Oregon Equity Stripper Cops Plea; Now Faces Foreclosure Himself

In Portland, Oregon, Willamette Weekly reports:

• Larry Jason Somera did something a week before Christmas that rarely happens in Multnomah County Circuit Court—he pleaded guilty to a mortgage-related crime.

***

• Somera, a 35-year-old former mortgage broker, first attracted the attention of law enforcement after two 2006 home purchases from the elderly and disabled. In one deal, he and a partner bought the 1,300-square-foot Northeast Portland home of Evelyn Allen, a 73-year-old blind woman who faced foreclosure. They made a gross profit of $155,000, most of which they paid to Allen only after Allen’s family sued.

• That same year, Somera and a partner bought the St. Johns home of an 80-year-old Portland man suffering from dementia. They paid $125,000, $45,000 less than it was worth, according to court records. After the man’s financial adviser challenged the purchase in court, Somera and his partner gave the home back.

• Shen ultimately charged Somera with first-degree forgery, a Class C felony, for concocting a bogus rental agreement as collateral for the loan on a third property. [...] Somera, whose pitch in 2006 to Allen was rescue from foreclosure, now also faces the loss of his home.

For more, see Grounded Vulture (One “foreclosure-rescuer” pleads guilty in 2008. Will there be more in 2009?).

For an earlier story on this case, see Rescue Me (A Portland Cop is targeting foreclosure vultures).

San Diego-Area Foreclosure Rescue Operator Faces Felony Charges For Allegedly Screwing 17 Homeowners In 150 Year Old Land Patent Scam

In San Diego, California, KGTV Channel 10 reports:

• A man accused of stealing more than $100,000 from people in a land patent foreclosure scam pleaded not guilty Wednesday to numerous felony charges involving the 17 alleged victims. Larry Smith, 60, allegedly told people who came to his seminars that if they gave him thousands of dollars, he would help them buy a land patent so the bank couldn't foreclose on it.

***

• Five others are charged in the case with Smith, although only one has been arrested, [Deputy District Attorney Marlene] Coyne said. The prosecutor said she believes there are more people allegedly victimized by Smith, who have not yet come forward.(1)

For more, see Man Pleads Not Guilty In Alleged Foreclosure Scam.

For related KGTV Channel 10 reports on this case, see:

• December 22, 2008: Man Takes Alleged Land Patent Scheme To Other States (Larry Smith Accused Of Using 150-Year-Old Scam On Foreclosure Victims),
• July 17, 2008: I-Team Pursues Man Suspected In Land Patent Scheme.

(1) Smith was charged with conspiracy to commit grand theft, conspiracy to commit deceitful practices by a foreclosure consultant and numerous counts of grand theft.

Atlanta Man Faces Theft By Deception Charges For Allegedly Taking Money From 11 Homeowners Facing Foreclosure, Failing To Deilver On Promises

In Atlanta, Georgia, Fox5 News reports that a man who made money off of people about to lose their homes to foreclosure has been arrested.

Dwayne Green, of Maximus Investment Group, has been charged with one felony count of theft by deception for taking $18,000 from one homeowner facing foreclosure, and one misdemeanor count of theft by deception for pocketing lesser amounts from ten other financially strapped homeowners. He failed to deliver on promises to help save homeowners out of foreclosure.

For the story (video only), see I-Team Maximus Arrest. loan modification

Mortgage Payoff "To Do" List

In a recent Q&A column, attorney/syndicated real estate writer Benny L. Kass gives this "to do" list when paying off a mortgage:

1. Make sure that your mortgage/deed of trust is formally released from the land records in the county where your house is located. Ask your former lender to confirm that they arranged for this release (If you are having trouble determining whether the release/satisfaction was filed, the local recorder of deeds may be of assistance.),
2. You should get your original promissory note and deed of trust returned to you, marked "paid and cancelled;"(1)
3. Advise your county real estate tax office to start sending you the real estate tax bills;
4. For those who had automatic bank withdrawals to pay your mortgage, make sure to stop these payments immediately.

For those of you looking to take advantage of the current low fixed rate mortgages available and are thinking of refinancing, you might want to keep the foregoing points in mind.

