Saturday, October 24, 2009

Special Forces Iraq Vet Returns Home To Find Delinquent Mortgage On His Free & Clear House; Friend Accused Of Using POA To Drain Equity From Property

In Mount Clemens, Michigan, C & G Newspapers reports:

  • When Kevin Robertson, a sergeant with the Army’s Special Forces, returned from this third tour of duty in Iraq in May 2007, he was astounded to find that many of his financial dealings were out of whack. “He started to realize that something was really wrong. He didn’t know what had transacted,” said Elizabeth Geary, Robertson’s friend for at least 10 years.

  • Robertson discovered that a loan totaling $135,000 had been taken out on his home in Mount Clemens. The home was also going into foreclosure. Moreover, another home had been purchased in Robertson’s name in Florida for $340,000. “He went to Iraq and that’s one big nightmare over there, and he comes home and it’s a worse nightmare,” said Geary.

  • How did it all happen? According to Geary, one day before Robertson was deployed in November 2006, he gave power of attorney to a friend, Mark Powell, whom he had met at a gym several years ago in Sarasota, Fla. “He had been convinced by a friend of his over in Sarasota to turn over his power of attorney,” said Geary, adding, “Kevin reluctantly did this and when Kevin came home … this man he took out two loans on this house.” Geary lives in the house on Smith Street that Robertson owns and that Powell took the two loans out on. She said Robertson, who lives in Sarasota because that’s where the Special Forces train, had obtained the Mount Clemens home from his father, who had paid cash for the property and owed no money on it. She added that the Florida home, which Powell bought for $340,000, now appraises for $160,000. Geary said that Robertson gave Powell no such permission to take out either loan or purchase a home.

For the story, see Locals come together to help out soldier who was scammed. DeedContraTheft

Wisconsin Woman Charged With Ripping Off Dad Of $91K+; Used POA To Pocket Mortgage Money From Father's Home, Get Credit Cards

In Eau Claire, Wisconsin, WQOW-TV Channel 18 reports:

  • An Eau Claire woman is accused of stealing more than $91,000 from her dad as his power of attorney. Jill Peterson is charged with four counts of identity theft and forgery. According to the criminal complaint, Peterson told her father that she lost most of the money gambling. She told authorities that as power of attorney, she had no problem getting the money from the bank and that she also took out three credit cards in her father's name and even mortgaged his house. To throw off suspicion, her father says she created a fake website so he could view his bank account which was supposed to have more than $80,000 in it. After telling his daughter he was going to drive to the bank to see how much money he really had, she admitted that it was "all gone." Peterson will make her first court appearance later this month.

Source: Daughter gambles away $91,000 stolen from father. FinancialAbuseOfElderlyAlpha DeedContraTheft

Man Charged With Abusing POA, Looting $122K From Elderly Mom's Bank Accounts; 82-Year Old Woman Left With Big Nursing Bill & No Funds To Pay For Care

In Daytona Beach, Florida, the Daytona Beach News Journal reports:

  • A man who had power of attorney over his mother's affairs faces a felony exploitation charge after police said he emptied her bank accounts of $122,722. William Frank Kunselman Jr., 62, was arrested [...] on a charge of exploitation of the elderly. Daytona Beach detectives said Kunselman's 82-year-old mother, whose name was not provided, has lived at the Good Samaritan nursing home since 2006. She was relying on an income of $39,600 from her Social Security and investments.

  • Police said she had no idea her bills were not being paid at the nursing home, and she now owes $69,000. Kunselman, who wrote dozens of checks to himself from his mother's account, told detectives he has no money to pay for his mother's care.

Source: Man accused of emptying mother's accounts. FinancialAbuseOfElderlyAlpha

Overleveraged NYC Apartment Buildings Leave Tenants In Tens Of Thousands Of Units Threatened With Consequences Of Foreclosure

In New York City, National Public Radio reports:

  • Ever since it was purchased in 2007, tenants of the hulking old apartment building on University Avenue in the Bronx have endured cockroaches, leaking pipes, electricity outages and myriad other deprivations and indignities. But the low point probably came last winter, when the boiler ran out of oil. "For two weeks, we had no heat. This room right here? Icicles coming from the ceiling. That's how cold it was," says Luis Correa, 33, standing in the back bedroom of the apartment where he has lived his entire life.

  • The building was long owned by a small landlord who did a good job of maintaining it, Correa and his neighbors say. But one day in 2007, they awoke to find it had been purchased by Ocelot Capital Group, along with 24 other buildings, for the staggering sum of $36 million. Later, when the real estate crash left the owners unable to pay the debt service and keep up the property, the new owners abandoned it.

For more, see Some Tenants Pay The Price For Mortgage Excesses (Anywhere from 70,000 to 100,000 New York City apartment units are in foreclosure or at risk of it right now).

In a related story on an 11,000 unit, 56 building NYC apartment complex in deep financial trouble, see The Wall Street Journal: An Apartment Complex Teeters (High-Profile Tishman/BlackRock Property in New York in Danger of Default). RentSigmaSkimming

Friday, October 23, 2009

NYS Regulators Form Fraud Unit To Tackle Title Insurance Crimes; Will Target Corrupt Closing Agents, Real Estate Scam Artists

From the Office of the New York State Insurance Department:

  • Superintendent James J. Wrynn [last week] announced the formation of a special Mortgage and Title Unit to fight title insurance crimes committed by criminals attempting to enrich themselves at the expense of consumers, financial institutions and municipalities.

  • Complaints alleging title insurance premium theft have increased with the downturn in the economy. The Insurance Department going to be very vigilant and is channeling its resources to enhance its ability to identify and root out this type of criminal activity,” Wrynn said. Wrynn cited the recent arrests of two men accused of stealing nearly $6 million in title insurance premiums, as well as other cases involving complex criminal schemes targeting indebted consumers.


  • Title insurance agents, in addition to providing title insurance, hold large sums of money including mortgage recording fees, real estate taxes and other fees related to commercial and residential real estate transactions. The lure of these funds, combined with the downturn in the economy, appears to be fueling an increase in title insurance related crimes,” Wrynn said.


