Saturday, December 12, 2009

NJ Woman Accused Of Abusing POA To Steal Nursing Home-Bound Mom's Monthly Social Security, Pension Payments & Stiffing Care Facility

From the Office of the New Jersey Attorney General:

  • Attorney General Anne Milgram and Division of Criminal Justice Director Deborah L. Gramiccioni announced that a Toms River woman has been indicted for allegedly stealing monies that her mother received from Social Security and a pension plan. [...] Laura Lembo, 46, of Toms River, was charged [...] with third-degree theft by unlawful taking or disposition.

  • The Ocean County grand jury indictment alleges that [...] Lembo exercised unlawful control of the property of her 80 year-old mother, a Medicaid recipient. An investigation determined that Lembo, who had power of attorney over her mother’s income – including her monthly Social Security and pension checks – allegedly failed to remit all of her mother’s income to the nursing care facility in which her mother resided. As a condition of continued Medicaid eligibility, this income, minus a small personal needs allowance, must be paid to the facility to partially cover the cost of the mother’s ongoing care. The investigation revealed that during the time in question, this income was $40,052.88 but, of this amount, Lembo allegedly paid the facility only $21,233.13 and kept the remainder for her own use.

For the NJ AG press release, see Toms River Woman Charged With Theft for Diverting Part of Her Mother’s Social Security And Pension Income.

Attorney Charged In £90,000 Ripoff Of Recently Widowed Blind 90-Year Old; Allegedly Forged POA Before Looting Senior's Savings Accounts

In Codsall, U.K., the Express & Star reports:

  • A scheming solicitor branded The Vulture swindled £90,000 from the blind widow of a millionaire Black Country industrialist, the Express & Star can reveal. Veronica Wilkinson spent thousands on plastic surgery, designer clothes, pets and a £37,000 Audi within days of the death of 86-year-old Les Carrier. Mr Carrier, former chairman of Wednesbury-based steel firm FH Lloyds, lived with his wife Doris, known as Dot, for most of their married life in Codsall.

  • Wilkinson was head of the wills and probate department at the Codsall office of law firm Dunham, Brindley and Linn – now DBL Talbots – when she forged a document to give her power of attorney over Mrs Carrier’s financial affairs. In less than two months, the debt-ridden lawyer plundered £72,086 from the 90-year-old’s Lloyds TSB bank account and £21,150 from her Hinckley Building Society account.

For more, see Lawyer stole from widow. FinancialAbuseOfElderlyAlpha

Discipline Recommended For Title Agency Owner Accused Of Pocketing Premiums & Failing To Remit To Insurance Underwriter

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

  • An administrative law judge in St. Paul is recommending that the owner of Scenic Title & Abstract be disciplined for failing to remit title insurance premiums in the last four years. Kevin Eckholm, owner of the now-closed title company in Duluth and Two Harbors, was accused in October of fraud and operating without proper licenses after an investigation by the Minnesota Department of Commerce. Eckholm was then accused of collecting title insurance premiums 237 times dating to 2006 and failing to submit that money to the title insurance company. Judge Eric L. Lipman concluded after a hearing in late October that in “nearly 100 separate transactions” Eckholm failed to “maintain sufficient account balances so as to timely remit premiums to Land America.”


  • Title insurance is packaged with the purchase of property to protect new owners or their lenders against unforeseen challenges to their ownership. Minnesota Department of Commerce officials said purchasers of title insurance through Scenic Title should not worry about insurance coverage. “It would be fair to say that they all have title insurance,” Rochelle Barnhart, a former department spokeswoman told the News Tribune in October. “So there is no repercussion to those customers at all.”

For more, see Judge recommends discipline against Duluth title company (Kevin Eckholm, owner of Scenic Title in Duluth and Two Harbors, was accused of collecting title insurance premiums and failing to submit that money to the title insurance company).

See also, Minnesota Department of Commerce press release: Title Insurance Company in Duluth and Two Harbors charged with fraud.

Friday, December 11, 2009

Fannie, Freddie Seek To Have Big Lenders Eat Bad Home Loans; Poor Underwriting Drives Mortgage Finance Giants' Recovery Efforts Over Debt Gone Sour

Dow Jones Newswires reports:

  • As home loans sour at a rapid clip, mortgage finance giants Fannie Mae and Freddie Mac are aggressively bouncing back defectively underwritten loans to lenders. The result: higher loan-loss reserves for the lenders and new headwind for banks trying to escape the housing downturn.

  • For lenders such as Wells Fargo & Co., Bank of America Corp., J.P. Morgan Chase & Co. and Citigroup Inc., which are among the largest sellers of mortgages to Fannie and Freddie, this could mean buying back souring loans at a loss. Banks are already on the hook for mortgages residing on their books. But Fannie and Freddie are seeking to hold them accountable as well for what they say are improperly underwritten mortgages sold to them in the past.(1)

For more, see Headwind For Lenders As Fannie, Freddie Bounce Back Loans.

(1) Reportedly, lenders are also pushing back and refusing some repurchase requests. Moreover, lenders don't have strict disclosure rules for these mortgage buybacks or the reserves to pay for them, so it's difficult for shareholders to estimate the potential exposure of a company, the story states. In most cases, investors holding these loans can force the lender to take the mortgages back, and recover the unpaid principal on them, if they were underwritten improperly. For instance, lenders would have to buy back loans from investors if borrowers lied about their income or misstated that the property is their primary residence, the story states. Other reasons a loan may be put back: a fraudulent home appraisal or inadequate documentation.

Right Of Redemption Creates 6-Month Period Of Legal Limbo For Vacant Minnesota Foreclosures, Forcing Cities To Step In With Maintenance Effort

The Minneapolis Star Tribune reports:

  • Redemption -- in Minnesota, usually a six-month period following a sheriff's sale during which the people who owned the house can buy it back -- poses a problem for cities. If a home winds up vacant or vandalized during that time, the homeowner and bank often deny responsibility, putting the burden of fixing it on the city. "It's essential for the city to [maintain a house], because in the period of exchanging ownership we have to," said Larry Lee, Bloomington's community development director. "We hire the contractor and bill the responsible owner." Then, he said, "If they do not pay, we get the money back as special assessments on property taxes."(1)


  • In Minneapolis, where thousands of homes have been moving through foreclosure over the past four years, the city has tried to minimize the threat to its housing stock by adding an array of stiff fees for violations. [...] Faraway banks "are draining city resources under the guise of being in the redemption period," [Minneapolis' manager of the problem property unit Tom] Deegan said. "The whole thing is to incentivize that bank to do something." Deegan hopes that the financial cost of letting a Minneapolis home linger in redemption will prompt more banks to use a new state law that allows them to petition courts for a five-week redemption period to speed along repossession of a house.

