Baltimore, St. Paul Among At Least 18 Cities Forming Litigation Work Group To Hammer Mortgage Lenders Over Vacant & Abandoned Foreclosures

In Baltimore, Maryland, The Maryland Daily Record reports:

• Baltimore’s law department is partnering with 18 cities across the country to use litigation to address the foreclosure crisis. City Solicitor George A. Nilson spoke Monday afternoon in support of a City Council resolution that was to have been introduced at Monday evening’s meeting that establishes a “Multi-City Litigation Work Group on Foreclosures” and would include officials from Chicago, Atlanta, Memphis and other cities.

• “The purpose and the importance of it is to do, at the city or municipal level, what has been done at the state level, and that is to deal with common problems of consequence in a coordinated manner rather than in an ad hoc manner,” Nilson said.

• The idea for the work group came from officials in St. Paul, Minn., who are considering litigation against the six major lenders that own the most vacant property in that city, including Wells Fargo, USBank, Deutsche Bank, HSBC and Chase.

For this story, see City joins 18 jurisdictions across U.S. in fighting foreclosures.

******************

In St. Paul, Minnesota, the Pioneer Press reports:

• St. Paul is helping to create a national working group of city attorneys who are trying to hold lenders accountable for the accumulation of vacant and foreclosed-on homes in urban areas.

• The idea is for the chief legal officers — some of whom have filed lawsuits against lenders — to share information and coordinate legal strategies that might decrease foreclosures and vacancies. A City Council resolution of support for St. Paul's participation in the working group is expected to be introduced this week.

***

• John Choi, the city attorney in St. Paul, has been appointed to co-chair the working group along with his counterpart in Baltimore, and city officials expect other municipalities to announce their involvement in the coming weeks.

For this story, see St. Paul / City goal to curtail vacant properties (National group to seek solutions).

See also, Minnesota Lawyer: St. Paul announces the launch of multi-city foreclosure litigation initiative.

Foreclosed Elderly Cancer Patient, Wife Locked Out Of Home Without Eviction Hearing; Lender Denies Having Locks Changed

In Bronson, Michigan, WWMT-TV Channel 3 reports:

• An elderly couple that lost their home say that was bad enough, but now they've told Newschannel 3 that they have been locked out of their home and can't get their belongings, including medical equipment. Nobody seems to know why, and that's when [Henry and Ruthie Leaf] contacted [Newschannel 3] for help.

***

• Henry Leaf has the end of his life staring him in the face, so it's not the greatest time for the terminal cancer patient to be locked out of his home, but that's what he and his wife say happened. [...] Ruthie says that after being in and out of hospitals in late 2008, they finally came home in December to new locks, and all their stuff still inside. An attorney that has worked with them says the locks were changed in November.

• The company that foreclosed their home says it doesn't know who changed the locks. "I don't know what's going on to be honest," said Tom Maleski from Bond Corporation, "why the locks would be changed in November. If the locks were changed in November, nobody called me and told me that." Maleski also said no home-owner would be locked out until an eviction hearing. The Leaf's have their hearing on January 23rd.

***

• Branch County lists Northpointe Bank as the new owners of the home, but in a statement to Newschannel 3, Northpointe said they would have never ordered the locks to be changed. Meanwhile, the Leaf's tell us they never received any eviction or lock-out notification and are willing to let the house go, but they do want their stuff back.

For the story, see Locked out of their own home (read story) (watch video).

For story update, see A happy ending, after being locked out of their home.

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

New Jersey Woman Charged With Pocketing Elderly Mother's Housing Money Intended For Long Term Care Facility Where She Resided

From the Office of the New Jersey Attorney General:

• Attorney General Anne Milgram announced that an Ocean County woman has been indicted for allegedly stealing more than $6,000 from her elderly mother.

***

• The indictment alleges that [... Ann] Selk failed to remit payments on her mother’s behalf to the long-term care facility in which the mother was a resident. As a condition of her mother’s Medicaid eligibility, Selk was required to turn over the mother’s monthly Social Security and pension checks to the residential long-term care facility as partial payment for care. The indictment alleges that Selk failed to turn over $6,376 of her mother’s available income to the facility on behalf of her mother.

For the New Jersey AG press release, see Ocean County Woman Charged in Theft of $6,000 from Her Mother.

DC Man Gets 12+ Years In Deed Theft Scam Targeting Deceased Owners; Victimized Families Forced To File Civil Suits To Properly Restore Property Titles

From the Office of the U.S. Attorney (District of Columbia):

• A District of Columbia man, Duane McKinney, [...] was sentenced [last week] to 150 months in prison on charges of fraud, theft, and monetary transactions,(1) [...].