  • Wrynn warned consumers to be wary of schemes involving title fraud used by so-called mortgage rescue companies. [...] These groups have targeted financially-troubled homeowners, low income people and others, including legitimate title insurance companies. The schemes have included such tactics as the use of “straw buyers” to purchase properties using false loan applications; the use of significantly inflated property values to obtain mortgages; and the enticement of financially-troubled homeowners to sell their homes in exchange for fraudulent leaseback arrangements.

For the entire press release, see Title Insurance Crimes Target Of New Frauds Unit (Insurance Department to Combat Upsurge in Premium Theft, Other Related Crimes).

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

Fake Attorney Gets 7+ Years For $1.7M Escrow Ripoff In Conducting Real Estate Closings; Pocketed Funds Due To Existing Lienholders, Homeowners

In Philadelphia, Pennsylvania, the Philadelphia Daily News reports:

  • A con man who passed himself off as an attorney was sentenced in federal district court yesterday to 7 1/2 years behind bars in connection with a scheme to bilk homeowners, lenders, title-insurance companies and the city of Philadelphia of $1.7 million. Jason Bloom, 39, of Mount Laurel, N.J., has been in federal custody since he pleaded guilty on July 13 to wire fraud affecting a financial institution.

  • Authorities said that Bloom [...] acted as a settlement and title-insurance agent for real-estate sales and refinancings for a firm in Trevose, Bucks County, and, later, his own company. Bloom kept money he received from settlements that was supposed to be used to pay off existing mortgages, pay real-estate taxes in Philadelphia and make refunds to homeowners for overpayments at closings.


  • By pretending to be an attorney, Bloom increased the number of settlements that he could handle. Some jurisdictions in New Jersey permit only attorneys to handle real-estate closings. [...] Joyner ordered Bloom to make restitution of $1,730,874 to three title insurance companies, two financial firms and the city. (Homeowners ripped off have already been made whole, the feds said.)(1)

For the story, see Bogus lawyer stole $1.7M, gets 7 years.

(1) I get the feeling that the insurance companies that underwrite the title policies in real estate transactions pay out more to cover the looting of escrow accounts committed by their agents than they do in actual title claims. EscrowRipOffKappa

South Florida Title Agency Duo Charged With Looting $10M From Escrow Account; Cash Earmarked For Completing Real Estate Closings

In West Palm Beach, Florida, the U.S. Attorney's Office announced four mortgage/real estate fraud indictments of 15 individuals in four separate cases, including the following:

West Palm Beach Residents Charged with Looting Title Company’s Escrow Account

  • According to an indictment returned by a federal grand jury sitting in West Palm Beach, between July 2005 and May 2008, Roger C. Gamblin, 61, and Peggy L. Gamblin, 53, both of Royal Palm Beach, Florida, defrauded companies and individuals out of approximately $10 million.

  • According to the indictment, the husband and wife owners and operators of Flagler Title Company teamed up to steal money from the escrow account for Flagler Title Company to cover company operating expenses and personal expenses. The fraud was committed by promising the Title Insurance Companies they represented and various companies and individuals with outstanding real estate transactions that money in the Flagler Title Company escrow accounts would be used solely in connection with real estate transactions and their fees would not be disbursed until the transactions occurred and Flagler had earned their fee. Instead, the Gamblins caused money to be transferred without completing the transactions or obtaining permission from the Title Insurers, buyers, sellers and mortgagees involved in the property transactions.

For the entire press release, see Palm Beach County Mortgage Fraud Task Force Brings Charges Against 15 Defendants For Lying To Banks To Get Money. EscrowRipOffKappa

Massachusetts Attorney/Title Agent Cops Plea In "Mortgage Stacking" Scam; Pocketed $2M+ While Stiffing Existing Lienholders On Loan Payoffs

From the Office of the Massachusetts Attorney General:

  • Attorney General Martha Coakley’s Office announced the guilty plea of a former Somerville real estate attorney [...] in connection with making false statements on mortgage applications and associated documents and using the funds secured from the loans for his own purposes, rather than paying off existing loans as directed by the new lenders.


  • While practicing as a real estate lawyer in Somerville and Medford, [Kevin] Carey engaged in a scheme called “mortgage stacking” on four residential properties he or his family members owned. The scheme involved serially refinancing the loans on these properties, without paying off the existing loans. Carey was also the agent for a New England title insurance company which allowed him to issue title insurance policies on mortgage transactions he processed.


  • When he received the proceeds of the loans, Carey did not pay off the existing mortgages on these properties, but rather used the funds for his own benefit. Carey issued title insurance policies or commitments in connection with the transactions, and the lenders were therefore protected, but ultimately the title insurance company suffered the financial loss. As a result of this scheme Carey stole over $2 million.

For the Massachusetts AG press release, see Attorney General Martha Coakley’s Office Announces Guilty Plea of Former Somerville Lawyer in Connection with Stealing Over $2 Million From Mortgage Lenders in Mortgage Stacking Scheme. EscrowRipOffKappa

The Broken Gavel Awards

Incorrigibles and other assorted knuckleheads seem to infiltrate all fields and occupations. A recent column in The Southeast Texas Record serves as a reminder that the judiciary is no less immune to such infiltration.

Whether its lying to investigators investigating sexual misconduct allegations, soliciting sexual favors in return for leniency, transporting prostitutes across state lines, tax evasion in kickback schemes, lying about neck and back injuries - and later abusing one's position on the bench - in order to cash in on roughly $440,000 in insurance payments following an auto accident, the columnist, Texas attorney John G. Browning, observes that "judges' recent foibles have demonstrated that they, too, are as prone to character flaws as the defendants appearing before them."

For the story, see Legally Speaking: The Broken Gavel Awards.

