Foreclosure Rescue - Criminal Indictments

In an attempt at doing a little housekeeping, I have placed links to the following indictments involving alleged foreclosure rescue scams on this post. I need them all in one place for future reference, and as I find more, they will end up on this page.

For those of you working in prosecutors' offices and law enforcement, feel free to use these indictments as templates when making your own cases.

For those homeowners who feel like they have been screwed over in an equity stripping or loan modification foreclosure rescue deal, and are told by law enforcement that there's nothing they can do because the situation is a civil, and not criminal, case, feel free to give the prosecutor or law enforcement investigator these indictments and ask them to explain what the difference is between your case and the cases descibed in these indictments.

Equity stripping, sale leaseback foreclosure rescue Federal indictments:

• U.S. v. JoyJackson, et al. (Maryland - "Metropolitan Money Store" case);
• U.S. v. Michael K. Lewis, et al. (Maryland);
• U.S. vs. McDowall, et al. (New York - Eastern District);
• U.S. v. Quiroz, Oliveri (Florida - Middle District);
• U.S. vs. Moumneh, et al. (Florida - Middle District);
• U.S. vs. Valenzuela - Plea Bargain Agreement; (California - Central District), Stipulated Statement of Facts, see pages 15 through 21;
• U.S. v. Mendoza, et. al. (Hawaii);
• U.S. v. Dimitrion (Hawaii);
• U.S. v. Krahnke, Striker (Minnesota);
• U.S. vs. Fiorito & Jerde (Minnesota);
• U.S. v. Head, et al. #1 (California - Eastern District);
• U.S. v. Head, et al. #2 (California - Eastern District);
• U.S. vs. Craig, et al. (California - Eastern District);
• U.S. v. Mitchell (Ohio - Southern District).

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

Upfront fee loan modification foreclosure rescue Federal indictments:

• U.S. v. Warsing (Ohio - Northern District)
• U.S. v. Divins (Texas - Western District);
• U.S. v. Webb (Ohio - Southern District) - U.S. v. Webb media report;
• U.S. v. Yass (Kansas).

Go here for updated vesrion of this post.

NAACP Targets Wells Fargo, HSBC In Separate Class Actions Alleging Violations Of Fair Housing, Civil Rights, Equal Credit Opportunity Acts

The NAACP announces:

• [Friday], the NAACP filed separate lawsuits in U.S. District Court in California against two of the country’s largest lenders, Wells Fargo, and HSBC. These lawsuits allege systematic, institutionalized racism in sub-prime home mortgage lending.(1) The remedies being asked for in the lawsuit include measures for increased accountability and transparency.

For more, see NAACP Files Landmark Lawsuit Today Against Wells Fargo and HSBC (Remedies would benefit millions of potential borrowers).

For the lawsuits, see:

• NAACP v. Wells Fargo Bank & Wells Fargo Home Mortgage,
• NAACP v. HSBC Mortgage & HSBC Bank.

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

(1) According to the NAACP press release, these two new lawsuits raise the same claims as pending litigation by the NAACP against other mortgage industry leaders. Lenders named in this pending litigation include Accredited Home Lenders, Inc., Ameriquest Mortgage Co., Bear Sterns Residential Mortgage Corp. d/b/a Encore Credit, Chase Bank USA, Citimortgage, First Franklin Financial Corp., First Tennessee Bank d/b/a First Horizon National Corp., Fremont Investment & Loan, GMAC Mortgage Group, LLC, GMAC ResCap, Long Beach Mortgage and SunTrust Mortgage. DiscriminationPredatoryLendingAlpha

NH Couple Beats Back Debt Scavenger's Attempt To Collect On Zombie Debt From Old Foreclosed Mortgage

In Manchester, New Hampshire, the New Hampshire Sunday News reports:

• [S]even years after they lost their home to foreclosure in 1994 -- during the last recession -- Daniel and Diane Lessard started getting calls from a company they'd never heard of, telling them they owed thousands of dollars. "I thought it was a scam," said Diane Lessard, who said she hung up each time.

***

• Over the years, the calls from Cadle representatives continued sporadically, according to the Lessards. "They would call maybe once a year and harass us, and we would tell them we didn't owe them any money," Diane Lessard, Dan's wife of 21 years, said. Then, in mid-2001, they got a letter from the company, stating they owed approximately $28,000. That led them to call St. Mary's Bank, where they had taken out their 1989 mortgage, but they were told they didn't owe the bank anything.

• Then in 2007 came the lawsuit from Cadle Company, which 13 years earlier had purchased a bundle of bad debts from St. Mary's, including the Lessards' loan deficiency, according to court documents.

***

• It turned out that Cadle had purchased the original note from St. Mary's Bank in 1994, but had not been assigned the mortgage until 2006. As a result, [director of clinical programs at Franklin Pierce Law Center Peter] Wright successfully argued that the loan was unsecured debt and thus the pertinent statute of limitations was only six years, not 20 years as is the case with mortgage debt. [...] In addition to dismissing the case against the Lessards, Judge Gillian Abramson also awarded them legal fees and $1,200 in damages.

***

• The judge also agreed with Wright's argument, under a legal doctrine known as a "Laches" defense, that Cadle had waited to try to collect the debt so that interest and late fees would pile up. The original loan deficiency on the Lessards' note was about $14,000, but Cadle was trying to collect nearly $30,000 by the time the lawsuit was filed.

For more, see NH foreclosure victims may still face trouble.

