Saturday, October 17, 2009

Woman Fraudulently Obtains Property Tied Up In Bankruptcy Case, Then Pockets Refinancing Proceeds, Say California Feds

From the Office of the U.S. Attorney (San Jose, California):

  • Vallejo, Calif., resident Myra Holmes was indicted by a federal grand jury with concealment of assets and bank fraud, United States Attorney Joseph P. Russoniello announced.


  • The indictment accuses Holmes of enriching herself by convincing her father – who had previously filed for Chapter 11 bankruptcy – to convey to her, without consideration and without notifying or obtaining the permission of the bankruptcy court or the bankruptcy trustee, his interest in the Vallejo property where she lived. The indictment further alleges that after Holmes obtained her father’s interest in the property she withdrew the equity from the property through a refinancing mortgage loan, which she procured with a fraudulent refinancing application. According to the indictment, as a result of her fraudulent refinancing application, Holmes received a refinanced mortgage, which increased the outstanding mortgage on the Vallejo property from approximately $180,000 to approximately $338,000; [...]. To date, Holmes has not repaid the bankruptcy estate for the funds she took out of the Vallejo property in the November 2005 refinancing.(1)

For the press release, see Vallejo Woman Charged With Mortgage And Bankruptcy Fraud (Defendant Used Fraudulent Deed to Obtain More Than $130,000 in Equity From Residence in Bankruptcy Proceeding).

For the indictment, see U.S. v. Holmes.

(1) According to the indictment, Holmes legitimately owns a 50% interest in the home, with her father holding the remaining 50% interest. The indictment states that the bankruptcy trustee in her father's case had filed court papers seeking a sale of the entire property (including Holmes' 50% share, despite the fact that she herself was not under the jurisdiction of the bankruptcy court) in order to get at and apply her father's 50% share of the sale proceeds to outstanding debts owed to his creditors, leaving her with half the home sale proceeds, but forcing her out of the house. The actions she is accused of may have been an attempt to thwart the bankruptcy trustee in his/her desire to liquidate the property.

Federal Law w/ Foreclosure Eviction Safeguards No Help To Tenants Forced From Building As Burst Sewer Pipe, Power Cut Leads City To Condemn Premises

In Opa Locka, Florida, WFOR-TV Channel 4 reports:

  • Imagine being told you had only days to move out of your home. That's the reality for several Opa-Locka renters, who got the shock of their lives when they were told their apartment building had been foreclosed on. They say they'd been paying their rent all along. Many of the renters gave off feelings of frustration and fear as they packed up to leave their homes.

  • In a matter of days, their apartment building was condemned. A sewer pipe burst and the power was cut. [...] Residents had nowhere to go after they were told they had to leave. The city felt the building was unsafe after the developer cut corners on renovations and lost the property to foreclosure, leaving the renters in the middle.

For the story, see Families Forced Out In Surprise Foreclosure. RentSigmaSkimming

Minnesota Regulators Take Action Against Title Agency That Allegedly Stiffed Underwriter Out Of Insurance Premiums Collected From Real Estate Closings

In St. Paul, Minnesota, the Duluth News Tribune reports:

  • A family-owned and operated title insurance agency in Duluth and Two Harbors has been accused of fraud and operating without proper licenses by the Minnesota Department of Commerce. Scenic Title and Abstract Inc. is accused of collecting premiums from clients on behalf of Fidelity National Title Insurance Co. and never sending the collections to Fidelity. The title company, owned by Kevin Eckholm, is accused of failing to submit premiums in 237 instances in the past four years, court documents show.(1)

For more, see Title company accused of fraud.

For the Minnesota Department of Commerce press release, see Title Insurance Company in Duluth and Two Harbors charged with fraud.

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

(1) The Minnesota Department of Commerce Order for Summary Suspension of the firm's licenses is effective immediately and will be considered at a hearing before an Administrative Law Judge. EscrowRipOffKappa title insurance legal issues

Financially Strapped Title Agency Owner Charged With Illegally Dipping Into Escrow Accounts To Pay Off Gambling Debts

In Brevard County, Florida, Florida Today reports:

  • Mark Brady seemed to have it all during the real estate boom -- two title companies, BMWs, a Hummer, powerboats, a $2 million home on Merritt Island, an oceanside condominium in Cape Canaveral and three other riverfront properties. Then, two days before Christmas, Brady was arrested -- charged with illegally using $80,000 of his clients' money from escrow accounts to pay off gambling debts in the Bahamas. Brady pleaded not guilty and was released on $8,500 bail. Hearings and sworn testimony are scheduled to begin in November. [...] Although it's unclear whether any real estate transactions were disrupted because money was removed the from escrow account, the money belonged to other people -- deposits toward purchases of homes, or mortgage money released to pay home sellers.(1)

  • And the state takes laws regulating escrow accounts seriously, Deputy State Attorney Wayne Holmes said. "These are essential components and aspects of commerce," Holmes said. "You have to have faith and trust in those entities or certain things just don't function."

For the rest of the story, see Fraud case tied to escrow checks.

(1) Reportedly, since his arrest, Brady has fallen into a financial spiral. He defaulted on several mortgages and is in foreclosure proceedings on his homes and condo, cars were repossessed, banks have sued him, and his two companies, Adams Title Co. and American Heritage Title Co., are defunct, according to the story. In September, he filed for bankruptcy, listing about $8 million in debt, including $500,000 in casino markers, the story states. EscrowRipOffKappa

Friday, October 16, 2009

Could Recent Land Court Ruling Impact Title To Any Massachusetts Home Foreclosed Upon In Last 20 Years?

In Boston, Massachusetts, the Boston Herald reports on the recent Massachusetts Land Court ruling that threatens to undo thousands of foreclosures in the state:

  • Experts say the ruling paves the way for thousands of people who’ve lost houses to foreclosure to challenge their homes’ seizures. “The judge has thrown into question every foreclosure performed in the Commonwealth over the last 20 years,” said lawyer Lawrence Scofield, who represents Wells Fargo and U.S. Bank. Scofield said only foreclosures before 1989 are beyond review, as [Massachusetts] state law gives people two decades to dispute land ownership.

  • Market watchers add that the judge’s ruling affects far more than just foreclosed homeowners. For instance, any consumer who owns a house foreclosed on in the past two decades must now worry that a former owner will sue to reclaim the property. Such homeowners could also find it impossible to sell or refinance because of “clouded” titles.

  • In fact, some consumers who’ve tried to buy foreclosed homes in recent months haven’t been able to get mortgages or title insurance because of [Judge Keith] Long’s initial decision. Bank of America and other firms have even pulled some foreclosed homes off of the resale market.

For the story, see Ruling could undo thousands of foreclosures (if link expires, try here).

Go here for Judge Long's rulings in this case (Oct. 14 ruling, March 26 ruling). title insurance legal issues

NY Court Kiboshes Town's Attempt To Seize Mentally Unfit Homeowner's $200K+ Property For $13K In Back Taxes

In Lewisboro, New York, The Lewisboro Ledger reports:

  • Lewisboro erred in foreclosing on a resident’s property without ascertaining that the man was mentally fit, a state judge has ruled. State Supreme Court Judge Gerald Loehr ordered last month that the town must return Richard Egloff’s Lake Kitchawan home to him in exchange for the payment of $13,000 in back taxes.

  • According to the judge’s order, provided to The Ledger by Mr. Egloff’s lawyer, Thomas Decea, Judge Loehr ruled that Mr. Egloff was “incompetent at the time of the foreclosure” due to mental illness, and that the town’s seizure of the property, worth more than $200,000 according to court papers, was “invalid.” The town had confiscated the property in May 2008 after foreclosing on the property for non-payment of property taxes. In June, Mr. Egloff sued the town alleging that his rights had been violated, and that the town had ignored his mental illness.

For more, see Judge rules town must return seized house.

Go here for a copy of Judge Loehr's preliminary judgment against the town.

For the lawsuit, see Egloff v. Town of Lewisboro, et al.

For an earlier post on the original story, see Schizophrenic Employee Says In Suit Town Stiffed Him On Five Years Back Pay, Then Seized His $200K Property For $11K In Delinquent Real Estate Taxes.