Thursday, October 22, 2009

Psychiatric Patient Dodges Prosecution In Alleged Contract For Deed Scam; Court Officials Say Man Lacks Mental Capacity To Commit Crime

In Cloquet, Minnesota, KQDS-TV Channel 21 reports:

  • By midnight Tuesday, a Cloquet man must be out of his home, which he thought he partially owned. Mike Bond made monthly payments on the house since May 2008, then found out through an eviction notice he had been paying an alleged con artist. [...] "We just lost $30,000," said Bond. "I have over $15,000 in labor and material in this property and now I just have to walk away from it."


  • Bond says he was making cash payments to Ron Sampson, from whom he thought he was buying the home. "He had an ad posted on Craigslist contract for deed house. It was a quick easy deal." [...] That was until he learned the house was sold in a sheriff's mortgage foreclosure auction on January 6th to Lasalle Bank.(1)


  • Record–keepers [at the Carlton County Court Administrators Office] confirm in 1999, Ron Sampson was civilly committed as mentally ill and dangerous in Carlton county. [...] Cloquet Police say Sampson was also deemed mentally ill and dangerous in Washington County in 1994 and has been in and out of the Minnesota Security Hospital in St. Peter, MN, for treatment. [...] Because Sampson has been committed, court officials say he's treated as not having the capacity to commit a crime. If he gets in trouble, he's sent back to the Security Hospital.

For the story, see Cloquet family loses home in alleged scam by mental patient.

(1) Reportedly, Bond says Sampson got the house from the original owner by having her move out and pay Sampson to take care of her pending foreclosure. rent to own lease purchase option scams yellowstone hijack KappaPhonyLandlordScam

More Borrowers Using Court System To Save Homes From Foreclosure

CNNMoney reports:

  • During the housing boom, mortgage lenders were doling out the dough, giving loans to people who could never have qualified before. Now, homeowners and government officials are increasingly taking these institutions to court, alleging unfair and predatory practices. While many of these suits are still winding their way through the legal system, some banks have already settled for millions of dollars.


  • "Borrowers are looking to the legal system for help in keeping their houses," said Gary Klein, a partner in Boston-based Roddy Klein & Ryan, which focuses on consumer law. "There are more cases pending than I've ever seen in my 23-year career."

  • Homeowners are seeking the courts' help either individually or as part of class action lawsuits. With foreclosures continuing to rise, borrowers are looking to force banks to modify unaffordable loans or to stop them from foreclosing on homes. Often, they also seek money. To be sure, banks have faced unfair lending lawsuits for years and have paid millions of dollars in settlements. But the recent housing boom was fueled by questionable and exotic loans that many borrowers had no hope of repaying.

For more, see Predatory-lending lawsuits on the rise (Homeowners and government officials are taking mortgage lenders to court for unfair lending practices). EpsilonMissingDocsMtg UndoMortgageLoans TILAdelta

Class Action Status Sought For Elderly Homeowners Persuaded To Borrow Against Home To Invest In Alleged Ponzi Scheme

In Constantine, Michigan, the Kalamazoo Gazette reports:

  • For more than three decades, Orrin and Jama Bowlby have enjoyed a quiet life on Patterson Road in this rural St. Joseph County community. But in the last eight months, the Bowlbys’ simple life has been turned upside down. They say Portage insurance company American Benefit Concepts Inc., which is facing several lawsuits from dissatisfied clients and an investigation by the state, persuaded them to invest in a California-based Ponzi scheme. And it may end up costing them their home.


  • The Bowlbys aren’t alone. Ann Arbor attorney Joseph Spiegel, who filed one of the three lawsuits pending against ABC, said the Bowlbys are among approximately 70 older homeowners in Michigan who were allegedly persuaded by ABC salesmen to take out new mortgages on their homes and invest the proceeds in Diversified Lending Group Inc. Spiegel’s suit seeks class-action status for an estimated 250 ABC clients in Michigan who invested with Diversified Lending Group, a California real-estate-investment company that was charged with securities fraud earlier this year. It promised investors 12 percent annual returns with no risk. Spiegel said he and West Bloomfield attorney Anthony Trogan represent about 160 ABC clients who claim they’ve lost about $7 million.

  • Diversified was a Ponzi scheme,” said David Gill, the court-appointed receiver overseeing Diversified Lending Group’s assets during the lawsuit. “The only way it could pay the returns it promised was by taking in and paying out money from new investors.”

For more, see Mortgage nightmare: Retired couple face foreclosure after 'too good to be true' investment (Orrin and Jama Bowlby, a retired couple in Constantine, say they were convinced by insurance company American Benefit Concepts Inc. to take out a loan on their house and invest the money into am alleged Ponzi scheme. Now they are at risk of losing their home to foreclosure).

Wednesday, October 21, 2009

Mass. AG Settles With Straw Buyer In Alleged Foreclosure Rescue Scam That Used Sale Leaseback Deals To Rip Off Equity From Strapped Homeowners

In Boston, Massachusetts, the Worcester Business Journal reports:

  • Attorney General Martha Coakley's office has reached a settlement with Neville Francis, one of 18 defendants accused of taking part in a wide-ranging foreclosure scam.(1) Per a consent judgment, Francis will pay $5,000 in restitution and $1,500 in attorneys' fees and costs. Coakley's office said Francis acted as a "straw buyer" in a scheme along with several real estate brokers, mortgage brokers and attorneys that ran a fraudulent foreclosure rescue program. Francis allowed a mortgage broker to use his name in applying for a loan to purchase a property. Francis took title to the property without paying deposits, or closing costs and had no intention of occupying the property. Francis is the third defendant, and the second straw buyer, to settle with Coakley's office in the case.(2)

Source: Alleged Foreclosure Scammer Settles With Coakley.

For the Massachusetts Attorney General press release, see Straw Buyer Who Participated in Foreclosure Rescue Scheme Enters into Consent Judgment.

(1) The defendants in the case tricked homeowners on the brink of foreclosure into selling their homes while promising that they'd be able to remain in their homes and that they would maintain their homes' equity, according to Coakley's office. However, the alleged scammers would disburse sale proceeds among themselves without paying any fees, and in certain cases, would sell the homes several times among themselves.