For more, see If no one owns the home, who's watching the house? (With foreclosure comes a six-month purgatory for some houses, and cities have to step in to keep them from becoming a nuisance).

(1) Michigan has a similar rule regarding a right of redemption after foreclosure sales, and probably has a similar problem.

Maryland Regulator Issues C & D Orders Against Five Firms Accused Of Running Illegal Upfront Fee Loan Modification Schemes

In Baltimore, Maryland, The Daily Record reports:

  • State officials have ordered five companies to shut down illegal home loan modification schemes that targeted Maryland residents facing foreclosure, the Department of Labor, Licensing and Regulation announced [late last month].(1) Homeowners paid thousands of dollars in upfront fees to companies that promised to modify their loans in order to avoid foreclosure, according to DLLR. Not only did the companies fail to deliver, but they stopped returning phone calls, misrepresented the loan modification process and ignored requests for refunds, the department alleged.


  • The cease and desist orders are usually enough to bring the companies to the bargaining table to discuss refunding consumers' upfront fees, which typically amount to about $3,500, [Assistant Commissioner for Enforcement Stephen] Prozeralik said. It is illegal for foreclosure consultants and credit services companies to charge such fees. "We've been successful in the past with Maryland companies," he said "They've sat done with us and worked something out. It is a little more difficult with these entities in California and Florida." [...] "We have well over 120-odd cases under investigation," Prozeralik said. "And then when you look at those cases, they're multiplied by the number of consumers under them. It adds up to thousands of consumers who have been ripped off."

For the story, see Md. Department of Labor, Licensing and Regulation orders 5 firms to end loan modification schemes.

(1) Companies served notices were:

  • Equity Recovery Services, Towson, Md.;
  • U.S. Equity Solutions, Owings Mills, Md.;
  • GIAN Inc., Laurel, Md.;
  • Save My Home USA Co. Inc., Michigan;
  • Help Modify Now Inc., California (The owner, Larry Ervan Gunter, 34, has reportedly recently been arrested by Newport Beach, California police in connection with alleged ripoffs his firm is accused of - see CBS 2/KCAL-TV Channel 9: Newport Beach Man Accused Of Loan Mod Fraud).

Victimized In Equity Stripping Scam, Minnesota Couple In Foreclosure Now Fight Feds In Attempt To Avoid Being Booted From Home

In Golden Valley, Minnesota, the Star Tribune reports:

  • Raise your hand if you've heard something like this before: A couple looking to save money in tough times refinanced their home -- only to discover they'd been taken in by fraud.(1) Now they are fighting foreclosure and the loss of their home. What you probably haven't heard before is that they are being foreclosed on by the Federal Deposit Insurance Corp., a federal agency that generally pushes to keep people in their homes by reworking loans rather than foreclosing them. So Glenn and Brenda Clark of Golden Valley are taking another unusual step -- they are fighting their foreclosure in federal court.

For more, see Victims of mortgage scam fight foreclosure in court (A Golden Valley couple take their case to federal court to avoid eviction).

(1) The homeowners in this story were reportedly ripped off in an equity stripping scam by Michael Fiorito, 41, who a federal jury convicted in May, 2009 on seven criminal counts in connection with a scheme that targeted vulnerable homeowners, according to the story. Working with an assistant, he reportedly devised a program to defraud homeowners who were in foreclosure or behind on their payments. He and the assistant convinced homeowners to refinance their homes -- often after inflated appraisals -- and then stole some or all of the equity checks the homeowners were to receive, the story states. In all, Fiorito reportedly stripped more than $400,000 in equity from at least 17 victims, and is scheduled to be sentenced in federal court on Dec. 30.

Thursday, December 10, 2009

Prosecutors: Scam Artist Used Parents' Stolen I.D. To Buy & Use Five Condos In Rent Skimming Racket Ultimately Ending In Foreclosure Of Each Unit

In San Diego, California, NBC San Diego reports:

  • Tyler Adams is a fraud artist with many faces and many names, prosecutors said. He targeted his own parents in a real estate scam. [...] According to court documents from San Diego, Adams stole the identity of his mother and stepfather to buy five condos in San Diego worth more than $3,000,000 combined. The documents say he then collected rent on the units, but never paid the mortgage. All five condos eventually went into foreclosure. The allegations also allege Adams posed as the Realtor in the sale of the condos and collected another $180,000 in commission fees.

  • His mother and stepfather live in a mobile home in Pennsylvania worth an estimated $50,000. When they were contacted about the condos going into foreclosure, they suspected their son, but were unable to reach him.

Source: A Fraud of Many Faces (A man, who allegedly even conned his parents, used cosmetic surgery to scam people).

Colorado AG Receives "Good Behavior" Promises From Ten Loan Modification Outfits Accused Of Failing To Deliver Results, Deceptive Advertising

From the Office of the Colorado Attorney General:

  • Colorado Attorney General John Suthers announced [...] that his office has taken action against 10 loan-modification firms doing business in Colorado as part of his office’s efforts to crack down on loan-modification companies preying on Coloradans in foreclosure. These 10 companies, nine of which are located outside Colorado, either failed to deliver results to Colorado consumers or engaged in deceptive advertising. The actions taken against the companies will require them to either comply with Colorado law or not do business in the state.(1)

  • These companies are barred from doing business in Colorado unless they comply with state laws, including requirements that only mortgage brokers licensed in Colorado or attorneys licensed in Colorado perform loan modifications. The companies also will be barred from using false or deceptive advertisements. The companies also will be required to comply with provisions of the Colorado Foreclosure Protection Act, such as not charging an upfront fee and using contracts that specifically lay out the agreement between the consumer and the loan-modification company.

