  • [T]he pitch companies make varies. But one approach includes paying a company to challenge the legality of a loan -- a process housing experts say can be long and complicated.

  • Vienna-based Mortgage Analysis and Consulting, for example, charges $150 for a consultation and $250 to $500 for a preliminary audit. If the audit finds problems with the loan document, Mortgage Analysis will refer the borrower to a lawyer, who may charge an additional $2,000 retainer. If the lawyer requests a more in-depth audit, Mortgage Analysis charges up to $1,750, which clients can pay in installments.


  • Virginia's State Bar is investigating a complaint that [the firm's founder Jose] Semidey has illegally practiced law.(1) Semidey said he makes clear he is not a lawyer and refers clients to a list of lawyers he has compiled.

For more see Firms Charge Thousands To Modify Mortgages (Nonprofits Offer Service For Free, Advocates Say).

(1) Unlicensed or unauthorized practice of law has been raised as an issue in at least two recent civil lawsuits against loan modification firms, one by the Tennessee Attorney General, and the other by the Florida Attorney General.

In addressing what constitutes the unlicensed practice of law, the Florida Supreme Court, in The Florida Bar v. We The People Forms And Service Center Of Sarasota, Inc., 883 So. 2d 1280; (Fla. 2004), relied on the following survey of its prior decisions in holding that certain activities of a non-lawyer constituted the unlicensed practice of law:

  • Florida Bar v. Catarcio, 709 So. 2d 96 (Fla. 1998) (holding that a nonlawyer who has direct contact with individuals in the nature of consultation, explanation, recommendations, advice, and assistance in the provision, selection, and completion of legal forms engages in the unlicensed practice of law);

  • Florida Bar v. Becerra, 661 So. 2d 299 (Fla. 1995) (enjoining a nonlawyer from advertising in any fashion that may lead a reasonable lay person to believe that the nonlawyer may offer to the public legal services, legal advice, or personal legal assistance);

  • Florida Bar v. Consol. Bus. & Legal Forms, Inc., 386 So. 2d 797 (Fla. 1980) (holding that a corporation engaged in the unlicensed practice of law where its officers and stockholders were nonlawyers with no legal training who supervised and maintained a degree of control over the legal services it furnished through its lawyer employees and noting the inherent conflict of interest between the legal needs of the client and the monetary policy of the corporation and how such a business structure permits unlicensed and unregulated persons to profit from the providing of services which by law they are prohibited from providing).

Where loan modification firms offer and conduct, for homeowners, reviews of mortgage loan and other legal documents for the purpose of determining whether said documents are in compliance with the applicable lending, consumer, and other laws (Truth in Lending, HOEPA, RESPA, etc.), such services seem to fall squarely within the scope of the above survey of Florida laws and, consequently, could constitute the unlicensed / unauthorized practice of law in Florida. Assuming other states have similar case law in this regard, it may only be a matter of time before these types of non-attorney loan modification firms offering "legal reviews" or "legal analyses" of loan documents find the legality of their services being challenged throughout the country.

Colorado, California Collaborate To Shut Down Loan Modification Scams

Buried in a recent story in the Rocky Mountain News on a homeowner claiming to have been screwed out of about $3,000 by a loan modification firm is this excerpt:

  • In addition to the [16 subpoenas sent to loan modification companies in Colorado, California and Arizona, Colorado director of the division of real estate Erin], Toll also recently entered into what she calls an "unprecedented collaboration," with Jeff Davi, the division of real estate director in California.

  • "(Davi) has agreed to work closely with us to shut down illegal loan modification companies that prey on consumers when they are most vulnerable," Toll said. "Mr. Davi is well aware of the problem and will do everything possible to ensure Colorado consumers are not harmed by unlicensed California companies."


  • Davi, in a phone interview Tuesday, said he is "very pleased with our relationship with Colorado and Erin," and hopes to build similar relationships with state real estate divisions across the country, because the practices have become so widespread.

  • "These companies are based everywhere," Davi said. "I heard of one yesterday where a 75-year-old California woman gave her last $2,000 to a company out of Massachusetts. It is the saddest thing I ever heard."

For more, see Loan modification firms causing more problems for homeowners.

Tuesday, December 30, 2008

Boston Legal Aid Firm Wins $54K Jury Verdict For Tenant Illegally Booted In Foreclosure Eviction; Now Seek Triple Damages, Attorney Fee From Servicer

In Boston, Massachusetts, The Boston Globe reports on William Allen, a local man who, with the help of local law students at Harvard Legal Aid Bureau, fought back against a mortgage loan servicing company in a case involving an illegal foreclosure eviction.

  • In January, after the Bank of New York, which owns the property, sent an eviction notice, Allen fought back. He filed a counterclaim, arguing that by changing the locks the bank tried to paint him as a squatter and that it intentionally did not turn on the water and heat, because it wanted him to leave.(1) Last month, after a three-day trial in Boston Housing Court, a jury awarded Allen $54,000 for his ordeal.(2)


  • Lawyers at the Harvard Legal Aid Bureau, which represented Allen, say that it's a rare victory for a tenant in a post-foreclosure case and that the verdict has caught the interest of legal services groups nationwide.

  • "The impact of this case is that the banks now know that if they engage in extrajudicial practices to gain possession of a foreclosed property it can cost them dearly," said Verner Moore, a lawyer and clinical instructor at the Harvard Legal Aid Bureau.

For more, see Vindication after eviction ordeal (Jury backs tenant in foreclosure dispute).

Go here for more on the law students at the Harvard Legal Aid Bureau urging tenants in foreclosed homes to fight back against careless/reckless mortgage companies seeking illegal evictions.

(1) The story states that, after experiencing a loss of heat and water to the premises, Allen turned to WilmerHale Legal Services Center in Jamaica Plain - one of two legal services programs run by Harvard. A law student reportedly fired off a letter to the Bank of New York, saying that Allen lived there and urging the bank to get the heat and water turned back on. Allen alleges that the bank instead changed the locks and sent police after him.

(2) Reportedly, the case is not over. A hearing is a set for Jan. 30, when Allen's lawyers will ask a judge to double or triple the award because, they contend, the bank willfully and knowingly failed to act responsibly as a landlord. They will also seek attorneys' fees.

Failure To File Proper Paperwork A Stumbling Block For Plaintiffs In Credit Card Suits As Well As Mortgage Foreclosures

In Erie, Pennsylvania, the Erie Times News recently ran a story on how some individual consumers are fighting back against large finance companies in debt lawsuits:

  • [A] recent ruling in Erie County Court, as well as rulings in U.S. Bankruptcy Court in Erie and in Pittsburgh, show how judges are forcing credit-card companies, banks and mortgage companies to play by the rules, even as those corporations are desperate to collect on debts in these desperate times.

  • The fine print -- all those regulations enumerated in tiny words in credit-card contracts and mortgages -- apply not only to you, the consumer. The banks and credit-card companies must follow them too. And, with the help of vigilant judges, "they are starting to," said Erie lawyer Lori R. Miller.


  • Erie County Judge Shad Connelly, citing Pennsylvania law, agreed with Miller and threw out a suit over a claimed debt of $21,305, including more than $3,000 in interest, on a Bank One credit card. Connelly said the plaintiff, a debt-collection company called Unifund CCR Partners, failed to file the proper paperwork(1) and filed an amended version of its suit too late.(2)

For more, including how two bankruptcy judges in Erie and Pittsburgh are holding lenders feet to the fire in home foreclosure actions, see In some area debt cases, small print has yielded big help.

