Saturday, May 15, 2010

Condo Converter Accused Of Unloading Mold-Infested Apartments On Unwitting Buyers, Leaving Unit Owners With Unaffordable $4M Remediation Price Tag

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

  • What many thought would be a dream condo ended up instead with a moldy mess. And to make things worse? The person the condo owners believe is responsible is nowhere to be found.

***

  • Thirteen homes in this community have been hit with water intrusion and mold. The problem appeared a few years ago, so homeowners commissioned an independent study. It found the problem was there since the apartments were converted to condos in 2006, and should have been fixed then.

  • We tried tracking down the developer, which was an LLC out of Las Vegas. It has since been dissolved, according to state records. Sources say the owner-operator moved to Mexico when the market went soft.

  • Homeowners face a $4 million price tag to fix the place, something no one can afford. "That, on top of an underwater mortgage… it's like throwing money into a bottomless pit," said homeowner Jason Ing. One other option: walk away and let the banks foreclose. Something the Bailes family feels could be their only option. "I feel like we're getting screwed, basically," Jessica Bailes said. "The fact that we can't get a hold of this developer."

For the story, see Condo owner: 'I feel like we're getting screwed.'

Residents In Dilapidated Mobile Home Park In Foreclosure Threatened With Immediate Boot Over Unpaid Water Bill

In Jacksonville, Florida, The Florida Times Union reports:

  • Among the dozens of ravaged homes, trash piles and overflowing sewage in a once thriving Jacksonville neighborhood stand eerie monuments to a time when the streets bustled with people. [...] About 40 people, a quarter of them children, still live in the Westport Mobile Home Park on 103rd Street near Interstate 295. The JEA plans to cut water and sewer service Monday over the owners’ delinquent $4,800 account, JEA records show. The JEA told residents last week the park will then be considered uninhabitable. The city can seek to have them removed within 30 days over safety issues.

  • Poverty-sticken residents wept when asked about their future. Some vowed to stay and fight, despite being circled by squalor. Those who own their homes can’t move them because the structures are too old.

***

  • The park’s owners, including St. Augustine businessman Farid Ashdji, have faced foreclosure since May 2009 after being cited for owing $1.3 million, court records show. [...] The city has cited the owners for safety and code violations and condemned dozens of properties stripped by vandals. The owners have not responded and face fines, said Renee Brust, a city spokeswoman. Brust said the city does not relocate people but can offer temporary assistance to residents who seek help.

For more, see Jacksonville residents to lose neighborhood ('It may not look like much, but it’s a home for my babies’).

For story update, see Residents of Jacksonville mobile home park get some time (Families at the Westport Mobile Home Park faced losing water and sewer service Monday; future remains uncertain):

  • About 40 people living in a nearly destroyed Jacksonville mobile home park got a break in plans to have their water and sewer service cut next week when the owners paid a delinquent $4,800 JEA bill late [Friday] afternoon.

City Of Atlanta, Management Company Work To Relocate 180 Residents Left Stranded In Dilapidated, Foreclosed Apartment Complex

In Atlanta, Georgia, the Atlanta Journal Constitution reports:

  • Josephine Roberts has to move – right away – out of the rundown southwest Atlanta apartment that has been her home for 25 years. “It’s probably for the best,” Roberts, 65, told the AJC on Thursday after meeting with an apartment management company that is trying to relocate the 180 people stranded in the Hidden Pines apartments after the bank foreclosed on the property. “The conditions [at Hidden Pines] are not [safe] living standards. I don’t think we, as a people, should live in this type of environment… It was unbelievable.”

***

  • This property is not safe,” said Mitzi Bickers with the Mayor’s Office for human services. Bickers said city workers discovered the Hidden Pines residents when crews were dispatched to investigate reports that broken pipes were spewing untreated sewage. She said several senior citizens and pregnant women were moved Friday while the others will leave over the next few weeks.

For more, see Atlanta trying to relocate residents in foreclosed apartments.

Tenant Gets 12 Years For Operating Indoor Pot Farm From Basement Of Rented Home

From the Office of the Monmouth County, New Jersey Prosecutor:

  • On April 12, 2010, Michael Papazoglou, 30, of Freehold Township, N.J., was sentenced to a 12 year State Prison term for the first degree crime of Maintaining or Operating a Controlled Dangerous Substance Production Facility. The charge stems from the November 18, 2008, arrest of Papazoglou and four others at Papazoglou’s rented Freehold residence.

***

  • The investigation revealed that Papazoglou had been growing the marijuana plants in the basement of the residence, that a decision had been made to move the marijuana plants elsewhere, and that Wheeler and Farmer were responsible for transporting the marijuana plants to the new location. On the day of the arrests, Wheeler rented the UHaul truck and traveled to Freehold where he met with Farmer, Papazoglou and another, unidentified man. The four men then loaded the marijuana plants and growing equipment into the U-Haul truck so that the production operation could be resumed at a different location.

For the Monmouth County Prosecutor's press release, see Freehold Man Receives 12 Year Prison Term For Operating A Marijuana Production Facility.

(1) On December 7, 2009, Jeremy Wheeler, 30, of Tuftonboro, N.H., and Jamil Farmer,26, of New York City, N.Y., also appeared before Judge Reisner and entered guilty pleas to second degree Possession of a Controlled Dangerous Substance With Intent to Distribute. On February 19, 2009, Wheeler was sentenced to a six year State Prison term. On January 29, 2009, Farmer was sentenced to a five year State Prison term. Based upon the factual bases provided by Papazoglou, Wheeler and Farmer during the entry of their guilty pleas, related charges against Stephanie Federico, 19, of Hoboken, N.J., and Alysson Woolley, 25, of Long Branch, N.J., which were contained in the same indictment were dismissed. marijuana grow house

Friday, May 14, 2010

Ohio AG Cautions Consumers Against Racket Targeting Payday Loan Customers For Debt Collection Ambush

From the Office of the Ohio Attorney General:

  • In a new twist on an old scam, con artists are now targeting recipients of payday loans using debt collection tactics. Attorney General Richard Cordray [] warned Ohioans to verify callers and money owed before paying out to debt collectors.