For the entire Colorado AG press release, see Attorney General announces actions taken against 10 companies preying on Colorado borrowers.

(1) Acxcording to the press release, since the last sweep in July, the Office of the Attorney General has obtained assurances of voluntary compliance with:

  • Abbotsford, LLC, d/b/a and United Financial Solutions Group LLC located in Queen Creek, Ariz., and Phoenix, Ariz.;
  • Airan2, Airan-Pace, Crose & Fernandez, P.A. a law firm located in Coral Gables, Fla.;
  • American Summit Financial Services, Inc. and its owner Peter Johnson located in Boulder;
  • Best Interest Rate Mortgage Company (BIRMCO) and its owner Michael DiPlacido, located in Westmont, N.J.;
  • Financial Solutions Law Group, d/b/a Financial Solutions, and Echo Loans and its owner Kelly David Christensen located in Rancho Santa Margarita, Calif.;
  • Hope 4 Homeowners America, LLC and its owner Cheryl Barnett located in Birmingham, Mich.;
  • Key Mortgage, Inc. located in Baltimore, Md.;
  • Gabee, LLC, d/b/a Modification HUB located in Granite Bay, Calif.;
  • Modify Loans, Inc. located in Irvine, Calif.; and
  • Pier West Captial, Inc., d/b/a Loan Modification Solutions located in San Clemente, Calif.

NJ Regulator Cites Nine Loan Mod Outfits For Operating Without State License; Demands $5K Fine From Each Plus Restitution In Offer To Resolve Charges

From the Office of the New Jersey Attorney General:

  • The Division of Consumer Affairs has mailed notices of violation to nine New Jersey-based companies that allegedly offered loan modification services to consumers without being licensed. The nine companies each were cited for violating the state's Consumer Fraud Act for engaging in unconscionable commercial practices by allegedly offering to negotiate mortgage modifications without being licensed as a debt adjuster by the Department of Banking and Insurance.(1) [...] Each company has the option of not contesting the charges contained in the Notice of Violation and paying the civil penalty and restitution within 15 days. Each company also has the option of contesting the charges and requesting an administrative hearing before the Division.

For the entire NJ AG press release, see Nine Unlicensed Companies Cited for Offering Mortgage Loan Modifications.

(1) Each company has been assessed a $5,000 civil penalty, in addition to the restitution noted below:

Ex-Met, Red Sox 1st Sacker Snags Control Of 14 Dilapidated Bronx Apt. Houses In Foreclosure Limbo As Fannie Dumps Delinquent Debt Secured By 416 Units

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

  • A collection of 14 deteriorating South Bronx apartment buildings have been snapped up by a real estate development company led by former New York Met first baseman Maurice “Mo” Vaughn in a foreclosure auction, the city announced Wednesday. The properties were owned by entities of the Ocelot Capital Group, which abandoned them, let them fall into disrepair and eventually defaulted on their mortgage.(1) Omni New York, the winning bidder, purchased the collateral for the current loan portfolio of 14 buildings—consisting of 416 units, with a mortgage debt totaling $23.8 million—from Fannie Mae and Deutsche Bank at a discount. The sale price was not disclosed.


  • The sale of these buildings to an affordable housing developer with a track record as strong as Omni's is a home run for the residents, the neighborhood, and all of New York City,” said Mayor Michael Bloomberg, in a statement.

For more, see Ex-Met bags Ocelot buildings in foreclosure (Maurice "Mo" Vaughn is the winning bidder for 14 decaying South Bronx apartment buildings; will rehab and manage the 416 units).

See also, The New York Times: New Landlord Is Chosen for Troubled Bronx Buildings:

  • The mortgage debt on 14 of Ocelot’s 25 original buildings was put up for bid. On Wednesday, officials announced that Omni New York had been selected as the winning bidder. [...] Tenant advocates say they believe that the bids by several qualified developers, including Omni, did not exceed $5 million, a significant step in stopping the cycle of overleveraging.


In a related story on failing predatory equity real estate investment deals in New York City, see Crain's New York Business: Bronx is burning over failed deals (Overleveraged buyers of rent-regulated apartments create one big mess throughout city).

(1) For other posts on the Ocelot Capital "predatory equity" real estate investment fiasco, see:

Wednesday, December 9, 2009

Firm Faces "Appraisal Shopping" Allegations In Ohio AG Civil Suit; State Settles Similar Claims Against Three Others For $160K+

From the Office of the Ohio Attorney General:

  • In an ongoing effort to hold the mortgage industry accountable for its part in the foreclosure crisis, Ohio Attorney General Richard Cordray [...] filed a lawsuit against Weststar Mortgage, Inc. In the lawsuit, Cordray charges the Washington D.C. area home appraisal company with improperly influencing Ohio appraisals.

  • According to the complaint filed in the Court of Common Pleas of Belmont County, Weststar violated Ohio law through a series of actions including using pre-printed “estimated value” forms for appraisals and shopping for a higher appraisal amount on behalf of clients. “Appraisal influence is a damaging practice that often goes undetected until it’s too late,” said Cordray. “With this case, we advance one more step in cleaning up the destructive actions that led to the foreclosure crisis.”(1)

For the Ohio AG press release, see Cordray Holds Home Appraisal Industry Accountable.

(1) In addition to this lawsuit, three other companies accused of attempting to influence Ohio home appraisals have recently settled lawsuits with the state, resulting in a combined total of more than $150,000 in restitution and civil penalties.

  • Cordray settled with First Ohio Banc and Lending to resolve a lawsuit alleging the company engaged in unfair and deceptive home appraisal practices including deceptive advertising violations. In the agreed entry, First Ohio agreed to pay the state $52,400, which includes restitution to consumers;
  • In another agreement, Fiserv Lending Solutions, based in Connecticut agreed to pay $95,000 to the state, which is the largest undue influence settlement in Ohio to date;
  • In September, Cordray entered into a similar agreement with Nations Lending, which agreed to pay the state $15,000 and will keep all appraisal records for three years.

