Federal Judge Orders Credit Bureaus To Clean Up Screw-Ups Affecting Consumers' Credit Reports In California Class Action Suit

The Wall Street Journal reports:

• [A] recent court order requires the three major credit-reporting bureaus -- Experian Group Ltd., Equifax Inc. and TransUnion LLC -- to clean up the credit files of millions of consumers who have filed for Chapter 7 bankruptcy. The problem: Old debts, which are typically forgiven by the courts in a bankruptcy filing, are still being reported as active on many consumers' credit reports. The judge for the case, David O. Carter of the U.S. District Court for the Central District of California, has given the bureaus until Oct. 1 to revamp their systems.

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• This ruling is expected to clean up the credit files -- and potentially boost the credit scores -- of an estimated six million to 10 million people who have filed for Chapter 7 bankruptcy but still had errors in their files, according to plaintiffs' attorneys. Consumers with so-called zombie debt -- old loans they may have paid off years ago that can resurface when an aggressive debt collector erroneously demands payment -- are also likely to get some relief, if those debts also were discharged under Chapter 7 protection.

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• The court order stems from a class-action lawsuit alleging that each of the credit bureaus violated the Fair Credit Reporting Act by failing to maintain reasonable procedures to assure the accurate reporting of debts that have been discharged in bankruptcy. The lawsuit could now move to a trial to determine liability and damages if Judge Carter decides later next month to give the damages portion of the case a class-action status.

For more, see Dealing With Debt That Refuses to Die (Court Ruling Requires Credit Bureaus To Wipe Away Bills Incurred Before Bankruptcy; Getting a New Report). zeta

Federal Judge Nails NYC Foreclosure Rescue Operator With 10 Year Sentence For Role In Equity Stripping Scam

In New York City, Reuters reports:

• A New York man was sentenced on Wednesday to 10 years in prison and will forfeit $2.5 million for his part in a home foreclosure "rescue" scheme targeting distressed homeowners. The case, which exemplified the easy credit and "no document" loans at the heart of the U.S. mortgage crisis, involved a scam that ran from November 2003 through April 2005 in the New York City boroughs of Brooklyn and The Bronx.

• Mary Banks, one of the victims of the scheme, told the U.S. District Court in Manhattan on Wednesday that she had put her life's work into her house since 1958 and was "still fighting to stay in my premises." She said defendant Maurice McDowall, who pleaded guilty in June to charges of conspiracy to commit bank and wire fraud, "deserves any misery he has put on us."

• Other victims told the court how they trusted McDowall to help them avoid foreclosure but fell foul of the scheme. McDowall, 49, said he was sorry for the crime and told the court, "While I was committing the crime we were all in the pot. Whatever we decided to do to save the home we did together."

• In sentencing McDowall, U.S. Judge Robert Patterson also ordered him to pay $100,000 restitution. The forfeiture of $2.5 million was part of his plea agreement. Another defendant Aleksander Lipkin also pleaded guilty in June. He agreed to forfeit $7 million and faces up to 30 years in prison when he is sentenced on October 10. Six people in all were indicted in December last year with fraudulently obtaining titles to scores of homes and taking out bad bank loans against them worth more than $20 million.

For more, see Judge hands 10-year sentence for foreclosure scam.

For the original indictment, see U.S. vs. McDowall, et al.

Go here for other posts on foreclosure rescue operator Maurice McDowall.

Go here for other criminal prosecutions of foreclosure rescue operators.

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.).

Southern California Foreclosure Rescue Operator Faces December Sentencing In Equity Stripping Scam That Screwed Over 100+ Homeowners

In Los Angeles, California, The Downey Patriot reports:

• Martha Rodriguez, 35, of Downey is scheduled for sentencing Dec. 10 in U.S. District Court in Los Angeles for a $12 million foreclosure scheme that victimized commercial lenders and more than 100 homeowners in Southern California. [...] Included in the indictments were Edward Seung OK, of Torrance; Cynthia Valenzuela, 23, of Downey; Vladimir Stefanovic, 35, of Lancaster; and Maria G. Juarez, 36, of Reseda.

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• The indictment alleges that the homeowners were asked by the defendants to sign documents including loan applications, trusts and grant deeds, while being assured they wouldn’t lose the titles to their homes. Rodriguez and her co-schemers promised the deed would either be held in escrow or that the title would be returned to them once their credit was repaired.

