Saturday, July 31, 2010

Recently-Passed Wall Street Reform Law Tacks On Two Add'l Years To Protecting Tenants At Foreclosure Act

From the Office of the National Low Income Housing Coalition:

  • The National Low Income Housing Coalition applauds the expected enactment of the Dodd-Frank Wall Street Reform and Consumer Protections Act (H.R. 4173), which has passed the House and Senate and is likely to be signed by President Obama [...]. While the bill’s financial reform and consumer-protection provisions have been well documented, the act also includes housing provisions important to low income households and communities.

  • The bill will extend the Protecting Tenants at Foreclosure Act (PTFA) through the end of 2014.(1) One of NLIHC’s highest policy priorities, the PTFA provides renters whose landlords have lost their properties to foreclosure the right to stay in the home for 90 days after the foreclosure or through the term of their lease. Under PTFA, housing choice voucher holders are offered similar protections. The Dodd-Frank bill also clarifies that any lease or tenancy created prior to the change of title as a result of foreclosure is protected by PTFA.

For more, see Dodd-Frank Reform Bill Includes Extension of Protecting Tenants at Foreclosure Act, Additional Housing Provisions.

(1) The law was originally written to terminate on December 31, 2012.

Chicago Lawmakers To Offer 5% Kickbacks For Reporting Vacant, Deteriorating Foreclosures In Effort To Persuade Lenders Into Maintaining REOs???

In Chicago, Illinois, CBS2chicago reports:

  • Ratting out your neighbors could have its rewards – at least when it comes to those living near crumbling, foreclosed homes. As CBS 2's Kristyn Hartman reports, tell the city about one and you could get paid – if an ordinance one alderman is set to propose, passes. "Our neighborhoods are becoming ghost towns," said Action Now President Michelle Young.


  • The problem is making someone maintain a place during the sometimes lengthy foreclosure process. Their plan would put it on the banks. Young said, "They wanted it back. They should maintain it."

  • Chicago's 3rd Ward Alderman Pat Dowell likes the idea so much, she's pitching it as part of a three-point plan. "It increases fines for neglect by almost five times," said Dowell. And if you report problem properties, you might get a finder's fee – 5 percent of the fine. So, rat on a neighbor and cash in. Dowell said, "What neighbor? It's ratting on the bank, and that's how it should be until they can show they can be more responsible." Dowell will propose the ordinance next week.
For more, see Ratting Out Your Neighbors May Earn You Cash (Propsed Ordinance Would Reward Snitching On Foreclosed Homes).

Duo Accused Of NYC Summer Rental, Loft Living Ripoff Victimizing College Students, Others; Foreign Tourist Trio Left Stranded In U.S. Until Sept.

In Williamsburg, Brooklyn, the New York Post reports:

  • What seemed like a dream deal of spending the summer living in one of New York's hottest neighborhoods has become a nightmare for more than a dozen out-of-towners. Many of the victims - college students and young professionals - told the Post they were each duped out of thousands of dollars by two Brooklyn men posing as lease holders of a massive loft within a new luxury apartment complex at 175 Powers St. in Williamsburg.

  • The alleged scammers, Desmond Eaddy and Ronnie Barron, used Craigslist and other ads to reel in the unsuspecting victims, including eight from Ireland, and collected at least $14,000.

  • Left with empty pockets, many say they've spent the past month working odd jobs and scrambling just to raise enough cash for food and shelter. "This has been pretty traumatizing," said Neil Sturdy, 19, who traveled to the city with two other friends from Ireland. "We came to New York and were taken advantage of. Now we sometimes don't even have enough money to feed ourselves." The trio says they were taken for a total of $3,375 and that their pre-paid, nonrefundable return flight home isn't until September.

For more, see Williamsburg scam turns loft-y dream to nightmare.

Rent-To-Own Deal Leaves Tenant As An Unwitting Squatter Out $5K After Doing Business With Home Hijacker Claiming Adverse Possession To Vacant Houses

In West Palm Beach, Florida, The Palm Beach Post reports:

  • Carole-Ann Higgs thought she was on a rent-to-own track when she signed up for a 12-month lease with the Wellington-based company Saving Palm Beach Homes Inc. In seven years, she was told, she and her husband would have a chance to buy the little home in Seminole Manor off Lantana Road as long as they took care of the property and agreed to pay $750 a month for the house "as is." It was an attractive offer to the growing family. But it may have made them unwitting squatters.

  • Four months after moving in and after they spent $5,000 on relocation and repair costs, they learned Saving Palm Beach Homes Inc. wasn't what they thought. The for-profit company incorporated in February by Wellington resident Mark Guerette didn't own the home, it didn't even manage the home, which has been in foreclosure since April 2008. A final judgment of $259,306 in favor of Chase Home Finance was awarded last month.

  • Instead, Guerette has been using a centuries-old law to take possession of foreclosed properties in Palm Beach and Broward counties - a dubious opportunity exacerbated by the real estate crash that flooded communities with vacant homes and often unclear rights of ownership.(1)

For more, see Odd old Fla. law makes makes earnest renters into squatters at risk of losing their homes.

(1) Reportedly, Guerette claimed adverse possession on dozens of homes in Broward County, but has since withdrawn the claims. In April, the Broward County State Attorney's Office charged the 46-year-old with one count of organized scheme to defraud over $20,000 for allegedly renting out six properties that he didn't own, the story states.

Foreclosed Couple Refuses To Vacate Historic $5M Bayfront Estate; Continues Pocketing Cash For Renting Premises Out For Weddings, Receptions

In San Diego, California, KGTV-TV Channel 10 reports:

  • Residents in a Point Loma neighborhood are angry over the way a historic home that has been foreclosed is being used. The Bowman-Cotton House, a $5 million estate which dates back to the 1920s, overlooks San Diego Bay and is located at the foot of Nichols Street.

  • For many, the home is a dream wedding location thanks to its stunning views and spacious layout. However, the house has been foreclosed upon and the new owner can't move in. Weddings and receptions are being planned for the house, but they may never happen there.

