Saturday, March 16, 2013

Landlord's Alleged Failure To Fork Over Interest On Ex-Tenant's Security Deposit Leads To $24M Lawsuit Seeking Class Action Status

In New York City, the New York Post reports:

  • A former Manhattan resident has slapped his ex-landlord with a $24 million suit over the interest on the security deposit he put down for a plush, rent-stabilized pad on the Upper East Side nearly 40 years ago.

    John Sacchi, 63, claims Elyachar Properties refused to hand over the interest after he moved out of 1100 Madison Ave. and relocated to New Jersey in 2012 after suffering a stroke.

    Sacchi, who worked as a colorist at the tony Pierre Michel hair salon, last paid a little more than $1,800 a month for a spacious, one-bedroom apartment on the 10th floor of the building, which is about a block from the Metropolitan Museum of Art.

    His lawyer, Stephen Simoni, said the accrued interest on Saachi’s 1975 security deposit exceeded $10,000.

    Sacchi’s Manhattan federal-court suit seeks damages for himself and potentially thousands of other ex-tenants at 1100 Madison and two other East Side buildings that Elyachar owns, on grounds including fraud and breach of fiduciary duty.

    Elyachar lawyer Alan Friedman said the company has the canceled checks showing that Sacchi got interest payments on his security deposit, and noted that he was allowed to occupy his apartment, rent-free, for two weeks after breaking his lease.Friedman also added the company Friday mailed Saachi a check for about $1,000 for “every speck of interest” he could possibly claim he’s owed.

Bay State AG Squeezes Landlord For $75K To Resolve Fair Housing Charges Alleging Use Of Bullying Tactics Against Renters With Young Kids To Dodge Obligations To Delead Apartments

From the Office of the Massachusetts Attorney General:

  • A Boston area property owner has agreed to pay $75,000 and delead his rental units, resolving allegations that he engaged in a pattern of unlawful and retaliatory practices against tenants with young children in order to avoid his obligation to comply with state lead paint laws, Attorney General Martha Coakley announced today.

    The consent judgment, [...] resolves a fair housing complaint filed in February 2011 against Keith L. Miller, of Newton, who at the time owned and managed at least 24 residential rental units in Chelsea, Newton, Arlington, and Brighton. This is the largest fair housing settlement with a landlord that has been reached under AG Coakley.
  • In February 2012, the AG’s Office expanded its case against Miller, after learning of additional claims by tenants of the landlord’s bullying tactics and discriminatory behavior.

    The amended complaint alleged that Miller evicted, or threatened to evict, tenants with young children, rented apartments containing lead paint to tenants with young children, failed to remove lead hazards in those apartments, failed to provide proper notice of lead hazards to his tenants, made misrepresentations regarding the presence of lead paint in his apartments, and refused to repair unsafe and unsanitary conditions.

    More recently, the AG’s Office obtained summary judgment for claims that Miller failed to abate lead hazards, failed to provide proper notice of lead hazards, and that he illegally attempted to charge tenants for water use. The court held that those violations constituted violations of the state’s Consumer Protection Act as well.
  • Massachusetts laws [] require disclosure of lead paint history, abatement of lead paint hazards in units in which children under the age of six are present, and prohibit landlords from retaliating against tenants who assert their rights under the lead paint laws.
For the Massachusetts AG press release, see Boston Area Landlord to Pay $75,000 and Delead Units to Resolve Fair Housing Lawsuit (Largest Fair Housing Settlement with Property Owner to Date Under AG Coakley).

Engaged Couple, Others Accuse Banquet Hall Operator Facing Foreclosure Of Booking Events (& Pocketing Customer Deposits) Scheduled To Take Place After Date Set For Public Sale

In West Hartford, Connecticut, the West HartfordPatch reports:

  • The doors to La Renaissance were locked [last month] amid reports that the popular East Windsor banquet facility that has played host to myriad proms, graduation ceremonies and wedding receptions throughout the years is subject to a court-ordered foreclosure sale in April.

    Upon hearing the news, several customers who had already put down a deposit to hold a function at the facility have contacted the Attorney General’s office and the state Department of Consumer Protection hoping for help with recouping their money and securing a new venue for their event.

    The owners of La Renaissance, located on Route 5, have been going through foreclosure proceedings since July of 2012, according to the state judicial website.
  • A number of consumers have said that, despite the order for the foreclosure sale, the owners of La Renaissance continued to book events - and accept deposits - that were scheduled to take place after the sale.

    One such case is that of Jose Rivera, who wrote in a complaint to the Attorney General’s office that the owners of La Renaissance took two $2,000 payments - $4,000 in total - as a deposit for a July wedding reception without telling Rivera that the facility was due to be sold.

    Rivera said that he and his fiancée are now looking for a new venue to host their wedding reception, in addition to possibly having lost $4,000.

    The state Attorney General’s office has fielded dozens of similar complaints from people who have said that they have deposited thousands of dollars to secure dates at La Renaissance, according to Susan Kinsman, director of communications of the Attorney General’s office.

    “The Office of the Attorney General is looking into the La Renaissance matter with the Department of Consumer Protection,” Kinsman wrote in an e-mail to Patch.

    Telephone calls to La Renaissance and its owners were unanswered. A message left with the attorney of one of La Renaissance’s owners was not returned.

Friday, March 15, 2013

S. Florida Woman Accused Of Grand Theft, Uttering Forged Instrument For Allegedly Hijacking Title To Home, Then Attempting To Evict Occupant

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

  • In South Florida, thieves will try to steal anything — even your home.

    A Lauderhill woman is accused of filing bogus paperwork at the Broward Government Center to transfer a Southwest Ranches property to her name and seize ownership of the home. She even tried to evict the woman who lived there.

    Neither the renter nor homeowner knew Marlene Baptiste, now charged with grand theft — and neither had any inkling she had set her sights on the property in the 6900 block of Southwest 185th Way, authorities said. Although Baptiste, 39, is now charged with grand theft, her case highlights how vulnerable South Floridians' homes are to strangers' attempts to seize them.

    Homeowners should use public records online to their advantage — just as thieves do, said Sunrise real estate lawyer Gary Singer.

    "It's impossible really to stop someone from fraudulently signing your name and filing it in the public record," he said. "Your house is your biggest investment. Just like protecting yourself against identity theft, you have to also check your public records and make sure no funny business is on it, because it does happen."
  • According to a Broward Sheriff's Office report, Baptiste was arrested Feb. 26 and charged with grand theft over $100,000, uttering a forged instrument and refusing to supply a DNA sample.
  • The Sheriff's Office said visitor logs and surveillance video showed Baptiste enter the Broward County Governmental Center, 115 S. Andrews Ave., and file the fraudulent quit claim deed in October.

    Last May, Eddie Banks, 40, allegedly took it a step further — after fraudulently recording a deed, he moved into a bank-owned Oakland Park home in the 800 block of Northeast 47th Court.