Go here for other posts on zombie debt. zeta

Loan Modification Issue Has State Bar's Phone Lines Burning; Lawyers Seek Ethics Guidance As Homeowners' Complaints Flood In

Buried in an article in the March, 2009 issue of the California Bar Journal was this excerpt on how the phone lines over at the State Bar offices are burning up due to the loan modification issue:

• [T]he bar’s Ethics Hotline, a free confidential research service for attorneys, has been receiving between one and two dozen calls a day for the last six months dealing with the residential mortgage crisis and loan modification — about 15 to 25 percent of its daily call volume.(1)

• Scott Drexel, the bar’s chief prosecutor, says that for the last three months, the bar has received 50 complaints each day — about 950 complaints a month — about lawyers involved in some way with the foreclosure crisis. While the complaints run the gamut, Drexel said the most common concerns lawyers who lend their name to a loan modification operation but non-lawyers do most of the work. The non-lawyers get fees upfront through the lawyer and either do not complete the modification or do it incompetently. As a result, he said, the client loses his or her money.(2)

• Calling the number of complaints “shockingly high,” Drexel said his office is “quite concerned. We’re especially concerned with attorneys allowing their names to be used by non-attorneys in some of these loan modification schemes or scams.”(3)

• The Department of Real Estate reports complaints about lawyers involved in loan modification programs who act as fronts or work inhouse. “We’re not certain if they are practicing law or just lending their names,” said chief counsel Wayne Bell.(4)

For more, see Bar issues foreclosure ethics alert.

(1) Reportedly, so many have contacted the State Bar for ethics advice that its professional responsibility committee issued an alert last month offering guidance to lawyers thinking about signing up with loan modification firms. “The most important thing is for lawyers to understand this area is fraught with danger from an ethics point of view,” said Jon Rewinski, a Los Angeles litigator who drafted the ethics alert.

(2) California's malpractice lawyers should have a field day with this issue, at least those who have no problem suing their wayward colleagues.

(3) For an example of a recent action by The State Bar of California involving an attorney allegedly providing a front for non-attorneys who were accused of practicing law involving the handling and settling of personal injury cases, see State Bar Uses Authority To Prosecute Non-Attorneys Running Law Office And Settling Cases.

(4) According to the article, Bell said when consumers who are in desperate financial straits see the word lawyer, “they somehow believe they’re going to get a higher level of care.”

200+ South Florida Property Owners Accused Of Screwing City, County Out Of $22M In Unpaid Property Taxes With Bogus Homestead Claims

In Sunrise, Florida, WFOR-TV Channel 4 reports:

• The City of Sunrise and the Broward Property Appraiser's office have joined forces in a crackdown on people illegally claiming homestead exemptions for their properties. And now some 237 homeowners will be receiving bills that total nearly $22 million.

For more, see Sunrise Cracks Down On Homestead Exemption Fraud (Sunrise Will Bill Homeowners Nearly $22 Million For Lost Revenue; More Than 230 Homeowners Caught In Crackdown).

California Caretaker Charged With Draining Equity From 84-Year Old Woman's Home, Leaving Her Underwater & Facing Foreclosure

In Huntington Beach, California, the Los Angeles Times reports:

• The live-in caretaker of an 84-year-old Huntington Beach woman allegedly took out fraudulent loans in her name, bilking the older woman out of about $200,000 and putting the woman's home in danger of foreclosure, authorities said Tuesday. Cindi Dee Powell, 54, has been charged with financial elder abuse, grand theft, identity theft, vehicle theft, fraud and forgery. She remains in custody.

• According to police, Powell moved in with Constance Wakefield about two years ago to help the woman, who uses a wheelchair, around the house and drive her to appointments. Wakefield hired Powell through a classified ad and was not aware that Powell was on probation in another elder abuse case.

For more, see Live-in caretaker charged with financial elder abuse, fraud and forgery (Police say Cindi Dee Powell bilked an 84-year-old Huntington Beach woman out of about $200,000 and put the woman's house at risk of foreclosure).

Go here, Go here, Go here, Go here, Go here, and Go here for other posts related to deed or refinancing scams by forgery, swindle, power of attorney abuse, etc.

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

Developer Accused Of Renting Out Long Island Mansion In Foreclosure To Unwitting Tenant; Renter Out $70K, Left Holding The Bag

In Bridgehampton, New York, the New York Post reports:

• The forecast calls for a summer bummer for a Florida woman who claims her dream Hamptons vacation plans have become a nightmare. Carole Via says a rich developer took her $56,000 deposit for a Bridgehampton mansion although it was to be auctioned off before the season began. As a result, Via, of Boca Raton, has filed a breach-of-contract suit against developer Michael Burns and the real-estate agent, Town and County Real Estate of East Hampton.

***

• Via said that in October, she signed a $140,000 personal lease with Burns for the summer of 2009 for his eight-bedroom mansion at 15 Bridge Hill Lane. The sumptuous 6,300-square-foot dwelling has a heated pool. She said she wrote a $56,000 deposit check to him and a $14,000 commission check to Town and Country.

• In the lease, Burns, 58, said he owned the property and had the right to rent it. But on Jan. 28, she said, Town and Country informed her there was a problem. Via said she learned that the mansion was actually owned by Burns' company, Brick Hill One Realty, a firm that he had placed in bankruptcy in August. The home was to be auctioned off before the summer began.

For more, see RENTER DEPOSIT-IVE SHE GOT RIPPED OFF.

For other posts involving tenants renting homes in foreclosure, go here, go here, go here, go here, go here, go here, and go here. Copyright 2009 The Home Equity Theft Reporter http:// HomeEquityTheft.blogspot.com SkimmingKappaRent

Businessman Comes Clean In Court In Attempt To Swipe 141 Acres Of Farmland By Forging Dying Man's Will

In County Wexford, Ireland, Independent.ie reports:

• A WEALTHY businessman-turned-whistleblower cried [Friday] as he told a court how he and two other men forged the will of a bachelor farmer as he lay dying in hospital. Charlie O'Leary (50), of The Haggard, Ramsgrange, Co Wexford, whose conscience eventually got the better of him, pleaded guilty to forging a document purporting to be the will of Matthew Hayes [...].

• Sergeant Mick Troy told Wexford Circuit Court that two other people are also implicated in the crime, the beneficiary, referred to as Mr X, and a third person, referred to as Mr Y. Mr X was O'Leary's best friend at the time and Mr Y is a close relative of O'Leary's. Sgt Troy said no genuine will was ever found in the name of the late Mr Hayes. When he died, he left £99,000 in a bank account and 141 acres of farmland, then valued at £350,000.

