Homeowners Cautioned To "Look Before You Leap" When Dealing With Loan Modification Rackets Peddling Foreclosure Rescue Quick Fixes

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

• Patricia Goff got taken not once, but twice, by shoddy loan modification companies promising to fix her mortgage woes for an upfront fee. Neither delivered and now Goff, 47, is facing foreclosure on the Rosemount home where she lives with her husband and 21-year-old son -- unless she comes up with $34,000 -- more than Goff earns in a year.

***

• Hoping to prevent others from ending up like Goff, the Minnesota Home Ownership Center and dozens of partners are kicking off Look Before You Leap, a campaign designed to teach people how to spot foreclosure-related scams and let people know help is available for free from housing counselors around the state.(1)

***

• [A]n event [was scheduled for last Tuesday] on the East Side of St. Paul, one of the areas hardest hit by foreclosure, featuring homeowners who have agreed to share their horror stories.

For the story, see Look Before You Leap: Out to quell foreclosure-related scam (The Look Before You Leap campaign warns of illegitimate loan modification companies. Event features homeowners who have agreed to share their horror stories).

(1) Reportedly, Look Before You Leap is part of a national public education effort called the "Loan Modification Scam Alert," which was started by the community development nonprofit NeighborWorks America with $1 million from Congress. According to the story, several cities around the country so far -- Los Angeles, Dallas, Miami, Atlanta, Las Vegas, Milwaukee and Kansas City, to name a few -- have created local versions of the campaign, NeighborWorks spokesman Steve Hermes said. Events are planned in Chicago, Des Moines and Omaha later this year, the story states.

NJ AG Scores $5M+ Consent Judgment Against Outfit Accused Of Upfront Fee Loan Modification Ripoffs

From the Office of the New Jersey Attorney General:

• Attorney General Paula T. Dow announced [] that a New Jersey loan modification company and its owners have agreed to a judgment of $5,051,253 to settle civil charges they defrauded homeowners who sought help in avoiding mortgage foreclosure.

• In addition to civil penalties of $5 million, corporate defendants Hope Now Financial Services Corp. and Hope Now Modifications LLC, of Cherry Hill, along with individual defendants Salvatore A. Puglia Sr. and Nicholas F. Puglia Jr., principals in the business, have agreed to pay the State $51,253 in attorney fees and investigative costs.

***

• The lawsuit accused Hope Now Financial and the other defendants of charging already-distressed consumers thousands of dollars in upfront fees for loan modification services, but failing to provide any such services. [...] The complaint also charged that Hope Now Financial and the other defendants placed content on a Web site designed to deceive consumers into believing the company was affiliated with the non-profit Hope Now Alliance, which provides credit counseling and free foreclosure prevention.

For the entire NJ AG press release, see Attorney General Announces Settlement in Mortgage Fraud Case; Loan Modification Company, Individuals Agree to $5 Million Judgment.

Go here for Final Consent Judgment - Dow v. Hope Now Financial Services Corp., et al.

Go here for the original NJ AG lawsuit: Milgram v. Hope Now Financial Services.

Indiana AG Tags Another Loan Mod Outfit w/ Civil Suit; Alleges Retired Cop Seeking To Lower Payments Was Screwed Out Of $1K By Out-Of-State Operation

In Corydon, Indiana, the Louisville Courier Journal reports:

• Larry Green thought he found the solution to his mortgage problem when he heard a radio ad. Green, a retired state trooper who has lived in his Harrison County home since 1983, wanted to lower his 9 percent interest rate to something more manageable. In April 2009, he heard the ad from California-based PFS Financial Corp. offering solutions for homeowners facing foreclosure. Although Green wasn't worried about foreclosure, he contacted the company and paid $1,000 up front, hoping they could help find a lower rate. "They seemed legit, but they weren't," he said.

• On Tuesday, Indiana Attorney General Greg Zoeller filed a lawsuit on behalf of Green against PFS Financial for alleged violations of the Credit Services Organizations Act, the Mortgage Rescue Protection Fraud Act, the Deceptive Consumer Sales Act, and for lacking proper certification from the Indiana secretary of state.

• Zoeller, who announced the lawsuit at a news conference in Corydon, said the company also failed to file a $25,000 surety bond that serves as insurance for clients when it doesn't perform services or provide a refund, something that Green has been seeking.

For more, see Indiana AG sues California mortgage consultant.

Cuomo Tacks On 31 Outfits To Calling Card List Of Loan Modification Rackets Around The Country Being Reminded To Observe NY Law

From the Office of the New York Attorney General:

• Attorney General Andrew M. Cuomo [] expanded his investigation into mortgage rescue companies that abuse New York homeowners. As a part of his ongoing investigation, Cuomo is sending over 30 additional cease and desist letters to mortgage rescue companies warning them to immediately end all misleading and illegal conduct. A total of 213 companies have now been put on notice.(1)

For the NY AG press release, see Attorney General Cuomo Expands Investigation Into Mortgage Rescue Companies That Abuse Homeowners (Cuomo Orders Over 30 Additional Mortgage Rescue Companies to Cease Fraudulent Practices; 213 Companies Have Now Been Put on Notice).

(1) Mr. Cuomo is reportedly the leading candidate for governor of New York in the state's upcoming election this November. Despite that, I'm quite confident that the timing of the recent 200+ friendly admonitions sent by his office to operators of loan modification rackets that may be screwing New York homeowners out of their hard-earned cash (especially those who plan to vote for governor but are undecided on who to support) is purely coincidental...

Minnesota Regulator Takes Enforcement Action Against Alleged Out-Of-State Loan Modification Rackets, Forensic Audit Peddler

The Minneapolis Star Tribune reports:

• On the heels of a statewide campaign alerting the public to foreclosure-related scams, the Minnesota Commerce Department took action against unlicensed, California-based loan modification companies Thursday.