(1) Among the documents lacking, Connelly said, were a complete list of the dates and merchants for the disputed charges; the contract or credit agreement that Anderson would have received with the disputed credit card; and the appropriate documentation showing how Unifund purchased Anderson's claimed debt from another company, First USA Platinum.

(2) Reportedly, Judge Connelly gave Unifund a chance to file a corrected suit, though attorney Anderson could argue that any new civil action violates the four-year statute of limitations in her case.

Sloppy Lender/Servicer Leaves Judge Fuming, Homeowners Frustrated

A recent story in The New York Times describes how Wells Fargo left one federal bankruptcy judge fuming regarding a dispute the lender had with a homeowner couple over whether they had missed some of their required payments on their home loan. Wells Fargo claimed that the couple missed some payments but that, if they could present “valid, accurate and true copies” of the front and back of the checks they sent in, they would receive the proper credit.

What ultimately had the judge fuming was that, several months later, evidence came out that strongly suggested that the borrowers' purportedly missing payments to Wells Fargo were, in fact, received and processed electronically. That meant that the lender never returned the checks to the borrowers' bank, thereby making it impossible for the couple to provide the proof of payment that Wells Fargo had demanded in the first place. An excerpt from the story:

  • [S]idney B. Brooks, the judge overseeing the case, was clearly dismayed by the bank’s performance. In his opinion, he fumed that Wells Fargo had asked the borrowers for canceled checks as proof of payment, even though such checks were often not available.

  • Wells Fargo’s request for canceled checks was especially troubling, the judge said, given that the bank was a proponent of the 2003 law that allowed banks to stop returning canceled checks to customers.

  • The only institution that could have the original checks is Wells Fargo, he concluded. “The payments have, evidently, been lost in a black hole of the creditor’s organization or through accounting mismanagement,” the judge wrote. “This is a major lender/mortgage loan servicer where the left hand does not know what the right hand is doing — the collection department does not know what the check processing and accounting departments are doing.”

  • Because this is not the first time the judge has encountered problems in Wells Fargo’s operations, he is considering sanctions on the bank. “This dispute might portend a widespread abuse of collection practices or creditor overreaching,” he wrote, “demanding of debtors what it, the creditor itself, is unable to provide: accurate and reliable record keeping and billing practices.”(1)

Not surprisingly, Wells Fargo reportedly disgreed with the judge's conclusions.

For the story, see A Mortgage Paper Trail Often Leads to Nowhere.

For the judge's written decision, see Wells Fargo v. Burrier.

(1) According to the story, the attorney for the homeowners says that this kind of dispute is becoming more common in her practice and that borrowers wind up losing too often. “A lot of times clients don’t keep canceled checks or maybe their bank account was closed and they can’t go and get the proof,” she said. “The bank gets that extra money for as long as the debtor can keep it up and when they can’t they are pushed out of their homes.” SloppyForeclosuresAlpha

Loan Modification Firms Beginning To Find Themselves In The Crosshairs Of Various Groups

The Washington Post reports:

  • A growing industry has emerged to take advantage of the unprecedented wave of foreclosures, charging distressed homeowners for help negotiating better loan terms -- a service provided for free or for a nominal fee by many nonprofits.

  • Such companies charge $500 to $2,500 or more and are drawing the ire of consumer advocates, regulators and lenders, who say many are just the latest version of foreclosure rescue scams and can make it more difficult for homeowners to get help.

For more see Firms Charge Thousands To Modify Mortgages (Nonprofits Offer Service For Free, Advocates Say).

Monday, December 29, 2008

Foreclosing Lender Can't Prove Ownership Of The Note? So What's The Big Deal???

The following excerpt out of a recent article on addresses the importance of establishing the ownership of a promissory note in foreclosure (or, for that matter, not in foreclosure):

  • [M]aking an issue out of the actual ownership of the securitized title might strike some as a shameless stalling tactic aimed at abetting a debtor who, after all, owes the money. But [Florida attorney April] Charney said that if such basic legalities aren’t adhered to, a homeowner could pay his or her way out of a foreclosure jam only to wind up in another when a new plaintiff emerges claiming to own the debt. She described cases in which homeowners have been sued for foreclosure by two different trusts, each claiming they owned their house, and cases where trusts have been sent documents on the same case by two different servicers.(1)


  • Bert Ely, a longtime analyst of the financial services industry and a scholar at the conservative Cato Institute who was among the first to predict the S&L scandal of the 1980s, said lenders may detest tactics like the ones Charney employs, but “this is well-established in bankruptcy practice, that you have to properly perfect the security interest, and if you haven’t, you’re screwed. … Debtors’ lawyers immediately start looking for flaws in how the debt is protected. Creditor attorneys always worry about this.”

  • It kind of boggles my mind that this is even an issue” in the nation’s current mortgage mess, he said. “I don’t understand how lawyers let this happen in the first place.” Mortgage-lending and servicing is “a matter of dotting the I’s and crossing the T’s. … That’s what puts the discipline in the process.”

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

(1) For an account describing this (apparently growing) phenomenon, see The Wall Street Journal Law Blog: Foreclosure Mess: Two Different Plaintiffs Claim to Own Same Mortgage. According to the story, Charney points out that, because of the way mortgages have been securitized, it’s often unclear who actually owns the debt, and further, found that in many cases, the originating lenders only pledged these loans and didn’t actually transfer ownership of them to the trusts that are supposed to hold them and issue the securities. KappaMtgDocsMissing

Judges, Homeowner Attorneys Begin To Wonder How To Do A Loan Modification When Lender Can't Prove Ownership Of Promissory Note?

The New York Times reports:

  • WITH home prices in free fall and mortgage delinquencies mounting, pressure to modify troubled loans is ratcheting up. But lawyers who represent candidates for modifications say the programs are hobbled by the complexity of securitization pools that hold the loans, as well as uncertainty about who actually owns the notes underlying the mortgages.(1)


  • How can a loan be modified, these lawyers ask, if the lender cannot prove that it actually owns the note? More and more judges are asking the same thing about lenders trying to foreclose on borrowers.

For more, see A Mortgage Paper Trail Often Leads to Nowhere.

For posts that reference the failure of mortgage lenders and their attorneys to prove ownership of the promissory note when starting foreclosure actions, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) As the article points out, problems often emerge because these notes — which are written promises to repay the full amount of a mortgage — weren’t physically handled, legally transferred, or accounted for properly when they were bundled by Wall Street into pools or were subsequently transferred to other holders. Many of the notes are now missing. KappaMtgDocsMissing SloppyForeclosuresAlpha

Judge Tells Convicted Foreclosure Rescue Scammer To "Take A Hike" In Response To Request For Relief From Sentence

In Newark, Ohio, the Newark Advocate reports:

  • A man convicted of preying on homeowners facing foreclosure was in prison for slightly more than two weeks before his first chance at early release presented itself. Common Pleas Judge Thomas Marcelain [last week] denied Harry Blausey an opportunity for placement in a state program that could have allowed him to move first to a halfway house or immediately be released on parole, [...].

  • Blausey was convicted Nov. 3 of nine counts of grand theft, a fourth-degree felony; 13 counts of securing writings by deception,(1) a fourth-degree felony; and four counts of theft, a fifth-degree felony.(2)

Blausey was sentenced to four and half years in prison.

For more, see Blausey denied entry into early-release program.

Go here for other posts on foreclosure rescue operator Harry Blausey.

(1) Sec. 2913.43(A), Ohio Rev. Code: "No person, by deception, shall cause another to execute any writing that disposes of or encumbers property, or by which a pecuniary obligation is incurred."