***

• The government's evidence at trial established that Duane McKinney obtained title to about $1 million worth of D.C. and Maryland properties through forged deeds, that is, deeds which purported to be signed by the owners transferring the properties to McKinney or his shell business. In fact, the deeds were not signed by the owners; the vast majority of the owners were deceased at the time of the forged and false deeds.

• McKinney was assisted by Joe D. Liles,(2) who would sign his name to these false deeds as the "notary" falsely stating that he saw the owner sign the deeds as grantor and that the owner "personally appeared before him." Once the deeds were notarized, McKinney would then sell the properties as if they belonged to him or his business and would use the money for himself.

• Some of those who purchased the homes lost all of their purchase money;(3) others whose families owned the homes for generations were required to file suit against McKinney to regain their properties.

For the press release, see District of Columbia man sentenced to prison on charges of theft, fraud, and money transaction offenses relating to forged property deeds.

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) McKinney was also ordered to pay $912,630.75 in restitution and to forfeit to the United States three luxury vehicles and two real properties; the court also ordered two money judgments in the amounts of $770,872 and $59,000.

(2) Liles was sentenced to 180 days, execution of sentence suspended, three years probation, and to pay restitution of $691,587, according to the press release.

(3) The press release is silent as to whether the unwitting homebuyers bore the entire loss of their purchases, or whether they obtained a title insurance policy (which would have likely insured their title against this type of scam), in which case the title agent & underwriter issuing the insurance may be left on the hook for the loss. KappaDeedTheft

Spokane Grandson, Girlfriend Jailed For Duping Grandma Into Signing Over Deed To Home; Then Filing Eviction Papers To Give Her The Boot

In Spokane, Washington, ABC News reports:

• At 83, Betty Halligan had lived a long and happy life, but after her husband died she needed extra care. Betty Halligan was suffering from dementia and diabetes, so her grandson Michael Halligan and his girlfriend Daphne Wood moved into her Spokane, Wash., home to help her out. Or so she thought.

• Betty Halligan's son, Dick Halligan, and his wife, Gail Halligan, lived in another state. At first they were happy that their mom had help, but later they became concerned when they learned she had signed over her power of attorney to their nephew. Dick Halligan was convinced his nephew was stealing from his mother.

***

• "They had convinced her to sign the deed to the house over to them, with the thought that they would stay and take care of her for the rest of life," Dick Halligan said. "As soon as the deed came in the mail, they started the paperwork to get an eviction notice to get her out of the house." With her life savings depleted and about to be evicted from her own home, Betty Halligan finally reached out to her daughter-in-law for help.

***

• Police raided the home and uncovered evidence that ultimately sent Michael Halligan and Wood to prison for more than two years. They were convicted of second-degree theft and forgery.

• Betty Halligan witnessed her grandson's trial and later moved to an assisted living center, where she lived until she passed away in June. "She was never the same after this," Gail Halligan said. "She died of disappointment and a broken heart."

For more, see Don't Give Power of Attorney to the Wrong Person (Will Power of Attorney Abuse Rise Because of Bad Economy?)

For ABC News video report, see Protect Against Thieving Relatives (Children and grandchildren are stealing from their senior citizen relatives).

Go here, here, here, here, here, and here for other posts on elder financial abuse. FinancialAbuseOfElderlyAlpha KappaDeedTheft

Saintfield Couple Cops Forgery Plea; Accused Of Ripping Off 94-Year Old, Blind Mother Of Her Half Of Residence; Civil Suit Expected To Undo Deed Theft

In Saintfield, Northern Ireland, the Belfast Telegraph reports:

• A man has pleaded guilty to a £100,000 fraud in which he and his wife left his blind 94-year-old mother without her home. Just moments after a jury was sworn in to hear the case George Ignatius Martin and his wife Mary Martin changed their plea and admitted forging land registry documents to transfer the elderly pensioner’s home into their name.(1)

***

• The fraud relates to a house at Downpatrick Street in Saintfield which the victim, Mrs Annie Martin, owned with her son George Ignatius Martin. [...] Mrs Annie Martin currently resides in a Belfast nursing home and civil proceedings are expected to be launched to have her share of the property signed back to her.

For more, see Son admits defrauding his mother of her home.

For additional Belfast Telegraph reports on this case, see:

• Family’s shame over son’s bid to swindle blind pensioner,
• Lawyer accused of cheating woman (94) out of her home.

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 Martins entered pleas to four charges of forgery and using false land registry documents with intent. Two charges of obtaining property by deception were not prosecuted, according to the story. KappaDeedTheft FinancialAbuseOfElderlyAlpha

Elderly, Penniless Mom Tells Judge To Jail Son For Home Equity Ripoff; Man Accused Of Abusing POA To Pocket Proceeds Of Reverse Mortgage On Residence

In Sarasota, Florida, the Sarasota Herald Tribune reports:

• An 82-year-old woman suffering from the mental and physical fallout of a stroke told a judge Thursday that her son should go to prison for stealing from her. About an hour later, her 61-year-old son was handcuffed, fingerprinted and sent away for two years.