(2) According to the Massachusetts AG's Office, it reached a similar settlement in August with straw buyer Marie Betey Mereus. Additionally, this past June, it reached a settlement with closing attorney Valerie Hanserd providing for a payment of $115,000 to resolve allegations over her role in both this foreclosure rescue scheme case and a second related enforcement action against her and Leo Desire Sr. and Primary Mortgage Resource, Inc.

Ex-NBAer Leaves Adoptive Mom Homeless; Duped Her Into Signing Over Home, Failed To Make Payments On Subsequent Financing, Resulting In Foreclosure

In Cambridge, Massachusetts, The Detroit News reports:

  • Rumeal Robinson got famous for his performance under pressure -- two free throws with three seconds left in overtime to clinch Michigan's 1989 NCAA basketball championship.(1) But the Cambridge, Mass., public school security officer who raised Robinson after finding him abandoned at age 10 says he has fallen far from the image of someone you can count on. Helen Ford, 65, took Robinson into her home, and accuses him of cheating her out of her house.(2)

  • Ford cried while describing to a Detroit News reporter how she was evicted in April from the home on Rumeal Robinson Way in Cambridge where she and her deceased husband Louis raised nine children and provided temporary care to many more. "I didn't know I was signing my house over. I thought I was taking out a mortgage because my son asked me for help," Ford said. "He said he would make the payments and I thought all these years he was making the payments until the constable came and told me I was being evicted."

  • She unwittingly signed papers in 2003 that sold the home for $600,000. The property has since changed three times and finally went into foreclosure. Her attorney bought time for her to remain in the home, but he now is uncertain if there is any way to get the place back.

  • Ford lives in a two-bedroom apartment. She said she doesn't sleep well because, for the first time in her life, she is alone. She had raised five of her own, four adopted children and provided temporary care for many more foster children in the five-bedroom house. She was honored for her dedication during the halftime of a Boston Celtics game in 2006.

For more, see U-M hoops hero Rumeal Robinson accused of swindling mom, others.

In a related story, see Broward-Palm Beach New Times: That's Foul (Hoops hero Rumeal Robinson blew a fortune on strippers, got indicted, and left his mom homeless).

(1) According to the story, his famous free throws downed Seton Hall, 80-79, and landed Robinson on the cover of Sports Illustrated. His adoptive parents accompanied him to the 1990 National Basketball Association draft in New York, where he was selected 10th overall in the first round by the Atlanta Hawks. He never lived up to expectations, and ended up literally bouncing around the NBA, playing for the New Jersey Nets, Charlotte Hornets, Portland Trail Blazers, Los Angeles Lakers and Phoenix Suns, the story states.

(2) No stranger to accusations of real estate hanky panky, Robinson was indicted by federal authorities in Iowa for his part in an alleged swindle of more than $2 million involving a proposed resort development called Harmony Cove in his native Jamaica. He was released last month on $50,000 bond, the story states. DeedContraTheft

Nevada AG Bags Two, Seeks Another In Alleged Scam That Used Unwitting Homeowner's Stolen I.D. To Pocket Proceeds From Fraudulently Obtained Mortgage

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

  • Two Las Vegas men have been arrested on several charges of theft, mortgage fraud, identity theft and forgery against senior citizens, Nevada Attorney General Catherine Cortez Masto said [...]. Thomas F. Gentile, 56, and Julio C. Martinez, 61, are in custody after they were allegedly involved in a scam to obtain a mortgage loan against a property owned by Gentile's former employer, without knowledge or consent, Masto said. An arrest warrant has been issued for a third man, 30-year-old Justin M. Sabo of Huntington Beach, Calif., whose whereabouts are unknown.


  • The three men, using the false identification, got a $65,000 mortgage loan against the former employer's property. The victims were senior citizens who had paid cash for their home and did not hold a mortgage on the property, Masto said. The lenders also were victimized when they approved an application without knowing it was false, Masto said. The elderly couple received a notice of foreclosure for non-payment, and they contacted the attorney general's office. Since the couple are senior citizens, several counts alleged in the criminal complaint could increases their sentences if the three men are found guilty, Masto said.

Source: Vegas men arrested in alleged mortgage scam against elderly.

For the Nevada Attorney General press release, see Attorney General Announces Arrest In Connection With Mortgage Scam Against Senior Citizens.

Tuesday, October 20, 2009

California Tenant Advocacy Group In Forefront In Fight Against Banks, Real Estate Agents Attempting To Illegally Oust Tenants From Foreclosed Homes

In Sacramento, California, NewsBlaze reports:

  • Backed by Tenants Together, California's statewide tenant rights organization, tenants in Sacramento have fought off local realtors and a bank that tried to illegally trick them into moving out of their home after it was foreclosed. Golden 1 Credit Union, through its local realtors at the Bishop Real Estate Group, attempted to drive out tenants after foreclosure in blatant violation of a new federal law. In a letter [...], Tenants Together is demanding that The Bishop Real Estate Group and Golden 1 Credit Union take immediate steps to comply with the law and stop evicting innocent tenants after foreclosure.

  • Mr. and Mrs. Caesar are tenants who have a two-year lease to continue renting their home through September 2010. Golden 1 Credit Union, the lender, took over the property on October 2, 2009. Golden 1 Credit Union quickly dispatched local realtors at The Bishop Real Estate Group to carry out the bank's dirty work - throwing innocent tenants out of their homes after foreclosure. On October 7, 2009, Kendra Bishop of The Bishop Real Estate Group told Mrs. Caesar that she and her husband had to move. Ms. Bishop also handed Mrs. Caesar a threatening letter, informing her that Golden 1 Credit Union had "started eviction proceedings" and urging Mrs. Caesar to accept a "relocation offer" that would expire in 3 days. [...] As soon as the foreclosure occurred, Mrs. Caesar called Tenants Together and learned that, pursuant to the Protecting Tenants to Foreclosure Act,(1) her lease survived foreclosure and that she was entitled to continue renting her home until the lease expires on August 31, 2010.(2)

For more, see Sacramento Tenant Fights Off Realtor & Bank Trying to Illegally Evict Her Family.

