Saturday, February 4, 2012

Law Firm Faces Bar Probe For Allegedly Using Trust Funds To Advance Anticipated Proceeds From Check That Subsequently Bounced; Left Holding $285K+ Bag

In Orlando, Florida, the Orlando Sentinel reports:

  • The Florida Bar is investigating practices by the KEL law firm that may have played a role in it being bilked out of more than $285,000 in a high-tech flim-flam, the Bar confirmed this week.

  • Staff investigators are looking at whether the Orlando law firm violated the Bar's rules of financial conduct when it moved funds in and out of a trust account while becoming ensnared in the international scam, a spokeswoman said.


  • In the latest incident, KEL finds itself both the victim of wrongdoing and the target of the complaint that accuses it of flouting Florida Bar rules. U.S. Attorney Robert E. O'Neill for the Middle District of Florida announced last week that KEL had been defrauded and that federal authorities have taken action to recover $285,833 stolen from the firm. The U.S. has filed a civil-forfeit lawsuit against JPMorgan Chase Bank as part of that effort, O'Neill said.


  • According to a Secret Service investigator's affidavit, KEL was contacted by phone last summer by a prospective client named "David Benson," who claimed to be a business consultant. He wanted to sue a former boss, identified as "Fred Sanders," for wrongful termination. The sum in dispute: $90,000.

  • After receiving a $500 retainer check, KEL took the case, contacted Sanders and obtained a settlement, the affidavit states. The firm later received a check in the mail for $285,833. It deposited the check in its business account and wired the money to Benson before the check cleared, apparently feeling "obligated" to get the money to him as soon as possible, according to the investigator.

  • But KEL didn't have enough money in the business account to wire the full amount, so it transferred funds from its title-work subsidiary account, the federal affadavit states. When it wired the money to Benson at an account in Shinsei Bank in Japan, someone withdrew the entire amount.

  • Later, both the retainer check and the settlement check were found to be counterfeit; and everything else about the people involved had been fabricated, according to the affadavit. KEL's money was gone, and the law firm had never met its client face-to-face.

For more, see Bilked by scam, KEL law firm draws Florida Bar scrutiny.

Wisconsin High Court Nixes Request From Advocates For Poor To Create Right To Free Counsel In Civil Cases Involving Housing, Other Basic Needs

In Madison, Wisconsin, The Capital Times reports:

  • Courts in Wisconsin will not have to provide lawyers for poor people embroiled in cases that involve basic human needs, the state Supreme Court ruled last week. But the court gave its blessing to starting a pilot project in one or more counties that would provide attorneys in certain cases.

  • The court's decision at Thursday's administrative conference was in response to a petition by Legal Action of Wisconsin(1) asking the court to adopt "civil Gideon," which takes its name from the landmark 1963 case Gideon vs. Wainright, which established the right to counsel for criminal defendants.

  • Civil Gideon advocates sought to establish a similar right in civil court for low-income people litigating matters involving basic needs like shelter, food, clothing, heat, medical care, child custody and safety.

  • Legal Action filed the petition, with 1,320 supporting signatures, in September 2010. John Ebbot, executive director for Legal Action, says he was "deeply disappointed" by the court's decision. "I'm concerned that this pilot project is going to be an excuse to wait for that to be concluded before courts start to appoint counsel," he says.

  • No state has enacted a comprehensive civil Gideon policy, but a few states have done pilot projects. Last year California embarked on an $11 million project.

For more, see Crime and Courts: Supreme Court rejects court-appointed lawyers for poor in civil cases.

(1) Legal Action of Wisconsin is a non-profit law firm that provides free legal services for low-income people in Wisconsin, having offices in six cities serving 39 southern counties.

Friday, February 3, 2012

Property Insurer Seeks Court Guidance On To Whom To Pay Policy Proceeds Where Multiple Claims Made On Same 'Ike-Destroyed' Home

In Galveston, Texas, The Southeast Texas Record reports:

  • American Modern Lloyds Insurance Co. is embroiled in a dispute over Hurricane Ike-related claims with three East Texas residents. The insurer filed suit against Orange resident Melvin Cook and Lumberton locals Stephen and Debora Dzenowski on Jan. 13 in Galveston County District Court, stating the respondents may expose it to "multiple liability" because of their alleged "rival claims."

  • The suit shows American Modern provides property damage coverage with a total limit of $43,000 to a Crystal Beach house which was completely destroyed by Hurricane Ike in 2008.

  • According to the original petition, American Modern "has indicated its willingness to pay the proceeds of the policy, but conflicting claims have arisen from the plaintiffs." "The defendant is unable to determine which, if any, of the defendants are entitled to the policy proceeds," the suit says.

  • "There is an issue between the named insureds regarding insurable interest and ownership of the insured property."

  • American Modern insists it claims "no interest in the proceeds of the policy, which the plaintiff has at all times been willing to pay to the person or persons entitled to payment."

Source: Insurance proceeds for destroyed beach house delayed by rival claims.

Oregon Foreclosure Trustee Accused Of Secret Markups For Published Legal Ads, Passing Jacked-Up Costs To Homeowners, Others

In Portland, Oregon, The Oregonian reports:

  • A lawyer representing The Bulletin of Bend and the Redmond Spokesman newspapers has filed an ethics complaint with the Oregon State Bar against an executive of the Northwest's largest foreclosure trustee, accusing the company of secretly marking up the cost of foreclosure legal ads to its lender clients.