  • Todd and Stacy Sabin lost the house to foreclosure and legally have no right to rent it out for special events. The city of San Diego issued a cease-and-desist order, and the issue has now made its way to court.

  • Attorney Grant Teeple represents the home's new owners and told 10News, "The city's told them, 'You can't have events and weddings.' They're selling that to people who have no clue, who go on the website, put down $5,000, $10,000, $15,000 deposit. [And] they're going to show up and find they can't have the event there. My predication is they won't be able to refund the money and won't be at the property."

For more, see Neighbors Upset With Events Held At $5M Point Loma Home (Home Was Foreclosed Several Months Ago; Ex-Owners Accused Of Renting Out Home For Weddings).

For story update, see City's Order On Pt. Loma Home Forces Couples To Alter Plans (Several Couples Told 10News They Are Looking For New Wedding Venue Due To Decision):

  • Couples who booked their weddings at a luxurious Point Loma home may have to find a new venue quickly following a city decision regarding the multi-million dollar property. Prospective brides and grooms and their families were shocked and worried that their weddings may not happen as planned after the city of San Diego shut down the almost weekly rentals at the historic Bowman-Cotton House due to complaints from neighbors.

Friday, July 30, 2010

Couple Blames Lender's Failure To Repair Leaky Roof In Adjacent Bank-Owned F'closure For Caving-In Ceilings, Black Mold Invasion; Fear Loss Of Home

In Cape Canaveral, Florida, WESH-TV Channel 2 reports:

  • The roof is caving in on a Central Florida couple. Roger and Sharon Harrell share a roof with the condo next door to them, which has been posted as unsafe by the city. The Cape Canaveral couple said there's a big problem: the condo next door is in foreclosure and owned by the bank. The Harrells said they fear they'll lose everything over the bank's inaction. "This could be catastrophic," Sharon Harrell said.

  • She said she and her husband have spent thousands fixing the leaks that originate on the other side of the wall, under the same roof. City inspectors took photos of the ceiling falling in, black mold on the walls and attic trusses covered in black. "We could lose everything," Sharon Harrell said.

  • Banking giant JP Morgan Chase bought the damaged condo last year for $100. The city is fining Chase $250 a day for failing to make repairs. Those fines now add up to $60,250, and Harrell said Chase is ignoring all her pleas. She said she has also filed a lawsuit. A Chase spokesperson did not answer WESH 2's repeated questions.

  • Chase received and returned $25 billion in taxpayer bailout money. The Harrells said they thinks the bank can afford to fix the roof on its condo. "How many other people are they doing this to?" Sharon Harrell said.

Source: Couple Cites Bank Inaction For Leaky Roof (Cape Canaveral Couple Files Lawsuit Against JP Morgan Chase).

Racket Engages In "Paper Terrorism" Says Local Prosecutor About "Sovereign Citizen" Group Attempting To Steal Empty Houses Across North Georgia

In North Georgia, WSB-TV Channel 2 reports:

  • DeKalb County prosecutors say they’ve cracked open an elaborate attempt to steal empty houses across North Georgia. Channel 2 Action News teamed up with police and the FBI to share information uncovered during a monthlong investigation. So far, four people are in jail and police have arrest warrants for four others.

  • The suspects call themselves sovereign citizens. They are anti-government extremist and refuse to answer to state or local authority. The members often refuse to pay taxes or register their vehicles. Some told Channel 2 Investigative reporter, Jodie Fleischer, their homes are considered sovereign land. "Frankly, it's rather absurd the philosophies and techniques they're espousing, but people will buy into that and try it," said FBI Agent Steve Emmett.

  • Fleischer confronted Gregory and Linda Ross, who were living at a 5-bedroom home on South Goddard Road in DeKalb County. A deed posted in the window of the house claimed Jermaine Gibson owned the property. Records show the $1 million home is actually owned by a bank. Authorities say Gibson filed fraudulent paperwork to take the house around the same time the bank was forcing out the previous owners who were in foreclosure.

  • According to the deed, Gibson signed over the property to himself for free. Gibson has also filed paperwork declaring himself a sovereign citizen and immune to the laws of Georgia. [...] Prosecutors say the scheme can force real owners of the homes to prove it in court. Buyers are sometimes delayed from closing on houses. "They're able to tie up the legal system by filing bogus paperwork and engaging in paper terrorism against anybody who dare comes after them," said DeKalb County Assistant District Attorney John Melvin.

For more, see Sovereign Citizens Accused of Stealing Georgia Houses.

Go here for more from the FBI on The Sovereign Citizen Movement.

"People Who Do It Are Going To Jail" Says DA As Couple Accused Of Stripping Fixtures From Their Foreclosed Home Face Grand Theft, Extortion Charges

In San Jaoquin County, California, the Stockton Record reports:

  • A married couple stand accused of stripping up to $100,000 in light fixtures, appliances, interior doors and more from their foreclosed Ripon home and then trying to sell the valuables back to the new owners. John and Janette Freitas face a three-count criminal complaint filed in San Joaquin County Superior Court charging them with grand theft, extortion and attempted extortion - all felonies.


  • San Joaquin County Deputy District Attorney Stephen Taylor said this is one in a stack of similar cases his office is filing against people who are up to such outlandish things as digging up trees and taking down fences while vacating their foreclosed homes.

  • "This is the kind of thing we're seeing, big and small, around the county," Taylor said. "People who do it are going to jail." Taylor said it is illegal to take items from a home under mortgage. He named off a long list of items the Freitases allegedly took, including the burglar alarm, wine cooler, built-in refrigerator, exterior lighting fixtures, shower doors and doorbell.

  • The couple went a step further - drawing extortion charges - when they tried to sell the removed valuables, some custom made, to the home's new owners for $50,000, the criminal complaint says. According to the arrest warrant, the Freitases lost their $1 million home [...] in Ripon last year to foreclosure.

For more, see Ripon couple accused of stripping foreclosed home (It's happening throughout S.J., D.A.'s office says).