For more, see Man forged dying farmer's will (Businessman gets suspended sentence after 'conscience gets the better of him'). DeedGammaTheft

Remove Straightjacket From Legal Aid Advocates

A Washington Post editorial comments on the recent news that the omnibus appropriations bill signed last week by President Obama set aside $390 million for Legal Services Corp., a group involved in providing wide-ranging civil legal assistance to the growing ranks of those in need. The amount is up $40 million, or 11 percent, over last year's funding level. However, the op-ed piece suggests that the federal government should do a little more:

• [L]awmakers should go a step further and unshackle Legal Services from congressionally imposed restrictions that have kept it from working more efficiently and broadly. For example, unlike most others who represent plaintiffs, Legal Services lawyers who prevail in a civil case are prohibited from seeking legal fees from an opponent. This makes no sense, especially because any recovery of fees could supplement the group's funding.

• Legal Services is also barred from using public or private funds to engage in a range of activities, including all class-action lawsuits, any representation of immigrants who are in the country illegally and all litigation involving abortion-related matters. While some limits on the use of taxpayer dollars may be appropriate, none should limit what local legal-aid clinics can do with money they raise privately. Sen. Tom Harkin (D-Iowa) is spearheading an effort to address many of these issues and may unveil legislation as soon as next week. Such reforms are long overdue.

For more, see Unshackling Legal Aid (An easy way for Congress to help poor people).

New York Chief Judge To Give State Civil Legal Services High Priority

In an op-ed article in The Journal News (New York's Lower Hudson Valley), Anne Erickson, president and CEO of the Empire Justice Center, writes:

• Re "Lippman has long list of reforms to pursue," (March 4 story), it's quite refreshing to see newly appointed Chief Judge Jonathan Lippman has put civil legal services funding as a top priority. Lippman is quoted as saying he wants to "reconfigure the indigent defense system and raise money for civil legal services."

For more, see Civil legal services funding lacking.

Attorneys: Are You Current On Your Malpractice Insurance Premiums???

An article in Texas Lawyer cautions attorneys on the increased risk of legal malpractice suits during tough economic times:

• Economic downturns often increase the risk that lawyers will face unhappy clients complaining of legal malpractice. While some lawyers may think they have nothing to fear since their practices do not involve areas of law many blame for the economic collapse, such a belief is unfounded. Some legal malpractice risks are not tied to any one specialized practice area but simply become more common when the economy goes bad.

***

• Some legal malpractice issues are simply an inevitable outcome of activity occurring more frequently in a bad economy. A spike in the number of foreclosures often means more people are unhappy with related legal services. People often sue lawyers who act as trustees in foreclosures, alleging failure to conduct the sale in a proper manner, though the more likely scenario is a suit to enjoin foreclosure.

• As collection activities rise, more people will seek relief under the Fair Debt Collection Practices Act. Various state and federal fair debt collection practices laws may apply to lawyers involved in collection activities, including foreclosures and collection litigation, so all such lawyers should understand and abide by these laws' requirements if there is any doubt as to their application.

For more, see In Tough Times, Look Out for Legal Malpractice Claims.

Lender Unwilling To Foreclose Offers To Cancel Delinquent Home Mortgage To Dodge Prosecution In Upstate NY Building Code Case

In Lockport, New York, the Lockport Union-Sun & Journal reports:

• [I]n another ongoing case, an attorney for M&T Bank said the bank is willing to forgive its mortgage on 34 Pound St., in order to avoid prosecution on seven code charges there. Attorney Thomas Frederick said the bank is still owed $34,000 by David and Andrea Woods, the former occupants, but it willing [sic] to wipe out the mortgage and let the house be transferred to anyone who’s willing to make needed repairs on the roof and exterior.

• M&T started foreclosure proceedings against the Woodses but never completed them, [prosecutor Matt] Brooks said, meaning the property remains in the Woodses’ name. They only found that out recently, although they were evicted from the premises by the bank in 2007. The city went after M&T in light of the eviction, which Brooks said is akin to asserting ownership interest in the property.

For the story, see Housing Court orders ‘hazardous’ garage closed off.

Go here for other posts on code violation & other problems associated with homes in legal limbo. responsibility code violations foreclosure

Homeowner Paying Cash For New Home Faces Threat Of Foreclosure As Builder Accused Of Stiffing Contractors

In Phoenix, Arizona, KPHO-TV Channel 5 reports:

• Some Valley homeowners are facing foreclosure even though they've paid their mortgages in full, thanks to a lien placed on the property by a contractor. Retired homeowner Danny Riggs paid cash for his home, but builder Brown Family Communities failed to pay the contractors who installed the windows, plumbing, drywall and air conditioning as well as the construction crew, he said. Contractors hit Riggs with a mechanic's lien, which gives a homeowner six months to settle a debt -- even if the homeowner was not the one who hired the contractor. Otherwise, the home goes into foreclosure.

For more, see Liens Send Homes To Foreclosure.

For more on homeowners left in the lurch due to actions by builders/contractors, go here, go here, go here, go here, and go here. StiffingContractorsTheta

"Old Gray Lady" Victimized In Multi-Million Dollar "Home" Equity Stripping Deal? Or Did She Lure "Unwitting" Billionaire Into An Equitable Mortgage?

In New York City, The New York Times (aka the Old Gray Lady) reports:

• The New York Times Company said [last] Monday that it had raised $225 million through a sale and leaseback of part of its headquarters building, one in a series of moves to pay down its debts and increase its cash cushion during a drastic slump for the newspaper industry.

• The sale-leaseback agreement with W. P. Carey & Company, an investment firm, could last as long as 15 years, but it gives the Times Company the option of buying the building back after 10 years for $250 million, an option both sides expect will be exercised. W. P. Carey specializes in corporate financing, not real estate, and both companies characterized the agreement more as a loan secured by the building, than a real estate transaction.

***

• The company spent more than $600 million on its building, on Eighth Avenue in Midtown Manhattan, which was completed in 2007. The Times Company owns 58 percent, and its development partner, the Forest City Ratner Companies, owns the rest.

• The deal is back-loaded, with the repurchase price looming in 2019, and a relatively low starting lease payment of $24 million a year on 750,000 square feet of space. That amounts to $32 a square foot, while most recent leases on Class A office space in the same part of Manhattan have gone for $50 to $80 a square foot.(1)

For more, see Times Co. Building Deal Raises Cash.