• The department sent cease-and-desist orders to Ronald LeClair of Bank Modifications and Ernest J. Bartlett of Reorg.org. Both promised homeowners loan modifications and charged upfront fees of $1,000 to $3,000. It's illegal to offer loan modifications without a residential mortgage originator license and to charge an upfront fee for such modifications.

• Steven Fattorusso of USA Loan Auditors, also known as Relief Law Center, allegedly offered a Minnesota resident a loan modification, claiming the homeowner's current mortgage company was being investigated for predatory lending and offering assistance, the Commerce Department said. The company sent ads to consumers that made it look as though it was somehow affiliated with the government. The company has caught the attention of regulators in several states. A hearing to show cause has been scheduled for Fattorusso on Aug. 12.

Source: State regulators crack down on loan modification firms.

For the Minnesota Department of Commerce press release, see Minnesota Department of Commerce takes action against unlicensed loan modification companies for deceptive business practices.

San Jose Man To Get Seven Years For Pocketing $1.6M From Investors While Purporting To Operate Foreclosure Rescue Business

In Santa Clara County, California, the San Jose Mercury News reports:

• A 34-year-old San Jose man pleaded guilty to nine felony charges for running an illegal investment scheme from 2006 to 2009, according to the Santa Clara County District Attorney's Office. Reyes Alcaraz operated Safe Recovery, which promised high rates of return for investing money to rescue residential properties from foreclosure. Many of the investors were Spanish-speaking immigrants.

• He defaulted on many of the contracts, but continued to solicit new investors, writing bad checks to some of them. Prosecutors say 40 investors lost a total of about $1.6 million in the scheme. Alcaraz pleaded guilty Thursday to one count of grant theft, one count of selling an unqualified security, one county of misrepresentation or omission of a material fact in the sale of a security, five counts of insufficient fund checks, and one count of money laundering. Alcaraz is scheduled to be sentenced Aug. 3 to seven years in state prison.

Source: San Jose man pleads guilty in foreclosure-rescue scam.

Vacant Home Hijacker Dodges Hard Time; Scraps "Adverse Possession" Defense, Cops Misdemeanor Trespassing Plea After Spending 13 Months In County Jail

In West Palm Beach, Florida, the South Florida Sun Sentinel reports:

• A Palm Beach County man who rented out homes he did not own will not spend any time in prison. Prosecutors dropped felony burglary and theft charges against Carl Heflin in return for him pleading guilty to trespassing, a misdemeanor. Heflin, 52, was released last week from the Palm Beach County Jail, where he had been since his arrest in June 2009.

• Heflin, of West Palm Beach, tried to take over more than two dozen homes through adverse possession, a centuries-old concept that allowed people to lay claim to abandoned farmland and cottages if they lived there and paid the taxes for a period of years. In recent times, authorities say, the legal doctrine has been misused by squatters and swindlers claiming ownership of vacant and foreclosed homes.

***

• In Heflin's case, prosecutors agreed to a plea deal because he had already spent 13 months in jail and "the victims/owners of the foreclosed properties were either unavailable or unwilling to appear for trial,'' Angela Miller, chief of white collar crimes for the State Attorney's Office, said in an email. "The resolution was appropriate under the circumstances.''

• Heflin filed adverse possession notices with the Palm Beach Property Appraiser and even submitted deeds declaring ownership of 27 properties, records show. Heflin went into several of the homes, changed the locks, opened utility accounts and rented them to tenants.(1)

For the story, see Palm Beach County man spared prison time for renting out homes he did not own.

(1) Reportedly, the owner of one of the homes, Edward Pamplona, told the Sun Sentinel last month that his house was in foreclosure in December 2008, when he returned from a weekend away to find his front door had been removed. Pamplona said Heflin told him he had bought the house. Pamplona said he was skeptical since he had not been notified of any sale but took Heflin's word and temporarily lived in his car before moving in with a relative. The house had not been sold and is still in Pamplona's name, records show.

Texas Judge Gets Five Years Probation For Using Forged Signatures To Obtain Mortgage On Home Owned By Another

In Edinburg, Texas, The Monitor reports:

• Elsa Municipal Judge Hilda Caceres was sentenced Wednesday to five years of probation for faking required signatures on a $227,000 loan application. An Hidalgo County jury took three hours Tuesday night to convict the suspended magistrate on four counts of forgery after a trial in which she maintained the charges amounted to nothing more than a personal dispute between her and a woman to whom she had sold an Elsa home.

***

• The charges against her stemmed from a loan she and her ex-husband, Elsa City Commissioner Cain Caceres, took out in September 2009 to stave off foreclosure on another property they owned. Because the couple was already $700,000 in debt, they used an Elsa home they were in the process of selling to Elsa resident Nora Delgado as collateral.(1)

• But prosecutors alleged throughout the six-day trial that Hilda Caceres never obtained Delgado’s consent and instead forged the woman’s signature on loan paperwork. She had an employee at the county judge’s office — where she also worked at the time — notarize the documents as if Delgado had signed them in her presence.

For the story, see Judge sentenced for forged signatures on loan documents.

For an earlier report on this story, see Grand jury indicts justice of the peace candidate on forgery charges:

• Hidalgo County Sheriff Lupe Treviño has said his office’s investigation centers on a piece of real estate that Caceres shares with Nora Delgado and used as collateral for the loan. [...] The seven-count indictment filed Dec. 23 alleges Caceres forged Delgado’s signature on three documents on May 14: a deed of trust, an assignment of leases and rents, and an affidavit of identity.

(1) Presumably, ownership rights to the home in question had already been conveyed by the judge to the victim pursuant to some form of a deferred payment arrangement (ie. contract for deed, owner-financed sale, lease-purchase, or some other similar deal) at the time of the alleged forgeries.

California AG Starts Probe In Effort To Ensure That Tenants In Foreclosed Houses "Aren't Rousted From Their Homes In Violation Of The Law!"

