Saturday, July 25, 2009

Foreclosing Lenders To Face Lawsuits For Failing To Deliver On Promises Of Loan Modification Help, Says Ohio AG

In Columbus, Ohio, The Columbus Dispatch reports:

  • Mortgage lenders who promise to work with clients facing foreclosure and fail to follow up could find themselves in court. Ohio Attorney General Richard Cordray said [Friday] that he will soon sue mortgage lenders who violate consumer-protection laws. "Many lenders are pledging to work with customers and failing to do so," Cordray said. "They're not returning calls, paperwork gets lost, payments misappropriated." He would not identify targets but said his office is looking at the 10 or 12 largest Ohio lenders.

  • "The goal of the lawsuits is compliance with their promises," Cordray said. "We want there to be accessible personnel, a reasonable process, clear steps. What we want is a change in behavior." The news came as he and other state officials, judges and representatives of nonprofit groups met in Columbus as part of a Save Our Homes Summit designed to focus on addressing the foreclosure crisis in the state.

For more, see Cordray warns mortgage lenders (Many customers not getting aid as promised, AG says).

Minnesota Real Estate Agent Gets Three Years In Alleged Foreclosure Redemption, Equity-Snatching Scam

In Hennepin County, Minnesota, the Minneapolis Star Tribune reports:

  • Michael R. Wayman Jr. was a top-tier real estate agent for ReMax before he discovered the lucrative business of redeeming properties after foreclosure to snatch their equity. [...] But somewhere Wayman's quest for profits veered into illegality, and the 35-year-old Ramsey man was sentenced Friday to just over three years in prison by Hennepin County District Judge Warren Sagstuen on 19 counts of racketeering, perjury and filing false documents. Wayman and his company also were fined $55,000 and face restitution payments to be determined later.

  • Prosecutor Tom Fabel sought a sentence of more than seven years, saying Wayman's use of false documents to redeem properties out of foreclosure constituted "massive, systemic abuse" that undermined the integrity of the public land records system.(1) But Sagstuen said Wayman's violations weren't as serious as some racketeering conduct.

For more, see Real estate agent gets prison for racketeering (The Ramsey man was convicted in May of illegalities that netted him thousands in a foreclosure redemption scheme).

(1) According to the story, under Minnesota state law, when a foreclosure occurs, a homeowner typically has six months following the sheriff's sale to redeem the property by paying off the debt owed to the foreclosing creditor. Some do so by selling the house or refinancing, but many owners lose their homes. A house may have several mortgages or other liens filed against it. The priority of those claims is determined by when they were filed with the county. If the homeowner doesn't redeem the property, a junior lienholder must do so to ensure that its debt is paid. That is done by paying off the loan, interest and certain expenses of more senior creditors. The reward is that by gaining the house, the junior creditor not only gets the money it is owed but also keeps any remaining equity in the property. People who specialize in buying up junior liens or creating new ones with the intent of gaining the equity are termed "bottom feeders" by prosecutor Tom Fabel, but what they do is legal under state law that is intended to protect junior lienholders. They can also claim certain expenses related to the property. Wayman ran afoul of the law when he was found to have falsely claimed to have paid taxes on a house he wanted to redeem or claimed expenses that were inflated or were not allowed.

Maryland Home Builder Cops Plea To "Playing Fast & Loose" With Buyers' Escrow Deposits

From the Office of the Maryland Attorney General:

  • Attorney General Douglas F. Gansler announced [...] that Walter Osborne Ely, Jr., 46, and his sister and business partner Kimberly Zahrey, 44, plead guilty before Baltimore County Circuit Court Judge Vicki Ballou-Watts to 6 counts of failure to hold new home sums in escrow. The offense is a felony punishable by 15 years imprisonment and/or a $10,000 fine.

For the Maryland AG press release, see Owners of Baltimore County Home Construction Company Plead Guilty to Failing to Properly Handle New Home Deposits.

(1) According to the press release, beginning in 2002, as owners of JAE Developers based in Owings Mills, Ely and Zahrey advertised new home construction at three different sites in Baltimore County. They met with prospective buyers, entered into contracts to sell lots and build homes, and took deposits ranging from $1,000 to $5,000 with the exception of a few home buyers who deposited between $8,000 and $50,000. After each deposit was received, it was deposited in either the JAE payroll account or business account, and spent within a week to cover both personal expenses and business expenses that were not associated with the individual client’s home. Some deposits were simply withdrawn as cash. During the time period covered by the indictment, Ely and Zahrey accepted deposits totaling $226,768 from potential home buyers and did not place them into segregated escrow accounts. StiffingContractorsTheta

Friday, July 24, 2009

SWAT Team Called In After Washington Man Allegedly Hijacks Home In Foreclosure While Owners Are Away

In Shoreline, Washington, KOMO-TV Channel 4 reports:

  • Sharon and Doug Larson were on their way back from the Oregon coast last week when neighbors told them a stranger had hijacked their house. Neighbors called 911 when James Vanvolkenburg moved into the Larson's home Friday night, claiming the house belonged to him. Police officers who arrived said Vanvolkenburg's name was on the tax records, so they let him stay. "He's there with this woman and their dog and my belongings, sleeping in my bed," Sharon said. With help from her sister, Sharon went to the courthouse Monday morning and discovered that Vanvolkenburg may have tried to take advantage a foreclosure proceeding against her house. Vanvolkenburg allegedly submitted his name six months ago as the taxpayer of record. The county treasurer's office told her that all Vanvolkenburg did was fill out a form asking for tax statements on the house.


  • A SWAT team searched the home Monday evening but Vanvolkenburg was not inside. He left behind his dog and two trailers still parked on the property. [...] The county said they receive about 21,000 taxpayer change of address requests each year and they've never had anything like this happen before.

For the story, see SWAT team called to save hijacked house.

Rent Skimming Landlord Facing Foreclosure Arrested For Stealing Electricity; Utility Shutoff Leaves Two Dozen Tenants Temporarily Homeless

In Pinellas County, Florida, Newschannel 8 reports:

  • A Pinellas County landlord was arrested [last week], accused of stealing electricity from apartments he owns in Clearwater. Lawrence Ayers, 42, of [...] Safety Harbor, was booked into the Pinellas County Jail on a grand theft charge. Ayers dropped out of sight after Progress Energy cut off power to eight residential rental units he owns on Westminister Avenue June 25th. [...] A week before, code inspectors had condemned apartments Ayers owns on Meridian Avenue in Oldsmar because of similar electrical problems. That's where a Pinellas County Sheriff's deputy caught up with him [...].(1)

For more, see Landlord arrested, accused of stealing electricity.

Go here for earlier posts on this story.

(1) Reportedly, cutting the power left as many as two dozen tenants from the Oldsmar and Clearwater rentals temporarily homeless. Most of the people there also had no water because Ayers had rigged a shallow well water pump as their only supply of water for drinking and bathing, according to authorities. Inspectors said the water was not fit for drinking. It had a bright orange color, and tenants said it smelled horribly. Code inspectors cited Ayers for numerous violations. He faces fines of as much as $5,000 a day and has a hearing scheduled Monday on the code violations. Ayers has 11 pending foreclosure actions against his rental properties and his home in Safety Harbor, according to code enforcement officials. RentSigmaSkimming

Failure To Inspect For Meth Contamination Could Create Future Financial, Health Havoc For Homebuyers

The New York Times reports:

  • The spacious home where the newly wed Rhonda and Jason Holt began their family in 2005 was plagued by mysterious illnesses. The Holts’ three babies were ghostlike and listless, with breathing problems that called for respirators, repeated trips to the emergency room and, for the middle child, Anna, the heaviest dose of steroids a toddler can take. Ms. Holt, a nurse, developed migraines. She and her husband, a factory worker, had kidney ailments.(1)

  • It was not until February, more than five years after they moved in, that the couple discovered the root of their troubles: their house, across the road from a cornfield in this town some 70 miles south of Nashville, was contaminated with high levels of methamphetamine left by the previous occupant, who had been dragged from the attic by the police. The Holts’ next realization was almost as devastating: it was up to them to spend the $30,000 or more that cleanup would require.

