Saturday, October 20, 2012

Cops: Underwater Property Owners Seeking To Rent Out Their Homes To Dodge Foreclosure Good Targets For Marijuana Growers Setting Up Indoor Pot Farms

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:

  • Metro Police narcotics officers have seized about 7,000 marijuana plants with an estimated street value of more than $20 million in recent raids of marijuana grow houses.

    According to police, detectives carefully track the location of each grow house and look for potential trends in making the bust.

    Police said the largest grow houses so far are in the southwest and northwest parts of the valley. Investigators believe homeowners are in over their heads and are the first to face foreclosure. It is also where large grow houses are now sprouting up.

    "Empty homes, people who are distressed and are trying to rent their homes rather than going under in their mortgage - it's a combination of a lot of different things," Lt. Laz Chavez of Metro narcotics said. "But, we attack the problem with enforcement and with awareness."

    Chavez said criminals saw an opportunity by turning homes into grow operations. "These are sophisticated criminals who are running 100, 200, 500 plant grows inside these homes," he said. "There are homes that are burning up, and they are endangering the lives of everyone around them."

    Metro designed an indoor marijuana map that shows locations of grow operations. Police said marijuana grow houses are extremely dangerous, because criminals bypass the meter when they rig their own wiring to prevent tipping off the power company.

    "They really have no consideration or concern for the community or where they are doing these grows - in residential neighborhoods, nice upscale neighborhoods, gated communities, country clubs - it really doesn't matter," Chavez added.

    Police said growers are ready to protect their lucrative investments. Police officers have recovered more than 100 guns, including assault rifles.

    Faced with budget cuts and doing more with less, investigators are doing their best to locate grows, but they rely on the public to call when something isn't right. Officers said activity, such as people coming and going during the early morning hours, could be an indication of a grow house.

Pair Busted For Commandeering Foreclosed Home In Upscale Neighborhood & Setting Up Meth Lab

In Ocoee, Florida, WFTV-TV Channel 9 reports:

  • Foreclosures already have a tough impact on neighborhoods around central Florida, but WFTV's Jeff Deal found out one foreclosure was particularly bad for the Silver Glen neighborhood in Ocoee.

    Investigators found a full meth lab hiding inside and neighbors said they saw investigators in masks pulling all kinds of equipment from the home. The outside of the home is a mess. The front door is ripped off the hinges, and through the window WFTV spotted all kinds of junk inside.

    The Silver Glen community is a well-kept neighborhood with big homes. "It's a good neighborhood and I don't know, (it) just turned bad," said resident Lascelles Mundle. Mundle said things turned bad because of one house that happens to be right next door.

    Monday neighbors reported a burglary in progress at the home they said had been empty for a few weeks. When Ocoee police arrived, they found two men, John and Joseph Stone, inside and they found meth.

    Investigators obtained a warrant and the Orange County Sheriff's clandestine lab response team found chemicals, jars, tubing and pseudoephedrine, which are all used to make meth.

Health & Safety Hazards, License Expiration Force Foreclosed Transient Motel Shutdown; 26 Long-Term Occupants Temporarily Dodge Boot As Judge Allows Management Chance To Fix Flaws

In Bremerton, Washington, the Kitsap Sun reports:

  • For the foreseeable future, the Chieftain will be a motel in name only. A Kitsap County Superior Court judge ruled Tuesday that the West Bremerton motel cannot rent rooms to any new guests until it regains a key state license necessary to operate a motel.

    But Judge Leila Mills, following an agreement forged between county prosecutors and the Chieftain's lawyer, will allow long-term residents to remain there as staff works with the state Department of Health to obtain its transient accommodation license, which lapsed in March 2011.

    Twenty-six people, denoted in court documents by their initials and room numbers, will be allowed to stay at the motel. "It seemed like a good compromise and a good disposition pending the department's decision" on the permit, said Ione George, Kitsap County deputy prosecutor.

    Hari Ghadia, a managing partner with the management company that has operated the Chieftain since June, called the agreement a "win-win for everybody." He said his company, Moteri Management, will continue to make improvements to the motel that will bring it back into compliance with the health department.

    "I'm very confident that everything will be done," he said.

    The agreement also states that police "will freely be allowed onto the premises" to ensure that no new guests are registered and rooms, outside of those for the long-term residents, remain closed.

    Kitsap County will drop its case against the Chieftain if the health department issues the license. But Mills' ruling says that if the department issues a "final denial" of the Chieftain's application, the motel will be emptied until the license can be secured.

    The motel on National Avenue rented rooms for $50 a night or $850 a month.

    The Department of Health refused to issue the transient accommodation license after inspections in May found "numerous deficiencies (that) created a hazardous and unsanitary environment for guests," including bedbugs, collapsed ceilings, overflowing trash and fire hazards.

    The property entered foreclosure and was purchased by Westside Community Bank of Pierce County in May for $1.3 million. The bank hired a property management company that has set about cleaning up the motel.

    City officials in August targeted the motel for alleged violations of its chronic nuisance properties ordinance. Police responded there 78 times in the first eight months of the year. The property also lacks a city business license. A hearing has been set in the city's case against the Chieftain on Nov. 26 at the Norm Dicks Government Center.

    While the city independently pursued that action, county prosecutors, acting on behalf of the health department, filed the civil action against the property for lacking the transient accommodation license.
Source: Judge: Chieftain can't rent rooms, but long-time residents may stay (Long-term residents at motel allowed to remain).

Unpaid $12K Water Bill May Lead To Boot For Condo Residents As Nearly Half Of Owners In 120-Unit Complex Aren't Paying Maintenance Fees

In Orlando, Florida, WFTV-TV Channel 9 reports:

  • People who live in an Orlando condo complex could soon be kicked out of their own homes.

    The Orlando Utility Commission is about to shut off water to The Village on Crayrich Circle because the complex isn't paying its bills. And if the water is shut off, no one will be allowed to live there.

    Some residents said this is not their fault. People who have paid their monthly bill to the management feel this notice that their water will be shut off in a week isn't fair since they've paid their portion.

    People who haven't paid their fees said they don't plan to until new management steps in. A water notice has pitted neighbor against neighbor at the Village condos.

    OUC plans to shut the water off to all 120 units in one week because of a $12,000 bill. If it's not paid, and the water is shut off, the condo association said the county may force residents to move out.

    Ann Tucker lives in the Village and works in the management office. She said the reason is twofold. She tells WFTV nearly half of the units are in foreclosure and the banks aren't paying fees. The other reason some just quite paying.

    Phyliss Scott, a former association board member, is one of those people who haven't paid her dues in years. Management said she owes $10,000. She and other homeowners haven't paid because they question where previous funds have gone.

