The Home Equity Theft Reporter Cases & Articles: 11/01/2008

Sunday, November 30, 2008

Central Florida Foreclosure Conciliation Program Begins In December

In Central Florida, the Bradenton Herald reports:

With foreclosure cases swamping local courts, the area’s top judge is planning a novel approach: Forcing lenders to talk with borrowers. Saying he wants to break “the wall of silence” between lenders and homeowners, 12th Circuit Chief Judge Lee Haworth soon will require them to discuss possible ways of avoiding foreclosure before it actually happens.

“Forcing the parties to slow down and discuss possible solutions is a good thing,” he said Monday. The new Homestead Foreclosure Conciliation Program likely is the first of its kind in Florida, Haworth said. The program applies to foreclosure suits filed on or after Dec. 1 against homesteaded residential properties in Manatee, Sarasota and DeSoto counties.

For more, see Local judge says borrowers, lenders must see eye to eye.

Go here for more on Florida's 12th Circuit Homestead Foreclosure Conciliation Program:

Saturday, November 29, 2008

N. Virginia Man Cops Plea In Fraud Case; Allegedly Pocketed Refinancing Proceeds Intended To Pay Off Existing Liens, Sold Same Loans Multiple Times

From the U.S. Attorney's Office (Eastern District - Virginia):

Vijay K. Taneja, age 47, of Fairfax, Virginia, pleaded guilty to one count of conspiracy to commit money laundering in connection with a mortgage fraud scheme involving his company, Financial Mortgage, Inc., (“FMI”), which originated and sold mortgages on residential properties in the Washington, D.C., metropolitan area.

According to the press release, the allegations against Taneja contained in court documents supporting the guilty plea include:

creating fictitious loans with bogus loan closings,
selling the same legitimate loan to multiple investors, and
pocketing the proceeds generated from refinancing loans, when the bulk of those proceeds were intended to payoff prior mortgages on the same properties.

Court documents also state that for at least part of the scheme, Taneja conspired with the owner of TitlePro, a now-defunct Fairfax, Virginia title company, the press release states.

For the U.S. Attorney's press release, see Fairfax Man Pleaded Guilty in $33 Million Mortgage Fraud Case.

Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. sneaky slick escrow agents gamma

Upstate NY Developer Faces Felonies For Allegedly Using Buyers' Deposits For Costs Unrelated To Building Their Homes

In Saratoga Springs, New York, the Schenectady Gazette reports on once-thriving homebuilder James McLagan who, once the real estate market tanked, now finds himself facing six felony grand larceny counts and a misdemeanor charge of scheming to fraud along with a number of civil lawsuits:

[P]ublic records show that McLagan’s mortgage company and other creditors say he stopped paying his bills sometime last year, after he had already racked up hundreds of thousands of dollars in mechanic’s liens from contractors and creditors.

That may mean he used housing deposits from customers to pay other bills rather than for supplies and contractor labor costs for their houses, which is illegal, [Saratoga County District Attorney James Murphy III] said.

“In these particular criminal charges, we’re alleging that he intentionally stole money and didn’t use the money he was given by the homeowner for materials or products that were to be used specifically in the home that was being built,” he said.

[DA Investigator Rich] Martin noted that state law requires builders who take money up front to put it into an escrow account and only draw on it for expenses for that home.

For more, see Boom times over for arrested developer.

For other posts on homeowners left in the lurch due to actions by builders/contractors, go here, go here, go here, and go here. StiffingContractorsZeta

Friday, November 28, 2008

Hawaii Feds Probe Alleged "Bogus Bond" Foreclosure Rescue Scam; Homeowners Clipped Out Of $300K+

In Hawaii, The Honolulu Advertiser reports:

The FBI is investigating several local companies that allegedly bilked homeowners out of more than $300,000 on O'ahu, the Big Island and Maui with false promises to help them avoid foreclosure, according to local lenders and law enforcement officials.

The families, many of which are Native Hawaiian, were charged between $2,500 and $10,000 to attend seminars or counseling sessions on avoiding foreclosure, and were told they would receive bonds worth $1 million(1) that could be used to pay off the outstanding balance of the mortgage. Officials said the bonds were bogus and no mortgages were paid off.

For more, see Homeowners targets of scam (Bogus bonds sold as mortgage relief landed many in foreclosure).

Las Vegas Man Pleads Guilty In Foreclosure Rescue, Transfer Tax Evasion Schemes

In Las Vegas, Nevada, the Las Vegas Sun reports:

A 64-year-old Las Vegas man, Mathew Marion, pleaded guilty [Thursday] morning to a mortgage fraud scam. [...] The investigation revealed that between July 2007 and November 2007, Marion falsely told homeowners facing foreclosure that he would buy their houses and land in Clark County for a price that equaled the sum of the outstanding mortgages, together with a small cash payment, and promised that he would pay off the mortgages to prevent the properties from going into foreclosure.

Reportedly, the investigation also uncovered a scheme designed to allow Marion to conceal his identity and avoid paying transfer taxes to the county.(1)

For more, see Las Vegas man pleads guilty to mortgage loan scam.

For the Nevada Attorney General press release, see Attorney General Announces Guilty Plea In Mortgage Loan Scam.

(1) According to the story, Marion was sentenced to pay a $20,000 fine to the state and ordered that he pay restitution to Clark County of $89,990.60 for property transfer taxes that were owed on properties. He was also ordered to pay restitution to the victim homeowners in the amount of $43,009.40. The total restitution payment is $130,000. He reportedly pleaded guilty to nine gross misdemeanor counts of making false representations on titles and one count of gross misdemeanor of making a fraudulent conveyance in connection with a mortgage foreclosure rescue scam, Nevada Attorney General Catherine Cortez Masto said.