(2) According to the story, the state successfully argued Blausey deceived 13 couples and individuals into signing over deeds to their homes on the premise that he would negotiate with their mortgage companies to avoid defaulting on their home debts.

"Foreclosure Chaser" Charged In Alleged Scam To Screw Lenders Financing His Buys; Accused Of "Playing The Gap" Leaving Title Insurers Holding The Bag

In Denver, Colorado, The Denver Post reports:

  • A man described by the Denver grand jury as a "foreclosure chaser" has been charged with multiple counts of theft and forgery for allegedly stealing money from various financial institutions in the Denver area. Indicted was Jay Donovan Jost, 63, who owned a series of companies, including Broomfield Lending LLC; MI-T Investments LLC; and Y-ZER Investments LLC.

  • According to the indictment, Jost is a "foreclosure chaser," who — through his various companies — obtains title to properties in foreclosure by establishing a redemption position. This is usually done by buying out a debt against the property.


  • The grand jury alleged that beginning in April 2005, Jost — using his companies — devised a scheme in which he defrauded those who were lending him the money to redeem the properties. Unknown to the lenders, said the grand jury, Jost had often already encumbered the properties. As a result, the deeds of trust offered for security often left the lender in an inferior position to another title holder.

  • In many of these cases, said the indictment, Jost was "playing the gap" — the time period between when legal documents from a closing on the property are presented to a county recorder and when the county actually records them. The gap in Colorado can be from five days to two weeks. During this gap period, title companies are unable to discover whether someone else holds title to a particular property.

  • Jost would use this "gap" to take out a mortgage from a second lender on a property that he, through one of his corporations, had recently purchased, the grand jury said. In some instances, Jost signed affidavits swearing the properties were unencumbered when, in fact, they were, said the indictment. As a result, the lenders were left without repayment on their loans to Jost.

  • Not only were the lenders deceived, said the grand jury, but so were the title companies involved in the closings with the lenders and Jost. The title companies guaranteed the entity making the loan that the properties were unencumbered. As a result of Jost's alleged trickery by playing the gap, said the grand jury, they were unable to discover that Jost had encumbered the properties. The title companies were then obligated to pay the lenders for the money lost as a result, said the indictment.

For the story, see Denver grand jury indicts 'foreclosure chaser.'

"Baby Mama" Accuses Ex-NBAer Of Forging Signature On Releases Of Lien For Child Support, Then Draining Equity From The Unencumbered Properties w/ Refi

In Mobile, Alabama, the Press Register reports on a civil lawsuit involving a former pro athlete and one of, what has been alleged to be a slew of, his babies mamas:

  • Former pro basketball player Jason Caffey has been hit with a lawsuit accusing him of using forged signatures on legal documents to transfer property.(1) [...] Caffey put up the properties as part of a negotiated settlement in a child-support case.

  • The plaintiff, Nicole Carter, is one of at least eight women with whom Caffey has had children, according to court records.


  • Carter's lawsuit accuses Caffey of forging her signature on documents filed in Mobile County Probate Court on Feb. 28, 2007, and May 31, 2007, canceling liens on the properties. "Jason admitted in a newspaper interview that he signed it but that my client authorized it. She did not," said Carter's lawyer, Steven L. Terry.

  • After canceling the liens, according to the lawsuit, Caffey transferred the properties to Marita Hansberry, who then refinanced them and sucked out the equity.

For more, see Caffey, former NBA player, accused of forgery (for the entire story on one page, try here).

Go here, Go here, go here, go here, and go here for other posts related to deed or refinancing scams by forgery, swindle, etc.

(1) Reportedly, the lawsuit also names the woman to whom rental properties were transferred, as well as the notary public who witnessed the transaction and the title company that handled the refinancing of the properties. KappaDeedTheft

Sunday, December 28, 2008

Ohio AG Files Suit Against Loan Modification Firm For Violations Of State Consumer Statutes; Homeowners Clipped For Upfront Fees Averaging $650

From the Ohio Attorney General's Office:

  • The Ohio Attorney General filed a lawsuit [last Friday] to stop a foreclosure rescue business from continuing to victimize consumers throughout the state. The lawsuit, filed in the Cuyahoga County Court of Common Pleas, alleges that James R. Van Putten, doing business as “Please Save My Home” in Conneaut, Ohio, violated Ohio’s consumer protection laws by engaging in unfair and deceptive practices. The complaint alleges violations of the Consumer Sales Practices Act, the Telephone Solicitation Sales Act, and Debt Adjusters Act.

  • Van Putten obtained the names of homeowners in foreclosure from court records and used direct mail to solicit his services. The mailing stated: “Regardless of your present mortgage or loan situation, we will be able to assist you by arranging a repayment plan to bring your loan current” and “Call Today & Save Your Home.”

  • Van Putten then entered into contracts through which he promised to save the consumers’ homes from foreclosure by obtaining and providing loan modifications, legal representation, and forbearance agreements. Consumers paid, on average, $650 for Van Putten’s services. The Attorney General’s investigation found that consumers did not receive the promised services.

For the press release, the accompanying lawsuit, and copies of the correspondence and contract used by the foreclosure rescue operator (Exhibits A thru D), see Mortgage Rescue Company Sued for Consumer Fraud.

Central Florida Foreclosure Rescue Operators With Massachusetts Connections Charged With Grand Theft, Racketeering In Alleged Equity Stripping Scam

From Fall River, Massachusetts and Orlando, Florida, The Herald News reports:

  • Father and daughter John and Shastine Pavao, along with other family members, participated in a four-year criminal scheme to strip equity from needy people’s homes, steal their homes and evict them, defraud lenders and resell the properties, Florida law enforcement officials allege.

  • Two of at least a half-dozen alleged victims were 83 and 90 years old, while the Pavao family, with deep roots in Fall River, “appropriated more than $3 million from various lenders,” Florida’s Bureau of Financial Investigations says in a 57-page affidavit provided Monday.

  • The criminal justice investigative unit released those details following news of the arrest Friday of John, 42, Shastine, 22, and her mother, Debra Pavao, 39, all of Windermere, Fla., on some 28 counts of first-degree grand theft over $100,000 and racketeering.


  • On Monday afternoon, Fall River police cooperating with Florida authorities arrested Debra Pavao’s brother George Rego, 43, and sister-in-law Cindy Rego, 46, of 203 College Park Road, on related charges, Toledo said. According to police and Orange County Clerk of Courts records, each are charged with two first-degree grand theft felonies and violating the Florida Communications Fraud Act.


  • A sixth person, Nancy Shine of Cape Canaveral, Fla., an employee of JPS Investments Group Inc. run by the Pavaos, was expected to turn herself in, Toledo said. She faces nine felony counts.

  • Florida authorities called John and Shastine Pavao the ringleaders, with JPS Investments in Ocoee and a second company, SCJ Investment Group LLC in Windermere, the two companies they operated. [...] “Evidence obtained during the course of this investigation revealed that John Pavao and Shastine Pavao were orchestrates of a ‘foreclosure rescue scheme’ that deliberately tricked victims into signing warranty deeds and other documents in an effort to steal their properties,” documents summarize.

  • Mr. Pavao stole their property out from under them by having them sign documents,” Toledo alleged. [...] Debra Pavao used her background as a mortgage company employee to obtain fraudulent larger loans without homeowners’ knowledge, investigators say.

For more, see Pavao family accused of scamming homeowners.

See also, Orlando Sentinel: Windermere family, 3 others face racketeering charges.