  • Michael Dillard, of the Karnopp Petersen law firm in Bend, filed the complaint last week against David Fennell, a lawyer and a principal owner of Northwest Trustee Services, which by its own account has handled more than 250,000 foreclosures.

  • Dillard alleges that Northwest Trustee and its advertising operation, FEI, charged its clients an undisclosed 18 percent premium over the actual price. These "deceptive and dishonest" tactics, Dillard said, allowed FEI to collect from its clients about $360,000 more than it actually paid for the foreclosure notices published in the Redmond newspaper just since 2009. Those costs were then presumably passed on by banks to homeowners and others, Dillard said.

  • Stephen Routh, CEO of Northwest Trustee Services, denied that FEI was charging a secret premium. "The markup was fully disclosed to it customers," Routh said. "It's how they make a profit."

  • The complaint is intriguing on several levels.

For more, see Portland foreclosure attorney hit with ethics complaint due to premiums.

Illinois AG Hits Debt Collector With Suit Alleging Variety Of Intimidation Tactics To Illegally Squeeze Cash From Consumers

From the Office of the Illinois Attorney General:

  • [T]he Attorney General took action against a Skokie-based debt collector, PN Financial Inc., filing suit in Cook County Circuit Court. Madigan said PN Financial emerged last year as one of the most egregious cases of illegal debt collection during her tenure as Attorney General.


  • Madigan’s lawsuit against PN Financial and owner, Nelson Macwan, of Skokie, alleges numerous violations of state and federal laws that protect Illinois consumers from off-limits debt collection tactics. Madigan alleged PN Financial acted illegally by:

    Revealing information about debts to people other than the consumer, including employers or family members;

    Fronting as a law firm and intimidating consumers with fake court case numbers on letters sent to consumers to falsely represent they had been sued for failure to pay a debt;

    Debiting more money from consumers’ bank accounts than consumers authorized, causing some to incur overdraft fees; and

    Accessing consumers’ credit reports without authorization to intimidate them to pay alleged debts

  • Additionally, Madigan said in some instances PN Financial attempted to collect debts it was not authorized to collect. As a result, some consumers paid PN Financial, without realizing they didn’t owe any outstanding balances to the collection company, and reported losing at least $9,000. PN Financial also contacted other consumers over debts that had already been paid off.

  • Fifty-two consumers have filed complaints with Madigan’s office against PN Financial. The Chicago Better Business Bureau has received 82 complaints against the company.

For the Illinois AG press release, see Madigan: 2011 Consumer Complaints Show Debt Collectors Using Illegal Abusive Tactics.

For the lawsuit, see The People of the State of Illinois v. P.N. Financial Inc.

Thursday, February 2, 2012

Novice Homebuyer Pockets $8K 1st Time Buyer Tax Credit, Uses Funds To Fix House Only To Learn He Purchased Worthless Land Contract From Slick Operator

In Dearborn Heights, Michigan, WXYZ-TV Channel 7 reports:

  • The complaints keep coming about Leonard Bale. 7 Action News Investigator Bill Proctor broke the story about the man who has been selling foreclosed homes to families who say they have lost their lifesavings on these deals. Now one city is taking on Bale, who may be facing major fines.

  • Leonard Bale will go before a Dearborn Heights board where he already faces $42,000 in fines for failing to maintain rental properties.(1)
  • But those who say they are victims of Bale continues to grow.

  • We were making our payments on schedule,” says Clayton Waldroup a father of five. He says he had hoped that the Dearborn Heights home he thought he was buying from Leonard Bale on a land contract would be the ideal place for his family for years to come.

  • Like so many of Bale’s customers, Waldroup took advantage of the federal first-time home buyers program, and received a substantial check to fix up the house.

  • We moved in. We took the $8,000 we got from the federal government, replaced the furnace. We rewired the home, repaired the plumbing, put new cabinetry in it, refinished the floors, repaired walls, put windows in it,” says Waldroup. “We spent that money, plus all our cash reserves because this was going to be our home.”

  • But like these families, and so many others who say they are victims Bale, the Waldroups would find out months after buying and renovating, and putting heart and soul into the place that Bale was no longer the owner. They learned their land contract was no good.

  • There were foreclosure notices,” says Waldroup, which is how he found out his land contract was no good.(2)

For the story, see More families comes forward to accuse Leonard Bale.

(1) See Controversial landlord now facing thousands in fines.

(2) Inasmuch as the so-called tax 'credit' is nothing more than a 15-year, interest free loan, this scam victim may now find himself on the hook for immediate repayment to the IRS of the entire amount of the credit (less any amount he may have already paid back). See Internal Revenue Service Information Release: IR-2008-106, Sept. 16, 2008: Tax Credit to Aid First-Time Homebuyers; Must Be Repaid Over 15 Years:

  • The first-time homebuyer credit is similar to a 15-year interest-free loan. Normally, it is repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed. The repayment amount is included as an additional tax on the taxpayer’s income tax return for that year. For example, if you properly claim a $7,500 first-time homebuyer credit on your 2008 return, you will begin paying it back on your 2010 tax return. Normally, $500 will be due each year from 2010 to 2024.


  • However, some exceptions apply to the repayment rule. They include: [...]

    If you stop using the home as your main home, all remaining annual installments become due on the return for the year that happens. [...] If you sell your home, all remaining annual installments become due on the return for the year of sale.

Fire Drives Unwitting Recent Homebuyer From Residence Shortly After Learning His Property Purchase Was Worthless Land Contract Fleecing Him Of $48K

In Vacaville, California, KTXL-TV Channel 40 reports:

  • The home Johnnie Carabajal was living in went up in smoke [earlier this month], but the fire was the last in a long list of bad things that happened to him and his four kids.