Elderly California Retiree Files Suit Alleging Negligence, Fraud, Elder Financial Abuse In Attempt To Undo Predatory Loan & Fight Off Foreclosure

In Carmel Valley, California, The Monterey Herald reports:

  • A Carmel Valley woman is facing the loss of her home of 50 years after she allegedly was led into a risky investment in the failed real estate investment firm Cedar Funding Inc. Margaret Bennett, 75, a retired government worker, is trying to stave off the foreclosure sale of her home in which she raised six children as a single mom. She filed a civil suit [...] that accuses a Monterey mortgage broker and the foreclosing bank of putting her into the predicament.


  • Her suit alleges that she was effectively duped into borrowing $600,000 on her home and putting $470,000 of that money into Cedar Funding — just 15 months before the real estate investment company sank into bankruptcy.(1) Cedar Funding owner David Nilsen was indicted on federal fraud charges last month [go here for Nilsen indictment].

For more, see Woman sues broker, bank over Cedar Funding investment (Retiree invested $470,000).

(1) According to the suit, Bennett went to Heidi Daunt in September 2006 to see about getting a $130,000 loan on her home, which was then valued at about $1 million, according to the story. She wanted to pay off a home-equity line of credit and to consolidate other debts. Her only source of income was about $2,000 a month from Social Security and her pension, she said. The suit alleges Daunt proposed that Bennett get a $600,000 loan instead from Washington Mutual, and put most of the money into Cedar Funding. According to the suit, Daunt told Bennett that her income would increase because Cedar Funding investors were making 10 percent on the company's real estate loans, the story states. The monthly payments on the $600,000 loan came to nearly double Bennett's monthly income, the suit alleges. The loan application to Washington Mutual stated Bennett's monthly income was $8,000, a figure used "without (her) knowledge or approval," the suit alleges.

The suit accuses the defendants of negligence, fraud, elder financial abuse and other wrongful actions. It contends they should have known the loan and investment strategy was unsuitable for Bennett, with her limited financial means and lack of financial savvy. The suit alleges she was taken advantage of by people motivated by greed.

Attorneys Accused Of Misleading Consumers About Nature Of Legal Services, Level Of Attorney Involvement When Offering Loan Mods Begin Feeling The Heat

Buried in a recent column in the Miami Daily Business Review is a recounting of a South Florida homeowner's experience with a local attorney selling loan modification services to the public:

  • The [Florida Attorney General's] office is investigating consumer complaints that Brian Korte, a West Palm Beach attorney tied to a Fort Lauderdale company called Legal Modification Attorney at Law, allegedly charged advance fees and “misled consumers regarding the nature of the legal services provided by the company and the level of involvement the attorney would have with each consumer’s case,” [deputy director Ryan] Wiggins said.(1)


  • Homeowner Peter Fischer of Sunrise said in a complaint to the AG’s office that he paid Korte’s law firm $2,900 to oversee a loan modification. According to Fischer, Korte and his staff told him to stop paying his mortgage and not to contact or answer calls from the lender. Fischer said he was told the fee would be refunded to him if the modification did not go though.

  • Fischer said after several failed attempts to reach Korte, a member of the lawyer’s staff called and said Fischer’s files had been lost and they needed his information again. Shortly after that, Fischer said, a Korte staffer told him he did not qualify for a loan modification. “I asked for the paperwork on why I was denied and nothing was ever sent to me,” Fischer said. “So I asked for my money back and they said ‘let me think about it.’"

  • Fischer said he was later told half of his fee would be returned. Fischer said ‘half is better than nothing,” but still filed a complaint with the attorney general’s office. The AG’s Wiggins said it has received six other complaints about Korte, but declined to discuss details of the investigation. The Florida Bar said it too has received multiple complaints against Korte, but would not provide additional information because the investigation is confidential. Bar complaints remain confidential until a grievance committee finds probable cause for the investigation to continue.

For the story, see Record number of complaints target modification lawyers.

(1) Reportedly, the attorney general’s investigation is continuing and no charges have been filed. Korte did not return messages left at his West Palm Beach office and did not respond to an e-mail seeking comment, according to the story. UnauthPractOfLawTheta

New Report Shines More Light On Lack Of Lawyers To Represent The Poor In Foreclosure Actions

In New York City, The Huffington Post reports:

  • As bad as America's foreclosure crisis is -- and it's very bad, with over 300,000 homes receiving a foreclosure filing every month -- it's being made even more devastating by the lack of legal assistance available to beleaguered homeowners. According to a new study by the Brennan Center for Justice, [...] "the nation's massive foreclosure crisis is also, at its heart, a legal crisis" -- with the vast majority of homeowners facing foreclosure doing so without legal counsel.


  • Having legal help can be the difference between people keeping their homes and being evicted. A lawyer can stop foreclosure proceedings or put enough pressure on lenders to get them to rework the terms of the loan. A lawyer can also intervene in other ways, such as enforcing consumer protection laws or spotting legal violations by banks and lenders.

  • According to the report, the barriers keeping homeowners from obtaining proper legal representation are twofold. The first, not surprisingly, is funding.(1) [...] The second barrier is that restrictions to adequate legal help have been deliberately built into the system.(2)

For more, see Lack of Legal Help: One More Way the Deck Is Stacked Against Homeowners.

Go here for the new report from the Brennan Center for Justice at New York University School of Law (Full Report) (Press release).

(1) According to the story, in 1996, the budget for the Legal Services Corporation, the primary agency that provides help for low-income Americans in civil cases, had its budget cut by one-third. At this point, to match the funding level the Legal Services Corporation received in 1981 would require an increase of $753 million. If Goldman Sachs or Bank of America needed that kind of cash (or even 10 times that kind of cash), Washington wouldn't think twice. But low-income homeowners have no clout in DC. No wonder the Brennan Center found that legal service programs for the poor are currently "besieged with requests for foreclosure assistance."

(2) Current law severely limits the ability of homeowners to get legal protection from predatory lenders, the story states. For instance, homeowners represented by the Legal Services Corporation are barred from bringing class action suits. Nor are they able to make the other side pay attorneys' fees even when the law would normally allow it. As the report states, "the possibility of having to pay attorneys' fees provides a critical incentive to help ensure that a better funded legal adversary does not drag out proceedings in an attempt to exhaust the indigent client's resources."

Loan Modification Outfit Accused Of Failing To Deliver Services For Strapped Homeowners Also Stiffs Its Notaries, Says One Victim

An alleged loan modification racket featured in two recent stories(1) that has been accused by homeowners of peddling bogus foreclosure rescue services nationwide is now accused of stiffing the local notaries it uses to collect money and paperwork from the financially strapped homeowners, according to a recent story from WCNC-TV Channel 36 in North Carolina:

  • 21st Century Legal Services was reaching out to Anita Hendren for her services as a certified notary public to help them facilitate loan modifications for North Carolina homeowners facing foreclosure. They asked her to collect checks and paperwork, and she did. After the first job, "I felt kind of comfortable, so I just accepted more jobs,” Hendren told Newschannel 36. "I did it 8 times in total."

  • The troubled started when she got her first payment -- a check that came back, "Not Sufficient Funds." When she called the company, she says she was told they'd send a new check immediately. She never saw one. She never got payment at all for the other jobs she performed. "21st Century owes me over $600," she says. Internet postings on the website express similar frustrations. Another notary in Charlotte told Newschannel 36 she was not paid as well.

  • In Hendren's case, those payment issues were frustrating, but she never truly worried until last week when she got a call from one of the homeowners she thought she’d helped. He told her the company had cashed his checks, but never contacted his lender. The family is on the brink of losing their home. When she heard a similar story from another customer, she started calling the homeowners who’d worked with 21st Century Legal Services.

For the story, see Company banned by NC AG operating under new name.

(1) See ProPublica:

Thursday, October 15, 2009

Lenders' Problem "Entirely Of Their Own Making" Says Judge In Affirming Earlier Ruling That Puts Title To Foreclosed Massachusetts Homes Into Question

In Boston, Massachusetts, The Boston Globe reports:

  • A Massachusetts Land Court justice's ruling [Wednesday] puts into question the ownership of hundreds -- and possibly thousands -- of foreclosed properties in the state.