• Instead of obtaining refinancing, loan applications were submitted in the names of “straw buyers” claiming to buy the property. Some straw buyers were paid up to $5,000 for the use of their personal information. In other cases, the defendants used the personal information of others without their knowledge. The false information on the applications caused lenders to fund mortgages to the straw buyers. The defendants would then pay off the loan in default and pocket the rest of the money.

• As a result, homeowners lost the titles to their homes and lenders sustained losses when the second loan would go into default because the straw buyers failed to make the loan payments.

• Rodriguez ran the foreclosure scam while awaiting sentencing after pleading guilty to defrauding the Department of Housing and Urban Development in another loan scheme.

For the story, see Resident awaits sentencing in foreclosure scam.

Go here for earlier posts and any available updates on this foreclosure scam.

More On Federal Court Ruling Disallowing Class Action Status In TILA Case Seeking Mortgage Recission

The National Law Journal recently ran a story on the recent win by the mortgage lending industry when a Federal appeals court stripped homeowners of class action status in a Truth In Lending Act ("TILA") lawsuit seeking recission of a mortgage in which the TILA was violated.

For the story, see Mortgage Lenders Fight Off Rescission Class Action in 7th Circuit.

For the court ruling, see Andrews v. Chevy Chase Bank (7th Cir., 9-24-08).

Break In Chain Of Title To Mortgage Loan Temporarily Stalls Foreclosure; Bankruptcy Judge Gives Lender Until Thursday To Prove It Owns The Debt

In Savannah, Georgia, The Augusta Chronicle reports:

• An Evans woman whose business dealings set off a series of foreclosures and bankruptcies fended off eviction from her own home Thursday -- at least for now. U.S. Bankruptcy Court Judge Susan D. Barrett gave the local counsel for American Home Mortgage Servicing until next Thursday to gather information to show that through a series of sales and transfers, it is the rightful owner of Regina Preetorious' $567,000 mortgage loan.

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• American Home Mortgage petitioned the bankruptcy court to allow it to proceed with foreclosure on the couple's Windmill Lane home. The company contends they haven't made a mortgage payment since October 2007 on the 3,540-square-feet home. The couple's bankruptcy attorney, Todd Boudreaux, contends American Home Mortgage should prove it holds the legal security deed on their home.

• Ms. Preetorious signed the original loan on Nov. 30, 2006, with Option One Mortgage Co. In January, the company's loans were placed in a trust with Wells Fargo as the trustee. On April 30, America Home acquired all the assets and interests of Option One, company attorney James Overstreet said Thursday. The contents of the trust overseen by Wells Fargo were included, he said.

• But that last step wasn't clear Thursday. There appeared to be a break in the chain of ownership, Judge Barrett said. Mr. Boudreaux said the couple is entitled to know exactly who owns their loan.

For the story, see Businesswoman avoids eviction.

$8.68 Billion Settlement In The Works In Countrywide Litigation With 11 State AGs; Loan Mods For Many Countrywide Borrowers On The Way

In Sacramento, California, Legal Newsline reports:

• With news of a billion-dollar settlement between financial giant Bank of America and attorneys general from 11 states, thousands of homeowners facing foreclosures could soon have a rebirth of opportunity to save their homes. News of the settlement leaked out of several state attorneys general offices Sunday night. Those close to the negotiations hailed the progress as a significant step toward stemming the tide of the foreclosure crisis that has caused an earthquake in the county's economic foundations.

• "This is definitely a home run," said San Diego City Attorney Mike Aguirre, one of the many city officials suing Countywide Financial Corp. over its alleged predatory lending practices. California Attorney General Jerry Brown, who led much of the negotiations with Bank of America, parent company of Countrywide, too hailed the victory of homeowners. "Unlike last week's congressional bailout," Brown said, "This loan-modification program provides real relief for borrowers at risk of losing their homes."

• Brown said the $8.68 billion settlement, with $3.5 billion going to his state, is the largest of its kind, far surpassing the $484 million settlement with Household Financial Corp. in 2002.

For more, see Countrywide clients find new life in settlement.

See also California AG press release: Attorney General Brown Announces Landmark $8.68 Billion Settlement with Countrywide:

• In addition to California, attorneys general in 10 states, including Arizona, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Texas and Washington, are participating in the settlement. Attorney General Brown’s office, along with the Office of the Illinois Attorney General, led the negotiations for the states.

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• The settlement does not include Angelo Mozilo, the former Chairman and Chief Executive of Countrywide Financial Corporation or David Sambol, formerly the President of Countrywide Home Loans and the President and Chief Operating Officer of Countrywide Financial Corporation. Brown will continue to prosecute his case against Mozilo and Sambol.