    When a bank representative contacted authorities, Banks called the Sheriff's Office to report someone had broken into his home. Banks was ultimately charged with burglary and grand theft.

Elderly Scam Victim Loses 14 Rental Properties To Foreclosure After Entrusting Accused Perpetrator With Making Monthly Mortgage Payments Out Of Rent Collections; Suspect Hit With $250K Bail In Alleged $220K+ Ripoff

From the Office of the Ventura County, California District Attorney:

  • District Attorney Gregory D. Totten announced [] the filing of a felony complaint against Julietta Quinones ( DOB 3/12/68) of Port Hueneme. Quinones is charged with seven felony counts of grand theft, along with an aggravated white-collar crime enhancement alleging the thefts involved the taking of more than $100,000. The case was investigated by the District Attorney's Real Estate Fraud Unit.

    The 70-year-old victim owned 14 rental properties throughout Ventura County. The victim entrusted Quinones to make the victim's monthly mortgage payment on each property and provided the defendant with signed, blank checks for that purpose. Rather than pay each respective mortgage, Quinones used the victim's checks for personal expenses. As a result, the victim lost all 14 rental properties. Quinones is accused of stealing in excess of $221,708 over a period of three years.
  • Quinones remains in custody in lieu of $250,000 bail and faces a maximum sentence of nine years in state prison.

Confusion In Legal Community, Conflicting Professional Opinions Lead To Late-Filed Wrongful Death Claim By Parents Of Married Locksmith Gunned Down During Foreclosure Eviction

In Stanislaus County, California, The Modesto Bee reports:

  • The parents of a locksmith gunned down April 12 along with a sheriff's deputy while serving a Modesto eviction have submitted wrongful-death claims to Stanislaus County.

    The claims are similar to one filed in September by the locksmith's widow, Irina Engert, who subsequently sued in federal court in January, saying the Sheriff's Department owed her husband better protection.

    Glendon Engert, 35, and deputy Bob Paris, 53, were ambushed by a distraught man whose property was sold in foreclosure. The murders touched off a standoff with authorities that ended in an inferno and the suicide of gunman Jim Ferrario, 45. "It's a shame that Mr. Ferrario created the situation for all of us," County Counsel John Doering said Monday.
  • Engert's mother, Ann, said in January that she had consulted an attorney who advised her that a dead man's widow has legal standing to sue, but not his parents.

    The San Francisco attorney representing his widow read that story in The Beeprovided a different legal opinion and was hired by Ronnie and Ann Engert. Their claims are considered a precursor to a lawsuit.

    The parents' claims come about four months later than allowed by a six-month legal limit for such action. They acknowledge as much in the documents, blame the initial attorney for bad advice and ask for a waiver allowing a late claim.
  • A brief says Modesto attorney Gerald Brunn made an "honest mistake" in his opinion regarding the legal standing of an adult's surviving parents and acknowledges "some confusion" in the legal community, saying, "Mr. Brunn is certainly not alone in making this mistake." Brunn could not be reached Monday for comment.

    Based on his assessment, Ann Engert had told The Bee in January, "The state of California does not recognize my loss as legally actionable" and said she supported her daughter-in-law's legal pursuit. She said she had been close to her son, playing online poker with him and chatting on the phone into the wee hours of the morning.

    After her consultation with Brunn, she sent him a letter citing puzzlement that laws would not recognize "my loss as his mother" and saying she "would have been happy to have worked with you" and thanking Brunn. The letter is attached to the new complaints.

    Support in trade journal

    Others believe such parents can sue for wrongful death if the adult who died had no children. Glendon and Irina Engert were childless.

    San Francisco attorney Richard Schoenberger, representing all three survivors, cited a 2008 article in a legal trade journal written by two Santa Monica lawyers specializing in wrongful-death cases. They acknowledged disagreement among lawyers but concluded that parents of childless adults can sue, as well as a surviving spouse.

    In an email Monday, Ann Engert wrote, "I said before that I supported my daughter-in-law's actions in connection with her lawsuit, and the current development is an extension of that conviction."
For the story, see Slain locksmith's parents file claim against Stanislaus County.

Go here for the above-referenced claim, legal brief, letter sent by the victim's mother to the lawyer who advised her she had no standing to file a claim, the earlier Modesto Bee story, and the trade journal article addressing the legal standing of parents to bring a suit for the wrongful death of a married child.

Thursday, March 14, 2013

Spineless Prosecutor Kiboshes Cop's Arrest Warrant Request For Developer Suspected Of Pocketing Customer's Cash, Then Misapplying Funds For Personal Use

In Indian River County, Florida, TC Palm reports:

  • Denise Cisneros is hopeful she will finally get the swimming pool a developer promised her a year ago.

    Recently, she walked alongside her unfinished swimming pool, her face pinched in frustration as she glanced into the concrete crater with trash strewed across dried scum at the bottom. The giant, dry hole was in contrast to her lush lawn and newly built, 3,200-square-foot home in Eagle Trace subdivision, north of Vero Beach city limits.
  • For almost a year she and her husband wrangled with developer Eli Baron, who built their house at Eagle Trace and, according to Cisneros, pressured them into paying him $43,000 to install a pool he was supposed to have completed by last June.

    The project stalled because Baron owed almost $6,000 to the pool contractor and $12,000 to the company that built the screen enclosure around the pool. Upset by the delays, Cisneros reported Baron to the Indian River County Sheriff’s Office last year.
  • In November 2011, a Press Journal investigation found Baron had a troubled financial history, a criminal record and a long list of contractors who claimed he failed to pay them.

    A year later, the Press Journal learned he has mounting unpaid taxesowes more than $140,000 in court settlements and has had 146 liens filed against him in the past three years. He also has unhappy homeowners in the subdivision at 58th Avenue and 61st Street.
  • Arrest warrant denied

    Cisneros filed a complaint with the Sheriff’s Office in August, arguing Baron taking her money and not using it to finish the job amounted to theft.

    Through subpoenaed bank records, detectives found Baron withdrew money from a business account that was supposed to cover costs such as pool construction and instead spent it on a Caribbean cruise, hotels, $1,000 monthly BMW car payments and restaurants with tabs as high as $175, a warrant affidavit shows.

    Milo Thornton, a detective with the economic crimes unit, stated in a report that he also talked to the contractors involved. In September, he requested a warrant to arrest Baron and charge him with grand theft, but the State Attorney’s Office quashed the warrant saying Baron’s actions didn’t meet the standard for theft under Florida law.

    Nikki Robinson, assistant state attorney, said her office denied the warrant on Sept. 20 because Baron did most of the work he promised and showed he intended to finish the job.

    Plus, Cisneros kept paying him, which suggests she believed he would complete the work, Robinson said. By law, a person must display criminal intent at the outset — otherwise, the main recourse is litigation, she said.

    “Did she pick a bad contractor? Absolutely,” Robinson said. “But is it criminal? Unfortunately, no.”(1)
For more, see Some residents, contractors unhappy with Eagle Trace developer.