  • With meth lab seizures on the rise nationally for the first time since 2003, similar cases are playing out in several states, drawing attention to the problem of meth contamination, which can permeate drywall, carpets, insulation and air ducts, causing respiratory ailments and other health problems.


  • Meth contamination can bring financial ruin to families like that of Francisca Rodriguez. The family dog began having seizures nine days after the Rodriguezes moved into their home in Grapevine, Tex., near Dallas, and their 6-year-old son developed a breathing problem similar to asthma, said Ms. Rodriguez, 35, a stay-at-home mother of three. After learning from neighbors that the three-bedroom ranch-style home had been a known “drug house,” the family had it tested. The air ducts had meth levels more than 100 times higher than the most commonly cited limit beyond which cleanup is typically required. [...] They moved out, throwing away most of their possessions because they could not be cleaned, and are letting the house go into foreclosure. “It makes you crazy,” Ms. Rodriguez said. “Our credit is ruined, we won’t be able to buy another house, somebody exposed my kids to meth, and my dog died.”

For the story, see Illnesses Afflict Homes With a Criminal Past.

Go here, Go here and go here for other posts on home-based methamphetamine labs.

(1) Some of the health problems associated with living in a meth-contaminated home appear to be similar to those currently being attributed to the "Chinese drywall" problem being experienced in some parts of the country. meth lab yak

Homeowners Running "Everything Must Go" Foreclosure Stripping Sales May Face Criminal Liability In Colorado

In Aurora, Colorado, KUSA-TV Channel 9 reports:

  • The "everything must go" sales are back and experts say they cost other homeowners money. The sales involve homeowners selling everything inside just days before it goes into foreclosure. 9Wants to Know found a woman selling fixtures in a condominium [...] Thursday morning. The Internet classified site Craigslist listed a sale at 10091 East Carolina Drive in Aurora.

  • Experts say these sales cost banks money because they have to pay to install new fixtures in the homes before they resell them. Those repair costs are passed along to other borrowers. At Thursday's sale, our undercover cameras found plenty to choose from. Colorful price tags offered the refrigerator, the kitchen cabinets, the overhead microwave and the range. Items such as cabinets are traditionally considered part of a home.


  • While a house does belong to a homeowner until it goes on the foreclosure auction block, there is a state law that says it's illegal to defraud a creditor. "If you sell fixtures out of your foreclosed upon house, you can be sued. You can be charged with a felony or multiple felonies. It's not a good idea," [9NEWS legal analyst Scott] Robinson said. A class three felony carries a maximum of 12 years in prison. A person who strips a home ahead of foreclosure could also be charged with criminal mischief and theft, according to Denver District Attorney Spokeswoman Lynn Kimbrough. She says prosecutors will look at any case brought to them by police. People buying the merchandise will likely not be charged as long as they did not know they were buying items considered stolen. However, even if they paid for the items, buyers could be required to return them.

For more, see House stripping continues as foreclosures loom.

For another recent post on this issue, see Arizona Crackdown On Foreclosure Stripping Continues As Homeowner Indicted On Charges Of Defrauding A Secure Creditor, Criminal Damage.

Go here for other posts on pre-foreclosure homeowner fixture stripping. foreclosure fixture stripping apple

Thursday, July 23, 2009

California Man Faces 147 Felony Counts In Alleged Real Estate Investment/Ponzi Scheme; Parents, Friends Head List Of Victims Claiming Losses Of $5M+

In Santa Barbara, California, The Tribune reports:

  • Hard money lender Mike L. Wilson, a Santa Maria mortgage business owner with many San Luis Obispo County clients and real estate investments, was arrested at his Santa Maria home [...] on 147 felony counts. Wilson, 55, was in Santa Barbara County Jail without bail on charges including grant theft, forgery, elder abuse by embezzlement, and fraud in selling securities.(1)


  • Wilson’s arrest follows at least seven lawsuits filed against the hard money lender in Santa Barbara Superior Court since the end of March. Those suits mirror the criminal complaint, alleging losses of more than $5 million that were supposed to go toward commercial and residential investments in Santa Barbara, San Luis Obispo and Monterey Counties.

  • Most of those allegations include an alleged Ponzi scheme, in which Wilson is accused of taking money from investors, promising them that it would be invested in secured real estate, but instead using the money to pay off other investors as a way to keep the scheme going. Wilson also allegedly forged real estate documents, failed to record assignments of deeds of trusts, promised investors they were more secured with real estate deeds than they actually were, failed to tell investors their loans were in default or had been paid off, and preyed on seniors for financial gain, according to the suits.

For more, see Santa Maria hard money lender Mike Wilson arrested on fraud charges (He's set to be arraigned on 147 felony counts of embezzlement, elder abuse and other offenses).

Go here for the Santa Barbara DA press release.

(1) Among the 45 or so alleged victims named in the criminal complaint are Wilson’s parents, and friends who say they had known and trusted Wilson for many years.

Now-Disbarred Georgia Attorney Cops Plea To Phony Real Estate Investment Scam Ponzi Scheme; Accused Of Stealing $1.9M From Clients, Friends

In Atlanta, Georgia, the Fulton County Daily Report reports:

  • For nearly four years, McDonough, Ga., attorney Steven H. Ballard capitalized on his credibility as a real estate and business law attorney to bilk friends and clients of more than $2 million in what federal prosecutors say was a Ponzi scheme(1) in which Ballard siphoned more than $200,000 for his personal use. [... Last week], Ballard pleaded guilty to one count of wire fraud in a criminal information (a federal charge filed either prior to or in lieu of a grand jury indictment) that accused him of stealing $1,910,827 from 24 clients and investors in Georgia, Florida and Tennessee between September 2002 and May 2006.


  • [Federal prosecutor Gale] McKenzie said Ballard's scheme relied primarily on his ability to lure friends and clients into what he billed as real estate investment opportunities. Ballard collected thousands of dollars from investors that he claimed to have used to buy properties and then resell at a significant profit. [...] But Ballard rarely, if ever, made the promised real estate purchases, McKenzie said. Instead, he forged sales contracts, deeds, settlement statements and sellers' signatures to trick his clients into believing the promised real estate transactions had taken place. He then appropriated those funds for his personal benefit or to repay clients and investors he had already bilked and who were threatening legal action, McKenzie said.

  • [Ballard's lawyer, T. Michael] Martin said that no banks were defrauded by Ballard's phony transactions because he secured money primarily from longtime clients and friends, many of whom dipped into their retirement funds with the promise of quick, lucrative returns.(2)

For the story, see Ga. Lawyer Pleads Guilty to Ponzi Scheme Worth $2 Million (Steven Ballard's victims were friends and clients).

For the U.S. Attorney (Atlanta) press release, see Former Georgia Attorney Pleads Guilty To Multi-Million Dollar Real Estate Ponzi Scheme (Over a Dozen Victims Defrauded in Georgia, Florida & Tennessee).

(1) Named for famed swindler Charles Ponzi, a Ponzi scheme collects money from legitimate investors but pays returns on those investments only by luring in additional investors and using their contributions to pay the scheme's original participants. A Ponzi scheme eventually collapses because it requires more and more investors and an increasing flow of cash to pay returns required to sustain the fraud.