• "Never in my life would I dream I would be in a position where my firstborn son hurt me," Barbara White said in a letter read aloud in court. "I am penniless and have had foreclosure suits filed against me."

• White's letter talked about the three years of suffering she has endured after finding out her son, Michael Garrett, took more than $80,000 from her. [...] A jury had convicted Garrett of using his power of attorney to give her a reverse mortgage on her home, then spend almost all the money on himself in 30 days.

For more, see Mother tells judge to imprison son (Michael Garrett was given a two-year prison sentence for stealing $80,000 from his mother).

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

Go here, here, here, here, here, and here for other posts on elder financial abuse. KappaDeedTheft FinancialAbuseOfElderlyAlpha

Memphis Loan Modification / Foreclosure Rescue Firm Agrees To Temporary Injunction With Tennessee AG; Will Stop Clipping Homeowners For Upfront Fees

In Memphis, Tennessee, Memphis Commercial Appeal reports:

• Memphis mortgage rescue company Patrick & Patrick Loss Mitigation Services has agreed to stop what the Tennessee Attorney General charged in a Nov. 18 lawsuit (go here for the Tennessee AG's Nov. 18 press release; here for the Tennessee AG's lawsuit; and here for Motion for Temporary Injunction & Asset Freeze) were illegal activities.

• According to the temporary injunction agreed to Tuesday by the firm and the attorney general, the firm may not engage in unfair or deceptive business practices, practice law, offer credit services without registering a bond with the state and must tell consumers in writing what services the firm and its people have provided before getting paid.

For more, see Memphis mortgage rescue company agrees to stop 'illegal practices.'

For Tennessee Attorney General Bob Cooper's January 13, 2009 press release, see: Tennessee Foreclosure Rescue Company Enters Agreed Order to Halt Alleged Unlawful Activities.

The Sloppiness Continues For Attorneys Representing Foreclosing Lenders; "They Are Totally Disorganized!" Says Florida's 12th Judicial Circuit Chief

In Sarasota, Florida, the Sarasota Herald Tribune reports:

• [T]he foreclosure glut is so bad that the law firms that specialize in handling the court cases in bulk for lenders are now too busy. They even let many foreclosure cases stall and remain inactive for months or years, if resident homeowners put up any sort of legal fight.

• [Florida's 12th Judicial Circuit Chief Judge Lee] Haworth says those law firms are apparently even failing to read [his] official written notifications [...]. Notices about local courtroom rules changes, like Haworth's requirement that there be a mediation meeting with a homeowner before a foreclosure can proceed, seem to go unread.

• "They are totally disorganized," Haworth said. They seek court hearing dates that the new rules say they are not entitled to, and seem clueless about it all.

For the story, see Troubled mortgages burdening the courts.

For Chief Judge Haworth's official notifications and links to the forms now required to be filed by attorneys representing foreclosing lenders within Florida's 12th Judicial Circuit (Sarasota, Manatee, and Desoto Counties), see:

• Chief Judge's Letter To Attorneys Summarizing New Foreclosure Procedures And Administrative Orders,
• Administrative Order Establishing Circuit-Wide Homestead Foreclosure Conciliation Program,
• 12th Judicial Circuit's Foreclosure Forms Section (links to required forms and procedures for 12th Circuit foreclosure actions),
• Go here for the 12th Judicial Court's website.

Maryland Victim Of "Money Store" Equity Stripping Scam Loses Battle Against Lender Seeking Mortgage Foreclosure

The Maryland Court of Special Appeals ruled last week against a homeowner fighting to save her home from foreclosure where her financial predicament was exacerbated by seeking help from a now-defunct foreclosure rescue operator.(1)

The court decision addressed the application of Maryland's Protection of Homeowners in Foreclosure Act (PHIFA), and how it applied as against a foreclosing lender.(2) The court ruled that PHIFA did not void the foreclosure rescue transactions, but rather made them voidable as to persons with notice. The mortgagee, the assignee of the lender who provided the financing in the foreclosure rescue, equity stripping scam, was held to be a bona fide purchaser/lender, and accordingly, was not subject to the homeowner's right of rescission.

In seeking to disqualify the foreclosing lender as a bona fide purchaser/lender without notice, the homeowner contended that the foreclosing lender had notice of the alleged fraudulent scam by reason of the fact that the foreclosure rescue operator, the closing agent, and/or the straw buyer were agents of the lender and their knowledge was imputed to it.

Alternatively, the homeowner contended that the foreclosing lender was on notice of sufficient facts to impose a duty to make appropriate inquiries, and failed to do so, thereby disqualifying it as a bona fide purchaser/lender and preventing it from foreclosing.