(1) Given that:

• the Old Gray Lady is desperate for cash (a report that she was spotted down at the welfare office, however, is unconfirmed),
• the parties reportedly characterized the arrangement as a secured loan,
• the rent payments on the leaseback apparently have no relation to fair market rents in the area ($32/sq. ft. vs $50-80/sq. ft.), and
• the amount raised is considerably less than what she has invested in the building ($225M vs. $600M+; the story is silent as to what the true current value of her building is),

this deal has the "fragrant scent" of an equitable mortgage, and not a true sale leaseback. I wonder how each of the parties will treat the deal when filing their Federal income tax returns, and whether that treatment gets the IRS' blessing.

Class Action Lawsuit Filed Against Owner Of Loan Modification Firm Currently Facing Felony Theft Charges

In Las Vegas, Nevada, the Las Vegas Sun reports:

• A nine-page class action lawsuit was filed [Thursday] against a former Las Vegas talk show host who was arrested in connection with an alleged mortgage rescue scam. Las Vegas attorney James Stout filed the lawsuit on behalf of Ana and Hilpolito Villafuerte and other unnamed plaintiffs. The lawsuit alleges fraud, breach of contract claiming damages to the plaintiffs of more than $50,000, and negligence.

• Attorney General Catherine Cortez Masto announced Wednesday that Jack Ferm was arrested on two counts of felony theft and related charges in connection with an alleged mortgage rescue scam. Ferm is president and owner of U.S. Justice Foundation, a business that led customers to believe that Ferm would prepare legal documents to stop ongoing foreclosures on their homes without the need for them to hire an attorney, Masto said.(1)

For more, see Class-action suit filed against former LV radio host.

Go here for other posts on U.S. Justice Foundation.

For a copy of the lawsuit, see Villafuerta v. U.S. Justice Foundation, et al.

(1) In the class action complaint (at paragraph 23), the plaintiffs assert the belief that Ferm engaged in the unauthorized practice of law in violation of Section 7.285, Nevada Revised Statutes.

City Of Oakland Files Five Lawsuits Accusing Lenders, Agents Of Illegal Foreclosure Evictions

In Oakland, California, KGO-TV Channel 7 reports:

• Oakland City Attorney John Russo said [Thursday] that his office has recently filed five lawsuits against major banks and local agents he alleges are illegally evicting tenants. At a news conference at City Hall, Russo alleged that despite repeated warnings, banks and their agents have continued to violate Oakland's "just cause" law by sending illegal eviction notices to good tenants in foreclosed buildings.

***

• Russo said the lawsuits name as defendants banking giants JPMorgan Chase and Fidelity National Financial, along with their subsidiary companies and local agents, whom he alleges are paid to remove tenants from properties the banks have acquired through foreclosure.

For more, see Banks accused of violating renters' rights.

For more from the Oakland City Attorney's Office, see:

• Press Release: Oakland City Attorney sues major banks, local agents to stop illegal evictions and abuse of tenants’ rights;
• Lawsuit against: JPMorgan Chase, Chase Home Finance, EMC, etc.,
• Lawsuit against: Fidelity National Financial, etc.,
• Lawsuit against: Keller Williams, etc.,
• Lawsuit against: Session Real Estate,
• Lawsuit against: Smart Choice Realty, etc.
• Examples of Wrongful Eviction Notices,
• City Attorney's Guideline for Tenants' Rights in Foreclosed Housing. SkimmingKappaRent

Bank Illegally Ransacks Home & Changes Locks, Says Homeowner In $150K+ Lawsuit

In Central Oregon, KATU-TV reports:

• Tammy Glenn’s central Oregon home on Pine Hollow reservoir has always brought her peace and happiness. The small A-frame home is right on the water, and it’s been a relaxing break from the everyday grind of running her hardware business – until now. “My whole sense of security has been rattled to say the least,” Glenn told KATU News. Rattled, Glenn says, because her mortgage company entered her home three times, ransacked everything, and changed her locks – all without her knowledge.

***

• The reason Chase Bank gave her? They thought the home was vacant and abandoned. Glenn says that not even close to the actual situation. [...] Now, she's suing Chase Mortgage for more than $150,000.(1)

For more, see Bank's mistake shatters woman's security.

Go here for other posts on foreclosure screw ups involving improperly changed locks, removal of belongings, etc.

(1) In a another case, a homeowner scored over $1M in a similar sounding case against another lender. See Nevada High Court OKs Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure. ForeclosureLockOuts

San Antonio Feds Set Up Hotline To Field Mortgage, Loan Modification, Foreclosure Rescue Scam Complaints From Area Homeowners

In San Antonio, Texas, WOAI-TV Channel 4 reports:

• A growing number of homeowners are becoming the targets of mortgage-fraud schemes, and some may not even know it until it's too late. Right now, homeowners across San Antonio are falling victim to mortgage-fraud schemes. The FBI says its new hotline could help curb the corruption.

***

• "The hotline is basically our attempt to become a little more proactive than reactive in addressing mortgage fraud here in San Antonio," Special Agent Jenson told News 4 WOAI. The F.B.I. says it is important to track mortgage-fraud crimes early on in the process. Anyone who is aware of a possible case of mortgage fraud should call 210-650-6777.

For more, see F.B.I. targets mortgage fraud with new hotline.

Mortgage Servicing Industry Reform Needed In Effort To Address Foreclosure Crisis

Ms. Margot Saunders, Counsel, for the National Consumer Law Center testified Wednesday before the House Financial Services Committee Subcommittee on Financial Institutions and Consumer Credit calling for reform in the mortgage finance industry.(1)

Included among the industry players that "need reforming" are those in the mortgage servicing industry, on whom Ms. Saunders offers this observation:

• Mortgage servicers are the link between mortgage borrowers and the mortgage owners. [...] Despite the important functions of mortgage servicers, borrowers have few market mechanisms to employ to ensure that their needs are met. Rather, in the interest of maximizing profits, servicers have engaged in a laundry list of bad behaviors, which has considerably exacerbated foreclosure rates. The most common abuses in loan servicing include misapplication of payments, use of suspense accounts, failure to make timely escrow disbursements, and cascading fees imposed upon homeowners in default. These abuses exist because there are market incentives rather than deterrents for this type of behavior. Any new regulation of the mortgage marketplace must account for these dynamics and move beyond them.