Elderly Victim Of Equity Stripping Deal Wins Hollow Victory As Court Ruling Comes Too Late To Allow Recovery Of Home; Scammers Claim To Be Broke

In Minneapolis, Minnesota, the Minneapolis Star Tribune reports:

  • Telsche Paulson, 86, lost her south Minneapolis duplex and now lives in a rented house in Farmington. A suit against a mortgage firm that offered to help Paulson avert foreclosure, alleged that the “refinancing” was really a sale, and the firm stripped $155,000 in Paulson’s equity in the deal.


  • This month, a federal judge ruled that the now-divorced couple at the center of the scheme, Timothy Beliveau and Shelley Milless, had "tricked" and "deceived" Paulson out of her home, equity and subsequent monthly payments. Paulson's situation is part of a case that federal investigators say encompassed 35 properties in Minnesota and drew in a number of Northwest Airlines pilots as investors.

  • The judge's ruling was bittersweet for Paulson. In September, as she turned 86, she moved out of 4231 Pleasant Av. S. as a bank moved forward with foreclosure. She had lived there since 1958.


  • On Dec. 1, U.S. District Judge Patrick Schiltz [...] handed Paulson her victory in her civil case against Tim Beliveau and Shelley Milless. But the couple, who split up last year, claim in court papers to have nothing left. Beliveau, whose million-dollar home in Mound is being repossessed, disagreed with the judge's ruling, saying Paulson knew what was happening the whole time.

  • He didn't put up a defense in the civil case, Beliveau said, because he didn't want to damage his defense against any criminal charges, which he expects.

For the full story, see Bittersweet victory for victim of swindle (A court ruled that Telsche Paulson had indeed been cheated out of her south Minneapolis home, but it's too late to recover it).

For the court's order, see Paulson v. Beliveau, et al.

For earlier story from the Minneapolis Star Tribune, see NWA pilots say they were misled in foreclosure venture (A Minnesota couple's investment and real-estate programs are under federal investigation).

Saturday, December 27, 2008

Denver Pastor Charged In Flipping Scam; Used Two Unwitting Churchmembers As Straw Buyers On 8 Homes Ultimately Ending In Foreclosure, Say Authorities

In Denver, Colorado, KMGH-TV Channel 8 reports:

  • A Denver pastor, indicted for alleged mortgage fraud, turned himself into authorities late Thursday. The indictment alleges that Harold Joe Hicks used surrogates to purchase property and then falsified mortgage applications to get lower interest rates.

  • "He would bring nearly completed mortgage applications... and (would) have the surrogate buyer simply sign off without reading it," said Lynn Kimbrough of the Denver District Attorney's office.

  • Pastor Harold Joe Hicks, 64, of Mount Carmel Community Baptist Church was formally charged, Thursday, with eight counts of theft and eight counts of forgery.(1) The two surrogates listed in the indictment attended Mt. Carmel. According to court documents, Hicks told both Richard Martin and Sherri Wrightsil that he would rent the properties, pay the mortgages, taxes, insurance and other expenses.

For more, see Grand Jury Indicts Pastor In Alleged Mortgage Fraud Scheme (Eight Properties Purchased Through Surrogates End Up In Foreclosure).

See also:

  • Rocky Mountain News: Minister indicted on 16 counts (Harold Hicks accused of stealing $80,000 in mortgage scheme) - "It is one of the most heinous examples of real estate fraud I've ever seen," said Jim Spray, a mortgage fraud expert familiar with details of the Hicks case. "To use his level of trust and abuse it severely, and hurt people so deeply that it shatters their faith . . . heinous doesn't even describe it."

  • Rocky Mountain News (July 7, 2007): Signing on faith (Ex-church members say pastor misused trust to conduct shady real estate deals).

(1) It should be noted that the forgery charges relate to the signatures appearing on the allegedly fraudulent mortgage applications used to obtain the loans. According to the indictment, the signatures are alleged to be the authentic signatures of the unwitting straw buyers; Pastor Harold Joe Hicks, while accused of filling out the mortgage applications with fraudulent information, has not been accused of actually signing these documents. Notwithstanding, he is facing the forgery charges in connection with those signatures.

Regardless of whether forgery convictions are obtained against Hicks, this case should serve as a reminder that, in Colorado as well as in some other states, the act of forgery need not be done by the hand of the person being charged; fraudulently procuring the signature of another to an instrument which the signer either has no intention of, or is otherwise tricked into, signing constitutes forgery on the part of the procurer in some states. It is sufficient that the forgerer caused or procured it to be done. See also:

  • May 27, 2008 post (1): New York Court Decisions A Reminder That Viable Forgery Claim May Arise When Homeowner Is Tricked Into Signing Deed; and
  • May 27, 2008 post (2): California Appeals Court Says Genuine Homeowner Signature On Instruments In Foreclosure Rescue Scheme Not A Bar To Scammer's Forgery Conviction.

By the way, in the State of Ohio, the crime of tricking someone into signing any writing that either conveys an interest in property, or creates a monetary obligation, is called "Securing Writings by Deception" - see Sec. 2913.43, Ohio Rev. Code) ForgeryGenuineSignatureKappa

Little Known Defense In Foreclosures Of FHA-Insured Mortgages Highlighted In Florida Homeowner's 4-Year Fight To Save Home

In Jacksonville, Florida, reports on the story of Vickie Lewis, an area homeowner fighting a foreclosure action filed against her by Washington Mutual, and who has been living with the uncertainties of being in foreclosure limbo for the last four years.

  • [F]or the past four years, Lewis, 48, has seen her name on dozens of legal documents and spent hours in court as her mortgage holder, Washington Mutual Bank, pursued foreclosure on the only home she has ever owned. And she has no more idea now than when this began where or how it all might end.


  • Lewis is one of scores of clients represented by [April] Charney, an attorney with Jacksonville Area Legal Aid who has developed numerous foreclosure defenses that have kept many of the troubled borrowers she represents in their homes for years.

  • Charney’s defense of Lewis has been based largely on claims that Washington Mutual did not follow federal regulations by offering her a “reasonable opportunity to get current” and “a face-to-face meeting” before three monthly mortgage installments went unpaid, among other requirements.(1)

  • According to court filings, prior to foreclosure, WaMu never discussed any options with Lewis other than demanding all back mortgage payments in full.(2) The bank is now demanding the entire balance, which had since ballooned by thousands of dollars with the addition of “illegal and outrageous” charges for attorney’s fees, collection costs and insurance, the filings allege.

For more, see When foreclosure limbo becomes a lifestyle (Like millions in U.S., Florida woman lives with housing uncertainty). (For the entire story on one web page, try here).

(1) These requirements apply to FHA-insured mortgages. According to the story, the FHA program is intended to provide a chance at home ownership for low-income and credit-challenged buyers. There’s a built-in expectation that FHA borrowers may have more trouble staying current on their payments than so-called prime borrowers, and so the borrowers pay hefty insurance premiums that protect the lenders for the life of the loan. Because of this, the FHA demands that lenders follow its extensive rules about dealing with borrowers who are in default.

(2) According to the story, Charney said lenders’ disregard for federal loss mitigation procedures and default loan servicing rules is just one sign of a larger problem: a mortgage-lending industry that ran wild for years under scant government review, inflating appraisals, overstating borrowers’ credit and income and creating such a maze of trusts and securities that the ownership of millions of mortgages is now almost impossible to establish.

Illinois AG, Cook County SA Say Firm Filed Phony Mechanics Liens & Started Foreclosure On Homeowners Refusing To Be Squeezed

From the Office of the Illinois Attorney General:

  • Attorney General Lisa Madigan and Cook County State’s Attorney Anita Alvarez [Wednesday] both filed lawsuits against a Chicago mechanic’s lien filing service for filing invalid liens against property owners and for intimidating homeowners either to pay debts they don’t owe or to overpay for debts incurred with contractors.