BofA Locks Financially Strapped Borrower Out Of Home Days After Agreeing To Revised Loan Payment Program

In Trenton, New Jersey, WPVI-TV Channel 6 reports:

  • A 57-year-old woman in Trenton is trying to put the pieces back together after being victimized by a mistake by her mortgage company which just happens to be the Bank of America. Three days after being locked out of her house because of a bank mistake, Nina Morra was let back in [Friday], only to find she had no water, no electric, and no heat.


  • After spending several months in the hospital following a stroke in January, Russian-born Nina fell behind in her mortgage payments to Bank of America and was facing foreclosure, but on November 19 she'd been accepted in to a repayment plan. Nina then went away for a week to visit relatives for Thanksgiving, but when she returned late Tuesday night to her Division Street home she found the locks had been changed.


  • Apparently Nina's paperwork for the repayment plan didn't clear quickly enough to stop an inspector for the bank from changing the locks and declaring her house abandoned while she was away. [Company s]pokeswoman Jumana Bauwens says Bank of America takes responsibility because it was their contractors and promised to pay any costs associated with the mix-up.

For the story, see Mortgage mix-up in Trenton. ForeclosureLockOuts

State Protection Fund Coughs Up $122K To Cover Client Losses From Illegally Pocketed Real Estate Closing Cash, Unearned Fees By Dishonest NJ Attorneys

The New Jersey Lawyers’ Fund for Client Protection recently announced:

  • During the third quarter of 2009, the New Jersey Lawyers’ Fund for Client Protection, funded by the State’s lawyers and judges, paid $122,606.14 to clients for losses caused by 7 lawyers,(1) the Board of Trustees announced [...]. The Fund’s purpose is to pay on behalf of the honest majority of lawyers for the wrongdoing of the few who are suspended or disbarred for misappropriation.(2)


  • For a claim to be paid, the attorney against whom it is filed must have been a member of the Bar, acting as either attorney or fiduciary, at the time of the incident; and unless deceased, must have been disbarred or suspended from the Bar, or convicted of embezzlement or other misappropriation of property. An individual client can receive up to $400,000 (for claims arising after January 1, 2007, lesser amounts for claims arising prior to that date) and the Fund can provide up to $1,500,000 in claims against a given lawyer. Special permission can be granted by the Supreme Court to exceed the aggregate limit.(3)

For the announcement, see Lawyers’ Fund for Client Protection Releases Third Quarter Report.

(1) Go here for the list of the third quarter claim awards and status of each attorney under the Supreme Court discipline system. The Fund's findings involve improperly pocketed client money by attorneys derived from real estate closings, an estate settlement, and the dishonest retention of unearned legal fees.

(2) The Fund only covers client losses due to dishonest conduct by the attorney who is licensed in New Jersey. Cases involving legal malpractice and negligence are handled through Civil Court actions and fee disputes through the District Fee Arbitration Committees established by the Supreme Court.

(3) If a New Jersey attorney, either in the course of representing you or acting as a fiduciary, screws you out of money or property through dishonest conduct, go to the New Jersey Lawyers' Fund for Client Protection for information on how to recover some or all of your losses from the fund.

For other states and Canada, see:

Short Sale Flipping: Today’s Equivalent Of California Gold Rush?

The Washington Independent reports:

  • With home prices continuing to fall and more foreclosures yet to come, it’s clear that tough times remain for a housing market recovery. And to add to the troubles, another threat to any rebound is emerging: mortgage fraud.

  • Interthinx, [a firm] which analyzes mortgage fraud nationally, and uses its risk measure to show where it may be increasing the most, found a continuing shift to schemes involving bank-owned foreclosed homes, and short sales, in which an owner sells the house for less than what’s owed on the mortgage and the lender forgives the remaining debt. The firm also reported that real estate agents and other professionals increasingly are involved in the schemes, which are growing in popularity due to the abundant supply of foreclosures, and the fact that appraisals frequently aren’t required in order to sell distressed properties.


  • Flipping properties isn’t illegal, but it can involved fraud in several ways, explained Ann Fulmer, vice president of business relations for Interthinx. It’s when a seller never mentions higher offers on the table from bona fide purchasers, or fails to disclose that the seller already has a contract with a buyer for a higher price. Red flags sometimes should be raised when borrowers use transactional funding, which means essentially renting someone else’s money for one day, in order to appear in a stronger financial position. Then there’s the use of land trusts – they’re not illegal, in and of themselves. Land trusts are organizations created to purchase and hold real estate. But short sale gurus are advising investors to set them up to evade FHA anti-flipping rules, and to hide the true borrower’s identity, which can amount to fraud.(1)

  • Short sale flips are today’s equivalent of the California gold rush,” Fulmer wrote recently. She and other mortgage experts noted that banks already are on to some of the schemes. In some cases, banks are requiring everyone involved in a transaction, from the real estate agent to the mortgage broker, to sign affidavits swearing they have aren’t [sic] in the flipping business with anyone else involved in the sale.(2) [Guy] Cecala, [publisher] of Inside Mortgage Finance, said federal law enforcement agents also are moving more aggressively even on smaller cases of mortgage fraud, unlike during the housing boom, when only major cases drew attention.(3)

For more, see Mortgage Fraud Threatens Housing Rebound (Taxpayers, Communities Ultimately Hit When Banks Get Scammed).

(1) See Land Trusts - The Answer to Flipping Short Sales?

(2) For one perspective on illegal short sale flipping, see National Mortgage News: The Gold Rush of 2010.

(3) For examples of recent federal indictments involving alleged fraud in connection with short sale flipping, see the following U.S. Attorney press releases:

One Underwater Homeowner's Experience With A Short Sale Flipping Operator

In Seneca, South Carolina, the Sarasota Herald Tribune reports:

  • DAN EGGER MAY HAVE LOST HIS job and is now underwater on his $500,000 mortgage, but the 41-year-old former telecommunications salesman is not desperate. A resident of Seneca, a small city in the northwest corner of South Carolina, Egger said he was approached by a real estate investment firm earlier this month that wanted to flip his house. [...] At first, the deal looked good to Egger. But he began to dig into the details and ultimately decided to pass.


  • All across America, people like Egger are being approached by investors looking to make a profit by buying properties inexpensively from banks through short sales and reselling them to end buyers at a profit. In some cases -- where investors lie to banks about what properties are worth -- the deals can be considered fraudulent, and Fannie Mae and the FBI have sent out warnings about unscrupulous operators.