Thursday, November 27, 2008

Colorado AG Foreclosure Rescue Crackdown Hits 15 Firms

In Denver, Colorado, the Rocky Mountain News reports:

[Colorado Attorney General John] Suthers [...] said he has taken action to protect homeowners who are in foreclosure from “rescue” firms that are not following Colorado’s Foreclosure Protection Act, which he supported and saw passed during the 2006 legislative session. So far, his office cease and desist agreements with 15 companies to prevent them from operating in Colorado until they follow this law.(1)

Many distressed homeowners in foreclosure are bombarded with solicitations from companies that offer to help save their homes. Under the Foreclosure Protection Act, homeowners enjoy many protections against abusive tactics. Rescue firms cannot accept an upfront fee and must provide the homeowner with a contract that specifies the services to be performed. Rescue firms are also prohibited from taking a lien or interest in the title to the home unless they provide certain disclosures.

For more, see Suthers cracks down on mortgage fraud.

(1) Under the cease and Desist agreements, seven rescue firms have agreed to cease operations in Colorado until they comes into compliance with the Foreclosure Protection Act. Companies that have agreed to cease & desist during 2008 include: Crisis Management, LLC, in Glendale, Arizona; Davis Foreclosure Assistance, Englewood, N.J. Debt Advocacy Center; Cleveland; Franklin Equity, Santa Ana, Calif.; HomeAssure, New York, N.Y.; National Foreclosure Counseling Servicesl Jacksonville, Fla.; and New Hope Modifications, Bellmawr, N.J. An additional eight companies have previously reached cease and desist agreements with the attorney general since the Foreclosure Protection Act was enacted, including one Colorado company, Denver Home Rescue.

Fee-Based Loan Modification Firms Require State Mortgage Brokerage License When Working With Colorado Homeowners, Says State Regulator

In Denver, Colorado, the Rocky Mountain News reports:

Only licensed mortgage brokers may provide home loan modifications in Colorado under the new Mortgage Broker Licensing Law, the Colorado Division of Real Estate reminded consumers on Wednesday.(1) The reminder came because of the increased number of complaints the division has received about loan modification companies.

For more, see Loan modifications require mortgage broker license.

See also, The Denver Post: Modified- loan services face scrutiny:

"We are getting a considerable number of complaints from homeowners who are being charged high fees with no results," said Zachary Urban, division spokesman. [...] Struggling homeowners are paying $4,000 to $6,000 upfront and not receiving the services that were promised, Urban said.

Go here for the recently enunciated Colorado Division of Real Estate Position Statement on Loan Modifications.

(1) Loan modification companies purporting to assist homeowners in backing out of bad loans by analyzing mortgage documents to find errors committed by lenders in violation of Federal and state lending and consumer protection laws may also need a law license in the states they are operating in, judging by legal actions against such firms alleging, among other things, the unauthorized practice of law recently brought in a Tennessee Attorney General lawsuit, and a Florida Attorney General lawsuit.

Loan Modification Firm Renegs On Money-Back Guarantee, Say Customers, Company Sales Rep

In San Diego, California, KGTV-TV Channel 10 recently ran a story in which it interviewed two unsatisfied customers and a former sales representative of a local company that reportedly took upfront fees (about $4,000) in exchange for money-back guaranteed promises to help lower loan payments, principal amounts on loans, and interest rates on the customers' home mortgages.

According to the story, the firm failed on its promises to the two customers, the customers haven't gotten their refunds, the sales rep quit after a couple of his clients didn't receive their promised refunds, and court records show the company has been already been sued by dissatisfied customers.

For more, see Company Accused Of Using Housing Crisis For Profit, and the Channel 10 I-Team Investigation blog on People’s First Financial.

Go here for the KGTV Channel 10 video report.

Wednesday, November 26, 2008

Alleged Long Island Foreclosure Rescue, Equity Stripping Scammers Among 16 Included In Two Federal Fraud Indictments

In Nassau and Suffolk County, New York, Newsday reports:

[F]ederal officials yesterday arrested 16 people who they said were involved in two multimillion-dollar Long Island mortgage fraud schemes, including one suspected of being tied to a drug distribution ring. The schemes are believed by investigators to have bilked lenders of a total of $13.9 million through finance companies in both Nassau and Suffolk counties.

Those arrested [in the alleged foreclosure rescue, equity stripping scheme] included Robert Guerrero, 33, who Brooklyn federal prosecutors said controlled Property Cash Inc. of Greenlawn. According to an indictment unsealed yesterday, Property Cash was nominally in the name of his girlfriend, Alison Edelman, 30, who was also charged. Federal agents also arrested Gary Jacques, 33, who according to court papers controlled Home Cash Inc. of Huntington Station.(1)

According to the indictment, Guerrero and Jacques used straw buyers with good credit to fraudulently obtain mortgages to pay for homes in Huntington, Greenlawn, Bay Shore and Uniondale at inflated prices.

Guerrero and Jacques gained control of the properties through use of a "foreclosure rescue scheme" in which they promised homeowners in danger of defaulting on their mortgages that they could sign their properties over to Home Cash or Property Cash, a method that stole the equity, the indictment charged.

The various straw buyers, who were paid up to $10,000 for their participation, had their credit inflated by Guerrero and Jacques, the indictment stated. Once Guerrero and Jacques got the properties, they flipped them at prices inflated with the help of licensed appraisers, prosecutors charged. The scheme lost lenders $8.8 million, prosecutors said.

For more, including the details of the second alleged mortgage fraud case, see Feds accuse 16 in LI mortgage fraud schemes.

S. California Group Claiming "Sovereign" Immunity From Laws Seize Vacant Foreclosures & Rent Them Out, Leaving Authorities Scratching Their Heads

In Southern California, The Press Enterprise reports on a local outfit claiming to be a religious orgainization with "soverieign" immunity from federal and local laws that, according to some local real estate agents, is going around seizing vacant foreclosed houses by recording legitimate looking deeds with the county recorder, and then turning around and renting the vacant homes to squatters.