Source: Real Estate Mailbag (last Q&A in the article).

(1) I wonder how many homeowners actually realize that they are entitled to get back their original promissory note. Also, I wonder how many would be successful in getting back their original note nowadays, given that many of the geniuses in the mortgage industry (ie. lenders, servicers, securitizers, Wall Street wizards, etc.) never bothered to physically keep track of the loan documents after the mortgage was consummated, and have no clue whether they actually lost them, or simply forgot where they stashed them (possibly in a dumpster).

For an example of how clueless some in the mortgage industry are, see The Associated Press: American Home under fire over loan files, where a mortgage lender, through its legal counsel, makes an idiotic request of a bankruptcy court for permission to actually dump the original documents for 490,000 mortgage loans. KappaMtgDocsMissing

Difficulty Tracing Title To Home Involving Securitized Foreclosed Mortgage Stalls House Closing

In Minneapolis, Minnesota, FOX9 reports:

• A Twin Cities couple is hoping to turn a foreclosed home into a home, but it has not been easy. Three different closing dates have fallen through. [...] In the Waite Park neighborhood in northeast Minneapolis, a little cottage on Benjamin Street has been sitting empty since spring. Heather Playman and her husband would love to buy it. In fact, they even have a purchase agreement, picking it up two months ago for a relative steal at $165,000.

• But the bank won't close on the deal. The problem is with the paperwork: the title and the deed. Wachovia used to own the house, now it's Fannie Mae. The city of Minneapolis says it’s a common problem that keeps hundreds of homes in limbo. "Many mortgages were bought and sold between lenders over and over again and it is difficult to trace the title."(1)

For more, see Bank Ownership of Foreclosed Homes Causing Confusion (Closing dates missed on NE Minneapolis home owned by Fannie Mae).

(1) Given the gigantic mess created by the mortgage lending industry in this regard, I wonder how many in the title insurance industry (ie. underwriters, agents, closers, etc.) there are who are having a problem insuring the titles to homes that have a recent foreclosure appearing in the chain of title. Based on this story, there apparently is at least one who's having a problem. Are there any others??? KappaMtgDocsMissing

Colorado Man Cops Plea To One Count Of Forgery In Alleged Mortgage Scam; Gets Free Pass From Prosecution In Cases Involving 15 Other Properties

In Weld County, Colorado, the Greeley Tribune reports:

• A Greeley man who holds himself out as a real estate broker and builder and is a defendant in a civil fraud case(1) pleaded guilty to forgery [...] in exchange for immunity on other mortgage crimes. Ernest Salazar Jr., 49, pleaded to the felony [...] and faces from one to three years behind bars.

***

• Weld District Attorney Ken Buck said he will ask for jail time but would not discuss specifics. He said he had been talking with Salazar’s attorney prior to the grand jury indictment against Salazar, and agreed to pursue only one felony charge. “I think that our resources are best spent pursuing the other targets we have identified,” Buck said. “I’d say stay tuned.” Buck said he couldn’t elaborate about who else may have been involved.

• Salazar said he would plead guilty to forgery if the Weld District Attorney’s Office agreed not to pursue charges in cases involving 15 properties(2) he worked with through his businesses, Sunset Construction, Sunrise Mortgage, A-1 Action Construction and All-Pro Mortgage.

For more, see Greeley man pleads in forgery case in deal with Weld DA.

(1) According to the story, the civil case against Salazar was filed in February, and alleges that he defrauded a man and other property owners in a series of real estate flipping schemes throughout Greeley and Windsor, designed to either steal equity, use others’ credit to obtain loans and skim off the top, and flat out steal money. Reportedly, the civil suit claims that the damage done to individual investors exceeds $800,000.

(2) Salazar's ostensibly sweet plea bargain may have possibly been obtained as a result of his "winning the race to the prosecutor's office" - which has been described as a natural phenomenon that arises whenever the government has multiple targets in its crosshairs. In this case, Salazar, the first "fish" to get to the prosecutor, negotiates a great plea deal for himself in exchange for an agreement to "sing" against the other "fish" (ie. his confederates in the alleged scam). The more "fish" Salazar can help the prosecutor "reel in" (through convictions), the less time he'll have to spend in the "frying pan" (ie. prison) when the "fish fry" takes place (ie. sentencing day).