  • What bothered Egger most was that the companies he was dealing with were a hodgepodge of entities in a slew of states.(1)

For more, see One man's time with the real estate flippers (Dan Egger was approached by real estate investors trying to convince him to let them flip his house in Seneca, S.C. To their surprise, he declined their offer after he found he was dealing with a hodgepodge of entities in several states).

(1) Go here for the string of e-mails that were sent back and forth between South Carolina underwater homeowner Dan Egger and Dennis Funk, a sales representative who was trying to convince Egger to sell his house to the flipping operator he was representing through a short sale.

Go here for the Short Sale Package (28 pages) homeowner Dan Egger was presented with by the short sale flipping operator and declined to enter into.

Tuesday, December 8, 2009

Newport Beach Man Probed In Alleged Loan Modification Ripoff; Clipped Approximately 50 Homeowners Out Of $175K+, Say Cops

In Newport Beach, California, CBS 2/KCAL-TV Channel 9 report:

  • Police say a Newport Beach man ripped off distressed homeowners with loan modification businesses that did nothing to help his customers save their homes. Larry Ervan Gunter, 34, is accused of taking money from homeowners having trouble making their mortgage payments and promising to work out better terms on their loans, but never doing anything on their behalf, Sgt. Evan Sailor said.

  • Gunter owns Help Modify Now, 4665 MacArthur Court, Suite 100, and Consumer Resource Law Center, 301 Shipyard Way. Gunter's companies charge homeowners at risk of foreclosure $1,500 to $3,500 to start a loan-modification process, Sailor said. About 50 customers told police that once they made their initial payment, they never heard back from anyone at the companies and all attempts to contact them were unsuccessful. The victims lost more than $175,000, Sailor said. Gunter was arrested Tuesday on a probation violation, Sailor said. Newport Beach police are working with the Orange County District Attorney's office to determine what charges should be filed. Anyone else who believes they are victims can call Detective Bob Watts at (949) 644-3799 or (800) 550-NBPD.

Source: Newport Beach Man Accused Of Loan Mod Fraud.

Arizona, Feds Join Forces In Battle Against Loan Modification Rackets; More Criminal Prosecutions Possible, Says State AG

In Phoenix, Arizona, The Arizona Republic reports:

  • Arizona's top prosecutor is partnering with federal regulators to stop more loan modification scams aimed at struggling homeowners. Attorney General Terry Goddard said his office and federal prosecutors plan to work together to go after the firms that market help to homeowners facing foreclosure but instead "cheat homeowners out of their last bit of cash." "This joint effort and sharing of information on loan modification scams could result in more criminal prosecutions," Goddard said. "There are a lot of cases and complaints in the pipeline. We have never had this level of cooperation."

For more, see Arizona unites with feds to target home loan schemes (Officials broaden reach to fight loan-modification scam artists).

Ohio AG Files Civil Suits Against Two Firms For Allegedly Running Upfront Fee Loan Modification Rackets

From the Office of the Ohio Attorney General:

  • Ohio Attorney General Richard Cordray [...] sued two companies that allegedly targeted then ripped off homeowners threatened by foreclosure.(1) The lawsuits are part of a national sweep on foreclosure rescue scams announced this afternoon by the Federal Trade Commission.


  • [The] lawsuits are the result of an ongoing effort by Cordray in holding companies accountable for violating Ohio law in the wake of the foreclosure crisis. To date, Cordray has issued approximately 30 cease and desist notices and filed seven lawsuits against foreclosure rescue operations targeting Ohioans. Additionally, Cordray has sued two loan servicers for unfair or deceptive loan modification practices.

For the Ohio AG press release, see Cordray, FTC Take on Foreclosure Rescue Companies.

(1) In a lawsuit filed in Cuyahoga County (see State of Ohio v. Debt Advocacy Center), Cordray accused Debt Advocacy Center (DAC) of failing to deliver services it promised. The lawsuit alleges that the Cleveland-based DAC advertised loan modification and loss mitigation services to consumers backed by a 100% money-back guarantee. DAC then collected upfront payments ranging from $500-$3,800, advised consumers to not make monthly mortgage payments and then never delivered the services.

In a lawsuit filed in Franklin County (see State of Ohio v. Kirkland Young, LLC), Cordray alleges that Kirkland Young, LLC, based in Florida, charged consumers an upfront fee that exceeded the $75 initial fee allowed by Ohio law. In complaints filed with the Attorney General’s office, consumers said that Kirkland Young required customers to pay approximately $500 into an escrow account monthly and pay “closing costs” if a loan modification was obtained. Additionally, the lawsuit alleges that the company solicited consumers through phone calls but is not registered in Ohio as required by law and further violated the law by making misleading or false statements to consumers during the call.

Now-Disbarred Closing Attorney For Alleged Equity Stripping Foreclosure Rescue Operator Dodges Add'l Prison Time On State Court Charges

In Worcester, Massachusetts, the Worcester Telegram & Gazette reports:

  • Disbarred Oxford lawyer Raymond A. Desautels III, who was sentenced last month to 2-1/2 years in federal prison on wire fraud charges, was sentenced [...] to a concurrent term of 2 years to 2 years and a day in state prison on charges related to what prosecutors said was an elaborate mortgage fraud scheme orchestrated by another Oxford man, Allen J. Seymour.(1) Mr. Desautels, 43, [...] pleaded guilty Oct. 29 in Worcester Superior Court to five counts of inducing a mortgage lender to part with property by false pretenses in connection with the alleged scheme. [...] The sentence imposed [...], which will not require Mr. Desautels to spend any additional time behind bars, was stayed until he begins his federal sentence later this month.

For more, see Desautels gets concurrent time in mortgage fraud scheme.

(1) According to the story, prosecutors said Seymour offered a variety of mortgage rescue options to homeowners in danger of foreclosure. The options included lifetime leases, reverse mortgages and refinancing, prosecutors allege. Some homeowners were reportedly told they would need to transfer title to their property to an investor, while others were not. Over an 18-month period, Mr. Seymour allegedly used false powers of attorney to cash more than $1 million in proceeds checks made payable to homeowners. Some investors who were reportedly lured into the alleged scam and used to take title from the homeowners facing foreclosure later said Seymour abandoned them to make the mortgage payments, causing those mortgages to fall into foreclosure and homeowners who had been promised lifetime leases to be evicted.