Law enforcement authorities appear to be somewhat befuddled about what to do about this group since, up until now, all they have been able to do is initiate an investigation.

For the story, see Would-be homebuyers find themselves in ownership limbo.

Tuesday, November 25, 2008

Mortgage Audit Services Offered To Homeowners In Financial Trouble

The Boston Herald recently ran a story on the mortgage audit industry, a group that is offering their services to homeowners in trouble with their mortgages:

[M]ortgage auditors review customers’ loan papers for forged signatures, sham home appraisals or other illegal acts. Any wrongdoing can strengthen financially strapped homeowners’ hands in negotiations with lenders.

Many customers are seeking “loan modifications,” where banks agree to cut homeowners’ interest rate or otherwise change mortgage terms to help homeowners avoid foreclosure. Others want lenders to OK “short sales,” where borrowers sell homes in today’s weak market for less than their unpaid mortgage balances and banks simply “eat” the difference.

***

Common flaws include math errors on federal Truth in Lending Act forms, which by law must accurately list a mortgage’s total lifetime cost within $35. While such mistakes can seem minor, they often give homeowners just enough leverage to get out of fraudulent loans.

Reportedly, one firm featured in the story performs about 100 checks on each customer’s loan, producing five- to 15-page reports and charging about $350 to $600.

For more, see Mortgage ’auditors’ help people fight foreclosure. missing mortgage foreclosure docs gamma UndoMortgageLoans TILAdelta

Illinois AG Continues Putting The Hammer On Upfront Fee Foreclosure Rescue Operators As Seven More Lawsuits Are Filed

From the Office of the Illinois Attorney General:

Attorney General Lisa Madigan [yesterday] announced that she has filed seven new lawsuits(1) against so-called mortgage “rescue” companies and warned consumers about an alarming rise in these scams that prey on vulnerable homeowners on the verge of foreclosure.

***

In each of the lawsuits filed late [Monday], Madigan alleges that con artists targeted homeowners who have fallen behind on their mortgage payments and promised that, for an upfront fee, the scammers could negotiate with the mortgage lenders to reduce the payments and save their homes.

However, according to Madigan’s complaints, after these “consultants” collected the upfront fees, they failed to negotiate or perform any services on behalf of the homeowners, leaving consumers at risk of losing their homes to foreclosure.

This tactic violates Illinois’ Mortgage Rescue Fraud Act, which prohibits mortgage rescue companies from requiring payment from consumers prior to completing all the terms of a rescue contract. [...] With these new filings, Madigan has brought lawsuits against 22 mortgage rescue fraud companies.

For more, see Madigan Sues Seven Companies For Mortgage Rescue Fraud (Attorney General Urges Consumers to Resist “Rescue” Schemes and Seek Reputable Assistance).

(1) Those companies sued, according to the Illinois AG press release (and links to copies of the lawsuits), are:

National Foreclosure Counseling Services, 7954 Baymeadows Way, Jacksonville, Fla.,
Foreclosure Solutions, 488 Pine Street, Burlington, Wis.,
Homestead Protection Services, 151 Southhall Lane, Maitland, Fla.,
Home Foreclosure Solutions, 17550 South Williamsburg Drive, Plainfield, Ill.,
Foreclosure Experts, 220 S. State Street, Chicago,
Mason Capital Group, 18375 Ventura Blvd., Tarzana, Ca.,
StopMyForeclosure.net, 3914 Abbotsford Road, Rockford, Ill.

Tennessee AG, MALS Tag Another Upfront Fee Foreclosure Rescue Operator With Lawsuits

From the office of the Tennessee Attorney General:

Tennessee Attorney General Bob Cooper filed suit [Tuesday] to stop another Tennessee foreclosure rescue company and its principal from charging service fees to consumers and then failing to follow through with the services promised. The lawsuit filed [Tuesday] alleges violations of consumer protection laws.(1)

***

The State’s complaint, which was filed in Shelby County Chancery Court, also alleges violations of the Tennessee unauthorized practice of law statutes(2) and the Tennessee Credit Services Businesses Act.

Memphis Area Legal Services also filed a lawsuit today in Shelby County Chancery Court against the defendants.(3)

For the AG's press release, see Attorney General Files Suit Against Tennessee Foreclosure Rescue Company, Requests Asset Freeze, Halt To Alleged Unlawful Activities.

See also, Eyewitness News ABC24-CW30: Scammed into Foreclosure.

(1) According to the AG's press release, Attorney General Cooper on behalf of Mary Clement, director of the Division of Consumer Affairs, sued Patrick & Patrick, LLC doing business as Patrick & Patrick Loss Mitigation Services, and its principal, Denise Patrick, also known as Sondrette D. Patrick. The defendants are also doing business via the Internet at www.patrickandpatricklm.com.

(2) Bringing charges of unauthorized practice of law against upfront fee loan modification / foreclosure rescue operators appears to be gaining steam - the Florida Attorney General reportedly made similar allegations in a recent lawsuit brought against a loan modification company.

(3) Last month, the Tennessee Attorney General's office and Memphis Area Legal Services also filed multiple lawsuits against another upfront fee foreclosure rescue operator, according to this press release.

Monday, November 24, 2008

Thousands Of Foreclosures Are Void, Says Massachusetts Class Action Demanding Lenders & Their Lawyers Prove Note Ownership

In Boston, Massachusetts, the Boston Herald reports:

A class action lawsuit has been filed that could stop hundreds of foreclosures and reverse thousands of others. “The rush to foreclose has turned the process into a circus,” said Gary Klein, an attorney representing two Boston homeowners facing foreclosure. "We’re asking these lenders to prove they hold the mortgage.”

The suit filed in Suffolk Superior Court alleges that since 2004 GMAC Mortgage, Deutsche Bank National Trust, Harmon Law Offices and Ablitt Law Offices foreclosed on properties despite the fact that they do not own or were not assigned the mortgages.