From the Office of the California Attorney General:

• Attorney General Edmund G. Brown Jr. [] launched an investigation aimed at protecting the rights of the "forgotten victims" of the housing market collapse -- the tens of thousands of tenants facing eviction from buildings that have been foreclosed by banks.

• "Tenants who live in properties in foreclosure are the forgotten victims of the collapse of the housing market," Brown said. "We'll fight every step of the way to ensure they aren't rousted from their homes in violation of the law." As a part of his investigation, Brown [] sent letters to 24 banks, loan servicers, private investors, and law firms demanding information about whether they are complying with federal, state, and local laws regarding foreclosed properties and their treatment of tenants.

• More than 20 housing rights and public interest groups from across California have petitioned the Attorney General to take action, citing a "pattern of illegal conduct" and tenant harassment by banks, real estate agents and lawyers attempting to speed up evictions so that foreclosed properties can be sold.

***

• In his letter, Brown requires banks, loan servicers, private investors and law firms to provide information by July 19 about their policies and procedures when dealing with foreclosed properties and current tenants. It specifically asks the recipients to outline how they "promote or preserve tenancies after foreclosure".

• In May 2009, the federal government enacted the "Protecting Tenants at Foreclosure Act" giving tenants new protections, such as the right to stay in their homes for at least 90 days after receiving an eviction notice. While state and local laws also contain strong protections, unlawful evictions and harassment of tenants continue.(1)

For the California AG press release, and the text of his letter to the 24 alleged evil-doers, see Brown Investigates Whether Tenants' Rights Are Violated in Foreclosures.

For more on foreclosures and the rights of tenants, see National Law Center on Homelessness & Poverty: Staying Home: The Rights of Renters Living in Foreclosed Properties.

(1) According to the California AG, the rights of tenants in foreclosed homes and apartments include:

• Tenants cannot be required to move out of their homes for at least 90 days following an eviction notice.
• Tenants can insist on staying until the end of their leases. The only exception occurs when the new owner of a single-family home wants to move in.
• Tenants can require banks and their agents to put all communication in writing.
• Tenants are not obliged to accept "cash for keys" money to move out sooner than the law prescribes.
• Harassment, such as improper entry into a person's home, shutting off water and lights, or changing the locks without a court order is illegal.
• The above rights extend to tenants living in government-subsidized Section 8 housing, who may also have additional protections under state and local laws.

In addition, the state Attorney General points out that if a California city has a "just cause for eviction" law, a landlord must have a specific reason to evict a tenant, and foreclosure may not be recognized as a legitimate basis for eviction. Tenants should check local ordinances.

According to the California Attorney General's office, sixteen cities in California have just cause for eviction ordinances: Berkeley, Beverly Hills, East Palo Alto, Glendale, Hayward, Los Angeles, Maywood, Oakland, Palm Springs, Richmond, Ridgecrest, San Diego, San Francisco, Santa Monica, Thousand Oaks, and West Hollywood.

Current & Former Local Cops, FBI Agent, Two Title/Closing Attorneys Among 13 Bagged by South Florida Feds In Alleged Mortgage Fraud Racket

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:

• When the former chief of the Plantation Police Department got a tip that some in his blue-uniformed ranks were involved in their off-hours in a suspicious real estate scheme, he turned the matter over to a state police agency. The Florida Department of Law Enforcement eventually brought in the feds, and Wednesday, six current and former Plantation police officers, along with an FBI agent, a Lauderhill police officer and others, were indicted by a federal grand jury, accused of being part of a $16 million-plus mortgage investment fraud ring that bought and sold homes with phony documents.(1)

For more, see Plantation police officers, FBI agent indicted in federal mortgage fraud ring.

For the U.S. Attorney press release, see Broward Mortgage Investment Scheme Indicted.

(1) Reportedly, Federal officials said a total of 13 people – including Plantation police officers Daryl Radziwon, 39, of Plantation; Casey Mittauer, 37, of Cooper City; and Joseph DeRosa, 35, of Coral Springs – were actors in the scheme. FBI agent Robert DePriest, 41, of Plantation, who was assigned to the Miami field office, was also named in the indictment, as was Joseph LaGrasta, 32, of Tamarac, a police officer with the city of Lauderhill. Also indicted were two brothers who had served as Plantation police officers but were fired years ago: Joseph Guaracino, 32, and Dennis Guaracino Jr., 34, both of Plantation. A third former Plantation cop, John Velez, 37, of Plantation, who left Plantation in 2007 and joined Hallandale Beach police in 2008, was indicted as well. Hallandale Beach police officials said Velez resigned several months ago. Steven Stoll, a licensed mortgage broker and a licensed attorney, and Stephen Orchard, also a licensed attorney, were also charged in the indictment with participating in the scheme by handling the closings of the fraudulently obtained loans, along with licensed mortgage brokers Matthew Gulla and Rene Rodriguez Jr.

MD Feds: Sticky-Fingered Closing Agent Looted $3.4M In Escrow Cash, Failed To Pay Off Existing Loans In R/E Deals, Leaving Clients Facing Foreclosure

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

• The target of an 11 News I-Team investigation is currently facing federal charges on accusations that he was part of a mortgage fraud scheme. The federal grand jury's 16-count indictment charged the president of Towson-based Maple Leaf Title, Anthony Weis, with wrongfully using $3.4 million from an escrow account set up by the firm in which the money was supposed to pay off his clients' mortgage loans. The indictment said he used the money for his own benefit.(1)

• When the I-Team tried to get answers from Weis in January, he said his attorney would not allow him to discuss the allegations against him or his company. Maple Leaf Title was once located at 11 E. Chesapeake Ave. The business left that location, moving to 606 E. Joppa Road before shutting down, I-Team reporter Barry Simms said. The grand jury said Weis took the funds intended for real estate closings and used the money for himself.(2)

For more, see Title Co. President Indicted In Mortgage Fraud Scheme (Anthony Weis Charged With Taking $3.4M From Escrow Account).