Using Statute Of Limitations To Wipe Out Lenders' Right To Foreclose A Mortgage?

In a recent story on MSNBC.com profiling Florida consumer foreclosure attorney April Charney and her approach to defending homeowners facing foreclosure, a point was made on the possible use of the statute of limitations to terminate a foreclosing lender's right to foreclose:

• Charney said that in a number of her cases, once there is no longer an ability for the loan servicer to profit, the foreclosure “just goes to sleep, and unless I’m going to pursue it, nobody’s setting hearings, nobody’s pursuing anything to get it to trial.”

• After five years, which is the statute of limitations to enforce a contract in Florida,(1) she can try to help her clients own their homes mortgage-free, Charney said. The first opportunity for her to help clients do that may arise next year.

• And that legal limbo is where the lion’s share of her cases stand now, Charney said. So far this year, she has achieved two “workouts” and lost two cases. “Many, many, many” of the rest are in sleep mode or getting a single filing each year by plaintiffs’ attorneys just to keep them alive.

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) Sec. 95.11(2)(c), 95.281(1)(a), Florida Statutes. KappaMtgDocsMissing

Lack Of Diligence Means Another Process Server Screw-Up, Another Void Foreclosure

A 2006 decision of a Florida appeals court adds a little fuel to the fire for those who believe that screw-ups by process servers (as well as attorneys for foreclosing lenders who, contrary to what they may think, have some responsibility for supervising the actions of a process server) in the course of serving homeowners with the lawsuit paperwork (ie. summons and complaint) in foreclosure proceedings are not all that uncommon.

The case involved a permanent resident of Canada who owned a second home in Spring Hill, Florida, and who was facing foreclosure on that home. At the time of the attempted service of process, the home was unoccupied. Because the process server couldn't find the homeowner after a couple of attempts at the premises, and an attempt at a second location, a decision was made to serve the homeowner by publication of a legal notice in the local newspaper.(1)

In reversing the lower court and deciding that service of process was no good in this case, the court ruled that the process server failed to meet the minimum requirements for conducting a "diligent search and inquiry" for the whereabouts of the homeowner prior to resorting to service by publication.(2)

For the details on the process server's lack of diligence in conducting a search and inquiry in connection with the homeowner's whereabouts in this case (sorry, no "easy-to-read" media report for this story; court decision only), see Godsell v. United Guar. Residential Ins., 923 So. 2d 1209; 2006 Fla. App. LEXIS 3884; 31 Fla. L. Weekly D 812 (5th DCA 2006).

Go here for other posts on foreclosures involving faulty notifications to property owners.

Go here for other posts on process server screw ups.

(1) Pursuant to Sections 49.021-.041, Florida Statutes.

(2) The court indicated that the plaintiff must prove that it made “an honest and conscientious effort, reasonably appropriate to the circumstances, to acquire the information necessary to fully comply with the controlling statutes,” and that "it is basic that to constitute diligent search and inquiry to discover the whereabouts of a party, that inquiry should be made of persons likely or presumed to known [sic] such whereabouts." foreclosure faulty notice ScrewUpProcessServing

Attorney Malpractice For Obtaining Loan Modification From Lender Who Can't Prove It Owns The Promissory Note?

An article in the Decenber, 2008 issue of Trial Magazine highlights problems faced by lenders as a result of the mortgage securitization process that leaves them in a difficult spot whether they're attempting a foreclosure action against, or a loan modification with, a financially strapped homeowner. It also raises a question regarding an attorney's professional responsibility when representing a homeowner in these situations.

• [B]ecause of lenders’ bundling and reselling of mortgages, [promissory] notes are often lost, misplaced, or corrupted. As a result, many lenders can’t prove that they are owed payments and entitled to foreclose.

***

• “Losing a note is like losing cash,” said Mitchell Roth, a lawyer in Sherman Oaks, California. “The right to payment depends, with limited exceptions, upon the actual possession of the note. To defend against a foreclosure, the first line of defense is, ‘Show me the note.’ And show me how you have the right to payment under the note by proper endorsement or assignment.”