(2) For those who have been screwed out of money or property through the dishonest conduct of a Georgia attorney in the course of providing legal representation, and seek some financial reimbursement for the screwing over, go to the State Bar of Georgia Clients' Security Fund for more information. For other states and Canada, see:

Dad's Death Spurs Bitter Sibling Battle Involving Allegations Of Forged Mortgage, Title Transfers Of 80-Year Old Mom's Real Estate

In Perth, Western Australia, The West Australian reports:

  • Perth property developer Joe Scaffidi, [...] has been accused in the Supreme Court of forging his mother’s signature to secure loans and the sale of a commercial property worth a total of $3 million. An affidavit, tendered into the court as part of a bitter family fight between Mr Scaffidi and his brother Gino, also alleges $110,000 from the disputed transactions was deposited into a company owned jointly by Joe and Lisa Scaffidi.


  • The fraud claims relate to four mortgage and land transfer documents signed between December 2005 and April 2006. The paperwork contains signatures of Joe Scaffidi and what purports to be the signature of his 80-year-old mother Maria.


  • Being fought on several fronts in the courts, the Scaffidi family feud has been escalating since the death of the brothers’ father Antonio in 2004. [...] One of the disputed transactions, a $480,000 loan taken against a [...] rental house owned by [the mother], has placed the property in jeopardy because the loan defaulted. Another transaction before the court was the $700,000 sale of an East Perth office.

For more, see Scaffidi family feud sparks forgery claim. DeedContraTheft

Ex-Aussie Footballer Accused Of Using Forged Deed To Score $320K In Loan Funds Secured By Property Owned By Another

In Manly, New South Wales, The Daily Telegraph reports:

  • FORMER Sydney Swans player Daryn Cresswell allegedly obtained $320,000 in fraudulent loan funds using a forged title deed, a court heard [last week]. The alleged scam went unnoticed for years until the rightful owner of the Coolum Beach property on the title deed applied for an investment loan and was told the astonishing news his home was already mortgaged. Cresswell, 38, is expected to be extradited to Queensland today after he was refused bail in Manly Local Court [last week]. He is charged with two counts of creating false loan documents, two counts of using those documents to obtain funds and a further two counts of obtaining funds by deception.


  • Numerous loan repayments were made from [a Cresswell-owned business] to the [...] home loan account during 2006, but the loan was referred to the banks collections department early in 2007. [...] Police allege funds were also transferred to the home loan account by [others] in January and February 2007. The alleged scam came to the attention of police in April 2007 when the rightful owner of the property applied for an investment loan and was told his home was already mortgaged.

For more, see Court: Ex-Swan frauded home loans. DeedContraTheft

Wednesday, July 22, 2009

Massachusetts Closing Attorney Cops Plea To Illegally Pocketing $1M+ In Real Estate Escrow Funds Earmarked For Satisfying Existing Mortgage Loans

From the Office of the U.S. Attorney (Massachusetts):

  • [R]oxbury attorney [ANDREA GOODE-JAMES, age 44,] was convicted [...] in federal court of mortgage fraud for pocketing more than $1 million in proceeds of loan closing transactions.(1) At [the] plea hearing, the prosecutor told the Court that had the case proceeded to trial the Government’s evidence would have proven that GOODE-JAMES performed closings on three different properties between 2005 and 2007, and pocketed more than $1 million in lender proceeds, rather than using those funds to pay off pre-existing mortgages as directed by the lenders. To conceal her fraud, GOODE-JAMES made some monthly payments on the pre-existing mortgage loans. She also issued title insurance commitments to the new lenders, which bound the title insurance company for title defects and misled lenders to believe that she had in fact cleared title by paying off prior loans and obtaining discharges of those mortgages.(2)

For the U.S. Attorney press release, see Roxbury Lawyer Pleads Guilty To Mortgage Fraud.

(1) Goode-James pled guilty to one count of mail fraud and three counts of wire fraud, all arising out of her scheme to defraud various mortgage lenders, a title insurance company and innocent homeowners.

(2) For those who have been screwed out of money or property through the dishonest conduct of a Massachusetts attorney in the course of providing legal representation or acting as a fiduciary, and seek some financial reimbursement for the screwing over, go to the Massachusetts Clients' Security Board Of The Supreme Judicial Court for more information. For other states and Canada, see:

Non-Profit Fair Housing Group Files Suit Against Publisher Of Allegedly Discriminatory Classified Ads Against Families With Children

According to a press release from the National Fair Housing Alliance:

  • It is illegal to discriminate against families with children in housing. In their lawsuit, NFHA and FHCCC allege that American Classifieds published discriminatory housing advertisements in violation of the federal Fair Housing Act and California’s Fair Housing and Employment Act. NFHA filed the lawsuit after a year-long investigation that uncovered over 60 discriminatory advertisements in 17 of the states where American Classifieds does business.


  • Since 1996, American Classifieds has resolved similar discrimination complaints in Boise, Idaho, Louisville, Kentucky, and Merritt Island, Florida for publishing illegal housing advertisements. Yet that has not stopped the company from continuing to print them.

For the entire press release, see American Classifieds Sued for Discriminating Against Families with Children (National Fair Housing Alliance Investigation Uncovers Advertisements Discriminating Against Families with Children, Other Protected Groups in 17 States).

For more on this case from the National Fair Housing Alliance:

Tenants Pocket Thousands In $ettlements In Fair Housing Discrimination Lawsuits Brought By Massachusetts AG

From the Office of the Massachusetts Attorney General:

  • AG Obtains Court Order Requiring Malden Landlords to De-Lead Rental Apartment in Settlement of Housing Discrimination Case: Attorney General Martha Coakley obtained a consent judgment against Wai On Chan and Qi Ling Huang-Chan, the owners of a three-bedroom rental property in Malden, resolving claims that they discriminated against a prospective tenant by allegedly refusing to rent to a prospective tenant with a child under the age of six years old because it would have required the landlords to abate any lead paint in the rental unit. [...] According to the complaint, the Chans refused to show their rental unit once they learned that the prospective tenants had an infant daughter. Under Massachusetts law, it is illegal to refuse to rent to a prospective tenant with young children due to the presence of lead paint. In addition to deleading the rental unit, the settlement requires the Chans to pay $1,000 to the victims.

  • AG Reaches Settlement Against Realty Company and Landlord for Allegedly Discriminating Against Two Women and 2-Year Old: Attorney General Martha Coakley’s Office obtained a consent judgment against Dorchester-based At Home Real Estate, Inc. (“At Home”), Edward Denney and Watershed Properties, Inc. (“Watershed”), resolving claims that the real estate company, landlord and property owner discriminated against two African-American women [with a two-year old child] by refusing to rent them an apartment because the defendants wanted to avoid their obligation to de-lead the apartment under Massachusetts lead paint laws. The consent judgment, entered yesterday by Judge Charles T. Spurlock in Suffolk Superior Court, requires the defendants to attend fair housing training, pay $7,500 to the victims, and for the property owner to de-lead the property.

  • AG Reaches $10,000 Settlement with Two Brookline Real Estate Brokers for Discriminating Against a Family with Young Children: Attorney General Martha Coakley’s Office obtained a consent judgment against Geoffrey Wells, doing business as (d/b/a) Harvard Real Estate of Brookline, and one of his employees, David Ravalli, accused of violating state antidiscrimination and lead paint laws by refusing to show a property to a family because they had young children. The judgment, [...] requires the brokers to pay the family $10,000 and prohibits them from discriminating against any person who seeks or applies for housing because they have children or otherwise discriminating against any person in violation of state and federal fair housing laws.