    Several homeowners are fighting a legal battle to have a third party handle the dues and payouts.

    "Another company they run the association and clean us up," said Scott.

    WFTV tried to contact the property manager who is also the board president, but he didn't come to the door and has not returned a phone call.

    Homeowner Kevin Souder, who's paid his bills, is afraid time may be running out. "I'm out because of course I have a mortgage payment here and my tenants out because she won't have anywhere to live," said Souder.

    The homeowners trying to get a third party to take over the dues will be in court Thursday. If a judge grants a third party. the homeowners said they plan to pay their back fees to management. If not, residents said they plan to stay as long as they can without water.

    Renters and homeowners have taken it upon themselves to try to come up with the $12,000 owed to OUC. So far, they have raised $7,000.

Friday, October 19, 2012

Purchaser Of Recently Foreclosed Home 'Inherits' Unwanted Surprise As Prior Owner's Unpaid Water Bill Leaves Buyer All Wet, Hosed For $1,800

In Tequesta, Florida, WPTV-TV Channel 5 reports:

  • A telephone call to a local utility provider may have spared a home buyer the responsibility of a nearly $1,800 water bill, housing counselors said.

    Linda Albrecht purchased an HOA foreclosure [...] in Tequesta earlier this year. She discovered she was responsible for the previous owner's water bill when she asked the utility to transfer the account to her. "They say I must pay it," Albrecht said. "They won't turn the water on until I pay that bill."

    According to housing counselors, home buyers are made responsible for outstanding fees and bills -- unless they learn of them before they purchase a home and are able to negotiate with the seller.

    "Without that due diligence, you are stuck in a position where you take title subject to everything of record," said Paul Krasker, founder of the Paul A. Krasker Law Firm. "Anything that can still be of record that wasn't wiped out in the foreclosure is what you're going to take title subject to."

77-Year Old Homeowner Struggles To Keep Roof Over Her Head After Being Shoved By Bankster Into Force-Placed Insurance

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

  • Compared with her neighbors' well-tended homes in St. Paul's historic Cathedral Hill neighborhood, Jean Keeney's 19th-century property looks a bit forlorn.

    The lot is overgrown, paint is peeling and two ragged posts are all that's left of the front railing. It has been years since Keeney could afford to maintain her home the way she wants. At 77, an age at which the former stockbroker thought she would be comfortably retired, Keeney is toiling away as a substitute teacher, trying to keep her lender from foreclosing on her home.

    "I would rather not be working, but I need the money," she said.

    Like thousands of other Minnesotans, Keeney's financial problems involve force-placed insurance, a little-known form of coverage generating billions of dollars in profits for insurers and banks -- but getting little scrutiny from state regulators.

    Billed as a policy of last resort, force-placed insurance is routinely imposed on homeowners by lenders when property is not covered against tornados, floods and other hazards. The coverage can cost 10 times as much as typical homeowners insurance despite offering less protection.

    Across the country, the high premiums are pushing hundreds of thousands of vulnerable homeowners closer to default as the costs are added to their monthly mortgage.

    When Keeney's homeowners policy lapsed, she was pushed into a forced-placed policy at an annual cost of $4,185, well above the $1,655 she used to pay State Farm. "It's ridiculous," she said.

    Minnesota officials concede they have no idea whether those rates are reasonable. Unlike most states, Minnesota regulators allow insurance companies to set their own rates on force-placed insurance without requiring either state approval or public disclosure. That means regulators don't check whether insurers have padded the bills.

    In an interview, Commerce Commissioner Mike Rothman said he was alarmed by the Star Tribune's findings and pledged to make force-placed insurance "a top priority." The department is reviewing its policies, and has requested current rates and other documents from firms providing force-placed insurance in Minnesota. "We want to make sure we are protecting consumers from inappropriate practices," Rothman said.

    Regulators in other states have also begun scrutinizing the industry after consumer advocates complained about alleged price gouging and questionable ties between insurance companies and lenders.

    Mortgage lenders typically receive a commission from carriers when they push their clients into force-placed coverage. Those commissions and other payments are big business for banks.

    For example, JP Morgan Chase -- one of the nation's biggest mortgage lenders -- disclosed in May that it earned $663 million in the past five years by charging commissions of up to 20 percent on each policy and splitting profits with its insurer.
  • When asked if the $663 million that JP Morgan earned from force-placed insurance created an "incentive" to keep homeowners in such policies, Segnini said "no," but conceded the point. "I can see how somebody would think that."
For more, see Forced insurance policies cripple Minnesota homeowners (Lenders slap struggling homeowners with sky-high insurance rates).

NYC HOA Sued For Allegedly 'Stealing' Little Old Lady's Parking Spot; Management's Offer To Place 93-Year Old Mom On 10-Year Wait List For New Spot Not Adequate: Son

In New York City, the New York Post reports:

  • Management at a Lower East Side apartment complex allegedly stole a little old lady’s parking spot — and now the 93-year-old is suing to get it back.

    Virginia Rubino has kept her sea-foam green 1967 Cadillac convertible in parking spot 1 in the Seward Park Housing Corp. garage since 1987, and she’s had the spot since 1981. But when her son, Richard, went to return it in May after getting some work done on the classic vehicle, he discovered another car parked there — and it wasn’t a mistake.

    We were told we don’t have access to the spot anymore,” Richard said.

    The lawyer for the management company told Virginia that “her right to her parking spot was revoked” because the car had “not been operable of driving in over a year” and the registration and insurance policy had expired. She was also told she’d been sent several notices about the problem. Richard said none of the claims were true.

    The son said while his mom’s no longer in good enough health to drive, he uses the car to take her to doctor’s appointments. The suit says having the car parked farther away is a physical hardship for Virginia, and Richard says it’s a financial hardship, too.

    While the spot in the complex’s garage cost about $100 a month, the public garage it’s in now is closer to $600.

    The Manhattan Supreme Court suit says that when Rubino complained, the managing agent offered to add her name to the end of the garage’s waiting list, which had hundreds of people on it. “It’s a 10-year wait,” Richard said.

    The suit seeks the spot’s immediate return, plus unspecified money damages for the lifelong Lower East Side resident. The lawyer for the co-op board, Arthur Weinstein, said that the building acted properly but that if Rubino wants “to bring additional facts to our attention” as to why she needs the spot, “we’ll be happy to listen.”

Thursday, October 18, 2012

Federal Law Shields Tenant Who Unwittingly Rented Home In Foreclosure From Unexpected Boot

In St. Louis, Missouri, KMOV-TV Channel 4 reports:

  • Less than two months after moving her family into a new home, Shirley McCoy received a letter in the mail, telling her the home was in foreclosure. McCoy signed a one year lease and paid her landlord a $700 deposit in August. She says her landlord never told her the home was in danger of going into foreclosure.