Go here for Ms. Saunders' entire prepared testimony to Congress (Her views on the reform of the mortgage servicing industry are found on pp. 11-13).

Go here, go here, and go here for posts on questionable mortgage servicing practices.

Thanks to Mike Dillon at GetDShirtz.com for the heads-up on the testimony.

(1) The title of the hearing was Mortgage Lending Reform: A Comprehensive Review of the American Mortgage System. Click Here To View Archived Webcast. questionable mortgage servicing practices tactics xero

State AG Files Civil Suits Against Two South Jersey Loan Modification Firms Promoting "Hope" - Won't Rule Out Future Criminal Action

In Trenton, New Jersey, KYW Radio 1060 (Philadelphia) reports:

• New Jersey officials have filed three separate lawsuits, two in Camden County Superior Court, alleging mortgage fraud on a large scale. The actions were announced Wednesday in Trenton during a midday press conference by Attorney General Anne Milgram, who says she decided to take the civil route in attempts to shut the operations down quickly. But she won’t rule out later criminal prosecution against any of the 11 people (four from South Jersey) named in the civil actions.

• In the two Camden County cases, it is alleged that "Hope Now Financial Services" of Cherry Hill and "New Hope Modifications" of Bellmawr attempted to align themselves with a national nonprofit effort that helps low-income people stay in their homes and avoid foreclosure. The two Camden County firms, in fact, have no connection with the Hope Now Alliance, a counseling service created in conjunction with the federal government.

• What the firms did, according to Milgram, is scam more than 100 people from as far away as Texas. Milgram told reporters, “These businesses collected substantial upfront fees from distressed mortgage holders for loan modification services, but did nothing to actually help.” The upfront fees were as much as $3,000 from each individual, many of whom lost their homes to foreclosure and suffered perhaps irreparable harm to the credit ratings, according to officials. Two principals named in the New Hope suit -- Donna Fisher and Brian Mammoccio -- reside in Mullica Hill (Gloucester County), NJ.

For the story, see Officials Say Finance Groups Preyed on NJ Homeowners.

For more from the New Jersey Attorney General's Office, see:

• NJ AG press release: Attorney General Announces Three New Mortgage Fraud Complaints - Disbarred Lawyer, Son Sued for Racketeering; Loan Modification Businesses Charged,
• Lawsuit: Milgram v. New Hope Property LLC d/b/a New Hope Modifications,
• Lawsuit: Milgram v. Hope Now Financial Services.

Texas AG Announces Final Distribution Of Restitution From Loan Modification Company; Firm Takes Total Hit Of $750K

From the Office of Texas Attorney General Greg Abbott:

• Texas Attorney General Greg Abbott [yesterday] announced the conclusion of the state’s enforcement action against Foreclosure Assistance Solutions (FAS). As a result of an agreement, the Florida-based company must no longer engage in the foreclosure mitigation business in Texas and has paid more than $390,000 in restitution to 351 Texas homeowners. FAS is the eighth foreclosure rescue operation shut down by Attorney General Abbott.

***

• Homeowners who contacted Foreclosure Assistance Solutions were pressured to immediately pay a $1,200 fee and enter into a contract. The contract prohibited homeowners from contacting their mortgage lenders – yet communicating with lenders is critical when homeowners are facing financial difficulties. After paying the $1,200 fee, homeowners were largely ignored, and many of their homes were foreclosured [sic].

• Today’s settlement also prohibits the company from conducting Texas-based mortgage foreclosure mitigation in the future and requires that the defendants pay a total of $750,000, including $475,000 in restitution, $100,000 in civil penalties and $175,000 in attorneys’ fees.

For the Texas AG's press release, see Texas Attorney General's Enforcement Action Provides Restitution To Texas Homeowners (Foreclosure Assistance Solutions Inc. repays 351 Texas homeowners more than $390,000).

For relevant court documents on this case, see:

• Court order distriubting remaining restitution from Foreclosure Assistance Solutions,
• Agreed final judgment and permanent injunction - Foreclosure Assistance Solutions, et al.,
• Original Texas AG's lawsuit (9/2007) - State of Texas vs. Foreclosure Assistance Solutions, et al. (lawsuit alleged violations of the Texas Deceptive Trade Practices Act).

Homeowner Facing Foreclosure Out $10K, Faces Eviction Despite Hiring Loan Modification Firm & Attorney Accused Of Leaving 2,000 Cases Unattended

In Bakersfield, California, KGET-TV Channel 17 reports:

• A local family says they are victims of a foreclosure scam. They came to 17News because, they say, the lawyer they paid $10,000 to help them took the money and did nothing.

***

• ''We had to pay $1,500 a month,'' [homeowner Eddy Herrera] said. The ''lawyer, which is Mitch Roth, would negotiate with the bank and help us lower our payments. He was supposed to modify our loan.” The Herrera family says a representative from attorney Mitchell Roth’s office told them to send monthly payments to a foreclosure relief company called United First. Herrera says the representative told them to ignore all letters from their lender, that everything was being handled. But seven months and $10,000 later, their house went up for auction. [...] The house was sold at the auction. Herrera says the supposed mortgage rescue company had never contacted the lender and he and his family are being evicted.

***

• A spokesman for the State Bar says it shut down Roth’s law offices after he was hospitalized in January and left 2,000 cases unattended. But in the meantime, the Herrera family says they still feel scammed. In court on Monday they were given two weeks to move out their home.

For the story, see 17News Investigation: Family blames attorney for foreclosure.