  • Justice Keith C. Long affirmed his own March decision that invalidated foreclosure proceedings involving two Springfield homes because the lenders did not hold clear titles to the properties at the time of sale. In [Wednesday]'s reconsideration of that ruling, Long described a convoluted process in which ownership of the mortgages changed multiple times without being properly recorded. He said the problems lenders now face are "entirely of their own making," and if they seek a change in law they should look toward the Legislature.

  • "The issues in this case are not merely problems with paperwork or a matter of dotting i's and crossing t's,'' Long said in a 27-page decision. "Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts Legislature."

  • The decision comes seven months after Long’s initial ruling, which came as a shock to many who deal with distressed properties. Lenders believed they could complete foreclosure transactions and later produce formal proof they held the mortgages.

  • Since March, some lenders have stopped selling foreclosed properties out of fear the sales later could be voided, and title companies have refused to insure them. The logjam has impaired efforts by communities and nonprofits to buy and rehabilitate foreclosed homes in some of the state's hardest hit areas. It has also made it difficult for individuals to buy foreclosed homes.

Source: Judge reaffirms crucial foreclosure sale ruling.

For the full text of the ruling in this consolidated case, see U.S. Bank, N.A. v. Ibanez; Wells Fargo Bank, N.A. v. Larace. EpsilonMissingDocsMtg

Co-Owner Gets Reduced Penalty In Title Agency Scam; Mortgages Unrecorded On 3000+ Deals, Insurer Stiffed On Premiums, Lienholders Left Unpaid

In St. Paul, Minnesota, the Star Tribune reports:

  • The Minnesota Commerce Department, which has accused a Twin Cities title company and an affiliated insurance company of keeping the money from more than 3,000 real estate mortgage transactions, has agreed to a settlement with a co-owner in which she'll pay a fraction of her penalty as long as she stays out of the business.

  • In an enforcement action [in August] against Jennifer K. Frantz, the department listed her penalty at $500,000 but said that she'll only have to pay $7,500 of it as long as she complies with other parts of the settlement. Frantz was a co-owner of Zen Title and TitleSource, doing business as TitleDirect. Besides keeping mortgage money, the Commerce Department said it failed to remit $196,000 in premiums to an insurer and failed to make $1.3 million in mortgage payoffs to prior lenders. The companies are in Mounds View.

  • In addition, Frantz's license as a real estate closer and notary were revoked and she is barred from any work that requires a license from the department. "She's been barred from the industry. That's her main penalty," said department spokesman Bill Walsh.
    Frantz's attorney, Tom Kelly of Minneapolis, said the settlement reflects that she was a minor stakeholder in the company.

  • In March 2008, the department ordered the companies to pay $2 million in civil penalties.(1) After negotiations, Frantz reached the August settlement. Walsh said that order still stands against the other two owners, Charles E. Bethel and Trent C. Jonas.

  • In the document ordering the $2 million in penalties, the department said the companies caused losses to lenders and exposed homeowners to disputes that can cloud property titles. It also said an $800,000 mortgage that wasn't recorded was for one of the owners. Walsh said the department has referred the case for criminal prosecution. "What they did was criminal. They essentially closed mortgages and did not finish. They did not send the money on, they did not pay the loans," Walsh said, calling it a "huge fraud." Some of the mortgages were in Minnesota and some in other states, he said. Kelly said he did not expect criminal charges to be brought against his client. Neither Bethel nor Jonas could be reached for comment [...].(2)

Source: State OKs deal in real estate loan case (A settlement with a co-owner of Zen Title and TitleSource cuts her share of a $2 million penalty to $7,500 and a ban from the industry).

See also, Minneapolis/St. Paul Business Journal: Title firms co-owner settles with state.

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

(1) See Minneapolis/St. Paul Business Journal: Title firms hit with $2M fines (The DOC contends that the companies, which operated out of the same office, failed to record more than 3,000 mortgages on real estate deals they closed and failed to make more than $1.5 million in payments to mortgage lenders and insurers, among other charges).

(2) According to the Minnesota Department of Commerce website, all licenses held by this outfit have been revoked. EscrowRipOffKappa title insurance legal issues

Ex-Cincinnati Cop Gets 3 Years For Stealing $188K In Life Insurance Proceeds From Victim Of Alleged Foreclosure Rescue Sale Leaseback Scam

In Cincinnati, Ohio, WCPO-TV Channel 9 reports:

  • As a former Cincinnati police officer, Adrian Mitchell understands hierarchy and chain of command. That chain led all the way up to a three-star general of the U.S. Army who [...] accused Mitchell of wrecking the life of the general’s sister. Adrian Mitchell will spend three years in prison after a federal judge sentenced him Wednesday in a scheme to defraud an insurance company. But prosecutors and the general said the scheme was much worse than it sounds.

  • Mitchell was a Cincinnati police officer who operated a foreclosure rescue and real estate business on the side. Police say he solicited homeowners having financial problems and offered to buy their houses, which they would then rent from him. If they couldn’t pay, he’d evict them. One of the owners committed suicide. That was the general’s brother-in-law.

  • Prosecutors say Mitchell then forged the widow’s name on a life insurance claim form and falsely represented himself to the insurer as a family member, depositing the $188,327 proceeds into his business bank accounts. He pleaded guilty in February to one count of mail fraud and one count of filing a false income tax return.

  • On Wednesday, he faced the judge for his sentencing. But first he had to listen as Army Lt. Gen. Lloyd Austin, one of the top officers at the Joint Chiefs of Staff in Washington D.C., who recalled the devastation to his sister, who hasn’t recovered after losing her husband, home, and insurance proceeds.

For the story, see Former Police Officer Sentenced To Prison.

For the FBI (Cincinnati Field Office) press release, see: Former Cincinnati Police Officer Sentenced to Three Years Imprisonment for Mail Fraud, Tax Crimes.

Mortgage Broker Cops Plea To Using Phony Lien Claims To Pocket $1.8M In Proceeds From Real Estate Closings

From the Office of the U.S. Attorney (Sacramento, California):

  • United States Attorney Lawrence G. Brown and Federal Bureau of Investigation Special Agent-in-Charge Drew Parenti announced [...] that JOSHUA GERVOLSTAD, 31, of Redding, pleaded guilty today to one count of mail fraud in connection with a mortgage fraud scheme. This case is the product of an extensive investigation by the FBI.

  • According to Assistant United States Attorney Matthew D. Segal, who prosecuted the case, GERVOLSTAD, who was a mortgage broker, submitted inflated appraisals and false lien documents for use in closing purchase transactions involving five different real properties located in Redding and in Lodi. The closing statement for each property contained fraudulent papers requiring the payoff of a lien to an entity called "TPG Investments." In each case, the lien did not exist. In reality, GERVOLSTAD controlled TPG Investments and used its bank account to divert mortgage loan funds to himself and other persons.

  • His conduct caused $1,798,888.91 in fraudulent payouts for liens that did not exist, affecting mortgages with a total value of $5,441,562. At least three of the properties were foreclosed and were sold for a combined loss of at least $1,170,000.

For the U.S. Attorney press release, see Redding Mortgage Broker Pleads Guilty To Mortgage Fraud.

Woman Charged With Forging Quit Claim Deed, Stealing Thousands From Incarcerated Acquaintence

In Bantam, Connecticut, The Register Citizen reports:

  • A New York woman is accused of taking advantage of a local man’s incarceration by stealing thousands of dollars from him and his family. Judy L. Lamay, 61, was arraigned Tuesday in Bantam Superior Court on charges of first-degree larceny, second-degree larceny and second-degree forgery.


  • Lamay reportedly convinced [Pieter] Parker to grant her power of attorney to cash his paychecks for him and under the guise of looking after his home. Lamay reportedly forged a quit claim deed in an attempt to place the home in foreclosure, and gain access to Parker’s mortgage account, according to the [arrest] warrant.