(1) This federal foreclosure law was passed this spring and requires (with one exception not applicable here) property owners who come into land through foreclosure to honor all existing leases, and to provide a minimum of a 90-day window for any month-to-month tenants. See Section 702(a)(2) of the Protecting Tenants at Foreclosure Act of 2009.

(2) "This behavior is outrageous," commented Gabe Treves of Tenants Together, "The Caesars have every right to stay in their home, yet the realtors and the bank came storming in and demanded that they vacate. Banks and realtors routinely act in blatant violation of the law. That is why we are demanding that they change their policy, commit to following the law, and stop harassing tenants." RentSigmaSkimming

Arizona AG Obtains $580K Default Judgment Against Alleged Loan Modification Racket For Fleecing Homeowners Out Of Upfront Fees, Breaking Promises

In a recent press release, the Office of the Arizona Attorney General announced the obtaining of a default judgment in a civil lawsuit it brought against a local foreclosure rescue operator who peddled loan modification arrangements to homeowners facing foreclosure, purportedly to help them avoid the loss of their homes.(1)

  • In the suit, [Attorney General Terry] Goddard alleged that [...] Matthew Castaneda, of Glendale, and Michael Winding, of Phoenix, through their limited liability company Hope for Homeowners Now, LLC, victimized homeowners facing imminent foreclosure with fraudulent claims of high success rates modifying mortgage loans. Hope for Homeowners Now advertised loan modification services for an upfront fee of $3,195.

Based on the Attorney General’s investigation, Goddard alleged that Hope for violated numerous state laws by:

  • Deceptively implying it was more successful at obtaining mortgage loan modifications than consumers who try to obtain modifications on their own or with the assistance of non-profit organizations. In fact, the company’s success rate was no better than that of its clients who tried to obtain loan modifications on their own,
  • Misrepresenting that the company was comprised of real estate and financial professionals, as well as “professional mitigation attorneys,” and that attorneys negotiate on behalf of Hope for Homeowners’ clients,
  • Charging consumers an upfront fee prior to the full performance of services and without first having obtained a surety bond,
  • Failing to provide its loan modification clients with the necessary substantive disclosures required by the Arizona Credit Services Act.

For the press release, see Goddard Wins $1.37 Million for Consumers in Two Mortgage Fraud Cases.

For the related court documents in this case, see:

(1) According to the court judgment, the defendants must:

  • Pay $424,935 in restitution to consumers,
  • Pay $155,000 in civil penalties to the State of Arizona,
  • Permanently refrain from providing loan modification or origination services in Arizona or on behalf of an Arizona consumer.

Short Sales Coupled With Lease-Buyback Option A Way To Help Those Facing Foreclosure Stay In Their Homes?

In Manteca, California, The Stockton Record reports on local homeowner Rachael Vasquez and her attempt to stay in her home despite a pending foreclosure on her family's three-bedroom home:

  • Vasquez has opted for what appears to be a growing trend - albeit one that should be approached with caution and isn't without its down side - in the Central Valley for struggling homeowners. She struck a deal with an investor to purchase her home as a short sale then entered into a lease-option agreement to buy it back in three years. Vasquez will pay rent for 36 months and will then repurchase her home for $234,000, 130 percent of what she sold it for on short sale.

  • Manteca ReMax agent Christine Papworth, [...] crafted the local lease-buyback program a year ago, and has completed about 65 sales with investors. Papworth has worked the deals with one main investor, the Land Group of Modesto. She also is close to reaching an agreement with a group of Stockton investors represented by Grupe Real Estate broker Jerry Abbott. Abbott said his group has two lawyers reviewing the program to make sure there are no pitfalls.(1) [...] He added that he worries banks would reject offers once they know a lease/buyback is being offered to the seller that it approved for a hardship.(2)

For more, see Home program savior or sketchy? (Buyback investor deals risky, some experts say).

(1) One potential pitfall for the investor is that the deal could be recharacterized as an equitable mortgage (and possibly, an usurious equitable mortgage, if the overall profit to the investor exceeds any applicable limit on the charging of interest under state law). In that case the homeowner, in the event of a default or failed buyback attempt, can only be ousted from the home after a lawsuit to foreclose the investor's equitable mortgage, and not through a tenant eviction action. Go here for some case law on Equitable Mortgage Doctrine In California.

(2) Failure to fully disclose any contemporaneous side deals to the lender/loan servicer approving the short sale, or any lender financing the short sale, could land the participants in these deals in hot water. See:

Cop Accused Of Duping Girlfriend Into Signing Over Her Share Of Jointly-Owned Home, Then Giving Her The Boot

In Elk Grove, California, the Elk Grove Citizen reports:

  • Authorities arrested and jailed former Elk Grove City Council Member Michael Leary(1) for allegedly committing real estate fraud on Oct. 2. A warrant was served on Oct. 1 for his arrest when Sacramento County Sheriff’s Department investigators suspected that he forged real estate documents and unlawfully evicted his then-girlfriend from their house in Elk Grove’s Laguna West area. Leary, 49, now faces the felony charges of grand theft, forgery and recording a false document, the Sacramento County District Attorney’s Office announced on Oct. 2.


  • His former girlfriend Alyc Maselli claimed that Leary deceived her into believing they had equal ownership of a house they bought for $610,000 on Marina Cove Circle in 2005. Investigators believe that he forged the grant deed where he claimed 90 percent ownership of the home, without her knowledge. Leary allegedly had this altered document notarized.


  • Maselli claimed she did not know about Leary’s allegedly altered deed until last January when he evicted her from the house. Her attorney reportedly informed her that she did not have the title to the home as of 2006.

For more, see Ex-council member Leary arrested for alleged real estate fraud.