  • Earlier in the month, he had been told to get out of the house he was trying to buy. "It went into foreclosure I lost it for hiring a bad realtor he's in court for embezzlement for 1.5 million dollars," said Carabajal.

  • FOX40 backed up his claim on the FBI’s website. Alonzo Brown III was indicted on mortgage fraud charges this past summer. The nine-count indictment states Brown took out loans in the names of friends and used the money to buy property without their knowledge. Carabajal was not named in the case, but he says he used Brown to help him through the short sale.

  • "I've given him almost 48 thousand dollars cash throughout the whole time," said Carabajal. That cash never made it to the bank. "The bank doesn't even know who I am on this house they look at me as a squatter on this house and I've been squatting in this house for two years," said Carabajal.

  • FOX40 tried to contact Brown today, he did not answer the phone. Wells Fargo is looking into the situation. For now Carabajal is living in a motel and is trying to find a rental in the school district his kids attend.

Source: Fire Uncovers Possible Real-Estate Fraud.

Unwitting Family Who Recently Lost Home In Tax F'closure Clipped For $5500 From Alleged Scammer Claiming To Be New Owner Offering To Sell Back House

In Southfield, Michigan, WJBK-TV Channel 2 reports:

  • A family loses their home to foreclosure. A man claiming to be the new owner of the house tells them to pay up or pack up. They gave him more than $5,000. Where did the money go?

For more, see Ex-Convict Accused of a Dirty 'Deed'.

Wednesday, February 1, 2012

Dangers Of Buying Or Selling Real Estate With Land Contracts, Lease/Options


  • It happens innocently enough: A seller wants to sell real property and a buyer wants to buy it, only the buyer does not have the ability to obtain traditional financing. So, the parties make an arrangement.

  • Perhaps the seller “leases” the property to the buyer for a period of time with the buyer having an “option” to purchase the property at some time in the future.

  • Perhaps the parties agree to an installment land contract (ILC) whereby the buyer makes payments over time and the seller agrees to deliver a deed when the purchase price is paid. What can go wrong? It turns out a lot.

For more, see Mountain Law: Dangers of leases with purchase options (And installment land contracts).

Sloppy Loan Servicers Continue Victimizing Homeowners With Crappy Recordkeeping

Reuters reports:

  • In July 2009, Roy and Sheila Bowers refinanced the mortgage on their suburban ranch home in Topeka, Kansas. The couple wanted to take advantage of the low interest rates that were all the rage at the time.

  • Roy, a truck driver, and Sheila, a former hotel housekeeping supervisor, knew their new loan from Wells Fargo would enable them to save $198.86 a month - a nice chunk to help with gas and groceries.

  • But what the Bowers never imagined was that their old loan, the one Wells Fargo told them was paid off, would resurrect itself, trashing their credit report, scotching their son's student loans and throwing the whole family into foreclosure. All, they say, even though they didn't miss a single mortgage payment. The Bowers aren't alone.

  • More and more, homeowners say that mortgages they thought were dead and buried are springing back to life, sometimes haunting them all the way into foreclosure. "It's the most egregious manifestation of an industry that's seriously broken," said Ira Rheingold, a lawyer who is the executive director of the National Association of Consumer Advocate.

  • Diane Thompson, an attorney with the National Consumer Law Center, says she has defended hundreds of foreclosure cases, and in nearly all of them, the homeowner was not in default. "The record-keeping on the part of the mortgage servicers is not to be trusted."

  • The problems grew from a lot of sloppy recordkeeping that began during the housing boom, when Wall Street built a quick-and-dirty back-office operation to process mortgages quickly so lenders could sell as many loans as possible. As the loans were later sold to investors, and then resold around the world, the back office system sidestepped crucial legal procedures. Now it's becoming clear just how dysfunctional and, according to several state attorneys general, how fraudulent the whole system was.

  • Depositions from "affidavit slaves" depict a surreal, assembly-line world in which the banks and their partner firms hired hair stylists, fast-food kids and Wal-Mart floor workers, paying them $10 a day, to pose as bank vice presidents, assistant secretaries and corporate attorneys.

  • These "robosigners" became a national sensation in the fall of 2010 when it was revealed that they faked titles, forged documents and backdated affidavits so they could make up for the bypassed procedures and foreclose on properties.

  • They passed around notary stamps as if they were salt. They did all of this, they testified, without verifying a single word in any of the documents - as is required by law. And it was all done, they say, to foreclose on as many homeowners as fast as possible.

For more, see Old mortgages rise from the dead, haunt homeowners.

Elderly Couple Says Misapplied House Payments, Force Placed Insurance Racket Victimized Them Into F'closure; Compelled To Hire Attorney To Stall Sale

In Baird, Texas, the Abilene Reporter News reports:

  • It's been enough to make Virginia Tollett sick with worry. "If we hadn't went and got an attorney, they would have auctioned our house on the courthouse lawn," said Tollett, 72, her voice rising. "They would have sold our house."

  • Tollett and her husband, Jim, 74, have turned to the courts in an effort to prevent lender JP Morgan Chase from foreclosing on the Baird home they bought for $300,000 in 2006 with the help of a $200,000 loan. The banking giant did not respond to a request for comment.