BofA, JP Morgan Chase Bank Employees Cop Fraud Pleas; Admit Falsifying Info On Loan Applications For Mortgages That Wound Up In Foreclosure

In Florence, South Carolina, the Lake Wylie Pilot reports:

  • Two former bank officials in South Carolina have pleaded guilty to fraud charges. Multiple media outlets reported 58-year-old Gary Albert Hager and 44-year-old Jill Diane Brennan pleaded guilty to conspiracy to commit bank fraud in federal court in Florence on Monday.

  • Hager and Brennan admitted falsifying information on loan applications so banks would approve mortgages that wound up in foreclosure. Hager worked at the J.P. Morgan Chase office in Myrtle Beach. Brennan worked at a Bank of America office in Myrtle Beach. U.S. District Judge Terry Wooden agreed to allow them to remain free until they are sentenced in about two months. Each face up to 30 years in prison. Hager and Brennan also face possible fines of up to $1 million each and could be ordered to pay restitution.

Source: 2 plead guilty in SC bank fraud case.

For a more detailed story, see The Sun News: Myrtle Beach lenders admit fraud (Two plead guilty in mortgage investigation).

Thursday, July 29, 2010

Minnesota Feds Charge Attorney In Alleged Mortgage Fraud Flipping Scam; Suspect Accused Of Using 86-Year Old Mom As Unwitting Straw Buyer

In Minneapolis, Minnesota, the Vadnais Heights Press reports:

  • A White Bear Town Board official who was accused of using his elderly mother to “flip” a real estate deal and pay off a foreclosed office property was indicted in federal court July 14. The U.S. Attorney’s Office said Richard Sand, 58, was charged in U.S. District Court with three counts of mortgage fraud through interstate wire and 11 counts of money laundering. Donald W. Krause, 49, of Plymouth, and Brenda Epperly, 58, of Oak Grove, were also charged with mortgage fraud and Krause was charged with one count of money laundering.

  • Sand, an attorney, has served on the White Bear Town Board for 33 years and was reelected to a three-year term March 9. He pled “not guilty” at a hearing July 15.


  • According to the complaint, Sand, Krause and Epperly allegedly obtained approximately $1.5 million in fraudulent bank loans by submitting fraudulent applications and closing documents. The group allegedly used Sand’s 86-year-old mother, Antoinette Sand of White Bear Township, to obtain loans by inflating her income and net worth. The indictment alleges that from February through April, 2008 the defendants devised a scheme to obtain loans fraudulently, using two residential properties to get funds. On Feb. 21, a purchase agreement was executed for a $1.6 million home in Orono to RSN Companies, in which Krause was a general partner. The next day Krause sold the residence to Antoinette Sand for $2.6 million — a $1 million profit.

For more, see White Bear Town Board chair indicted in mortgage scam (Dick Sand, two others headed for federal court).

From the Office of the U.S. Attorney:

See also: Minn. Feds Suspect Attorney Of Leaving 88-Year Old Mom Holding The Bag As Straw Buyer In Scam To Generate Cash To Redeem His Law Office From F'closure.

Alleged Rent Scammer Charged With Theft By Deception After Pocketing $1,000 From Unwitting Tenant For Foreclosed Home

In Atlanta, Georgia, WXIA-TV Channel 11 reports:

  • It's time to turn the table on landlords. They do background checks on you. We'd recommend you do background checks on them. Why? You could find yourself kicked to the curb after signing a lease. Shanitra Jones learned that the hard way. "When the foreclosure people came, I just started putting my stuff back in boxes because I knew that one day soon, I'd have to move," she told 11Alive's Center for Investigative Action.

  • Just days after signing her lease and paying $1000.00 to rent an Atlanta house, she got a knock on the door from Bank of America representatives, telling her the house had been foreclosed upon. The man who rented her the house, Eliot Harrison had signed the lease with her 3 days after Bank of America said it had full legal title to the property to sell the house at auction. So we knocked on his door to get Harrison's side of the story. "I don't want to talk about it," Harrison said, as he closed the door on us.

For the story, see Dangers of Renting a Foreclosed House.

(1) Reportedly, Bank of America has offered the victimized tenant relief under the 'cash for keys' program. She has been offered $2000.00 and 2 months to find a new place to live. Harrison's case is now in the hands of the DeKalb County District Attorney and, despite repeated requests, he still hasn't offered us his side of the story, according to the story. Harrison had surrendered his Georgia real estate license following an investigation in 2007 on an unrelated matter. Click here to see the order from the Georgia Real Estate Commission.

Tampa Man Accused Of Commandeering Vacant Home For Sale & Renting It Out; Also Suspected Of Leasing Condos He Didn't Own To Unwitting Tenants

In Tampa, Florida, ABC Action News reports:

  • An ABC Action News investigation has uncovered a bizarre alleged real estate scam where a local man is accused of breaking into vacant homes and renting them out to unsuspecting victims.


  • Robert Smith got a call from one of his former neighbors about the home [...] he was trying to sell. "Congratulating me on selling my house. It had been on the market for a while," said Smith. It was good news all around. Not exactly. "So when she called I was like I haven't sold my house yet,” according to Smith.

  • Smith, a soldier at MacDill Air Force Base, went to the neighborhood and found a house full of people inside the home he hadn't sold yet. Once at the front door, a man came out, "...and he gives me this spiel about my partner and I have a business in Tampa and we rent houses and buy foreclosed homes then rent them out," said Smith. "What did you say when you told him you were the owner of the house?” We asked. “He didn't say anything," Smith responded.

  • His full name is Jackie Robinson Moore. Moore is now jailed after being charged by Hillsborough Sheriff's Deputies with Grand Theft, Dealing in Stolen Property, and Fraud. [...] We learned this may not be an isolated case. The management company, which runs a New Tampa condominium complex, said a man calling himself "J Moore" also leased 4-5 units he didn't own to unsuspecting renters.

For more, see INVESTIGATION: Man accused of renting other people's homes.