    The sale date is set for October 16th and McCoy says she started to panic, assuming she'd have to move and incur all the expenses that come with it. "I don't know... it did something to me. It just stabbed me in the heart," said McCoy.

    But, the law is on McCoy's side. The Protecting Tenants at Foreclosure Act of 2009 gives tenants at least 90 days from the date of the foreclosure sale to move out if the tenant wants to move.

    "The lease survives the foreclosure sale," said Susan Alverson, Managing Attorney for Legal Services of Eastern Missouri.(1) Renters can also choose to stay in the home through the duration of the lease. There may be a few exceptions and there's a chance the new owner (who buys the property in the foreclosure sale) will offer a cash incentive for the tenant to move out before the lease is over.

    Tenants, however, are not required to accept a cash offer. "You still have to honor that lease unless the tenant living there doesn't want to and you all negotiate something different, but the tenant is the person in power in that case," Alverson explained.

    Alverson adds many tenants may not be aware of their rights and receive misinformation in the foreclosure process. "All it means is that the owner is going to lose ownership, but it doesn't mean, at all, that the new owner has a right to just set them out."
For the story, see Renter gets foreclosure notice: What now?

(1) Legal Services of Eastern Missouri (LSEM) is a private, non-profit 501(c)(3) organization providing legal assistance to the low-income community in 21 counties of eastern Missouri. LSEM handles only civil cases in the areas of family, housing, consumer, education, immigration, public benefits, income maintenance, and other problems specific to the elderly.

Fines Arising From Failure To Connect House Directly To City Sewer System Leaves 93-Year Old Facing Foreclosure Of Residence She's Called Home For 55 Years

In Honolulu, Hawaii, The Associated Press reports:

  • A 93-year-old Honolulu woman is facing foreclosure because she refuses to properly connect her home to the city's sewer system.

    The Honolulu Star-Advertiser reported Monday that Sunny Lee owes hundreds of thousands of dollars in fines for the home she has lived in for 55 years.

    Lawyers say it's the first time Honolulu has foreclosed on someone for not hooking up a line directly to the city's sewer grid. Lee had been using a line that ran through a neighbor's house. But the line was discovered when it sprang a leak in 2000.

    The neighbors sued to try to recover repair costs and settled with other residents but not Lee's family. The line was disconnected in 2002 when a judge ruled Lee didn't have rights to the line.

Montana Man Gets Four Years For Duping Elderly Woman Out Of $600K+, Leaving Her Financially Ruined, Rendered Homeless To Foreclosure

In Billings, Montana, the Billings Gazette reports:

  • As Billings resident Mitchell John Romersa chased his dream of becoming a country singer, he turned the life of one his supporters into a nightmare.

    [Last week], Anne Kero, an elderly Bozeman woman whom Romersa left financially ruined, watched as Chief U.S. District Judge Richard Cebull sentenced Romersa to four years in prison for wire fraud and money-laundering convictions.
  • In 2009, when Kero, who formerly lived in the Billings area, became homeless from a Romersa-related foreclosure, Romersa was still living in a 3,200-square-foot house on 10 acres, driving nice vehicles and giving Kero “false promises,” Cebull said.
  • Kero, 74, testified at the hearing that she trusted Romersa, whom she had met through her late husband. “I was his surrogate grandma. He was short of money” as he tried to launch his singing career, she said.

    Kero started lending Romersa money in 2003. By the time Romersa’s scheme imploded in 2008, Kero had given him more than $697,000, including money from refinancing her home, which she lost to foreclosure, and from cashing out annuities.

    Romersa paid back $51,224, leaving $645,776 still owed to Kero, not including interest, said Assistant U.S. Attorney Victoria Francis.
  • Romersa scammed others as well, Kero said, using the money to live a lifestyle he thought he deserved. Kero said she was too embarrassed to tell anyone what was happening but finally called her brother when she had to leave her house because of the foreclosure. She ultimately contacted law enforcement.

Wednesday, October 17, 2012

Non-Profit Attorney Group Tags Network Of Suspected Loan Modification Rackets In Civil Suits Saying Homeowners Were Illegally Clipped For Upfont Fees & Failed To Get Positive Results

The Lawyers' Committee for Civil Rights Under Law recently announced:

  • The Lawyers' Committee for Civil Rights Under Law (Lawyers' Committee) has filed a lawsuit in Riverside County, California against a network of for-profit loan modification companies on behalf of 16 homeowners from California and five other states.

    The suit alleges that defendants defrauded vulnerable homeowners out of tens of thousands of dollars by falsely promising to obtain—for substantial upfront and monthly membership fees—much-needed mortgage modifications on the homeowners’ behalf, but consistently failing to deliver results. Plaintiffs also sought and obtained a temporary restraining order against the defendants enjoining their illegal operations. Attorneys in the San Diego office of Latham & Watkins LLP are providing pro bono counsel on the case.

    In exchange for sizable advance fees of up to $3,700 collected in violation of California law and also, in addition, monthly membership fees required from a number of homeowners, defendants promised to work directly with plaintiffs’ lenders to renegotiate their home loans and to secure lower monthly payments and interest rates, and, in some instances, avoid impending foreclosure.
  • The complaint alleges that the loan modification scam in this case is operated by multiple corporate and individual defendants, managed by principals Michael Wayman and Don Brokaw. The corporate defendants named are Certified Financial Protection Group, LLC, Financial Hope for America, Inc., Safehouse 911, LLC, d/b/a Safehouse Professional Mortgage Restructuring 911, and U.S. Financial Advantage, all of which are California companies.
  • Cox v. Certified Financial Protection Group is the Lawyers’ Committee’s ninth loan modification scam lawsuit and second in California. As part of the Lawyers’ Committee’s work with the Loan Modification Scam Prevention Network (LMSPN), this litigation effort has sought to put an end to the fraudulent and deceptive behavior of so-called loan modification “specialists” in California, Florida, Georgia and New York.

    LMSPN is a broad coalition that also includes representatives from key governmental agencies, such as the Federal Trade Commission, the U.S. Department of Housing and Urban Development (HUD), the U.S. Department of Justice, the U.S. Department of the Treasury, the Federal Bureau of Investigation, and the offices of numerous state Attorneys General.
For the press release, see Lawyers’ Committee Files Lawsuit and Obtains Temporary Restraining Order Against Loan Scam Operation Targeting Homeowners Nationwide.

For the lawsuit, see Cox, et al. v. Certified Financial Protection Group, et al., (No. RIC-1214494) (filed in California Superior Court in Riverside County).

Go here for the Temporary Restraining Order.