The court rejected both contentions.

For the court decision, see Julian v. Buonassissi, No. 2740, Court of Special Appeals of Maryland, 2009 Md. App. LEXIS 2 (January 5, 2009).

(1) The alleged scam was one involving the notorious Metropolitan Money Store, of Lanham, Maryland.
(2) Maryland Code (2005, Supp. 2006), § 7-301, et. seq. of the Real Property Article.

NJ Closing Lawyer Cops Plea To Pocketing $4M In Escrow Cash; Blows Money Intended For Existing Lien Holders On AC Slots; Title Insurers Foot The Bill

From the Office of the New Jersey Attorney General:

• Attorney General Anne Milgram and Criminal Justice Director Deborah L. Gramiccioni announced that a Lyndhurst lawyer pleaded guilty [last week] to stealing approximately $4 million entrusted to him for real estate closings, which he used to gamble in Atlantic City.(1)

***

• [Michael P.] Rumore was hired as an attorney and settlement agent for real estate purchasers. Between April 16, 2007 and August 13, 2008, he received approximately $4 million into his attorney trust account from various mortgage companies. He had a duty to disburse the funds for closings and use them to pay balances on existing mortgages and other associated costs and fees.

• In pleading guilty, Rumore admitted that he instead transferred the funds into his personal and business accounts and used them to gamble at casinos in Atlantic City, primarily on slot machines.

For the NJ AG press release, see Lyndhurst Lawyer Pleads Guilty to Stealing $4 Million in Funds for Real Estate Closings Which He Gambled in Atlantic City.

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

(1) According to the NJ AG press release, the plea agreement provides that the state will recommend that attorney Michael P. Rumore be sentenced to 15 years in state prison, and must sign a consent judgment to pay full restitution to the victims, which are various title insurance companies. Rumore, 50, pleaded guilty to first-degree money laundering and second-degree theft by failure to make required disposition of property received. EscrowRipOffAlpha

NYC Attorney Disbarred For Stealing From Clients Refuses To Stop Practicing Law; Arrested Last Week For 3rd Time Since Losing License

In New York City, the New York Post reports:

• Practice doesn't necessarily make perfect. An elderly Manhattan lawyer, banished from the legal profession for stealing from clients, could spend his golden years in prison - because he refuses to stay out of the city's courthouses.

• At an age when most career attorneys have taken to the golf course, all 81- year-old Bertram Brown wants to do is work, something he is now alleged to have done three times under an alias since his disbarment.

***

• Brown, a Columbia Law grad and an attorney for nearly a half-century, surrendered to Brooklyn prosecutors last week for allegedly using a phony name to represent a client in a housing-court case.

• He's been without a license since April 2006, when he was disbarred for stealing $54,000 from a Queens man [William Ryan] who had hired him to stop the foreclosure on his Ozone Park home.

***

• Brown was also charged with stealing more than $20,000 from one of Ryan's neighbors, whom he represented in the sale of her Ozone Park home, authorities said.

For more, see COURT IN OB-SESSION (Crooked Attn'y Refuses To Stop Practicing).

Nigerian Scam Artist Swipes & Sells Deed To Cape Coral Lot; Leaves Listing Agent With Egg On Face, Title Insurer Holding The Bag

In Cape Coral, Florida, the News Press reports:

• Roberta Kunda thought she was buying a vacant lot in Cape Coral. Instead, $18,000 of her money went to a computer-savvy scam artist — possibly in Nigeria. Because she had title insurance, Kunda will probably get back her money from the 2007 purchase, but the incident highlights cracks in the real estate market and the risk from international scammers who are growing more sophisticated.

***

• Kunda went through a reputable RE/MAX realtor, paid for a title search and filed all the proper paperwork. But somehow, the real estate agent, title company and an underwriter on the title insurance all missed the fact that the seller was a scam artist who never owned the property [...]. Whoever posed as the seller on Kunda's property had the Deed Warranty notarized in Lagos, Nigeria. That address, [a manager at a local title agency] said, should have triggered a red flag. It did not.

For more, see Internet scammer sells Cape Coral residential lot for $18,000. KappaDeedTheft

One More Arrested, Two Others Sought In San Diego-Area Alleged Land Patent, Foreclosure Rescue Scam; 17 Cheated Out Of $100K+, Say Prosecutors

In San Diego, California, the San Diego Union Tribune reports:

• Prosecutors are asking for the public's help in finding two people suspected of scamming homeowners in a foreclosure fraud scheme, officials announced Friday. Julita Whittingham and Edgardo Orcino are part of a group of people suspected of defrauding San Diego County homeowners out of more than $100,000 in 2007, prosecutors said.