Novice Auction Sale Bidder Fails In Conducting Due Diligence; Winds Up Holding The Bag, Spending $120K+ For Worthless Foreclosure

In Boulder Creek, California, the Santa Cruz Sentinel reports:

  • Roberta and Randall Strand thought they were getting a great deal on a foreclosure and helping their daughter and future son-in-law become homeowners. Instead they are holding a worthless second mortgage. The home they bought for just under $98,000 and fixed up for $25,000 is scheduled for a foreclosure auction [...] to satisfy a debt of more than $529,000. They offered lender Wells Fargo $75,000, but it was to no avail.


  • The Strands saw a newspaper notice last fall about the home, which is a mile from theirs, slated for a foreclosure auction. The unpaid debt was listed as $97,604. [...] Roberta looked up the property records. She saw there were two mortgages, a first and a second, recorded on the same date with the same lender. She figured the lender was auctioning the first and that the second mortgage would be wiped out. "The price was right," her husband said.

  • They took out a mortgage on their own home to make their offer. At the auction on the steps of the county Governmental Center in November, they were the only bidders. The house had been stripped, and they spent $25,000 on improvements -- windows, paint, carpet, lighting and appliances. In January, before Hayley and Bryan could take out a mortgage to pay them back, a notice arrived from Wachovia Bank, saying the previous owners owed $529,259 on their loan.


  • The family sued Wells Fargo, which acquired Wachovia, and Cal-Western Reconveyance, which posted legal notices of the sale, claiming deceit, fraud and wrongful foreclosure. They want their money back. The Strands' attorney, Steve Vondran of Newport Beach, argued that "Wells Fargo and Cal-Western have set up a system that allows them to mutually profit off the sale of worthless second mortgages."

  • Superior Court Judge Tim Volkmann granted a temporary restraining order halting the May 7 sale, then denied a motion for a preliminary injunction, saying the plaintiffs had not established a reasonable probability of success. This allows the sale to occur [] as scheduled. "They relied on their own mistaken beliefs and lack of diligence," Martin McGuinn, Cal-Western's attorney, noted in his written arguments. "Bidding at a foreclosure sale is a highly speculative endeavor."

  • He pointed out the plaintiffs admitted they knew Wells Fargo had two deeds of trust on the property and "decided on their own what interpretation to place on that information" without consulting Cal-Western.

For the story, see Boulder Creek family bought worthless second mortgage from Wells Fargo at foreclosure auction (if link expires, try here).

For story update, see Wells Fargo regains disputed Boulder Creek home at second foreclosure auction.

Wednesday, July 28, 2010

BofA Screw-Up Leads To Foreclosure For SW Florida Homeowner Having Valid Loan Mod Agreement In Effect; Bank Fails To Contact Its Lawyer To Cancel Sale

In Cape Coral, Florida, The News Press reports:

  • Nicole DePuy thought she was one of the lucky ones when she walked out of Harborside Event Center on Jan. 27 with a loan modification that would save her home from foreclosure. After waiting hours to talk to her lender at the highly publicized event, the 40-year-old speech-language pathologist had been approved for a trial with the Home Affordable Modification Program.

  • Under the government-sponsored program called HAMP, DePuy's mortgage payments were cut almost in half, dropping from $2,100 to $1,054. And best of all, under the terms of the program, all foreclosure action would stop. The scheduled sale of DePuy's Cape Coral home was prohibited under the terms of the agreement. "I thought my problems were over," DePuy said.

  • Nothing could be further from the truth. But DePuy didn't know that until John Moffatt of Isla Blue Development LLC put a note on her door March 31 telling her to call about her property. Moffatt told DePuy the company he represented had purchased her home in a foreclosure sale at the courthouse.

For more, see Bank of America's error cost Cape Coral woman a house.

NYC Launches Notification Program Targeting Deed Thefts By Scammers Recording Bogus Land Docs To Hijack Unwitting Property Owners' Title, Home Equity

In New York City, the New York Daily News reports:

  • You can help catch a thief. The city has launched a new program to immediately notify property owners when scammers try to steal their holdings with a phony deed or a bogus mortgage or lien.(1)

  • The Finance Department will send the alarm by e-mail, text message or letter to any owner who has filled out a simple online form at "It's free and it's a major step in our attack [on] this pervasive fraud," Finance Commissioner David Frankel said. "If you're notified of an unauthorized transaction, immediately call 311 and the matter will be referred to the appropriate law enforcement agency."

  • The new program comes 18 months after a Daily News reporter "stole" the Empire State Building, transferring the deed from the rightful owners to his own bogus corporation to illustrate how easy it is to commit deed and mortgage fraud.(2) The new deed was accepted and recorded by the city Register's Office - no questions asked - even though the notary and witness listed were fake.

Source: City launches program to help combat mortgage fraud.

For more on the deed theft minimization program from the New York City Department of Finance, see:

(1) According to their website, the New York City Department of Finance Land Records Division will contact property owners who join the program whenever the following land documents are recorded against their real estate:

  • Deed and Deed-related Documents: Air Rights, Condemnation Proceedings, Condo Declaration, Confirmatory Deed, Contract of Sale, Correction Deed, Court Order, Deed, In-Rem Deed, Judgment, Life Estate Deed, Memorandum of Contract, Power of Attorney, Real Estate Investment Trust Deed, Revocation of Power of Attorney, Sundry Agreement, Unit Assignment.
  • Mortgage and Mortgage-related documents: Collateral Mortgage, Correction Mortgage, Mortgage, Mortgage and Consolidation, Mortgage Spreader Agreement, Satisfaction of Mortgage, Subordination of Mortgage, Sundry Mortgage, Initial UCC1 (Financial Statement).