FTC Targets Three In Civil Suits Variously Alleging Forensic Mortgage Audit Ripoffs, Loan Modification Scams, Rackets Claiming To: Be Attorneys, Have Gov't Affiliations, Be Private Charities

The Federal Trade Commission recently announced:

  • The Federal Trade Commission has filed three separate suits in federal court to halt the allegedly deceptive tactics of three operations that preyed on distressed homeowners by falsely claiming they could save their homes from foreclosure, and then charging them thousands of dollars up-front, while delivering little or no help and often driving them deeper into debt.
  • In all three cases [...], the FTC took action against defendants who allegedly peddled bogus mortgage relief services, in violation of the FTC Act and the MARS Rule. The agency also charged that two of the operations violated the Telemarketing Sales Rule.

    Prime Legal Plans/Reaching U Network [go here for lawsuit]. The FTC alleged that from at least mid-2010, the defendants behind this scheme marketed mortgage relief services in English and Spanish, including under the names “Reaching U Network,” and “American Legal Plans.” They allegedly told consumers who were in debt that attorneys would review their mortgage loan documents to see if their lenders complied with state and federal mortgage laws, and would use the resulting “forensic audit” information to help save their homes and negotiate more favorable mortgage terms. The defendants told consumers that “80 percent of mortgages contain some fraud,” and “Our network attorneys have helped hundreds of Americans stay in their homes,” according to the FTC complaint.

    But instead of helping consumers, the defendants charged them up to $750 a month, while little or nothing was done to save their homes from foreclosure, and running an operation that a court found was “permeated with illegal practices” , according to the FTC.

    The FTC alleged that on company websites, the defendants would falsely claim to be a “private charity working for struggling consumers that can’t afford legal representation.”
  • American Mortgage Consulting Group [go here for lawsuit]. The FTC alleged that since early 2011, the defendants claimed a phony affiliation with the U.S. government, pretended to be attorneys, and promised to substantially lower monthly mortgage payments in exchange for an up-front fee ranging from $1,495 to $4,495. Along with two companies he controls – American Mortgage Consulting Group, LLC and Home Guardian Management Solutions, LLC – defendant Mark Nagy Atalla allegedly violated “nearly every provision of the Mortgage Assistance Relief Services Rule.”

    The defendants telemarketed mortgage relief services to consumers nationwide, often stating that they were paid by the federal government to assist homeowners and obtain so-called “Home Saver” grants from the government to reduce consumers’ up-front fees, according to the FTC’s complaint. They also allegedly proclaimed themselves to be “a California Professional Legal Team,” sent documents to consumers from their so-called “Legal Department,” and referred to their operation in e-mails as a “law office.”
  • Expense Management America [go here for lawsuit]. Presenting themselves as the solution to all the consumer’s financial problems, the defendants have cold-called thousands of U.S. consumers from their call center in Montreal since at least mid-2010, including those whose numbers were registered on the Do Not Call Registry, according to the FTC complaint.

    Whether the consumer was struggling with a mortgage, credit card debt, student loans, car payments, or a poor credit score, the defendants charged an up-front fee of $2,200 to $10,000 that they claimed was being used to pay off debts, according to the complaint. The defendants allegedly claimed that their relationships with lenders and their ability to negotiate on behalf of large groups of consumers made it possible to substantially reduce their payments. But according to the FTC, the defendants failed to produce any of the promised results.
For the FTC press release, see FTC Cracks Down on Phony Mortgage Relief Schemes (Victimizing Thousands of Consumers, Marketers Allegedly Falsely Claimed They Could Help, But Instead Drove Distressed Homeowners Deeper into Debt).

Head Law Enforcement Feds: Year-Long Foreclosure Rescue Scam Initiative Resulted In 285 Indictments That Clipped 73K+ Homeowner Victims For Over A Billion

The U.S. Department of Justice recently announced:

  • Attorney General Eric Holder, Housing and Urban Development (HUD) Secretary Shaun Donovan, FBI Associate Deputy Director Kevin L. Perkins and Federal Trade Commission (FTC) Chairman Jon Leibowitz [] announced the results of the Distressed Homeowner Initiative, the first-ever nationwide effort to target fraud schemes that prey upon suffering homeowners.

    The yearlong initiative, launched by the FBI, a co-chair of the Financial Fraud Enforcement Task Force’s Mortgage Fraud Working Group, resulted in 530 criminal defendants charged, including 172 executives, in 285 federal criminal indictments or informations filed in U.S. District Courts across the country.

    These cases involved more than 73,000 homeowner victims and total losses by those victims estimated by law enforcement at more than $1 billion.
  • From Oct. 1, 2011, to Sept. 30, 2012 (FY 2012), the Distressed Homeowner Initiative focused on fraud targeting homeowners, such as foreclosure rescue schemes that take advantage of homeowners who have fallen behind on their mortgage payments.

    Typically, the con-artist in such a scheme promises the homeowner that he can prevent foreclosure for a substantial fee by, for example, having so-called investors purchase the mortgage, or transferring title in the home to persons in league with the scammer. In the end, the homeowner can lose everything.

    Other targets of the Distressed Homeowner Initiative include perpetrators of loan modification schemes who obtained advance fees from homeowners after falsely promises that they would negotiate more favorable mortgage terms on behalf of the homeowners.
For the Justice Department press release, see Financial Fraud Enforcement Task Force Members Reveal Results of Distressed Homeowner Initiative (First Law Enforcement Effort Focused on Crimes Against Struggling Homeowners 530 Criminal Defendants Charged, 73,000 Victims and Losses of More Than $1 Billion).

Washington State Regulator Tags 40 Outfits In Enforcement Actions Against Alleged Unlicensed Loan Mod Rackets, Attorneys

From the Washington State Department of Financial Institutions:

  • The Consumer Services Division of the Washington State Department of Financial Institutions (DFI) announced today they have filed 40 Statements of Charges against businesses preying on Washington homeowners facing foreclosure.

    None of the companies or individuals charged with offering these so-called mortgage rescue services are licensed with DFI, a requirement that provides essential consumer protections. In addition, none of the attorneys charged are licensed with the Washington State Bar Association (WSBA) to practice law in the state.

    With this multi-company sweep, DFI intends to send a clear message to unlicensed individuals and companies taking advantage of Washington consumers — “You are not welcome in this state.”
  • DFI has received literally hundreds of complaints from Washington homeowners taken advantage of by these ‘rescue’ businesses,” DFI Director Scott Jarvis said. “Financially distressed homeowners paid advance fees of up to $5,000 and received nothing in return. Homes that could have been kept out of foreclosure by legitimate licensed or non-profit businesses were instead foreclosed upon, leaving families homeless and their homes empty, contributing to the depressed housing values and slowing the recovery here in Washington.”