See also, The Baltimore Sun: Title agency head indicted on fraud charges (Homeowners were bilked of $3.4 million, federal authorities say):

• The Maryland Insurance Administration has revoked the licenses or penalized more than three dozen title and settlement companies since 2008, according to The Baltimore Sun's economic columnist, Jay Hancock. He wrote two weeks ago that complaints have jumped from 90 in 2005 to more than 600 last year.(3)

• In September, the owner of a Severna Park title company was sentenced to seven years in federal prison for bilking homeowners of $3.4 million. And in February, the owner of a Parkville title company was arrested in Palm Beach, Fla., after having been a fugitive for a year while facing federal charges that he defrauded lenders of half a million dollars. His case is pending.(3)

(1) For the U.S. Attorney press release, see Towson Title Agency Operator Indicted In $3.4 Million Mortgage Fraud Scheme.

(2) "This man affected my life and a lot of other victims' lives in so many ways -- financially, emotionally, physically. Stealing our money, not paying off our mortgages and putting us through having to hire attorneys to have to represent us as victims, to getting our homes out of foreclosure because we were put in foreclosure," one victim reportedly said.

(3) See:

• Lax oversight enables title-insurance crooks,
• "Sun" Shines Light On Sticky-Fingered Title Insurance, Real Estate Escrow/Settlement Agents Victimizing Homeowners.

(3) Apparently, state lawmakers have been made aware of the closing agent problem in Maryland. See Report of the Commission to Study the Title Insurance Industry in Maryland (February, 2010 - 240 pages).

Racket Recorded Forged Deeds To Steal Homes From Unwitting Owners For Use In Mortgage Fraud Scam, Say Florida Authorities

In Miami, Florida, the South Florida Business Journal reports:

• Ten South Floridians have been arrested in what authorities say was a criminal mortgage fraud and identity theft operation. It is alleged they defrauded banks out of more than $8 million by using stolen identities to obtain mortgages, according to a news release from Florida Attorney General Bill McCollum’s office. The arrests are the result of a four-year probe. Investigators said straw buyers used the stolen IDs of Florida and New Jersey residents to purchase and flip properties.

• As part of the scheme, the straw buyers are alleged to have stolen property from legitimate owners by forging a quit claim deed or warranty deed, and then transferring ownership of the property to one of the co-conspirators. A total of 14 properties in Miami-Dade and Broward counties were involved, with most falling into foreclosure as a result.

For the story, see Ten arrested in mortgage fraud scam.

For the Florida Attorney general press release, see Ten Arrested in Multi-Million Dollar Mortgage Fraud and Identity Theft Enterprise.

Feds Indict Trio In Alleged $1.24 Trillion Bogus Lien Extortion Racket Targeting Government Officials, Bank Executives

In Kingston, New York, the Times Record Herald reports:

• A federal grand jury has indicted three anti-government zealots in connection with an alleged scheme to extort money from Ulster County, three towns and a handful of public employees. The accused men also targeted executives of Mid-Hudson Valley Federal Credit Union, court papers said.

• The bizarre plot came to light in April, when Ulster County and public workers brought a racketeering case against the alleged conspirators. The suit accused six people of intimidating government employees by sending them fraudulent bills and filing liens against their personal property, totaling $143 billion. Feds pegged the extortion plot at $1.24 trillion.(1)

***

• According to the court papers, the stream of phony invoices and fraudulent liens started in 2009, after Ulloa and Parenteau were ticketed in separate incidents for driving without licenses. Ulloa later claimed he had an international driving permit.

• But rather than hire lawyers and plead their cases in courts, the men and their alleged accomplices unleashed a barrage of fake paperwork, court documents said. Ulloa sent phony criminal invoices totaling $700 million to Rosendale Town Justice Robert Vosper. Parenteau filed a $62 billion federal lien against the Town of Lloyd and its police chief. And when Mid-Hudson Valley Federal Credit Union began foreclosure proceedings on a property Ulloa owned on Van Keuren Highway in Kingston, he filed a $2.82 billion lien against a top bank executive.

For more, see Ulster County men indicted in bizarre anti-government extortion plot (Feds say men sent fake bills, filed liens in $1.24T scheme).

For an earlier story, see Courthouse News Service: Towns, Judges Say They're Being Extorted.

For the civil lawsuit filed earlier this year, see County of Ulster, New York, et al. v. Ulloa, et al.

(1) According to the story, federal authorities arrested two of the men: Richard Enrique Ulloa, 41, of Stone Ridge, faces four counts of mail fraud. Ed George Parenteau, 53, of Chenango County, was charged with mail fraud and conspiracy to commit mail fraud. Ulloa was released on $10,000 bail, but Parenteau remains jailed in Albany County. The third man, Jeffrey Charles Burfeindt, 47, of Highland, is still missing. He faces the same charges as Parenteau. The men were charged with mail fraud because their fake documents were sent through the mail. No charges were filed against the remaining three, who were named in the civil suit.

Countrywide Illegally Steered & Overcharged Blacks, Latinos In Home Financing Transactions, Says Illinois AG In Reverse Redlining Lawsuit

From the Office of the Illinois Attorney General:

• Attorney General Lisa Madigan announced [] that she has filed a lawsuit against Countrywide, a subsidiary of Bank of America, for unlawfully discriminating against African American and Latino borrowers in home mortgage sales, in violation of the Illinois Human Rights Act and the Illinois Fairness in Lending Act. The Attorney General filed her complaint in Cook County Circuit Court against Countrywide Financial Corporation; Countrywide Home Loans, Inc.; and Full Spectrum Lending, Inc., an arm of Countrywide that mostly sold subprime loans.

• Madigan’s complaint alleges that the former mortgage giant steered African American and Latino borrowers into risky subprime mortgages more often than similarly-situated white borrowers. The complaint also alleges that minority borrowers paid more for mortgages across Countrywide’s product line, including its prime loans. Significantly, Madigan’s analysis of Countrywide loan data found that the racial disparities could not be explained by objective factors, such as borrowers’ credit scores or debt-to-income ratios.