Klein estimates that as many as 1,000 homes in Massachusetts could be affected and thousands more going forward. If the lawsuit is successful, foreclosures in the pipeline would be placed on hold until lenders can prove they own the mortgage. If a foreclosure sale has taken place without the proper authority, it could be set aside.

For more, see Lawyer to lenders: Prove you own mortgages (or try here for a free version).

See also, The Boston Globe: Lenders' right to foreclose is challenged:

"Massachusetts' foreclosure process has become an undisciplined and lawless rush to seize homes," the suit alleged. "Many thousands of foreclosures are plainly void under statute and settled Massachusetts case law."

For posts that reference the failure of some mortgage lenders and their attorneys to prove ownership of the promissory note when starting foreclosure actions, Go Here, Go Here, Go Here, and Go Here. missing mortgage foreclosure docs gamma

Maryland State Lawmaker's Bankruptcy Filing Stalls Completion Of Sale Leaseback, Foreclosure Rescue Court Case

In Annapolis, Maryland, The Capital reports:

Del. Tony McConkey filed for bankruptcy [Monday], delaying a jury trial that was set to begin today in a civil case in which he is accused of scamming a woman out of her home. A judge ruled in September that the Severna Park Republican violated state law when he bought the home of a Pasadena woman facing foreclosure.

The jury was set to rule on additional allegations of fraud, misrepresentation and determine final damages, but Mr. McConkey's bankruptcy filing puts a halt to that process. He filed for bankruptcy under Chapter 7 yesterday in U.S. Bankruptcy Court of Maryland.

***

Circuit Court Judge D. William Sampson ruled in September that Mr. McConkey violated the Protection of Homeowners in Foreclosure Act [Sec. 7-301 to 7-325] in 2006 by acting as a foreclosure consultant to Ms. [Teresa] Milligan and then buying her home. Judge Sampson declared Mr. McConkey's deed to the house null and void, but did not decide how much Ms. Milligan should receive in damages.

For more, see McConkey's bankruptcy filing delays foreclosure case.

See also, WBAL-TV Channel 11: Delegate Facing Lawsuit Files For Bankruptcy (Delegate Accused In Foreclosure Fraud Scheme).

Sunday, November 23, 2008

Queens DA Indicts Nine In Alleged Straw Buyer Scam Using Fake Identities To Fradulently Flip Homes; Widow Has Home Sold Out From Under Her

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

An accused sex tour operator and a high-ranking Brooklyn court official were among nine people indicted Tuesday in a $1.4 million mortgage fraud scheme that featured stolen identities and an elaborate series of masquerades.(1) In the scheme, con artists using fake IDs to conceal their participation bought and sold two Queens properties and one in Brooklyn and then took out the mortgages, authorities said.

***

The victims included a Jamaica woman who owned her home outright and now faces foreclosure; and a New Jersey woman, whose identity was stolen and is now fighting off banks over mortgages fraudulently taken out in her name, said [Queens District Attorney Richard] Brown.

In addition to the accused sex tour operator (who is also a certified public accountant) and the now-chief deputy county clerk for Kings County (an attorney who, prior to taking his current position, was in private practice at the time of the alleged bad acts and, according to this New York Post article, the brother of a Brooklyn trial judge), a disbarred attorney who allegedly handled all the closings of the transactions involved was also among the indicted, a Queens DA press release said.

For more, see Court clerk indicted in mortgage scam.

Arizona Refinancing Scam Leaves Elderly Woman Facing Loss Of Home Of 45 Years; Court Orders $343K+ In Restitution To Four Seniors

From the Arizona Attorney General:

Attorney General Terry Goddard [...] announced that a Phoenix mortgage broker has been sentenced to prison for operating a residential mortgage scam that defrauded four Phoenix seniors of more than $400,000.

***

According to court documents, [Rick Thomas] McCullough was the president of licensed mortgage broker CactusCash, Inc. In 2005 and 2006, he used this position to persuade four seniors, two single women and one couple, to refinance their homes through him for amounts far greater than the balance of their existing mortgages.

McCullough also convinced all four victims to invest their net refinancing proceeds with him, effectively obtaining for himself much of the equity that these elderly clients had in their homes. McCullough claimed that he would invest the victims’ funds in real estate and personally guaranteed the loans. [...] In fact, McCullough used the money to make personal purchases, including a $42,000 ring for his wife.

***

"Because of this vicious scheme, an elderly woman may lose her home of 45 years and a 65-year-old victim must choose between a needed surgery and making the new mortgage payment," said Goddard.

For the Arizona AG press release, see Phoenix Mortgage Broker Who Defrauded Seniors Gets Prison Term.

Saturday, November 22, 2008

Investors In Countrywide MBS Cry Foul In Bank Of America $8.4B Loan Modification Settlement With State AGs

The Wall Street Journal reports:

Bank of America Corp.'s decision to embark on an $8.4 billion home-loan-modification program to settle charges brought by state attorneys general against Countrywide Financial Corp. was hailed as a milestone when the deal was announced this fall. But apparently nobody talked to one group that will shoulder much of the settlement's costs: investors who hold securities backed by Countrywide mortgages.

***

Bank of America didn't seek investor approval before agreeing to the settlement "because the design of the program was based in large part on the delegated authority" in the contracts, [a Bank of America spokesman said].

But some investors believe they should have been contacted first. [...] Other investors said Bank of America is moving much of the cost of the settlement to investors when it should be paying those costs itself. [... T]hey said that many of these loans violated representations and warranties made when the mortgages were packaged into securities. As a result, they said, Bank of America should repurchase the loans before modifying them.

"This is literally an attempt to settle a dispute with state attorneys general on predatory lending claims with someone else's money," said one money manager. "In 10-plus years in the market, I've never seen anything as outrageous as this."