    In many cases, the companies failed to perform or presented loan modification offers to lenders that did not significantly improve the homeowners’ mortgage. Because many of the companies charged refused to comply with DFI subpoenas to provide records of Washington transactions, the charges provide notice of DFI’s intent to order the companies to provide a list of all Washington transactions.

    DFI has obtained legal service on 21 of the 40 companies charged, including seven law firms and 14 other businesses.
For the entire DFI press release, see DFI Charges 40 Companies In Continuing Efforts To Combat Mortgage Foreclosure Rescue Scams (DFI seeks full restitution, prohibition from operating in Washington, $873,000 in fines).

Tuesday, October 16, 2012

BofA's "Independent" Foreclosure Review Based Largely On Work It Does Itself? Crucial Judgment As To Compensation Entitlement "Only A Matter Of Double Checking" Bankster's Work: Report

Investigative reporter Paul Kiel writes in ProPublica:

  • Late last year, the country's bank regulators launched a massive program to evaluate millions of foreclosure cases and compensate homeowners who fell victim to the banks' flawed or illegal practices. Regulators dubbed it the "Independent Foreclosure Review" to emphasize that the banks would not be making key decisions about loans they had made or serviced.

    But a raft of evidence — internal Bank of America memos and emails obtained by ProPublica, interviews with two bank staff members who have worked on the review, and little-noticed documents released late last year by a federal banking regulator — throw the independence of the review into serious doubt. Together, they indicate that Bank of America — the financial giant with the largest number of homeowners eligible for the program — is performing much of the work itself.

    The ultimate decision as to whether and how much a homeowner will be compensated is not made by Bank of America, the evidence shows, but is based largely on work that the bank itself performs. One current employee called that crucial judgment "only a matter of double checkingthe bank's work.

    Moreover, the bank gets a chance to challenge that key decision before it becomes final — an opportunity not given to homeowners.

Feds' Civil Suit: Outfit Acquired 17,000 Lists Conatining Consumers' Credit Info Prescreened For Mortgage-Delinquent Homeowners, Then Peddled Lists To Loan Modification Operators

In San Diego, California, Courthouse News Service reports:

  • Two people and their three companies paid Equifax for credit reports on millions of delinquent consumers, then sold the lists to bad actors in the "debt relief" business, the United States says in Federal Court.

    The United States sued Robert M. Bailey Jr., Linda Giordano, and Direct Lending Source, Bailey & Associates Advertising, and Virtual Lending Source.
  • The defendants "purchased over 17,000 prescreened lists containing the consumer report information of millions of consumers from Equifax," according to the complaint. "The lists included, among other things, consumers' credit scores and whether they were 30, 60, or 90 days late on their mortgage payments.

    "Defendants sold these prescreened lists to third parties. For example, defendants sold over 2,400 lists to entities that target consumers in financial distress for loan modification, debt relief and foreclosure relief services. Some of the lists were sold to entities with names such as: 'Save Me From Foreclosure,' 'SOS Modification,' 'Stop Your Lender,' 'Virginia Foreclosure Preventing,' 'Making Homes Affordable, 'Fight Your Credit Co.,' and 'Debt Regret.'"

    Equifax is not a party to the complaint.

    People may not obtain consumer reports without a "permissible purpose," under the Fair Credit Reporting Act.

Suit: Mortgage Holder Fails To Remit Property Tax Escrow Payments To County, Leaving Homeowner Facing Tax Lien Foreclosure

In Chicago, Illinois, the Post-Tribune reports:

  • An East Chicago woman claims her mortgage company never paid her property taxes, sending her house into a tax sale and furthering her bankruptcy troubles.

    Arlene Nunez’s estate and Paul Chael, a bankruptcy trustee, filed a lawsuit Tuesday in U.S. District Court in Hammond against Juan Martinez and Guadalupe Zuniga-Martinez, the owners of the now-defunct JNRC Capital Investments, an Illinois firm. The company, based in Plainfield, Ill., was involuntarily dissolved in 2010.

    The suit claims that JNRC never paid her property taxes and failed to give her a detailed accounting of what happened to her monthly payments, including money that was supposed to be used to pay the property taxes.

    Nunez bought her home in the 4500 block of Baring Avenue in 2005. The loan was transferred about a year later to JNRC, and, the suit claims, Nunez continued to pay the money meant for taxes. The company never sent those payments to Lake County, however. That led Nunez’s house to be placed on a tax sale list, which in turn caused Nunez to file for bankruptcy, according to the suit.

    Nunez had filed for bankruptcy in the past, according to court records. She filed again in 2007, and JNRC claimed Nunez owed the company about $2,856.

    Nunez’s lawsuit says she asked the company for a breakdown of her payment history, the claimed arrears and foreclosure fees, but the company never sent the information.

    Nunez’s attorney Adam Sedia said federal law dictates that banks and financing companies have to share information with their customers about their mortgages. “It’s all about openness,” Sedia said. “The financing entity has to let you know what you’ve paid, where it’s gone and how much you owe.” He added that Nunez had been paying her taxes as part of her Chapter 13 bankruptcy case.

    She is asking for treble or punitive damages and attorney fees.

Forum Shopping By Debt Collection Attorneys: Possible Motivations, Implications For Consumers

Notre Dame Law School Clinical Professor Of Law Judith Fox writes:

  • In an email to the Small Claims Task Force, a committee appointed by the Indiana Supreme Court to investigate allegations of abuse in the Marion County Small Claims Court, an Indiana attorney claimed that collection attorneys were forum shopping in Indiana small claims court.

    In its subsequent report, the task force confirmed that some forum shopping is occurring in Marion County Small claims courts.

    This study takes that allegation a step further and looks beyond the small claims courts of Marion County to examine the forum shopping practices of collection attorneys throughout Indiana. The evidence suggests that collection firms do forum shop between courts in individual judicial districts.

    This article takes a closer look at forum shopping by exploring the possible motivations for the forum shopping and its implications for consumers.

Canadian Bank Puts Collection Squeeze On Homeowners By Buying Up Their Old Unpaid Debts, Then Filing Foreclosure To Enforce Judgment Liens

In Northern California, The Bay Citizen reports:

  • In a significant escalation by debt collectors who pursue consumers for payment, a major Canadian bank has threatened to foreclose on the homes of hundreds of Californians unless they pay back old credit card debts.

    California law generally makes foreclosure available only to lenders using residential properties as security, and collectors of unsecured debts, like credit card loans, normally are limited to attaching wages or bank accounts.

    But Credigy Receivables – a unit of the National Bank of Canada, which has more than $150 billion in assets – has taken advantage of California’s relatively lax debt collection laws. The bank has repeatedly bypassed a legal hurdle that normally prevents credit card companies from threatening to take away the homes of debtors who refuse or are unable to pay.