Rhode Island Closing Attorney Gets 42 Months For Pocketing $2.5M In Escrow Funds & Failing To Pay Off Existing Mortgages In Real Estate Transactions

From the Office of the U.S. Attorney (Providence, Rhode Island):

  • A federal judge has sentenced Pasquale Scavitti, III, a former attorney based in Cranston, to 42 months in prison for diverting more than $2.5 million in mortgage funds from his firm’s client account for personal use.


  • As part of his practice, he maintained a client escrow bank account. Mortgage Guarantee and Title Company, a real estate title and closing company, utilized the services of Scavitti’s law office to facilitate mortgage lending. As part of those services, mortgage and refinancing proceeds were wired into the client escrow account at Scavitti’s firm. The firm’s obligations were to pay off existing liabilities from those loan proceeds. Between 2003 and August 2008, Scavitti directed that client escrow account funds not be used to pay off the corresponding existing mortgages but rather to pay for various personal and business expenses. Escrow funds were also used to pay off previously negotiated mortgages that were already delinquent, since they had not been paid off in a timely fashion.


  • In September 2007, Mortgage Guarantee terminated the authority of Scavitti’s law office and its attorneys from acting as approved attorneys for Mortgage Guarantee. However, for subsequent mortgages, Scavitti contacted other attorneys to act as title attorneys on real estate transactions and closings. For these transactions, Scavitti falsified letters purporting to authorize his firm to act as the approved attorney for Mortgage Guarantee.(1)

For the U.S. Attorney press release, see Attorney is sentenced in $2.5 million mortgage fraud scheme.

(1) As a result of Scavitti’s fraudulent scheme, he failed to pay off 13 mortgage loans and refinancing transactions, resulting in total losses of approximately $2.5 million to borrowers and financial institutions, the press release states. EscrowRipOffKappa

Monday, December 7, 2009

Foreclosure Rescue Operator Gets 30 Months In Equity Stripping Mortgage Scam; Bogus Sale Leasebacks Left Investors Holding The Bag, Homeowners Booted

In Edmond, Oklahoma, The Edmond Sun reports:

  • An Edmond man was sentenced Wednesday to serve 30 months in prison for money laundering, stemming from a mortgage fraud scheme. Phillip Neill Seibel, 39, of Edmond, was sentenced by U.S. District Judge David Russell, who ordered Seibel to pay $770,037.31 in restitution and serve three years of supervised release after completing his sentence.


  • A licensed mortgage broker, Seibel formed Homesavers in April 2007. The company had an Oklahoma City address. Homesavers contacted homeowners facing foreclosure and told them they could remain in their homes while they worked to improve their credit, according to court records and court proceedings.(1)

For the story, see Edmond man sentenced in fraud.

(1) According to the story, the company also promised to find investors to buy homes and to let people remain in their homes and begin paying “rent.” Seibel’s company reportedly promised to use those payments to pay mortgages, and said sellers could rebuy the homes for a fixed price once their credit improved. The company promised the potential investors their only role would be to buy the homes. It would coordinate all rent payments with the sellers and ensure mortgages were paid on time, the story states. Homesavers then assisted the investors in obtaining financing to buy the homes, and regularly submitted false documents on the investors’ behalf to mortgage companies and assisted investors in submitting false documents to the mortgage companies. At closing, Seibel’s company would arrange to receive the equity checks directly and, without permission, endorse the sellers’ names and deposit the checks into a company bank account. The story states that Homesavers did not make the mortgage payments on the homes as promised, but repeatedly assured sellers falsely that mortgage payments were being made. Most of the homes were reportedly foreclosed upon, and the sellers lost all equity in their homes, according to the court document.

Debt Collector's Use Of 1st Amendment To Get Default Judgment Against Mentally Disabled Debtor Without Giving Proper Notice Slammed By Alaska Supremes

Public Citizen, a national, nonprofit consumer advocacy organization, recently announced:

  • The Alaska Supreme Court ruled [last month] that debt collectors who employ unfair or deceptive tactics during collection lawsuits are not shielded by the First Amendment.(1)


  • The case arose out of an attempt by a collection agency to sue Robin Pepper, a mentally disabled woman, without providing her with proper notice. The agency sent papers to a nonexistent address, misrepresented to the court that Pepper was competent, and tried to get a default judgment against her.

  • Pepper, represented by Alaska Legal Services,(2) then brought a separate lawsuit, alleging that the collection agency’s practices violated the Unfair Trade Practices Act. The collection agency asked the court to dismiss Pepper’s case on the theory that its litigation conduct was protected by the First Amendment, which provides a right of access to the courts. The lower court agreed and dismissed Pepper’s case. Alaska Legal Services asked Public Citizen to handle the case on appeal.(3)

  • The Alaska Supreme Court broadly rejected the debt collector’s immunity defense, ruling that the First Amendment’s petition clause does not extend to conduct that was unfair, deceptive, and in violation of the Unfair Trade Practices Act. Quoting Public Citizen’s brief, the court ruled that debt collectors have “no legitimate interest in pursuing collection litigation without notifying debtors, or in seeking to default incompetent debtors without notice to their lawyers or guardians.”(4)(5)

For Public Citizen's press release, see Debt collectors drubbed by Alaska high court (Constitution Does Not Shield Abusive Tactics by Debt Collectors, Alaska Supreme Court Rules).

For the ruling of the Alaska Supreme Court, see Pepper v. Routh Crabtree, APC, Supreme Court No. S-13042, No. 6437, 2009 Alas. LEXIS 160 (November 20, 2009).

(1) According to the press release, this case is the first ruling on the issue by any court nationwide. Debt collection firms have raised a constitutional defense, based on the right to petition the courts, in a series of consumer cases. This ruling overturns a lower-court decision that had ruled in favor of a collection agency.

(2) Alaska Legal Services is a private, nonprofit law firm that provides free civil legal assistance to low-income Alaskans.

(3) Also appearing in this lawsuit, as "friends of the court" on behalf of the consumer, were the National Association of Consumer Advocates and the National Consumer Law Center.