(1) In addition to grand theft, the described conduct by the developer could possibly also constitute a misapplication of construction funds, a second-degree felony in Florida (Section 713.345 F.S.) for ripoffs of at least $1,000 but less than $100,000. Further, under Section 713.345(1)(c) of the Florida statute:
  • A permissive inference that a person knowingly and intentionally misapplied construction funds in violation of this subsection is created when a valid lien has been recorded against the property of an owner for labor, services, or materials; the person who ordered the labor, services, or materials has received sufficient funds to pay for such labor, services, or materials; and the person has failed, for a period of at least 45 days from receipt of the funds, to remit sufficient funds to pay for such labor, services, or materials, except for funds withheld pursuant to paragraph (a).
Thumbs up to the detective who requested the arrest warrant; a Bronx cheer for the prosecutor who, in all fairness, may have such a heavy caseload that she didn't feel that the developer's actions, even if rising to the level of a crime and despite his reported track record as a creditor-stiffing businessman, wasn't a big enough deal to merit criminal prosecution. Hence the always-handy fall-back position not-uncommonly invoked by some unmotivated law enforcement personnel - 'No criminal conduct here - It's only a civil matter!'

Atlanta Feds: Broker Duped Unwitting Prospective Buyers For $1.2M+ In Upfront Fees On Bogus Loan Commitments; Victims Also Allegedly Lost Earnest Money Deposits On Expiring Home Purchase Contracts

From the Office of the U.S. Attorney (Atlanta, Georgia):

  • A New York broker has been indicted for conspiring to defraud 350 financially strapped customers of more than $1.2 million. Kenneth J. Enrico, 46, of Bohemia, New York, was arraigned [] on a federal indictment [...] on one count of conspiracy, three counts of mail fraud, and 13 counts of wire fraud.
  • According to United States Attorney Yates, the charges and other information presented in court, between June 2011 and August 2012, Enrico offered property buyers private lender loans of 105 percent of the property’s selling price at a 4.99 percent interest rate, regardless of the buyer’s credit score, as long as the buyers had jobs that generated enough income to qualify for the loan amount and monthly payments.

    Enrico required the buyers to pay him an up-front fee of $2,500 per loan, which he claimed covered loan processing fees and the appraisal. Enrico publicized his offer through several brokers, two of whom were located in the metropolitan Atlanta area. The broker tacked on additional fees.

    More than 350 individuals responded to Enrico’s pitch and sent in more than $1.2 million in up-front fees either to Enrico directly or through the brokers.

    Enrico approved all the buyers for loans. However, none of the buyers ever received a loan from Enrico. He gave the buyers numerous excuses as to why their loans never closed.

    Not only did the buyers lose the fees paid to Enrico, they lost the earnest money they paid to the sellers of the properties they were trying to buy when their sales contracts expired. The buyers often relied on Enrico’s excuses and entered into sales contracts on second properties with additional earnest money payments, which they later lost when Enrico never funded their loans.

KC Feds Indict Two For Allegedly Duping Financially Distressed Homeowners With False Debt Rescue Promises, Getting Victims To Send Mortgage Payments To Them, Sign Over POAs To Control Homes

From the Office of the U.S. Attorney (Kansas City, Missouri):

  • [J]ohn Lee Norris, 42, and Julie Tina Hatcher, 37, both of Kansas City, were charged in a 21-count indictment [accusing them of running a racket that promised to help financially-strapped clients get out of debt and defrauding them, causing some of them to lose their homes and vehicles].
  • According to the indictment, Norris and Hatcher operated Reaper Investment Partners, LLC; in August 2011 they formed Death Productions LP. Between August 2010 and April 2012, the indictment alleges, Norris and Hatcher participated in a conspiracy to defraud homeowners and other debtors who were in financial distress (as well as their victims’ lenders and the Federal Housing Administration).

    Norris and Hatcher allegedly recruited and targeted homeowners and others who were in financial difficulties with promises that they would be rescued from their financial problems, including foreclosure. Norris and Hatcher allegedly told victims that Reaper Investment Partners (RIP) would refinance the homeowners’ existing mortgages for a lower amount and at an interest rate of three percent.

    As part of their scheme, the indictment says, RIP would control title to the homeowners’ properties. The homeowners would stop making payments to their lenders and instead make their monthly payments to RIP. The homeowners gave Norris and Hatcher power of attorney.

    Homeowners did not communicate with their lenders, the indictment says, even when they received telephone calls, late notices and foreclosure notices from their lenders. Instead, homeowners forwarded the notices and other documents to Norris and Hatcher. When homeowners contacted Norris and Hatcher to report that they had received notice that their homes were being foreclosed, the defendants reassured them by telling them not to worry, that was part of the process.

    Norris and Hatcher allegedly told some of their client-victims that one or both of them were lawyers, had legal experience, or were able to practice law. They allegedly said that RIP would draft, serve, file, and record legal forms, pleadings, and other documents and would conduct necessary legal processes, contact the relevant parties, and implement administrative procedures. Norris and Hatcher allegedly mailed documents to the homeowners’ lenders, demanding the lenders “cease and desist” collection activities.

    Norris and Hatcher also allegedly told individuals who were in financial difficulties due to credit card debt, vehicle loans, and other debt, that they would refinance the debt for a lower amount and interest rate and lower their monthly payments. These clients, likewise, would stop making payments to their lenders and instead make their monthly payments to RIP.
  • In addition to the conspiracy, Norris and Hatcher are charged together with nine counts of mail fraud and 10 counts of wire fraud.
For the U.S. Attorney press release, see KC Business Owners Indicted For Defrauding Debt-Stressed Clients.

Wednesday, March 13, 2013

Foreclosure Rescue Scammer Hammered With 11+ Years In Slammer For Pocketing $63K+ In Upfront Fees, House Payments From Six Financially Drowning Homeowners & Throwing Them An Anchor

In Ventura County, California, the Ventura County Star reports:

  • A woman who lost her house and thousands of dollars to real estate fraud was pleased Tuesday when a judge sentenced the manager of the bogus mortgage business. “I am very happy,” Luz Lechuga said in Spanish in an interview outside the courtroom. “I feel better. Yes, this is justice.”

    Ventura County Superior Court Judge James Cloninger sentenced Laura Cecilia Carlson, 66, of Hacienda Heights, to 11 years and eight months despite pleas from the woman’s daughters and lawyer for leniency. The judge ordered her to pay $63,900 to six victims as restitution.

    Cloninger said Carlson was in a management role of a criminal enterprise that tricked Ventura County homeowners out of tens of thousands of dollars.

    “You ruined people’s lives, you and your crime partners,” Cloninger told Carlson, noting Lechuga’s case in particular. “You took her to the brink of suicide with the harm that you inflicted,” Cloninger said. “They (the victims) were drowning, and so you all decided to throw them an anchor to make sure they would drown.”