    Little-noticed except by debtors and consumer attorneys, Credigy’s unusual collection efforts begin with the purchase of judgment liens issued in California lawsuits filed by credit card lenders and other unsecured creditors. Credigy then names debtors who own residential properties as defendants in foreclosure lawsuits.

    A California Watch review of court records identified foreclosure lawsuits filed by Credigy since December 2009 in superior courts in Alameda, Fresno, Kern, Los Angeles, Marin, Orange, Sacramento, San Bernardino, San Francisco, San Mateo and Solano counties.

    A spokesman for Credigy’s owner, the National Bank of Canada, declined to comment, citing pending litigation. The company’s tactic – which consumer advocates say is designed to intimidate debtors – has sparked outrage.
For more, see Canadian bank goes after homes to collect credit card debts (New tactic catches some Bay Area homeowners off guard).

Monday, October 15, 2012

S. Georgia Feds Pinch Foreclosure Rescue Operator; Found In Arizona, Suspect Faces Charges Of Screwing Over Distressed Homeowners Out Of Their Equity, Investors

In Augusta, Georgia, the Augusta Chronicle reports:

  • A former Augusta businesswoman has been indicted on federal charges of mail fraud and money laundering in connection with a “foreclosure rescue” business she ran.

    Regina M. Preetorius is scheduled to make her initial trip to U.S. District Court in Augusta next week. She faces 10 counts of mail fraud and three counts of money laundering. The indictment accuses Preetorius of cheating investors out of more than $1.7 million and defrauding homeowners trying to stave off foreclosures.

    The Augusta Chronicle first wrote about Preetorius and her company, SDA & Associates, in August 2008. Her foreclosure rescue business left a wake that included more than 40 foreclosure filings and about a dozen bankruptcies, including her own.

    According to the federal indictment, Preetorius solicited people to invest in SDA, saying the money would be used to buy houses from distressed homeowners, then the houses would be sold at a profit that would guarantee investors a minimum return of 12 percent.

    According to the indictment, Preetorius “misapplied the investors’ money and converted those funds to her own use” and “defrauded a number of distressed homeowners by using their homes without their authorization as collateral for investors’ loans.” The indictment says Preetorius and others ran the scheme from 2004 to 2009.

    People in danger of losing their homes were sought out and convinced that SDA could save them from foreclosure because its staff would work out a payment plan with the mortgage holders and sell the homes for them if they signed a “special power of attorney,” the indictment said. Preetorius then enticed investors to loan SDA money to purchase and renovate those homes, the indictment said.

    Investors were lured into a false sense of security because they were promised their money would be protected by legally recorded deeds. According to the indictment, they were also promised that the houses had sufficient equity to cover their investments and that each property’s value was assured by proper real estate appraisals. In reality, according to the indictment, there was neither.

    What investors didn’t learn until it was too late was that each home already had a mortgage from a financial institution that stood first in line for any value of the property, leaving their deeds worthless.

    Preetorius previously said she did nothing wrong and was trying to help homeowners. At one of her bankruptcy court hearings, she told investors that she got caught short by the real estate market crash.

    She and her husband, Charles, who also worked at SDA, filed for bankruptcy in 2008, claiming $2.47 million in liabilities and zero assets. Though there were several legal challenges to the bankruptcy petition by people who believed they were cheated out of money and homes, the couple’s debts were discharged by the court.

    According to court documents, the Preetoriuses moved to Arizona in 2009.

Long Island Woman: Elderly Mom Fell Victim To Sale Leaseback Equity Stripping Scheme, Leaving Both Facing Homelessness

In Bohemia, New York, WCBS-TV Channel 2 reports:

  • The new wave of mortgage rescue scam operators targets homeowners who are facing possible foreclosure. “They prey on the fact that people are feeling desperate. The goal of these foreclosure rescue scam artists is to make a quick profit from these vulnerable home owners,” Jessica Wollman with Long Island Housing Services told WCBS 880 Long Island Bureau Chief Mike Xirinachs. The organization is warning people to be on alert for scammers.

    Nicole Garafalo told Xirinachs that her elderly mother was a victim. “Stole the ownership of our home and put a mortgage in his name at an inflated value. He drained the equity out of the property and pocketed the money that he had promised to leave in an escrow account,” she said. “It changed our lives forever. We lost our home and we’re now facing homelessness.”

Suit: Social Service Volunteer Used Forged Deed To Steal Title To Financially Distressed Owner's Home, Then Flipped It For Big Buck$

In Lakewood, New Jersey, The Associated Press reports:

  • Not so long ago, he was a successful carpenter and handyman, with a lagoon-front home at the Jersey shore, a small fishing boat that was the lifelong dream of his and his wife, and a solid middle class existence.

    Now he lives in a teepee made of plastic tarpaulins atop a plywood platform, deep in muddy, mosquito-infested woods. He has no money and no belt; a length of thin red rope holds his pants up.

    Hardman is suing a volunteer with a homeless assistance program, and a real estate company, accusing them of cheating him out of his home, selling it without giving him any of the proceeds.

    "I worked my ass off all my life; I never stole a thing," he said. "Everything was stolen from me, right down to my underpants. It all went straight to hell."

    When his wife died of cancer, Hardman started drinking to escape the pain, and soon developed a drinking problem. He fell behind on the payments on his Bayville house, and it went into foreclosure.

    While living in temporary housing in 2010, he met two real estate investors and agreed to sell his house to them for $115,000, even though it was worth far more. Soon afterward, he ended up at Tent City, an encampment of homeless people in the woods of Lakewood that township officials have tried for years to shut down.

    Hardman's troubles worsened at Tent City; it was there that he met Wallace Doman III, a Jackson Township man who volunteered as housing director with a social service agency that works to help the homeless. Doman is also a real estate investor who buys distressed properties, fixes them up and re-sells them.

    At issue is an April 6, 2010, deed that purports to transfer title to Hardman's house to a company Doman owns, Platinum Home Management, for the sale price of $50. Hardman swears he never signed it. But in court papers, Doman insists that's exactly what happened, and that he has witnesses to the transaction.

    Doman returned a call seeking comment but hung up as soon as a reporter identified himself. He did not answer subsequent calls.

    In court papers filed in response to the lawsuit, Doman maintains Hardman signed the house over to him of his own free will. Doman also claims he tried to end the deal and sign the house back to Hardman once he found out that Hardman had already signed a contract to sell the house to the two real estate investors, but that Hardman refused to take it back.

    The house was sold for $215,000 to the two investors, who are not named as defendants in the lawsuit. They later sold it to a third party for $355,400. Hardman and his lawyer, Benjamin Dash, say not a penny of that went to Hardman.