For more, see Investors Hit BofA Loan Modifications.

Go here for other related posts on mortgage servicing issues. MortgageServicingIssuesAlpha

$8B+ Countrywide / B of A Loan Modification Lawsuit Settlement May Yield As Little As $1B, Complains Advocacy Group

Legal Newsline reports:

Just a month ago, when the terms of the largest settlement in home mortgage history were announced, many hailed the settlement as the first significant step to providing needed relief to homeowners buried in rising interest rates and declining property value. But some [...] are now taking issue with the deal, claiming the Bank of America settlement will protect Wall Street investors more than it will Main Street customers.

For more, see Countrywide settlement may favor Wall Street over Main Street.

Fine Print In Loan Servicing Contracts Stalling Loan Mods?

The Washington Post reports:

More than a year into the foreclosure crisis, whether a distressed homeowner is eligible for a more affordable mortgage can often come down to the fine print. That fine print in contracts that govern mortgages bundled into investment pools dominated a House Financial Services Committee hearing yesterday as lawmakers questioned whether lenders are doing enough to keep people in their homes.

Millions of loans are held in these pools, called securitizations. They are governed by contracts that dictate what changes can be made to the loans. Lawmakers and industry officials debated yesterday the degree to which those agreements are making it difficult to modify a homeowner's loan and thus hampering foreclosure prevention efforts.

For more, see Foreclosure Relief Is Getting Lost In Fine Print of Loans.

Friday, November 21, 2008

Tanking Market Makes It Tougher To Split As Divorcing Spouses Now Fight Over Who "Doesn't" Get The House

In South Florida, The Miami Herald reports:

During the real-estate boom, couples who divorced would fight over who got the house, betting that the winner could get rich from rapidly escalating prices. [...] Now, in a twist on the classic divorce dispute, houses have become hot potatoes for couples divorcing during the downturn. 'It's like, `You take the house!' 'No, You take the house.' 'I don't want it, you take it,' '' said Drew Sheridan, a veteran divorce lawyer in Kendall.

***

''Instead of an asset where they used to fight for occupancy, possession and ownership, they're now fighting to abandon their personal interest,'' said William Koreman, a divorce lawyer in Hollywood. "Neither of them wants the property because they would be accepting a huge liability.''

In extreme cases, a homeowner has used the mortgage as a weapon of spite, deliberately sabotaging his or her own credit to destroy the credit of the former partner, said Adam Franzen, a Fort Lauderdale family lawyer. Even when couples try to play nice, their disintegrating financial condition turns an amicable split into a war of the roses.

For more, see When couples split, the home is a hot potato (In this period of a declining housing market and negative equity, there's a different kind of divorce battle for custody of the house -- neither spouse wants it).

St. Paul Man Pleads Guilty To Ripping Off His Blind Elderly Mother, Leaving Her Home Of 50 Years Facing Foreclosure

In St. Paul, Minnesota, the Pioneer Press reports:

A St. Paul man reached a plea deal in court Wednesday on charges he stole tens of thousands of dollars from his blind, elderly mother while her health insurance and phone were cut off for nonpayment. Scott Douglas Clark, 53, pleaded to felony theft.

***

The complaint [among other things] alleged that Clark persuaded his mother to sign a quitclaim deed on her St. Paul home and got a reverse mortgage, pulling $29,000 in equity from it and transferring it to his account.

His brother and sister-in-law, who were in the courtroom Wednesday, said after the hearing that Clark was clearly trying to hide a methamphetamine habit. They said the amount he bilked his mother out of was closer to $100,000. [...] Because of the financial mess created by Scott Clark, their mother is in an assisted-living facility, and her home — where she lived for 50 years — is in foreclosure, [the defendant's brother] Todd Clark said.

For more, see St. Paul man reaches plea deal in theft from 79-year-old mother (Man accused of stealing tens of thousands of dollars) (when link expires, try here).

Thursday, November 20, 2008

Obtaining Deficiency Judgments Against Foreclosed Homeowners Not A Pratical Option for Big Lenders

In Lee County, Florida, The News Press reports:

[T]he big news is that at present very few large institutional lenders are even bothering to seek deficiency judgments in foreclosure suits. The main reason is that lenders figure that if someone cannot pay his or her mortgage, then he or she probably cannot pay a deficiency judgment either, and the lender could waste money on an attorney chasing a deficiency judgment and not collect a dime. Instead, lenders focus on getting title to the real estate in a foreclosure suit so they can resell the property and recoup some of their losses. (Note though, that a few smaller banks and hard money lenders are regularly seeking deficiency judgments).(1)

For more, see Lenders don't seem to be pursuing deficiency judgments.

See also, Most lenders not seeking deficiency judgment (Florida often seen as 'debtor friendly').

(1) The article points out that, at least in Florida, deficiency judgments are only available if "personal service of process" has been made when serving the homeowner with notice of the foreclosure action. If the homeowner has already bolted from the home, can't be found, and thereby causes the lender to rely on "constructive service of process" (ie. taking a legal notice out in the local newspaper) to legally serve the homeowner with notice of the foreclosure, deficiency judgments are not available to foreclosing lenders in those cases.

Delay In Bringing Legal Action Sinks Predatory Lending Victims; Judge Allows Foreclosure Sale To Proceed

In Mendham, New Jersey, the Observer Tribune reports on a local homeowner facing foreclosure whose allegations of fraud against a mortgage lender were dismissed by a judge because she waited too long to raise the issues in court.

For the story, see Family under the foreclosure gun (Family says they’re subprime victims and will lose home without last-minute help).

Wednesday, November 19, 2008

Another "Rent-To-Own" Program, Another Horror Story For Tenants

In Killeen, Texas, the Killeen Daily Herald reports on two families who paid $2,500 and $5,000 upfront to enter into rent-to-own real estate purchase arrangements with Robert "Bob Buys Houses" Alford III, a local operator.

