Feds To Announce Joint Effort To Attack Loan Modification Scams

The Washington Post reports:

• The Obama administration will announce [today] a multi-agency effort to combat loan modification scams. As the country's foreclosure rate rises, companies have popped up offering to help borrowers save their homes. But banks and consumer advocates complain that the fees, which can reach thousands of dollars, do not translate into results and many of the programs are scams.

***

• According to a government statement, the effort will align responses from federal law enforcement agencies, state investigators and prosecutors, civil enforcement authorities and the private sector to protect homeowners.

For more, see Government to Offer Plan to Fight Home Loan Scams.

For story update, see Government Rolls Out Plan to Fight Loan Scams:

• [S]ometimes, these scams use names similar to legitimate groups offering help. For example, many companies use the word "Hope" in their title, similar to Hope Now, an alliance of mortgage lenders, and Hope for Homeowners, a foreclosure prevention program run by the Department of Housing and Urban Development, according to federal officials.

Alleged Deed Theft Scammers Pocket Proceeds From Mortgage On Victim's House, Say Cops; Owner Loses Home To Foreclosure, Now Faces Eviction

In Oshawa, Ontario, The Toronto Star reports:

• Police say imposters with a forged driver's licence stole Lana Morrison's home-ownership title to get a loan. Then the thieves defaulted on the loan.(1) Now, despite a pending fraud trial, a Toronto trust company wishing to recoup its money is trying to evict Morrison and take her house. The local sheriff has ordered Morrison out within two weeks, along with her 12-year-old boy, Tyrone, and their pet poodle, Peanut.

***

• In April last year, in connection with the case, police laid fraud charges against two women and a man. On May 1, the Durham Region land titles department issued a notice saying "no dealings be had with the property" until the fraud case is settled.

• Two months ago, Home Trust Company went to court to seize the property anyway and the judge granted the request, the company's lawyer, Amanda Jackson, said in an email. Morrison failed to appear, Jackson said. Morrison said she was given the wrong court address and arrived 20 minutes late.

• Home Trust president Nick Kyprianou said he does not believe Morrison's hard-luck story and is not prepared to await the outcome of the fraud trial. "We can't put ourselves in a situation to lose money – interest is accruing," he said of the mortgage loan. "This could take five years."

For the story, see Oshawa mother faces eviction after alleged mortgage scam.

In other "north of the border" deed theft stories from The Toronto Star, see:

• Man, 90, off hook for loan: Court (Landmark ruling lifts $300,000 burden) ("The decision is the first of its kind in the province since a landmark Court of Appeal ruling [...]. That decision found that even a bona fide purchaser can't legally buy property from a fraudster.");

• Judge chides bank in mortgage fraud (Couple's identity stolen, home lost; TD not 'innocent victim,' judge says) ("Ontario is experiencing a "serious mortgage-fraud plague," says a judge who released a blistering decision [...] that chastised the Toronto-Dominion Bank for failing to detect a scam that left a North York couple without their home.").

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.

(1) Nadia Kelly, 27, Antonia Pasculli, 48, and Christopher Dewsbury, 29, face charges of fraud, conspiracy to commit an indictable offence and charges related to forging documents in connection with the case. Pasculli faces further charges including possession of a counterfeit mark. Dewsbury is also charged with forgery, intimidation and attempting to obstruct justice. DeedGammaTheft

Minnesota Title Agent Faces State Regulator's Embezzlement Charge; Accused Of Pocketing $230K+ In Real Estate Closing Proceeds

From the Minnesota Department of Commerce:

• The Minnesota Department of Commerce has summarily suspended the real estate closing license, resident insurance producer license and notary public commission of Kuntee Singramdoo and charged her with embezzling over $230,000 in real estate closing proceeds and using the money to pay off her own creditors or her family members' creditors.

***

• Singramdoo admitted under questioning from Commerce Department investigators that she embezzled the funds but at this time has only paid back $10,000 [...].

For the entire press release, see Lakeville woman charged with $230,000 embezzlement (Licensed real estate closer used proceeds from closing to pay her own debts).

Go here for the Department's administrative charges.

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

Undercover Probe Into Massive Repair Scheme Allegedly Overcharging Homeowners For Shoddy, Inadequate Work Yields Financial Settlement

From the Office of the California Attorney General:

• Attorney General Edmund G. Brown Jr. and the Contractors State License Board (CSLB) have finalized an agreement that will stop a massive service and repair scheme that unfairly overcharged thousands of Californians for "shoddy and woefully inadequate" home repair work. [...] A months-long investigation by the Attorney General's Office and the Contractors State License Board found that SRVS Charge Inc. and its affiliated companies had been cheating some 6,000 customers each year for overpriced and substandard home repair work since 1989.(1)

***

Over several years, the Attorney General and the CSLB shut down affiliates of SRVS Charge, Inc. But instead of ending their scheme, the defendants continued to run their company under a labyrinth of business names and fraudulent contractor license numbers that were interchangeable. When CSLB either revoked a license or received an excessive number of complaints, the company would establish a new corporate identity and business would continue without interruption. As part of its investigation, CSLB conducted undercover stings against service

Second Mortgages A Major Sticking Point In Effort To Help Homeowners Avoid Foreclosure As Subordinate Lienholders Fight To Keep From Getting Stiffed

The Wall Street Journal reports:

• The Obama administration's $75 billion effort to help troubled homeowners avoid foreclosure has hit a stumbling block: a fight over how to aid borrowers who have more than one home loan. The Treasury Department, scrambling to address the problem, is trying to persuade lenders to forgive or greatly reduce so-called second liens. But that effort has sparked a fight between investors who own securities backed by first mortgages and banks that hold second mortgages over how losses should be shared.

For more, see Homeowner-Aid Plan Caught in Second-Loan Spat.

State Orders Unlicensed/Unauthorized Loan Modification Firm To Stop Performing Services

In Sacramento, California, Central Valley Business Times reports:

• A Fair Oaks-based company called 2nd Chance Negotiations Inc. has been ordered by the California Departments of Corporations and Real Estate to stop performing loan modification services. [...] The company solicited financially stressed borrowers, and, in exchange for an upfront fee, promised them they would negotiate with the borrower’s lender to modify the terms of the borrower’s loan. However, the joint investigation established that 2nd Chance Negotiations was not licensed and/or legally authorized to perform the promised services or collect advance fees, the state says.