  • Tom Watson, the Abilene attorney representing the Tolletts, said a judge stepped in to prevent a sale of the home, scheduled for January. The status of the house remains uncertain, however, as a lawsuit remains pending in federal court that claims JP Morgan Chase wrongfully foreclosed on the home.

  • "What we are alleging is they took money that we submitted for payment to the principal and interest and instead applied it toward insurance," Watson said.

  • But the couple claim that they already had insurance, so the lender was wrong to take out the home insurance policy.

  • "My husband and I truly believe that we were paying our payments," said Tollett, 72, explaining that the couple paid roughly $1,500 monthly. Chase wants about $10,000 to bring the account up to date, Watson said. "I don't know how they arrived at that amount," Watson said.

  • He added: "We don't know how the payments were applied. Their records don't disclose that to us, at least in what I would call an intelligible, understandable form." The claim also seeks recovery of the couple's $100,000 down payment.

  • Tollett said she has cried and even been sick to her stomach since first receiving a foreclosure notice last fall. [...] The experience has caused her to "hate this beautiful home." She said she's been embarrassed by the courthouse foreclosure postings and doesn't know how she wants things to end, recalling her initial enthusiasm for the house.

For the story, see Baird couple facing foreclosure claims house payments wrongly uncredited to mortage loan.

Tuesday, January 31, 2012

Elderly Woman Faces The Boot From Home Of 40+ Years After Unwittingly Signing Over Premises To Convicted R/E Scam Artist Assisted By Then-L.A. Cop

In Los Angeles, California, NBC Los Angeles reports:

  • A tangled web of fraud allegedly involving an ex-LAPD officer and a self-proclaimed Bishop has ensnared an 89-year-old woman who is losing to foreclosure the Lynwood home she paid off more than two decades ago, police say.

  • Vistula Graham bought the three-bedroom ranch house more than 40 years ago, and owned it free and clear after paying off the mortgage in the late nighties, said her daughter, Keta Davis, who grew up there. Now the house is scheduled to be auctioned off. “I want the foreclosure to stop because we’re not at fault,” Davis said.

  • The story begins with Leroy Dowd, a 74-year-old, self-proclaimed, charismatic leader of a now-defunct South LA church called Triumph Church of God. “Bishop Dowd is a con artist," Davis said. "Bishop Dowd preyed on my mom.”

  • Dowd conned Graham into giving him money and unknowingly sign over the house, Davis said. “He called himself a bishop he called himself a prophet,” she said. Profit off her mother is more like it, she said.

  • Her mother "didn’t know what she was signing,” Davis said. Davis claims the Bishop opened a $150,000 credit line with Bank of America using her mother’s information and the house as collateral. Checks signed with her mother’s name were forged, Davis said.

  • Dowd also added his name to a Wells Fargo account. Wells Fargo and BofA both determined it was fraud and canceled those loans. But the last loan Dowd allegedly obtained, through IndyMac Bank, for $410,000 is the one in foreclosure.

  • Two years ago, Dowd pleaded guilty to one count of grand theft for forging a grant deed and stealing another church member’s house. That victim was 87.

  • Mr. Dowd is a smooth con artist,” said Claremont Detective David DeMetz who has a thick file on Leroy Dowd, from that case. The victim “had no idea what she was signing or that she gave her house away to Mr. Dowd.”

  • Sound familiar? Dowd was sentenced to 3 years in prison on that case, but in the case of Vistula Graham, the Los Angeles District Attorney didn’t press charges because the primary witness, Graham, can no longer talk. Davis has offered to testify on behalf of her mother.

  • But the story doesn’t end there. Sheriff’s investigators say Leroy Dowd could not have been working alone. Detectives suspect he was working with Darcy Greenfield, who was an LAPD officer at the time and had a real estate business on the side.

  • Deed records on the Lynwood house show that in 2007 the house was put in Greenfield’s company name: Greenfield and McCall. Documents show Greenfield and McCall were named beneficiaries of the IndyMac Bank loan, and a received a payout of more than $261,000.

  • Keta Davis says the loan is clearly “fraudulent.”(1)I’d never heard of them,” she said. Davis was stunned to learn that not only did a stranger own her family house, but that the stranger was an LAPD officer. Greenfield was never charged in Graham’s case, but the former LAPD officer was charged last May in a San Bernardino fraud case.

  • Greenfield has been charged with ten felony counts all pertaining to real estate fraud, said San Bernardino deputy district attorney Vance Welch who specializes in real estate fraud. Greenfield has pleaded not guilty, and her attorney Grover Porter has not returned numerous calls to his office.

  • Greenfield’s connection to Dowd is the subject of a broader investigation by the LAPD and FBI.
For the story, see Elderly Woman Falls Victim to Con, Loses House to Foreclosure (Elderly woman loses home in tangled web involving an ex-LAPD officer and self-proclaimed Bishop).
(1) Unwinding or undoing a scam like this requires the filing of a civil suit in which, among other things, a determination is sought as to whether the deed signed by the unwitting victim is void, or is merely voidable. See Schiavon v. Arnaudo Bros., 84 Cal. App. 4th 374; Cal.Rptr.2d 801 (Cal. App 6th Dist. 2000), for California case law that references the propositions that:
  • A deed is void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing. (Erickson v. Bohne, supra, "130 Cal.App.2d at pp. 555-556.)