  • My office recently received notice that con artists are posing as debt collectors attempting to collect on payday loans in Ohio,” said Cordray. “The ploy is dangerous because scammers aim to catch consumers off-guard by calling out of the blue and demanding repayment. Even if the consumer has not borrowed money, the natural instinct for some will be to respond to this ambush by paying a debt that they do not owe. In this situation it is absolutely imperative that consumers ask for a letter stating the debt owed and then verify the source. Under no circumstance should consumers rush to make payment or give out any personal information including banking and credit card information.”

For the entire Ohio AG's press release, see Legitimate Debt Collector or Con Artist?

Novice Homebuyer May Be Out $8K After Unwittingly Signing Contract Sans Loan Contingency On Foreclosure, Then Discovers Mortgage Insurance Unavailable

In Edmonton, Alberta, CTV Edmonton reports:

  • A young woman is now fighting for her life savings after a housing venture went through the cracks. Brenda Vanner says she cashed in her RRSPs [Registered Retirement Savings Plans] and her savings to make an offer on a property that was up for foreclosure. "It seemed like a good deal and a real good property to buy," she said. But days before the deal was set to close, the woman says she was denied mortgage insurance because of deficiencies on the property.

  • The 23-year-old signed a contract with no conditions, and may now be out $8,000. "I was naive. I took for granted that someone was looking out for me and I will never do it again. I just want to make sure it won't happen to someone else."(1)

For more, see Young woman fights for life savings after housing venture plummets.

(1) This story illustrates the importance of being properly advised before signing a real estate contract, as well as having the premises thoroughly inspected for defects (preferably by an inspector the buyer obtains on his/her own, not referred by anyone who has a vested interest in seeing the transaction consummated (ie. seller or commissioned real estate or mortgage broker/salesperson). For a story on what can happen when a buyer gets the wrong inspector, see Contra Costa Times: Brentwood leader's company crumbles in wake of questionable home inspections (A Brentwood councilman's contracting firm has collapsed under the weight of impending lawsuits over home inspections gone awry, underscoring the perils for homeowners and firms alike in a largely unregulated industry)).

New Wave Of Foreclosures Currently On Hold As Lenders Drag Feet In Dealing With Delinquent, Underwater Condo Owners

A recent column in Barron's addressed the problem of mortgage lenders dragging their feet on condominium foreclosures in order to avoid taking title to units in order to avoid becoming responsible for footing the bills for the HOA's maintenance fees:

  • IF A CONDOMINIUM OWNER is behind on his mortgage, he usually isn't paying his condo association dues either. And that, oddly, could be helping to prevent the already roaring rate of U.S. condominium foreclosures from becoming even worse.

***

  • In the most troubled markets -- think Florida, California, Nevada, Arizona and parts of the Midwest -- some condos are three years in arrears on association fees. When a bank takes ownership, it risks having to pay those fees, plus any that accrue until it resells the unit. Fourteen U.S. states now have "super lien" laws mandating that a lender pay at least part of the owed dues when it seizes a property. Ohio legislators are even fighting to make association liens in their state superior to first mortgages. In states where there's no law mandating payment, condominium associations must sue the lenders to recoup any dues shortfall, and they're not always successful.

  • For lenders, the simplest way to delay -- or avoid -- paying the dues is by postponing foreclosure until a buyer turns up who's willing to shell out the accrued dues if the property is priced low enough. But in the current market, especially in the worst-hit areas, that can take a very long time.(1)

For more, see The Condo Conundrum (Lenders reluctance to pay overdue condo fees is merely postponing a new wave of U.S. foreclosures). (requires paid subscription; if no subscription, TRY HERE; or TRY HERE, then click link for the story).

(1) A new tactic in dealing with delinquent condo units where mortgage lenders are now being challenging to foreclose or get out of the way (essentially being required to decide to either take title to the financially upside down unit, or release their mortgage) was recently reported in Florida. See:

Blanket Receiverships Come To Daytona Beach In Fight Against Deadbeat, Rent Skimming Condo Owners Stiffing Associations On HOA Fees

In Daytona Beach Shores, Florida, The Daytona Beach News Journal reports:

  • At the peak of the area's housing boom four years ago, Chicago native James Dolan bought a unit at the nine-story Oceanside Inn here when it converted from a hotel to a condo-tel. [...] But, since then, the housing bust has cost him plenty. The owners association recently passed its second special assessment, on top of monthly maintenance fees, to make up for other owners who are in foreclosure or walked away and are not paying their fees.

***

  • The frustration is widespread. So, the owners association, the inn's hired management firm and a local attorney sought and won a rare legal ruling that should help them recover the $154,000 owed by 23 of the building's 123 owners. Circuit Court Judge Richard Graham recently approved the appointment of a "blanket receiver" for the Oceanside Inn. It's the first such ruling in the 7th Judicial Circuit, attorney Jason Harr said.(1)

  • "It's groundbreaking in this district. It's been approved in other districts, but it's never been asked for and the court has never approved it here prior to when we did it," he said. "It's given a life preserver to the association that was in dire straits. There are some owners who owe as much as $16,000."

For the story, see Condo associations gain weapon to collect fees from deadbeats.

Go here for other posts on blanket receiverships.

(1) The story states that the blanket receivership order allows the association to include all delinquent units in one filing, and that similar blanket receivers have been approved in just a few Florida jurisdictions. "It's up to each judge to interpret the statutes in each case," one lawyer said. "But, it's a new strategy, a new argument, novel and it is catching on."

Lenders Refuse To Finance Condo Sale Where 15%+ Of Members Delinquent On HOA Fees, Leaving Unit Owner Unable To Unload Apartment

In Baltimore, Maryland, WBAL-TV Channel 11 reports:

  • The tightening of the mortgage industry is keeping one Glen Burnie man from selling his home. Dave Shaffer said he has a buyer for the home, but that buyer is having trouble getting a home loan because of a lending rule that's just recently been enforced.

  • Shaffer is disabled and unable to work. He said he can't afford to live in his condo community anymore, so he found a buyer to purchase it. Shaffer's home in the Elvation Towne Condominium neighborhood has been on the market for a year and a half. He said he was excited to find a buyer, had packed up his home and was ready to close on the deal last week.