***

• Roth said confusion about the note holder is one reason lawyers should counsel their clients to avoid loan workouts or other negotiations offered by their banks or mortgage companies.

• “Why should we renegotiate unless we know that we are negotiating with the actual holder of the note?” he said. “In fact, I think lawyers are committing malpractice if they are negotiating with an entity that is not the original holder in due course in possession of the instrument.”

For more, see Homeowners bank on new ways to fight foreclosures (article reproduced and appearing on the website of The Consumer Warning Network).

In related posts, see:

• 12-29-08: Foreclosing Lender Can't Prove Ownership Of The Note? So What's The Big Deal???,
• 12-28-08: Judges, Homeowner Attorneys Begin To Wonder How To Do A Loan Modification When Lender Can't Prove Ownership Of Promissory Note?KappaMtgDocsMissing

Federal Prison Sentences Expected To Get Stiffer As Tanking Real Estate Market Drives Up Lenders' Losses From Mortgage Fraud

Buried in a recent story in the South Florida Sun Sentinel is an observation that prison sentences in federal mortgage fraud prosecutions will begin becoming stiffer than they have been:

• [U]ntil now, the punishments meted out to mortgage fraud offenders have been relatively mild — usually less than five years' imprisonment and sometimes nothing more than probation.

• That's because under federal sentencing guidelines, penalities in such cases are tied to the amount of documented financial loss. When home prices were climbing, fraudsters generally paid off their loans and lenders had no direct losses.

• Now the foreclosure crisis is driving up losses, resulting in stiffer punishment. In [one recent] case, prosecutors and defense lawyers agreed [a mortgage scam defendant's] crimes cost lenders at least $1 million because many of the properties he purchased were subsequently foreclosed on at a loss [he received eight years in prison].

Source: Mortgage fraud cases in South Florida might bring stiffer sentences (Judge imposes 8-year term, saying he wants to deter others).

HELOC Freeze Puts Squeeze On Family's College Tuition Plans

In Algonquin, Illinois, the Chicago Sun Times reports:

• Jim and Cindy Ranallo are determined to give their two sons one thing they don't have: a four-year college degree. But the home equity line of credit they were relying on to get both boys through school was unexpectedly frozen by JPMorgan Chase weeks before their elder son's recent tuition payment was due.

***

• The Ranallos' situation is a familiar one for hundreds of thousands of Americans who have found their home equity credit lines frozen or reduced this year. Their struggle to send their children to college also is familiar to parents patching funds together for higher education, constantly worried they will come up short.

***

• Hysterical after opening the bank's letter, Cindy Ranallo feared her son would be kicked out of school because they couldn't afford it. A [college] official reassured the Ranallos that they would find a way for their son to stay, offering additional student loans, which the family accepted.

For more, see Frozen home equity loan hurts family (ECONOMY'S VICTIMS: Freezing of home equity loan threatens to kill Algonquin family's dream of sending sons to college).

The U.S. Office of Thrift Supervision recently issued a six-page letter of guidance which generally explains what obligations lenders have in connection with the freezing of home-equity lines of credit [HELOCs].

Go here for other posts on Frozen HELOCs.

More On Anticipated Home Mortgage "Cram Downs" In Bankruptcy

The Wall Street Journal reports:

• Mortgage lenders who wake up Thursday with a New Year's hangover are likely to face another headache soon: The effort to give bankruptcy judges the power to rewrite mortgages is gaining steam.

• The banking industry hoped the mortgage "cram-down"(1) measure died when Congress removed it from the $700 billion bailout bill that passed in October. But it has been gathering momentum in Democrat-controlled Washington, as evidence emerges that current voluntary foreclosure-prevention programs are falling short.

***

• "It is absolutely clear that voluntary modification is just not working," says Rep. Brad Miller, a North Carolina Democrat. "Every plan that Congress has passed, we do it and nothing happens."

For more, see Mortgage 'Cram-Downs' Loom as Foreclosures Mount (may require subscription; if no subscription, go here - then click link for the story).