***

• In general, and with limited exceptions, only licensed real estate brokers and California attorneys operating as lawyers within the scope of their license, may collect advance fees. Real estate brokers must have their advance fee agreement reviewed and sanctioned by the DRE prior to its use.

For the story, see Central Valley firm ordered to stop loan modifications.

California Man Says "Prove It" To Multiple San Diego-Area Mansion-Stealing, Deed Theft Allegations; Local Authorities Notice Phony Deed Filing Trend

In San Diego, California, XETV Channel 6 reports:

• A 43-year-old man pleaded not guilty [last week] to numerous counts in an alleged real estate fraud case in which the perpetrators allegedly filed deeds under the guise of a religious order. Terry Lee Herron, 43, was charged with conspiracy to file false documents and conspiracy to commit forgery, said Deputy District Attorney Marlene Coyne.

• Herron also faces 12 counts of filing false documents and six of forging documents, Coyne said. The original defendant in the case, Maurice Antoine Simmons, 31, was also charged with two conspiracy counts, Coyne said. Simmons was accused last year of taking blank grant deeds and filling them out as if he owned the properties -- a condominium in San Diego and five homes in Chula Vista, according to Coyne. She said three properties were owned by banks and two by private individuals.

• Authorities said they have noticed a trend in which people claim ownership of properties by filing bogus grant deeds. The fraudulent owners then move people into the vacant or distressed homes. Investigators said the perpetrators claim to be immune from prosecution because they file the deeds under the guise of a religious order known as the Sovereign Solomon Brothers Archbishop Corporation Sole.

• Herron, who was ordered held on $40,000 bail by Judge David Szumowski, is also known as King Solomon II, according to Coyne. "He's part of the sovereign movement, which doesn't recognize government authority," Coyne said.

For more, see Plea Entered in Mansion Stealing Scheme.

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. DeedGammaTheft

Housing Advocates Caught Flat-Footed As Fannie, Freddie Fail To Extend Moratorium On Foreclosures, Evictions; Program Quietly Allowed To Expire

The Washington Independent reports:

• A ban on foreclosure sales and evictions from houses owned by mortgage giants Fannie Mae and Freddie Mac, which began as a high-profile effort just before the holidays to keep people in their homes as the government tried to come up with homeowner rescue plans, is over.

• Spokesmen for Fannie Mae and Freddie Mac confirmed the ban ended March 31, in a response to an inquiry from TWI. The agencies made a major announcement in November to roll out the ban, garnering headlines and extensive news coverage. Freddie Mac CEO David Moffett issued a statement at the time, saying the ban “provides a new measure of certainty” to families facing foreclosures during the holidays.

• But its expiration didn’t seem to merit the same level of fanfare, with some housing advocates caught by surprise, scrambling for information today and Wednesday on listservs and in phone calls.

For more, see Fannie, Freddie Quietly Lift Moratorium on Foreclosures (Stopgap Plan Outlined With Fanfare Ends Without Announcement).

California AG Declares War On Loan Modification Scams; Will Target Bogus TV, Other Mass Media Ads Offering Useless Deals

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

• State Atty. Gen. Jerry Brown pledged Saturday to investigate and prosecute businesses that charge struggling homeowners fees to help get more favorable terms for repayment of their mortgage loans. "We have lawyers, we have investigators, and we will go after those who break the law by falsely representing what they can do," Brown said at a congressional hearing in South Los Angeles.

• Brown, a Democrat planning to run for governor next year, vowed to focus specifically on bogus television ads that lure homeowners into expensive mortgage consulting deals that are useless. "We will document the rip-offs that are over the mass media as best we can," he said.(1)

For more, see California attorney general promises to tackle homeowner scams (At a congressional hearing in South Los Angeles, Jerry Brown says his office will investigate and prosecute firms that charge fees for bogus mortgage consultant deals).

(1) Unlike his counterparts in some states who are prosecuting loan modification foreclosure rescue fraud with civil lawsuits, Attorney General Brown has recently been bringing criminal actions against the alleged perpetrators charging grand theft and criminal violations of the state's foreclosure consultant statute. See:

• Attorney General Brown Sends Perpetrators of Loan Modification Fraud to Prison (press release, felony complaint);
• Brown Announces Arrest of Two Scam Artists Who Committed Loan Modification Fraud (press release, felony complaint, arrest warrant affidavit);
• People v. Santos (press release, felony complaint, arrest warrant affidavit).

Pennsylvania Homeowner Uses "Produce The Note" Self-Help Strategy In Attempt To Fend Off Foreclosure

In Ellwood City, Pennsylvania, KDKA-TV Channel 2 reports:

• A Lawrence County man is trying a new strategy to save his home. Mark Strohecker, of Ellwood City, is a former firefighter who is on disability. When his adjustable rate mortgage jumped, he was unable to make payments. Facing foreclosure, he used a strategy promoted by a Florida-based website called the Consumer Warning Network. He filed a motion asking the lender to "produce the note." "Provide to me the promissory note to show to me that they are indeed the rightful owner of my property here," Strohecker said.(1)

***

• Strohecker tells KDKA his lender has told him they can't find the note. It's unclear what will happen next. He plans on filing more paperwork in court next week.

For the story, see Ellwood City Man Uses 'Note' Strategy To Save Home.

For the KDKA-TV Channel 2 video, see 'Note' Strategy Could Stop Home Foreclosure.

See also The Consumer Warning Network: Homeowner Stops Foreclosure after filing “Produce the Note”

• [T]he fight for Strohecker’s home is not over yet. The Judge’s order delays the foreclosure sale until May 13th. The order gives the plaintiff, LaSalle Bank National Association, time to come up with the original note, or, if it was lost or destroyed, to prove that LaSalle is the rightful owner of the note. The Judge’s order cites a potential loan modification as a reason for stopping the Sheriff’s Sale. “Said sale is stayed until the next sale scheduled for May 13, 2009, as there is the strong possibility of federal relief for mortgage foreclosures,” Judge Cox wrote in his order.

