Two Admit Roles In Fractional Interest Deed Transfer Foreclosure Rescue Scam That Abused Bankruptcy Process To Stall Sales On 1400+ Homes

In Los Angeles, California, Westlaw News & Insight reports:

• Two people have admitted that they participated in a fraud scheme by using falsified bankruptcy petitions to delay foreclosures on more than 1,400 properties in California.(1) The scheme improperly postponed foreclosures on $725 million worth of mortgages and caused banks and lenders to lose out on loan payments from homeowners, according to a statement released by U.S. Attorney Andre Birotte of the Central District of California.

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• Birotte said the three advertised a foreclosure rescue service that promised at-risk homeowners that their properties could be saved in exchange for monthly payments of about $1,500.

• After collecting the first fee installment, the defendants had the property owner sign a deed that granted a one-eighth interest in the home to a fictitious person, according to the charges. The defendants then filed a bankruptcy petition in the name of the nonexistent individual without the homeowner’s knowledge, Birotte said.

• The fraudulent bankruptcy filing triggered an automatic stay of the foreclosure proceedings in each instance. When a lender would succeed in having the bankruptcy case dismissed, the defendants would have their client sign another deed that granted another interest in the home to a different fictitious person, according to the charges. The defendants would then file another bankruptcy case in the new fictitious person’s name, prosecutors said.

• The fraudulent deeds and bankruptcy filings allowed the defendants to repeatedly postpone foreclosures while collecting $550,000 in fees from homeowners, Birotte said. While the defendants profited, lenders incurred legal fees to defend their interests in the bankruptcy cases and suffered unspecified losses on unpaid mortgages, he added.

Source: 2 admit roles in California foreclosure rescue scheme.

See Final Report Of The Bankruptcy Foreclosure Scam Task Force for a report describing fractional interest deed transfer and other foreclosure scams involving the abuse of the bankruptcy court process (available online courtesy of the Loyola of Los Angeles Law Review).

Go here for other posts on fractional interest deed transfer, foreclosure rescue bankruptcy scams.

(1) Reportedly, Darwin Bowman, 74, pleaded guilty to bankruptcy fraud on Dec. 15 and Co-defendant Robin Phillips, 53, entered her guilty plea Nov. 29. A third defendant, Irving Cohen, 74, is still facing charges in the scheme, which operated between 2006 and July 2010, according to prosecutors.