  • According to the Attorney General’s complaint, Contractor’s Lien Services (CLS) and its founder, Steve Boucher, analyze, prepare and file mechanic’s liens on property on behalf of general contractors and subcontractors. CLS allegedly misrepresents to contractors that it has valid cause for filing mechanics liens against homeowners when, most often, those contractors do not actually have valid claims under state laws.

  • CLS also allegedly files liens without the knowledge of some contractors and, in other instances, CLS files liens against homeowners when contractors have not performed work at the properties in question.

  • After filing foreclosure liens, CLS allegedly files foreclosure actions against consumers who don’t pay off the debts. Some contractors claim that CLS collects money on behalf of contractors but then fails to redistribute the collected debts to them.

For the Illinois AG press release, see Attorney General Madigan, State's Attorney Alvarez Sue Chicago Lien Filing Service For Fraudulent Practices.

For what sounds like a similar matter recently resolved by the Massachusetts Attorney General's Office, see Mass AG: Firm Agrees To Remove Mechanics Liens On Houses (Resolves Complaints By Paid-In Full Homeowners Of Improper Squeezing By Contractor, Supplier).

Go here for other posts on suspected mechanics lien scams. StiffingContractorsTheta MechanicLienScamTheta

Friday, December 26, 2008

Arrest Warrant Issued For Unlicensed California Contractor Suspected Of Illegally Slapping Phony Mechanics Liens On Homes In Foreclosure

In Vallejo, California, the Vallejo Times Herald reports:

  • A $30,000 arrest warrant has been issued for a Benicia man who officials believe has been trying to profit illegally from Vallejo's foreclosure crisis. A team from the Solano County District Attorney's Office and Vallejo Police Department on Wednesday went to arrest James Paul Jones in the Vallejo home he's been occupying and found him gone, said Deputy District Attorney Laura Undlin.

  • Jones, 53, also known as James King and King James, is suspected of contracting without a license and filing false or forged documents, Undlin said. The false document charge is a felony, she said.

  • Jones has filed mechanic's liens against several foreclosed Vallejo homes he claims to have done work on for which he wasn't paid.(1) [...] Reached by phone Friday, Jones appeared surprised to hear about the warrant, and insists he's done nothing wrong.(2)

For the rest of the story, see Man trying to cash in on foreclosures, officials say.

Go here for other posts on suspected mechanics lien scams.

(1) If Jones actually did what he is suspected of doing, he possibly felt that having the mechanics liens would facilitate a claim on his part to all or part of any surplus funds generated by a subsequent foreclosure sale, in the event the home sold at auction for more than what was owed to the foreclosing lender.

(2) Reportedly, in one case, Jones seems to have contracted for $40,000 worth of water damage repairs with a relative of Jones's who owned the property before it was foreclosed on, according to Deputy DA Undlin. Jones is then said to have then filed a $75,000 mechanics lien six days later. "We don't believe that such extensive work could be done in six days, and, in fact, we have a witness that says he saw work being done for six to eight weeks after the lien was filed," Undlin said. StiffingContractorsTheta MechanicLienScamTheta

Texas Legal Aid Firm Files Suit Alleging Developer Tricked Seven Families Into Signing Over Deeds To Property They Just Agreed To Buy

In San Juan, Texas, The Monitor reports:

  • Seven families are suing a developer, saying he tricked them out of the property they had just agreed to purchase. The lawsuit against William Schwarz alleges he used deceptive practices to trick low-income, Spanish-speaking families into signing the titles to their property over to him the same day the families made down payments on the land.

  • None of the families mentioned in the suit have lost their homes at this point, but the developer is moving in that direction, said Corinna Spencer-Scheurich, an attorney for the South Texas Civil Rights Project who filed the suit on behalf of the families. She said the closing documents they signed could allow the developer to evict them from the property at any time.(1)


For more, see Lawsuit filed against developer alleges fraud.

(1) According to the story, area community organizers have been meeting with families in two local subdivisions to try to determine how widespread the practice may have been, Spencer-Scheurich said. She suspects hundreds of families were affected.

Fine Print Buried In Debt Relief Firm's Contract Leaves Orlando Couple Screwed Out Of Thousand$

A recent story in the Orlando Sentinel warning against phony debt relief companies and other scams targeting people with financial trouble contained this excerpt on how one area couple was left screwed over after dealing with one of these firms:

  • [Orlando bankruptcy lawyer Anne-Marie Bowen] recently worked with a young couple as clients who had paid a debt-relief company thousands of dollars to fend off creditors. But the company never paid their creditors a dime, Bowen said.

  • When Bowen looked at the deal her clients had signed, she found a clause tucked in the fine print stating that the first 11 payments would go directly to the company itself as the fee for its "service." The company didn't negotiate at all with the couple's creditors, who continued to charge them late fees and turned them over to bill collectors.

  • "They had gotten so many harassing phone calls and had been burned so badly," Bowen said. "By the time they came to me, they were at wits' end."

Source: Beware of bogus debt relief.

Thursday, December 25, 2008

Attorney Accused Of Pocketing Closing Funds Due To Lien Holders Seeks "Free Pass" From Prosecution As Psych Pros Contest Competence To Stand Trial

In Pittsburgh, Pennsylvania, the Tribune Review reports:

  • Two mental health experts had differing opinions Wednesday on whether a once-prominent Fayette County trial attorney is competent to stand trial on theft charges.

  • Adam Sedlock, a Uniontown psychologist, testified [...] that crippling physical ailments have reduced Mark F. Morrison of Hopwood to functioning at the level of a seventh-grader. He said Morrison's condition is permanent and he will never be able to assist in his own defense.


  • Morrison, 51, is accused of stealing about $99,000 in mortgage-settlement payments from two elderly Hopwood couples.(1) Instead of settling outstanding mortgages on the two properties, Morrison allegedly paid off smaller mortgages and diverted most of the money.

For more, see Ex-attorney Morrison's ability to face theft trial disputed.

(1) Reportedly, Morrison is charged with two counts each of:

  • theft by failure to make required disposition of funds received,
  • forgery,
  • tampering with records or identification, and
  • misapplication of entrusted property.

California Lawmaker Urges AGs For Probe Into Loan Modification Firms Targeting Distressed Homeowners Charging High Fees, Producing Low Results

In Riverside County, California, The Desert Sun reports:

  • [C]iting complaints from constituents about fraudulent and suspicious mortgage-reduction schemes, [California Congresswoman Mary] Bono Mack sent a letter to U.S. Attorney General Michael Mukasey and California Attorney General Jerry Brown, urging that comprehensive steps be taken to address the problem and ensure those who commit mortgage crimes be held accountable.


  • Bono Mack noted that local residents have contacted her office about fraudulent individuals and companies who continue to approach homeowners with promises of mortgage loan modifications or interest rate reductions. These individuals have been charging large up-front fees and offering little to no service to homeowners.

For the story, see Bono Mack presses for probe on homeowner scams.

Wednesday, December 24, 2008

Nothing Civil In Civil Court As Schoolyard Brawl Breaks Out Between Attorneys In Rival Class Actions; Colleagues Jump Into Fray To Bust Up Donnybrook

In New Orleans, Louisiana, The Times Picayune reports :

  • Two attorneys competing for clients, prestige and a bounty of legal fees opened a hearing at Orleans Parish Civil District Court [last week] with a schoolyard brawl that shocked the buttoned-up crowd and ended with one led away in handcuffs on charges of contempt.