    Lechuga, who worked in the fields, said in an interview that she had lived for 14 years in her Oxnard home, which was worth $600,000 before she lost it to foreclosure.

    Carlson, a licensed real estate agent, and others were arrested in January 2011, according to prosecutors. Prosecutor Dominic Kardum told Cloninger that state licensing officials would be told of the conviction.
  • Carlson ran the business as Global Team Consulting. She trained employees and collected thousands of dollars in upfront fees from clients after promising to reduce the principal and monthly mortgage payments on their homes. Victims were told to stop making mortgage payments and pay the fraudulent company.

    The payments instead went into Carlson’s bank account, Kardum said.
  • Carlson’s daughter and two stepdaughters said she was an honest real estate agent who took pride in helping people buy houses.

    They gave tearful comments to the judge, saying their mother was an active church member and law-abiding citizen but that her life worsened after her husband died in 2005. They said they were shocked by what had happened, describing Carlson as a woman who always helped others.
  • Cloninger told Carlson’s relatives that if they had heard the facts in the case they would understand the jury’s verdict. The judge said Carlson stole from hardworking, unsophisticated people in a “cold, calculated and heartless way.”

    In an interview, Kardum said co-defendants Victoria Santos, Juan Alvarado Cervantes and Felipe Castro have been convicted and that Jose Miguel Aguilar is a fugitive from justice. Carlson will be eligible for parole after serving 50 percent of her sentence, Kardum said.

Father & Son Scammers Who Ripped Off Struggling Homeowners With Sale Leaseback Peddling Scam Cop Guilty Pleas To NJ State AG Charges After Earlier Pleading Guilty To Feds In Separate Prosecution

From the Office of the New Jersey Attorney General:

  • Attorney General Jeffrey S. Chiesa announced that a Monmouth County man has pleaded guilty in a scheme in which he stole more than a million dollars by promising to rescue homeowners who were facing foreclosure, but instead sold their homes to unwitting investors. His son previously pleaded guilty in the scheme.

    Vito Grippo, 58, of Jackson, pleaded guilty yesterday (Feb. 27) to a criminal accusation charging second-degree theft by failure to make required disposition of property received and third-degree money laundering before Superior Court Judge John Triarsi in Union County.

    Grippo’s son, Frederick P. Grippo, 32, of Old Bridge, pleaded guilty on Jan. 23 to a criminal accusation charging second-degree theft by deception.

    According to the plea agreement, the state will recommend that Vito Grippo be sentenced to ten years in state prison and that Frederick Grippo be sentenced to four years in state prison. In addition, Vito Grippo was ordered to pay full restitution. Frederick Grippo was ordered to pay $24,681 in fines.

    “This father and son ripped off struggling homeowners at the height of the national housing crisis,” Attorney General Chiesa said. “My office will continue to seek out those who prey upon unsuspecting homeowners and will prosecute these offenders to the full extent of the law.”
  • In pleading guilty, Grippo admitted that between Feb. 14, 2008 and Jan. 7, 2010, he stole $1.3 million by soliciting 12 financially distressed homeowners, saying he could rescue them from foreclosure and fix their credit rating by transferring title to their homes temporarily to a company called Morgan Financial.
  • Vito Grippo admitted to his role in the scheme in connection with 12 homes in Elizabeth, N.J., Brooklyn, N.Y. (3 homes), Jersey City, N.J., Staten Island, N.Y. (2 homes), Rutherford, N.J., Monroe, N.J., Somerville, N.J., Mine Hill, N.J., and Cambria Heights, N.Y.

    The investigation determined that he submitted fraudulent loan applications to obtain a total of more than $4.5 million to purchase the homes. Vito Grippo in turn stole more than $1.3 million in loan proceeds that should have been disbursed to the original homeowners as equity at closing.

    He diverted those funds into his companies’ bank accounts in order to launder the money. The investigation determined that he then disbursed the funds to himself and other co-conspirators.

    Frederick Grippo was involved in seven of the fraudulent loan applications and received checks from Morgan Financial for his participation in the fraud. Although Vito Grippo made some mortgage payments on the loans in the names of the investors, all of the homes ultimately fell into foreclosure. The original homeowners lost the properties and the investors’ credit ratings were ruined.(1)
For the NJ AG press release, see Father and Son Plead Guilty in a Scheme to Steal More Than $1.3 Million from Struggling Homeowners.

For the U.S Attorney press releases announcing the earlier guilty pleas on federal charges, see:
(1) For more on this type of foreclosure rescue ripoff, see:

92-Year Old Widow Duped By Loan Peddler Into Removing Name From Home Title To Get Reverse Mortgage With Now-Deceased Hubby Dodges Foreclosure After CFPB Intervenes

Syndicated Real estate columnist Kenneth Harney reports:

  • Jeanette Ogle, a 92-year-old widow with a reverse mortgage on her house, got a huge birthday surprise recently: She did not lose her home at a scheduled foreclosure auction that had drawn scrutiny from federal and state agencies and consumer advocates.

    Because of obscure federal rules that critics say have snared unwitting elderly homeowners across the country, Ogle's home in Lake Havasu City, Ariz., had been set for foreclosure on Feb. 27, her birthday. But after interventions on her behalf by the federal Consumer Financial Protection Bureau, AARP and the Arizona attorney general's office, the auction was canceled.
  • According to government estimates, more than 9 percent of all federally insured reverse mortgages — the ones hawked on TV by Henry "the Fonz" Winkler, among others — were in default in 2012. This is especially significant because so many reverse mortgage borrowers, like Ogle, are in their 80s and 90s, living on Social Security, and may be unaware of certain fine-print details about their loans.
  • One technicality tucked away in FHA's regulations can snag owners whose spouse dies after taking out the reverse mortgage. If the surviving spouse's name does not appear on the mortgage documents, the outstanding debt balance becomes due and payable. If the surviving spouse can't afford to buy the house to make the payoff, the property may be put up for foreclosure sale.

    Ogle's situation illustrates the problem: She did nothing wrong. Ogle and her late husband, John, who died in 2010, refinanced a reverse mortgage in 2007. Though Ogle believed her name remained on the mortgage documents and she was a co-borrower, a loan officer listed only John's name. Ogle says she never agreed to her name being removed and suspects fraud.

    When her husband passed away, the loan balance became due and payable. Bank of America — the servicer of the mortgage on behalf of Fannie Mae, the big national loan investor — informed Ogle of the FHA rule. She complained to the Arizona attorney general's office, which negotiated an agreement with Bank of America that it would not foreclose. Subsequently, however, when the servicing contract was transferred to Reverse Mortgage Solutions, that firm renewed the threat of foreclosure and set the date for the sale.

    Reverse Mortgage Solutions refused to comment on the matter. Meanwhile, Ogle's son, Bob, filed complaints with the Consumer Financial Protection Bureau and with the state attorney general, seeking their help in saving his mother's home. He told me in an interview that "I don't think my mother could survive a move, she just couldn't handle [a foreclosure]." Fannie Mae, owner of the loan, expressed sympathy for her situation and promised not to evict her, but would not postpone the scheduled foreclosure.