  • "A day and a half before we were to go to closure, I was called and told the banks could not underwrite the loan," he said. Shaffer was told that more than 15 percent of the homeowners in his neighborhood are behind on their homeowners association fees, so his buyer couldn't get a loan. He said they tried many banks and mortgage companies. [...] He said he can't afford to stay in his home, can't refinance because he doesn't have a job and, if he can't sell his home soon, it'll go into foreclosure.

For more, see HOA Fee Law Keeps Man From Selling Home.

Thursday, May 13, 2010

Grant Deed Solicitation Scam Letter Targets Homeowners Facing Foreclosure

In Palm Dedert, California, California Chronicle reports:

  • Supervisor John J. Benoit [] is warning about a mailing received in the Coachella Valley [...] from the "Title Compliance Office" informing residents that, per a recommendation of the U.S. Government Federal Citizen Information Center, they should obtain an official copy of their Grant Deed by a deadline of May 24, 2010. The recipients are directed to send $167 payable to Title Compliance Office, a P.O. Box in Riverside. The backside of the solicitation is a notice printed in Spanish.

  • "This solicitation is a rip-off that takes advantage of distressed homeowners worrying and working to save their homes from foreclosure," said Supervisor John J. Benoit. "At a fraction of the cost, the Riverside County Assessor-County Clerk-Recorder's office can provide these official documents so residents would be wise to avoid this entity."

For more, see Benoit Warns About Grant Deed Solicitation Letters.

Minnesota Woman Faces Charge Of Ripping Off Dementia-Disabled Aunt Of Life Savings, Leaving Her Facing Eviction From Nursing Home & Foreclosure

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

  • An Eagan woman faces a felony charge of exploiting a vulnerable adult for allegedly stealing more than $35,000 from her disabled aunt. She is accused of gambling away the woman's life savings. Misty M. Williams, 30, was the conservator of the estate of Doris Jean Johnson, 72, who has dementia and lives in an assisted care center in Eagan. [...] Papers filed in probate court show an even higher loss. An examination of Johnson's accounts estimated the losses at more than $50,000 and possibly as high as $125,000, records show.

  • Johnson's bills and rent had gone unpaid, she faced eviction, and her home, which her estate still owned, went into foreclosure because of a mechanic's lien by a homeowner's association, records show.

Source: Eagan woman accused of stealing aunt's life savings, gambling it away.

Bid-Rigging Attorney Gets 12 Months In 5-Year, $10 Million Conspiracy At Baltimore-Area Real Estate Tax Lien Auctions

In Baltimre, Maryland, The Maryland Daily Record reports:

  • Baltimore County lawyer and real estate investor Harvey M. Nusbaum was sentenced Tuesday to a year and a day in federal prison for his role in a five-year, $10 million bid-rigging conspiracy at tax lien auctions in Maryland. The Justice Department’s Antitrust Division had requested an 18-month sentence, while Nusbaum’s attorney recommended a term of home detention coupled with daily community service, arguing Nusbaum did not know he was committing a crime. U.S. District Judge J. Frederick Motz doubted Nusbaum’s claimed naiveté throughout the day-long hearing, asking about the 72-year-old defendant’s “moral compass.”

***

  • Nusbaum, who was indicted along with longtime friend Jack W. Stollof in June and pleaded guilty in February, must also complete 100 hours of community service and serve two years of probation. In keeping with his plea, he must pay $800,000 in restitution, $250,000 of which he has already paid. He will also lose his law license and not be able to work as an accountant or participate in tax lien auctions, according to his attorney, Paul Mark Sandler.

***

  • The hearing featured a previously undisclosed star witness for the government: John K. Reiff, an attorney, who, along with law partners Anthony J. De Laurentis and Richard Turer, formed an investment fund tax lien that conspired with Nusbaum, Stollof and others to rig bids.

  • Nusbaum’s and Stollof’s names have been in the news for years, thanks to The Baltimore Sun’s 2006 investigation into the problem of ground rents in Maryland. Co-conspirator Steve L. Berman pleaded guilty in June 2008. Reiff and his partners’ involvement had not been made public before Tuesday. (Berman, who did not testify Tuesday, is scheduled to be sentenced later this month.) Thanks to an amnesty agreement reached with federal prosecutors, Reiff will likely have to pay restitution but has not pleaded guilty to any crime, and he, De Laurentis and a third man, John E. Reid, still operate a law office in Highlandtown. Neither De Laurentis nor Turer testified Tuesday.

  • Speaking in a low voice, Reiff detailed how he and his co-conspirators met before or at 10 auctions in Baltimore City and Anne Arundel, Baltimore, Montgomery and Prince George’s counties to make sure they didn’t bid against one another, or “beat each other up,” creating what he called a “sort of round-robin effect.” Reiff said he and his partners bought approximately 5,000 liens from 2003 to 2007, a period in which their firm, then in Columbia, was bidding on behalf of investor clients.

  • Two of those clients have come under legal scrutiny elsewhere for alleged bid-rigging: Bank Atlantic has been sued in federal court in Chicago, and Mooring Tax Asset Group has been subpoenaed in a New Jersey antitrust grand jury investigation.

For more, see Lawyer, 72, sentenced for bid-rigging conspiracy.

Go here for more on bid rigging at real estate-related auctions.

Cook County Continues Sitting On Million$ In Unclaimed Foreclosure Surplus Funds

In Chicago, Illinois, WFLD-TV reports:

  • If your house has been foreclosed on, believe it or not -- you may have some money coming to that you don't know about. The Cook County Circuit Court Clerk's office has a list of former homeowners who are owed what's called a mortgage surplus. "We have money for you, and we want to give that money to you," Dorothy Brown, Cook County Circuit Court Clerk said. "Our list goes from 13 cents to $461,000 dollars."

  • The mortgage surplus is the amount left over when a foreclosed home is auctioned off and sold for more than you owe. Once the bank is paid off, the rest is yours. Cook County has more than $19 million in unclaimed mortgage surplus funds. The problem is finding foreclosed home owners. Legally, the auction company has to mail out a letter. But the address they have for foreclosed homeowners is usually the house that's just been foreclosed.