  • AG Sues Brighton Realty Company for Housing Discrimination: Attorney General Martha Coakley’s Office has filed a housing discrimination complaint against City Realty Group, Inc. (“City Realty”), a Brighton-based real estate company, and one of its real estate agents for refusing to rent an apartment to a tester from the Boston Fair Housing Commission who represented that she was looking for an apartment for herself and her three-year-old child. The complaint, [...] alleges that City Realty violated state antidiscrimination and consumer protection laws by refusing to rent to a prospective tenant with a child because it would have created an obligation to abate lead paint hazards in the rental unit. [...] The Attorney General’s Office is seeking an order prohibiting City Realty from engaging in housing discrimination, compensatory and punitive damages on behalf of the victim, and attorneys’ fees and costs.

  • AG Sues East Boston Landlord for Discriminating Against Family: Attorney General Martha Coakley’s Office has filed a housing discrimination complaint against Russell Tremaine, the owner of a three-unit building in East Boston, for refusing to rent an apartment to a couple and their infant daughter. The complaint, [...] alleges that Tremaine violated state anti-discrimination and consumer protection laws by refusing to rent to a family with a child because he wanted to avoid the obligation to abate lead hazards in the rental unit. [...] Under Massachusetts law, it is illegal to refuse to rent to a prospective tenant with young children due to the presence of lead paint in the rental unit. It is also illegal to discriminate against renters because of their familial status or because they have children. The Attorney General’s Office is seeking an order prohibiting Tremaine from engaging in housing discrimination, compensatory and punitive damages on behalf of the victims, civil penalties, and attorney’s fees and costs.

  • AG Reaches Settlement with Real Estate Company to Resolve Discrimination Claim: Attorney General Martha Coakley’s Office has reached a settlement with a Brockton real estate company in response to a tenant’s claim of discrimination and retaliation. The Assurance of Discontinuance filed in Plymouth Superior Court against Churchill Forge Properties, Inc., and its employee Joyce Levine, alleges that the real estate company and the employee violated state anti-discrimination laws by retaliating against an African-American tenant when he contacted the Massachusetts Commission Against Discrimination (MCAD). Churchill Forge, which is headquartered in Newton, Massachusetts, manages several rental properties across the Commonwealth. [...] “It is against the law for anyone to retaliate against a person who exercises his or her right to make an allegation of discrimination,” said Attorney General Martha Coakley. “If people do not feel free to speak out when they believe they have experienced discrimination, then the Commonwealth cannot effectively fight against discrimination.” [...] The Assurance of Discontinuance requires that Churchill Forge and its employees agree to abide by federal and state fair housing and anti-discrimination laws; [...] notify the Civil Rights Division of any discrimination complaints in the next five years; and pay $11,000 to the tenant. These obligations apply to all of the properties that Churchill Forge manages and operates across the Commonwealth.

  • AG Obtains Consent Judgment Against Boston Realty Company Resolving Allegations of Discrimination: Attorney General Martha Coakley’s Office has obtained a consent judgment against a Boston realty company and one of its owners, resolving allegations that they violated Massachusetts antidiscrimination laws by asking a prospective tenant about her national origin. [...] Dakota Enterprises and Lehrer will pay $8,000 to the prospective tenant and her husband, and $500 to the Commonwealth’s Local Consumer Aid Fund.

  • AG Obtains Consent Judgment Against Cambridge Landlord for Discriminating Against Section 8 Recipient: Attorney General Martha Coakley’s Office obtained a consent judgment against Brian Keefe and JBK Associates, LLC, the owners of a two-unit apartment building in Cambridge who were accused of violating state antidiscrimination laws by refusing to rent an apartment to an individual who participates in the Section 8 program. The judgment, [...] requires Keefe and JBK Associates to pay the victim $3,000 and prohibits them from discriminating against any person who seeks or applies for housing because they have a Section 8 voucher or otherwise discriminate against any person in violation of state and federal fair housing laws.

  • Attorney General Martha Coakley Obtains Jury Verdict in Housing Discrimination Case: A Suffolk Superior Court Jury returned a verdict [...] against Hakim DeFreitas of Dorchester ordering him to pay $8,200 in restitution for discriminating against a prospective tenant who would have used a Section 8 housing voucher to pay her rent. “The Section 8 program provides invaluable assistance to thousands of low income tenants in Massachusetts. This assistance is of particular importance during these economic times as we face critical housing needs and the strain on families is particularly great,” said Attorney General Martha Coakley. “Landlords in Massachusetts should understand that discrimination against prospective tenants that receive public assistance is against the law and will not be tolerated.” The complaint, [...] alleged that DeFreitas screened out applicants with Section 8 vouchers when he tried to find a tenant to rent a home he owned in Dorchester. Under Massachusetts law, it is illegal to discriminate against housing applicants because they receive public assistance, such as assistance through the Section 8 program. It also is illegal to print or publish a housing advertisement that says that Section 8 will not be accepted, or otherwise to make a discriminatory statement about Section 8 in connection with the rental of a home.

  • AG Obtains Consent Judgment Against Property Management Company and Condominium Association in Housing Discrimination Case: Attorney General Martha Coakley’s Office has obtained a consent judgment against Property Management of Andover, Inc., and Royal Oaks Condominium Association, resolving claims that the companies discriminated against a disabled condominium owner by refusing to provide him with a reasonable accommodation. [...] According to the complaint, [...] the condominium owner was diagnosed with melanoma, a type of skin cancer, in 2002 and received treatment in 2002-2006 for basal cell carcinomas. He continued to receive treatment for his condition and was advised by his doctor to utilize sun-protective devices, including an awning for his deck, which he then paid for and installed. The complaint alleged that after the owner submitted medical documentation to the defendants that demonstrated his need for sun protection, the defendants threatened to remove the awning and assess fees against him. The complaint alleged that by refusing to permit the owner to install an awning to accommodate his disability, the defendants violated state antidiscrimination law. In addition to barring the company from future acts of discrimination, the consent judgment requires Property Management of Andover, Inc., to [...] make a payment of $2000 to the condominium owner; [...] and report any discrimination complaint that it receives to the Attorney General’s Office for the next four years. In addition, the consent judgment permits the condominium owner to maintain an awning while he resides at the unit.

  • AG Obtains Judgment Against Brockton Property Owner and Landlord in Housing Discrimination Case: Attorney General Martha Coakley’s Office has obtained a consent judgment against a Brockton property owner and landlord, accused of unlawfully discriminating against a former tenant by refusing to participate in the Section 8 housing subsidy program. [...] The consent judgment resolves a complaint [...] alleging that the defendants discriminated against a tenant by refusing to accept her Section 8 housing subsidy and by refusing to make certain repairs to the tenant’s apartment, as required by the Section 8 program. Under Massachusetts law, it is illegal to discriminate against housing applicants because they receive public assistance.

Tuesday, July 21, 2009

Shaky Loan Modifications That Turn Into Questionable Short Sales?

A new form of foreclosure rescue involving purported loan modification services coupled with questionable short sale arrangements has arrived on the scene and possibly gaining in popularity, according to DESPERATE HOMEOWNERS: Loan Mod Scammers Step In When Loan Servicers Refuse To Provide Help, a recently issued report by the National Consumer Law Center:

  • Information is beginning to surface about a new variety of foreclosure rescue involving the sale of a house that is upside down (that is, more is owed on the house than is worth). Indeed, some loan modification websites tout their expertise in short sales.