    Enter the Consumer Financial Protection Bureau. Though precisely how it brokered the final resolution of Ogle's problem has not been made public, its intervention into the case appears to have been a catalyst. Bank of America, which had made a promise in 2010 to Ogle not to foreclose simply because her name was missing from the documents, purchased her loan from Fannie Mae and now owns it. The bank then canceled the Feb. 27 auction.

    "We wanted to stay true to our commitment," said Dan Frahm, a spokesman for Bank of America. "So we bought back the loan."

    Ogle's reaction? "Oh, I'm on cloud nine," she said. "I'm staying put in my house. I don't have to move. And even though I'm 92, I've got all my marbles — so everybody should know I plan to be around for a while."

Alaska Feds Pinch Disbarred Lawyer, Another On Wire, Mail Fraud Charges In Connection With Alleged Hijacking Of Elderly Widow's $2M+ In Trust Funds, Leaving Her To Lose Home To Foreclosure & Die Destitute In Nursing Home

In Anchorage, Alaska, the Anchorage Daily News reports:

  • Two men are charged in federal court with crimes related to duping an elderly Anchorage woman out of millions of dollars by taking control of her trust fund, which her husband set aside for her care before his death.

    In December, a grand jury indicted friends and business partners Brian Ben-Israel, 53, and Philip Myers, 60, for mail fraud. On Feb. 22, jurors handed up a superseding indictment adding charges of wire fraud and, for Ben-Israel, charges of filing false tax returns.

    Both men pleaded not guilty to all the charges Wednesday, court records show.

    Ben-Israel, once a registered nurse in Anchorage and now a Georgia resident, and Myers, a disbarred California lawyer still residing there, worked together to pilfer the accounts of Juanita Gielarowski, a longtime Anchorage resident and the widow of Thomas Gielarowski, according to the indictment.

    The two men -- who were either very close friends or romantically linked -- emptied the Gielarowski trust, leaving Juanita destitute, according to court filings in a separate civil case.

    Without funds to pay for her in-home care, and with her house in foreclosure, Juanita was forced to live in a state-funded nursing home, where she died during the legal wrangling over the stolen money, according to the indictment and civil court filings.

    In some instances, Ben-Israel asked Juanita to sign documents without her reading glasses, and the trusting woman abided, according to the civil court papers. He also wooed Juanita's daughter, who fell in love with him, even though he was in a relationship with another man, the court papers say.

    A judge in a civil case awarded the Gielarowskis' estate $7 million in punitive damages. The results of a separate medical-malpractice lawsuit brought against Ben-Israel and his employer at the time, Meridian Psychiatric Group, remain sealed.

    According to the federal indictments, the scheme worked like this:

    Ben-Israel met Juanita and her daughter, Linda Stowers, while working in Juanita's home as a nurse, providing care to both women. In 2007, Ben-Israel gained control over Juanita's trust fund and, with her mental health deteriorating, made himself a beneficiary of the trust. He and Myers ultimately used funds from the trust to travel and transferred $2.8 million to a California-based company Myers owned: Typhoon Security Technology, which aimed to be a global leader in "explosives and weapons detection technology," the indictment says.

    But past fraud cases involving Typhoon had caused the State of California to revoke the company's business license. When Ben-Israel and Myers were bilking Juanita Gielarowski, the company served only as a vessel through which the men could get at her money.

    With the trust emptied, bills went unpaid, and a bank foreclosed on Juanita's house in 2009. Her family filed the lawsuit that year, but, as it was still playing out in court in 2010, Juanita died at a nursing home.

    The wire transfers Myers and Ben-Israel made and a fraudulent check they mailed led to the wire and mail fraud charges. Ben-Israel faces tax fraud charges for allegedly filing false tax returns because he failed to report the hundreds of thousands of dollars he received.

Tuesday, March 12, 2013

Antitrust Feds Notch Two More Pleas In Ongoing Probe Into Northern California Foreclosure Auction Bid-Rigging Rackets

From the U.S. Department of Justice (Washington, D.C.):

  • Two Northern California real estate investors have agreed to plead guilty for their role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.

    Felony charges were filed [] in the U.S. District Court for the Northern District of California in Oakland against Peter McDonough of Pleasanton, Calif., and Michael Renquist of Livermore, Calif.

    Including [these] pleas, 29 individuals have pleaded guilty or agreed to plead guilty as a result of the department’s ongoing antitrust investigation into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

    According to court documents, for various lengths of time between November 2008 and January 2011, McDonough and Renquist conspired with others not to bid against one another, but instead designated a winning bidder to obtain selected properties at public real estate foreclosure auctions in Alameda County, Calif .

    McDonough and Renquist were also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected Alameda County properties sold at public auctions, to make and receive payoffs and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy.

    The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions. The private auctions often took place at or near the courthouse steps where the public auctions were held. Renquist was also charged with additional counts for his involvement in similar conduct in Contra Costa County, Calif.

    “The conspirators suppressed competition and lined their pockets through fraudulent and collusive conduct at the expense of lenders and distressed homeowners,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.
For the Justice Department press release, see Two Northern California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (29 Individuals Have Agreed to Plead Guilty to Date).

See Illegal Bid Rigging Racket? Or Mere Innocent 'Joint Bidding' Arrangement? for the distinction between what bidders can and can't do when engaged in cooperative bidding with others at public auctions.

Recent Bid-Rigging Prosecutions Have Tax Lien Investors' Trade Group Seeking Training From Antitrust Feds To Keep Members Out Of 'Sherman Act' Hot Water

In Washington, D.C., Reuters reports:

  • Solo investors, specialty investment firms and others who buy up property tax liens for a profit are studying the finer points of U.S. antitrust law after watching comrades in their niche face charges of bid rigging.

    A Department of Justice lawyer familiar with a series of recent cases in New Jersey has signed on to speak at a training session next month for the National Tax Lien Association. The training is part of a plan to inform members about antitrust pitfalls in the auctions where liens are bought and sold. It will be at the association's annual meeting in Miami.
  • Fear of criminal prosecution rippled through the industry in the past few years as the Department of Justice's Antitrust Division brought cases of alleged bid rigging in the local auctions where the lien sales take place.

    Bid-rigging convictions can mean prison time and millions of dollars in fines under the Sherman Act.

    "No one would ever violate the Sherman Antitrust Act if they knew the significance of the penalties," said Brad Westover, executive director of the National Tax Lien Association.

    The association began regular training sessions at its annual meeting last year, Westover said. At his request, the Antitrust Division has agreed to send a trial attorney from New York this year.
  • Westover said he tells his members to assume there is a federal agent at every tax-lien auction in the country. "We don't want to venture anywhere near something that could look on the wrong side of the law," he said.
For the story, see After busts, tax-lien industry asks for antitrust training.