***

  • The Cook County Circuit Court clerk's office is also making an extra effort. They recently added a special search engine where you can check on their web site. If you find your name on the clerk's website, you have to file for a court appearance and prove to the judge you are the person on the foreclosed mortgage.

  • Dupage and Will Counties also have mortgage surplus funds. If you live in one of those counties, call the Circuit Court Clerk's office or the Sheriff's Department there to see if you are owed this type of money.

For the story, see Millions In Unclaimed Foreclosure Cash For Cook County Residents.

See also, WLS-TV Channel 7: Clerk: $18M due to foreclosed homeowners:

  • The clerk's database found about 1,900 people are due surplus money. The surpluses mostly involve foreclosures from the 1990s and not the recent subprime mortgage collapse.

Wednesday, May 12, 2010

Indiana AG Files Suit Against Alleged Foreclosure Assistance Racket Accused Of Taking Over Financially Distressed Homes & Failing To Pay The Mortgage

In Noblesville, Indiana, WRTV-TV Channel 6 reports:

  • The state has filed suit against a man in the wake of numerous complaints about foreclosure rescue programs. [...] Investigators said Daniel Shrader worked as an agent for at least 10 such companies, including Northstar Homes, Orion, Great Homes LLC, Prizm Partners, Regal Partners and the Oakbay Group, along with a website offering foreclosure help, indy-housebuyers.com.

  • According to the complaint, Shrader and the companies took over homes but failed to pay the mortgage, and failed to follow state rules on providing services that would help people save their homes from foreclosure. [...] A Hamilton County judge on Friday ordered Shrader to a pay delinquent mortgage payment for one of his customers. He then had to be chased down by a state investigator waiting to serve him with a lawsuit seeking an injunction against his business practices.

For the story, see State Reports Rash Of Foreclosure Rescue Complaints (Suit Filed Against Agent For 10 Companies).

Lender Exercises Setoff Rights To Drain Cash From Unwitting Couple's Bank Account

In Atlanta, Georgia, Next Student Student Loan Blog reports:

  • An Atlanta couple has found themselves with their savings wiped out after their bank, Wells Fargo, cleared out their checking account in order to pay a piece of what bank officials maintain is an outstanding student loan (“Suddenly, Bank Account Was Gone,” The Atlanta Journal-Constitution, May 1, 2010).

  • After Hope and Matt Hughes had problems trying to make a purchase with their debit card last month, they discovered that Wells Fargo had cleaned them out, withdrawing $4,059.82 — everything they had — from their checking account. They were also hit with $385 in overdraft fees for debit-card purchases they had made on the day their checking account was emptied.

  • Wells Fargo appropriated the funds under its right of “setoff,” a prerogative held by most banks that allows a bank to take money from a customer’s savings or checking account in order to pay off any other account — a home mortgage, credit cards, student loans — that the customer holds with the bank that’s overdue.

For more on a bank’s license to help itself to your money, see Wells Fargo Empties Customer’s Checking Account to Pay Delinquent Student Loan.

Maryland AG Moves To Halt "Free Rent" Investment Racket That Resulted In 100+ Tenants Being Bounced Out Of Homes

In Baltimore, Maryland, The Baltimore Sun reports:

  • The Maryland attorney general's office moved Thursday to halt an alleged pyramid scheme by a Gambrills company and its owner, who are accused of bilking about 500 people out of hundreds of thousands of dollars by promising commissions, free rent and cars in exchange for recruiting more investors.(1) The plan started to fall apart when rent checks bounced and the investors were evicted. More than 115 people paid several thousand dollars into the company for an apartment, and most have been tossed out, according to authorities.

***

  • Among those allegedly duped [...] were Helen Martin, a 59-year-old social worker, and her two daughters who together lost more than $11,000, including scholarship money and savings. They said they were lured by the promise of better housing, and they felt assured by testimonials from a network of friends and family.

For more, see 'Free rent' pyramid scheme ordered to halt operations (More than 115 people evicted).

For the Maryland AG press release, see Securities Division Orders Halt to "Free Rent" Pyramid Scheme, and go here for the AG's cease and desist order.

(1) The Maryland Attorney General's office says the people were allegedly scammed out of hundreds of thousands of dollars in a pyramid scheme that included promises of a year's free rent in exchange for upfront payments toward a supposed business venture. The securities division of the attorney general's office issued a cease-and-desist order against Diversified Marketing Consultants Inc., its owner, Lamondes D. "Monte" Williams of Clinton, and related companies Digital-Zone Electronics Warehouse and Mainline Properties LLC., the story states. The division contends the operation raised more than $800,000. Williams was reportedly convicted in 2005 of running a similar scheme. According to the story, his most recent troubles triggered a probation violation hearing scheduled for Friday in Prince George's County Circuit Court, according to court records. In the previous case, he was reportedly sentenced to five years in prison and three years of probation and ordered to pay $146,000 in restitution.

Nevada AG's Office: Forensic Loan Auditing Is The Next Evolution In Mortgage Modification Scams

In Las Vegas, Nevada, KTNV-TV Channel 13 reports:

  • Odds are you or someone you know is desperate to save a home from foreclosure. But as you know, many offers for assistance are simply too good to be true. For months, Contact 13 has been digging up dirt on the latest foreclosure rescue scam. It's called forensic loan auditing. Upside down in his mortgage like so many other Southern Nevadans, Al Lopez reached out to a forensic loan audit company called Home Protection Service for help.

***

  • Al says Home Protection Service took his money, but did little to help protect his home. When he received his loan audit, he says they claimed everything passed. Al says the company didn't even do the work they were supposed to.

***

  • The state attorney general's office tells Contact 13 forensic loan auditing is the next evolution in mortgage modification scams. The AG's office is currently investigating 194 companies for similar types of foreclosure rescue fraud. The California Attorney General issued a release warning homeowners to avoid forensic loan audits all together.

***

  • Contact 13 reached out to Home Protection Service, which used to be based in an office complex. Contact 13 started with a phone call, then an email, but never got a response. When we showed up to speak to someone in person, we found the company has closed up shop and basically disappeared, leaving no forwarding address or new phone number. Unlike mortgage modification firms in Nevada, there are no regulations on forensic loan auditing companies.(1)

For more, see Forensic loan auditing is the latest foreclosure rescue scam.

