Feds Bag Eight In Alleged Equity Stripping, Foreclosure Rescue Scam Involving $35M+ In Fraudulently Obtained Loans, $10M+ In Lost Home Equity

In Greenbelt, Maryland, The Associated Press reports:

• Federal prosecutors have charged a Maryland mortgage foreclosure rescue company in a fraud scheme that allegedly involved more than $35 million worth of fraudulent loans and mortgages. Joy Jackson, the president of the former Lanham-based Metropolitan Money Store, and Jennifer McCall, the company's CEO, are among eight people named in an indictment released Thursday in U.S. District Court on charges that include conspiracy, mail fraud and money laundering. Metropolitan was a foreclosure rescue operation that claimed to help strapped homeowners at risk of losing their homes.

• It allegedly convinced homeowners to sign over their homes to people with strong credit to keep the homes from foreclosure. Homeowners were told that they could keep their homes and repair their credit, get better mortgages and eventually buy back the homes. But prosecutors allege once it took control of the homes, Metropolitan would borrow heavily against the properties, sucking out any equity the original homeowners had built up. Many couldn't buy back the homes. Prosecutors say homeowners lost more than $10 million in equity.

Source: Feds file charges in Md. foreclosure rescue scheme.

See also, The Washington Post - Prince George's Woman Arrested in 'Massive' Mortgage Fraud:

• [Joy J.] Jackson, 40, and [her husband, Kurt] Fordham, 38, both of Fort Washington, were charged with conspiracy to commit mail and wire fraud, six counts of money laundering and 15 counts of mail fraud to obtain money and property from homeowners and lenders.

• Also arrested today were Jackson's business partner, Jennifer McCall, 46, and her husband, Clifford McCall, 47, McCall's daughter, Chandra Jones, 30, Wilbur Ballesteros, 32, all of Lanham; and Fordham's sister, Katisha, 35, and Ronald Chapman, both of Washington. All are facing mail and wire fraud charges, and Jennifer and Clifford McCall and Jones are each charged with one count of money laundering.

Go here for other posts on the alleged Metropolitan Money Store equity stripping, foreclosure rescue scam.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Are Foreclosure Prevention Counselors Letting Lenders Off The Hook?

A recent article on CNNMoney.com gives an informative description of:

• [t]he complicated and time-consuming foreclosure prevention process. Working together are mortgage servicers - the companies that manage the loans - and the borrowers, with foreclosure prevention counselors often acting as go-betweens.

For more, see The trick to getting a mortgage fixed (Foreclosure prevention is a messy business -- more art than science. Here, an inside look at why some people get a loan workout and others don't).

Editorial Note:

Unfortunately, what is not included in the article (and implicitly points to a weakness in the negotiating process for the financially strapped homeowner - the lack of participation of competent legal counsel on his/her behalf) is the need to remind lenders of the legal problems they face in connection with the enforcement of the loan agreement if a loan modification satifactory to the homeowner can't be worked out in the event:

• they don't have physical possession of the actual promissory note (see Fight Foreclosure: Make ‘Em Produce The Note!; and see Paper Chase (You're in luck. Your mortgage lender has flipped, sliced and diced your loan--and now no one knows who holds it)),

• in the case of a mortgage obtained in a home refinancing (as opposed to a home purchase), the loan documents contain violations of the Federal Truth In Lending Act (see Homeowners Misled By Mortgages Finding Ways Out; and see Finding a legal escape clause (Attorney rescues homeowners from loans they can't afford)),

• the loan violated any applicable state predatory lending and/or consumer protection laws (see Fighting Back Against Foreclosure - New York Judge Denies Foreclosure Based on Alleged Predatory Lending),

• in attempting to collect on the loan, the Federal Fair Debt Collection Practices Act (or any applicable state debt collection statutes) has been violated (see Un-Fairbanks - How West Haven sisters fell victim to a national mortgage scam, and how it could happen again).

Loan counselors who are not attorneys are obviously not in a position to practice law. Consequently, (unless working in conjunction with an attorney experienced in negotiation and familiar with the relevant legal issues ) they are unable to raise these issues during the loan workout negotiation process and will likely result in homeowners unwittingly overlooking the leverage they possibly (some may say probably) have in reaching the best possible deal they can with their mortgage lender.

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For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, and Go Here.

For other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans, Go Here and Go Here.

Does Foreclosure Rescue Statute Prohibit Attorneys From Taking Upfront Fees In The Course Of Representing Florida Homeowners Facing Foreclosure?

A recent article by Central Florida attorney Michael Alex Wasylik, of the firm Ricardo & Wasylik, PL, points to an apparent flaw in the newly passed Florida state statute, The Foreclosure Rescue Fraud Prevention Act of 2008.

The flaw relates to the ability of attorneys, engaged in typical attorney-client arrangements with Florida homeowners facing foreclosure, to charge and collect upfront retainer fees from those clients. The law prohibits "foreclosure rescue consultants" from charging and collecting upfront fees for performing "foreclosure-related rescue services" to Florida homeowners facing foreclosure.

A reading of the plain language of the new statute appears to include (or ensnare) attorneys among those prohibited from charging upfront fees for their services. (See Section 501.1377(2)(b), Florida Statutes, for definition of the term "Foreclosure-rescue consultant.")

Further, the definition of the term "Foreclosure-related rescue services" in Section 501.1377(3) appears broad enough to include those services typically provided by attorneys in the course of defending clients in foreclosure actions, as well as those services in connection with Federal bankruptcy proceedings. In addition, Section 501.1377(2)(b) enumerates six persons or entities that are specifically excepted from the definition of the term "Foreclosure-rescue consultant"- attorneys are not included on the list.

Based on the reading of the plain language of the statute, it appears that a Technical Corrections Bill by the Florida legislature is in order to correct, what appears to be, an inadvertent but obvious flub in the drafting of the statute that ostensibly prohibits attorneys from charging upfont legal fees from homeowners that they represent in foreclosure-related legal proceedings.

For more, see New Florida Law May Hurt Homeowners in Foreclosure (New Section 501.1377 may make it impossible for homeowners to find lawyers to represent them in foreclosure or bankruptcy proceedings).

Postscript: The same issue was raised in Massachusetts in a January, 2008 article in connection with that state's Attorney General's foreclosure rescue regulations - see Massachusetts Lawyers Weekly: Lawyers: unclear foreclosure regs forcing them to turn down business (Claim that new rule bars acceptance of retainers in certain types of cases).