  • In one version of a short sale scam, the realtor and the buyer collude to conceal the full price of the sale from the lender so that they can pocket the difference, often by using option contracts and back-to-back closings.(1) This version is aimed primarily at defrauding the lender, though the homeowner is also hurt by an artificially low sales price, either by being liable on a deficiency or by paying taxes on a higher forgiven balance.(2)

  • In another version of a short sale scam, the buyer takes over the mortgage without satisfying the due-on-sale clause and the sale is concealed from the lender.(3) The owner of a We Buy Houses franchise explained at trial that these deals work when the homeowner is only 10% to 15% upside down, because the home is sold to a buyer who cannot qualify for a regular loan and so is willing to pay a premium above fair market value to avoid a credit check. Depending on how the transaction works, the homeowner may be out cash, lose the home, and still end up with a foreclosure on the credit report.


  • These transactions may begin as traditional loan modification contracts, in which the homeowner pays a fee in the hopes of saving the home. The rescuer may then pressure the homeowner into agreeing to the sale—and into paying a sales commission to the rescuer. Thus, the homeowner has to pay two fees, loses the home, may still have her credit blemished by a foreclosure if the new buyer defaults, and may be exposed to liability for violating the contract.

For more, see What Else Are They Selling? Loan Mods That Turn Into Questionable Short Sales? (begins at page 17 of the report).

See also ATIF Refuses To Issue Title Insurance On Controversial Short Sale Deals Involving Simultaneous Investor "Flips" - involving the recent decision by title insurance underwriter Attorneys' Title Insurance Fund to refuse to issue title insurance policies on deals made using the controversial method for closing flips of short sales (possibly recognizing the potentially fraudulent nature of these transactions).

(1) Also known as "flipping."

(2) The NCLC report cites three media reports indicating the existence of this scam. See Nick & Cindy Davis, Sellers Beware of Short Sale Scams (Apr. 21, 2009); Bill Gassett, Short Sale Scammers We Buy Houses (Aug. 14 2008); New "short sale" scam taking root?, St. Petersburg Times (April 22, 2008).

(3) The NCLC report cites an article appearing on several real estate investing websites which explains how the due on sale clause is avoided. "The game for us is how to transfer ownership to the property without getting caught by the lender." Attorney William Bronchick, There's No "Due on Sale" Jail (an article which pre-dates the foreclosure crisis and the loan modification explosion).

Florida AG Tags Another Outfit With Lawsuit Alleging The Targeting Of Homeowners In Foreclosure With Illegal Loan Modifications

The Office of the Florida Attorney General (which apparently is not a part of the recently-announced, joint Federal/State "Operation Loan Lies" loan modification scam eradication effort) announced last week:

  • Attorney General Bill McCollum [Friday] announced his office has filed a lawsuit against a Central Florida company that allegedly charges homeowners facing foreclosure up-front fees for loan modification services.(1) According to the lawsuit filed today in Orange County, Victor Lopez & Associates and its owners are in violation of Florida’s Foreclosure Rescue Fraud Prevention Act. The company’s office is located in Orlando.

For the Florida AG press release, see Central Florida Loan Modification Company Targeting Hispanics Sued for Mortgage Fraud.

For the lawsuit, see State of Florida v. Victor Lopez & Associates, et al.

Go here to file a complaint against this outfit with the Florida Attorney General's office.(2)

Go here for a list loan modification firms being sued by the Florida AG's office and instructions on filing complaints against them.

(1) An investigation conducted by members of the Attorney General’s Economic Crimes Division, working as part of the Attorney General’s Mortgage Fraud Task Force, indicated that Victor Lopez & Associates was charging up-front fees as high as $2,295 to homeowners seeking loan modification services. Additionally, consumer complaints allege that the company has not performed the promised services and that consumers are unable to contact the company or get refunds.According to the lawsuit, Victor Lopez & Associates targeted the Hispanic community by advertising on Spanish radio and television and conducting the majority of sales transactions in Spanish, but only provided consumers with contracts in English.

(2) The Florida AG's Office is currently suing a number of other outfits, alleging illegal loan modification activity. Click on a company to see a brief description of their questionable business practices, a link to the lawsuit against the firm, and a link to an affidavit and instructions for consumers to fill-out if they have been a victim.

"Now It's The Lenders Who Are Doing The Walking" - Milwaukee Feels The Sting Of Homes In Foreclosure Being Left In Legal Limbo

In Milwaukee, Wisconsin, the Milwaukee Journal Sentinel reports:

  • For years, lenders complained about debtors who left the keys on the kitchen table and skipped town, leaving it to the bank to file for foreclosure and eventually take title by buying it at a sheriff's sale. The latest twist: Now it's the lenders who are doing the walking, often without telling the borrowers, who may believe erroneously they have already lost title.(1)

  • "This is just the meanest and nastiest thing (lenders) could do," said Catherine Doyle, chief staff attorney at the Milwaukee Legal Aid Society. "Even more profound is the terrible damage to the community. All of us are going to have to bail them out." City officials, lawyers and community activists say they've seen an increase in lender walkaways, although they can't estimate how large the problem is.

  • The Journal Sentinel found more than $400,000 in back taxes, fees and demolition costs owed on nearly three dozen properties that lenders foreclosed on in the past two years but didn't complete the process. Three more have been condemned and are scheduled to be bulldozed at an estimated cost of up to $15,000 each.

For more, see Lenders abandoning foreclosed properties (‘Walkaway’ properties quickly deteriorate, dragging down borrowers and neighborhoods).

Go here for other posts on homes being left in legal limbo (when a lender intentionally delays completion of a foreclosure to avoid taking title to the repossessed collateral, or fails to record its deed after foreclosure sale.

(1) In that scenario, the neighborhoods and taxpayers may lose, say city officials and neighborhood activists. "The debtor is gone, the lender is gone and here, Mr. Mayor, you've got this attractive nuisance in your neighborhood," Mayor Tom Barrett said. "Then I get a call from my fire department, and they're telling me we've got too many homes that are attractive nuisances, as they say, for arson or prostitution or drug trafficking. The current situation is a lose, lose, lose situation." responsibility code violations foreclosure

Lenders' Foreclosure Sale Cancellations An Attempt To Slow Growing Stockpile Of Repossessed Inventory, Leaving Abandoned Homes In Legal Limbo

In Central Florida, the Sarasota Herald Tribune reports:

  • Across Florida, tens of thousands of foreclosed homes are being left in limbo, between homeowners who have abandoned them and banks that have not yet taken possession of them. Over the past year, banks and other lenders have canceled up to 50 percent of foreclosure sales in some parts of the state, adding to a growing stockpile of unclaimed homes.


  • Pushing foreclosures through quickly used to be in the bank's best interest, so the home could be resold and the bank could recoup the equity in it. Now, depressed housing prices mean few investors snapping up the properties at auction. And banks put off the foreclosure sales in many cases because once they take the property, they become liable for taxes, fees and maintenance, say some analysts and industry watchers. [... A]s long as the foreclosure is pending -- and the foreclosure sale has not taken place -- the banks' ledgers show the mortgage as an asset. And the bank keeps the money it would otherwise spend on maintenance and taxes.


  • Foreclosure sales are set by a judge but can be canceled by the lender for any number of reasons. And once it is put off one time, the case does not go back to court unless the bank wants it to.

For more, see Lenders' latest foreclosure strategy: waiting (Banks know that once they take empty property, it's their liability).