Go here for more on Produce The Note “How-To”.

Go here for Sample Foreclosure Legal Documents.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) For those in Mr. Strohecker's position, it might be a good idea to request that the mortgage company prove, not only that it has the note, but that it also has the legal right to enforce the note through foreclosure by demanding that it produce, among other things:

• a complete "chain of title" tracing assignment of the mortgage from the loan originator or other party named in the mortgage;
• all necessary affidavits, powers of attorney, etc. that impact on the validity of the written assignments of mortgage;
• the pooling and servicing agreement if a loan servicer is involved (see Max Gardner’s Top Resasons for Wanting a Pooling Servicing Agreement). ThetaMissingDocsMtg

Foreclosure Sale Called Off As KC Homeowner Files Suit Alleging Fraud In Lending Process

In Kansas City, Missouri, The Kansas City Star reports:

• Sherrita Richardson’s home was to be taken in foreclosure on Monday, making her just one more American caught in the nation’s widening foreclosure crisis. Instead, Richardson became a rare statistic. She’s won a reprieve. The lender has stopped the foreclosure to investigate Richardson’s claims that she was the victim of an inflated appraisal and fraud.

***

• Richardson has been assisted by retired attorney Sid Willens, who lobbied the lender to stop the foreclosure until her claims could be investigated. [...] What’s more, Willens has filed a lawsuit against the mortgage broker and seller. She said they misled Richardson and committed a fraud in the deal, using an inflated appraisal and misrepresenting how much money she would put into the deal.

For more, see Foreclosure halted while lender investigates claims that woman was victim of inflated appraisal and fraud.

See also, KMBC-TV Channel 12: Woman Successful In Fight To Stop Foreclosure (Attorney Tries To Get KC Home Reappraised).

Illinois Woman Charged With Felony Theft In Alleged Loan Modification Scam

In Sherman, Illinois, the The State Journal Register reports:

• A Sherman woman has been arrested in connection with an alleged real estate fraud scheme, including trying to sell property she did not own and conducting a mortgage rescue scam, authorities said. Tamptha S. Hickman, 39, turned herself in to police after a warrant for her arrest on a charge of felony theft was issued Tuesday. She was released from jail after posting $1,000 bail.

***

• Under her company name, police said, Hickman mailed out as many as 500 letters to homeowners who were in the foreclosure process and claimed she could help save their homes at no cost to them. One homeowner who got the letter contacted Hickman, who allegedly told the homeowner that she had contacted the victim’s mortgage company and that if she wrote Hickman a check right away for $3,800, the home would not be foreclosed upon. Hickman then would negotiate a payment plan for the rest of the debt, she allegedly told the woman. The victim gave the check to Hickman and a week later contacted the mortgage company to make sure the payment had been made. It hadn’t been, police said. Authorities believe Hickman pocketed the money.

• The victim never went to authorities about Hickman’s alleged scam, but police found her after going through Hickman’s financial records. “The victim never came forward because she was embarrassed and didn’t know there was anything she could do about it,” Hill said.

For more, see Sherman woman arrested in alleged real estate fraud scheme.

Lenders Abandoning Foreclosure Actions In Some Markets; Dilapidated Collateral Not Worth Repossessing; Homeowners Left On The Hook For Code Violations

In South Bend, Indiana, The New York Times reports:

• [C]ity officials and housing advocates here and in cities as varied as Buffalo,(1) Kansas City, Mo., and Jacksonville, Fla., say they are seeing an unsettling development: Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost of the ordeal — from legal fees to maintenance — exceeds the diminishing value of the real estate.(2)

• The so-called bank walkaways rarely mean relief for the property owners, caught unaware months after the fact, and often mean additional financial burdens and bureaucratic headaches. Technically, they still owe on the mortgage, but as a practicality, rarely would a mortgage holder receive any more payments on the loan.(3) The way mortgages are bundled and resold, it can be enormously time-consuming just trying to determine what company holds the loan on a property thought to be in foreclosure.(4)

For more, see Banks Starting to Walk Away on Foreclosures.

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

Thanks to Bill Collins of Crossroads Abstract, Rochester, NY for the heads-up on this story.

(1) According to the story, in Buffalo, where officials said the problem had reached “epidemic” proportions in recent months, the city sued 37 banks last year (see City of Buffalo v. ABN Amro Mortgage Group Inc., et al.), claiming they were responsible for the deterioration of at least 57 abandoned homes; the city chose a sampling of houses to include in the lawsuit, even though the banks had walked away from many more foreclosures. So far, five banks have settled.

(2) Reportedly, Chuck Leone, the South Bend city attorney, made this observation on the foreclosing lender walk-aways: “We see it one of two ways. One is that the bank will simply dismiss the foreclosure complaint. The other is that the mortgage holder will follow through and take a judgment of foreclosure, but then not schedule the property for sheriff’s sale.”

(3) The article highlights the story of one local property owner who though she lost a two-family rental home to foreclosure, which fell victim to looters after her tenants moved out. The City of South Bend contacted her recently, demanding that she resume maintenance on the property. The sheriff’s sale had been canceled at the last minute, leaving the property title — and a world of trouble — in her name. Reportedly, the home is now so worthless the city plans to demolish it — another bill for which she will be liable.

(4) One recent story (see National Public Radio: Banks Refusing To Take Back Foreclosed Properties) reported that Cleveland, Ohio Housing Court officials said they are now seeing homeowners take matters into their own hands when dealing with the abandonment of foreclosure lawsuits by lenders. One instance is cited involving a foreclosing lender that was reluctant to complete the foreclosure process and repossess a dilapidated property. In that case, the homeowner simply deeded back the property to the lender by preparing a deed, naming the lender as grantee, and recording it.