In early 2007, two Killeen couples moved into homes they hoped to raise their families in. Now they are out thousands of dollars and desperately counting on people who were strangers just a few weeks ago to help save their dreams.

***

Both families were satisfied with the experience until the original homeowners knocked on their doors. They say now that Alford scammed them out of thousands of dollars and their dream of owning a home.

According to the initial story, Alford originally acquired possession of the homes through agreements with the original owners in deals where, rather than pay off the existing mortgages, he agreed to continue making the payments. He then entered into the rent-to-own deals with the tenants. Now, the original owners are also complaining, saying that the mortgage payments are not being made. According to a subsequent story:

Alford said he never intended to defraud anyone. However, his business model resembles scams documented by the FBI and mortgage lenders in the past. The scam operates by a person agreeing to take on mortgage payments on a property to sell. Instead of selling the property, they rent the property, ask for a large up-front down payment, stop paying the mortgage and leave the homeowner or lenders to clean up the mess.

For more, see:

Real estate woes hit home,
More residents worry about mortgage fraud.

For more on problems with "Rent To Own", "Lease / Option" and "Contract for Deed" real estate deals, go here and go here. rent to own lease purchase option scams yellowstone

Failed "Contract for Deed" Arrangements Leave Ozark Homeowners Facing The Boot

In Springfield, Missouri, KSPR-TV reports a story involving about a dozen families across the Ozarks who pay their mortgage on time but are losing their homes to foreclosure anyway.

The deals reportedly involved a sale to the families using a "contract for deed" arrangement, where the seller pockets an upfront downpayment, and the families agreed to pay the balance in periodic payments over time. As the seller collects these payments, the money is applied to the payments due on an existing mortgage which encumbers the subject home. When the agreed upon payment plan is completed, the homebuyers obtain the legal title to the home.

In this case, it is reported that, at some point, whoever was receiving the periodic payments made by the innocent homebuyers stopped applying the funds to the existing mortgage, triggering foreclosure, and leaving the homebuyers feeling like they just had the rug pulled out from under them.

For the story, see Ozarks Homeowners Lose Homes They Never Really Owned.

For story update, see:

Springfield Business Journal: Foreclosures prompt backlash from The Real Estate Co.,
Springfield News-Leader: Homeowners hurt by Greenleaf have option (One resident bypasses company, pays straight to titleholders).

For more on problems with "Contract for Deed," "Rent To Own", and "Lease / Option" real estate deals, go here and go here. rent to own lease purchase option scams yellowstone

Tuesday, November 18, 2008

Sloppy Foreclosures Continue As Florida Homeowner Faces Actions From Two Different Plaintiffs Each Claiming To Own The Same Note & Mortgage

The Law Blog at The Wall Street Journal reports:

[F]or the legal beagles at so-called foreclosure “mills,” which do assembly-line lawyering for lenders and other mortgage owners, the crisis has meant lots of work but also woes, including sanctions and stern lectures from judges (examples here, here and here). Why are judges so frustrated? The increased volume is leading to mistakes and irregularities, which we’ve chronicled before.

Now comes the foreclosure case of Joanne Fredenburg, a widowed homeowner in Lehigh Acres, Fla., where real estate prices have plummeted. Last month Ms. Fredenburg was served with not one but two foreclosure lawsuits from two different plaintiffs that both claimed to own her promissory note and mortgage and said she owed them each more than $276,000. That, of course, is impossible. (Click here and here for the two complaints.)

For more, see Foreclosure Mess: Two Different Plaintiffs Claim to Own Same Mortgage.

Go here for other posts on sloppy foreclosures and assembly line lawyering. SloppyForeclosuresAlpha

Judge Freezes "Presumptively Unfair" Option One / H&R Block Mortgages From Foreclosure Throughout Massachusetts In Discrimination Suit

From the Office of the Massachusetts Attorney General:

Attorney General Martha Coakley’s Office has obtained a preliminary injunction against Option One Mortgage Corp. and H&R Block Mortgage Corp., subprime lenders that originated thousands of loans in Massachusetts. The order, granted Monday [...], prohibits Option One and American Home Mortgage Servicing, Inc. (“AHMSI”), which currently services 9,700 active Massachusetts Option One loans, from initiating or advancing foreclosures on mortgage loans that are considered “presumptively unfair” under the court order.(1)

Under the order, AHMSI must give the Attorney General’s Office at least 30 days notice before it intends to foreclose on any such loan, and if the Attorney General objects, obtain approval from the Court before foreclosing on a loan.

For the Massachusetts AG's press release, see AG Martha Coakley Obtains Preliminary Injunction Against Option One and H&R Block, Accused of Deceptive and Discriminatory Lending Practices.

For the original lawsuit filed in this case, see Commonwealth of Massachusetts v. H&R Block, Inc., et al.

(1) In teeing off on the mortgage lenders, the Court stated that, "[a]nyone with any understanding of home foreclosure recognizes how much injury it causes to the families who resided in foreclosed homes. Consequently, any lender with even a modicum of business morality should recognize that it is immoral, unethical, and unscrupulous to issue a home loan with reckless disregard of the risk of foreclosure.” The Court also rejected the defendants’ attempt to make the Attorney General arbitrate these claims under federal arbitration law.

Monday, November 17, 2008

NYC Jury Convicts Foreclosure Rescue Operators In Sale Leaseback, Equity Stripping Scam

In New York City, Newsday reports:

The owners of a foreclosure rescue company that promised to save struggling homeowners but swindled them out of their houses were convicted Thursday of bank fraud conspiracy charges. Andrea Moore and Michael Irving, who ran a Brooklyn-based company called Homes R Us USA, were part of a group of unscrupulous entrepreneurs who came up with a scheme to profit from the subprime mortgage crisis as it unfolded, prosecutors said.