For the rest of the Illinois AG press release, see Madigan Sues Countrywide For Discrimination Against African American And Latino Borrowers (Alleges African American and Latino Homeowners Paid More for Their Mortgages than They Should Have).

For the lawsuit, see People v. Countrywide Financial Corporation, et al.

NY AG's Recent Calling Card To Loan Modification Operators Around The Country Warns Of Personal Financial Liability For Officers Of These Outfits

In a cease and desist letter recently sent out to over 180 loan modification outfits, the Office of New York Attorney General Andrew Cuomo offered this friendly admonition to the firms, as well as to the individuals operating these rackets who mistakenly believe they can hide behind their corporate veils to shield themselves of personal financial liability for their actions:

• Recently, the New York Supreme Court issued a favorable decision in one case filed by this Office, finding that one of the largest foreclosure rescue companies and its president had violated Section 265-b as well as General Business Law §§ 349 and 350.

• Specifically, the Court found that the company violated Section 265-b by charging illegal, upfront fees for its loan modification services, failing to provide contracts in the language of its customers, especially Spanish, and failing to provide homeowners with the legally required notice of their right to cancel within five business days. The Court also ruled that the company made numerous false claims in its advertisements, including misrepresenting the number of homes it had saved, falsely claiming to have a 90% to 100% success rate, falsely claiming to be "licensed" by a government agency, and falsely claiming that it was affiliated with "legal experts."

• The decision holds the company's president personally liable for engaging in fraudulent and illegal acts, and permanently prohibits the respondents from engaging in the illegal, fraudulent and deceptive business practices and false advertising described in OAG's lawsuit.

• I encourage you to review your company’s practices and, where applicable, to cease and desist engaging in any unlawful, fraudulent, or deceptive practices. If you have any questions, please do not hesitate to contact our office at 212-416-8300 or 212-416-8250.

Go here for the NY AG's cease and desist letter.

Cleveland Housing Judge Hands Out $13M In Fines To Pair Of Out Of State Owners Of Dilapidated Real Estate

In Cleveland, Ohio, The Cleveland Plain Dealer reports:

• Cleveland Housing Judge Raymond Pianka has fined two out-of-state real estate companies about $13 million -- the largest collective fines the court has imposed -- for their persistent failure to fix derelict property conditions. In a pair of blistering decisions, Pianka fined Interstate Investment Group, LLC $11.9 million and Paramount Land Holdings, LLC more than $1 million. The two are sister companies in Gilbert, S.C.

• He gave the companies until July 19 to pay up. Unpaid fines will be ordered converted to civil judgment so that dollars can be collected and sent to the city's general fund. The decisions covered 13 properties, some that had houses so dilapidated that the city demolished them. Both Paramount and Interstate pleaded no contest. Company officials could not be reached for comment [].

• In the Interstate ruling, Pianka criticized not just the companies for their offer to contribute no more than $100,000 toward resolving their property violations -- but Cleveland for recommending vastly lower fines than the maximum allowed by law. "Defendant's (and the City's) proposed sentences would allow Defendant to treat its neglect of its properties and the laws of the City as a mere cost of doing business and send the message to others that they too may benefit from wholesale disregard for the laws of the City," he wrote.

For more, see Cleveland Housing Court Judge fines 2 real estate firms about $13 million for neglect.

Struggling HOAs Use "Reverse Foreclosure" To Mitigate Problems Due To Foot-Dragging Lenders Reluctant To Foreclose On Underwater Condos

Lexology reports on a court ruling that came out earlier this year in Florida on the use of so-called "reverse foreclosures" by condominium and homeowners' associations to stick foot-dragging, foreclosing lending institutions with the title to unwanted underwater units. By doing so, the HOAs put those lenders on the hook for the periodic maintenance payments due to the HOAs that they (the lenders) were looking to avoid paying by failing to vigorously prosecute their foreclosure actions in court:

• In a recent ground-breaking state court decision in Florida, a state particularly hard hit by residential mortgage foreclosures, one court has upheld the HOA’s right to recoup these past due assessments and costs from the lender, despite the fact that the lender has yet to take back title to the delinquent property. In HSBC Bank USA, et al. vs. Keys Gate Community Association, Inc., A Florida Non Profit Corporation, et al., the homeowners’ association successfully introduced a new procedure, dubbed a “reverse foreclosure.”

• In Keys Gate Community Association, the homeowners’ association filed and foreclosed its own claim of lien on the delinquent property and acquired title to the property through its own foreclosure sale in April 2007. However, the home-owners’ association could not sell the property because of the lender’s senior priority mortgage. In June 2007, the lender filed its foreclosure against the delinquent property. Yet, two and a half years later, the lender had not completed the foreclosure process. As a last resort to move the case forward, the homeowners’ association set for hearing a summary judgment motion against itself, and asked the court to issue partial summary judgment in favor of the lender and to immediately grant the lender’s request to take title to the unit as stated in the lender’s foreclosure complaint. As part of this procedure, the association waived its rights to the property, and as the current unit owner, waived its rights to a public sale.

• The court granted the homeowners’ association’s motion, and directed the Clerk of Court to issue a certificate of title immediately transferring ownership of the property to the lender, thus triggering the lender’s requirement to pay its share of past due assessments, legal fees, court costs and all assessments going forward.

• It is important to point out that the reverse foreclosure procedure can only be filed after a home-owner is out of the picture and the home is legally the property of the homeowner’s association.

• The use of this new legal strategy saved the Keys Gate Community Association a minimum of eight months or more of bad debt write-offs. Furthermore, given the current logjam of foreclosure cases pending in many state courts. clerks of court have enthusiastically endorsed this new procedure as an effective means of reducing their backlogs. Until the financial crisis subsides and the housing market regains steam, undoubtedly many homeowners’ associations will increasingly use this procedure in their quest to force lenders to take title to financially upside down properties much faster than the lender may have anticipated.