NYC Feds Tag Wells In False Claims Suit; Bankster Allegedly "Engaged In Longstanding, Reckless Trifecta Of Deficient Training, Deficient Underwriting & Deficient Disclosure"

From the Office of the U.S. Attorney (New York City):

  • Preet Bharara, the United States Attorney for the Southern District of New York, [and others] announced [] that the United States has filed a civil mortgage fraud lawsuit against WELLS FARGO BANK, N.A. (“WELLS FARGO”).

    The Government’s Complaint seeks damages and civil penalties under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) for more than 10 years of misconduct in connection with WELLS FARGO’s participation in the Federal Housing Administration (“FHA”) Direct Endorsement Lender Program.

    The lawsuit alleges that, as a result of WELLS FARGO’s false certifications, FHA has paid hundreds of millions of dollars in insurance claims on thousands of mortgages that defaulted.

    Manhattan U.S. Attorney Preet Bharara said:

    As the complaint alleges, yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance. As also alleged, Wells Fargo’s bonus incentive plan – rewarding employees based on the sheer number of loans approved – was an accelerant to a fire already burning, as quality repeatedly took a back seat to quantity.

    What’s more, even after concerns were raised internally at the bank, Wells Fargo began self-reporting bad loans in a significant way, as required, only after this Office issued a subpoena last year. Now a jury will have to weigh the facts to determine the bank’s liability and the scope of the damages it must pay
For the U.S. Attorney press release, see Manhattan U.S. Attorney Files Mortgage Fraud Lawsuit Against Wells Fargo Bank, N.A. Seeking Hundreds Of Millions Of Dollars In Damages For Fraudulently Certified Loans (Suit Alleges Longstanding Practice of Reckless Underwriting and Fraudulent Loan Certification for Thousands of FHA-Insured Loans That Ultimately Defaulted).

Arizona Appeals Court Rejects Banksters' Use Of Credit Bid As Sole Basis In Calculating Debt Deficiency Owed By Foreclosed Property Owners, Guarantors

From a client alert from the law firm Snell & Wilmer:

  • In MidFirst Bank v. Chase, 640 Ariz. Adv. Rep. 9, __ P.3d __ (App. 2012), the Arizona Court of Appeals recently held that the amount of a successful credit bid at a trustee’s sale does not constitute admissible evidence of “fair market value” of the foreclosed property for the purposes of Ariz. Rev. Stat. (A.R.S.) § 33-814(A).(1)

    In other words, the opinion requires a lender to introduce evidence of “fair market value” as part of its prima facie case in a deficiency action, even if the debtor does not request a “fair market value” hearing under A.R.S. § 33-814(A). As a result of this decision, lenders will generally be required to obtain an appraisal or broker's price opinion to ensure they have admissible evidence of the fair market value of the collateral.

    The facts of the case describe a rather ordinary fact pattern. In 2008, the secured lender loaned $1,620,000 to a borrower. The loan was secured by a deed of trust recorded against real property, and was guaranteed by two individuals – Mike and Linda Chase (the “guarantors”). The borrower and guarantors defaulted and the lender exercised its right to conduct a trustee’s sale of its real property collateral.

    The secured lender was the successful bidder at the trustee’s sale with a credit bid of $486,000. Even after applying the credit bid to the then outstanding balance of the loan, the secured lender was left with a deficiency of $1,325,044.09.

    The lender moved for summary judgment against the borrower and guarantors for the full deficiency amount based solely on its credit bid. The guarantors argued that summary judgment was not appropriate, because they alleged that the “fair market value” of the real property serving as collateral was greater than the debt. The guarantors did not support their assertion with any evidence and never filed an application for a “fair market value” hearing under A.R.S. § 33-814(A).

    The trial court rejected the guarantors’ defense, finding that “[n]o reasonable juror could find for the Chases on the issue of fair market value based upon the record presented.” Thus, the trial court granted summary judgment for the secured lender.(2) The guarantors timely appealed and the Court of Appeals reversed.(3)
For more, see Lender’s Credit Bid is Not Evidence of Fair Market Value.

For the ruling, see MidFirst Bank v. Chase, 640 Ariz. Adv. Rep. 9, __ P.3d __ (App. 2012).

(1) Ariz. Rev. Stat. (A.R.S.) § 33-814(A) is the Arizona state law that governs deficiency judgments. According to the Arizona appeals court:
  • The primary purpose of the statute is to "prohibit a creditor from seeking a windfall by buying property at a trustee's sale for less than fair market value." First Interstate Bank of Ariz., N.A. v. Tatum & Bell Ctr. Assoc., 170 Ariz. 99, 103, 821 P.2d 1384, 1388 (App. 1991). Because of the nature of a trustee's sale, the statute does not contemplate that the purchase price will necessarily reflect the fair market value of the property. Dewey v. Arnold, 159 Ariz. 65, 70, 764 P.2d 1124, 1129 (App. 1988).

    For this reason, the statute requires a determination by the court of the fair market value before a deficiency judgment may be awarded. A.R.S. § 33-814(A). The court is directed then to subtract from the amount owed the higher of the sales price or the fair market value.
(2) To add insult to injury, the trial court also granted the foreclosing bank's request for attorneys' fees of $80,550.91.

For earlier posts relating to foreclosing lenders' attempts to score deficiency judgments from foreclosed property owners, see

Sunday, October 14, 2012

Texas' Rule 37, Similar Laws In Other States Aid In Energy Companies' Land Grab That Wrestles Away Some Land Owners' Mineral Rights For Little Or Nothing

In Arlington, Texas, Reuters reports:

  • Ranjana Bhandari and her husband knew the natural gas beneath their ranch-style home in Arlington, Texas, could be worth a lot - especially when they got offer after offer from Chesapeake Energy Corp.

    Chesapeake wanted to drill there, and the offers could have netted the couple thousands of dollars in a bonus and royalties. But Bhandari says they ultimately declined the deals because they oppose fracking in residential areas. Fracking, slang for hydraulic fracturing, is a controversial method used to extract gas and oil.

    Their repeated refusals didn't stop Chesapeake, the second-largest natural gas producer in the United States. This June, after petitioning a Texas state agency for an exception to a 93-year-old statute, the company effectively secured the ability to drain the gas from beneath the Bhandari property anyway - without having to pay the couple a penny.

    In fact, since January 2005, the Texas agency has rejected just five of Chesapeake's 1,628 requests for such exceptions, a Reuters review of agency data shows. Chesapeake has sought the most exceptions during that time - almost twice the number sought by a subsidiary of giant rival Exxon Mobil, Reuters found.

    Chesapeake says it only seeks exceptions to the Texas statute - called Rule 37 - as a last-ditch effort, and often because it cannot locate the land owner. The law, company spokesman Michael Kehs said, "protects the rights of the majority of mineral owners."