(1) Reportedly, Leary is a Sacramento County Sheriff’s Department lieutenant who co-managed the Rio Cosumnes Correctional Center outside Elk Grove. His agency declined to release an official statement about his criminal case. A Sheriff’s department spokesperson said that Leary was placed on administrative leave, according to the story. DeedContraTheft

Monday, October 19, 2009

Defunct Miami Loan Modification Outfit Faces Class Action Suit; Key Company Employee Bolts Florida & Resurfaces In Nevada With New Firm, Says Attorney

In Miami, Florida, The Miami Herald reports:

  • A Miami lawyer has filed a class-action suit in hopes of recovering millions of dollars paid by thousands of clients to a mortgage-rescue company. [...] On Thursday, Miami lawyer John H. Ruiz filed a class action suit in the Lincoln [Lending Services] case. Ruiz said he already has more than 1,000 clients in the case and believes that thousands of others are in the same situation. The suit also names two people associated with the company, Guillermo Leyes and Rita Gomez, as defendants. Ruiz said he believes they have assets that could be used to pay restitution.


  • Ruiz said that Leyes recently resurfaced as a manager at a Nevada loan modification company. According to Nevada records, a Guillermo Leyes was a manager at 1st Loan Modification of America in Henderson. Ruiz said Leyes withdrew his name from that company this week.

For more, see Lawyer sues mortgage-rescue firm to recover improper fees (A local attorney is suing a mortgage-rescue company that he says broke state law, then failed to reimburse all its former clients).

(1) Florida's attorney general shut down the company, Lincoln Lending Services, earlier this year, saying it illegally demanded advance payment for mortgage-rescue services (See Florida AG press release, State of Florida v. Lincoln Lending Services lawsuit). Since October 2008, Florida law has prohibited companies from accepting payment in advance for mortgage rescues. The company paid back about $500,000 in restitution, then said it was out of money, according to the office of Attorney General Bill McCollum (see Status update concerning Lincoln Lending). The agency is now trying to determine whether Lincoln has other assets that could be used to repay additional customers.

Right To Counsel In Key Civil Cases Now Recognized In California; Levels Playing Field For Poor In Certain Housing, Other Litigation

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

  • California is embarking on an unprecedented civil court experiment to pay for attorneys to represent poor litigants who find themselves battling powerful adversaries in vital matters affecting their livelihoods and families. The program is the first in the nation to recognize a right to representation in key civil cases and provide it for people fighting eviction, loss of child custody, domestic abuse or neglect of the elderly or disabled. Advocates for the poor say the law, which Gov. Arnold Schwarzenegger signed this week, levels the legal playing field and gives underprivileged litigants a better shot at attaining justice against unscrupulous landlords, abusive spouses, predatory lenders and other foes.(1)

For more, see California gives the poor a new legal right (Under a new law, the state will provide lawyers in key civil cases, such as those dealing with eviction and domestic abuse. Advocates say underprivileged litigants will get a better shot at justice).

(1) "How ironic that you can be arrested for stealing a small amount of food -- a box of Twinkies from a convenience store -- and you're entitled to counsel. But if your house is on the line, or your child is on the line, or you're being abused in a domestic relationship, you don't have the same right to counsel," said Assemblyman Mike Feuer, the Los Angeles Democrat who sponsored the bill.

Foreclosure Rescue Operator To Cough Up $690K+ To Resolve Arizona AG Civil Charges In Alleged Sale Leaseback Equity Stripping Scam

In a recent press release, the Office of the Arizona Attorney General announced the settlement of a civil lawsuit it brought against a local foreclosure rescue operator(1) who peddled sale leaseback arrangements to homeowners facing foreclosure, purportedly to help them avoid the loss of their homes.(2)

  • In March, [Arizona Attorney General Terry] Goddard filed a lawsuit on behalf of his office and the Arizona Department of Financial Institutions against an alleged foreclosure rescue operation believed to have defrauded some 270 Arizonans of their homes. In the suit, Goddard alleged that between 2003 and 2007, Richard Winer, 33, of Tempe, through his limited liability companies - Taken Care of Investments, LLC; Homeowner Solutions, LLC; Bourbon Street Property Management, LLC; and Filibuster, LLC - victimized homeowners facing imminent foreclosure with fraudulent offers to help them stay in their homes.


  • According to court documents, Winer and his salespeople persuaded struggling homeowners to deed him their homes in return for assuming their monthly mortgage payments and paying off the full value of their delinquent payments. Winer charged homeowners a monthly fee equivalent to the mortgage payment to remain in the home as a renter. Neither the owner’s mortgage lender nor servicer was notified of the transfer of title.

  • These owners-turned-renters had the option to repurchase the house from Winer within one year for a fee of approximately $15,000, if they met all of the conditions of the sale-leaseback agreement. If the owner-turned-renter violated any of the conditions, such as by making even one late rental payment, the option to repurchase the home became void and the individual was subject to immediate eviction. The State’s lawsuit claimed that homes obtained under this scheme were resold within two weeks to investors who paid a commission to Winer. Almost all of the owners-turned-renters proved unable to repurchase their properties, at which time the investor sold or refinanced the home at full market value, earning profits in the tens or, in some cases, hundreds of thousands of dollars.

For the press release, see Goddard Wins $1.37 Million for Consumers in Two Mortgage Fraud Cases.

For earlier post on this lawsuit, see 400 Sale Leasebacks Are Disguised Equitable Mortgages, Says AZ AG In Invoking State Consumer Fraud Act, TILA In Suit Against Foreclosure Rescue Firm.

For the related court documents in this case, see:

(1) According to the terms of the settlement, Richard Winer must:

  • Pay $391,500 in restitution to homeowners victimized by their alleged scheme,
  • Pay $150,000 in civil penalties to the Attorney General’s Office,
  • Pay $150,000 in civil penalties to the Arizona Department of Financial Institutions,
  • Refrain from participating in any manner in any financial institution or enterprise licensed by the Arizona Department of Financial Institutions.