Such a conveyance may ultimately be found to be ineffective because the mortgage lender surely would assert that it never "accepted" the deed conveyed by the owner of the dilapidated wreck collateralizing its loan (ie. to be effective, a deed must be both "delivered" by the grantor-owner, and "accepted" by the grantee-lender; in other words, no acceptance = no conveyance). However, recording a deed in the name of the unwitting lender may, under state law, create a legal presumption that it has been "accepted" by the lender (see Janian v. Barnes, 284 A.D.2d 717, 718; 727 N.Y.S.2d 182 (N.Y. App. Div. 3d Dep't 2001)) until such time that it straightens out the mess by going into court, presenting evidence to a judge that there was no actual acceptance, and obtaining a judgment declaring the deed to be void. Unless and until it does so, it could arguably be treated as the legal owner of (and find itself legally responsible for the code violations on) its abandoned dilapidated loan collateral. Inasmuch as many mortgage holders, their loan servicers, and their assembly line foreclosure mill attorneys have proven themselves to be quite clumsy when handling the paperwork relating to their mortgages, it could be quite some time before they discover that title to the loan collateral has been put in their name - probably when they start getting tagged with the code violations - and possibly even longer before they figure out what to do. responsibility code violations foreclosure

Real Estate Agent Charged In Staten Island Gas Station Heist; Used Phony Deed To Transfer Title To Client's Business Property To Son, Say Cops

The following excerpt appeared in a recent NYPD Daily Blotter column in the New York Post:

• A real-estate agent was busted after he tried to steal a million-dollar Tompkinsville property from the owner, sources said. Mike Odeh, 53, was hired by the owner to sell a gas station on Bay Street and Hannah Street, the sources said.

• The owner changed his mind about the sale and notified Odeh, but the agent allegedly forged a phony deed and on Feb. 17 filed it with the County Clerk's Office, police said. The phony deed transferred the property to Odeh's son, who tried to sell the property for $300,000, cops said. The property is worth about $1.5 million, according to court papers.

• The owner learned of the scheme from another agent, and cops arrested Odeh at his Grasmere home Thursday. He was charged with grand larceny and criminal possession of a forged instrument.

Source: NYPD Daily Blotter (excerpt appears halfway down page).

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. DeedGammaTheft

Report: Supply Of Publicly Funded Legal Aid, Pro Bono Services "Entirely Inadequate" To Meet State's Needs

Buried at the end of a New York Law Journal article on a new volunteer attorney initiative to assist unrepresented defendants in civil cases [credit for the idea for this program attributed to former New York Court of Appeals' Chief Judge Judith S. Kaye](1) is this excerpt on the state of publicly funded legal aid and pro bono services in New York:

• In a report earlier this month, the Office of the Deputy Chief Administrative Judge for Justice Initiatives termed the supply of publicly funded legal aid and pro bono services "entirely inadequate" to meet the need. In 2007, Kaye estimated that about 1.8 million litigants appeared without a lawyer in New York state courts.

Source: Economy Prompts N.Y. Courts' New Program for Volunteer Attorneys.

For the March, 2009 report, see Expanding Access To Justice In New York State (A Ten-Year Report Prepared By The Office Of The Deputy Chief Administrative Judge For Justice Initiatives).

(1) In an interview Wednesday, Kaye said she had been thinking of ways to bring the "regrettably increasing supply side of lawyer time" caused by the failing economy to the "aid of the regrettably increasing demand side" of people needing legal services. "I am so heartbroken every day to read the lead news item in the [New York] Law Journal about more lawyers being suspended, exited, encouraged to do something other than their law firm work," Kaye said. "And there are the courts just flooded with foreclosure cases, flooded with credit card debt cases, flooded with Family Court filings."

IRS Publication 4681: Canceled Debts, Foreclosures, Reposessions & Abandonments

Those who are trying to figure out how to handle the tax ramifications of a cancellation of debt on a short sale, foreclosure sale, loan modification, or any other debt cancellation might want to consult IRS Publication 4681: Canceled Debts, Foreclosures, Reposessions and Abandonments.

While this publication indicates that it is for use in preparing 2007 tax returns (as opposed to 2008 returns), it is the most recent version of the publication put out by the Internal Revenue Service and, accordingly, the information contained therein may be useful.

For more from the IRS on cancellation of debt, see:

• IR-2008-17 - Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form,
• The Mortgage Forgiveness Debt Relief Act and Debt Cancellation. short sale income tax

Loan Modification Firm Workers Flee Offices As ACORN Demonstrators Prepare To Protest; Accuse Company Of Clipping Homeowners Out Of Upfront Fees

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

• Consumers trying to warn the public about so-called loan modification scams found themselves tripping an alarm of another sort Wednesday: About 15 of them got stuck in a Buena Park office building's elevator during a demonstration.

• The failed protest was the latest in a string of tough breaks for a group of about 30 mostly elderly and Latino homeowners who gathered Wednesday outside the offices of a company called Centre Legal. Many of the demonstrators are about to lose their homes to foreclosure. Several had paid Centre Legal or one of its affiliates(1) thousands of dollars to help them work out easier payment terms, but said they received nothing in return.

***

• [W]hen protesters entered the building, they found Centre Legal's fourth-floor offices empty. Neighboring tenants said the company's workers fled minutes earlier down a set of back stairs, perhaps tipped off by the gathering of homeowners in the parking lot.

For more, see Protest of alleged loan modification scam goes nowhere (An elevator mishap adds to the frustration of homeowners gathered at the offices of Centre Legal, a company they say took their money but did nothing to help them).

(1) According to the story, ACORN alleges that a number of Southern California homeowners have paid fees to Centre Legal but received nothing in return. ACORN said the company has also operated under the names Centro Legal, Modificate and Gigante Mortgage.

Disbarred Florida Attorney Gets 14 Years For Pocketing $1.7M+ From Escrow Accounts Involving Clients' Real Estate Transactions

In Pinellas County, Florida, the St. Petersburg Times reports:

• Richard Da Fonte, the disbarred Clearwater lawyer accused of stealing more than $1.7 million from clients, was sentenced to 14 years in prison and 15 years' probation.(1)

***

• [His lawyer, Larry] Sandefer said his client had hoped to pay back his victims from the sale of his business, real estate and life insurance. The business, though, which Da Fonte sold to a former associate, is tied up in a legal dispute. Foreclosure is pending on his office condominium, and his home is in foreclosure, Sandefer said. His $3 million life insurance has lapsed.

For more, see Disbarred lawyer Richard Da Fonte gets 14 years for stealing from clients.