  • The courtroom was filled with the early morning murmur of shuffled papers and crinkled newspaper when fisticuffs broke out between attorneys Madro Bandaries and J. Robert Ates, who were pushing rival class-action suits about the late handling of insurance claims.

For more, see Brawl erupts between two lawyers at civil court.

Let Courts Modify Bad Loans Says Consumer Bankruptcy Group; Quality, Sustainability Of Current Modifications Depends On The Individual Servicer

The Philadelphia Inquirer reports:

  • With fresh evidence that voluntary mortgage modifications aren't working, a national lawyers' group is urging the government to let the courts fix bad loans. "Court supervision of loan modification is needed, and unlike so many of the responses to the foreclosure crisis so far, there will be no cost to the taxpayer," Henry Sommer of Philadelphia, president of the National Association of Consumer Bankruptcy Attorneys, said Thursday.

  • Of the 21,000 of these delinquent loans modified, two-thirds saw an increase in principal, called "negative prepayment," which added an average of $11,000 to loans of $210,000, White said. [...] "There is a tremendous variation in the number and quality of modifications, and the chance of getting one depends on the servicer," White said, adding that the monthly payments on 45 percent the 21,000 loans modified actually increased.

For more, see Lawyers: Let courts fix bad loans.

In a recent related statement from the Center for Responsible Lending, see Repeat Failures on Home Loans Reveal Faulty Modifications. loan modification

New Los Angeles Ordinance Prohibits All Tenant Foreclosure Evictions Until Property Is Sold To New Owner

In Los Angeles, California, CBS2 reports:

  • Renters whose residences have gone into foreclosure cannot be evicted until the property is sold to a new owner under a city law signed Friday by [Los Angeles] Mayor Antonio Villaraigosa. The one-year ordinance, spearheaded by Council President Eric Garcetti, will impact 300,000 apartment buildings and single-family homes. [...] Renters [in Los Angeles] who are being evicted as a result of foreclosure were urged to contact the city's Housing Department at (866) 557-RENT.

For the story, see Mayor Passes New Rental Foreclosure Law. ThetaTenantRentSkimming

Tuesday, December 23, 2008

Another Foreclosure Screw-Up As Lender Approves Short Sale, Then Locks Out New Owner From Home A Week After Moving In

In Fort Wayne, Indiana, The Journal Gazette reports:

  • [First-time homebuyers Brian and A.J. Spitznaugle] had arranged what is known as a short sale, an increasingly common transaction these days. The owner of the house was in default on the mortgage, so the bank that held the mortgage, Chase, agreed to sell the house to the Spitznaugles for slightly less than was owed.


  • Slightly more than a week [after the closing], the couple got the shock of their lives. Brian Spitznaugle arrived at the house on a Saturday morning to find it cold and dark. The bank, it turned out, had contracted with a company named Safeguard Property Management, which in turn hired a company called B&CG Services to go to the home, turn off the water and electricity, drain the pipes, winterize the home and padlock it shut. Oh, and before workers left, they’d rifled through all the boxes in the garage.

For more, see Bank sells house, locks out buyers.

Go here for other posts on improper foreclosure lock-outs and other lender screw ups. ForeclosureLockOuts

Upstate NY Foreclosure Rescue Operator Files For Ch. 11 Bankruptcy Protection; Over 40 Current Sale Leaseback Deals Listed On Petition

In Albany, New York, the Daily Gazette reports:

  • Geoffrey Goldman over the past two years portrayed himself as a savior in the foreclosure crisis. He made a living by buying homes from cash-strapped owners who wouldn’t be kicked out after sales closed and could even buy the properties back under leaseback agreements. “We’re helping more people than ever,” Goldman said in an April 2007 press release.(1)

  • Now Goldman is in need of help. Two of his real estate leaseback businesses filed Tuesday for Chapter 11 reorganization in U.S. Bankruptcy Court. His Rivertown Investments and its real estate holding company, Momentum Properties, recently closed after falling victim to downturns in the housing and credit markets, according to documents filed with the Albany court.


  • The liquidation of those assets could cast into limbo the former homeowners who entered leaseback agreements with Rivertown. Rivertown lists in its Chapter 11 petition more than 40 leaseback agreements in New York, New Jersey and Pennsylvania.

For more, see Real estate leaseback company files for bankruptcy.

See also, Albany Times Union: Lease-back plan for homes fails (Owner of dozens of properties files for bankruptcy protection).

(1) The article reports that under Rivertown’s leaseback program, according to the 2007 press release, homeowners sold their homes because they were on the verge of foreclosure or too far behind on payments to reinstate their mortgages. Sellers used proceeds from the sale to pay off their mortgages, then made rental payments to Rivertown so they could continue living in their homes, which they ultimately hoped to buy back.

"No-Deficiency" Laws Give Homeowners "Get Out Of Jail Free" Card When Walking Away From Unaffordable Mortgages In Some States

The Associated Press reports:

  • Mortgage law experts say the incentive to walk away from a home loan is highest in states that have anti-deficiency statutes, which prohibit lenders from suing borrowers for additional funds after foreclosure.

  • "These anti-deficiency laws make a huge impact on foreclosure rates because they are basically 'get out of jail free' cards," said Todd Zywicki, a law professor at George Mason University [...].

  • This handful of non-recourse mortgage states includes the high-foreclosure states of California and Arizona, which not coincidentally also are leaders in the numbers of mortgage walkaways.

For the story, see Walkaways highest in 'non-recourse' states.

Monday, December 22, 2008

Florida Legal Aid Attorney Earning National Reputation For Foreclosure Defense Both As Advocate For Clients & Trainer For Other Lawyers

In Jacksonville, Florida, reports:

  • [April] Charney, a lawyer with the Jacksonville Area Legal Aid agency, is quickly developing a national reputation as a champion of homeowners facing foreclosure and a serious adversary for those attempting to take possession of those homes. Her encyclopedic knowledge of contract law, debt-collection practice, securitized mortgages, the trusts that hold them and the agreements that govern the trusts have put her at the forefront of the rapidly expanding specialty of foreclosure defense.

  • While carrying her own load of 70 to 100 foreclosure cases as a legal aid attorney, Charney, 51, also has become one of the nation’s top trainers of other lawyers eager to learn how to serve the growing clientele spawned by America’s mortgage meltdown.(1)

For more, see 'Angel' of foreclosure defense bedevils lenders (Florida attorney trains hundreds of others to help troubled borrowers).

(1) According to the story, about 1,500 lawyers have attended her daylong classes on foreclosure law so far, 80 to 200 at a time. She has taught in Ohio, California, Minnesota, South Carolina, Missouri and throughout Florida. She offers the classes at cost with the help of local bar associations and aid groups and requires that all students perform 20 hours of pro bono legal work in their communities.

"Money Store" Suspects In Sale Leaseback, Foreclosure Rescue Scam Continue To Fall

In Greenbelt, Maryland, The Associated Press reports:

  • A Fort Washington woman has pleaded guilty in a scheme to defraud homeowners facing foreclosure. Jennifer McCall, 47, pleaded guilty in federal court Thursday to conspiracy to commit mail and wire fraud.

  • McCall was the chief executive officer of Metropolitan Money Store, a company that claimed to provide help to people in danger of losing their homes. But prosecutors say the company left homeowners worse off by draining equity out of the properties and imposing exorbitant transaction fees. Prosecutors say McCall is responsible for a loss of more than $16 million dollars.

McCall is the fifth defendant in this case to cop a guilty plea.