***

• A third suspect, Jessica Refuerzo, 55, of Spring Valley, was found and taken into custody Friday, officials said. Prosecutors said the trio falsely promised to help homeowners who had defaulted on mortgage payments or who feared they would soon default by holding seminars in which they pitched their scheme.(1)

For more, see Authorities Seek 2 In Alleged Land Patent Scam.

(1) Two other suspects in the case are in custody. Larry Smith, 60, has pleaded not guilty to felony charges of grand theft, conspiracy to commit grand theft and engaging in deceitful practices while acting as a mortgage foreclosure consultant. Prosecutors said Smith and the others sold “land patents” to homeowners facing foreclosure and told them that the patents would make them a sovereign nation that would be protected from the banks. At least 17 people fell for the scheme, prosecutors said, and lost tens of thousands of dollars.

Mortgage Servicers Feeling The Pain As Mounting Mortgage Delinquencies Drain Cash Reserves

Bloomberg News reports:

• Bank of America Corp., GMAC LLC, and WL Ross & Co. are among mortgage servicers that have endured billions of dollars in unexpected costs and added thousands of workers to handle rising foreclosures, denting a business once viewed as a safe haven from the housing market’s collapse.

***

• Servicers agree to advance cash to investors when borrowers are delinquent and get repaid when the loans are brought current or through foreclosure sales. [...] When late payments mount, servicers have to draw on their own reserves or credit lines until they conclude the loan won’t be repaid.

For more, see Mortgage Servicing Loses Luster as Bad Loans Mount.

IRS To Ease Up On Squeezing Financially Stressed Taxpayers Owing Back Taxes

The Sacramento Bee reports:

• Can't pay your federal taxes? The IRS wants to help. Acknowledging the "difficult economic times," officials said Tuesday they're relaxing some rules to help financially stressed taxpayers dealing with job losses and other economic uncertainty.

Among the measures announced Tuesday:

• IRS employees now have "greater authority to suspend collection actions in cases where taxpayers simply cannot pay," said [IRS commissioner Doug] Shulman.

• Taxpayers may be allowed to skip a payment or obtain a reduced monthly payment, without automatically suspending their current installment agreement for paying back taxes. Previously, if a payment was missed or late, those agreements would be voided, with the full amount due.

• Given the steep drop in home values, the IRS has set up a unit to handle cases where a home's value has stymied efforts to reach an "offer in compromise."(1) A so-called OIC agreement allows a taxpayer to settle a tax debt for less than what's owed. "Anytime home equity is a roadblock to an OIC, we're going to take a second look," Shulman said. Also, taxpayers who are already in an OIC but cannot make their payments for hardship reasons will be offered options to avoid default.

• Taxpayers whose wages or bank accounts are being garnished for delinquent back taxes can request a hardship release. The IRS says it will work with taxpayers to speed up so-called "levy releases."(2)

For more, see IRS relaxes some rules for those in financial bind.

Go here for more on:

• IRS Offer-In-Compromise - see IRS Form 656 & Instructions (44 pages - 3.3 MB);
• IRS Payment Plans, Installment Agreements - see IRS Form 9465),
• The IRS Collection Process - IRS Publication 594 .

(1) An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. For an IRS advisory warning taxpayers to beware of promoters’ claims that tax debts can be settled for “pennies on the dollar,” see IR-2004-17: Check Carefully Before Applying for Offers in Compromise.

(2) A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens. A lien is a claim used as security for the tax debt, while a levy actually takes the property to satisfy the tax debt. Go here for more on IRS tax levies.

Cramdowns & Lien Stripping Of Home Mortgages Under Existing Bankruptcy Law

Buried at the end of a recent story in The Wall Street Journal contains an excerpt referencing how the existing bankruptcy rules can be used when stripping second mortgages from "underwater" real estate(1) (either owner-occupied or investment properties), and how the current bankruptcy cramdown rules (unless changes currently under consideration are enacted) can only be used to modify (ie. cramdown) existing first mortgages on investment properties and not those that are owner-occupied:

• Samuel Schwartz, a Las Vegas bankruptcy lawyer, has a client who is facing foreclosure on her primary residence even though she has been able to modify the loans on her two investment houses. Under the current bankruptcy rules, she was able to "strip away" the second mortgage on one of the investment homes and she "crammed down," or reduced, the principal balances on the first mortgages for both rentals -- reducing her combined loan balances to a total of $355,000 from $590,000.

• She was also able to strip away the second mortgage on her primary residence but couldn't modify the first mortgage. That mortgage, Mr. Schwartz said, is more than $100,000 above the current value of the property. Thus, she still may lose her own home. Under the [proposed] new law, her first mortgage on her home also could be modified.

For the story, see Power to Modify Mortgages Sits Well With Judges.