Source: Some lenders may soon be forced to follow through with residential foreclosures. (subscription required; for non-subscribers, TRY HERE - then click link for the story).

For another post on attacking foot-dragging lenders reluctant to foreclose on underwater condos and homes in a homeowners' association, where they are challenged to either take title to the financially upside down unit or release their mortgage, see Foot-Dragging Mortgage Lender Yields To HOA Demand; Abandons Foreclosure On Unwanted Collateral, Releases Security Interest In Condo Unit.

BofA To Rescind Foreclosure Sale After Media Intervention Attracts Attention; Jerked-Around Homeowner Says She'll Believe It When She Sees It

In Wheat Ridge, Colorado, KDVR-TV Channel 31 reports:

• The Wheat Ridge woman who had the Bank of America sell her house out from under her could be getting her home back. On Thursday FOX31 News first reported 61-year-old Stephanie Martin's story. She's lived in her home for 20 years and now takes care of her 84-year-old mother and 7-year-old granddaughter. Martin never had any trouble making her house payments, until last June when her legs were crushed in a horrible accident at the Target store where she worked.

• She applied for and was accepted into a Freddie Mac program that lowered her mortgage payments and stopped any foreclosure proceedings. [...] But, even though her participation in the program was supposed to stop all foreclosure proceedings, Bank of America earlier this month sold her house at a foreclosure auction, to itself.

• Martin says they never sent any warning or notification. And she found out about the foreclosure only after her lawyer coincidentally saw the public notice at the courthouse.

***

• For nearly a month, Martin unsuccessfully tried to get some answers or help from the Freddie Mac program and the bank. After she contacted FOX31 News and KHOW Radio Talk Show host Peter Boyles, her case received attention. She and her lawyer say the Bank of America called them Friday and said they are going to rescind the sale and give Martin her house back. They indicated they will also work with her to keep the lower house payments. Martin is relieved, but says after all she's been through, she'll believe it when she sees it. "I hope this is true because I've been told so many things."

For the story, see: Bank to return woman's home sold without notice.

Illinois AG Hammers 5 Home Repair Contractors In Seperate Suits Alleging Outfits Pocketed $167K In Upfront Payments & Performed Substandard Or No Work

From the Office of the Illinois Attorney General:

• Attorney General Lisa Madigan [] urged consumers to use caution when choosing home repair and remodeling contractors as she announced five lawsuits filed against home repair businesses,(1) alleging they defrauded Illinois consumers of more than $167,000 in down payments by performing substandard work or no work at all.

For the Illinois AG press release, see Madigan Cracks Down On Home Repair Fraud (Attorney General Urges Consumers to Be Aware of Potential Fraud During Spring and Summer Home Repair Seasons).

(1) The five outfits who made the Illinois AG hit parade are:

• C & P Development, Inc., and DM Realty & Building Inc., both of Chicago, and the owner of the companies, David S. Paul (five consumer complaints filed);
• Paul Bunyon Tree Services, Inc., a Melrose Park, Ill.-based firm, and its president, Timothy Mullis;
• All Seasons Contracting, Inc. with addresses in Manhattan, Ill., and Frankfort, Ill., and business owner Carol Richard and General Manager Patrick Richard;
• Jody Dobrinich, who does business as AAA Bloomington Construction, AAA Bloomington Concrete Company and Bloomington Construction & Handyman Services (eleven consumer complaints filed);
• J. Robert Rankin, who does business as Rankin Backhoe & Septic System (six consumer complaints filed).

Mississippi AG Warns Consumers Against Online Rental Scams Advertised On Craigslist

In Jackson, Mississippi, WLBT-TV Channel 3 reports:

• A good priced house in a normally higher priced neighborhood is reason for consumers to put up a red flag. Craigslist is one of the fastest ways to find a great deal in today's market, as thousands of home rental listings dominate the online ad site. That's why the Attorney General's office sent out a notice on Monday, for potential renters to be weary of scammers.

***

• "It's best to try to prevent it by letting people know those scams are out there," Hood said. Hood said these cases are popping up more and more in Mississippi. However, he says online advertisers are making bank at the expense of others. "They are making tons of money off of illegal activity and the con artists are just trying to scam people," said Hood.

***

• [T]he Attorney General's office recommends for consumers to watch out for money wires through Western Union or MoneyGram. Also, to be aware of anyone out of the country listing a house or saying they just moved from the United States.

For the story, see Attorney General warns consumers of rental housing scam.

Foreclosed Home Preservation Contractor Says It's Also A Victim Of Mortgage Crisis In Suit Against BofA; Claims Bank Gave It $400K Stiffing

WFAA-TV Channel 8 reports:

• A property preservation company with business in Texas charges Bank of America with fraud and deceit, breach of contract, and unjust enrichment in a civil suit in California. Diversified Field Services of Tustin, California — which maintains foreclosed properties for banks — says in the lawsuit that Bank of America signed DFS to a contract to maintain repossessed homes in 14 states last year. The company says it spent nearly $2 million preparing for the work, but that the work never came.

***

• "Homeowners are not the only victims of this [mortgage] crisis; it extends to firms like DFS and onward to the mom-and-pop businesses who actually mow the lawns and clean the countless homes that now sit empty," said DFS attorney Eric Goodman. DFS also alleges B of A publicly misrepresented the quality of the work DFS did, destroying its business and ruining its reputation. DFS also alleges the bank never paid it for nearly $400,000 in work that it did do. The suit seeks unspecified damages.

Source: Property preservation firm sues Bank of America.

For a press release issued by Diversified's attorney, see Diversified Field Solutions, Inc. Sues Bank of America.