    A voidable deed, on the other hand, is one where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations. (Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106 [215 Cal.Rptr. 748].) The same rules apply to the reconveyance of the property interest under a deed of trust as to the conveyance of property by grant deed. (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 43 [198 Cal.Rptr. 418] (Wutzke).)
If the deed is found to be void, a subsequent bona fide purchaser for value is not protected by the state recording statutes, in which case his/her interest is a nullity. If the deed is found to be voidable, a subsequent conveyance to a bona fide purchaser will be recognized as valid. Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103 [215 Cal.Rptr. 748]:
  • A deed obtained as a result of fraud committed against the grantor or by use of undue influence by the grantee may be rescinded by the grantor. (Rogers v. Warden (1942) 20 Cal.2d 286 [125 P.2d 7].) If a grantor is aware that the instrument he is executing is a deed and that it will convey his title, but is induced to sign and deliver by fraudulent misrepresentations or undue influence, the deed is voidable and can be relied upon and enforced by a bona fide purchaser. (Peterson v. Peterson (1946) 74 Cal.App.2d 312 [168 P.2d 474]; Conklin v. Benson (1911) 159 Cal. 785 [116 P. 34].)

  • In Conn. Life Ins. Co. v. McCormick (1873) 45 Cal. 580, the Supreme Court held a deed voidable, not void, if obtained as a result of undue influence or compulsion. Such a deed "stands on the same footing as a deed procured by fraud." The court concluded that a deed or mortgage procured by duress cannot be set aside as against a party purchasing in ignorance of the facts constituting the duress, that is to say as against a purchaser for a valuable consideration and without notice of the duress. Until a voidable deed is declared void it is fully operative. (Frink v. Roe (1886) 70 Cal. 296 [11 P. 820].) Civil Code section 1107 provides: "Every grant of an estate in real property is conclusive against the grantor, also against everyone subsequently claiming under him, except a purchaser or incumbrancer who in good faith and for a valuable consideration acquires a title or lien by an instrument that is first duly recorded."
For more, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.

Go here for more on void and voidable deeds.


Sale Leaseback Peddler Squeezed By Norfolk Feds 'Scores' 54 Month Stay In Federal Prison After Copping Plea For Running Home Equity Stripping Racket

From the Office of the U.S. Attorney (Norfolk, Virginia):

  • Kathleen Harps, 51, of Chesapeake, VA, was sentenced [] in Norfolk federal court to 54 months in prison for operating a foreclosure rescue mortgage fraud scheme. [...] Harps previously pled guilty on August 23, 2011.

  • According to court documents, during 2006 Harps owned and operated the now defunct Hampton Roads businesses, New Beginnings Group, LLC, and IMAK Group, LLC, which specialized in “foreclosure rescue.”

  • Through these businesses, Harps and others solicited homeowners in financial distress and facing foreclosure, to agree to sell their homes to Harps or straw buyers working with her.

  • Harps promised the homeowners that, during a one year period after the sale, they could remain in their homes without having to pay the mortgage, while simultaneously putting their financial affairs back in order, so that they could buy back their homes at the end of the year.

  • This, however, failed to occur. Instead, court records show that Harps and her straw buyers made assorted false statements to fraudulently obtain mortgage loans, upon which they later defaulted.

  • As a result, foreclosures soon followed and the homeowners lost both their homes and substantial sums of homeowner equity, which was siphoned out of the closing transactions and paid to Harps’ businesses.

For the U.S. Attorney press release, see Business Owner Sentenced to Prison for Foreclosure Rescue Scheme.

(1) For more on this type of foreclosure rescue ripoff, see:

Minneapolis Feds Pinch Two In Alleged Sale Leaseback Rescue Peddling Scheme, Stripping Home Equity From Dozens Of Homeowners Seeking Financial Help

In Minneapolis, Minnesota, the Star Tribune reports:

  • Two Bloomington residents were arraigned Thursday in Minneapolis on charges that they ran an $8 million equity-stripping scheme under the guise of a nonprofit that claimed to help troubled homeowners avoid foreclosure.

  • Richard Scott Spady, 38, and Michele Denise Sengstock, 48, were each charged Jan. 19 in a sealed indictment with conspiracy, fraud and money laundering involving transactions that took place from 2005 through October 2007.

  • Spady owned and operated Unified Home Solutions, which he promoted as a nonprofit but ran as a for-profit entity, the indictment says. He also owned and operated American Mortgage Lenders, a mortgage brokerage that facilitated the transactions. And Sengstock owned and operated a company called MLAA Holdings, which also played a role, the government says.

  • According to the indictment, Spady told homeowners facing foreclosure that Unified Home Solutions offered a rescue program backed by investors who would buy their homes and sell them back after they'd regained their financial footing in a year or two.

  • The homeowners could live in the homes and pay rent and upkeep in the meantime. Some homeowners only learned that their homes were being sold when they attended the closing.(1)

  • The indictment says mortgages were obtained with fraudulent financial information, a common pattern in such schemes. Investors collected a "risk fee," generally 3 percent of the purchase price, but most of the equity in the home went to Unified Home Solutions and American Mortgage Lenders in the form of "undisclosed kickbacks," according to an affidavit filed in the case by IRS criminal investigator Angela Johnson. She said Spady and his companies facilitated the sale of about 79 properties; fewer than five avoided foreclosure.

  • Spady closed the two companies in 2008 and opened new firms that he's believed to be operating, Johnson said. They include New Start Homes, Start to Finish Realty, RVenture Inc. and RInvestment I. None of those firms was mentioned in the indictment, however.

For the story, see Bloomington duo accused of mortgage fraud (Indictment says they preyed on homeowners facing foreclosure and stripped away the remaining equity).

For the U.S. Attorney press release, see Two Bloomington residents indicted in mortgage fraud scam.