Go here for other posts on homes being left in legal limbo (when a lender intentionally delays completion of a foreclosure to avoid taking title to the repossessed collateral, or fails to record its deed after foreclosure sale. responsibility code violations foreclosure

Title Company's Failure To Discover Lien Leaves First Time Homeowner Facing Foreclosure Over Prior Owner's Debt

In Highlands Ranch, Colorado, KDVR-TV Channel 31 reports:

  • Brandi Hager just bought her first home 6 months ago, made every payment, but now she's facing foreclosure over someone else's debt. "I haven't been sleeping. I haven't been able to take my mind off of it." Brandi just found there's a $9,000 lien on her property that belongs to the previous homeowner, and unless she pays it, her family could lose their home. The mortgage company, Sterling Mortgage, says it thought the property was free and clear or any liens or debts or the company wouldn't have sold it to her. Sterling Mortgage says the title company, National Real Estate services, should have found the lien and notified Brandi before the sale.

For more, see Family could lose home over title company's mistake. title insurance legal issues

Monday, July 20, 2009

NY Senator To Fannie: Stop Online Horse Trading In Delinquent Bronx Building Mortgages As Deteriorating Conditions May Force 500+ Families Onto Street

In The Bronx, New York, Crain's New York Business reports:

  • Sen. Charles Schumer will join Bronx tenants Monday to demand that Fannie Mae abandon its effort to sell distressed mortgages on a portfolio of 19 Bronx buildings via an online auction and instead work with the city to find a buyer who will fix up the rundown properties and keep them affordable. The government-sponsored entity bought the $29 million mortgage portfolio from Deutsche Bank Berkshire Mortgage in 2007 and has proposed auctioning it off through a website called DebtX—an eBay-like site that deals exclusively in the sale of distressed mortgages.

  • Many of the buildings, located in the Crotona section of the Bronx, are in states of disrepair, including 10 which have made the city’s list of worst-maintained buildings. The buildings are home to 520 families. “Allowing these buildings to be horse-traded on the open market is a sure fire way to guarantee that another speculator gobbles them up, and either continues to let the buildings rot or kicks the current tenants out on to the street” said Mr. Schumer. “We simply cannot allow that to happen.”

For more, see Fannie Mae urged to abandon Bronx mortgage auction (Sen. Schumer, housing advocates demand that Fannie Mae halt an online auction of mortgages on 19 foreclosed Bronx buildings).

(1) According to the story, a portfolio of 19 apartment buildings in 2007 was purchased for $36 million, $29 million of which was debt issued by Deutsche Bank and immediately sold to Fannie Mae. Fannie discovered the loans didn't meet their underwriting standards after they were delivered by Deutsche Bank. The buildings were subsequently abandoned by the owners when they could no longer afford to pay the overvalued mortgage. The loans went into foreclosure in March.

Nationwide Loan Modification Scam Sweep Begins As FTC Announces Coordinated Effort Of 25 Federal, State Agencies Involving 189 Legal Actions

The Federal Trade Commission announced last week:

  • Federal Trade Commission Chairman Jon Leibowitz, joined by California Attorney General Jerry Brown, [Wednesday] announced Operation Loan Lies, a coordinated national law enforcement effort to crack down on mortgage modification scams. The operation involves 189 actions by 25 federal and state agencies(1) against defendants who deceptively marketed foreclosure rescue and mortgage modification services. The FTC actions, which affect consumers throughout the nation, are being announced in southern California, where the scams originated.

    These con artists see the high foreclosure rates as an opportunity to prey on people in distress,” FTC Chairman Jon Leibowitz said. “They promise to rescue homeowners in troubled financial waters, but after they take their money they throw them an anchor instead of a lifeline. People facing foreclosure should avoid any company or individual that requires a fee in advance, guarantees to stop a foreclosure or modify a loan, or advises the homeowner to stop paying the mortgage company.”

    The FTC announced four lawsuits,(2) bringing to 14 the number of mortgage foreclosure rescue and loan modification scam cases the Commission has brought since April. Twenty-three state attorneys general and other agencies are participating in the operation, taking action against 178 companies engaged in these types of deception. The FTC also announced a settlement in a lawsuit filed last November.


  • The FTC also released “Real People. Real Stories,” a three-and-a-half minute video about keeping your home. It features people targeted by foreclosure rescue scammers sharing lessons learned from their experiences. The FTC is distributing the video, and a version in Spanish, to more than 5,000 housing counseling and consumer protection organizations around the country, and posting them at and

For the entire FTC press release, see Federal and State Agencies Target Mortgage Foreclosure Rescue and Loan Modification Scams (FTC Leads “Operation Loan Lies” to Stop Fraud and Help Distressed Homeowners).

(1) The 25 Federal & state agencies are:

  • U.S. Federal Trade Commission,
  • U.S. Attorney's Office for the Central District of California (Los Angeles),
  • Arizona Attorney General's Office,
  • California Department of Justice,
  • California Department of Real Estate,
  • State Bar of California,
  • Colorado Attorney General's Office,
  • Idaho Attorney General's Office,
  • Illinois Attorney General's Office,
  • Iowa Department of Justice,
  • Kansas Attorney General's Office,
  • Maine Attorney General's Office,
  • Maine Department of Professional and Financial Regulation, Bureau of Consumer Protection,
  • Maryland Department of Labor, Licensing, and Regulation, Office of the Commissioner of Financial Regulation,
  • Massachusetts Attorney General's Office,
  • Michigan Attorney General's Office,
  • Missouri Attorney General's Office,
  • New Jersey Attorney General's Office,
  • New Jersey Department of Banking and Insurance,
  • New Mexico Attorney General's Office, Consumer Protection Division,
  • North Carolina Department of Justice,
  • Ohio Attorney General's Office,
  • Oregon Department of Justice,
  • Texas Attorney General's Office,
  • Washington Attorney General's Office.

(2) The four lawsuits (with links to the FTC complaints) filed by the FTC target three California firms:

  • Aliso Viejo-based Lucas Law Center (other defendants: Future Financial Services, LLC, Paul Jeffrey Lucas, Christopher Francis Betts, and Frank Sullivan),
  • Orange-based U.S. Foreclosure Relief Corp. (firm used eight aliases – U.S. Foreclosure Relief, Lighthouse Services, Pacific Shore Financial, California Foreclosure Specialists, H.E. Service Company, Safe Harbor, Pomery & Associates, and Homeowners Legal Assistance. Other defendants are George Escalante, Cesar Lopez, and Adrian Pomery, Esq.), and
  • Santa Ana-based Loss Mitigation Services Inc., (other defendants: Synergy Financial Management Corporation (d/b/a Direct Lender), Dean Shafer, Bernadette Perry, and Tony Perry),

and Coeur d'Alene, Idaho-based Apply2Save Inc. (other defendants: Sleeping Giant Media Works, Inc., and Derek Oberholtzer).

In addition to these cases, the FTC reached a settlement with Foreclosure Solutions, LLC and Timothy Buckley (Plaintiff's Complaint, Settlement/Stipulated Final Judgment) who claimed that, for a fee often exceeding $1,000, they would stop foreclosure (see press release dated April 29, 2008).

Consumer Advocate Calls For Ban Against Upfront Fees For Loan Mod Help Or Any Comp Unless Mortgage Workout Actually Helps Distressed Homeowners

The Cleveland Plain Dealer reports:

  • The National Consumer Law Center [NCLC] is calling for a ban on advance fees for loan modification help and a federal rule that no one can charge homeowners fees unless the loan modification actually helps homeowners avoid foreclosure. The NCLC's report was released [Friday], just ahead of the Federal Trade Commission's deadline for comments on whether the agency should take steps to declare some loan modification practices unfair and deceptive.

For more, see Consumer law group urges FTC to save homeowners from foreclosure rescue scams.

For NCLC's report, see DESPERATE HOMEOWNERS: Loan Mod Scammers Step In When Loan Servicers Refuse To Provide Help.