(1) It's difficult to believe that this service, when performed by non-attorneys (or attorneys not licensed in the jurisdiction in which the services are performed) directly for the general consumer public, does not constitute the unlicensed practice of law (which, in most places that I know of, is a felony).

Tuesday, May 11, 2010

Arizona AG Shuts Down Foreclosure Help Outfit That Allegedly Promised To Buy Clients' Defaulted Loans From Lenders, Then Re-Work Payment Terms

In Scottsdale, Arizona, KPHO-TV Channel 5 reports:

  • State regulators have shut down a mortgage rescue company that CBS 5 investigators exposed one week ago. [... Homer] Becker and thousands of other homeowners said they handed over $1,595 each to Guardian [Group], which was supposed to buy their homes from the bank and then sell them back to the homeowners at a reduced price.(1) However, dozens of Guardian clients told CBS 5 that the company just took their money.

***

  • Last week CBS 5 exposed some complaints against Guardian Group. When CBS 5 reporters showed up at the company's Scottsdale office to ask questions, the receptionist ran out the back door. A sign hung on the entrance said the office was closed due to technical difficulties. But a cease and desist order issued Thursday by state regulators means Guardian is effectively out of business.

For the story, see Company Shuts Down After CBS 5 Investigation (Guardian Group Accused Of Operating As Unlicensed Mortgage Broker).

(1) 5 Investigates discovered that the plan was laid out in a power point presentation the company sent to desperate homeowners. Go here for Guardian's Principal Reduction Presentation.

Convicted Loan Modification Scammer Buys His Way Out Of Jail Time By Coughing Up $10K+ In Victim Restitution Prior To Sentencing

From the Office of the Nevada Attorney General:

  • Attorney General Catherine Cortez Masto announced [] the sentencing of William Vargas in connection with his involvement with a mortgage foreclosure rescue company, Federal Housing Aid, whose operation included a call center in the Philippines.

  • District Court Judge Michael Villani sentenced Vargas to a year in the Clark County Detention Center, but suspended the sentence pursuant to a plea agreement. Vargas was allowed to enter a plea to a gross misdemeanor charge of attempted theft but was required to pay half of the restitution owed prior to sentencing. Vargas is required to pay total restitution of $21,000 to the victims of his crime.(1)

For the Nevada AG press release, see Defendant Sentenced In Mortgage Rescue Scam Operated From The Philippines.

(1) According to the press release, Vargas would contact homeowners facing foreclosure and offer to stop the foreclosure proceeding and save their credit. The victims entered into an agreement to pay an up front fee ranging from $700.00 to $1,500.00 as compensation for effecting a solution to the foreclosure. Once these fees were forwarded to Federal Housing Aid, no further action was taken. The homeowners, some of whom were over the age of 60, were never provided with assistance in resolving their problems and, in fact, ended up losing their homes.

Indiana AG Targets Now-Defunct California Company In Alleged Upfront Fee Loan Modification Scam

In South Bend, Indiana, the South Bend Tribune reports:

  • [I]ndiana Attorney General Greg Zoeller has filed a lawsuit [...] against [USA Mortgage Aid Inc.], a purported business that Zoeller says has swindled hundreds of Indiana residents out of hard earned money. Zoeller was in South Bend [] to file the suit in the St. Joseph County clerk's office and also to urge residents to beware of likewise scams.

  • Since the foreclosure crisis, many businesses have popped up, touting themselves as "mortgage rescue," companies," Zoeller said. The M.O. is usually the same: money up front, help later. [...] Zoeller said [] USA Mortgage Aid Inc. violated several state consumer protection laws by demanding the money and by not being properly bonded. The attorney general's office also accuses the company of misrepresenting its positions and lying to consumers about having in-depth industry knowledge. [...] According to the California secretary of state website, USA Mortgage Aid, based in Irving, Ca., is now a dissolved company.

For the story, see Indiana attorney general files lawsuit against purported foreclosure aid company (Mishawaka man reports losing $1,700).

For the Indiana AG press release, see Action taken to curb foreclosure scams.

NJ Appeals Court: NY Lawyer Unlicensed In NJ Representing Homeowners In Settling F'closure Cases Subject To NJ Jurisdiction In Legal Malpractice Suit

The New Jersey Law Journal reports:

  • A New York lawyer who represented clients in a New Jersey real estate case [involving the representation of a couple who she knew to be New Jersey residents, for the purpose of settling pending or impending foreclosure actions in a New Jersey court for New Jersey properties] without crossing the Hudson is nonetheless subject to New Jersey's jurisdiction in a legal malpractice suit, a state appeals court said [].

  • Overturning a judge below who "relied almost exclusively on the absence of credible evidence of defendant's physical presence in New Jersey," the Appellate Division said personal jurisdiction was warranted because the lawyer was hired to stop a pending New Jersey foreclosure action, pertaining to four properties in the state, which provided sufficient minimum contacts.

  • What's more, subjecting the defendant to jurisdiction in New Jersey is reasonable because the minimal inconvenience she will experience is outweighed by the state's substantial interest in regulating the unauthorized practice of law within its borders, the court said in Halley v. Myatt, A-1378-09 (N.J. App. Div. May 3, 2010).(1)

For more, see N.J. Malpractice Suit Can Proceed Against Lawyer Who Did Work From New York.

(1) Reportedly, the couple was represented by Leena Khandwala, a clinical teaching fellow at the Seton Hall University School of Law, Center for Social Justice, a pro bono and clinical program designed to give its law students hands-on experience while providing pro bono legal services for economically disadvantaged residents in the region.

Idaho Couple Say Loan Servicer Approved Loan Modification, Accepted Subsequent Payments, Then Foreclosed On Them Anyway

In Ada County, Idaho, the Idaho Statesman reports:

  • Carey and Tracie Kinghorn were content with their adjustable-rate mortgage, but they were pleased when the Texas-based servicer that had bought their loan offered them a modification to lower their monthly payment by about $500. The change cost them $11,000 in fees and charges, but the Kinghorns signed a contract in April 2009.