For the story, see Woman steals from jailed man. DeedContraTheft

Long Island Man Gets 4-12 Years In Vacant Home Hijacking Scam; Filed Phony Liens On Houses In Foreclosure, Then Rented Them To Unwitting Tenants

In Suffolk County, New York, Newsday reports:

  • A Medford man who rented out homes he didn't own continued to collect rent from unsuspecting tenants even after he was arrested in February on fraud and burglary charges, a prosecutor said Tuesday at the man's sentencing in Riverhead. Paul Salamone, 28, was sentenced Tuesday to 4 to 12 years in prison by Suffolk County Court Judge James Hudson, who ordered Salamone to pay more than $10,000 in restitution to his victims.

  • Salamone filed phony liens against seven homeowners in the midst of foreclosure proceedings, falsely claiming they owed him money, prosecutors said. He fixed up two of those homes, in Medford and East Patchogue, then rented them to tenants, prosecutors said.

  • Insisting he owned the homes, Salamone removed signs and changed the locks to keep homeowners and bank and real estate agents from entering the properties, prosecutor Marc Lindemann said. [...] Salamone placed dogs on the properties to scare off real estate agents and continued to collect rent after his indictment, Lindemann said. Salamone's victims will have to apply to the state to have the false liens declared invalid, Lindemann said.

For the story, see Man posing as landlord collected rent even after arrest.

See also, Long Island Press: Wannabe Landlord Gets 4-12 Years. mechanics lien KappaPhonyLandlordScam

Wednesday, October 14, 2009

Last Minute Legal Aid Help Thwarts Real Estate Agent's Attempt To Illegally Boot Tenants From Recently Foreclosed Home

In New Haven, Connecticut, the New Haven Independent reports on a Bridgeport-based real estate agent who, on behalf of a mortgage lender, attempted to force the tenants out of a foreclosed house in violation of the recently enacted Protecting Tenants At Foreclosure Act, which, among other things, requires lenders to respect any existing tenant leases, and provide at least 90 days notice when vacating month-to-month renters. In fear of getting the boot, the tenants were referred to a local legal aid lawyer, who put a stop to the failed eviction scam.

  • [Local legal aid attorney Amy] Marx — who has found ways to help other tenants stay in foreclosed-upon homes — blasted the realtor and OneWest for “a shockingly flagrant violation” of the new law. Foreclosers are entitled to offer cash-for-keys deals, she said. But not to present them as the only option. It has to happen “only in the context of an honest conversation of what the tenants’ options are,” Marx said.

  • Marx said she’s confident the law will protect them in the meantime. She worries about other tenants who don’t have City Hall relatives to steer them to legal-aid lawyers. “Miss Walters is extremely lucky. She knew someone who knew someone” who knew someone else who could help, Marx observed. “What we are really worried about are the countless tenants out there who do not know about the law and will not get the chance to fight back against the bank the way Miss Walters is now doing.”

For the story, see Foreclosure Law Has Her Back. RentSigmaSkimming

More Homeowners Face Foreclosure Despite Making All Payments As Seller-Financed Home Purchases That Left Existing Mortgages Unpaid Go Sour

In Milledgeville, Georgia, WMAZ-TV Channel 13 reports:

  • Andrea Wright takes pride in her decor. This year Andrea and her husband Henry bought their first home. "It was just like a dream come true," said Henry Wright of Milledgeville. A lifelong dream they say got cut short. Now, the couple faces foreclosure. "We trusted him because we saw it as an opportunity for us as well as an opportunity for him," said Andrea Wright.

  • Andrea means Jason Gallacher, LLC. She says they didn't have the credit to buy the home on their own so they bought the home in January from Gallacher through a seller finance purchase agreement where they paid Gallacher and he paid the bank.(1) They say they didn't know he still owed money on the property. "Our names were in the paper stating that this address as well as our name was being foreclosed, it was being auctioned off," said Andrea Wright.

  • Jason Gallacher says four homes in the Logan Bluff's subdivision are under foreclosure. Gallacher says he did sign seller finance purchase agreements with each of the four buyers and maintained payments through July but says after July his bank BB & T stopped accepting payments because partners in other projects he was involved in filed bankruptcy.

For the story, see Home Purchase Goes Sour for Milledgeville Couple.

(1) This type of seller-financing arrangement is commonly referred to in some states as a "wraparound mortgage." In other states, it is generally referred to as an "all-inclusive trust deed." rent to own lease purchase option scams yellowstone

Tenant Accuses Priest Of Skimming Rent From Home In Foreclosure; Now Faces The Boot After Sinking $3K+ Into Repairs

In Wolcott, Connecticut, The Republican American reports:

  • At first glance, the modest Cape Cod house [...] seemed ideal for Shelly Ryan and her family. There was room for her small children and a back yard for her service dog. It was owned by a priest and available for rent. She and her landlord, the Rev. William R. Sokolowski, the pastor of St. Maria Goretti Church, signed a one-year lease that began on May 1. However, Sokolowski failed to mention problems with the house, including the fact that it had been under foreclosure since March 7.

  • Judge Salvatore Agati issued a strict foreclosure ruling on July 20, and Aurora Loan Services took over the property on Sept. 8. Ryan was unaware of the foreclosure until mid-September, when a person parked in her driveway and took pictures of the house. The photographer said the house had been foreclosed and was owned by a bank. She was told she needed to leave by Oct. 7, which came as a shock to her and her children.(1)


  • On the brink of becoming homeless, Ryan wants to know why Sokolowski never told her about the foreclosure — and a plethora of other problems with the house. Ryan has sunk more than $3,000 of her own money into repairs, saying that she virtually gave up with Sokolowski and took matters into her own hands.

For the story, see New tenant finds house haunted by foreclosure.

See also, NBC Connecticut: Priest Loses Home to Foreclosure; Family Booted (She didn't know when she moved in).

(1) Regrettably, this tenant is unaware of her rights under a federal foreclosure law signed this spring by President Barack Obama which requires property owners who come into land through foreclosure to honor all existing leases, and to provide at least a 90-day window for any month-to-month tenants. See Section 702(a)(2) of the Protecting Tenants at Foreclosure Act of 2009. By the way, the 90-day window begins, not on the date of the foreclosure sale, but rather, after the sale - specifically, on the date the foreclosure sale purchaser (be it the foreclosing lender or a third party purchaser) serves the formal notice to vacate on the tenant. RentSigmaSkimming

Loan Servicer Switch Lands One Homeowner Couple In Costly Mess

A recent column in The Philadelphia Inquirer details how a screw-up relating to the transfer of the servicing rights by one company to another on mortgages owed by a New Jersey couple landed them in foreclosure, cost them $15,000 in legal fees, destroyed their credit, resulted in reductions in their credit lines, and caused them to raid their 401(k) to pay for college tuition because no one would lend them money while the foreclosure was an issue -- all this despite having promptly made their mortgage payments.

For the story, see Blindsided by switch of servicers.

Florida Attorney Peddling Loan Modifications Disbarred For Abandoning Clients After Pocketing Hefty Upfront Fees

In South Florida, the Miami Daily Business Review reports:

  • When Maryann Salvas sent $1,795 to Aventura attorney Daniel Fox to arrange a modification of her mortgage and reduce her monthly payments, she didn’t hesitate because she thought “people were supposed to trust lawyers.” Almost a year passed without the loan on her Rhode Island house being modified, said Salvas who hired Fox based on a phone solicitation. In order to pay Fox’s fee, Salvas said she missed a mortgage payment, never caught up on the late payment, and is now four months behind on the mortgage.


  • Salvas and dozens of other homeowners filed complaints against Fox with the state attorney general or Florida Bar. Fox, 32, was disbarred on Sept. 3 after pleading guilty to disciplinary charges that he abandoned the “representation of clients” seeking real estate loan modifications. The attorney general’s office, which has received 50 complaints involving Fox, said its investigation of him continues.

Source: Record number of complaints target modification lawyers. UnauthPractOfLawTheta

Tuesday, October 13, 2009

Amendment To NJ Tenancy Complaint May Create Hurdle For Foreclosure Rescue Operators Attempting To Boot Homeowners In Sale Leaseback Deals Gone Sour

A press release from The Law Office of Michael D. Mirne discusses the hurdles foreclosure rescue operators in New Jersey may be facing when attempting to boot homeowners from their houses in the context of sale leaseback, "home saver" arrangements:

  • Under ordinary circumstances, a landlord can expect that an action filed for non-payment of rent will result in a Judgment for Possession within about 4 weeks of the time the action is filed. The expediency of this process is attractive to most landlords who are often struggling to pay their own bills, and cannot afford to subsidize a tenant who is not paying rent. At an eviction trial, the Judge reads a preliminary set of instructions, which includes the statements that (1) he or she may not force the landlord to wait for rents, and (2) all outstanding rents must paid by the day of Court or the tenant will be evicted.