Source: Md. Woman Pleads Guilty In Mortgage Fraud Scheme.

See also, U.S. Attorney (Maryland) press release: CEO Of Metropolitan Money Store Pleads Guilty In Mortgage Fraud Scheme (Conspirators Took Title of Homes from Financially Distressed Homeowners and Secretly Used Home Equity for Furs, Jewelry and Other Personal Benefits, Defendant Caused Over $16 Million in Losses).

Go here and Go here for other posts on the alleged Metropolitan Money Store foreclosure rescue scam. JoyJackson

Colorado Slaps Subpoenas On 13 Loan Modification Firms; Creating Fear To Squeeze Cash From Consumers Concerns State Regulator

In Denver, Colorado, The Denver Post reports:

  • The Colorado Division of Real Estate has issued subpoenas to 13 mortgage loan-modification companies in Colorado, California and Arizona.(1) "Our concern is that there appear to be fly-by-night operations that are soliciting Colorado consumers who appear to be in trouble," said Erin Toll, director of the division. [...] "This is a brand-new cottage industry. These loan-modification companies are springing up like wildfire."(2)


  • Toll said many solicitations are misleading. At the top of one company's solicitation is "Notice & Demand" in large type, making it appear to be an official document. Some solicitations appear to be from the U.S. Department of Housing and Urban Development until the small print at the bottom of the page. "What we're hearing from consumers is they feel threatened when they get these notices," Toll said.(3)

Toll added that it's illegal even to solicit Colorado residents for loan modifications without being a state-licensed mortgage broker.

For more, see Loan-modification firms subpoenaed.

For story update (12-19-08), see The Denver Post: 3 more loan-modification firms subpoenaed (All are based in California. Such companies may be preying on desperate homeowners).

(1) According to the story, among the paperwork the division wants are documents used for marketing to Colorado consumers; lists of borrowers who have attempted loan modifications and the status of their cases; bank statements; copies of checks; and lists of mortgage lenders or mortgage services the companies have worked with.

(2) Problems occur, Toll said, when the companies or individuals charge large up-front costs, usually one month's mortgage payment, plus a fee of several hundred dollars, then fail to return the borrowers' money when they are unable to renegotiate the loan.

(3) Using written communications that simulate either official court documents, or documents issued by a Federal or state government agency, for the purpose of extracting money from a consumer are the types of deceptive practices that have been declared illegal when done in the debt collection context. See Fair Debt Collection Practices Act, § 807(9), § 807(13). The false representation or implication that a company is vouched for, bonded by, or affiliated with the United States or any State has also been declared to be an illegal practice in the debt collection context. FDCPA, § 807(1). It sounds to me that some of the loan modification people using these types of deceptive practices may be grifters formerly in the debt collection industry who have simply "grifted" into a new line of work.

FTC, Pennsylvania Lender Settle Race Bias Charges; Borrowers' Credit Risk Didn't Warrant Higher Loan Costs, Say Feds

In Horsham, Pennsylvania, the Philadelphia Inquirer reports:

  • Gateway Funding Diversified Mortgage Services L.P., a Horsham mortgage lender, has settled federal allegations that it charged African Americans and Hispanics higher prices for loans than it did white borrowers, the government said yesterday.

  • "We are not admitting that we did it," said Bruno Pasceri, president and chief executive officer of Gateway. "I can tell you we certainly do not discriminate against anybody. I'm glad it's over."


  • The FTC found that Gateway loan officers charged several thousand African American and Hispanic consumers more - in higher interest rates and higher up-front charges - than was warranted, given the borrowers' credit risk.

  • The settlement payment was set at $200,000, even though the FTC had alleged $2.9 million in damages to consumers. The FTC said it allowed the lower payment because of Gateway's "inability to pay."


  • Irv Ackelsberg, a consumer attorney with Langer, Grogan & Diver P.C. in Center City, said millions of borrowers were paying more than they should be, feeding the nation's foreclosure problem.

For more, see Horsham lender settles discrimination case.

From the Federal Trade Commission in the matter of FTC v. Gateway Funding:

Go here, Go here, and go here for other posts on alleged race bias in real estate transactions. DiscriminationPredatoryLendingAlpha

Sunday, December 21, 2008

Foreclosure Rescue Scammer Convicted On State Charges Now Faces Federal Bankruptcy Fraud Allegations Involving Fractional Interest Deed Transfers

In Oakland, California, the San Francisco Chronicle reports:

  • A Livermore business owner is facing federal charges for allegedly taking advantage of the mortgage crisis by running an elaborate foreclosure rescue scam, court records show. Sonia Alburez, 37, [...] is accused of inducing homeowners desperate to avoid foreclosure to transfer an interest in their properties to what turned out to be sham companies. She was charged Friday with four counts of bankruptcy fraud in U.S. District Court in Oakland.(1)


  • She claimed that her company, Community Home Saver Program, could delay or stop foreclosure proceedings so long as homeowners transferred an interest in their properties as a gift to one of several companies and paid fees, authorities said.

  • But her customers didn't realize that the companies in question were fictitious and bankrupt, authorities said. Alburez is accused of filing fraudulent bankruptcy petitions for properties in Fremont, San Ramon, Vallejo and Modesto from January to March to delay foreclosure proceedings.

For more, see Livermore woman charged in foreclosure scam.

See also: this report on the use of abusive bankruptcy court filings in connection with foreclosure rescue scams.

Go here for other posts on fractional interest deed transfer, foreclosure rescue bankruptcy scams.

(1) According to the story, Alburez and Verena Silva pleaded no contest earlier this year in Alameda County Superior Court in a similar case. Prosecutors said the women bilked more than a dozen homeowners of $1,500 to $2,500 a month in exchange for a plan the two allegedly said would save homes from foreclosure. Instead, the victims still lost their homes, as well as the money they paid Alburez and Silva. According to an earlier story, they were found guilty of two felony counts each of foreclosure rescue fraud and grand theft. loan modification

Solicitors For Loan Modification Firms "Loitering" At Free Foreclosure Prevention Seminars Seeking New Business Get The Boot

Buried in a recent story on loan modification firms in The Sacramento Bee is this blurb on how some of the companies are reportedly attempting to drum up business:

  • [L]ast week, vendors passed out postcards for modification firms at a free Hope Now foreclosure-prevention workshop in Sacramento. State and Consumer Services Secretary Rosario Marin said solicitors always stalk such free events "and we boot them out."

For the story, see Beware of mortgage rescue solicitors.

Missouri "Contract For Deed" Operator Hit With C&D Order By Securities Regulator, Preliminary Injunction By State AG

In Springfield, Missouri, the Springfield News Leader reports:

  • The Missouri Securities Division [yesterday] issued a cease-and desist order against Greenleaf Companies of Springfield, its subsidiary and owners Eric Gagnepain and Scott Dasal prohibiting them from offering their real estate investment program, said Ryan Hobart, spokesman for the Missouri Secretary of State’s office.


  • Greenleaf came under public scrutiny after many of the houses the company brokered recently were lost — or threatened to be lost — to foreclosure.


  • Greenleaf commissioned the construction of hundreds of investment houses and solicited investors — both in Missouri and out of the state — to take out loans and purchase those homes. In exchange for the use of their good credit, Greenleaf promised the investors at least $10,000 in returns after three years.

  • Greenleaf hoped to sell the homes to those with blemished credit histories, letting them move in first on a contract for deed. Greenleaf would collect monthly payments and forward enough to investors to cover their monthly obligations, such as loan principle, interest, taxes and insurance.