See Illegal Bid Rigging Racket? Or Mere Innocent 'Joint Bidding' Arrangement? for the distinction between what bidders can and can't do at public auctions.

Jury Convicts Title Agent Of Using Mom's I.D. To Illegal Score Reverse Mortgage On Her Own Home, Used Proceeds To Make "Hard Money" Loans; Made Bogus Reps In Subsequent Short Sale

From the Office of the U.S. Attorney (Miami, Florida):

  • A Miami title agent and former mortgage broker was found guilty [...] for her role in a “reverse mortgage” fraud scheme in connection with a loan worth more than $400,000, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.

    After a six-day jury trial [...], a federal jury convicted Yesenia Pouparina (aka Yesenia Campos), 40, of four counts of wire fraud and one count of mail fraud for her role in securing a fraudulent Home Equity Conversion Mortgage (HECM), commonly referred to as a reverse mortgage loan, and making false representations related to the occupancy of the property and its subsequent “short sale.”
  • According to court documents and evidence presented at trial, Pouparina, a licensed title agent in the state of Florida, devised a scheme to obtain a reverse mortgage loan on her own property in the name of her mother, an individual who failed to meet the requirements of the HECM program.

    Pouparina submitted to a lending institution a false loan application and doctored records in support of that application, misrepresenting her mother’s eligibility to participate in the HECM program.

    Pouparina acted as the title agent for the loan and disbursed the loan proceeds directly to her own personal bank accounts.

    Pouparina also enriched herself by collecting fees generated by the loan, and also profited by using the loan proceeds in connection with her business as a “hard money lender” in other mortgage deals.

Law Firm Secretary Pinched For Allegedly Swiping Escrow Account Cash & Lawsuit Settlement Proceeds, Forging Client's Signatures & Pocketing Their Checks

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

  • A former secretary at a Deerfield Beach personal injury law firm has been accused of forging client checks and stealing nearly $25,000, according to an arrest affidavit. Charged with grand theft, Vanessa Belotte, 29, of Coral Springs, is being held at the Main Jail on $25,000 bond.
  • "[Belotte's] fraudulent activities amount to $24,916.30; however, the final amount of loss may increase, as it is difficult to ascertain at the present time whether any additional forged checks will be discovered," Detective John Calabro, of the Broward Sheriff's Office, wrote in a Feb. 25 arrest affidavit.

    In a prepared statement, one of the firm's partners, Andrew Berrio, said: "Fuentes & Berrio are working closely with the few clients involved, as well as law enforcement, during this ongoing investigation and assure that the clients will ultimately suffer no economic loss."

    According to the arrest affidavit, as many as 11 clients were affected.

    Embezzlement suspicions were first sparked when it was discovered in November 2012 that five fraudulent debits — three payments to Florida Power & Light totaling $700 and two payments to Comcast for a total of $521 — had been made from a client's trust account in October 2012.

    A subsequent investigation "uncovered an even bigger fraud," including the discovery at Belotte's old desk of "notepads where she practiced client's signatures," and "incriminating correspondenceon her work computer, the arrest affidavit said.

    Aside from the five unauthorized debits, beginning in August 2012, Belotte was also involved in the forgeries of at least nine checks that should have been mailed to clients, according to the affidavit.

    When notified, the clients informed investigators that "they did not receive their checks and that their signatures were forged," the affidavit said. In one instance, the affidavit says, Belotte changed a client's mailing address to her own Coral Springs home address.

    And on another occasion, Belotte sent a letter to a client advising that the firm no longer wanted to represent him. She then called the insurance company and settled the case. When the settlement check arrived at the law firm, instead of arranging for the client to pick it up, Belotte "negotiated the check through the same previously described fraudulent means," the affidavit said.

    It was not immediately clear if Belotte had retained an attorney to represent her.

Oakland Feds: Paralegal Settled Lawsuits, Then Swiped Settlement Proceeds Out From Under Unwitting Law Firm Employer, Clients

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

  • Ana Lissa Reyes, of San Lorenzo, Calif., was arraigned [] on an information charging her with multiple counts of mail fraud and tax evasion, United States Attorney Melinda Haag and IRS Criminal Investigation Special Agent in Charge Jose M. Martinez announced.

    According to the information, Reyes is alleged to have worked as a secretary, office manager and paralegal for a Bay Area personal injury law firm.

    From about 2006 through June 2011, Reyes, without authorization, settled claims without the knowledge of the law firm or its clients and stole the settlement proceeds.

    It is also alleged that Reyes engaged clients without the law firm’s knowledge and stole client retainer fee payments. To carry out the scheme to defraud, Reyes created a bogus company to correspond with clients without the law firm’s knowledge and to defraud the clients into believing their cases were ongoing.
For the U.S. Attorney press release, see Paralegal Charged In Scheme To Defraud Bay Area Law Firm And Its Clients.

For the formal charges, see U.S. v. Reyes.

Monday, March 11, 2013

U.S. Senator Requests DOJ Probe Into Suspected LPS' Racket That Allegedly Employed Improper Fee Structure, Resulting In Double Billing Of Fees For Legal Services

The Wall Street Journal reports:

  • A U.S. senator has asked Attorney General Eric Holder to investigate the business practices of a company that provides technology services to lenders and other companies that process foreclosures.

    In a letter sent to the Department of Justice on Thursday, Sen. Ron Wyden (D., Ore.) raised concerns over the business practices of Lender Processing Services Inc. LPS +0.04%, a Jacksonville, Fla.-based company that offers software and logistical services for mortgage companies.

    The letter alleges that LPS employed an improper fee structure that resulted in double-billing homeowners or mortgage investors for legal services related to the processing of foreclosures and bankruptcies.

    It also says that the firm’s business model may have been responsible for sowing what became known as “robo-signing,” where bank attorneys and paralegals improperly signed off on foreclosures.

6th Circuit Kiboshes Defendant Zombie Debt Buyer, Named Consumer Plaintiffs (& Their Lawyers) From Screwing Over 133,000 Unnamed Class Action Members With Crappy Settlement In FDCPA-Robosigning Suit

In Cincinnati, Ohio, the Toledo Blade reports:

  • A federal appeals court has reversed a lower court’s approval of a class-action lawsuit settlement that dealt with robo-signed [debt collection lawsuit] filings.

    Originally filed in 2008 in Erie County, the class-action suit challenged debt-collection agency Midland Funding’s practice of using false affidavits to initiate [debt collection lawsuits]. The affidavits claimed the person signing the paperwork had direct knowledge of the situation, when in fact they did not.

    Midland employees had been signing 200 to 400 computer-generated affidavits a day for use in debt-collection actions without any knowledge of the accounts.

    In August, 2011, a U.S. District judge approved a $5.2 million settlement in the Midland Funding vs. Brent case that would have paid $17.38 to each of the approximately 133,000 plaintiffs.(1)

    Eight plaintiffs objected to the ruling, however, arguing the settlement was improper and unfair.

    In a decision published [February 26, 2013], the 6th District Court of Appeals agreed, sending the case back to the district court.