The company told desperate owners that if they temporarily signed over the deeds to their homes, they could have their mortgages paid for 12 months while they got their finances in order. After a year, they were told, they would get their homes back. In reality, the rescue company immediately saddled the homes with big new mortgages taken out in the names of buyers who never intended to pay them off.

When those bogus buyers failed to make payments, the mortgages went into default, the banks lost the money and in some cases the original owners lost their houses for good. Meanwhile, Homes R Us and a group of affiliated companies pocketed millions of dollars in fees.

***

Several people associated with the scheme previously pleaded guilty. One, Maurice McDowall, described in court papers as a leader of the conspiracy, was sentenced in October to a 10-year prison term.

For the story, see NY jury convicts foreclosure rescue pair.

See also, U.S. Attorney (Southern District, New York) press release: Members Of Foreclosure Rescue Scheme Found Guilty Of Engaging In Multi Million Dollar Mortgage Fraud.

For the original indictment, see U.S. vs. McDowall, et al.

Go here for earlier posts on this story.

Go here for other criminal prosecutions of foreclosure rescue operators.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Another Defendant In Alleged "Bait & Switch" Predatory Loan Scam Takes Plea, 3 Year Prison Sentence

In San Bernardino, California, the San Bernardino Sun reports:

Eli Hassine, one of seven defendants in [one of the county's biggest predatory mortgage lending cases], pleaded guilty to four counts and accepted a sentence enhancement [...] in San Bernardino Superior Court.

Hassine, 25, was originally charged with 47 counts, including conspiracy, grand theft, forgery and filing false documents. As part of the plea bargain, Hassine wrote a four-page letter to the court and admitted that $2.5 million was taken from victims.

Hassine is the fourth defendant to plead guilty in the case, leaving as remaining defendants Tarzana-based Lifetime Financial owner Eric Pony, 26, his sister Paulette Pony, 24, and Jacob Shawn Franco.

***

The investigation is ongoing, prosecutors have said, and there could be hundreds of other homeowners who have fallen victim to a bait-and-switch scheme by operators of Lifetime Financial.

For the story, see Defendant in predatory mortgage case takes plea bargain.

The California Attorney General has filed a parallel civil lawsuit against this alleged mortgage fraud operation:

For the AG's civil lawsuit, see People v. Lifetime Financial Inc., et al.,
AG's press release announcing the civil lawsuit - Attorney General Brown Shuts Down Mortgage Scam Artists,

Go here for earlier posts & any updates on this story.

Sunday, November 16, 2008

Mortgage Servicers Fearing On Oncoming Foreclosure Moratorium?

An article from American Banker makes the following observation on the trouble mortgage servicing companies may face if a 90-day federal moratorium is imposed on foreclosures:

With pressure mounting for Congress to enact a 90-day moratorium on home foreclosures, mortgage servicers are warning that the move could have the perverse effect of prolonging the housing downturn.

***

Pooling and servicing agreements typically require that servicers advance all the principal and interest payments, as well as tax, insurance, maintenance, and foreclosure costs, to investors regardless of whether the borrower is paying. Servicers get reimbursed for expenses incurred while a loan is delinquent but only after the property goes into foreclosure, so getting repaid can take nine months to a year.

A foreclosure moratorium would indefinitely extend the advances that servicers pay to investors and come as borrowing facilities that servicers rely on to make advance payments are strained by the liquidity crunch.(1)

For more, see Why Foreclosure Relief Worries Many Servicers.

Go here for other related posts on mortgage servicing issues.

(1) According to the story, the chief financial officer of a New York buyer and servicer of distressed loans likened the state of the servicing industry to the "I Love Lucy" episode in which Lucy is furiously grabbing chocolates off a fast-moving conveyor belt. "The borrowers are just piling up, and servicers are inundated and overwhelmed with calls they can't answer, short sales they can't complete, and not enough staff," he said. "They need more manpower." MortgageServicingIssuesAlpha

Cash-Hemorrhaging Bond Insurers Drag Lenders Into Court For Mortgage Underwriting Shenanigans

Forbes reports:

The housing crisis is not over for bond insurer MBIA. The company is still losing money on dodgy mortgage-backed securities that it insured at the height of the U.S. housing bubble. [...] The bond insurance industry has been hemorrhaging losses as the credit crunch worsens and the financial products the companies insured have plunged in value.

***

MBIA has taken legal action against two loan sellers and servicers, and filed a claim against a third, regarding certain defaulting bundles of second-lien mortgages. The insurer is alleging that certain past loans do not meet eligibility requirements for its protection and that it should therefore not be liable for losses.

[Bond insurer Ambac Financial Group], which was also forced to fortify its reserves against bad residential mortgage loans, said it expects to pull in at least $500.0 million in legal damages related to underwriting shenanigans such as this.

For the story, see Second Mortgages Sting MBIA.

Saturday, November 15, 2008

Ohio Legislature Attempting To Slither Proposed Industry-Friendly Debt Settlement Statute Into Law?

In Columbus, Ohio, a column in The Cleveland Plain Dealer describes "a House-passed bill, pending in the Senate Finance and Financial Institutions Committee, to let "debt settlement" companies charge Ohioans fees of up to 20 cents per $1 of debt." Reportedly, the Governor and the current state treasurer (and now attorney general-elect) have serious reservations about this proposed law, passed in the state house of representatives by a 93-0 vote, and is opposed by the current state attorney general.

The columnist warns:(1)

The bill is pending at a dangerous time of year - for consumers - at the Statehouse. Legislators soon begin a post-election "lame-duck" session. Hot-button bills slither through lame-duck sessions because retiring or defeated ("lame duck") legislators, who can pass laws through Dec. 31, won't face voters again.

For more, see Debt 'rescue' bill would charge Ohioans for something they can do themselves.