For a related post, see Federal Judge, State Bar Slam Attorney For Stiffing Clients Referred By Loan Modification Firm; Lawyer/Foreclosure Consultant Ties Now Facing Scrutiny. UnauthPractOfLawTheta

Attorney Agrees To Refund Upfront Fees For Failed Loan Modification Attempts Under Threat Of Bad Media Publicity, State Bar Complaints

In Newark, California, KGO-TV Channel 7 reports on the experiences of three local homeowners seeking to have their home loans modified with an area law firm:

• [Mika] Baba says she's regretted getting into [her home] loan almost from the beginning and has been unable to renegotiate it. Then she heard an ad from Lucas Law Center on the radio. "And that's why I called Lucas Law Center because they made the promise that they can do the modification. If they couldn't you'd get your money back. And at this point, I'm in a corner where I have no choice," said Baba.

• That's the same reaction Scott Castruita and Steve Ferdin had when they heard the same ad. "I called them up, so they said they could make all the phone calls for me and they knew people and they said they know how to get hold of the people at Indy Mac," said Castruita. Scott and Steve paid $3,200 up front to hire Lucas Law Center to negotiate a loan modification on their home in Antioch. Mika paid $3,700 to hire Lucas, and what do they say they got for their money? "They haven't done anything for me," said Baba.

***

• Mika, Scott and Steve all requested a refund from the Lucas Law Center. Lucas turned down Mika because she fell under two exemptions to its refund policy. She is in a negatively amortized loan and she had been previously denied for a modification. Those exemptions were stated explicitly in Mika's contract, but she said they were never explained to her.

• We called Lucas Law Center and it agreed to refund her money 100 percent. Scott and Steve also received a refund, after they threatened to file a formal complaint with the state bar.

For more, see Homeowners dissapointed with loan service.

Postscript:

When hiring an attorney in connection with a loan modification, a homeowner should ask upfront whether the attorney will engage in actual litigation in court, either defending against a foreclosure action, or initiating a lawsuit, either for:

• violations of applicable lending, consumer protection, and other laws; or

• in a non-judicial foreclosure state, asking a state court to intervene in a foreclosure attempt by obtaining a temporary restraining order in order to demand that a lender to produce the promissory and the associated legal documents proving that the lender has the legal right to conduct the foreclosure.

If an attorney holding him/herself out as doing loan modifications pockets thousands of dollars in upfront, or periodic fees without any intention of representing a homeowner in the actual litigation described above, the homeowner should seriously consider the possiblity of filing a complaint against the attorney with the state bar association for charging excessive fees(1) and for taking the client's case and failing to do what was in the client's best interest (as well as considering any possible malpractice claim against the attorney).

In California, complaints can be filed with the The State Bar of California. To file a complaint against a California attorney (or a loan modification firm for engaging in the unauthorized practice of law), see Overview Of Attorney Discipline System (go here for a Complaint Form).

In addition, consumers generally can avail themselves of the California State Bar's Mandatory Fee Arbitration Program (MFA), which is an informal, low cost forum for resolving fee disputes between lawyers and their clients. MFA arbitration is mandatory for the lawyer if the client requests arbitration.

(1) The Florida Supreme Court, in The Florida Bar v. Richardson, 574 So.2d 60 (Fla. 1990), quoted from one of its earlier decisions on the harm caused by attorneys charging excessive fees:

• Lawyers are officers of the court. The court is an instrument of society for the administration of justice. Justice should be administered economically, efficiently, and expeditiously. The attorney's fee is, therefore, a very important factor in the administration of justice, and if it is not determined with proper relation to that fact it results in a species of social malpractice that undermines the confidence of the public in the bench and bar. It does more than that; it brings the court into disrepute and destroys its power to perform adequately the function of its creation. Baruch v. Giblin, 122 Fla. 59, 63, 164 So. 831, 833 (1935).

The court in Richardson, in finding that the attorney fees charged in the case before it were clearly excessive, went on:

• Mr. Richardson is an officer of the court, subject to its orders. We find that these were clearly excessive fees and that the amounts he charged did in fact constitute a"social malpractice." Ethical Consideration 2-17 of the Model Code of Professional Responsibility explains that a lawyer must charge clients reasonable fees because the "excessive cost of legal service would deter laymen from utilizing the legal system in protection of their rights." This Court recognizes that a lawyer's fee will vary in accordance with many factors; however,we fully concur with the expert witness's statement in this case that all of the time a lawyer spends on a case is not necessarily the amount of time for which he can properly charge his client. As explained by the expert witness, "[I]t's the time that reasonably should be devoted to accomplish a particular task." This statement is consistent with the principles we set forth in Standard Guaranty Insurance Co. v. Quanstrom, 555 So.2d 828 (Fla. 1990), and Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145 (Fla. 1985), neither of which allows billing clients solely on billable hours or charging clients without determining what is the reasonable time to accomplish a particular task. Further, absolutely no justification exists to bill for twenty minutes for every phone call or for a minimum of forty-five minutes to prepare a page of a document without regard to the amount of time actually spent. UnauthPractOfLawTheta

Countrywide To Argue In NH Lawsuit That It Has No Legal Obligation To Modify Loans Despite Assurances To The Contrary

In Merrimack County, New Hampshire, the New Hampshire Sunday News reports:

• With more and more folks hoping for loan modifications to save their homes, what obligation does a lender have to work with borrowers in good faith? That's the crux of a case coming up in Merrimack County Superior Court [today]. Gary and Jessica Raymond have sued Countrywide Home Loans Inc., alleging the company "violated the implied covenant of good faith and fair dealing by failing, refusing or neglecting to provide workout assistance."

***

• Countrywide's lawyers are asking the court to dismiss the case, arguing the company has no contractual obligation to modify loan agreements.(1) But that's not the point, Jessica Raymond told the New Hampshire Sunday News. "We're not saying they owed us a loan modification," she said. "Our lawsuit is saying, when they entered into the whole loan-modification process with us, then at that point they should least have treated us fairly, instead of roping us around for eight months."

For more, see Granite Staters suing Countrywide over mortgage woes.

(1) In an earlier story, Countrywide attorneys reportedly described the lender's publicly-made loan modification assurances as “mere commercial puffery.” For an earlier post on this story, see Attorneys For Major Lender In New Hampshire Lawsuit Admit Company's Loan Modification Assurances Are "Mere Commercial BS."