(2) See:

Profitable Restaurant Helps Owner Get Free Lunch In Jail Time "Buy Down" In Mtg Scam; Court Guidelines Advise 41-Month Minimum, Judge Says 6 Is Enough

In Chicago, Illinois, The SouthstarStar reports:

  • Attorney Michael Monico said the next six months will be difficult for his client James Garofalo, of Homewood. The former Homewood village trustee and local businessman was sentenced Monday to six months in prison for his role in a mortgage fraud scheme that included houses in several Southland communities.(1) [...] Garofalo, who runs The Egg & I restaurants in Chicago Heights and Tinley Park and whose family recently opened Grady's Grill in Homewood, pleaded guilty in 2009 to two counts of wire fraud.


  • Sentencing guidelines advised a minimum prison sentence of 3 years and 5 months for Garofalo, but [U.S. District Judge Wayne] Anderson said he sought a sentence that would send a message about the seriousness of Garofalo's crime but not cripple his ability to pay restitution to the lenders who were the victims of the scheme.

  • "The (Egg & I) may disappear if I give you 41 months," Anderson said. "We want to see the business continue to operate and restitution to continue." Garofalo told the judge he has already paid about $250,000 in restitution - which included his recent income tax refund and his cashed-in IRA.

  • Assistant U.S. Attorney Daniel May argued that Garofalo should not be allowed to "buy" his way out of jail. Anderson said a person should get points for paying back victims because it mitigates prior bad acts. The judge also credited Garofalo for cooperating in other cases involving the mortgage fraud scheme, and for contributing to needy causes through his restaurant business. "That's worth something," he said.

For the story, see Former Homewood trustee sentenced to six months.

(1) Reportedly, U.S. District Judge Wayne Anderson also gave Garofalo two years of probation, 300 hours of community service and ordered him to undergo alcohol treatment. According to the story, Garofalo, as co-owner of the now-defunct, Olympia Fields-based Madison Homes Partnership homebuilders, was charged with selling eight new and existing homes to straw buyers at inflated prices. Prosecutors reportedly said about $5.2 million was taken out in loans on the eight houses, but the straw buyers had no intention of living in the homes or paying back the mortgages, and that after the homes went into foreclosure and were resold, lenders wound up hosed for approximately $1.3 million.

Tuesday, July 27, 2010

BofA Demands Death Certificate As Condition For Loan Modification; Financially Strapped Homeowner Refuses To Comply, Exclaims "I Am Not Deceased!"

The Wall Street Journal reports:

  • Sarah Larson had been trying for months to get a break on her mortgage payments when a letter from her bank arrived in March. Sitting at the dining-room table of her Minneapolis house, the 33-year-old acupuncturist ripped open the envelope and pulled out a list of important documents demanded by Bank of America Corp. Bank statements. A utility bill. Her death certificate.

  • Ms. Larson, who was struggling to make her $1,055-a-month mortgage after client appointments dropped off by half, is in good health. So she replied to the nation's largest bank in assets with a letter. "I am not sending a death certificate because I am not deceased," she wrote. "I am currently still living."

  • Turns out the bank had erroneously asked for proof of her demise—the sort of paperwork snafu that has roiled applicants since the Obama administration's foreclosure-prevention plan was announced in February 2009. [...] Across the nation, applicants are flush with tales of the absurd. Lenders and mortgage-payment processors—sometimes in error—ask borrowers to demonstrate the impossible. Or they ask them to verify events of many decades past.

For more, Grave Errors as Undead Rework Loans.

Chicago Suit Challenging Use Of Private Process Servers In F'closure Actions Could Void Thousands Of Cases In Cook County; "Sewer Service" A Concern

In Chicago, Illinois, Chicago News Cooperative reports in The New York Times:

  • In the summer of 2007, with the housing bubble bursting and the number of foreclosure cases soaring, [Dorothy Kirie Kinnaird, the presiding judge in the Chancery Division of Cook County Circuit Court,] issued an order making it easier for mortgage-foreclosure lawyers to hire special process servers to do what otherwise would be carried out by Cook County sheriff’s deputies, according to records reviewed by the Chicago News Cooperative and the Better Government Association.


  • A lawsuit filed last week in federal court in Chicago is challenging the practice, saying it is a violation of state and federal law for the judge to allow freer use of special process servers. The lawyer for David L. Washington, the foreclosed property owner who is the plaintiff in the suit, said he hoped to convert the case into a class-action suit that would void tens of thousands of foreclosure cases handled by special process servers in recent years.


  • Edward T. Joyce, the lawyer for Mr. Washington, the plaintiff in the case, said Judge Kinnaird’s order was well-intentioned. But Mr. Joyce said her action was most favorable to banks and foreclosure lawyers because it allowed them to serve papers on debtors more quickly and cheaply. He also said the private process servers often engaged in sewer service” — stuffing court papers between sewer grates in front of debtors’ homes.

For more, see Use of Private Process Servers Is Up; Concern Is, Too.

For the lawsuit, see Washington v. Wells Fargo Bank NA.

Subprime Loan Investors Gain In Effort To Force Major Banks To Buy Back Crappy Mortgages

Reuters reports:

  • U.S. mortgage bond investors have quietly banded together to gain the long-sought power needed to challenge loan servicers over losses the investors claim resulted from violations in securities contracts. A group holding a third of the $1.5 trillion mortgage bond market has topped the key 25 percent threshold for voting rights on 2,300 "private-label" mortgage bonds, said Talcott Franklin, a Dallas-based lawyer who is shepherding the effort.

  • Reaching that threshold gives holders the means to identify misrepresentations in loans, and possibly force repurchases by banks, Franklin said. Banks are already grappling with repurchase demands from Fannie Mae and Freddie Mac, the U.S.-backed mortgage finance giants.

For more, see Mortgage bond holders get legal edge; buybacks seen.

Lenders, Mortgage-Backed Bond Packagers May Eat As Much As $30B In Crappy Loans Owned by Fannie, Freddie, Says Regulator

Bloomberg News reports:

  • Fannie Mae and Freddie Mac’s regulator may identify as much as $30 billion of debt included in mortgage bonds that the companies can force sellers to repurchase, according to Joshua Rosner, an analyst who in 2007 predicted the collapse in the market for the securities.