  • However, Landlords who have acquired title to the property from the tenant,(1) and Landlords who have given the tenant an option to purchase may not have the right to have their cases heard in Landlord Tenant Court.

  • The body of the Tenancy Complaint has been recently amended to include an inquiry as to whether the Landlord acquired title to the property from the Tenant, or alternatively, if the Landlord gave the tenant an Option to Purchase the Property. Since both of these conditions would substantially affect the equitable property rights of the tenant, the cases brought under these conditions are not easily resolved on a summary basis.

  • To put it simply, Judges in Tenancy Division, who are often swamped with a heavy caseload of relatively simple matters, are reluctant to make the factual inquiries necessary to resolve a dispute when the ultimate issue affects the ownership of the property.(2) The unfortunate(3) result is that these matters are routinely transferred out of Tenancy Division into the Law Division (or even worse, the Chancery Division), where the parties can spend the next 12 months exchanging discovery, attending Court Ordered mediations, and waiting for trial. More importantly, the Tenancy Judge very often orders that the tenant does not need to pay rents to the Landlord until the Law Division has an opportunity to rule of the issues of the case. Under the Rules of Court, the Transfer out of Tenancy Division can be requested by the Judge, sua sponte (on his own initiative), or by one of the parties (usually the tenant).

For the press release, see Information for Landlords who Acquire Title from their Tenants.

(1) A typical sale leaseback arrangement.

(2) A judge in the Tenancy Division may lack jurisdiction to make rulings that adjudicate title to property. Further, regardless of what judicial division hears the case, a court could make a finding that the sale leaseback foreclosure rescue deal between the operator and the homeowner is an equitable mortgage, in which case an eviction of the homeowner would be rendered legally impossible without the operator first filing a lawsuit to foreclose on its equitable mortgage (exactly the scenario the operator wanted to avoid in the first place when it structured the financing transaction with the financially strapped homeowner as a sale leaseback, coupled with an option to repurchase).

(3) Or fortunate, depending on one's perspective.

2005 Bankruptcy Reform, Electronic Filing Requirements "Impede Consumers Trying To Save Their Homes From Foreclosure" Says Attorney In Federal Suit

In Chicago, Illinois, Courthouse News Service reports:

  • The combination of Bush-era bankruptcy law reform and a new electronic filing rule in the Northern District of Illinois bankruptcy court reduced competition among lawyers, increased legal fees and hindered the public from trying to rescue their homes from foreclosure, a lawyer argues in a federal lawsuit. Attorney Thomas Holstein claims that the two actions, which he describes as "two sides of the same coin," are "overly broad and restrictive." In particular, Holstein says the mandatory electronic filing rule adopted by the bankruptcy court just months after the Bush reforms went into effect wrongfully "impedes consumers trying to save their homes from foreclosure under Chapter 13."


  • Holstein argues that the filing of a bankruptcy case is "an entirely clerical act" that doesn't require the skills of a licensed attorney. However, the bankruptcy court's mandatory e-filing rule holds that only lawyers are allowed to register for the service, Holstein says. He bases his challenge on federal antitrust law, which he says favors competition and is based on the principle that increased competition stimulates lower prices in the public interest.

For more, see Lawyer Says E-Filing Rule Is Anticompetitive.

Florida Appeals Court Puts Kibosh On Judicial "Benevolence & Compassion" When Setting Sale Dates In Foreclosure Actions

In Miami, Florida, the Miami Daily Business Review reports:

  • "Benevolence and compassion” have no place when it comes to setting foreclosure sales, a state appellate court ruled in a stern order. The 3rd District Court of Appeal judges said they "thoroughly disapprove" of a decision by Miami-Dade Circuit Judge Valerie Manno Shurr to give an extra month to a couple trying to sell their home before a foreclosure sale, Senior Judge Alan R. Schwartz wrote for the panel last week.

  • Manno Shurr declined to comment on the decision, citing judicial rules that prohibit her from talking about specific cases. But in court, she made her position clear. “People are having a hard time now. They are having a difficult time. Everybody knows it. Businesses are failing. People are losing money in the stock market. You know, unemployment is high,” Manno Shurr said. “Everybody knows that we are in a bad time right now, and I hate to see anybody lose their home.”(1)

  • The appellate court found her reasoning flawed and said her decision granting extra time was “an abuse of discretion in the most basic sense of that term” because the bank had a right to the sale.(2)

For more, see Appeal court takes judge to task for ‘benevolence’.

For the court ruling, see Republic Federal Bank, N.A. v. Doyle, No. 3D09-2405 (September 30, 2009 ).

(1) Charles M. Rosenberg, attorney for Republic Federal Bank, said his client decided to appeal Manno Shurr’s decision in part because the bank felt Miami-Dade trial judges “needed some guidance.” “With all of the foreclosures being filed in this county, we thought that the trial judges needed some guidance from the court of appeal on under what circumstances they could grant extensions because it’s very common for people to run into court at the last minute asking for extensions,” he said.

(2) The Florida appellate court reinforced their ruling with this observation from a 1980 ruling of the Florida Supreme Court, which, in turn, invoked some words of wisdom from the late U.S. Supreme Court Associate Justice Benjamin Cardozo, regarding the discretionary power of judges:

  • The trial courts’ discretionary power was never intended to be exercised in accordance with whim or caprice of the judge nor in an inconsistent manner. Judges dealing with cases essentially alike should reach the same result. Different results reached from substantially the same facts comport with neither logic nor reasonableness. In this regard, we note the cautionary words of Justice Cardozo concerning the discretionary power of judges:

  • The judge, even when he is free, is still not wholly free. He is not to innovate at pleasure. He is not a knight-errant roaming at will in pursuit of his own ideal of beauty or of goodness. He is to draw his inspiration from consecrated principles. He is not to yield to spasmodic sentiment, to vague and unregulated benevolence. He is to exercise a discretion informed by tradition, methodized by analogy, disciplined by system, and subordinated to "the primordial necessity of order in the social life." Wide enough in all conscience is the field of discretion that remains. B. Cardozo, The Nature of the Judicial Process 141 (1921).

"Don't Get Mad, Get Even" Says Northern California Homeowner Group Using Court System To Fight Back Against Foreclosure

In Northern California, the Marin Independent Journal reports on "a growing movement of nearly 80 homeowners in Marin and Sonoma counties facing foreclosure and fighting back."

  • United under the guise of "Don't Get Mad, Get Even," the group has met weekly for the past few months in the San Rafael office of its overseer, nonprofit Marin Family Action. [...] "It's not that these people don't want to pay or aren't paying," said Manny Fernandez, executive director of Marin Family Action, who has worked on their behalf. "Multiple times people were trying to modify their loans. They got nowhere. Next thing you know, the house is sold right from underneath them."

  • [Rochelle] Cook's was the first of the group's series of individual lawsuits filed last month in Marin against the various patchworks of banks, mortgage firms and loan modification companies controlling their homes and forcing them out. The suits seek restitution for lost properties, financial devastation and crumbling credit. [...] Cook said she followed her bank's advice [...] to purposely miss three months of payments since her credit rating was too good to garner help. Default notices then piled up as calls to her lender, IndyMac Bank of Pasadena, went unheeded.


  • Officials with Marin Family Action, which assists residents with financial literacy and housing services, went the legal route after careful study of paperwork supplied by group members. Documents showed families were being forced into bankruptcy and out of their homes after what officials of the nonprofit called a sham of a loan modification process. Fernandez said each family had been denied loan modifications. Many were taken advantage of by brokers profiting from loan documents using overstated incomes and no proof of income, he said. "They were set up to fail," Fernandez said.


  • San Rafael attorney Russell Marne has provided pro bono litigation and bankruptcy assistance for the Marin group. "What we are trying to accomplish is simple, justice," he said. "Most of the group members received home loans that they did not understand nor could they afford. The loan brokers made their money and the banks have insurance against foreclosures."