Arizona AG Tags Upfront Fee Loan Mod Firm With Civil Suit, Alleging Violations Of State Consumer Fraud, Consumer Services Acts

From the Office of the Arizona Attorney General:

  • Attorney General Terry Goddard has filed a lawsuit against a Phoenix-based mortgage loan modification company, Santoya Financial Company, LLC and its owners, Thomas Montoya and Robert Sanchez, for engaging in deceptive practices.

The lawsuit alleges that Santoya’s actions violated the Arizona Consumer Fraud Act(1) and the Arizona Credit Services Act,(2) by:

  • Falsely representing the company as being endorsed by HUD,
  • Falsely representing that it and an allied company, Partners in Charity, were approved by HUD to provided foreclosure avoidance counseling to consumers,
  • Failing to disclose the limited nature of its services, which was simply collecting and forwarding clients’ information to independent entities for whom Santoya had no responsibility and who had not complied with Arizona law regulating loan modifications in this state,
  • Failing to provide consumers with information statements and contracts required by law,
  • Charging clients upfront fees [upfront fee of $1,199 plus the equivalent of one month’s mortgage payment, according to the lawsuit] without having obtained a surety bond.

The Arizona AG is seeking full restitution to the screwed over homeowners, civil penalties of up to $10,000 per violation of law, and reimbursement of investigative and litigation costs.

For the Arizona AG press release, see Goddard Sues Mortgage Loan Modification Company for Deceptive Practices.

For the lawsuit, see State of Arizona v. Santoya Financial Company, LLC.

(1) Title 44: Sections 44-1521 through 44-1534, Arizona Revised Statutes.

(2) Title 44: Sections 44-1701 through 44-1712, Arizona Revised Statutes.

FTC Identifies Individuals Accused Of Making Deceptive Claims Of Affiliation With Free Federal Foreclosure, Loan Modification Assistance Programs

The Federal Trade Commission recently announced:

  • A U.S. district court has ordered newly named defendants to stop making deceptive claims that they are affiliated with free federal government programs, such as Making Home Affordable.

  • On May 14, 2009, the FTC charged that Internet search ads were diverting homeowners from free counseling available through government-endorsed to Web sites that marketed loan modification services for a fee. The defendants’ identities were then unknown, and the district court on May 15, 2009, entered a temporary restraining order that barred the deceptive practices and authorized the FTC to identify the unknown defendants. The Commission has now identified several of the previously unknown parties in this case, and amended the complaint accordingly.(1)

For the FTC press release, see Court Bars False Claims of Affiliation with United States Homeowner Relief Programs.

For the amended lawsuit, see FTC v. Cantkier, et al.

(1) The amended complaint names the following advertisers that placed deceptive online ads for the Making Home Affordable program: 1) Jeffrey Altmire, 2) Sean Cantkier, 3) Michael Haller; 4) Lisa Roye, 5) Scot Lady, 6) Alan LeStourgeon, 7) Kean Lee Lim, 8) Greg Rivera, and 9) Neil Sperry. At the FTC’s request, following a preliminary injunction hearing on June 25, 2009, the U.S. District Court for the District of Columbia entered orders barring eight of the defendants – four of whom agreed to the orders – from engaging in the allegedly illegal conduct. loan modification

Fire Damage, Code Violations, Growing Fines, Unresolved Insurance Claim, 50+ Apts. In Foreclosure May Spell Doom For 182-Unit C. Florida Condo Complex

In Titusville, Florida, Florida Today reports:

  • Code violations keep racking up at Bay Towers Apartments, the fire-scarred riverfront complex facing a crippling cash crunch. The south tower remains condemned after a May 2008 fire. Since Feb. 6, Titusville officials have fined the property’s South Florida owners up to $1,400 per day for damaged elevators, stairwells, plumbing and other problems. As of today— 159 days later — these ongoing fines total $222,600.


  • Bay Towers Development LLC unsuccessfully targeted the aging 182-unit complex for an apartment-to-condominium conversion during the real estate boom. [Registered agent Bernie] Feldman estimated that the fire wreaked $5 million in damages, but the complex’s insurance company only paid about a quarter of that. He said his company cannot bring the building into code compliance without this additional money. An insurance-claim appeal remains unresolved, he said.

  • Making matters worse, Feldman said 104 units were sold before the fire — and more than 50 have slipped into foreclosure. He said the condominium association faces tremendous financial problems.(1)

For more, see Titusville condo owners face fines for violations.

(1) According to the story, one of the remaining condominium owners is a Boca Raton resident who paid $180,000 for a two-bedroom unit in the south tower in September 2006. Testifying before the code board, he called the Bay Towers situation “ludicrous,” “a quagmire,” “just ridiculous” and “fraudulent from top to bottom.” He used the condominium as a weekend destination until the fire struck. Three days after the blaze, Titusville building officials declared the structure unsuitable for human habitation. “They need to fix this. I want to get inside my condo. Fourteen months have gone by,” he said. “I see my mortgage payment leave my bank account, for what? For nothing. I can’t use what I rightfully own. It’s maddening now,” he said.

Recruiting Drive For Philadelphia Lawyers To Provide Pro Bono Representation To Local Homeowners Facing Foreclosure Continues

In Philadelphia, Pennsylvania, WPVI-TV Channel 6 reports on a local non-profit legal agency tasked with recruiting local attorneys to represent financially strapped homeowners through the Philadelphia Residential Mortgage Foreclosure Diversion Program:

  • Stefanie Seldin of Philadelphia VIP told Action News that there are 300 lawyers mostly from small to medium-sized and solo firms. A non-profit legal agency, Philadelphia VIP specially trains lawyers to help low-income folks in the program. Sledin adds, though, that the problem is "to sustain the program we really need to hit the large law firms." But many of those firms have lawyers who represent the lenders. "If you have 300 lawyers in a firm and 10 of them represent Citi - those other 290 could not participate in this program until now," Sledin says.

  • Now, Citi has agreed to waive conflicts of interest for law firms who participate in the foreclosure diversion program. Citi says it's a win-win: It has loans that are being paid back again, and homeowners get to avoid a lot of anguish.


  • Philadelphia VIP always has a big table set up at the conciliation conferences. You'll get matched up with a free lawyer on-the-spot. By the way, Citi is also giving a grant to Philadelphia VIP to help them recruit and train these volunteer lawyers.

For the story, see Free legal help for homeowners (Free legal help could now be more accessible to thousands of Philadelphia homeowners).

Sunday, July 19, 2009

Mass. Man Charged In Alleged Foreclosure Rescue Scam; Allegations Include Collecting Rents From Victims' Properties, Failing To Make Mortgage Payments

In Fall River, Massachusetts, The Herald News reports:

  • City businessman Joseph Pereira is facing more larceny charges after two victims told police they were swindled in a scam that resulted in the loss of their homes. Pereira, 44, [...] has been charged with two counts each of larceny over $250 by a single scheme and unauthorized practice of law, subsequent offense.(1) [... Authorities say they were] recently approached by two alleged victims claiming Pereira said he could help the men avoid foreclosures on their properties.

In the first instance, according to authorities, a Fall River man reached an agreement with Pereira for assistance, after which he began receiving delinquency notices. He said the matter was brought to Pereira’s attention and was told it would be taken care of. But soon after, the victim learned his two properties were being foreclosed. The victim reported losing a $22,000 Harley Davidson motorcycle and an estimated $110,000 after Pereira collected rent from tenants at the Fall River property and allegedly pocketed the money.

In the second instance, according to authorities, a Rhode Island man who said that he feared losing him home said he contacted Pereira, and was told that for $2,000 cash, Pereira would take care of the mortgage problems. A short time later, the victim reported he was notified his house was going into foreclosure and that no payments had been made since he made the arrangement. The man reported losing his home and the $2,000 given to Pereira.