(2) In similar settlements of lawsuits brought by other state Attorneys General in alleged sale leaseback, foreclosure rescue, equity stripping scams, see:

Statewide Ban On Upfront Fees For Loan Modifications Now Includes Attorneys, Out Of State Operators Who Solicit California Homewoners

In Sacramento, California, The Sacramento Bee reports:

  • Loan modification firms that promise to help struggling borrowers get their mortgages rewritten have been banned immediately from asking for cash upfront. Attorneys, too, who specialize in loan modifications are no longer allowed to ask consumers for payment before they perform services. The ban expires on Jan. 1, 2013. The abrupt change in California law comes after Gov. Arnold Schwarzenegger Sunday signed Senate Bill 94, by Sen. Ron Calderon, D-Montebello. As an urgency measure, the bill takes effect immediately.


  • Loan-modification firms have made relentless pitches to borrowers through radio and television ads, postcards and telephone calls. Many desperate people have turned to them, often coughing up a few thousand dollars for help that didn't come. "This is a huge problem, and the signing of this (bill) will help," said Tom Pool, spokesman for the California Department of Real Estate. He said the department has 1,300 complaints on file and has issued 400 cease and desist orders against loan modification firms. The law banning advance fees applies to firms in California or elsewhere that solicit clients in California.

For more, see Loan modification firms banned from demanding upfront fees.

Nevada Homeowners Saddled By IndyMac With "Exploding ARMS" To Freeze Foreclosure By Joining Class Action?

In Las Vegas, Nevada, the Las Vegas Review Journal reports on homeowner Luis Armando Benito and others who allege to have been duped into unaffordable adjustable rate mortgages from IndyMac Bank that "exploded" on them shortly after obtaining the loans:

  • Today, Benito and other locals with Indymac mortgages are fighting back -- and making progress. They have joined a federal class-action lawsuit against Indymac Mortgage brought by attorneys Matthew Callister and Brooke Bohlke. Their clients' homes range in value from $150,000 to more than $1 million.

  • Among many allegations, the attorneys contend OneWest "breached the loan agreements/contracts by failing to disclose the following: APR, method of determining the finance charge, balance, actual finance charge, total payments, amount financed, number of payments, and due dates. OneWest breached the loan agreements/contracts by doubling Plaintiffs mortgage payments when the mortgage 'arms' came due."

  • Although they come from vastly different backgrounds, the homeowners share a common story of how creatively they were qualified for their loans. Some of the loan documents contained more fiction than a Stephen King novel.


  • The list of homeowners taking action grows as they learn about the lawsuit. "Somebody's got to bite the bullet and say, 'We're going to freeze foreclosures on single family homes,'" Callister says. "If it takes the court system's intervention, then so be it." Once a troubled Indymac borrower learns of the lawsuit, Bohlke says, "We've been able to stop foreclosures with 24 hours' notice." With about 1,000 Indymac mortgage loans heading into default in Southern Nevada alone, the phones at the law office figure to keep ringing for some time to come.

For the story, see Homeowners whose mortgages fizzled fight back with class-action lawsuit. UndoMortgageLoans TILAdelta

CT Feds Indict Two In Alleged "Short Sale" Flipping Scam Using Straw Buyers To Dupe Lenders Into Accepting Less Than Full Payment On Underwater Loans

From the Office of the U.S. Attorney (Bridgeport, Connecticut):

  • Nora R. Dannehy, United States Attorney for the District of Connecticut, [...] announced that a federal grand jury sitting in Bridgeport has returned a two-count indictment charging SERGIO NATERA, 35, of Bridgeport, and ANNA McELANEY, 38, of Norwalk, with one count of conspiracy to commit bank fraud and one count of bank fraud. NATERA and McELANEY are licensed real estate agents and the charges stem from an alleged “short sale” mortgage fraud scheme involving four properties located in Connecticut.


  • The indictment alleges that in 2007 and 2008, NATERA and McELANEY conspired to defraud financial institutions of the full proceeds due to them on four separate real estate transactions in Bridgeport (2), Monroe and Wallingford. The indictment alleges that NATERA and McELANEY created straw buyer transactions in order to negotiate with mortgage holders to allow sales of the properties to occur without paying the mortgages in full. During the negotiations with the mortgage holders, NATERA and McELANEY knew that legitimate purchasers already had executed purchase and sale agreements with the property owners to purchase the property at higher prices.

  • On each of the transactions, NATERA and McELANEY are alleged to have arranged for two closings to take place, the first from the property owner to the straw buyer at the short sale price, and the second from the straw buyer to the legitimate purchaser at a higher price. The indictment alleges that the mortgage lenders did not know about the second closing and received no proceeds from the second closing.(1)

For the U.S. Attorney press release, see Two Connecticut Real Estate Agents Charged with Engaging In Short Sale Mortgage Fraud Schemes.

(1) For other stories on alleged short sale flipping scams, see:

Sunday, October 18, 2009

NYC Feds Bag 41 Suspects In Eight Separate Fraud Cases Involving Home Flipping, Short Sales, Foreclosure Rescue, Equity Stripping

From the Office of the U.S. Attorney (New York City):

  • PREET BHARARA, the United States Attorney for the Southern District of New York [and other Federal, state, and local law enforcement officials] announced [last week] the unsealing of charges against 41 defendants, in eight separate cases, for allegedly engaging in various mortgage fraud scams that collectively defrauded lenders out of more than $64 million in home mortgage loans on more than 100 properties across New York State. Among those charged are six lawyers, seven loan officers, three mortgage brokers, an accountant, and a residential property appraiser.


  • The mortgage fraud scams alleged in the cases announced [last week] included, among other things, property flips, equity stripping, and appraisal and loan fraud. In one case, defendants operated a foreclosure rescue scheme, targeting individuals who were on the verge of losing their homes by tricking them into giving up the equity in the properties with false promises that their homes would be saved.

For the U.S. Attorney press release, including a summary of allegations in each case, see Manhattan U.S. Attorney Charges 41 Defendants In Coordinated Mortgage Fraud Takedown Across New York State (Defendants Charged With Fraudulently Obtaining More Than $64 Million In Residential Mortgages On More Than 100 Properties; Lawyers, Mortgage Brokers, And Loan Officers Among Those Arrested In "Operation Bad Deeds").