For the indictment, see U.S. v. Spady, et ano.

(1) For more on this type of foreclosure rescue ripoff, see:

Suit: Foreclosure Rescue Outfit Ran Loan Modification Racket Targeting Elderly Woman Seeking Help With House Payments

In Kansas City, Missouri, the Kansas City Business Journal reports:

  • Legal Aid of Western Missouri(1) has filed a lawsuit on behalf of victims of an alleged foreclosure rescue scam operating out of Mission. According to the suit filed Friday in U.S. District Court in Kansas City, Death Productions LP promised to help elderly women lower their mortgage payments by negotiating with lenders in exchange for a monthly fee.

  • Then they do nothing, and you end up losing your home,” said Jim Jenkins, a Legal Aid lawyer representing Marilyn Bowman of Raytown and Doris Linningham of Kansas City. Jenkins said he has received several other complaints from Kansas City-area residents who allegedly lost money to the husband and wife behind Death Productions, John Lee Norris and Julie Tina Hatcher.

  • They previously ran the company in Nevada as Reaper Investment Partners LLC, Jenkins said, adding that they tend to target single black women older than 60 who hear of the company through trusted friends. “It wouldn’t surprise me if there are quite a few more” victims, he said.

  • The suit seeks more than $75,000 for Bowman, who filed bankruptcy, and more than $100,000 for Linningham, whose house was sold out of foreclosure for $28,000 on Jan. 9.

Source: Suit: Mission company bilked elderly women in foreclosure rescue scam.

(1) Legal Aid of Western Missouri provides legal services to low-income citizens living below the poverty level in a 40 county area in western Missouri.

Monday, January 30, 2012

Sacramento Feds Squeeze Another Guilty Plea Out Of Real Estate Investors Suspected Of Bid Rigging At Foreclosure Sale Public Auctions

From the Office of the U.S. Attorney (Sacramento, California):

  • [K]enneth A. Swanger, 41, of Woodland, pleaded guilty to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County.(1) The primary purpose of the conspiracy was to suppress and restrain competition and to obtain selected real estate offered at San Joaquin County public foreclosure auctions at noncompetitive prices, the department said in court papers.

  • According to the court documents, after the conspirators’ designated bidder bought a property at a public auction, they would hold a second, private auction, at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay.

  • The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the price at the public auction and that at the second auction was the group’s illicit profit. The illicit profit was divided among the conspirators in payoffs. According to his plea agreement, Swanger participated in the scheme beginning in or about June 2009 until in or about October 2009.

  • To date, nine individuals, including Swanger, have pleaded guilty in U.S. District Court for the Eastern District of California in connection with the investigation. They are: Anthony B. Ghio; John R. Vanzetti; Theodore B. Hutz; Richard W. Northcutt; Yama Marifat; Gregory L. Jackson; Walter Daniel Olmstead; and Robert Rose. In addition, four other investors, Wiley C. Chandler, Andrew B. Katakis, Donald M. Parker and Anthony B. Joachim, and one auctioneer, W. Theodore Longley, were indicted by a federal grand jury in Sacramento on Dec. 7, 2011.

For the U.S. Attorney press release, see Woodland Man Pleads Guilty To Bid Rigging And Fraud At San Joaquin County Public Auctions.

(1) Swanger pleaded guilty to bid rigging, a violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either of those amounts is greater than the statutory maximum fine. Swanger also pleaded guilty to conspiracy to commit mail fraud, which carries a maximum sentence of 30 years in prison and a $1 million fine.

Lack Of Standing Sinks Effort To Squeeze Cash Out Of Consumer; 'Show Me State' High Court: Collector Failed To Show Proper Evidence Of Debt Assignment

Lexology reports:

  • A recent Missouri decision in a credit card collection case illustrates the kind of documentation attacks that are increasingly being lodged against the non-mortgage consumer lending industry.

  • In its January 17, 2012, opinion in Cach, LLC v. Askew, the Missouri Supreme Court ruled that a debt collector was not entitled to judgment in its favor because the collector had not properly established that it had been assigned the debt in question. Following the card issuer’s acquisition by another bank, the consumer’s credit card account was assigned to a purchaser that subsequently assigned the account to the debt collector.

  • At trial, the collector submitted a document purporting to be a bill of sale transferring the account from the acquirer bank to the purchaser.

  • The Missouri Supreme Court held that the trial court erred by admitting the bill of sale into evidence based on testimony of the debt collector’s records custodian. More specifically, the court found that the custodian was not a “qualified witness” to lay the foundation for the document to qualify for the business records exception to the hearsay rule.

  • According to the court, the custodian failed to show that she had any personal knowledge of how or when the bill of sale was prepared. Without the bill of sale, the debt collector had no competent evidence of the first assignment and therefore failed to show it had standing to bring the collection action, the court found.

For the story, see Missouri High Court scuttles credit card collection action due to problem documentation (may require subscription; if no subscription, TRY HERE - then click appropriate link for the story).

For the ruling, see Cach, LLC v. Askew, No. SC 91780 (Mo. January 17, 2012) (en banc).

Reluctant Banksters Refuse To Correct Loan Servicing Abuses, Resulting In Continued Harrassment Of Homeowners With Foreclosure Threats

An excerpt from a recent story from The Center for Public Integrity's iWatch News:

  • Since 2007, nearly 9 million homes have been lost to foreclosure, according to data from RealtyTrac. About 4 million are currently in default on or in some stage of foreclosure. Some of these homeowners saw their payments skyrocket, some lost their jobs, and some bought a more expensive home than they could afford.