(1) In a cram-down, a judge modifies a loan, often reducing principal so a borrower can afford it. Lenders hate it because they have to absorb the loss. Bankruptcy judges currently have the ability to modify certain personal loans and even mortgages on vacation homes, but they can not cram-down mortgages on primary residences.

Lenders Accused In Housing Court Of Dumping Blighted Foreclosures Onto Real Estate Market Shop For Friendlier Forum; Move Cases To Federal Court

In Cleveland, Ohio, The Washington Independent reports:

• The fight that neighborhoods in Cleveland are launching against banks that dump vacant and vandalized foreclosed homes back onto the real estate market received a bit of a setback, [...]. A private, non-profit housing advocacy group had filed suit in local housing court to force the banks to clean up their properties before selling them, or to demolish them entirely. But the banks - Deutsche Bank and Wells Fargo - convinced a judge to move the suit to federal court.

***

• The move to federal court is more than just an arcane legal development. The neighborhood group wants the case heard in housing court because it validates what has become increasingly clear in the foreclosure crisis: Banks are property owners, with all the responsibilities that come with it. As they foreclose on houses and their inventories of bank-owned properties swell, banks try to dodge this reality by blaming servicers and paying lawyers to get them out of housing court.

• The same thing happened in Cincinnati recently, where the local legal aid agency filed suit in housing court, but the case was moved to a federal court instead.

For more, see Banks with Deep Pockets Dodge Foreclosure Damages.

See also, Lawsuit Targets Banks With Novel Tactic (Advocacy Group Takes Grievances to Housing Court):

• [C]leveland and other cities are “looking at old bodies of law to address new problems,” [University of Connecticut law professor] Patricia McCoy said, because they are trying to fight foreclosures with any tools they can. Cleveland has taken legal action previously over foreclosures. The city in January sued 21 investment banks, including Wells Fargo and Deutsche Bank, and accused them of creating and enabling the subprime crisis. The suit was filed in Cuyahoga County Common Pleas court. The latest suit differs in that it was filed in housing court. BetaVacantForeclosure

Connecticut Warns Consumers Against Unsolicited Mortgage, Credit Card Debt Assistance; False Offers Of Help Are A "Scavenger Hunt" Says State AG

From the Office of the Connecticut Attorney General:

• Attorney General Richard Blumenthal issued an urgent consumer warning [last week] about unsolicited calls to consumers offering reduced rates on mortgages or credit card debt.

***

• "Our advice to consumers: hang up on unsolicited offers," Blumenthal said. "This scam victimizes our most vulnerable citizens -- homeowners desperate to save their families and escape financial ruin. This reprehensible ruse -- false promises of reduced rates on mortgage and debt -- is actually a scavenger hunt for private, personal information on consumers that may be illegally exploited. Consumers who divulge details hopeful for better lives will find only deeper financial ruin."

For the Connecticut AG press release, see Attorney General Issues Consumer Alert On Mortgage And Debt Rescue Scam. loan modification

Loan Modification Services Prohibited In Vermont Unless Licensed, Say State Officials

In Montpelier, Vermont, The Burlington Free Press reports:

• Homeowners having trouble making mortgage payments or facing foreclosure should be cautious when offers of assistance come unsolicited, requiring up-front fees, or are high-pressure sells, officials for the Vermont Department of Banking, Insurance, Securities and Health Care Administration said.

• (BISHCA) has received inquiries and complaints about so-called foreclosure “rescue” services. While it is not inherently illegal to offer these services, the person doing it must be licensed with BISHCA as a lender, mortgage broker, or debt adjuster, said BISHCA officials.

For the story, see State: Be wary of foreclosure rescue services.

More On Philly Deed Theft Problem

In Philadelphia, Pennsylvania, The Intelligencer reports:

• [P]hiladelphia has become a hot spot for deed theft in the past couple of years, said [Montgomery County Recorder of Deeds Nancy J.] Becker. She recalled an incident where homeowners left for their winter home in Florida only to return to the city in the spring to find all of their furniture and possessions gone and a family living in their home who thought they had rightfully bought the property.

• “In Philadelphia, it's so bad that the president judge designated two judges, and all they hear is land-fraud charges.”

For more, see New law helps limit deed fraud.