Go here for links to the "OPERATION BAD DEEDS" Charging Documents for each of the eight cases.

Indianapolis Feds: Attorney Skimmed $106K In Foreclosure Sale Proceeds From Lender

In Indianapolis, Indiana, The Indianapolis Star reports:

  • An Indianapolis lawyer was charged today with bilking a mortgage company of $106,000 from the purchase of foreclosed homes. The U.S. Attorney's office in Indianapolis said Brian L. Nehrig, 43, skimmed profits from 32 foreclosure purchases in Indiana. He was hired by CitiMortgage to place bids for foreclosed homes at sheriff's auctions. He was charged with mail fraud because he mailed checks that were less than he received for selling the properties to third parties.

Source: Feds charge lawyer with skimming foreclosure cash.

See also, Former Fishers foreclosure lawyer faces federal mail-fraud charges (Man allegedly was to place bids on homes for lienholder but bought properties himself).

For the U.S. Attorney (Indianapolis) press release, see Former Attorney Charged With Fraud:

  • [According to the charging documents,] Nehrig placed an inflated minimum bidding price for many of the properties at the sheriff’s sale. He then completed sales of the properties with third parties with whom he was associated without CitiMortgage’s knowledge and permission. Nehrig hid the conduct from CitiMortgage by sending CitiMortgage a check for its minimum price plus $1, making CitiMortgage believe its property had sold at the sheriff’s sale in an arm’s length transaction. The charging document alleges that the difference between the funds sent to CitiMortgage and the actual funds received by the deals was $106,122.

Arizona HOA Thrown Into Receivership Amid Allegations Of Board Members' Fraud, Theft Of Association's Funds

In Pinal County, Arizona, the Arizona Capitol Times reports:

  • A Casa Grande homeowners association was placed in receivership, following allegations that board members drained funds for their own benefit - including what was described as the “theft” of more than $600,000. Pinal County Superior Court Judge Robert Olson’s Sept. 30 order placed a receiver in charge of the Desert Carmel Lot Owners Association.

  • Along with other reasons, Olson cited a board member’s unauthorized withdrawal of $665,000 from association’s account. “The court finds that the parties controlling the DC Lot Owners Association were grossly negligent in failing to protect to, protect, preserve or detect these withdrawals, which constituted the bulk of the liquid assets of the association,” Olson said in his order. “This alone justifies the appointment of a receiver.”

For more, see Casa Grande HOA stripped of powers over accusations of theft and fraud.

Housing Authority Seeks To Boot 86-Year Old Tenant; Son Sold Drugs On Property, Say Officials

In Bucks County, Pennsylvania, the Bucks County Courier Times reports:

  • Officials said Belle Perry violated her lease because her son sold drugs on the property. The Bucks County Housing Authority has filed paperwork to evict an 86-year-old woman from her federally subsidized home in Venice Ashby because officials say her son sold drugs on the property, among other lease violations.(1)


  • Police records of the Aug. 20 drug arrest state that her son, Sylvester Perry, sold a small amount of drugs to another man on the 1600 block of Foster Avenue Circle. Belle Perry lives in that block. Sylvester Perry is in prison on $40,000 bail awaiting an October hearing on those charges. On Aug. 26, the housing authority filed a complaint seeking Belle Perry's eviction.


  • "Its disturbing that an 86-year-old woman would be evicted and given less than 72 hours to leave for something her son allegedly did and he doesn't even live there," Philadelphia attorney L. Kenneth Chotiner said Friday. Chotiner, a former Philadelphia Housing Authority attorney, said he advised Belle Perry to file for bankruptcy to try to stave off the eviction. [Daughter] Bobbie Perry said she filed for bankruptcy on behalf of her mother Friday morning.

For the story, see 86-year-old woman fights eviction.

(1) In court records, the authority states that Belle Perry violated her lease by allowing drug-related activity on her premises, allowing herself, tenants and guests to disturb the peace, failing to maintain decent, safe and sanitary conditions, allowing herself, tenants and guests to engage in illegal, unlawful or disorderly conduct, and allowing drug-related criminal activity, according to court records.

Virginia Couple Get Prison Time For Running Foreclosure Rescue Ponzi Scheme Resulting In $9.7M In Losses

In Richmond, Virginia, the Richmond Times Dispatch reports:

  • Darrell and Cynthia Underwood were sentenced to prison terms of 10 years and three years, respectively, [...] in a real estate investment scheme that caused $9.7 million in losses. The Chesterfield County couple were sentenced by U.S. District Judge James R. Spencer, who imposed the stiffest term called for under Darrell Underwood's plea agreement but two years less than the maximum his wife was facing. Each apologized yesterday for their conduct and to their victims, many of them fellow church members at the Mount Gilead Full Gospel International Ministries.


  • The Underwoods were owners of Walkwood Properties,(1) which specialized in helping homeowners about to lose their homes to foreclosure. The company solicited money from investors to help purchase homes. Many who invested were promised -- and received -- a 50 percent return on their money within 60 to 90 days. But the Underwoods were running a Ponzi scheme in which money from new investors was used to pay earlier ones. [...] Of $18 million the couple brought in from investors in just eight months, only $2.1 million was used in any housing transactions.

For more, see Chesterfield couple sentenced in fraud scheme.

For the U.S. Attorney (Richmond, VA) press release, see Chesterfield Husband and Wife Sentenced in Multi-Million Dollar Fraud Scheme.

(1) According to the U.S. Attorney's Office, Walkwood Properties is connected to another case styled United States v. Colin C. Connelly, Case No. 3:08CR466. In connection with a guilty plea entered on December 2, 2008, Connelly admitted to conspiring with representatives from Walkwood Properties to skim equity in housing transactions by making false entries on HUD-1 Settlement Statements. On March 10, 2009, Judge Spencer sentenced Connelly to 24 months imprisonment and ordered him to pay $376,464.62 in restitution.