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

(1) The story describes some of Da Fonte's victimized clients as follows:

• Shakawat Hossain of St. Petersburg hired Da Fonte in 2003. He said the lawyer stole about $235,000, money he planned to use to buy a gas station and convenience store;
• Pinellas Park resident Sharon Dore and her family lost $110,000 when they hired Da Fonte to handle the sale of her late mother's St. Petersburg home. The money was supposed to go to Dore, her daughter and a brother;
• Joan Kelly, a widow, paid for her Seminole home in full in April 2007. That summer, while she was in Cape Cod, she began getting calls from lawyers offering help with a problem. It was foreclosure. Da Fonte had taken almost $200,000 meant to pay her home's previous owners;
• Winnie Yang of Clearwater couldn't wait to have her say during the lengthy hearing. The lawyer stole $400,000 from her brother-in-law Kenneth Yang, who lives in Texas. The money was from a real estate transaction involving Yang, her husband and her brother-in-law. EscrowRipOffAlpha

Court Orders Temporary Shut Down Of Miami Loan Modification Firm; Company Directed To Refund Upfront Fees Within 90 Days

From the Office of the Florida Attorney General:

• Attorney General Bill McCollum [Friday] obtained a temporary injunction against Lincoln Lending Services, LLC and owner Rita Gomez, prohibiting the company from engaging in any type of consumer-debt related service or mortgage modification service and from taking payment from consumers for such services until further order of the court. The company will also be required to preserve and allow inspection of its records and refrain from liquidating its assets.

• In addition to freezing the company’s assets, the order requires that the company refund any up-front payments made by consumers for foreclosure-related rescue services subsequent to October 1, 2008, the effective date of the law prohibiting up-front charges.

• These refunds should be completed within 90 days and will be made without the necessity of consumers filing a claim. The Attorney General's Economic Crimes Division sued Lincoln Lending and Gomez earlier this week (press release, lawsuit) for allegedly charging up-front fees for loan modification services in violation of the Foreclosure Rescue Fraud Prevention Act. The Attorney General’s office has received hundreds of complaints regarding this case since the lawsuit was filed. Both parties agreed to this order.

For the Florida AG's press release, see Temporary Injunction Obtained in Foreclosure Rescue Fraud Lawsuit.

Ex-Subprime Mortgage Peddlers Now Running Loan Modification Scams

Bloomberg News ran a lengthy story describing how loan modification scam artists have popped up all over the country. Many of the players are described as out-of-work real estate professionals who peddled subprime mortgages during the boom who are now pocketing hundreds of thousands of dollars in advance fees and disappear or bleed their victims by charging monthly payments. The following excerpt describes one mortgage broker who jumped on the loan modification bandwagon and who now finds herself in hot water:

• In early 2008, Cheryl Ann Montero, a California mortgage broker, held a series of free seminars [for homeowners facing foreclosure] in the clubhouse of the Lone Tree Golf Course in Contra Costa County, a suburban area near San Francisco. [...] She said her firm, Freedom Financial Solutions, could pressure lenders to stop foreclosures by challenging the legality of loan agreements, according to court records. Her fee: $2,500 upfront and a $2,000 monthly payment to cover legal costs. Promoting her services on the Web site Craigslist, Montero, a blond-haired, blue-eyed woman who looked like a soccer mom, became known as a foreclosure escape artist.

***

• She was also ripping people off, says Ken McCormick, a prosecutor in the Contra Costa County District Attorney’s office. A player in a new confidence game exploiting soaring defaults, Montero didn’t have a team of attorneys to confront lenders. Instead, her firm took a small ownership stake in some of her clients’ houses and filed for bankruptcy, temporarily suspending foreclosure proceedings on those homes, according to an investigative report filed in court by prosecutors.

***

• “She couldn’t make it in real estate anymore, so she just changed hats,” McCormick says. “But she was taking money and doing nothing.” The prosecutor charged Montero with 36 counts of grand theft and related charges in December. She pleaded not guilty and is free on $100,000 bail.(1)

For the entire story, see Subprime Swindlers Reconnect to Homeowners in Foreclosure Scams.

(1) According to the story, Montero ran a three-person operation in which she told homeowners that she could find technical violations committed by lenders in loan contracts, an investigative report filed in court says. Montero blundered during one of her seminars by dropping the name of an attorney who she claimed was working with her, the report says. One of Montero’s clients called the lawyer, who had never heard of Montero, and he in turn complained to the authorities. “That’s what gave us a heads up,” says McCormick, the prosecutor.

Assignee Liability Essential In Enforcement Of Lending, Consumer Protection Laws

A recent op-ed column in the Atlanta Journal Constitution makes an observation on a weakness in Georgia state law in connection with the enforcement of lending and consumer protection laws:

• Many consumer advocates support the lending law revisions in Senate Bill 57, but the changes are window dressing for those of us who represent poor people faced with foreclosure. The law falls short in one crucial area — assignee liability.

• Assignee liability entitles a bilked borrower facing foreclosure to sue not only the originator of the loan but also the current holder. It’s important because most loans are sold and transferred into mortgage-backed security pools. SB 57 doesn’t mandate assignee liability, which means that homeowners would be left with no clear recourse.

For more, see Once mortgages sold, homeowners often left stranded.

Ohio Woman Cops Plea To Theft From Disabled Siblings, Allowing Home To Go Into Foreclosure Despite Having Power Of Attorney

In Cuyahoga County, Ohio, The Cleveland Plain Dealer reports:

• A 56-year-old Brooklyn woman entered a guilty plea on Monday in Cuyahoga County Common Pleas Court to theft charges after authorities said she stole more than $38,000 from her mentally disabled sisters. Irene Schultz faces up to eight years in prison when she is sentenced in April.

• Schultz had been accused of allowing a Cleveland home in which her two sisters lived to go into foreclosure by not making payments. The Cuyahoga County Prosecutor's Office said the county's Board of Mental Retardation and Developmental Disabilities conducted an audit that revealed Schultz's alleged theft. The office said Schultz was responsible for her sisters' finances and had been granted power of attorney from 2001 to 2007.

Source: Woman admits stealing from sisters.