  • The Federal Housing Finance Agency this month said it issued 64 subpoenas seeking loan files and other documents related to so-called non-agency mortgage securities bought by the two government-supported companies. The U.S. is trying to determine whether misrepresentations might require issuers to repurchase debt, producing funds from firms that may include Wall Street’s largest banks to help repay taxpayer money.

For more, see Fannie Subpoenas to Show $30B Bad Mortgages, Rosner Says.

Virginia AG Files Civil Suit Against Two Firms Allegedly Running Loan Modification Racket

In Virginia Beach, Virginia, The Virginian-Pilot reports:

  • Virginia Attorney General Ken Cuccinelli says he has filed suit against two Virginia Beach-based mortgage modification companies that offered services to help homeowners prevent or avoid foreclosure. The suit, filed in Virginia Beach Circuit Court, accuses Nationwide Loan Modification Bureau and Real Estate Resolutions of charging illegal fees before performing foreclosure rescue services for customers, a news release from Cuccinelli’s office says.

  • The fees were as much as $1,200, according to the release. The suit also accuses Nationwide of doing little or nothing to help customers prevent or avoid foreclosure, the release says.

For more, see Cuccinelli sues two Beach-based foreclosure rescue firms.

For the Virginia AG press release, see Attorney General Cuccinelli sues two Virginia Beach-based mortgage modification companies (Companies allegedly charged illegal advance fees for “foreclosure rescue” services).

Monday, July 26, 2010

Woman Recovers Home Title Lost In Equity Stripping Scam; Judge Belts Sale Leaseback Peddlers w/ $75K In Punitves, Refers Case To Criminal Prosecutors

In Newark, New Jersey, the New Jersey Law Journal reports:

  • A Bergen County, N.J., judge [...] ordered the president of a mortgage firm and one of its salespeople to pay $75,000 in punitive damages, and more in attorney fees, for leading a homeowner into unknowingly selling her house and losing $162,000 -- for their own benefit. The defendants "continuously concealed the character of their enterprise and the true nature of the transaction" and "preyed" on the homeowner's "weakened health condition and financial vulnerability," Chancery Division Judge Ellen Koblitz said in the case, One West Bank, FSB v. Capo, F-5952-09.(1)


  • When [the unwitting bank that financed the sale leaseback] foreclosed on [straw buyer Maria] Capo, [victimized homeowner Marva] Coleman was included as a defendant by her status as tenant. Coleman brought a third-party complaint against the [foreclosure rescue operators]. Coleman also named Capo but dismissed claims against her [...] when Capo agreed to deed the property back to her.

  • Koblitz said Coleman demonstrated the five elements of common-law fraud: material misrepresentation of facts, knowledge or belief by the defendant of its falsity, intention that the other party rely on it, reasonable reliance thereon by the other party and resulting damages. Koblitz ruled that the deed conveying Coleman's house to Capo and the mortgage Capo took out on the house were void ab initio. Koblitz also ordered IndyMac's successor, One West Bank, to issue an equitable mortgage in Coleman's name on the house.(2)


  • She referred the case to the Bergen County Prosecutor's Office and the state attorney general's office to determine whether the third-party defendants committed criminal acts.

Attorney Anthony Viso, Lodi, N.J., reportedly successfully represented the screwed-over homeowner.

For the story, see Mortgage Rescue Firm Hit With Punitive Damages, Attorney Fees.

See also Cliffview How a mortgage scheme nearly claimed an innocent victim.

For Judge Koblitz' court ruling, see One West Bank, FSB v. Capo, Docket No. F-5952-09 (N.J. Super. Chancery Div., Bergen County, July 19, 2010).

(1) According to the story, Charles Kohout, president of Salvation Home Buyers LLC of Bergenfield, N.J., and Linton Gentles, a salesman, offered to help arrange refinancing when Marva Coleman of Teaneck, N.J., a home health aide, fell behind on her mortgage payments.

The story states that a seriously ill Coleman had been taken by ambulance to a local hospital, where she remained for a week on oxygen and medications, and that Gentles visited her with numerous documents prepared by Salvation and she signed them from her hospital bed. Coleman was not given copies and later did not recall signing the documents, but the contract she signed conveyed her house for $422,000 to Maria Capo, who obtained a mortgage from IndyMac Bank, according to the story.

(2) Although she found both the deed and the mortgage to be absolutely void, Judge Koblitz reportedly then awarded the lender an equitable lien / equitable mortgage against the home to the extent that the proceeds of the loan that financed the scam were applied towards Coleman's benefit, the story states. The amount of the equitable mortgage awarded to the lender was $268,156, and breaks down as follows:

  • Payment of Coleman's existing first mortgage at the time of the ripoff - $231,950,
  • Payment of judgments in her name - $7,500,
  • Back taxes owed by Coleman - $2,800,
  • Cash received by Coleman - $10,000, and
  • One West's payment of real estate taxes and homeowner's insurance - $15,116 and $760.

To the extent the proceeds of the new loan did not benefit Coleman, but were instead diverted into the pockets of the foreclosure rescue operators, the lender was left holding the bag. According to Judge Koblitz, One West "was not involved in the fraud and should not be penalized beyond losing that portion of their security in their $337,600 loan beyond Coleman's original debt."

Reportedly, Koblitz then set punitive damages against Gentles at $20,067, the amount he profited in the scheme carried out by Kohout. Finding Kohout the mastermind of the deal, the judge set his punitives at $55,500 -- three times the profit he realized, the story states. "His casual, flippant, self-important attitude and disrespect for Coleman and others in economic distress was readily apparent. Kohout's arrogance is exemplified by the letter of gratitude he required Coleman to write after he defrauded her," Koblitz wrote.

Utah Court Declares Rental Agreement, Eviction Invalid; Future Trial To Determine Property Title In Lawsuit Between Homeowner, Sale Leaseback Peddler

In Taylorsville, Utah, KTVX-TV Channel 4 reports:

  • A Taylorsville man faced with the prospect of losing his home turned to a foreclosure rescue company for help. But instead of help, he claims the company practically tricked him out of his home.