Unforgiven Debt Balances On Foreclosure, Short Sales Leave Ex-Homeowners Stunned; Failure To Obtain Written Waivers Drive Some Into Bankruptcy Court

In Gainesville, Virginia, The Washington Post reports:

• After the bank foreclosed on Fernando Palacios's home in March, he thought he was done with what he described as the most stressful financial situation of his life. The bank sold the home for far less than Palacios owed on it, as often happens with foreclosures. What Palacios did not see coming was the letter from his lender demanding that he pay the shortfall: $148,064.02.

***

• Over the past year, lenders have become much more aggressive in trying to recoup money lost in foreclosures and other distressed sales. In many localities, lenders have the right to pursue borrowers whose homes have sold at a loss to collect the difference between what the property sold for and what the borrower owed on it, also called a deficiency.

• Before the housing bust, when the volume of foreclosures was relatively low, lenders seldom bothered to chase after deficiencies because borrowers had few remaining assets to claim and doing so involved hassles and costs. But with foreclosures soaring, lenders are more determined to get their money back, especially if they suspect borrowers are skipping out on loan they could afford, an increasingly common practice in areas where home values have tanked.

***

• To avoid personal liability for the deficiency, Palacios is filing for bankruptcy protection, as many people do who are in similar situations, said Nancy Ryan, his bankruptcy attorney.
  "I am definitely seeing more people come through my door who walked away from houses a year or two ago and thought they were as free as the dead," Ryan said. "They're stunned when they realize they're not."

***

• Borrowers should get a waiver in writing from their lenders to protect themselves, said Diane Cipollone, an attorney at the nonprofit Civil Justice. "Nobody should assume the deficiency is forgiven," she said.

For more, see Lenders get aggressive in recouping foreclosure losses.

BofA Uses Computer Glitch As Excuse To Stiff Property Preservation Contractors Out Of Million$, Leaving Thousands Across Country Without Paychecks

In Fort Worth, Texas, WFAA-TV Channel 8 reports:

• If the nation's largest bank had lost the records of thousands of its customers, federal regulators would take swift action. But that's just what Bank of America has done — directly and indirectly — with the paychecks of thousands of its contractors and subcontractors in the property preservation business.

• The failure to pay contractors millions of dollars has created a tide of financial ruin in the backwash of the mortgage crisis. For most Americans, foreclosure is a personal tragedy. But Bank of America has a thriving business taking care of tens of thousands of foreclosed homes across the country. For months, the bank has not paid dozens of the contractors who do the work; and as a result, thousands of their employees have gone without a paycheck.

***

• News 8 obtained a memo that Bank of America Field Services sent to its contractors last October announcing "delays in payment" because of computer problems. [...] News 8 has talked to contractors who worked in California, Colorado, Alabama, Mississippi, Florida and Tennessee who say non-payment by Bank of America crushed their businesses.

***

• Bank of America declined to be interviewed on camera. In response to written questions, the bank said: "We apologize to our vendors for the system issues that resulted in late payments. We have been working diligently with our vendors and contractors to resolve any outstanding payments." [...] The institution won't say how much money is involved, but News 8 has learned the amount is in the millions.

For more, see Bank of America admits it did not pay dozens of contractors.

Wells Fargo Pre-Foreclosure Inspection Contractor Accused Of Repeatedly Sledge-Hammering Delinquent Borrower; Claims Self Defense

In Reno, Nevada, The Reno Gazette Journal reports:

• When Ralph "Pete" Peterson of Spanish Springs saw a stranger taking photos of his house and suspected the man might have sinister motives, he confronted the person, who he said refused to identify himself.

• The photographer sped off in a van, said Peterson, who went after him in his truck. The driver -- a contractor for Wells Fargo Bank who was "inspecting" the house because Peterson had missed a monthly mortgage payment -- pulled over. An argument ensued and the bank's agent, who claimed self-defense, hit Peterson repeatedly with a sledgehammer, according to a police report.

• The Christmas Eve incident is an example of a mortgage default inspection gone horribly wrong. Each man blamed the other for the escalation of violence. Each man said the other is lying about the circumstances of the case.

For the rest of the story, see Sparks man's overdue mortgage leads to sledge hammer beating.

Judge Unsympathetic To "Poor Business Decisions" Defense As Title Agent Gets 11+ Yrs For Looting Escrow Cash; 15 Refin'cing Homeowners Left w/ 2 Loans

In Fort Wayne, Indiana, The Journal Gazette reports:

• The courtroom was packed Friday to see what sentence Joseph Garretson would receive for running what state officials called one of the worst fraud cases they had seen. Allen Superior Court Judge Fran Gull ordered the former title broker to spend 11 1/2 years in prison and to pay more than $3.4 million in restitution. Friday’s sentence came more than five months after Garretson, 37, pleaded guilty – admitting to conversion or misappropriation of title insurance escrow funds, corrupt business influence and unlawful loan origination activities.

***

• Along with numerous letters from family and friends, Garretson’s sister, Jodi, and his grandmother-in-law spoke on Garretson’s behalf. Most, as well as Garretson himself, characterized his conduct as “poor business decisions,” made to keep up a certain lifestyle as the economy and mortgage industry tanked.(1)

***

• [Judge] Gull listened to victim after victim describe their anxiety over the possibility of losing their homes.(2) So far, Garretson has paid less than $60 in restitution, which, if paid at that pace, would take more than 28,000 years to make the victims whole, [Allen County Deputy Prosecutor Tim] McCaulay said.

For the story, see Broker given 11.5 years in fraud scheme.

See also, The News-Sentinel: Broker gets 11.5 years for $3.4 million mortgage fraud scheme.

(1) Reportedly, Garretson said he was a victim of a shakedown and was adamant that he gave much of the money taken, about $1.8 million, to Todd Leary, former Indiana University basketball star and radio commentator, who faces 17 felony counts alleging his involvement in the title fund scheme. Leary was arrested in February, days after Garretson’s guilty plea and minutes before he was to call the IU-Purdue basketball game at Assembly Hall in Bloomington. According to court documents, Garretson told prosecutors Leary pressured him for money, threatening to reveal the scam, the story states.