Texas Woman Gets 99 Years In Alleged Mortgage Fraud, Payment Skimming Scam; Homeowners In Foreclosure, HUD Left Holding The Bag

From the Office of the Texas Attorney General:

• A Henderson County woman was [Monday] sentenced to 99 years in prison for her role in a mortgage fraud scheme. On Tuesday, a Navarro County jury found the defendant, Kandace Yancy Marriott, 52, of Gun Barrel City, guilty of engaging in organized criminal activity. According to prosecutors, evidence presented at the punishment stage showed Marriott received monthly mortgage payments from her clients, failed to remit those payments to the mortgage lender, embezzled the homeowners’ funds, and therefore caused her clients to default on their home loans.

***

• The scheme involved predominantly low-income purchasers whose residential loans were guaranteed by the U.S. Department of Housing and Urban Development. As a result, when the unqualified buyers defaulted on their home loans, their mortgage lenders did not suffer financial losses. Instead, HUD – and therefore the taxpayers – had to cover the default costs. Investigators believe the defendants’ scheme cost the taxpayers more than $3 million.(1)

For the Texas AG's press release, see East Texas Woman Sentenced To 99 Years In Prison For Mortgage Fraud (Kandace Yancy Marriott convicted, three additional suspects await trial in alleged scheme).

(1) According to state investigators, the defendants illegally forged home buyers’ signatures, inaccurately completed loan applications, and falsified supporting documents, including the buyers’ rent payment verification statements, proof of employment, and Social Security Administration benefits data, among other items. Court documents filed by the state indicate that the defendants conduct was intended to ensure that unqualified home buyers loans were approved by mortgage lenders.

Buying Residential Mortgage Loans? Documentation Issues & Risks Increase As "Produce The Note" Strategy Gains In Popularity

An article on mondaq.com advises that:

• Investors considering the purchase of residential mortgage loans should include on their diligence checklists verifying the mortgage loan documentation to ensure they will be in a position to enforce the Note and realize on the mortgage if necessary. This entails making sure there is a proper negotiation of all Notes in accordance with UCC requirements, obtaining physical custody of the original Notes, and obtaining written assignments of mortgages in recordable form.

The article highlights the following issues that investors can expect to be raised if they fail in their due diligence:

• [O]ne issue that has become an increasing focus of litigation between residential mortgage lenders and borrowers is the adequacy of the "paper trail" of mortgage loan securitizations. [...] Consumer lawyers around the country have sought to capitalize on the inability of some mortgage servicers and foreclosure counsel to adequately "prove up" the mortgage loan documentation to prevent or delay foreclosure of defaulted loans.

***

• The principal points of contention have been, first, whether possession of the borrower's original promissory note is a prerequisite to exercise of foreclosure remedies; and, second, whether the foreclosing creditor must show a complete "chain of title" tracing assignment of the mortgage from the loan originator or other party named in the mortgage.

***

• Increasingly, at the urging of debtors and debtor's counsel, state courts and in particular bankruptcy courts presented with motions for relief from the automatic stay to foreclose defaulted residential mortgage loans are requiring creditors to produce original Notes.

***

• A related issue concerns who is entitled to enforce the Note. It has been held that "[i]f a loan has been securitized, the real party in interest is the trustee of the securitization trust, not the servicing agent." In re Hwang, 396 B.R. 757, 767 (Bankr. C.D. Cal. 2008). Enforcement and foreclosure proceedings are often brought by the loan servicer, sometimes in its own name and sometimes in the name of its principal pursuant to a power of attorney. Any claimant who is not the "holder" of the Note within the meaning of the Uniform Commercial Code and in actual physical possession of the Note may find its standing challenged by borrowers and courts.

***

• The other principal line of attack by borrowers and their counsel concerns the validity of written assignments of mortgages.

***

• Another complication concerns the role of MERS-- the Mortgage Electronic Registration System, Inc. MERS was established to maintain an electronic off-record mortgage registry, thus eliminating the need for filings in the public land records whenever a mortgage changes hands.

For the article, see Documentation Issues And Risks In Purchasing Residential Mortgage Loans (article starts half way down the webpage).

Tulsa Bar Response To Call To Ante Up Financial Help For Legal Aid Underwhelming As Governor, Others Attempt To Bridge "Justice Gap"

In Tulsa, Oklahoma, an op-ed column in Tulsa World reports:

• Two hundred Tulsa law firms that had not contributed to Legal Aid Services of Oklahoma in past fund drives recently received an appeal to help match a $35,000 challenge grant from the George Kaiser Family Foundation. So far, response is underwhelming; four firms dug deep and gave a total of $1,000. The annual public fund drive continues, led by Gov. Brad Henry and first lady Kim Henry.

***

• [I]f this were a typical year — LASO again would serve 20,000 clients, who could not otherwise afford a lawyer to aid them with civil legal matters. And LASO again, lamentably, would turn away another 20,000 Oklahomans because it did not have enough staff to get them past the front door. Even in good times demand far outstrips resources. "We call it the 'justice gap,' " says LASO's Gayla Machell. "They're all the people who cannot afford an attorney's help but cannot make it to the front of the line at Legal Aid."

• This, however, will not be an ordinary year. Here and nationally Legal Aid groups are witnessing crushing demand. LASO staff across the state can only hope that the number they must turn away remains at 20,000 because the figure could go far higher.

For more, see Justice for all? Not really (Lack of Legal Aid funding creates unbalanced system).

NY Courts Roll Out Attorney-Assisted Self Help Initiative For State Residents Fighting Foreclosure, Personal Debt, Landlord-Tenant, Other Lawsuits

The New York Law Journal reports:

• Administrators of New York courts rolled out a new program Thursday to enlist attorneys, many of whom may be laid off or on reduced work schedules due to the sour economy, to provide legal advice and expertise to pro se litigants. The initiative will differ from traditional pro bono work in that lawyers will not represent poor clients in court nor provide assistance throughout their cases.

• Rather, lawyers in the new Volunteer Attorney Program will make themselves available to multiple pro se litigants to help them prepare petitions and other court paperwork, advise them about what might happen in court and interpret orders from courts, Chief Administrative Judge Ann Pfau said.(1) The program at first will focus on providing legal services in courts in New York City and in Westchester, Suffolk and Nassau counties.