  • The company cashed the check but never recorded the modification, the Kinghorns said. In February, they said, they learned that the home would be sold at a foreclosure auction because they hadn't been paying the original full monthly payment. They tried to stop the sale, but it went forward in March.

  • The Kinghorns blame the mortgage servicer for taking their money and selling their home. The company says it handled the Kinghorns' mortgage properly and tried to reach the couple by phone and mail in the past year to no avail. The couple contends they were not contacted.(1)

For more, see Complaints about mortgage relief mount in the Treasure Valley (Some Idaho homeowners say foreclosure threats often follow empty promises of help).

(1) According to the story, an Idaho Statesman story April 7 about a family whose owners said their home was sold after a botched loan modification prompted dozens of responses from Treasure Valley residents complaining about loan servicers, lost paperwork, miscommunication and prolonged modification trial periods. Many reportedly said their loan representatives told them the only way the family could get help was to stop paying their mortgage for several months, and several reportedly said they had lost their homes through foreclosures that shouldn't have happened.

Monday, May 10, 2010

CBS' 60 Minutes On Underwater Homeowners & Strategic Defaults

eCreditDaily reports:

  • 60 Minutes [last night] put the national spotlight on strategic defaults, or homeowners walking away from “underwater” mortgages and into foreclosure, despite being able to make their payments. In a segment that aired [last night], Morley Safer interviewed homeowners mired in negative equity, a spreading “epidemic” for an estimated 11 million homeowners.

For more, see Foreclosures & Walking Away: 60 Minutes Eyes an ‘Epidemic’.

For the CBS 60 Minutes' piece, see Mortgages: Walking Away (or for the 60 Minutes' transcript, see Strategic Default: Walking Away from Mortgages (60 Minutes: A Million Have Walked Away; Trend Could Undermine the Fragile Economic Recovery).

Flood Of Foreclosure Fraud Complaints Overwhelms DA's Office; Financially Strapped Victims Told To Prosecute Cases Themselves By Filing Civil Suits

In Riverside County, California, The Press Enterprise reports:

  • A nonprofit organization representing 23 faith congregations in Riverside and San Bernardino counties demonstrated Friday, calling for county government to give higher priority to fighting foreclosure fraud with prosecutions and education. [...] Speaking for the grassroots organization, called Inland Congregations United for Change, Tim Lucas, a member of St. Catherine of Alexandria Church in Riverside, said they are asking the district attorney's office, the assessors office and the board of supervisors for help.

***

  • Lucas complained that the district attorney's real estate unit does not have enough staff to handle its workload. Also Lucas complained that the district attorney has told the group that the majority of foreclosure fraud complaints should be prosecuted as civil rather than criminal cases. He said that would require victims, many of which are of modest means, to hire lawyers.(1)

  • In response to the criticism, Ryan Hightower, spokesman for the Riverside County district attorney, said "We work with the resources we have and make the most of them." He said real estate fraud already is a high priority for the office and every complaint is evaluated on an individual basis for possible criminal prosecution. There are 350 cases in some stage of investigation or prosecution, Hightower said.

For the story, see Group demands action on foreclosure scams (DEMONSTRATION: The Riverside County DA's office says fraud is a high priority and is investigating 350 cases).

(1) It's not uncommon for authorities to claim that such incidents are "civil cases," suggesting the victim would need to file a civil lawsuit against the scammer to seek a remedy. California case law has clearly addressed the notion that some scammers have that they can insulate themselves from prosecution by using terms and conditions contained in legitimate-looking business contracts to screw over consumers. The rule in California is cited in, among other cases, People v. Frankfort, (1952) 114 Cal.App.2d 680, 700; 251 P.2d 401 (case law links are found at Findlaw.com - may require free registration):

  • The simple answer to this argument is that "The People prosecuting for a crime committed in relation to a contract are not parties to the contract and are not bound by it. They are at liberty in such a prosecution to show the true nature of the transaction." (People v. Chait, 69 Cal.App.2d 503, 519 [159 P.2d 445]; People v. McEntyre, 32 Cal.App.2d Supp. 752, 760 [84 P.2d 560]; People v. Jones, 61 Cal.App.2d 608, 620 [143 P.2d 726]; People v. Pierce, supra, p. 605.)

In People v. Jones, 61 Cal.App.2d 608, 620 [143 P.2d 726], a California appellate court made this observation:

  • Defendant argues that the deal with each "seller" was a civil transaction; [...] Cloaked in the draperies of his corporation and pretending to act in its behalf, he boldly approached his unsuspecting victims.

***

  • Although each deal in its incipiency bore the color and trappings of a normal, civil contract, yet when subjected to a postmortem it exhaled the stench and disclosed the carcass of a fraud. (People v. Epstein, 118 Cal.App. 7, 10 [4 P.2d 555].) There appears no sign of good faith at any turn. Each taking and appropriation was a grand theft. The use of the corporate name and the promises made in accomplishing his purpose were a camouflage of such common variety that no excess of genius was required to discern the fraud. Parol evidence of all that occurred was admissible to show the intention of defendant. (People v. Robinson, 107 Cal.App. 211, 221 [290 P. 470].)

The Lawsuits Continue Against Foreclosing Lenders Accused Of Jerking Around Homeowners Seeking Loan Modification Help

In New York City, Crain's New York Business reports:

  • Three Queens homeowners filed a lawsuit against J.P. Morgan Chase Bank N.A. and two of its subsidiaries, Chase Home Finance and Washington Mutual Bank, claiming that the groups illegally delayed and denied their applications for permanent foreclosure relief under the federal Home Affordable Modification Program. The lawsuit is seen as one of the first cases involving the modification program in New York City.(1)

  • The lawsuit, which was filed in the Eastern District Federal Court in Brooklyn, claims that the bank violated the federal program that requires banks to provide permanent modifications to eligible homeowners who complete three months of trial payments and verify their income.

  • Similar lawsuits have been filed against a number of other banks, such as Bank of America and Wells Fargo, in other states over the past year. Last month, a California couple reportedly sued Chase because it told them to stop making mortgage payments so they could qualify for loan modification. Chase then foreclosed on their home. Chase declined to comment.