    Among the points the appellate court raised in its reversal was that while the settlement exonerated the debts of the four named plaintiffs, [...] it did not exonerate the debts of the other plaintiffs.

    In fact, the settlement prevented unnamed class members from using Midland’s use of false affidavits against the collection agency in other lawsuits.

    The court said that virtually guaranteed Midland would be able to collect those debts.

    The court wrote that the “disparity in relief is so great that we conclude the district court abused its discretion in finding that the settlement was fair, reasonable, and adequate.”

    The settlement also provided a one-year injunction that required Midland of San Diego, to change its policies. The appellate court argued that Midland would be free to resume its “predatory practices” after that year, should it choose to do so.
Source: Appeals court agrees deal unfair to plaintiffs in Erie County robo-signing case.

For the ruling, see Vassalle v. Midland Funding LLC (6th Cir. February 26, 2013).

(1) From the court ruling:
  • Midland agreed to pay $5.2 million into a common fund for the benefit of the class. From this fund, class counsel would receive attorney fees of no more than $1.5 million, and the costs of administration.

    From the remainder of the fund, eligible class members who timely returned a claim form would receive payments of $10.00 each. In fact, however, the response rate was such that each class member would receive $17.38.

    In addition, the four named plaintiffs were to receive $8,000 collectively.

Actual Knowledge Of Defectively Acknowledged Mortgage & Bona Fide Purchaser Status

Is it possible for a "purchaser" of real estate (for this purpose, "purchaser" = a buyer of said real estate, or a lender acquiring a security interest thereupon) to have actual knowledge of a land document that is defectively acknowledged and recorded in the office of the local land record registry and still be treated as a  bona fide purchaser?

A 2010 federal district court ruling in northern Ohio concluded, based on a state appeals court case, that yes, it appears it is possible in some cases - at least in Ohio. An excerpt from the ruling, in which the district court, sitting in its appellate capacity, reviewed the ruling of an earlier federal bankruptcy court decision:

  • Under Ohio law, it has long been established that a defective deed is not entitled to record and, even if recorded, must be treated as unrecorded, which means it does not afford constructive notice of the conveyance to all the world. See, e.g., Citizens National Bank in Zanesville v. Denison, 165 Ohio St. 89 (1956); Straman v. Rechtine, 58 Ohio St. 443 (1898); Amick v. Woodworth, 58 Ohio St. 86 (1898); Erwin v. Shuey, 8 Ohio St. 509 (1858); White v. Denman, 1 Ohio St. 110 (1853).

    This longstanding rule has been applied more recently as well. See, e.g., MERS v. Odita, 159 Ohio App.3d 1, 5 (Tenth Dist. 2004) ("a defective mortgage is treated as though it has not been recorded").

    Indeed, the Odita court held that a defectively executed, albeit recorded, mortgage was not entitled to priority over a subsequent mortgagee's properly executed and recorded mortgage, even though the subsequent mortgagee had actual knowledge of the prior mortgage. Id. at 9.

    In so holding, the Odita court acknowledged that its ruling may seem unfair given the actual knowledge of the subsequent mortgagee. However, after a careful historical analysis of Ohio law upon the subject (See Odita, Id. at 9-10), the court explained:

    [A]lthough this court recognizes that the current ruling may seem intuitively unfair or inequitable to some observers, because there exists a significant line of authority supporting the ruling, we follow these precedents based upon stare decisis and to lend stability to future property transactions.

    Id. at 10
Source: Bank of Am., N.A. v. Corzin, Case No. 5:09 CV 2520, No. 08-54674, Case No. 09-503, 2010 U.S. Dist. LEXIS 8755 (N.D. Ohio Feb. 2, 2010).

(1) The Odita court's discussion of the apparent inequity in the case law, as it relates to sloppy banksters and other careless secured lenders, follows:
  • {¶ 21} It would seem that, as a matter of principle, a defectively executed mortgage should be superior to a subsequent legal interest if the subsequent legal interest was acquired with notice of the prior defectively executed mortgage. See 69 Ohio Jurisprudence 3d, Mortgages and Deeds of Trust, Section 103, supra. However, "[w]hile this is the rule in many jurisdictions, the rule is otherwise in Ohio because of the recording statutes." Id.

    Notwithstanding, with property rights it is not necessary that the outcome be the best outcome possible in each case; only that the outcome be consistent across every case so as to provide reliability and predictability.

    In addressing an issue similar to that in the present case, the Ohio Supreme Court noted that it was constrained by cases that had been affirmed and adhered to by subsequent legal authority for many years. See White v. Denman (1853), 1 Ohio St. 110, 115, 1853 WL 2. The court was also mindful that its decision was based on the construction given to a statute, had relation to rights of property, and had become a rule of property in determining priorities among creditors. Id. The court then explained:

    Stability and certainty in the law, are of the very first importance. Hardships may sometimes result from a stern adherence to general rules. This is unavoidable under any system of jurisprudence. Some barrier is essential to guard against uncertainty. If judicial decisions are subject to frequent change, it would disturb and unsettle the great landmarks of property. The certainty of a rule is often more important than the reason of it; and in the case now before us, we think that the maxim, stare decisis et non quieta movere, is the safe and judicial policy, and should be adhered to. If the law, as heretofore pronounced by the court, in giving a construction to the statute, ought not to stand, it is in the power of the Legislature to amend it without impairing rights acquired under it.

    Id. at 115.

    {¶ 22} Therefore, although this court recognizes that the current ruling may seem intuitively unfair or inequitable to some observers, because there exists a significant line of authority supporting the ruling, we follow these precedents based upon stare decisis and to lend stability to future property transactions. For these reasons, appellants' first and second assignments of error are sustained.

More On Defectively Acknowledged Instruments

More on defectively acknowledged instruments, courtesy of, and presented here for general information only (Reliance on these cases by any reader of this blog is not recommended without first doing further research to determine the currently applicable state law):

  • Some statutes require that an instrument must be acknowledged before recording. In such a situation, if the certificate of acknowledgment is materially defective and does not establish a valid acknowledgment either active or presumptive, then the actual recording of the instrument will not impart constructive notice to third parties. A defectively executed mortgage is valid between the parties in absence of fraud.[i]

    In Bank of Am., N.A. v. Corzin, 2010 U.S. Dist. LEXIS 8755 (N.D. Ohio Feb. 2, 2010), it was observed that a defectively executed mortgage, although recorded, is not entitled to priority over a mortgage that is executed and recorded subsequently in a proper manner, even though the subsequent mortgagee had actual knowledge of the prior mortgage.

    In Mortg. Elec. Registration Sys. v. Odita, 159 Ohio App. 3d 1 (Ohio Ct. App., Franklin County 2004), the court observed that a defectively executed mortgage although recorded, is treated as though it is not recorded. Therefore, a defectively executed mortgage without proper acknowledgement of the mortgagor by a notary will not be entitled to priority over a subsequent, properly recorded mortgage.