Burden On Homeowner To Initiate Lawsuit To Employ "Produce The Note" Strategy In Non-Judicial Foreclosure States

In Atlanta, Georgia, WXIA-TV Channel 11 reports:

• With foreclosures all over the country reaching record levels, more and more people are beginning to fight back with three words that hit lenders like a fist: "Produce the note." "If a lender cannot produce the note," said bankruptcy attorney Howard Rothbloom, "it's no different than a person going to the bank trying to cash a lost check. If you don't have the note you can't prove that you don't have the mortgage."(1)

***

• But to be used here in Georgia, the three words have to be uttered by an attorney, not by you. That's because Georgia is a non-judicial foreclosure state, and for the court to intervene an attorney has to ask for a temporary restraining order. "So in order to demand that a lender to produce a note outside of bankruptcy court a borrower is going to have to sue the lender in state court and demand that the lender produce the note," noted Rothbloom.

For more, see Fight Foreclosure With Three Simple Words?

(1) And just like the lost check, even if the foreclosing lender or its agent can produce the note, it has the burden of proving that it has the legal right (ie. the legal standing) to enforce it (ie. endorsements, assignments, affidavits, powers of attorney, and any other required legal paperwork must all be in proper order). Copyright 2009 The Home Equity Theft Reporter (http:/HomeEquityTheft.blogspot.com) ThetaMissingDocsMtg

Mandatory Mediation Available On Request For Indianapolis-Area Homeowners Facing Foreclosure

In Indianapolis, Indiana, The Indianapolis Star reports:

• Marion Superior Court has passed a new local rule that allows homeowners facing foreclosure in civil court the option of settlement conferences, or mediation, with their financial lenders. The conferences are mandatory for lenders if the borrower responds to a notice from the court. The borrower must reside in the house facing foreclosure. Local housing experts estimate that one in 220 Marion County homes is in some state of foreclosure.

Source: Foreclosure mediation OK'd.

Florida Supreme Court Forms Statewide Task Force To Relieve Foreclosure Backlog

The Miami Herald reports:

• To sandbag the flood of foreclosures pouring into the state's underfunded court system, the Florida Supreme Court announced the formation of a statewide task force on Monday that will look for solutions to the docket backlog while ensuring borrowers and lenders are treated fairly.

• ''This is a hurricane that has hit our state,'' said Miami Circuit Court Judge Jennifer Bailey, who was appointed to lead the 15-member task force. "Over 75 percent of the incoming cases are mortgage foreclosures. Our dockets have exploded.'' The task force will take specific aim at integrating the growing patchwork of judicial rules that have been established by the state's circuit court judges as they seek to manage the influx of cases.

***

• Statewide, the time needed to complete a foreclosure has increased from roughly 150 days to around 300, leaving homes vacant longer and condo associations hurting from unpaid maintenance fees.

For more, see Task force to seek answer to foreclosure court backlog (The Florida Supreme Court is looking for ways to cope with the overwhelming volume of foreclosure cases coming into the system, including a mediation requirement).

3 Sentenced In Upfront Fee Loan Modification Scam; Prosecution Of 2 More Pending, 3 Others On The Lam

In Southern California, the San Diego Union Tribune reports:

• After pleading guilty to loan-modification fraud, three people connected with a company that scammed hundreds of distressed homeowners in Southern California have received sentences ranging from probation to six years in prison.(1) “There are a lot of these scam artists roaming around California looking for vulnerable people, so it's important to catch them and convict them and imprison them,” state Attorney General Edmund G. Brown Jr. yesterday. “It is also important to send up a flare for people in foreclosure to watch out.”

• In November, Brown announced the breakup of First Gov, a company based in San Bernardino. The firm took payments from troubled borrowers but did nothing to prevent foreclosures, officials said. First Gov offered to renegotiate loans and reduce mortgage payments. It charged upfront fees that ranged from $1,500 to $5,000, Brown said. Homeowners were told to stop making mortgage payments and end communications with their lenders.

For more, see 3 sentenced in scam over foreclosures.

For more on this case from the California Attorney General:

• Press release: Attorney General Brown Sends Perpetrators of Loan Modification Fraud to Prison,
• Felony Complaint - People v. Amador, et al.,
• Flyer and Envelope allegedly used by the defendants to solicit business.

(1) Rosa Conrado, 51, of San Bernardino was sentenced yesterday to six years, four months in prison for six counts of grand theft in connection with the scam, officials said. Alejandrina Maldonado, 33, of St. Lucie, Fla., was sentenced Feb. 26 to a three-year prison term for one count of grand theft. Martin Jesus Flores, 33, of Baldwin Park was given three years of probation yesterday, based on limited participation in the scheme. David Giron, 44, of Ontario, and Saul Amador, 23, of West Covina are scheduled for a preliminary hearing March 19 on charges of theft, money laundering and conspiracy. Three other alleged members of the group – Juan Jose Perez, 48, Isuara Hernandez, 33, of La Habra, and Antonia Gonzalez, 66, of San Bernardino – are believed to have fled the jurisdiction and may be outside the country, officials said. foreclosure rescue

Nevada AG Files Felony Theft Charges Against Owner Of Vegas Loan Modification Firm

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:

• Jack Ferm was arrested on felony charges Wednesday morning after a hearing in District Court. He is the head of mortgage rescue company, the U.S. Justice Foundation, which was ordered to close last week. Instead of a slap on the wrist, Foundation President Jack Ferm left district court in handcuffs. The man whose company filed hundreds of unsuccessful lawsuits to stop foreclosures now faces felony criminal charges.

***

• According to the complaint, Ferm promised he could stop foreclosure by helping homeowners sue their mortgage companies themselves. Instead, at least two victims claim they paid thousands for services Ferm never provided.

• "Attorney General Masto is aggressively pursuing any fraud related to the mortgage industry. The current wave of scams happens to be the loan modification scams, and again, this was one of the companies we've received the most complaints about," said Chief Deputy Attorney General John Kelleher.

• In previous interviews, Ferm insisted his foundation filed as many as 800 lawsuits using boilerplate legal documents prepared by paralegals.

According to the story, Ferm, a non-attorney, was arrested while in court on a different matter related to his loan modification activities. Specifically, he was responding to an order to show cause in connection with allegations of unauthorized practice of law.