(2) According to this story, several of Garretson's victims described him as a friend whom they trusted to refinance their home mortgages with title insurance, settlement and escrow services through Fort Wayne Title. The plan Garretson sold was to use an escrow agent to immediately pay off the mortgages using money derived from the refinancing. But Fort Wayne Title did not pay off the mortgages, pocketing the funds and using fraudulent statements to fool the homeowner into a false sense of security. The scheme resulted in net losses to homeowners of more than $2.7 million. It left 15 victims with two mortgages on their plate, according to Secretary of State Enforcement Officer David Maxwell.

Reportedly, Judge Gull was visibly moved, and said she was troubled by the stories the victims told about Garretson's actions, saying he “wreaked havoc” for his own benefit. Gull recalled one victim saying she could not plant flowers at her home because it would inevitably be taken from her for non-payment. “I'm just a lowly criminal court judge, Mr. Garretson, and I don't deal a lot with financial crimes,” Gull said. “I have a front-row seat to some of the most horrible crimes in humanity. What you've done here is horrible.”

Six To Cop Pleas In Flipping Racket That Left Unwitting Would-Be Homebuyers Under Rent-To-Own Deals, Straw Buyers, Foreclosing Lenders Holding The Bag

In Fort Myers, Florida, The News Press reports:

• Seven defendants accused of participating in a more than $3 million mortgage fraud scheme appeared in state court [] with six of them ready to enter pleas. Before Lee Circuit Judge Edward Volz Jr., attorneys for Paul Bosnyak, Brian Chili, Erling Hall, Jeremy Hatlee, Trinity Ruffino and Mark Wallen indicated their clients were ready to enter pleas and testify against co-defendant Erich Heckler, who also was in court. A plea date has been set for July 12.

• "We have come to an understanding with every defendant except for Mr. Heckler," assistant state attorney Douglas Sprotte said in court. "Mr. Heckler has to make a decision if he wants to plea."

• According to court documents filed last year, Bosnyak, Hatlee, Chili, Ruffino and James Dalonzo worked with Heckler, Hall and Kim Jack as part of a conspiracy dating back to 2002. Heckler, Hall and Jack ran Alternative Home Financing Inc. on Dean Street in Fort Myers.

• According to the documents, Alternative would find people and pay them to allow the company to apply for mortgages in their names to buy houses. Authorities allege the company would falsify application information so the person could qualify for the mortgage. Dalonzo, Hatlee, Bosnyak, Chili and Ruffino would distribute the money, knowing the loans were fraudulent. Alternative would manage the property, finding tenants who would make monthly payments in a lease-to-own option.

• After a specified amount of time, the company would stop making payments, causing the house to foreclose. The tenant would be kicked out of the house and the person whose name was used for the loan would be associated with the foreclosure.

For the story, see Six in fraud scheme want to plead (Ready to testify against seventh).

Death Threats Begin Coming In To Texas HOA That Foreclosed On Active Duty Servicemember While Away In Iraq Over Unpaid $800 Fee

In Frisco, Texas, WFAA-TV Channel 8 reports:

• An Army officer on active duty lost his house when his homeowners' association foreclosed for back dues. It's a story first reported by News 8, and it outraged people around the world.(1)

• Now the HOA is breaking its silence, saying the board is getting death threats — even though it did nothing wrong. [...] The [Heritage Lakes Homeowners' Association] has now hired public relations specialist David Margulies as its spokesman. He says the HOA is getting negative attention it does not deserve. "The death threats have been reported to the Addison police, and they're being investigated," Margulies said.

• And now, other residents of Heritage Lakes, [...] are coming forward, too. They say they are embarrassed to live in a community that could foreclose on an officer's home while he is defending his country.

For more, see Frisco HOA that foreclosed on soldier getting death threats.

(1) According to the report, the Clauers owned their $300,000 home free and clear; it was a gift from family members. Capt. Michael Clauer says when he got called up, his wife May became depressed, missed two HOA payments totaling about $800, and said she did not open letters from the HOA alerting her to foreclosure proceedings, the story states. Reportedly, Select Management Company — which runs the Heritage Lakes HOA and many more in North Texas — says it is adding procedures that will keep this from happening to another family in the future, and says it will attempt to call families facing foreclosure to check on their situation, instead of relying only on certified mail, which, in the Clauers' case, was never opened.

"Sun" Shines Light On Sticky-Fingered Title Insurance, Real Estate Escrow/Settlement Agents Victimizing Homeowners

In Baltimore, Maryland, The Baltimore Sun reports:

• It's the lesser-known side of the mortgage disaster. As lenders foisted billions of dollars in mortgage debt on unqualified borrowers buying overpriced houses, too often there was a sticky-fingered settlement agent standing nearby. Since the beginning of 2008, the Maryland Insurance Administration has revoked the licenses of or imposed penalties on more than three dozen title and real-estate settlement companies, [...].

• In 2009 alone, the agency fielded about a dozen complaints concerning misappropriation of funds by title agents, estimates Darlene Arnold, assistant chief enforcement officer for the administration. Complaints of all kinds about title-insurance companies ballooned from 90 in 2005 to more than 600 last year, according to the agency. It had to double the number of agents investigating title complaints to four. If reform of Wall Street is a priority in Washington, stopping the homeowner heartache from title-insurance scams ought to be near the top of the list for Annapolis.

***

• Government knows it has a problem. In a recently concluded report, the Commission to Study Title Insurance in Maryland, appointed by the legislature two years ago, wants the insurance commissioner to study setting up a guaranty fund to pay back future victims. It also suggests making title-insurance underwriters more responsible for the behavior of agents [...] who represent them at the closing table. Those are decent ideas. But the report lacks a sense of urgency and outrage over the mounting rip-offs. It seems far too easy to obtain a title-insurance agent's license in Maryland; there are more than 400 agencies.

For more, see Lax oversight enables title-insurance crooks.