***

• Free training will be available, and attorneys will earn CLE credit for volunteering under the program, according to court administrators. [...] Lawyers in the program will be shielded from liability for the advice they dispense under §17 of the Public Officers Law, according to Lawrence Marks, director of administration for the Unified Court System.

For more, see Economy Prompts N.Y. Courts' New Program for Volunteer Attorneys.

(1) According to the story, Pfau said the need for attorneys to help pro se litigants is particularly acute in cases that reflect the bad economy, such as foreclosures, tenant-landlord disputes, personal debt, child support and other matters in Family Court and small estate settlements in Surrogate's Court. Both employed and unemployed lawyers can participate, Pfau said. Applications and other information about the program are available on the Unified Court System's Web site:

http://www.courts.state.ny.us/attorneys/volunteer.shtml

Court officials will give examples of the types of matters where attorneys can provide legal advice and volunteering lawyers can express preferences for counties where they want to serve. There is no minimum time commitment.

Florida High Court Issues Administrative Order Creating Task Force On Residential Mortgage Foreclosure Cases

The Florida Bar News reports:

• The [Florida] Supreme Court has created a Task Force on Residential Mortgage Foreclosure Cases to recommend policies, procedures, strategies, and methods for easing the backlog of pending foreclosure cases while protecting the rights of parties. Chief Justice Peggy Quince, in a March 9 administrative order, said the residential mortgage foreclosure crisis is of statewide proportions and should, to the extent possible, be addressed on a statewide basis with uniform rules, policies, and procedures to manage cases, protect the rights of homeowners and lenders, and to ease the burden on the courts. The chief justice asked the task force to submit an interim report and recommendations no later than May 8 and a final report no later than August 15.

For more, see Supreme Court creates task force to study foreclosures.

Go here for the Florida Supreme Court's administrative order.

Madoff Using Florida Homestead Protection To Shield Palm Beach Mansion?

A recent story in the Palm Beach Post addresses the possibility that the admitted $50+ billion Ponzi scheme operator Bernard Madoff may be attempting to use the Florida law prohibiting a forced sale of a homestead to protect a Palm Beach mansion titled in his wife's name:

• [Federal prosecutors] served notice [...] that they want to seize a vast array of assets in Ruth Madoff's name, including the Palm Beach home. Federal officials could try to pierce state homestead protection by arguing that the money used to buy the home in 1994 came from fraud or other criminal activity and that federal law is preemptive, [...].

***

• "It seems to me that the federal prosecutors are fairly confident that they will be able to demonstrate that Mrs. Madoff used the proceeds of a criminal enterprise" to buy the home, said New York attorney Richard Greenfield, who said he represents a group of Palm Beach investors. "They may employ RICO, a law aimed at racketeers to obtain the proceeds of the enterprise. They are already contending, contrary to Madoff's contention that the scheme began in the 1990s, that it began at least in the 1980s, well before she purchased the home."

For the story, see Madoff's $9 million Palm Beach property's size could leave small part vulnerable to creditors.

Utah AG Charges Couple With Multiple Felonies In Alleged Equity Stripping Foreclosure Rescue Scam; Seeks Asset Freeze, Criminal Forfeiture, $500K Bail

From the Office of the Utah Attorney General:

• The Utah Attorney General's Office [Friday] charged the CEO of Utah Financial Inc., Midvale, Utah, and his wife with 18 second-degree felony counts for allegedly running a lucrative mortgage fraud scheme. Utah Financial President Brendan Tyler Cassity, 36, and Olivia Cassity, 29, were both charged with 15 counts of communications fraud, one count of racketeering and two counts of money laundering.

***

• According to court documents, the Cassitys allegedly prepared their own appraisals using the name of a separate licensed appraiser and substituting photos of more lavish homes as part of those appraisals to inflate the value of the real estate described in those appraisals. They then allegedly used straw buyers to obtain loans far in excess of the true value of the properties. Equity was then allegedly skimmed from the properties in order to gain tax advantages and buy other properties. The alleged scheme may have netted several million dollars. The Attorney General's Office has asked a judge to freeze the assets of the defendants and is seeking criminal forfeiture of their business at 193 East Fort Union Boulevard in Midvale and their home in Salt Lake City. Prosecutors are also asking that bail be set at $500,000 for each defendant.(1)

For the Utah AG's press release, see Midvale Mortgage Company Owners Charged With Fraud.

For earlier post on this case, see Utah AG Raids Foreclosure Rescue Operator's Office, Home; Investigators Mum About What They're Looking For.

(1) "The ripple effect of mortgage fraud schemes across the country is far-reaching and significant," says Attorney General Mark L. Shurtleff. "The Utah Attorney General's Office places a high priority on uncovering and squelching predatory practices of unscrupulous mortgage brokers. Some of these so-called ‘mortgage assistance' programs are merely schemes to defraud people of their money and their homes."

Jointly Owned Marital Real Estate Facing Foreclosure - Did Both Spouses Sign The Paperwork?

In a recent column appearing in The Herald News (Fall River, Massachusetts), foreclosure defense and bankruptcy attorney Glenn Russell Jr. writes about one problem facing lenders in some foreclosure actions that has gone pretty much unnoticed in general media reports - What happens if a sloppy loan originator and/or title closer obtained only one spouse's signature on a promissory note and mortgage in connection with property owned by husband and wife jointly as tenants by the entirety?

• If your lender is seeking to foreclose on your home, and you live in a state like Massachusetts that recognizes a type of property ownership known as “Tenancy by the Entirety,” you have some protection.(1) Both spouses’ signatures are required to be on all of the loan and property documentation when you purchased your home.

***

• During the mortgage frenzy over the past 7 years, mortgage brokers could not keep up with the paperwork and became very sloppy, or worse. Many times, these people were in too much of a rush, and lacked the necessary knowledge about this issue, to even ask for both signatures.

For the entire column, see Tell bank where to stick its foreclosure note.