For more, see U.S. Justice Foundation's President Arrested.

See also Nevada Attorney General press release: AG Announces Former Las Vegas Radio Talk Show Host Arrested In Mortgage Rescue Fraud Scheme:

• Nevada Attorney General Catherine Cortez Masto announced today that Jack Ferm, a former talk show host in Las Vegas, Nevada, has been arrested on two counts of felony theft and related charges in connection with the operation of U.S. Justice Foundation, a mortgage rescue scam.

Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law. UnauthPractOfLawTheta

Nevada State Bar Accuses Loan Modification Firm Of Unlicensed Practice Of Law As Hundreds Of Their Lawsuits Move Thru State, Federal Courts

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:

• First it was a federal judge, and now the State Bar of Nevada is taking action against a local mortgage rescue company. The bar seeks to stop the U.S. Justice Foundation and its president from practicing law without a license.

• The Foundation claimed it could stop foreclosures by helping people to sue their mortgage companies themselves. Trouble is, in the vast majority of cases, it didn't work. Now the Foundation, and its president Jack Ferm, have to answer for the hundreds of lawsuits moving through both the state and federal courts.

***

• The bar seeks a court order to stop Ferm and the Foundation from continuing to engage in the unauthorized practice of law. Ferm says that's unnecessary because he has already closed his doors.

For more, see I-Team: More Legal Trouble for U.S. Justice Foundation.

Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law. UnauthPractOfLawTheta

NJ AG Files Civil RICO Charges Against Alleged Flippers; Accused Of Using Unwitting Investors To Pocket Big Profits, Leaving Them Holding The Bag

In Northern New Jersey, WABC-TV Channel 7 reports:

• There are major developments in an Eyewitness News investigation. The New Jersey Attorney General's office is filing civil RICO (racketeering) charges against a disbarred lawyer and his son, accusing them in a widespread investment scheme.

***

• The defendants, Seth and Marty Gendel, ran a property management firm in Totowa, New Jersey. They are accused by the Attorney General's office of orchestrating a pattern of racketeering that included making false promises to investors, submitting fraudulent mortgage applications and failing to make mortgage payments, resulting in ruined credit.

***

• In the complaint, the Attorney General's office alleges the Gendels, mortgage brokers and others conspired in a pattern of racketeering to solicit investors to buy properties in distressed neighborhoods at grossly inflated prices to generate unwarranted profits for themselves. [...] The investors say the Gendels promised to manage the homes and pay the mortgages, but then came the foreclosure notices and destroyed credit.

***

• The AG's office claims many homes in the Gendel scheme have been condemned, left vacant or abandoned. [...] Sources say that there is also an ongoing criminal investigation into the Gendels and others.

For more, see Racketeering scheme in New Jersey.

For more from the New Jersey Attorney General's Office, see:

• Lawsuit: Milgram v. Casey Properties, LLC, et al.,
• Press Release: Attorney General Announces Three New Mortgage Fraud Complaints (Disbarred Lawyer, Son Sued for Racketeering; Loan Modification Businesses Charged).

The ten defendants in this case are: Casey Properties, LLC; Seth L. Gendel; Martin A. Gendel; Lee Alan LLP; Francis T. Memmo; Kelly Kotzker; Damien Figueroa; Edward Evans; Nicholas Manzi; and Robert B. "Barry" McBriar.

New York Foreclosure Rescue Operator Back In The News

In Brooklyn, New York, The New York Times reports:

• In 2005, [Waver Brickhouse] fell behind on her mortgage payments and turned to a so-called rescue firm, which, court papers allege, tricked her into signing away the deed to her Brooklyn home. She says the company, Home Savers Consulting, secretly sold her home, with the help of a mortgage from IndyMac Federal Bank, and ran up huge new debts.

• Now broke, deeply embarrassed and facing the loss of her small row house in the Brownsville neighborhood, Ms. Brickhouse, 69, faces a new problem. She must convince the Federal Deposit Insurance Corporation, which last year took control of IndyMac, now insolvent, that her mortgage payments should not include at least $150,000 tacked on by fraud.

***

• Ms. Brickhouse has sued Home Savers,(1) and her case underscores the conundrum facing the F.D.I.C. as it wades through thousands of troubled mortgages it has inherited from failed banks, 40,000 from IndyMac alone.

***

• F.D.I.C. officials asked Ms. Brickhouse to forward financial information so they could work out arrangements for her to pay some portion of the $380,000 mortgage. Ms. Brickhouse acknowledges that she is responsible for the $213,000 on her original mortgage. But she refuses to pay any part of the mortgage that she said was obtained through fraud.

For more, see Mortgage Fraud Case Poses Federal Quandary.

For some of the legal documents filed in this case, see:

• Brickhouse v. Millett - Complaint & Notice of Removal to Federal Court,
• Brickhouse v. Millett - Memorandum of Law in Opposition to Motion to Dismiss.

Go here for other posts on New York City-area foreclosure rescue operator, Home Savers Consulting Corp.

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.).

(1) According to the story, Ms. Brickhouse’s case has a persuasive ring to it, not least because one of those engaged in the alleged fraud, straw buyer Yolanda Millett, returned her deed and swore out an affidavit describing the scheme. In it, Ms. Millett accused Home Savers of misleading Ms. Brickhouse at every turn. “She did not at any time believe that ownership of the subject property passed to me,” Ms. Millett stated in the affidavit, “and her intent was never to relinquish ownership.”

Reportedly, Home Savers Consulting has been sued by homeowners in Brooklyn, Queens and Staten Island, and nearly every case alleges a similar pattern of deception: An owner behind on a mortgage turns in desperation to Home Savers, which secretly transfers the deed to a “straw buyer” with good credit who qualifies for a cash-out refinancing. Then, it is alleged, Home Savers drains the homes of equity. Jessica Attie, co-director of the South Brooklyn Legal Services Foreclosure Prevention Project, estimates that Home Savers extracted at least $5 million in equity from the homes of people in a handful of her cases. Legal services lawyers have frequently forwarded information on Home Savers to prosecutors, but no criminal cases have been brought.