(4)The Alaska Supreme Court’s ruling sends the message that debt collection companies can’t get away with abusive tactics simply by hiring lawyers,” said Deepak Gupta, the Public Citizen attorney who argued the case. “The court rejected a dangerous new immunity defense that would have created a gaping hole in consumer protection law.”

(5) Had the court ruled in the debt collection agency's favor, collectors would be in a position to slap judgment liens against any real estate owned by defaulting debtors and force the sale of those properties (subject to any applicable state or federal homestead exemption protections), as well as garnish the wages and seize the bank accounts belonging to these unwitting victims. For more on debt collectors and their attorneys obtaining default judgments against unwitting consumers by failing to serve proper notice of the lawsuit on them (ie. "sewer service"), see Justice Disserved: A Preliminary Analysis of the Exceptionally Low Appearance Rate by Defendants in Lawsuits Filed in the Civil Court of the City of New York.

Financially Strapped Couple Scores Against Home Lender; Pays $1K In Full Payment Of Allegedly Fraudulent $103K Loan

In Bradenton, Florida, the Sarasota Herald Tribune reports:

  • Pedro Torres and his wife purchased the Bradenton home they were renting in 2007 because it reminded them of their native Puerto Rico. They were told their monthly payment would be $670, but it turned out to be $800, about half of their income from Social Security. The couple, both over 65, struggled so much to make payments that Torres collected aluminum cans for food money. Torres and his wife, Ederlinda Soto, likely would have lost the home to foreclosure over the $103,000 mortgage.

  • But when a Gulfcoast Legal Services attorney(1) found numerous problems and fraud in the loan, the lender offered to give them the home for a single $1,000 settlement payment.(2)

For more, see Bradenton couple prevail in mortgage imbroglio (Pedro Torres and his wife, Ederlinda Soto, struggled to pay their mortgage, which they thought would be $670 a month but ended up being $800. An attorney discovered so many problems in their loan document that they now own their Bradenton home free and clear).

(1) Gulfcoast Legal Services is a non-profit corporation providing free legal aid to income eligible residents of the greater Tampa Bay area, with offices in Pinellas, Manatee, Sarasota and Hillsborough counties.

(2) According to the story, the retired couple's mortgage contained problems common to loans approved during the height of Florida's real estate boom, said their attorney, Dawn Marie Bates-Buchanan. Torres and Soto reportedly got the low settlement offer from an attorney for California-based Accredited Home Lenders because the loan would likely have been voided if the case had gone to trial, Buchanan said. Also, Accredited could have faced up to $2,000 sanctions for each violation under truth in lending and unfair business practices laws, the story states. Accredited's attorney reportedly called Buchanan and said, "Basically, 'What do you want?'" she said. "My answer is, 'I don't want them to have a mortgage.'" Now, Torres and Soto are continuing their lawsuit against the mortgage broker and the sister and brother-in-law who helped arrange the loan, the story states. Gulfcoast Legal Services reportedly took the case because the couple is over 65 and has low income. The legal fees would have been unaffordable otherwise, something that leaves many Spanish-speaking victims of mortgage fraud unable to fight. UndoMortgageLoans TILAdelta

New Rule Now Mandates Foreclosing Lenders To Advise New Jersey Tenants Of Their Legal Right To Stay Put

In Northern New Jersey, The Record reports:

  • New Jersey tenants whose landlords fall into foreclosure have a right to stay in their homes — and lenders must tell them that, under a new rule adopted by the New Jersey Supreme Court. [...] Under the rule, before lenders obtain a final foreclosure judgment, they must inform tenants living in the property that they have the right to stay. The rule also requires sheriffs to post notices about tenants' rights on the buildings before a foreclosure auction.

  • New Jersey has some of the strongest tenant-protection laws in the nation. While the rising tide of foreclosures in other states has pushed out tenants, a New Jersey tenant "in good standing comes with the property when the property changes hands because of a foreclosure," [New Jersey Public Advocate Ronald K.] Chen wrote recently.(1)

  • Matt Shapiro, president of the New Jersey Tenants Organization, praised the new rule. "Tenants have a lot of rights in New Jersey, but they don't always know it," he said. "A lot of tenants are being intimidated and displaced because they don't know their rights."

  • Tenants in other states have much weaker protections, though a federal law passed earlier this year allows tenants to remain in their foreclosed rentals for at least 90 days.(2) Previously, many received almost no notice.

For the story, see In foreclosures, N.J. tenants have rights.

(1) "Tenants are the invisible victims of the foreclosure crisis,'' Chen reportedly said Tuesday. "It is critical that tenants are notified in these situations because many are unaware that, under New Jersey law, they cannot be evicted solely because of a foreclosure." Chen said his department has received nearly 200 calls since the beginning of the year from tenants who have been told — incorrectly — that they may have to move because their building is in foreclosure. Tenants living in foreclosed properties should call (609) 826-5070 if they are being pressured to leave, he said.

(2) Among other things, the new federal law requires lenders taking title to foreclosed homes respect any existing tenant leases, and provide at least 90 days notice when vacating month-to-month renters. See Section 702(a)(2) of the Protecting Tenants at Foreclosure Act of 2009. The new federal law appears to have little or no practical application in the state of New Jersey in light of existing state law that provides for greater protections for tenants.

Recent NY Court Foreclosure Ruling Wiping Out Mortgage Debt Not Expected To "Open The Floodgates" Against Lenders

In Suffolk County, New York, Newsday reports:

  • A Suffolk judge's decision to wipe out the mortgage debt of a foreclosed-upon East Patchogue couple may send a message to predatory subprime lenders that unless they work to save their customers' homes, they stand to lose everything, some real estate attorneys said. "This case shows the change in the tide as to the sentiment about mortgage foreclosures in general," said Woodbury bankruptcy attorney Craig Robins, who called Suffolk County Court Judge Jeffrey Spinner's decision "a good demonstration that courts are not going to tolerate this type of conduct by the mortgage companies anymore."


  • Robins said such improper and irresponsible practices were not isolated to IndyMac. But, while Spinner's decision could create important case law that will likely be cited by homeowners' attorneys in future foreclosure proceedings, Robins said he did not think it should "open the floodgates" for similar decisions.