For the story, see Marin, Sonoma residents facing foreclosure rally against system they say scammed them.

Nevada AG Secures Indictment Against Two In Alleged Loan Modification Scam; Non-Attorneys Accused Of Peddling Legal Services To Desperate Homeowners

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

  • Two Las Vegas residents were indicted [..] for allegedly operating a foreclosure rescue scam in Las Vegas, Nevada Attorney General Catherine Cortez Masto said. Jack Ferm and Mario Saunders allegedly operated the foreclosure scheme from September 2008 through September 2009 under the business name US Justice Foundation.

  • The indictment alleges that Ferm and Saunders operated US Justice Foundation, described as a document preparation business that charged $2,500 and misled customers into thinking that the service would stop foreclosures on their homes or help them obtain loan modifications, Masto said. [...] In most cases, Ferm and Saunders required the victims to pay a monthly charge of $150 for litigation costs in addition to the original $2,500 retainer, despite the fact that neither Ferm nor Saunders were licensed attorneys in Nevada, authorities said.(1)

For the story, see Two Las Vegans indicted for alleged foreclosure scam.

In an earlier post, see Nevada AG Files Felony Theft Charges Against Owner Of Vegas Loan Modification Firm.

(1) Ferm was indicted on one felony theft count for obtaining money in excess of $2,500 by misrepresentation from a person 60 years of age or older; five felony counts of theft; and one felony count of theft of money in excess of $250 by misrepresentation from a person 60 years or older; and three felony counts of theft obtaining money in excess of $250 by misrepresentation. An indictment against Saunders included four felony counts of theft in excess of $2,500 and one felony count of theft of $250 or more by misrepresentation.

Cops: Land Grabber Hijacked Vacant Homes, Rented Them To Unwitting Tenants; Used Bogus Adverse Possession Claims, Quiet Title Suits To Swipe Deeds: AG

In North Las Vegas, Nevada, the Las Vegas Review Journal reports:

  • Former real estate agent Eric Alpert, whose nefarious business practices were brought to light by the Las Vegas Review-Journal in 2003, has been arrested by North Las Vegas police for renting homes he did not own or have permission from the owner to rent. [...] Alpert, 54, has been charged with four counts of burglary; four counts of theft; four counts of obtaining money under false pretenses; and seven counts of forgery. The district attorney's office said it also plans charges on three counts of offering a false instrument.

  • Alpert identified properties that appeared to be abandoned or in foreclosure, cleaned them up and changed the locks, then rented them cheaply to people who had no suspicion of his wrongdoings. He had about 20 homes in Las Vegas, some of them titled to living trusts and under the name of his former business, Sherlock Homes, according to Clark County Assessor records.


  • Court filings reveal that Alpert apparently continued to engage in real estate activity that's at least similar to what he was doing a few years ago, attorney Mark Connot of Hutchison & Steffen law firm said. Alpert appears to file an action to quiet title on properties, and if the owner does not appear to contest the action, he receives title to the property, the lawyer said. He claimed at that time to be legally taking homes by "adverse possession" under Nevada law, but the attorney general's affidavit notes that NRS 11.150 specifically states that "requirements for adverse possession is occupation continuously for five years" and payment of taxes, which Alpert did not do.

For the story, see: Ex-agent arrested for renting homes he didn't own (Victims lured by cheap rent soon evicted).

For a follow-up story, see Victims of rental scam speak out. KappaPhonyLandlordScam

Monday, October 12, 2009

Ohio Appeals Court Ruling Finding Wells Fargo "Lacked Standing" In Foreclosure Allowed To Stand; State High Court Declines Review Of Lender Appeal

From the Law Offices of Marc Dann:

  • In a significant victory for consumers and particularly victims of predatory lending the Ohio Supreme Court [see Case Announcement #2009-1030 - Wells Fargo Bank, N.A. v. Jordan; three of seven Justices dissenting(1)] on Wednesday [Sept. 30, 2009] quietly let stand what may turn out to be a landmark decision prohibiting banks, trusts and other loan servicing entities who cannot prove ownership of a mortgage note from foreclosing on Ohio homeowners.

  • Following a trend originally initiated by U.S. District Judge Christopher Boyko, Northern District of Ohio in Federal Court, The 8th District Court of Appeals (Cuyahoga County) ruled in June of this year that banks, loan servicers and trusts did not have standing to pursue foreclosure of homes in Ohio if they could not prove that they owned the mortgage note at the time of the filing of the complaint.(2)


Attorney Dann goes on to make this observation regarding the effect of a court's lack of jurisdiction in a foreclosure action could potentially have on the current status of title to real estate that has gone through the foreclosure process in the past:

  • [S]ince Ohio Law has long recognized that the issue of Jurisdiction can be raised by a party in a lawsuit at anytime, there may be thousands of judgments granting foreclosure that are void putting the title to those properties in question. Ohio Courts have the inherent power to vacate the prior void ab initio judgments in foreclosure. Patton v. Diemer (1988), 35 Ohio St.3d 68, 70, 518 N.E.2d 952.

For more, see Ohio Supreme Court Lets Wells Fargo v. Jordan Stand (Foreclosure Plaintiffs Who Do Not Own the Mortgage at the Time of Filing Lack Standing to Pursue Cases).

Thanks to Richard Davet for the heads-up on this story.

(1) Apparently, three of the seven justices of the Ohio Supreme Court were eager to weigh in on this issue, only to be outvoted by their four colleagues. Maybe the four didn't feel this was the right case to create statewide precedent with.

(2) In Wells Fargo Bank, N.A. v. Jordan, 2009-Ohio-1092, 2009 Ohio App. LEXIS 881, Judge Frank D. Celebrezze Jr. writing for a unanimous panel of the 8th District held that in order to bring a lawsuit in Ohio the plaintiff must have an genuine interest in the subject matter of the lawsuit:

  • {¶ 21} “A party lacks standing to invoke the jurisdiction of a court unless he has, in an individual or a representative capacity, some real interest in the subject matter of the action. State ex rel. Dallman v. Court of Common Pleas (1973), 35 Ohio St.2d 176, 298 N.E.2d 515, syllabus. The Eleventh Appellate District has held that ‘Civ.R. 17 is not applicable when the plaintiff is not the proper party to bring the case and, thus, does not have standing to do so. A person lacking any right or interest to protect may not invoke the jurisdiction of a court.’ Northland Ins. Co. v. Illuminating Co., 11th Dist. Nos.2002-A-0058 and 2002-A-0066, 2004-Ohio-1529, at ¶ 17 (internal quotations and citations omitted). The court also noted that ‘Civ.R. 17(A) was not applicable unless the plaintiff had standing to invoke the jurisdiction of the court in the first place, either in an individual or representative capacity, with some real interest in the subject matter. Civ.R. 17 only applies if the action is commenced by one who is sui juris or the proper party to bring the action.’ Travelers Indemn. Co. v. R.L. Smith Co. (Apr. 13, 2001), 11th Dist. No.2000-L-014.” Wells Fargo Bank, N.A. v. Byrd, 178 Ohio App.3d 285, 2008-Ohio-4603, 897 N.E.2d 722.”

It went on to hold, "If plaintiff has offered no evidence that it owned the note and mortgage when the complaint was filed, it would not be entitled to judgment as a matter of law.” EpsilonMissingDocsMtg

Decision Imminent On Judge's Reconsideration Of Ruling Negating Validity Of Thousands Of Massachusetts Foreclosure Sales

In Boston, Massachusetts, The Boston Globe reports:

  • A court decision expected as soon as today could negate the validity of sales of thousands of foreclosed homes in Massachusetts, causing havoc for buyers and sellers and further stalling the housing market’s recovery in hard-hit areas. At issue is proof of ownership at the time of a foreclosure sale. During the housing boom, millions of mortgages were bundled into bonds and sold to investors, a process that resulted in lengthy and twisted paper trails that can obscure ownership. Many lenders believed they could complete foreclosure transactions and later produce formal proof they held the mortgage.