(1) Property that is worth less than the amount owed on the existing mortgage(s) encumbering the real estate.

Major Lender, Top Senate Democrats Reach Understanding On Mortgage Cramdown Provisions Allowing Bankruptcy Judges To Modify Troubled Home Loans

The Wall Street Journal reports:

• A Senate bill aimed at giving strapped homeowners more leverage in renegotiating their mortgages cleared a hurdle Thursday when Citigroup Inc. dropped its opposition. The legislation, which is being advanced by top Senate Democrats, would let judges set new repayment terms for mortgage holders in bankruptcy court.

***

• The proposal from Sen. Dick Durbin, an Illinois Democrat, to allow so-called mortgage "cramdowns," would apply only to homeowners who have filed for Chapter 13 bankruptcy protection.

***

• The Democrats' proposal allows judges to approve plans that make major reductions in home-loan debts, after homeowners certify that they have attempted to contact their lenders about a mortgage reduction before bankruptcy proceedings begin. [...] The cramdown bill would apply to all mortgage loans, including subprime loans, written any time prior to the bill's date of enactment.

• In a concession to lenders, a mortgage debt could be forgiven entirely only if the lender was found committed a major violation of the Truth in Lending Act. Under the bill's original language, the entire mortgage debt could be wiped away based on a violation of any number of state and federal consumer lending laws.

For more, see Plan to Cut Foreclosure Rate Clears Key Hurdle.

See also:

• BusinessWeek: Does Citigroup Stand Alone? Industry Balks at Bankruptcy Bill,
• New York Times: Citi Reaches Deal With Lawmakers on Home Loans.

$100M Class Action Suit Filed Against L.I.-Based Loan Modification Company; Described As More Of A Sales Operation Than Professional Services Firm

In downstate New York, Crain's New York Business recently ran a story about American Modification Agency (AMA), a Long Island-based loan modification firm that, allegedly, has been the target of numerous complaints from homeowners claiming the company clipped them for thousands in upfront fees in exchange for failed promises of adjustments to the terms of their home loans to make their house payments affordable.

As part of the arrangement, the firm is accused of instructing the homeowners to cease making payments to, and ignore all communication from, their lender. White Plains, NY attorney Jeffrey Greene reportedly filed a $100 million class-action suit(1) against AMA last month and descibed the deal as, “It's like taking somebody's money and telling them to jump off a bridge.”

• [C]ourt papers and interviews with customers and former employees reveal a company that pulled out all the stops to bring customers in, but did little or nothing for them once it had their money. Phone calls went unanswered; untrained agents dissatisfied with paltry commissions resigned, leaving customers in the lurch; and homeowners received foreclosure notices despite guarantees that their homes would be saved.

• AMA claims to be the largest of a growing collection of mortgage modification firms that have sprouted up nationwide in the past two years as homeowners have battled to keep up with unaffordable subprime loans. The burgeoning industry has caught the eye of the FBI's New York office and the state attorney general's office, which are reviewing complaints.

• Former sales agents say working for AMA was a nightmare. They received no training or salary and relied on commissions of 15% to 25%. Many of the clients they brought in never had their loans modified by the firm's processors, with whom they were not allowed to speak. “We've had clients in for well over 150 days that aren't done,” says an agent who was hired off a Craigslist ad and worked at AMA for six months.

***

• Former employees say the company grew too fast, too soon and describe a frenetic, almost circus-like atmosphere in the office. They recall President Sal Pane riding around the office on a Segway scooter drinking Red Bull and exhorting agents to bring in customers.

• “Each time we'd turn in a file, we'd go out on the floor and hit a gigantic brass gong hanging from the ceiling,” says one former employee. “Everybody cheered one another, "yeah, yeah, yeah.'"

For the story, see No helping hand (Struggling families sue mortgage fixer AMA; paid but got nothing in return).

(1) Presumably, any evidence of possible wrongdoing coming out of this civil suit will come in handy for federal and state prosecutors (both in New York and in other states in which AMA operates) in deciding whether to bring their own cases (either civil or criminal) against the firm.

FTC, Central Florida Upfront Fee Foreclosure Rescue Operator Resolve Charges Of Screwing Financially Strapped Homeowners

The Federal Trade Commission announced:

• A mortgage foreclosure rescue service that claimed that, for a $1,200 fee, they would stop foreclosure and save consumers’ homes, has agreed to settle Federal Trade Commission charges that it violated federal law. Many consumers who paid the company ultimately lost their homes to foreclosure, and others avoided foreclosure only through their own efforts.

***

• The settlement imposes a judgment of $1,178,920, all but $8,320.84 of which is suspended based on the defendants’ inability to pay. The full judgment will be imposed if they are found to have misrepresented their financial condition. The settlement also contains record-keeping provisions to allow the FTC to monitor compliance with the order.