  • "I do see a lot of the irresponsible practices that mortgage lenders commit frequently, but I think what sets this case apart was that there were several irresponsible practices in this one case," said Robins, adding that Spinner "used this case to send a loud warning to all mortgage companies . . . that they better shape up and get their act together."

For the story, see Foreclosure ruling sends message to lenders (requires paid subscripition to Newsday; those without a subscription can try here).

Debt Collection Law Firm Faces Hot Water For Dragging Wrong Person Into Court; Resists Judge's "Suggestion" To Compensate Victim For Lost Day's Pay

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

  • A person who blows off a civil court summons — even if wrongly identified — faces a default judgment and frozen bank accounts. But to date, there have been few penalties against collectors for dragging the wrong people into court. Until [Mark] Hoyte turned up last week in Brooklyn.

  • After trying to settle the case in the hallway — the 11th floor of 141 Livingston Street is an open bazaar of haggling — the collections lawyer realized he had the wrong man. He got Mr. Hoyte to sign an agreement that would end the case against him, but not against the Mark Hoyte who actually owed the $919. In front of the judge, the lawyer, T. Andy Wang, announced that the parties had reached a stipulation dismissing this Mr. Hoyte from the suit.

  • Not so fast, said the judge, Noach Dear. “Why didn’t you check these things out before you take out a summons and a complaint?” Judge Dear asked. “Why don’t you check out who you’re going after?” [...] “So you just shoot in the dark against names; if there’s 16 Mark Hoytes, you go after without exactly knowing who, what, when and where?” Judge Dear asked. [...] The judge turned to Mr. Hoyte, who works as a building superintendent, and asked him how much a day of lost pay would cost. Mr. Hoyte said $115.


  • The judge said he was prepared to dismiss the case and wanted Mr. Hoyte compensated for lost wages. “Your honor,” Mr. Wang said, “I’m personally not willing to compensate him.” No, the judge said; he meant that the law firm, Pressler & Pressler — one of the biggest in the collection industry — should pay the $115. He would hold a sanctions hearing, a formal process of penalizing the law firm for suing the wrong man.


  • He told Mr. Wang and Mr. Hoyte to come back to court in January. “If, somehow, counsel, you decide that you’re going to compensate him for his time off,” Judge Dear said, “I will reconsider sanctions.”

For the story, see Hello, Collections? The Worm Has Turned.


In a related story, see The Village Voice: An Unlikely Rescuer from the Jaws of Debt (By 9:30 a.m., the 11th-floor hallway of a courthouse in downtown Brooklyn is filled with tight huddles made up of people in debt and the lawyers who are after them to pay):

  • It's a scene that will be repeated over and over again in the courtroom of Judge Noach Dear, as he repeatedly dismisses lawsuits, denies attorneys seeking payment, and sends people on their way, amazed that they are free from further harassment by collection agencies. Twice on a recent morning, his rulings are met with standing ovations.

Sunday, December 6, 2009

Central Florida Chief Judge Ramps Up Court Foreclosure Mediation Effort

In Central Florida, The Tampa Tribune reports:

  • Pasco homeowners in foreclosure could have more of a chance to keep their homes if a court system emphasis on mediation succeeds. The push began last month when Chief Judge Thomas McGrady signed an administrative order adding more prominent language about mediation into paperwork homeowners receive when they're served with foreclosure lawsuits. The drive for mediation is a response to the continued onslaught of foreclosure filings and to the inability of homeowners in foreclosure to get in touch with their lenders, McGrady said. [...] Homeowners interested in mediation can find information and a form motion requesting mediation at the Sixth Judicial Circuit's Web site, [...].

For the story, see Pasco courts move to help homeowners.

Go here for standard form Defendant's Motion for Mediationin Mortgage Foreclosure Action.

Prohibition Against Upfront Fees Fails To Stop Out-Of-State Loan Modification Racket, Leaving North Carolina Woman Out Cash, Home

In Greensboro, North Carolina, WXII-TV Channel 12 reports:

  • Susan Pifer, who drives a bus and works at Ellis Middle School, said her family lost $2,000 to a company in Arizona that claimed it would keep her and her family from losing their home. Despite paying the company, Pifer's home was foreclosed on last April. Pifer said the company promised to refund the money if it couldn't negotiate the lower payment. Pifer, who has since moved into a rental property, said the company no longer returns her phone calls.


  • An independent processor who worked on Pifer's loan modification said she knew of at least three other families who lost their money to the same company. According to North Carolina law, it's illegal to charge up-front for these types of services.

For the story, see Family Lost Cash, Home To Mortgage Scam (Mortgage Scam Complaints Soar In NC).

Prosecutor Drops Charges Against Woman Accused Of Forging Hubby's Name On POA In Sale Leaseback Of Family Home Resulting In Both Getting The Boot

In Bantam, Connecticut, The Register Citizen reports:

  • A criminal case brought against a Bethlehem woman for allegedly selling her family’s home without her husband’s knowledge was dismissed [...] at her husband’s request.(1) Shelley Ciriello, 55, was arrested Sept. 19 [...] and charged with second-degree forgery, for allegedly signing her husband’s name to a power of attorney to sell their marital home. Further, without her husband knowing, Ciriello reportedly agreed to rent the house from the new owner. [...] The Ciriellos were evicted from the house after rent checks for $3,767 bounced, according to court records.(2)

Source: Case dismissed for woman who sold husband's family home.

For earlier story, see Wife sold house, husband clueless.

(1) According to the story, the prosecutor said he decided to drop the charge against Ciriello after the husband agreed to adopt his wife’s property transactions. “The defendant’s husband wrote a letter indicating he didn’t want to pursue case because they are under great financial hardship and it would only further victimize him,” Supervisory Assistant State’s Attorney Devin Stilson reportedly said. “He did not want to pursue the case or testify.”

(2) According to an earlier story, Ciriello found herself in financial trouble by reportedly abusing a line of credit, using the family home as collateral. Ciriello then responded to an advertisement from a now-defunct lending company, which arranged a sale leaseback with a third party in an attempt to provide relief from the financial pressure. The lending company reportedly has since been shut down by the State of Massachusetts for offering sub-prime loans and inflating borrower assets.