  • That changed in March when Justice Keith C. Long of Massachusetts Land Court found that two foreclosures in Springfield were invalid because ownership of the mortgages was not clear at the time of the foreclosures. Long’s ruling, which came as a shock to many who deal with distressed properties, called into question the ownership of hundreds if not thousands of foreclosed homes in Massachusetts, prompting some lenders to delay sales out of fear they could later be voided, title companies to balk at insuring them, and nonprofits to steer away from certain foreclosed homes altogether.


  • Two of the plaintiffs asked Long to reconsider the ruling, and a decision is imminent.(1)


  • Gary Klein, a consumer law attorney who filed a friend of the court brief in the case, said the real estate system placed “expedience and convenience’’ before the law. Providing home buyers with a “full set of procedural protections,’’ he said, is more important than comforting lenders who ignored the law. He said the lending community created the mess and it needs to fix it.(2)

For more, see Foreclosure sales in limbo over title issue (Expected ruling may complicate transactions).

(1) For earlier posts on this story, see:

(2) Kathleen Engel, professor of law at Suffolk University, said the federal government should step in to help states deal with “toxic titles’’ that are clogging up the system from California to Florida. EpsilonMissingDocsMtg

Fugitive Duo Charged In C. Florida Equity Snatching Foreclosure Rescue Scam Nabbed In South America; Suspects On Secret Service Int'l Most Wanted List

In Tampa, Florida, The Tampa Tribune reports:

  • The owners of a Tampa company have been arrested in Peru in a scheme to defraud nearly 300 Florida homeowners, most of them Hispanic, with offers to help them avoid foreclosure. Mario Quiroz and Jose Oliveri, who owned Valrico-based 4 Solutions, were taken into custody late last week, said John Joyce, special agent in charge of the Secret Service's Tampa field office. They disappeared two years ago as a mortgage fraud investigation expanded.(1)

  • "These guys were on our international most-wanted list, and some of our agents in Peru were contacted with information as to their whereabouts," Joyce said. The U.S. government is tying to extradite them to face charges of wire fraud, conspiracy, mail fraud and money laundering, Joyce said. The company, he said, carried out an elaborate scheme targeting homeowners in the Tampa area, Orlando and south Florida.


  • Using the Internet, radio and television, the company marketed a method to avoid home foreclosures. Financially strapped homeowners thought they were refinancing or signing over rights to their homes temporarily. The company then sold the homes without the homeowner's knowledge, the Secret Service said. Twelve financial institutions lost a total of $8 million, Joyce said.

  • In some cases, homeowners were told they were refinancing their homes. In other cases, the company agreed to make the mortgage payments for up to two years, stopping the foreclosure and give the homeowner time to get back on their feet. Homeowners say they were told they would get their houses back. Instead, the company put the homes in the names of others - often the wife of one of the owners – and took out large mortgages, stripping the home of its equity. The company then stopped paying the mortgage and let the homes fall into foreclosure.

For more, see Tampa suspects in statewide mortgage fraud arrested in Peru.

See also, St. Petersburg Times: Tampa mortgage fraud suspects arrested in Peru.

For the October 2, 2008 indictment, see U.S. v. Quiroz, Oliveri.

Go here for other stories on this alleged foreclosure rescue racket.

(1) Oliveri's wife, Carmen Maria Oliveri, was arrested by Tampa police in June 2007 on charges of grand theft of $100,000 or more and organized fraud over $50,000. equity stripping

Suit Charges Law Firm Principals, Others In Alleged Equity Snatching, Sale Leaseback Scam Targeting Bucks County Homeowners Facing Foreclosure

In Bucks County, Pennsylvania, The Intelligencer reports:

  • Nine area residents are suing Doylestown Township Supervisor Jeffrey Bennett and his law partner Stephen Doherty - attorneys at Bennett & Doherty P.C. - claiming they were defrauded in a real estate scheme. In a lawsuit filed in Bucks County Court last week, Bennett and Doherty are linked to what is alleged to be a complicated ploy where homeowners expecting to refinance mortgages ended up losing their homes and seeing their equity divvied up among attorneys, mortgage brokers and investors through a maze of fees, adjustments and "kickbacks."(1) [... Last week's] lawsuit adds seven new plaintiffs to what has been an evolving case against the defendants that started with complaints from Plumstead's William and Phyllis Kemp. [...] Neither Bennett nor Doherty agreed to be interviewed about the lawsuits but, in court documents filed in the Kemps' earlier state and federal suits, they denied any wrongdoing.(2)


  • Stuart Eisenberg of Warminster's McCullough & Eisenberg PC is representing all nine plaintiffs - the Kemps, Michael and Joann Lieber, Mark and Beverly Goldman, Jose and Carmen Ortiz and Susan Edge. All had faced foreclosure of their homes and turned to the defendants for help.(3)


  • The new court filing, which will consolidate the Kemps' earlier Bucks County court action, alleges similar claims brought by other plaintiffs who owned property in Bucks County, ran into financial trouble, and sought help from Bennett and Doherty or, in some cases, [mortgage broker Ed] McCusker. The suit alleges all were guided through similar transactions that ended with them losing title to their homes as well as equity.(4) The suit claims those deals included forged signatures on sales agreements, improperly inflated appraisals used to maximize borrowing from Long Beach Mortgage, the loss of more than $1 million in home equity from the six properties and alleged "kickbacks" to Bennett and Doherty totaling almost $56,000.


  • Reached at his Upper Makefield home last week, McCusker said he was simply following a program Bennett and Doherty said they designed "to help people facing foreclosure." The program, which he referred to as a sale-leaseback, allowed the Kemps to sell their home to investors and lease it back. Sale-leaseback deals aren't uncommon in real estate circles and they're not illegal if everyone involved knows and understands the terms and purpose. The Kemps say they didn't understand either, because they didn't have the documents in advance, they didn't realize what they were signing at the settlement table and they claim their names were forged on the agreement of sale. Assuming the homeowners could make their share of the mortgage payments and their credit remained solid, McCusker said they could have had the house sold back to them a year later [...]. The Kemps signed an "Option Agreement" at settlement listing terms by which the property could be returned.

For more, see Suit claims 9 are victims of mortgage scheme.

(1) Bennett and Doherty top a list of defendants in the case, in which the residents claim they were swindled out of houses they owned in Haycock, Hilltown, Newtown Township, Plumstead, Richland and Solebury.

(2) Reportedly, the situation has caught the attention of Federal criminal investigators. In June, through their attorneys, Bennett and Doherty asked the U.S. District Court to halt the civil proceedings due, in part, to "a pending criminal investigation" by the U.S. Attorney's Office and the FBI, according to the story. They claimed defendants in the civil case were subpoenaed to appear before a grand jury in April with records relating to Bennett, Doherty and the others named in the suits. The motion for a delay was reportedly denied July 7.

(3) According to the story, not long after receiving word of the impending foreclosure, the Kemps said they received a flier in the mail from a company called "Foreclosure Relief Services," offering to help "stop foreclosure" and "save" the home. Bennett and Doherty admit in court documents to owning the company. The Kemps said they went to Bennett and Doherty for help in March 2006. Doherty agreed to represent the Kemps and file preliminary objections to the foreclosure. That was the extent of Doherty's legal representation, the defendants claimed in documents filed in response to the earlier suits.

(4) "It's my experience that clients go into a pink cloud," the homeowners' attorney Stuart Eisenberg reportedly said of people in a tight spot who believe they're getting help. "They're happy to have their burdens lifted. They don't know the details, but they're very happy about it. They sign where they're told to sign. They initial where they're told to initial." foreclosure rescue equity stripping

Two More Sentenced In Metropolitan Money Store Equity Stripping, Foreclosure Rescue Conspiracy

From the Office of the U.S. Attorney (Greenbelt, Maryland):

  • U.S. District Judge Roger W. Titus sentenced Clifford McCall, age 48, of Lanham, Maryland today to four years in prison followed by five years of supervised release and his daughter, Chandra Jones, age 31, of Lanham, Maryland, to 33 months in prison followed by five years of supervised release for conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Titus also entered judgements ordering McCall to pay restitution of $2,462,107.85 and ordering Jones to pay restitution of $3,879,093.58.