For the story, see Pereira arrested on new fraud charges.

(1) Reportedly, Pereira has been charged multiple times since January, including larceny by false pretense, larceny greater than $250 by single scheme, unauthorized practice of law, embezzlement, employer failing to pay wages in a timely manner and possession of ammunition without a FID card. See:

According to the story, these charges later led to a Superior Court indictment in June on 12 felony counts of larceny by a single scheme greater than $250 and one count of unauthorized practice of law. He’s also been arraigned 38 times since 1982, with 34 of those charges larceny related. He spent 15 months in jail in 1996 and 1997 for similar charges, the story states.

$900K Real Estate Deposit Part Of $2.2M In Escrow Cash Ripped Off From Clients By NYC Attorney, Says Manhattan DA

From the Office of the Manhattan District Attorney:

  • Manhattan District Attorney Robert M. Morgenthau announced [Wednesday] the second indictment charging a lawyer with stealing settlement and escrow monies from his clients. This second indictment charges the defendant with stealing more than $1.5 million from five clients. This follows a previous indictment that was unsealed on May 19, 2009 charging the defendant with stealing $652,600 from 11 medical malpractice and personal injury clients. The total amount the defendant is charged with stealing in both indictments is $2.2 million.

  • MARC A. BERNSTEIN, 54, of Bernstein & Bernstein, LLP in Manhattan, was arrested [Wednesday] on charges of grand larceny and scheme to defraud. [...] The investigation leading to [the current] indictment, and the one preceding it, revealed that BERNSTEIN engaged in a scheme to steal from his victims, many of whom were affected by medical malpractice or injury suffered as a result of car accidents. In the typical case, BERNSTEIN negotiated a settlement on behalf of the victim, took control of the incoming settlement money and then stole it.

  • In one instance that has now given rise to charges, Bernstein, acting as an escrow agent, received $900,000 in real estate deposit money on a contract of sale for the purchase of a building in lower Manhattan and stole that money from the intended purchaser of the property.(1)

Go here for the entire Manhattan DA press release.

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

(1) For those who have been screwed out of money or property through the dishonest conduct of a New York attorney in the course of providing legal representation, and seek some financial reimbursement for the screwing over, go to the The Lawyers’ Fund For Client Protection Of the State of New York for more information. For other states and Canada, see:

NYC Man To Pay $95K Restitution For Home Sold Out From Under Elderly Stroke Victim; Agrees To Cough Up $40K By Sept. To "Buy Out" Of 3-9 Year Sentence

From the Office of the Queens County District Attorney:

  • Queens District Attorney Richard A. Brown [Thursday] announced that a St. Albans an has pleaded guilty to stealing the identity of a 68-year-old Jamaica, Queens, man who had been disabled as a result of a stroke and then secretly selling his house out from under him and pocketing the profits.(1)


  • The District Attorney identified the defendant as Shawn Corcas, 39, of [...] St. Albans. The defendant pleaded guilty [...] to one count of second-degree grand larceny and one-count of first-degree falsifying business records.(2) He was ordered to pay $95,000 in restitution to the victim, Keith Simmons. As a condition of the plea, the defendant agreed to pay $40,000 restitution by September 14, 2009, the date of his sentencing. If he adheres to that condition he is expected to be sentenced to five years’ probation. If the defendant fails to make that amount of restitution by that date he is expected to be sentenced to three to nine years in prison.(3)


  • District Attorney Brown said that, according to the charges, [... t]he defendants sold the home of the victim, Keith Simmons, 68, [...] in Jamaica, on March 6, 2008, without his knowledge, then deposited the proceeds of the sale – $95,801.29 – into [a] business account [...]. The victim suffered a stroke in January 2008 that left him without the ability to speak coherently. [...] An unidentified man is alleged to have posed as Keith Simmons [at the title closing] using a fraudulent driver’s license in his name as identification.

For the Queens DA press release, see ST. ALBANS MAN PLEADS GUILTY IN CONNECTION WITH FRAUDULENT SALE OF DISABLED 68-YEAR-OLD QUEENS MAN’S HOME (Faces 3 To 9 Years In Prison In Event Of Failure To Pay Part Of $95,000 Restitution To Victim By Date Of Sentence).

(1) District Attorney Brown said, “The victim was swindled out of his home by this defendant with the help of his sister. He took advantage of an elderly man suffering from disabilities to strip the equity dollars from his home without regard to the financial and emotional consequences that his actions would cause. Fortunately, the victim’s niece reported the crime. Today’s guilty plea – and the ordered restitution – provide a measure of justice for this victim.”

(2) The defendant’s sister, Patricia Corcas, 55, of Rosedale pleaded guilty earlier this year to first-degree falsifying business records and is expected to be sentenced on July 15, 2009 to five years’ probation.

(3) My guess is that another term of Corcas' probation might be for him to make monthly payments to the victim to be applied to the unpaid balance on the $95K restitution order over the five year probation period, with any subsequent default in the payments constituting a probation violation.

Obama Administration About To Turn Up The Heat On Mortgage Servicing Industry Over Sluggishness In Making Loan Modifications?

A column in The New York Times reports on an invitation recenly extended(1) by the Treasury & HUD Secretaries to the top 25 mortgage loan servicers to get together in Washington on July 28 for a chat:

  • The subject of the meeting is going to be loan modifications. Specifically, the government is going to be asking — in none-too-friendly fashion — why the nation’s big servicers aren’t doing more to modify loans for homeowners who are in danger of defaulting on their mortgages. Back in the spring, after all, they all signed onto the administration’s new Making Home Affordable program, which uses a series of incentives — not the least of which is $1,000 to the servicers for every mortgage they modify — to help keep people in their homes and prevent foreclosures. And yet, five months later — and two years into the housing bust — the rising tide of foreclosures remains the single biggest threat to economic recovery.

Among the reasons cited by loan servicers for their difficulties in modifying delinquent loans are:

  • The volume of loans is overwhelming servicers,
  • The process is a one-on-one process that requires servicers to actually underwrite the loan, many of which were not properly underwritten when originated (“Servicers have to become full-blown underwriting shops,” according to one loan servicing firm CEO).

However, some suspect the continuing lack of incentive for the lenders and servicers in accomplishing loan modifications as being equally or more compelling reasons for the sluggisness surrounding the loan modification effort:

  • Many times, when a mortgage holder falls behind, he will “self-cure” (as it’s called in the trade) — and eventually get current with his mortgage. So the bank, or the servicer, often has a reason to simply wait him out,

  • The rate of re-default on modified mortgages can be as high as 50 percent, resulting not in foreclosure avoidance, but merely foreclosure postponement,

  • Many institutions also are reluctant to do large-scale mortgage modifications because the write-downs of the portion of the loans they'll have to eat will hurt their balance sheets,

  • The length of time it takes to complete a foreclosure can take a long time, enabling lenders to keep the loans on their books at their inflated values,

  • The $1,000-per-modification being dangled by the government was pretty meaningless, given the amount of time, money and effort they require, according to some in the industry.
For the story, see From Treasury to Banks, an Ultimatum on Mortgage Relief.
Thanks to Mike Dillon at for the heads-up on the story.
(1) From the story:
  • That letter the administration sent out on Thursday did not mince words. It demanded that the servicers begin “adding more staff than previous planned, expanding call centers beyond their current size, providing an escalation path for borrowers dissatisfied with the service they have received, bolstering training of representatives, developing extra online tools, and sending out additional mailings to borrowers who may be eligible for the program.”