• The Commission vote to authorize staff to file the stipulated final order regarding Florida-based Mortgage Foreclosure Solutions, Inc., Debra Behrens, and Michael Siani, was 4-0.

For more, see:

• FTC Press Release: Mortgage Foreclosure "Rescue" Operators Settle with FTC,
• Stipulated Final Judgment and Permanent Injunction,
• Original FTC lawsuit: Federal Trade Commission v. Mortgage Foreclosure Solutions, Inc., et al. loan modification

Two Loan Modification Firms Resove Issues With Colorado AG; Agree To Refund $30K To Homeowners, Pay $10K In Investigative Costs

In Denver, Colorado, Rocky Mountain News reports:

• Two companies collecting money to help homeowners avoid foreclosure have reached agreements with Colorado Attorney General John Suthers, [...].

• Suthers announced Sunday that Castle Rock-based Hawk Financial Services agreed to pay $26,500 in fees unlawfully collected from 31 customers before performing any service. Suthers also collected $10,000 in penalties, costs and attorneys' fees. Infinity Funding Group of Bohemia, N.Y., agreed to refund a $3,500 payment collected up front from one customer.

Source: Attorney General reaches settlement with mortgage companies.

Loan Modification Firm Accused Of Illegally Charging Minnesota Couple Upfront Fees To Avoid Foreclosure

In St. Paul, Minnesota, WCCO-TV Channel 4 reports on another casualty involving loan modification firms illegally charging homeowners facing foreclosure upfront fees to avoid foreclosure.

• The [homeowners] paid almost $2,000 to National Foreclosure Counseling Services three months ago. They haven't heard anything from them for weeks. Now, their home will go up for auction first thing Tuesday morning.

***

• Minnesota's Attorney General Lori Swanson has sued 10 companies in the last year for the very same thing. It's illegal in Minnesota for foreclosure consultants to charge anything until after they do something.

For more, see Mortgage Help Scam Now Costing Couple Their Home.

San Diego Media Outlet Looks Into Area Loan Modification Firm

In San Diego, California, XETV-TV Channel 6 recently reported on an area loan modification firm that charges homeowners an upfront fee of $2,995. Channel 6 was reportedly able to obtain a script used by the firm's telemarketers to reel in financially strapped homeowners.

For the story, see They Promise a Safe House But Do They Deliver? (read text) (watch video).

Go here for the firm's telemarketing script.

Connecticut AG Urges Passage Of New Law To Target Loan Modification, Debt Reduction Firms

From the Connecticut Attorney General's Office:

• Attorney General Richard Blumenthal [Tuesday] proposed legislation to fight predatory debt reducers that offer mortgage and debt rescue services that may actually cost consumers their homes. [...] Debt reducers are unregulated and often claim to offer services to rescue homeowners from foreclosure or severe debt.

• In some cases, debt reducers deceive consumers into relinquishing their homes, turning homeowners into tenants. In other cases, consumers pay expensive advance fees to debt reducers that fail to provide promised relief. Often, consumers report that oral promises fail to translate into consumer contracts.

• Blumenthal's proposal -- An Act Concerning Foreclosure Rescue and Debt Reducers -- would compel debt reducers to provide advance disclosures that clearly and conspicuously explain their services, and prohibit advance fees.

For more of the Connecticut AG press release, see Attorney General Investigates And Seeks To Stop Predatory Debt Reducers.

See also, The Connecticut Post: Blumenthal: Beware of debt-reduction companies.

Bank Screw-Up Throws Tennessee Congresswoman's Home Into Foreclosure; No Word Yet On Impending Blizzard Of Unscrupulous Loan Modification Offers

In Brentwood, Tennessee, The Associated Press reports:

• A bank's mistake caused a Tennessee congresswoman's home to enter foreclosure. Bank officials say Republican U.S. Rep. Marsha Blackburn's home was placed into foreclosure proceedings because of a processing error.

• GreenBank spokesman Bill Adams said in a letter dated Thursday that Blackburn's husband had authorized several electronic mortgage payments for the suburban Nashville home, but that the bank failed to send the money to Countrywide Financial. Adams says the Greeneville-based bank is working with Countrywide to resolve the issue.

No word on whether Rep. Blackburn has begun finding her mailbox stuffed with loan modification solicitations.

Source: Bank: error led to Blackburn's home foreclosure.

FTC, 3 Loan Orignators Settle Charges Of TILA & Reg Z Violations; Deceptively Advertising "Teaser" Rates

The Federal Trade Commission announced:

• Three mortgage loan advertisers that allegedly deceptively touted low monthly payments and low rates without fully disclosing loan terms have agreed to settle Federal Trade Commission charges that their ads violated federal law.(1)

• According to the FTC, the ads represented that people could receive mortgage loans at the terms prominently stated in the ads. However, in violation of the FTC Act, the ads allegedly failed to disclose, or failed to disclose adequately, that the advertised low monthly payment amounts and low rates apply only for a limited time, after which they will increase, and that the advertised payment amounts and rates did not include the interest owed each month, with the interest added to the total loan balance.