  • Chase breached their contract,” said Carmela Huang, an attorney at the Urban Justice Center,(2) which is representing the Queens homeowners in the case. “As far as we know, this is the first case in New York.” [...] “Our clients' situation is not unique. We have been inundated by people in foreclosure,” said Ms. Huang, adding that homeowners don't have enough resources to sue banks. In this particular case, Urban Justice is providing its legal service for free. “The law is clearly on our side. We hope Chase will settle quickly.”

For the story, see Chase sued in NYC for denying foreclosure relief (Three Queens homeowners allege the bank illegally delayed and denied their applications under the Home Affordable Modification Program; suit seen as first in NYC).

For the lawsuit, see Begum et al v. JPMorgan Chase Bank, N.A. et al.

See also:

Reportedly, ProPublica is matching local journalists around the country with homeowners having trouble getting loan mods:

(1) For some of the other lawsuits in connection with lenders allegedly jerking around homeowners facing foreclosures with bogus loan modification plans, see:

(2) The Urban Justice Center is a non-profit group that represents an array of New York City's most deprived and abused people in society, including members of the working poor, through the implementation of strategies to provide needed legal services and advocacy to unrepresented and under-represented groups and individuals in New York City, according to its website.

Matchmaker To Link Victims Of Foreclosing Lenders' Loan Modification Jerk-Arounds With Reporters Looking To Cover These Stories

ProPublica reports:

  • Millions of homeowners face losing their homes in the continuing foreclosure crisis, but homeowners often have more than the struggling economy and slumping house prices to worry about: Disorganization within the big banks that service mortgages has made a bad problem worse.

  • Sometimes the communication breakdown within the banks is so complete that it leads to premature or mistaken foreclosures. Some homeowners, with the help of an attorney or housing counselor, have eventually been able to reverse a foreclosure. Others have lost their homes.

***

For more, see Disorganization at Banks Causing Mistaken Foreclosures.

ProPublica reports that it is matching local journalists around the country with homeowners having trouble getting loan mods.

Attorney Cranked Out Paperwork For $2 Per Each Blindly Signed Document Filed In Florida Foreclosure Mill's Home Loan Lawsuits

In Central Florida, a recent story in The Tampa Tribune contained the following execrpt on how notorious assembly line, foreclosure mill law firm Florida Default Law Group, headed by attorney Michael Echevarria, has, in the past, put in requests for attorney fee awards in foreclosure actions:

  • In 2004, The Florida Bar reprimanded Echevarria for violating certain Bar rules, one of which concerned attorney fees. According to Bar documents, Echevarria's law firm asked a Land O' Lakes attorney named Anthony Woodward to certify that Echevarria's legal fees were reasonable, given the amount of time the firm spent on each case.

  • Instead of reviewing each foreclosure case fully, as he was supposed to do, Woodward was simply signing documents attesting to the fairness of Echevarria's fees. Each time Woodward signed his name to a document, he received a $2 fee, the Bar documents show. When reached for comment Friday, Woodward referred a reporter to his own Florida Bar disciplinary case file, which was not available late Friday.

  • Several months ago, Woodward told a Tribune reporter that Echevarria's legal fees - about $1,000 per foreclosure case - were so low he was confident they were reasonable even without reviewing each case.

Source: State AG investigates its own.

Chicago-Area Foreclosure Rescue Operator Peddling Sale Leaseback Programs Targeted In Multiple Lawsuits, Illinois AG Probe

In Chicago, Illinois, the Chicago Tribune reports:

  • The accusations that have piled up against Eliseo Carrillo run counter to the image the Chicago entrepreneur cultivated as a champion of Latino immigrants. As the housing market weakened in recent years, Carrillo's smiling face appeared on billboards throughout the city's Mexican-American neighborhoods. Spanish-language TV commercials featuring Mexican music and Carrillo wearing a stylish cowboy hat promised that his real estate companies — all using the name "Protecta" — were friends and guardians of immigrants in need.

  • But after signing what they believed were loan papers to save their homes from foreclosure, at least four of his struggling clients have filed lawsuits alleging that they were misled into surrendering the deeds to their homes in complex "mortgage rescue" schemes they didn't understand.(1)

***

  • Protecta, which Carrillo has shut down, and two other companies he directs — Loan Negotiator and Cairo Holdings — are being investigated by the Illinois attorney general's consumer fraud division. A spokeswoman for the attorney general confirmed the probe of Carrillo's companies but declined to discuss specifics. Carrillo and his companies also have been targeted by at least a dozen lawsuits since 2006, including the four filed by clients regarding Protecta schemes in which third parties "lent" their credit to distressed homeowners by assuming ownership and taking out a new mortgage in exchange for a profit, with the original homeowner paying rent to cover that second mortgage.

***

  • Lea Weems, an attorney with the Legal Assistance Foundation of Metropolitan Chicago,(2) which represents [one screwed over homeowner], said her nonprofit organization has been looking into nearly 70 cases of alleged mortgage rescue fraud involving a variety of operations. Referring to Protecta, she added: "This one is particularly egregious."(3)

For more, see Mortgage 'rescuer' preyed on immigrants, clients allege (Immigrants sue and say they were misled into surrendering deeds to their homes).

(1) According to the story, the mortgage lawsuits depict Carrillo, 36, as a "scam" operator, savvy in the arcane laws governing real estate transactions, who saw profit in the thousands of troubled home mortgages taken out by immigrants less likely to understand the complicated English-language legal documents and less prone to speak out if something went awry. A few of the clients were in the country illegally, making them even more vulnerable, according to attorneys and community activists, the story states. Two suits are described by the story:

  • In a federal suit, Rafaela Moreno claimed she was steered by Carrillo into signing over the deed to her house in a $10 quit-claim transaction after he allegedly promised to fix her credit. A new loan taken out by an investor on the house paid off her $120,000 mortgage balance. It also earned Carrillo a bank check for $86,320.The next year, Moreno was allowed to repurchase the home, but for $250,000 — more than twice what she owed on the first mortgage, according to court documents. In a 2008 settlement of Moreno's lawsuit, Carrillo agreed to pay Moreno $62,500 in compensation for her losses. He paid nearly half that amount but stopped payments late last year, court documents show.