  • Mark Jeffs was months late on his mortgage, and his bank was looking to collect. Jeffs says one day a man with a plan came knocking on his door, promising Jeffs he'd save his home. Jeffs claims that the man's company, Foreclosure Connection, helped catch him up with his mortgage and said they'd assume his mortgage from the bank. In return, Jeffs signed over the deed to his home but asserts that he didn't understand what he was doing at the time. "I thought my home was saved," Jeffs told ABC4 but continues, "a few months later I got an eviction notice." Turns out, Jeffs had in effect become a renter in his own home. And when the Taylorsville man couldn't afford to make payments to the foreclosure rescue company on his own home he was evicted. "They said it was a lease option," Jeffs told ABC4 and we asked, "did you understand what you were signing at the time? No."

  • However, Jason Williams, owner of Foreclosure Connection says that simply isn't true. [...] The Foreclosure Connection owner says Jeffs knew exactly what he was doing, and in fact Jeffs fell behind in his payments to William's company that was why he was being evicted.


  • Williams could not elaborate further on his situation with Jeffs due to current litigation and an impending trial. But Williams did say that the Jeffs were frustrated because they fell behind, "when things don't go their way it's no longer a buy and sell, it's a loan because I lent them money."(1)

  • Currently, the two head to court in December to find out who really owns the Taylorsville home. A judge has ruled that Jeffs lease and eviction are invalid but Williams still holds the deed to Jeffs' home.

For the story, see Homeowner claims "lender" tricked him out of home.

(1) Apparently, Williams, like many other sale leaseback peddlers, are clueless that one of the risks of entering into these types of transactions is the possible recharacterization of the deal from a sale leaseback arrangement into a secured loan through the judicial invocation of the centuries-old equitable mortgage doctrine. See, generally:

Maryland-Based Foreclosure Rescue Operator Gets Hammered With Multiple Court Awards In Favor Of Victimized Homeowners Duped In Sale Leaseback Rackets

Buried in a recent story in The Baltimore Sun reporting on a $700K court award in favor of an Elliott City, Maryland woman who accused foreclosure rescue operator New Town Properties LLC, lender Royal Financial Services Inc, and their principal Robert Hurd of stealing the equity in her home through a sale leaseback, equity stripping ripoff is the following excerpt on another case involving this outfit:

  • Royal Financial's mortgage lender license has been revoked by the state commissioner of financial regulation, who found the company violated the state law in a separate foreclosure rescue scheme.

  • In that case, according to court documents, Hurd offered to refinance a defaulted loan for homeowners Woodrow Boyd Jr. and his wife, Cheryl, and then hours before the foreclosure sale, told them he couldn't refinance but could instead buy the home and lease it back to them.

  • A Baltimore County circuit judge in 2007 found Hurd in violation of the foreclosure protection law, and the couple got their house back with a new mortgage in their name, said [executive director of Baltimore-based Civil Justice Inc. Philip] Robinson, an attorney for the Boyds. Last month, the couple was awarded more than $104,000 in damages in a separate court case, he said.

For the story, see Court awards $700,000 to victim of foreclosure rescue scam (Protective law helps pave the way for recent judgments).

Foreclosure Rescue Operator Gets 7+ Years For Tax Evasion, Money Laundering In Connection With Equity Stripping, Sale Leaseback Peddling Racket

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

  • Timothy Lynn Beliveau is polite and pleasant, his lawyer told the judge, and that’s a reason to think he might turn his life around. “Of course you’re pleasant and polite, you’re a con man,” retorted U.S. District Judge James Rosenbaum. Con men who aren’t polite, the judge noted, tend to starve.

  • Beliveau, 42, of Mound, used the proceeds to pay for boats, mansions and diamonds. He admitted to tax evasion and money laundering charges, but his attorney argued in court papers that the scheme was related to Beliveau's ultimately failed effort to rescue his businesses. Rosenbaum didn't buy it. He accused Beliveau of trying to pull one over on the court. "You knew from the get-go that this was nothing but a fraud." Beliveau, who had already apologized, mumbled a protest - "I'm responsible for this." "You're not responsible," the judge shot back. "You're guilty."

  • Beliveau's attorney asked the judge to let him serve his time in a South Dakota federal pen. Denied. Beliveau's attorney asked the judge to give him one more month to get his affairs in order. Denied. “Grow up,” the judge told him. “It’s time to live a better life.” Beliveau put his hands behind him, accepted the handcuffs from a federal marshal and walked through a door in the side of the courtroom.

Source: 'Con man' gets 7+ years in prison.

For the U.S. Attorney press release, see Minnesota man sentenced to over seven years in prison for carrying out a $2.4 million real estate fraud scheme.

(1) Because Beliveau's ex-wife, who played a role in the scam, was a licensed real estate agent, the victimized 80+ year-old Paulson received compensation from the state Real Estate Education, Research and Recovery Fund, which makes reimbursement to victims who are screwed out of money due to the fraudulent, deceptive or dishonest practices, or conversion of trust funds by Minnesota licensed real estate brokers, salespeople, or closing agents. See State Recovery Fund To Cough Up $116K+ To Compensate Elderly Victim Of Bogus Sale Leaseback Equity Stripping Scam Involving Licensed Real Estate Agent.

Sunday, July 25, 2010

Legally Blind 89-Year Old WW II Vet Faces Boot From NYC Residence Of 40+ Years After Being Victimized In Home Equity Refinancing Ripoff

In Springfield Gardens, Queens, the New York Daily News reports:

  • World War II veteran Lucius Dorsey thought he'd seen the worst in people after being stationed in the Pacific in 1942. Now, more than 40 years after leaving the Navy, the legally blind 89-year-old vet is fighting a nasty battle on the home front.

  • Dorsey is the victim of a deed theft scam and is battling eviction from the Springfield Gardens, Queens, home he bought in 1969. "Someone is trying to steal from us," said Dorsey, who lives with his wife and two sons. "I'm blind. I can't understand it."