  • McCall conspired with others in a scheme to fraudulently promise to help homeowners, who had substantial equity in their homes but were facing foreclosure because of their inability to make monthly mortgage payments, avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a year, during which time Metropolitan Money Store promised to improve the homeowners’ credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them.


  • Using the homeowners’ properties, the conspirators applied for mortgages to extract the maximum available equity from the homes. They prepared and submitted fraudulent loan applications to mortgage lenders to obtain fraudulently inflated loans on the target properties in the straw buyers’ names. At settlements, the conspirators imposed numerous fees and required “seller contributions” which were far in excess of industry standards; they imposed fees for services which were not performed, disclosed or explained to the homeowners; and they transferred the sale proceeds out of the escrow accounts into the conspirators’ business and personal bank accounts and converted a substantial portion of those funds to their personal use.

For the entire press release, including the status of the eight other co-conspirators, see President and Vice President of Financial Service Firms Sentenced in Metropolitan Money Store Mortgage Fraud Scheme (Father and Daughter Who Served as Officers of Mortgage Foreclosure Consulting Companies Responsible for Over $6 Million in Losses Under the Scheme, Including Almost $800,000 Deposited by the Daughter Into Her Personal Bank Account).

Jury Says St. Pete-Area Foreclosure Rescue Operator Liable For Duping Financially Strapped Homeowner Into Signing Over Home Under Guise Of Help

In Sarasota, Florida, the St. Petersburg Times reports:

  • In a "groundbreaking'' case that could be the first of its kind in the nation, a jury this week found that the owner of a St. Petersburg foreclosure rescue company scammed a 60-year-old Port Charlotte woman out of her home. The Sarasota County jury awarded $93,467 to Wanda Costa, who unwittingly sold the house to Gideon Rechnitz for nothing in 2006 even though she had substantial equity at the time. Under the guise of helping her, Costa's lawyers said, Rechnitz and associate Thomas Cook duped her into signing over the deed without making it clear she would still be responsible for the mortgage and thousands of dollars in "commissions.''(1)

  • "What the jury did in this case was say 'No' to that kind of behavior,'' said attorney Elizabeth Boyle of Gulfcoast Legal Services, which represented Costa for free. "I hope other people will come forward because they may get some relief, too.''


  • As fraud proliferates, there has been a growing number of cases nationwide in which judges ruled in favor of homeowners who claimed they were cheated out of their property.(2) Boyle said her research indicated that Costa's case may the first in which a verdict was rendered by a jury. The nonprofit National Consumer Law Center said it did not know if there have been jury verdicts elsewhere.

For more, see Jury finds Rechnitz defrauded widow of her home in a foreclosure scam.

(1) According to the story, Rechnitz, the subject of several St. Petersburg Times articles, is among scores of individuals and foreclosure prevention companies under investigation by Florida Attorney General Bill McCollum.

(2) After a six day bench trial, the Office of the Washington State Attorney General similarly secured a significant award (nearly $4.2 million) from a foreclosure rescue operator peddling sale leaseback deals to, and running alleged "foreclosure surplus snatching" scams on, financially strapped homeowners. The operator entered into transactions with more than 300 property owners, and no one ever successfully regained their home from him, according to the state AG's office [see Pay time for notorious foreclosure rescue scammer (Attorney General announces major victory in state’s case with Washington man who promised help but took homes)].

  • Kaiser’s victims were elderly, disabled or low-income individuals – people who trusted him to solve their foreclosure problems and were betrayed,” [Prosecuting attorney James] Sugarman said. “Kaiser portrayed himself to these people as an expert in saving homes facing foreclosure, when he is actually an expert in taking homes facing foreclosure.”

For more, see Washington AG Scores Big Win In Bogus Equity Stripping, Land Trust/Sale Leasebacks & Surplus Ripoffs; Foreclosure Rescue Operator Tagged For $4.2M.

Complaints Begin Rolling In Against Florida Attorneys Offering Loan Modifications; Lack Of Legal Representation, Fee Structure Among Concerns

In South Florida, the Miami Daily Business Review reports:

  • Gladis Heras [...] thought she was in good hands. Heras said she paid [attorney Daniel] Fox $3,500 in January 2009 to modify her mortgage. Yet months later, the bank told the New York resident it had never been contacted by Fox about the modification. Her story is familiar, according to the attorney general’s office and [Florida] Bar officials. The officials say homeowners most frequently report that lawyers charged them from $1,500 to $5,000 to negotiate lower monthly mortgage payments. And that once paid, the attorneys either stopped answering calls or made no effort to contact the lender.

  • On top of lack of representation cases before the AG’s office and the Florida Bar, there also are ethical questions about how lawyers handle foreclosure defense and loan modifications, especially the way homeowners are billed. Some lawyers are being criticized for aggressive fee structures that are tied to the amount owed on the mortgage rather than the scope of work involved. Some lawyers charge homeowners monthly fees until the case is resolved or flat fees billed in monthly installments.(1)


  • Another issue: Some homeowners believe that as soon as they start making monthly payments to an attorney they have legal representation. That is not always the case, [local foreclosure defense attorney George] Castrataro said. Although the payments are in installments, legal representation may not begin until a minimum amount is deposited into a lawyer’s trust account. That could take two to six months.


  • Another pitfall for homeowners who don’t want to do [their loan modification] themselves: Castrataro said some lawyers take on modification cases where they know — or should know — the homeowner doesn’t qualify for a loan modification. After taking a fee and overseeing a needless process, they tell the homeowner the modification was denied. Castrataro says inexperience or taking too many cases is as much to blame as greed for that situation.

For the story, see Record number of complaints target modification lawyers.

For a related story on similar problems faced in California, see Calif. Bar Official: "The Number Of Attorneys Using Their Law Licenses To Essentially Take Money From Unwary But Trusting Consumers Is Astounding!"

For State Bar advisories addressing lawyer conduct in loan modifications, see:

(1) Both fee structures are problematic, said George Castrataro, a former lawyer with Legal Aid Service of Broward County who now has his own firm and does foreclosure defense work. “The fees should be directly related to a reasonable number of hours an attorney spends working on the case,” he said. “The amount often taken is very similar to client mortgage obligation. If it takes two hours to resolve it, that is what it should cost, and not how much they pay in mortgage. That [practice] is in direct violation of our obligations.” UnauthPractOfLawTheta

Nevada Homeowners Seek Preliminary Injunction To Halt MERS' Foreclosures

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

  • A bankruptcy judge here, joining judges across the country, is throwing a bit of sand in the gears of the mortgage machine and its ruthless foreclosure blade. She has raised this issue: In many home foreclosures springing out of bankruptcy proceedings, the foreclosure is being triggered by a representative of the lender — a surrogate that may not have a legal, equity stake in the proceedings. As a result, it is conceivable — though still something of a legal long shot — that the homeowner who is filing for bankruptcy protection could end up saving his house.

  • The argument that a lender’s surrogate can’t trigger foreclosure has drawn notice of Nevada homeowners, who are preparing a class action lawsuit. They are seeking a preliminary injunction this month to stop their foreclosures.(1)


  • [I]n a Las Vegas case this spring, federal Bankruptcy Judge Linda Riegle ruled that MERS had no standing because the company is not the real party in interest — it doesn’t actually own the loan. In other words, in the course of bankruptcy proceedings, MERS had no claim to the house.(2)

For more, see Ruling by judges rattles mortgage industry (Some foreclosures may at least be slowed).

See also, United Press International: Nevada Suit Could Halt Thousands of Foreclosures.

(1) Reportedly, University of Utah law professor and former consumer rights attorney Christopher Peterson has been hired by the Reno law firm Hager & Hearne as an expert witness in a class action lawsuit that will seek to invalidate the right of MERS to trigger foreclosure. Their case will reportedly rely heavily on a recent Kansas Supreme Court ruling [see Landmark Nat'l Bank v. Kesler, No. 98,489, 2009 Kan. LEXIS 834 (August 28, 2009)]. In that foreclosure case, the court said that MERS had “no right to the underlying debt repayment secured by the mortgage ...

(2) In re Mitchell, Case No. BK-S-07-16226-LBR (D. Nev. 2009). See also, Las Vegas Business Press: Judge's ruling deals blow to national mortgage servicer.