  • Yet another lawsuit, filed last year by Carmen Macias, tells a similar tale, accusing Protecta and its agents of "stealing" her Southwest Side home after she thought she was refinancing her mortgage in 2006. Instead, the suit claims, the deed was transferred to an investor. Protecta earned $1,800 in fees, while another real estate company with whom Carrillo had had a partnership received $38,000, according to closing documents.

(2) According to its website, the non-profit law firm Legal Assistance Foundation of Metropolitan Chicago has provided free civil legal assistance to tens of thousands of low-income and elderly individuals in Chicago and suburban Cook County for over 40 years.

(3) Innocent straw buyers were reportedly also lured into the scam under the belief that they can participate in helping homeowners facing foreclosure and get paid for it at the same time. Two Protecta investors interviewed by the Tribune described the "sale leaseback" programs Carrillo pitched to help immigrants in financial trouble. From the story:

  • In the arrangement, the investors expected to collect monthly payments from the original homeowners. But in [two] cases, the rent payments went to Protecta, their lawsuits say. Carrillo confirmed that Protecta did handle the rent payments but said it was merely to help document them.

  • One investor, who spoke on the condition of anonymity because he's in the country illegally, was a maintenance man who wound up owning four houses besides his own, according to closing documents naming Protecta as the broker. Though the man said he initially profited about $20,000, all four of the houses now are in foreclosure proceedings. In loan documents recorded by a Protecta agent, the man's monthly income was reported to be $7,200 — more than twice the $3,400 per month his pay stubs at the time say he earned — which made it easier for him to qualify for the loans. "If he would have explained this is how it would happen, we would never have done it," said the investor, who is named as a defendant in one case. "I never wanted to cause pain to those families, nor mine."

  • The second investor, Sergio Villegas, received a profit of $12,438 in one Protecta-arranged transaction, according to court documents. Several properties under his name now are in foreclosure proceedings or were taken over by a bank. "My credit is ruined," Villegas said. "All of this has been very bad."

Loan Modification "Jerk-Arounds" Continue For Homeowners Seeking Relief From Foreclosure

Lenders continue in their efforts to sell false hope to financially strapped homeowners seeking to keep their homes out of foreclosure by offering them loan modification deals, then pursuing foreclosure against them anyway, despite the fact that the payments on the loan modification are current and up to date. For two recent stories, see:

  • Puyallup, Washington (Bank of America): Puyallup family fights to keep home (Recession: Owners of Sumner cafe thought they were in federal program, but now foreclosure looms),

Sunday, May 9, 2010

The BofA Apologies Continue For Wrongfully Seizing Homes

In Fort Worth, Texas, the Star Telegram reports:

  • Freda Snowden's months-long ordeal to stop a bank from wrongly seizing a house her son owns in far south Fort Worth has ended. Bank of America apologized [] and agreed to pay for damage to the three-bedroom house on Oldham Court caused by agents the bank hired to secure the property for foreclosure. Snowden said bank executives admitted that their records had a coding error and know they have no claim to the property. She said it was frustrating trying to get anyone at the bank to listen to her, let alone return phone calls and e-mails.

***

  • Snowden calls the ordeal, which sent her through several layers of bank bureaucracy to get the problem fixed, a nightmare. "If it's happening to me, how many other families is this happening to?" she said. "These last four months has taken at least 10 years off my life."

  • The bank, she said, was preparing to foreclose on the previous owner. That person bought the house in March 2007 and defaulted on the loan nine months later, deed records show. [...] Snowden said her 29-year-old son bought the 1,460-square-foot house in a September 2008 foreclosure auction and moved in a month later. He put in new appliances, changed light fixtures and was enjoying his house, she said.

  • That changed in November 2009, when he returned home one day to find that the house had been broken into. Nothing was taken, but someone had tried to re-key the home's locks. Not feeling safe, he put the house up for sale in December and moved out, she said.
    In February, the house was broken into again and the locks re-keyed. And again, nothing was taken. Police suggested that squatters might be entering the house, Snowden said.

  • The mystery started to clear a few days later when a real estate agent was showing the house and an uninvited man walked in. When the agent asked why he was there, he said the bank hired his company to re-key the house because of a pending foreclosure. Snowden immediately called her son's lender and the title companies for the sale, she said. All assured her that yes, her son owned the house. "I started calling everyone at Bank of America. No one would talk to me," Snowden said.

For more, see Bank apologizes for error that nearly cost a Fort Worth man his home.

BofA Strikes Again; Hits Central Florida In Its Relentless Seizures Of Wrong Homes Followed By An Apology

In Sarasota, Florida, ABC Action News reports:

  • Neighbor Scott Mondro started asking questions as soon as he spotted the stranger drilling holes in his neighbor's door. Turns out the guy with the hardware was representing Bank of America. Scott Mondro shares the conversation. “He says 'we are foreclosing on this property' and I said 'You have the wrong address. You guys are making a great, big mistake.'”

***

  • The landlord sent Action News an email saying she had previously informed Bank of America about this ongoing mix-up. [..] We asked Bank of America for an explanation, and days later they responded with this statement: "The owners have been contacted to apologize for this inconvenience and to let them know that we are rectifying the process internally. We have also asked the 3rd party contractor to stop all actions."

For more, see Bank attempts foreclosure on wrong home.

Another Lender Wrongfully Seizes Former REO It Recently Sold

In Grand Rapids, Michigan, WZZM-TV Channel 13 reports:

  • It's happened again -- another recently purchased home broken into by a company that was hired to take care of foreclosed homes. WZZM 13 News reported a story Monday about a Newaygo County couple who paid cash for a foreclosed home, only to have their possessions taken six months later.

  • On Tuesday morning, we got another call. This time, workers with a non-profit organization in Grand Rapids said they had a near-identical situation. The organization purchased a foreclosed home a year ago and completely renovated the property. Last month, though, the same company that maintains foreclosed homes, broke-in and winterized the property.

***

  • There were several warning signs posted throughout the house. [Vanessa] Remo called the company listed on the papers, Field Asset Services. "They were very adamant that American Home, a mortgage company, was the person that owned it, so we called and did some research and it was Deutsche Bank that sent them out," says Remo. "I must have sat on hold for two hours, and nobody ever called back."

For more, see Company apologizes for removing property from Newaygo County family's home.