    In Gregg v. Georgacopoulos, 990 S.W.2d 120 (Mo. Ct. App. 1999), the court observed that if the formal acknowledgment is defective, the instrument is not invalidated between the parties or persons having actual notice of the deed. The recordation of the unacknowledged instrument is a nullity and will not provide constructive notice to any subsequent purchaser. Therefore, only purchasers for value without notice can take advantage of a defective acknowledgment.

    However, a deed to secure debt is considered as valid between the parties even if it is unattested or improperly attested.[ii] Recordation of an improperly attested deed to secure debt will not provide constructive notice of the contents or existence of the deed.

    [i] Seabrooke v. Garcia, 7 Ohio App. 3d 167 (Ohio Ct. App., Lorain County 1982),

    [ii] In re Updike, 93 B.R. 795, 797 (Bankr. M.D. Ga. 1988).

Sunday, March 10, 2013

Broker Sues Freddie For Blacklisting Him On Suspicion Of Improperly Counseling Customers On Short Sale 'Shuffles'; Feds Respond By Raiding His Real Estate Office

In Livonia, Michigan, the Observer & Eccentric reports:

  • Former state Attorney General Mike Cox, who represents the owner of the Livonia-based realty raided Wednesday by the FBI, said he expects no charges will be filed against his client because he hasn't broken any laws.

    “I think it will turn into a whole bunch of nothing,” he said. “I haven't seen one thing that would lead to a charge.”

    Cox said the FBI raided William Elias's Livonia and Brighton offices because the Federal Home Loan Mortgage Corp. (Freddie Mac) told law enforcement officials he was committing fraud by hiding the fact some of his short-sale customers had bought second homes. Cox said Freddie Mac is going after Elias and his businesses, including Elias Realty, because he does more short sales than anyone else in Michigan.

    Cox said Thursday he had not seen a copy of the search warrant.

    Elias sued Freddie Mac in U.S. District Court Jan. 31, saying his businesses were unjustifiably blacklisted and have lost 500 clients and more than $2 million in revenue. Freddie Mac placed Elias on its exclusionary list in November, meaning it could not participate, either directly or indirectly, in any Freddie Mac transaction.

    In a letter Oct. 1 to Elias, Freddie Mac alleged Elias “instructed borrowers to purchase a new home prior to applying for short sale assistance on the Freddie Mac loan,” the lawsuit says, and the short sale packages submitted to the Freddie Mac servicers on behalf of the borrowers “failed to disclose the acquisition of the new home.” Freddie Mac also alleges the inability of the borrowers to repay the Freddie Mac loans was “not genuine” or “was created as a result of the purchase of the new homes made possible through Elias and his companies.”(1)

    Elias denies all the allegations.
  • Cox said Elias never broke any Freddie Mac rules; he simply explained them to people.

    According to Freddie Mac, people generally qualify for a short sale by demonstrating one of four hardships: divorce, debt, disability or distant relocation. They also qualify if they haven't paid their mortgage for three months, Cox said. “He doesn't tell them what to do,” he said, adding that Freddie Mac guidelines encourage some homeowners to forego payment of their mortgage if they do not qualify by virtue of a death, divorce, disability or distant relocation.

    These same regulations do not prohibit potential short sale homeowners from purchasing a second home with lower payments before they stop paying on the first mortgage, Cox said.
For the story, see Cox doesn't expect charges against Elias Realty (Short-sale customers caught in quagmire).

See also Livingston Daily: FBI raid raises questions about short-sale deals.

(1) According to a Detroit Free Press story (see FBI raids William Elias' realty offices, Agents sought files on 23 properties):
  • Elias, 38, was until this fall a familiar presence on local radio and television, where he advertised his real estate services with a showman's flair. He encouraged frustrated homeowners who were underwater on their mortgages to erase their debt by dialing 877-CALL-WILL.

    The ads went off the air soon after Elias received notice in October that the Federal Home Loan Mortgage Corp., known as Freddie Mac, would add his businesses to its "Exclusionary List" of agents and lenders with which it will not do business because of alleged unsavory practices.
An April, 2012 story attributed to reporter Greta Guest in the Detroit Free Press says this about Elias:
  • And he’s advised homeowners who feel trapped in underwater mortgages to buy a new home before starting the short-sale process. It could be hard to get approved for a mortgage if the lender knows you are doing a short sale even if you haven’t missed payments.

    Am I tricking the bank? Absolutely not. There are no laws against this, and the banks can’t turn down an applicant who qualifies for two mortgages just because they want to,” Elias said. “I hope I’m looked at as helping people.”

Some Unscrupulous Real Estate Operators Employ 'Reverse Staging' Tactic To Beef Up Profits When Running Short Sale Flopping Conspiracies

A recent story from Northern California NPR/PBS-affiliated TV & radio station KQED on mortgage fraud had this excerpt describing a growing real estate fraud - short sale "flopping":

  • Flopping: In one widely publicized case, a homeowner spread possum urine around the house, turned up the heat and closed all the windows for a few days. Why?

    The seller wanted to convince a bank’s appraiser the house wasn’t worth as much as it actually was ahead of a short sale. The bank is already accepting a write-down of the property's value, but the fake evidence drops the price tag even lower.

    The impression of reduced value can be gained with less aromatic strategies than urine, like ripping out ceiling fans or air conditioning. Think of it as “reverse staging.” The seller unloads the home for the discounted price to an accomplice, who can then clean it up and flip it for a quick gain. The real estate agent is typically in on this conspiracy, too. Average take: $55,000.

Big Banksters Turn Over Information To Regulators Indicating That 700+ Military Members Were Slammed With Wrongful Foreclosures

The New York Times reports:

  • The nation’s biggest banks wrongfully foreclosed on more than 700 military members during the housing crisis and seized homes from roughly two dozen other borrowers who were current on their mortgage payments, findings that eclipse earlier estimates of the improper evictions.

    Bank of America, Citigroup, JPMorgan Chase and Wells Fargo uncovered the foreclosures while analyzing mortgages as part of a multibillion-dollar settlement deal with federal authorities, according to people with direct knowledge of the findings. In January, regulators ordered the banks to identify military members and other borrowers who were evicted in violation of federal law.

    The analysis, which was turned over to regulators in recent days, provides the first detailed glimpse into the extent of wrongful foreclosures amid the collapse of the housing market. While lenders previously acknowledged that they relied on faulty documents to push through foreclosures, the banks claimed borrowers were rarely evicted by mistake, including military personnel protected by federal law.

    That thesis, which underpinned the government’s response to the financial crisis, helps explain why homeowners languished for years without relief. The revelations of more pervasive harm could provide fresh ammunition for Wall Street critics and prompt regulators to adopt a tougher stance.

    Housing advocates say the findings also underscore the broader flaws with the settlement. In the latest negotiations, according to people briefed on the talks, the banks secured favorable terms for doling out some aid, a deal that could diminish the relief to homeowners.