    Not so, say many local residents.

    "The principle of it is insane," said Calvin Tillman, a former mayor of Dish, Texas, a small town north of Fort Worth where drilling has been heavy. "Not only can they take your property, but they don't have to pay you for it."

    Chesapeake's use of the Texas law is among the latest examples of how the company executes what it calls a "land grab" - an aggressive leasing strategy intended to lock up prospective drilling sites and lock out competitors.
  • Some land owners oppose fracking, and New York, Vermont and Maryland have all refused to grant fracking licenses. The technique's effects on groundwater are still under review by the U.S. Environmental Protection Agency.

    But Chesapeake and other energy companies, which view fracking as safe, are now using state statutes to access the minerals under unleased land even if owners object to the drilling technique.

    If property owners refuse deals, Chesapeake and its land men have made clear their plans to take the oil and gas from beneath the land by using little-known laws in Texas, Ohio and other states. The terminology varies from state to state - a Rule 37 exception in Texas, mandatory pooling or unitization in Ohio. But the result is often the same: getting state regulators to enable the company to drill, sometimes against the owner's will.

    The economic argument for granting access to unleased land is logical. Difficulty in stitching together large plots leaves holes in drilling units that can make development less profitable. Large, contiguous plots enable drillers to pump more oil and gas. Allowing companies to access remaining land means that property owners who want to sell their mineral rights aren't shortchanged by a few holdouts.

    "Under Ohio law, it's not legal for one or a few land owners to keep the vast majority of land owners from exercising their rights to develop their minerals and get the benefits," said Heidi Hetzel Evans, a spokeswoman with the state's Department of Natural Resources, which rules on such requests.

    Chesapeake has based some of its petitions on just such a premise: that it is protecting the rights of people who want to drill, rather than succumbing to the will of holdout land owners.

    That marks a turnabout in Texas. When the state passed the Rule 37 statute in 1919, it was meant to prevent excessive drilling of oil wells and to protect the mineral rights of small land owners, say legal experts. The rule prohibits companies from drilling too close to unleased properties.

    Today, Rule 37 exceptions "seem to be a new creative use of the statute in a way that was not intended when it was designed," said Matthew Festa, an associate professor of law at South Texas College of Law. "It's possible that this amounts to the transfer of private property from one private entity to another private entity."
For more, see The casualties of Chesapeake's "land grab" across America.

Thanks to Deontos for the heads-up on the story.

Suit: Association, Management Conspired To Mainipulate Bylaws To Hijack Control Of Resort Condominium Through Acquisition Of Only Four Of 226 Units

In Elkhorn, Wisconsin, the Janesville Gazette reports:

  • Forty-five Lake Lawn Lodge condominium owners have sued the resort and its condo association for more than $5 million over rent payments, a unit management agreement and other financial matters.

    The suit, filed Sept. 26 in Walworth County, has been assigned to Judge James Carlson. The summons requires the defendants to respond with a written answer to the complaint within 45 days.

    The 40-page complaint alleges that Lake Lawn and Lodges at Lake Lawn Resort Condominium Association manipulated agreements with the owners following the resort’s Aug. 5, 2009, foreclosure. The 45-condo owners allege that the defendants illegally obtained a majority of the governing board through four commercial units and assumed control of 70 percent of rental revenue when a customary percentage for management was 40 percent.

    A spokesman for the resort said any reaction to the suit must come from General Manager David Sekeres, who is listed as a defendant in the suit. Sekeres did not return calls for comment.

    The plaintiffs allege in the complaint that the resort and condo association conspired to create a post-foreclosure set of bylaws that gave the defendants “control over the association as an organization by its ownership of only four of the 226 units.” The original bylaws assigned four seats on the association board to condo owners and three to the resort.

    The condo owners allege that during the sheriff’s sale following the foreclosure, the defendants failed to purchase the four commercial units for a “nominal sum.” That failure, the owners said, significantly reduced the value of their units and prevented them from controlling “their own association.”
For the story, see Condo owners sue management.

Authorities: Trio Duped Bank Into Rescinding Home F'closure, Then Used Counterfeit Docs To Sell Premises Via Phony Short Sale; Title Insurer May Be Left Holding The Bag

From the Office of the Los Angeles County Sheriff:

  • On October 2, 2012, three Los Angeles area residents were indicted by a Federal Grand Jury in connection with a complex scheme that defrauded Bank of America and Fidelity National Title Company out of $1.5 million.

    On October 5, 2012, the suspects were arrested at their homes by detectives from the Los Angeles County Sheriff’s Department’s Real Estate Fraud Team, and booked into the Metropolitan Detention Center in Los Angeles.

    The suspects are identified as: Saliya “Sal” DeSilva, male, 49, of Northridge; Nora Yefima, female, 50, of Santa Clarita; Vahe Hayrapetian, 45, of Burbank.

    In July, 2009, the owner of a residential property on Gould Avenue in La Canada-Flintridge defaulted on $3.5 million in loans which were secured by the property.

    Bank of America foreclosed on the property and took possession of it. In February, 2010, it is alleged that Saliya “Sal” DeSilva contacted Bank of America posing as the prior owner, provided Bank of America with counterfeit documents, and convinced Bank of America that the foreclosure was improper.

    As a result, Bank of America rescinded the foreclosure, and DeSilva, a licensed real estate salesperson, listed the property for sale without the consent or knowledge of the prior owner.

    In August, 2011, the property was eventually sold in a fraudulent short sale transaction after a title insurance company was given false information regarding the condition of the property, and was provided with counterfeit documents, including a fake Bank of America Short Sale Approval Letter stating that Bank of America had approved a sales price of $250,000.

    The buyer used Loan Broker Vahe Hayrapetian to obtain a $1.5 million loan for the “purchase,” and the funds were wire transferred by the lender to Oshana Escrow in Encino.

    It is alleged that Loan Broker Vahe Hayrapetian submitted materially false and fraudulent documents to the lender order to secure the $1.5 million loan.

    It is also alleged that the owner of Oshana Escrow, Nora Yefima, sent false documents to the title insurance company, wire transferred a relatively small portion of the loan funds to the title insurance company for the fraudulent short sale, and then disbursed the rest of the funds, an amount exceeding $1 million, to several other parties who had nothing to do with the transaction.

    The buyer of the property then defaulted on the loan which was fraudulently obtained by Vahe Hayrapetian, and since Bank of America never approved the short sale and continues to assert the validity of their $3.5 million in liens, there is insufficient equity in the property to compensate the subsequent lender for their $1.5 million loss.

    Fidelity National Title Company insured the lender and may have to reimburse them for the loss.