(1) According to Russell, tenancy by the entirety is recognized in 28 states, including Massachusetts. In most cases the foreclosing lender will not be able to foreclose and sell your property, but will be able to place a lien on the property equal to the spouse’s share who did sign the loan documents, as long as the couple remains married and alive. He goes on to point out, however, that this share is only a “contingent” interest, meaning that the lender would only take actual ownership of the property if the non-signing spouse pre-deceased the signing spouse. If the married couple divorce, the lender can proceed with the foreclosure process.

I would add to this point by observing that in the State of Florida, a mortgage on a primary residence (ie. homestead property) signed only by one spouse (irrespective of how title is held) is treated as null and void pursuant to the provisions of Article X Section 4 of the Florida Constitution (relating to the state homestead exemption from forced sale) and the state court interpretations thereof. In that case, the foreclosing lender will find itself having no recourse at all against the property and, accordingly, will be left holding the bag.

While I have yet to see specific recent cases recounted in general media reports on incidents where only one spouse signed the note and mortgage on property owned as tenants by the entirety that is facing foreclosure, anectdotes thereon are definitely out there. ThetaMissingDocsMtg

Recovering Damages From Those Engaged In The Unauthorized Practice Of Law

A recent story in The Florida Bar News may be of interest to those in Florida who have suffered monetary damages when doing business with individuals and companies whose activities constitute the unauthorized practice of law (which could include non-attorney loan modification firms engaged in providing forensic loan audits in search of violations of relevant lending and consumer protection laws):

• Florida residents have legal recourses when they have been damaged by those committing the unlicensed practice of law, according to The Florida Bar. The Bar has provided the above response to a request from the Supreme Court, which is considering an appeal from the Fourth District Court of Appeal in Goldberg v. Merrill Lynch Credit Corporation, 981 So. 2d 550 (Fla. 4th DCA 2008).

• The appeal is two consolidated class action cases where the plaintiffs sued alleging that corporations engaged in the unlicensed practice of law when they prepared closing documents and other paperwork in connection with mortgages. The Fourth DCA dismissed the case, saying the plaintiffs could not seek civil remedies absent the finding by the Supreme Court of unlicensed practice of law.

• The case was appealed to the high court, which in turn asked the Bar’s unlicensed practice of law office for an amicus brief “focusing on the existence and adequacy of remedies that may be available to those claiming to have been harmed by persons engaging in the unauthorized practice of law.”

For more, see Damaged by UPL? The Bar argues the public has a right to redress.

Go here for The Florida Bar's amicus brief.

Go here for links to all the briefs filed in this case (scroll down to case #SC08-1360 Goldberg, et al. v. Merrill Lynch Credit Corporation, et al.).

Go here for information on Filing an Unlicensed Practice of Law Complaint with The Florida Bar. UnauthPractOfLawTheta

Florida Bar Issues Ethics Alert For Lawyers Working With Loan Modification Firms

The Florida Bar has recently issued an "Ethics Alert" in which it provides Florida attorneys some guidance as to what activities they should steer clear from when forging working relationships with non-attorney loan modification firms.

• [T]his alert does not address every potential problem or concern. Lawyers should not assume that conduct is permissible merely because it is not listed [herein].(1)

For more, see Ethics Alert: Lawyers should be very wary of loan modifiers.

For more from The Florida Bar:

• Florida Bar Ethics Opinions,
• Rules Regulating The Florida Bar: Chapter 4. Rules of Professional Conduct (for pdf version, try here - 139 pages),
• Go here for the complete set of Florida Bar Rules - Chapters 1 through 20.

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

(1) The list of prohibited activities contained in the alert:

• Cannot pay a referral fee or give anything of value to a nonlawyer for referring distressed homeowners to the lawyer. [Rule 4-7.2(c)(14)]
• Cannot be paid by a nonlawyer to provide services to distressed homeowners. [Rule 4-5.4(a)]
• Cannot directly or indirectly divide fees with a nonlawyer. [Rule 4-5.5(a)]
• Cannot assist in the unauthorized practice of law by: (a) providing legal services for a distressed homeowner while employed as in-house counsel for a nonlawyer company; (b) forming a company with a nonlawyer to perform foreclosure related services if any of the services are the practice of law; or (c) assisting a nonlawyer individual or company in providing services that the individual or company is not authorized to provide or are otherwise illegal.[Rule 4-5.5(a)]
• Cannot assist a nonlawyer in violating the provisions of the Foreclosure Rescue Act, Section 501.1377, Florida Statutes. [Rule 4-8.4(d)]
• Cannot directly contact distressed homeowners to offer representation (including by telephone or facsimile) and cannot allow someone else to directly contact distressed homeowners on the lawyer’s behalf. [Rules 4-7.4(a) and 4-8.4(a)]
• Cannot accept referrals from non-lawyers acting in the guise of a “lawyer referral service” (legitimate lawyer referral services must comply with a rule which requires all advertisements and contact with prospective clients to be in compliance with the attorney advertising rules, in addition to other requirements) [Rule 4-7.10]
• Must have a direct relationship with distressed homeowners who hire the lawyer for representation. [Rules 4-1.1, 4-1.2 and 4-1.4]
• Cannot allow a nonlawyer to choose a lawyer for a distressed homeowner or direct a lawyer’s representation of a distressed homeowner. [Rules 4-1.1, 4-1.2, 4-1.4, and 4-5.5(a)]

The above cited rules can be found in Chapter 4 of the Rules Regulating The Florida Bar: Rules of Professional Conduct (for pdf version, try here - 139 pages).

According to the Ethics Alert, several ethics opinions, Opinions 92-3 and 95-1 in particular, discuss similar proposals and the ethics problems that arise when lawyers enter business arrangements with nonattorneys. UnauthPractOfLawTheta

Police Detective: "Rent Skimming, It Is Epidemic In The City Of L.A. Right Now"

PBS' NewsHour with Jim Lehrer reports:

• With the national foreclosure rate still climbing, some chose to live in foreclosed homes while others have been the victims of "rent skimmers," people who pretend to own a foreclosed property and scam tenants out of thousands of dollars in security deposits and fees.

For more, including link to the video broadcast of the story, see Glut of Foreclosed Homes Encourages Scams, Desperation.

Go here, go here, and go here for posts on phony landlord rent scams. PhonyLandlordScamZeta