For more, see Three Home Loan Advertisers Settle FTC Charges; Failed to Disclose Key Loan Terms in Ads.

(1) For links to the relevant court documents in the three cases (ie. consent orders, original FTC complaints, etc.), see:

• American Nationwide Mortgage Co.;
• Michael Gendrolis, doing business as Good Life Funding; and
• Shiva Venture Group, Inc., doing business as Innova Financial Group.

NY AG Settles With Two Mortgage Brokerages, Files Suit Against Another For Alleged Race-Based, Discriminatory Lending Practices

From the Office of the New York Atttorney General:

• Attorney General Andrew M. Cuomo [Monday] announced results of a landmark investigation with the New York State Department of Banking into discriminatory practices in the mortgage brokerage industry.

• In the first law enforcement action of its kind in New York State, two mortgage brokerage companies – HCI Mortgage and Consumer One Mortgage – will collectively pay $665,000 in restitution to approximately 455 Black and Latino borrowers who were illegally charged higher fees than similarly-situated White borrowers. The companies collectively operate more than 20 branches throughout New York State.

• The Attorney General also filed a lawsuit in federal district court against another mortgage brokerage company – U.S. Capital Funding, LLC – that engaged in similar discriminatory practices.(1)

Go here for the NY AG press release: Attorney General Cuomo Announces Groundbreaking Agreement With Major Mortgage Brokers Who Discriminated Against Minority Customers (HCI and Consumer One to Pay Over $650,000 in Restitution After Illegally Charging Black and Latino Customers Higher Brokerage Fees; Cuomo Sues U.S. Capital Funding for Similar Discriminatory Practices).

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

(1) According to the NY AG press release, unlike HCI and Consumer One, U.S. Capital Funding failed to agree to provide appropriate relief to victims. Consequently, the Attorney General filed a lawsuit seeking restitution for over 100 minority borrowers and a court order requiring the company to cease its discriminatory practices. DiscriminationPredatoryLendingAlpha

City Of Memphis Joins Shelby County; Gives Go-Ahead For Discrimination Suit Targeting Major Home Lenders

In Memphis, Tennessee, Memphis Commercial Appeal reports:

• City Council members on Tuesday approved a resolution authorizing the city to file suit against national lenders who they say created a foreclosure crisis in Memphis and Shelby County that disproportionately affected African-Americans.

• The resolution alleges lenders engaged in "deceptive" and "discriminatory" lending practices targeted at the black community and "other select groups" that caused "substantial" and "irreparable" harm to neighborhoods and the governments.

• The Shelby County Commission recently approved a similar resolution (see Shelby commissioners authorize lawsuits against mortgage lenders), claiming the foreclosure epidemic has devastated neighborhoods, slashed property values, eroded the tax base and drained local government coffers because of a host of direct and indirect costs.

• "They have caused property values to plummet," said Webb Brewer from Memphis Area Legal Services, which is working with the city and county on the lawsuit. "As the property values go down, the property taxes go down. There are a lot of increased costs, like police and fire protection."

For more, see Council says OK to city lawsuit (Resolution alleges lenders targeted black community).

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

Foreclosure Not A Basis For Tenant Evictions In San Francisco

In California, a story in San Francisco Bay Guardian serves as a reminder that, within the city of San Francisco, it's illegal for a bank or broker or anyone else to evict a tenant just because the ownership of a building changed hands, including an ownership change due to foreclosure.

• [I]n an effort to promote tenant-rights awareness, the Assessor-Recorder's Office will be circulating letters to inform tenants when a landlord has received a 'Notice of Default' — the precursor to a foreclosure.

• "According to San Francisco law," the letter says, "it is illegal for the new owner to ask you to leave without just cause or shut off your utilities." Since most of the renters who have been evicted by this latest ruse don't speak English, the letter is being circulated in English, Spanish, and Chinese.

***

• The law may seem confusing, and in some cities, a foreclosure may mean the tenants have to go. But that's not the case in San Francisco. The city's rent ordinance requires "just cause" for eviction — and a change of ownership, no matter the cause, is not in itself a just cause.

• The San Francisco Rent Board's literature makes that clear: "The Court of Appeal held in Gross v. Superior Court (1985) ... that foreclosure, like any other sale, is not a just cause for eviction under the Rent Ordinance and provides no basis to force the tenant to leave."

For the story, see Don't leave your home (A foreclosure can be tough on tenants — but it shouldn't lead to eviction).