  • Without enough buyers and adequate income, Greenleaf has been unable to pay its investors, who in turn are defaulting on their mortgages, triggering foreclosures not only in Greene County but Branson, northwest Arkansas and south of Kansas City.

For the story, see State orders Greenleaf to cease and desist operations.

See also:

Go here for other "contract for deed" problems involving Greenleaf Companies.

Legal Aid Effort In Connecticut Has Nationwide Effect As Fannie Persuaded To Reverse Course On Foreclosure Evictions; Freddie Expects To Follow Suit

In Hartford, Connecticut, The Hartford Courant reports:

  • What began with a single mother in Hartford fighting her eviction has led to a policy change by Fannie Mae allowing renters to remain in their homes after their landlords are foreclosed on, a switch that could help thousands of renters across the country.


  • Legal Aid lawyers in Hartford — and subsequently, New Haven — began fighting tenant evictions by Fannie Mae in Housing Court after Congress passed a financial market bailout bill containing provisions protecting tenants in good standing from eviction.


  • The [Emergency Economic Stabilization Act of 2008] applies to federal agencies that control mortgages. Legal Aid lawyers argued that provisions in the law(1) pertained to both Fannie Mae and Freddie Mac because they were taken over by the federal government. The policy change — Freddie Mac said Monday it expects to follow suit — will have vast implications for renters because Fannie Mae and Freddie Mac guarantee or own half of the country's residential mortgages, which apply to buildings that house one to four families.

For the story, see Hartford Renter's Fight Leads To Fannie Mae Policy Change (Renter Wins Fannie Mae Fight) (if link expires, try here).

See also:

(1) See Section 109(b) of the Emergency Economic Stabilization Act of 2008, which, they argue, requires Fannie Mae "to permit bona fide tenants who are current on their rent to remain in their homes under the terms of their lease." ThetaTenantRentSkimming

Saturday, December 20, 2008

Washington Woman Faces Forgery, Theft Charges In Alleged Refinancing Scam; Accused Of Using Stolen Notary Stamp, Abusing POA In Scheme To Pocket $32K

In Bremerton, Washington, the Kitsap Sun reports:

  • A Bremerton woman was charged with forgery and theft [...] after an investigation found she'd stolen a notary stamp and taken more than $32,000 through refinancing schemes where she served as a power of attorney, according to documents filed in Kitsap County Superior Court.

  • Ebony L. Washington, 33, was found by a Bremerton police detective to have refinanced an Arsenal Way duplex twice with power of attorney given to her by a 46-year-old Bremerton man.

For more, see Woman Accused of Pocketing $32K in Refinancing Schemes.

Go here, go here, go here, and go here for other posts related to deed or refinancing scams by forgery, swindle, etc. DeedTheftAlpha

Ex-Pastor, Ex-Banker Charged With Mortgage Fraud, Forgery, Theft By Deception, Etc. In Alleged Scheme To Swindle Church Members

In Macon, Georgia, the Macon Telegraph reports:

  • A former Macon pastor and a former Macon banker were indicted [last] Tuesday by a Bibb County grand jury on RICO charges stemming from an alleged scheme to swindle church members into taking out fraudulent loans totaling more than $600,000, according to court records. The indictment names Steven Pittman, a former employee of BB&T Bank in Macon and Jimmy Collins, former pastor of God’s Worship Center on Gray Highway.(1)


  • Pittman and Collins allegedly used Pittman’s position as a bank officer to obtain loans and lines of credit for about 10 church members, according to the records. [...] Collins and Pittman provided false financial information about the church members in banking documents, submitted forged documents to the bank and misrepresented the true use of the loan funds, according to court records.

For more, see Ex-pastor, ex-banker hit with racketeering charges in Bibb County.

(1) According to the story, the indictment charges Collins and Pittman with, among other things, violation of the RICO Act, bank fraud, residential mortgage fraud, forgery, theft, and theft by deception, according to court records. DeedTheftAlpha

Mosque Leader Gets 20 Years On Deed Theft Scam Targeting The Elderly & Deceased

In Miami, Florida, The Miami Herald reports:

  • An officer at a Liberty City mosque was sentenced to 20 years in prison on Tuesday for his role in a housing scam that stole homes from the elderly -- and even from dead people. Sameer Muhammad, the vice president of Muhammad Mosque No. 29 [...] was convicted earlier this year of nine counts of grand theft, forgery, identity theft and using false identification.


  • Investigators say Muhammad, 51, and a partner, Carolyn A. Murphy, targeted elderly residents who had liens on their homes. Murphy would file fraudulent deeds showing herself as the owner of the home, and Muhammad would then sell the homes through his real estate investment company, Bar None Properties Inc.

  • In one case, investigators found a deed a couple purportedly signed, transferring their home to Murphy years after they had died. Murphy pleaded guilty last year and was sentenced to three years in prison in exchange for her agreement to testify against Muhammad.

For more, see Mosque leader jailed over scam targeting the elderly (A Liberty City mosque leader was given a 20-year sentence for stealing houses from the elderly). DeedTheftAlpha

Stolen Identities, Phony Documents Used In NYC Deed Theft; Leaves One Victim With Ruined Credit & Unwitting Widow Facing Foreclosure

In Jamaica, Queens, the New York Daily News reports on a scam where a con man was paid $1,000 by an alleged fraud ring to show up at a closing pretending to be a homeowner who has been dead for 19 years to sell a home from out from under the deceased homeowner's widow. A stolen identity, backed up with phony documents, was used by a purported buyer to obtain a $533,000 mortgage, which has since gone unpaid, leaving a widow facing the loss of her home of over 30 years, and the identity theft victim with her credit in shambles.

For the story, see Dead man gets mortgage worth whopping $533G. DeedTheftAlpha

Friday, December 19, 2008

Fannie To Extend Moratorium On Foreclosure Evictions; Freddie Mum On Further Action

The Wall Street Journal reports:

  • Fannie Mae is finalizing a national policy that will allow tenants to remain in their homes even if their landlord goes into foreclosure -- a landmark decision for tenants. The policy will be in effect Jan. 9, Fannie Mae said Sunday, and reflects growing pressure on the mortgage company from a legal-aid group that threatened to sue over recent evictions. The company said it will also ensure its current holiday moratorium on new evictions is being followed until the new policy takes effect.


  • In late November Fannie Mae and Freddie Mac said they would suspend tenant evictions temporarily during the year-end holidays. [Connecticut legal aid firm] New Haven Legal Assistance said that despite the pledge, Fannie Mae was proceeding with more than a dozen new eviction cases in Connecticut. The advocacy group said the evictions would violate legislation passed earlier this year to rescue the two mortgage-finance giants that required them "to permit bona fide tenants who are current on their rent to remain in their homes under the terms of their lease."(1)

  • In his letter Sunday to the New Haven group,(2) Fannie Mae General Counsel Curtis Lu wrote: "As far as we know, this will be the first nationwide program of its kind." [...] Freddie Mac hasn't announced a similar policy reversal, though a spokesperson said they are "currently evaluating additional actions."

For more, see Fannie Mae to End Tenant Evictions in Foreclosures.

(1) Section 109(b) of the Emergency Economic Stabilization Act of 2008 may require the U.S. Secretary of the Treasury to work with the F.H.F.A. and other government entities to permit tenants in foreclosed homes to remain in their apartments after foreclosure.

(2) Fannie Mae General Counsel Curtis Lu was responding to a December 8, 2008 letter sent by New Haven Legal Assistance, demanding that FNMA immediately cease violating Section 109(b) of the Emergency Economic Stabilization Act of 2008.