  • But many, [...], say that their foreclosures or defaults were triggered by an error made by the mortgage servicing company. Common errors include late fees generated through questionable accounting and imposed without notice, excessive charges for property inspections and maintenance, and inflated or unnecessary attorneys’ fees.

  • Many homeowners who have tried to correct what seem to be simple accounting mistakes say that the servicers — often, an arm of a major bank — are unable or unwilling to help them resolve even the most basic problems.

  • Every time I would call I’d get a different person,” said William Allen, a retiree near Baltimore who is fighting a Bank of America foreclosure. “I worked on it nearly a year and it didn’t do me any good.”

  • Most banks and independent loan servicers now say that they have cleared the decks on systemic problems that led to the errors and that they now make it much easier for homeowners to easily resolve their problems with bank representatives.


  • But veterans of the foreclosure wars tell a different story. More than four years after reports of these kinds of errors began bubbling to the surface, homeowners are still fighting to fix servicer mistake that threaten their homes, they say.

  • Almost all loans in default have something wrong with them,” said Tara Twomey, a lawyer at the National Consumer Law Center who recently completed a study of the servicing industry.


  • So why are things such a mess? Much of the blame can be directed at a foreclosure machine created during the housing boom to deal with the mad rush of mortgage applications. The automated system prizes efficiency over customer service, makes frequent errors in the administration of troubled home loans, and, according to one study, pays servicers more for foreclosures than loan modifications.

  • They don’t want to spend enough money to not make mistakes,” said Kurt Eggert, a law professor at Chapman University, who testified about servicing errors at a Senate hearing in 2010 and has written extensively about the industry.


  • [R]ather than hire and train enough employees to personally manage troubled loans in a way that minimizes foreclosures and encourages loan modifications, servicers entrusted management of troubled loans to old computer software that legal experts say isn’t up to the task.

  • The end result is a system with little accountability and a whole lot of angry homeowners. It is impossible to know how many loans have been subject to wrongful fees and accounting errors, but foreclosure war veterans say the number is high.

  • Jay Patterson, a forensic accountant who has examined hundreds of mortgage loans in bankruptcy or foreclosure, said that “95 percent of these loans contain some kind of mistake,” from an unnecessary $15 late fee to thousands of dollars in fees and charges stemming from a single mistake that snowballs into a wrongful foreclosure.

For more, see Raging against the foreclosure machine.

Arizona AG: BofA Stymies State Probe Into Loan Modification Practices By Silencing Homeowner-Victims With Settlement Agreements

Bloomberg reports:

  • Bank of America Corp. is impeding an investigation of its loan modification practices by negotiating settlements with borrowers who must agree to keep them secret and not criticize the bank in exchange for cash payments and loan relief, Arizona officials say.

  • The Arizona Attorney General’s office is asking a court to block those aspects of the settlements and require the bank to turn over all the agreements. The bank denies any wrongdoing.


  • The settlement agreements came to light as state investigators followed up on borrower complaints filed with the attorney general’s office. The office learned of 12 settlements while examining 1,900 complaints and when it attempted to contact the borrowers, Assistant Attorney General Carolyn Matthews said in Jan. 11 court filing.

  • Only four returned phone calls and none would provide a copy of the settlement, Matthews said. Some who signed the settlements had previously been in frequent contact with the attorney general’s office, according to court records.

  • Matthews contends that under the terms of the settlements, even if subpoenaed, borrowers can’t reveal any unflattering information about the bank. They couldn’t talk about misrepresentations the bank made about loan modifications, which is what the state is investigating, she said.

  • These agreements have completely silenced even the most communicative consumers,” Matthews said in the filing. “The settlement agreement purposefully makes it impossible, legally and practically, for a consumer signing it to come forward, voluntarily and promptly, to provide evidence in this case.”

  • She asked a state judge to order Bank of America to notify borrowers who signed the agreements that they don’t have to adhere to the confidentiality and non-disparagement provisions.

For more, see Bank of America Settlements Impede Fraud Probe, Arizona Says.

Register Of Deeds Calls For Criminal Probe Into Foreclosure Fraud; Makes Major Document Dump Of 31K+ Robosigned Land Instruments On Bay State AG, Feds

From the Office of the Southern Essex (Massachusetts) District Register of Deeds John O’Brien:

  • Saying that the time has come for a full scale criminal investigation, Southern Essex District Register of Deeds John O’Brien, [] has sent some 31,897 of what he says are fraudulent documents that have been recorded in the Salem Registry to Massachusetts Attorney General Martha Coakley, U.S. Attorney General Eric Holder and U.S. Attorney Carmen Ortiz.

  • O’Brien said that he is asking these officials to impanel a Grand Jury to look into the evidence that he has presented.

  • I am confident that these documents will show a pattern of fraud, uttering and forgery. These documents are signed by known robo or surrogate signers, whose signatures were supposedly witnessed by notary publics. In addition, these documents may contain fraudulent information in the body of the documents. I believe that a criminal investigation is the next step to hold the perpetrators responsible.”

For more, see O’Brien calls for criminal action against the Big Banks, Says they acted like “criminal enterprise”.

Note: If you are a victim of robosigning, contact the Southern Essex District Register of Deeds customer service department to ask about receiving an affidavit as proof that a document being used to take your home contains a fraudulent or surrogate signed document.

Go here for a list of active robosigners identified by McDonnell Property Analytics in the Southern Essex District Deed Registry.