For an old NBC10 (Philadelphia) television story in which investigative reporter Lu Ann Cahn "steals" the homes of Pennsylvania Governor Ed Rendell, as well as the homes of the Philadelphia mayor and the Pennsylvania Speaker of the House of Representatives to highlight the deed theft problem in Philadelphia, see Stolen Homes.

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

Shelby County Commisioners Give Go-Ahead For Filing Race Bias, Predatory Lending Suit Against Major Lenders

In Memphis, Tennessee, Memphis Commercial Appeal reports:

• Shelby County commissioners approved a resolution [last week] authorizing the county to file suit against the national lenders who, officials say, gave out risky, high-interest rate loans and enabled a foreclosure crisis in Shelby County.

• The resolution alleges that these major national lenders engaged in "deceptive" and "discriminatory" lending practices targeted at the black community. And the resulting foreclosure epidemic has destabilized neighborhoods, eroded property values and damaged the tax base -- costing county and Memphis city government millions in tax revenues.

***

• Webb Brewer, the director of advocacy for Memphis Area Legal Services, who will help the city and county prosecute, said the 10 or so national banks that gave out the most predatory loans will most likely be named.

For more, see Shelby commissioners authorize lawsuits against mortgage lenders (Resolution says loans targeted minorities, forced foreclosures).

See also, Memphis Daily News: Details Coming Soon for Lender Lawsuit.

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

1031 Exchange Intermediary Suspected Of Feloniously Pocketing $550K+ In Clients' Sale Proceeds Found Dead By Suicide

In Boulder Colorado, the Boulder Daily Camera reports:

• [K.C.] Schneider, who owns a commercial real estate firm in Boulder, said Wednesday he is [...] out $425,000 in real estate proceeds he gave National 1031 Exchange Service to hold while he closed on a new property.

***

• Schneider filed a complaint in October against the now-defunct holding company's owner, Debra Edwards, and earlier this month Boulder police issued a warrant for her arrest on suspicion of three felony counts of theft of more than $20,000.

• But the day before Edwards was to surrender to authorities, the 53-year-old certified public accountant and former board member of the Longmont Area Chamber of Commerce was found dead in her Longmont office. The Boulder County Coroner's Office said Wednesday that her Dec. 15 death was a suicide -- asphyxiation due to inhalation of helium.

• Edwards' death led Boulder police to close its criminal case against her. Schneider said that leaves him and two other National 1031 Exchange Service clients -- who also claim to have been bilked of tens of thousands of dollars -- out in the cold.

For more, see Suicide complicates money-recovery effort (Client says Debra Edwards' Boulder financial firm stole $425,000 from him).

Go here for other posts on problems with 1031 exchange intermediaries.

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. EscrowRipOffAlpha

S. Florida Man, Others Charged With Using Unwitting Mother-In-Law's I.D. & Submitting Simultaneous HELOC Applications To Suck The Equity From Her Home

The U.S. Attorney's Office in Miami, Florida announced the return of a five count grand jury indictment charging eight participants(1) with a bank fraud scheme that resulted in the approval and disbursement of two home equity loans, totaling approximately $1 million. The U.S. Attorney's office said:

• According to the indictment, "Benny" Benach [and three others] decided to submit simultaneous applications for fraudulent home equity lines of credit (“HELOCs”) to Bank of America and Wachovia for the total amount of $1 million, requesting $500,000 from each bank. Each HELOC application listed Benach’s mother-in-law as the purported borrower, and a home owned by Benach’s mother-in-law as the collateral. To prepare and process the HELOC applications, Benach’s mother-in-law’s name and social security number were used without her knowledge, input or authority. [...] At the time of the submission of the fraudulent HELOC applications, neither bank was made aware of the other pending HELOC application.

Among the participants charged were employees of the lenders who allegedly accepted and processed bogus loan applications.

For more, see Two Bank Insiders And Six Others Charged In Bank Fraud Scheme To Defraud Bank Of America And Wachovia Of $1M.

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) Charged were Bienvenido “Benny” Benach, Jr., Ramon Puentes, Danny Flores, Rolando Alfonso, Jorge Nobrega, Jorge Arrieta, Sebastian Kishinevsky, and Adriana Cruz. KappaDeedTheft