  • The scammer accused of preying on the Dorseys in 2007 is Allen Robinson - a person Dorsey's wife, Wanda, 52, thought was a "friend with good credit." But instead of helping them refinance, Robinson had the deed transferred into his name. "They did not know that they were actually signing away their title to the property," said Wendy Dolce, a lawyer from the City Bar Justice Center. Robinson is now in an upstate prison - not for scamming the Dorseys, but for drug possession, records show.

  • Most deed theft scammers zero in on their victims by checking foreclosure listings, which are a matter of public record. "If the person is crafty enough, they shove 100 papers in front of your face and say, 'Sign here to get rid of your problem.' Somewhere in that pile of papers they sign away their deed," said Daniel George, a counselor at Neighborhood Housing Services of Jamaica.

  • Robinson paid off the Dorseys' mortgage and took out a larger one, property records show. Then he "pocketed the cash and disappeared," Dolce said. The Dorseys are appealing the sale of their foreclosed home in hope of negotiating a mortgage rate they can afford. The trouble is Robinson took out the last mortgage, so the Dorseys aren't customers of EMC Mortgage Corp., which initiated the foreclosure. "My husband spent half of his life here," Wanda Dorsey said. "He did nothing wrong. He doesn't deserve this."(1)

Source: Battle on the home front: WWII vet fights eviction after falling victim to deed theft scam.

(1) Support in New York case law for the proposition that a title transfer as described in this story where the homeowner is tricked into signing over a deed is subject to being voided and set aside can be found in Marden v. Dorthy, 160 N.Y. 39; 54 N.E. 726 (N.Y. 1899), in which the New York Court of Appeals, the state's highest court, set aside a similarly obtained title to real estate, and ruled that a subsequent mortgage placed on the property to be unenforceable. The court held that the instruments were void because the property owner never intended to convey her property and because the false instruments were not converted into genuine instruments by the act of recording.

Marden v. Dorthy has recently been cited in:

Further, whether the deed transfer described in the New York Daily News report is absolutely void (ie. void ab initio), or merely voidable should be of no consequence in also voiding the subsequent mortgage placed upon the property at the time of the ripoff.

If the transfer is found to be void ab initio, the mortgage will automatically be absolutely void as well.

Should the conveyance be found to be merely voidable (as opposed to being absolutely void), the lender who unwittingly financed the ripoff could avoid having its lien voided and set aside if, and only if, it can establish that it was a bona fide purchaser / encumbrancer at the time of making the loan. In this case, because the victimized homeowner never relinquished possession of the home, the lender had the duty to inquire of those in possession as to any unrecorded rights or equities they may have in the property. The lender's failure to make any inquiry into the rights of the victimized family, who were in possession at the time the mortgage was made, leaves its mortgage susecptible to being voided. See Phelan v. Brady, 119 N.Y. 587; 23 N.E. 1109 (NY 1890):

  • "Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in possession is able to establish."

Phelan v. Brady has recently been cited in:

See also, Brooklyn Court Rulings Void Deeds & Subsequent Mortgages Used To Drain Home Equity In Bogus Sale Leaseback Foreclosure Rescue Scams.

BofA Accused Of Another Foreclosure Screw-Up; Northern California Couple Say They Never Missed A Payment, Claim Bank Wasn't Even Their Lender

In Kenwood, California, The Press Democrat reports:

  • Keith and Julie Hanover felt like someone was trying to steal their home. Bank of America had started foreclosure proceedings on their house in Kenwood. Yet the Hanovers had never missed a mortgage payment. In fact, Bank of America wasn't even their lender.

  • The nation's largest bank appears to have mistakenly determined it owned their loan due to a clerical error resulting when another mortgage company collapsed and was taken over by the federal government, according to court records. The Hanovers spent seven months hounding and pleading Bank of America to fix the mistake. But none of the numerous bank representatives they contacted was able to solve the problem.

  • "It's like their foreclosure process is on auto pilot," Keith Hanover said. "It starts and there is nothing anyone can do to stop it." Finally, distraught and exhausted, the couple hired a Santa Rosa attorney who got a court injunction to stop the auction of their home set for 11:30 a.m. April 30 on the Sonoma County courthouse steps. "You're just losing your mind," Keith Hanover said. "We had never even missed a mortgage payment."


  • The couple filed a lawsuit in Sonoma County Superior Court to stop the bank from seizing their home. "When they came and were literally going to pull our house from underneath us, we knew we had to sue," Keith Hanover said. [...] For the Hanovers, anxiety over the situation is still a daily presence. "You can't help but wonder what is going to happen. It just wears you down," Keith Hanover said. "The whole lending industry is such a mess. And it is affecting everyone in the country."

For more, see Frustration with banks reaching boiling point (Errors, inaction, morass of red tape vex homeowners trying to fend off foreclosure proceedings — and may end upcosting taxpayers billions).

(1) For other posts on Bank of America's seemingly relentless pursuit of homes that they have no apparent legal claim to, see:

Converted Courthouse Closet Now Used As Windowless Conference Room To Mediate (Non-Claustrophobic) Queens Foreclosures

In Jamaica, Queens, the New York Daily News reports:

  • In the desperate battle to end New York's home foreclosure crisis, a windowless storage closet in a Queens courthouse serves as ground zero. The 6-feet-by-10-feet room has been turned into a conference room where banks and homeowners meet to work out their differences in a new statewide program aimed at keeping debtors from losing their homes.


  • Parents have shown up with kids in strollers, says Tracy Catapano-Fox, chief law clerk to the court's administrative judge. [...] Every week, about 250 to 300 conferences fill the calendar. The converted storage closet - repainted in March when Mayor Bloomberg visited to announce free legal services for the conferences - is now used on Mondays and Tuesdays. "That shows how desperate we are for space," Catapano-Fox says.

For the story, see Queens Supreme Court storage closet, now a conference room, helps families hold on to homes.