Thanks to Deontos for the heads-up on the press release.

Sunday, January 29, 2012

Florida AG Stands Behind Crappy Nationwide Foreclosure Fraud Settlement She Helped Negotiate

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

  • Florida Attorney General Pam Bondi stood by the 50-state attorneys general settlement with the nation's biggest banks on Thursday as California and Delaware formally rejected the proposal she helped negotiate.

  • Bondi said Floridians can't wait for foreclosure relief and that the draft proposal sent to states on Monday addresses California's concerns.

  • "The settlement under discussion contains all the elements California purports to be looking for; transparency, substantial relief for distressed homeowners, and strict enforcement," Bondi said Thursday.

  • "Florida's homeowners need relief now, and protracted and uncertain litigation would be contrary to their best interests." Bondi is on a core team working with the nation's five biggest banks to settle an investigation into mortgage servicing and foreclosure wrongdoing.

For more, see Florida Attorney General bashes states that rejected nationwide foreclosure settlement.

Calif. AG Gives Thumbs Down To Latest Version Of Nationwide F'closure Fraud Settlement; Says New Deal Still Falls Short For Golden State Homeowners

In Sacramento, California, The Sacramento Bee reports:

  • Calling it "inadequate for California," the state is rejecting the latest settlement proposal between states and major U.S. banks over lending abuses that fueled the foreclosure crisis.

  • California Attorney General Kamala Harris pulled out of nationwide talks with the banks in October, saying the proposed $25 billion deal gave too much immunity to lenders and didn't provide enough relief for homeowners in a state hard hit by the mortgage meltdown.

  • On Wednesday, Harris' office said a new version of the settlement plan still falls short of those goals. "At this point, this deal does not suffice for California," said spokesman Shum Preston.

For more, see California attorney general rejects foreclosure settlement.

Recent Nevada High Court Rulings Add Teeth To Earlier Precedent On Banksters' Obligations To Cough Up Loan Documents During Mediation

In Las Vegas, Nevada, KTVN-TV Channel 2 reports:

  • Officials say a pair of Nevada Supreme Court rulings requiring mortgage lenders to produce all required foreclosure documents before repossessing a house don't establish a new legal standard, but rely on state high court opinions issued last July.

  • In unanimous rulings Friday,(1) the court ruled there was insufficient documentation for separate foreclosure cases in Las Vegas and in Reno.

  • The court sent the cases in Clark County and Washoe County back to district court judges who had determined lenders produced enough documentation to foreclose.

  • The rulings rely on two cases setting a strict standard for lenders to produce the original note and deed of trust plus subsequent ownership records. The foreclosure mediation program was created in 2009 to give lenders, homeowners and an arbiter a chance to rework defaulted loans.

Source: Supreme Court Ruling Strengthens Foreclosure Mediation.

See also, Las Vegas Review Journal: Papers in foreclosure cases ruled insufficient.

(1) Piazza v. Citimortgage, Inc., No. 57026 (Nev. January 20, 2012); Karl v. HSBC Bank, USA, N.A., No. 57561 (Nev. January 20, 2012).

White House To Create Mortgage Crisis Unit To Probe Bankster Wrongdoing; Names Foe Of Current State AG Investigation To Co-Chair Operation

Bloomberg reports:

  • President Barack Obama said he will create a mortgage crisis unit that includes federal and state officials to investigate wrongdoing by banks related to real estate lending.

  • The president announced the unit in his State of the Union speech yesterday after protests by the Campaign for a Fair Settlement, a coalition of labor unions, consumer advocates and political activists including The group is calling for a full investigation into bank home lending and the creation and sale of mortgage-backed securities.

  • This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans,” Obama said in the speech.

  • New York Attorney General Eric Schneiderman will co-chair the unit along with officials from the Department of Justice, Securities and Exchange Commission and Internal Revenue Service.


  • Representatives of Democratic attorney general offices met at a Chicago hotel Jan. 23 to discuss the negotiated terms and ask questions, said Iowa Attorney General Tom Miller. Miller, who is helping to lead talks, said an agreement with the banks is getting closer.

  • Schneiderman and California Attorney General Kamala Harris have said any settlement shouldn’t protect banks from claims that haven’t been fully investigated, such as claims stemming from the packaging of mortgages into securities sold to investors.


  • Schneiderman has been participating in the nationwide probe of foreclosure practices. His office also has been conducting a broader investigation into the mortgage operations of major banks.

  • In coordination with our federal partners, our office will continue its steadfast commitment to holding those responsible for the economic crisis accountable, providing meaningful relief for homeowners commensurate with the scale of the misconduct, and getting our economy moving again,” Schneiderman said in his statement.

For the story, see Obama Creates Unit With States to Investigate Mortgage Misconduct by Banks.

See also, Firedoglake: The Schneiderman Gambit: Financial Fraud Unit Appears Designed to Fail, and Grease Skids for Foreclosure Fraud Settlement:

  • I’ll pepper in my thoughts on the State of the Union Address throughout the day, but I would be remiss if I didn’t start with the announcement of a Unit on Mortgage Origination and Securitization Abuses (UMOSA) to investigate bank practices during the financial crisis.

    The unit will be co-chaired by Eric Schneiderman, the New York Attorney General who bravely waged an often lonely battle to stop a misguided settlement on foreclosure fraud.

    But “co-chair” is the operative word here, and it suggests that the entire maneuver was created to grease the wheels for the pre-arranged settlement, while turning this investigatory arm into nothing so much as regulatory theater.