(1) According to the Plain Dealer columnist, Thomas Suddes:

The Ohio General Assembly may prove again what a judge ruled long ago: "No man's life, liberty or property are safe while the Legislature is in session."

Hazard Reporting Co., Real Estate Firm Settle RESPA Charges; Allegedly Used Sham Entities To Hide Kickbacks, Cheat Consumers; Will Pay Up To $35M

From the Department of Housing and Urban Development ("HUD"):

The U.S. Department of Housing and Urban Development [recently] announced that it has settled its federal lawsuit under the Real Estate Settlement Procedures Act (RESPA) against Property I.D. Corporation, a large hazard reporting company in California, Realogy Corporation, Cendant Corporation (now known as Avis Budget Group, Inc.) and Coldwell Banker Residential Brokerage Corporation.(1)

***

HUD alleged that Property I.D. Corporation of Los Angeles made improper payments to large real estate brokers in California based on the referral of consumers to Property I.D. Such referral-based payments are kickbacks and prohibited under Section 8 of RESPA.

***

In return for these referrals, the brokers were paid through quarterly payments, $25 per report, or one-quarter of the total report's cost. The sham affiliated businesses did not provide hazard disclosure reports to non-referred customers and shared in profits based solely on the number of referrals made to Property I.D.

For more, see HUD Settles Lawsuit With California Hazard Reporting Company And Real Estate Brokerage (HUD also wins ruling giving it authority to recover illegal profits).

Go here for other HUD Settlement Agreements With Alleged RESPAViolators.

(1) A settlement in a related federal class action lawsuit requires the companies to pay up to a combined $35 million dollars, much of it to California consumers who purchased hazard disclosure reports as far back as 1996.

Friday, November 14, 2008

Queens DA: I.D. Theft Leads To Sale Of Home Out From Under Unwitting Elderly Stroke Victim; Suspects Allegedly Pocketed $95K

From the Queens County, New York District Attorney's office:

Queens District Attorney Richard A. Brown [last week] announced that a brother and sister are charged with stealing the identity of a 68-year-old Jamaica, Queens, man who had been disabled as a result of a stroke and then secretly selling his house out from under him and pocketing the profits.

***

The District Attorney identified the defendants as Shawn Corcas, 38, of [...] St. Albans and Patricia Corcas, 55, of Rosedale. The siblings were arraigned [last week] on an indictment [...]. They are charged with second-degree grand larceny, third-degree grand larceny, second-degree criminal possession of stolen property, third-degree criminal possession of stolen property, first-degree falsifying business records, second-degree falsifying business records, first-degree identity theft and second-degree identity theft.

For more, see Brother And Sister Charged With Fraudulent Sale Of Disabled 68-Year Old Queens Man's Home.

Go here, go here, go here, and go here for other posts related to deed or refinancing scams by forgery, swindle, etc. DeedTheftAlpha

San Antonio Homeowner Alleges Scam As She Pays $10K In Failed Attempt To Save Home From Foreclosure

In San Antonio, Texas, WOIA-TV Channel 4 reports on a local homeowner facing foreclosure who allegedly was scammed out of $10,000 by a woman with a history of approaching cash strapped individuals with offers to save their homes.

[Homeowner Janie] Anderson had gotten a letter from Rosie Divins saying she could help them keep their home. The letter said the Anderson family didn't have to go into foreclosure. Divins claimed she had a way to save their home. Janie Anderson and her husband owed the mortgage company $3,600 dollars.

But, in the end, they wound up giving Divins $10,000. [...] Eventually, the bank foreclosed and Anderson and her husband had to get out.

The News 4 Trouble Shooters found out Janie Anderson is not alone. According to bankruptcy court records at the federal courthouse, at least two other families say Divins did the same thing to them. They claim she charged them thousands of dollars, but they still lost their homes.

This, despite the fact, that a judge told her in 2000 to stop offering people help. [...] The judge said Divins was charging an excessive fee and providing legal services without a law license.

For more, see Family Loses Home and Blames Local Businesswoman.

Thursday, November 13, 2008

NYC Senior Clipped Out $3K After Loan Modification Firm Fails To Renegotiate Home Mortgage

In Mill Basin, Brooklyn, WABC-TV Channel 7 reports:

Evadne is a senior citizen and living on a fixed income. She was worried she would lose her home, so she paid RSR Asset Management nearly three thousand dollars to contact her lender, Washington Mutual, to try to lower her mortgage.

***

"But then once he got the money," [Evadne's grandson Andre Henry] says, "I feel nothing was done." Despite paying three grand for help, her mortgage stayed the same. And that fee? It was non-refundable. And Andre says, RSR Asset Management gave him no answers. "You leave a message, no one calls back. So what are we to do? This is $3000 here we're talking about," said Andre.

***

So, [7 On Your Side] went to the Garden City offices of RSR Asset Management to find out what happened with Evadne's case. But, we never got past the receptionist and numerous calls went unanswered. [...] And as for Evadne's mortgage? After [7 On Your Side] contacted her lender they worked out a fixed rate mortgage at a rock bottom interest rate, saving her hundreds each month.

For more, see Senior saved from foreclosure. New York City

More On Florida AG's Lawsuit Against Loan Modification Firm

In Fort Lauderdale, Florida, WSVN-TV Channel 7 reports on the recent state Attorney General's lawsuit against Outreach Housing, a locally-based loan modification company accused of using unfair and deceptive practices to clip homeowners out of thousands of dollars in upfront fees to renegotiate mortgage terms with their lenders. According to the report, the firm claimed that most mortgages in South Florida were made in violation of some Federal laws and can be undone,(1) and blames its current problems on a couple of attorneys it retained to help its customers.(2) Some of the unsatisfied alleged victims are interviewed, as well as a company representative.

For the WSVN Channel 7 story transcript & link to its video report, see Home Heartache.

(1) According to their website, "Through the efforts of Outreach Housing, a dedicated network of professionals will pursue restitution for thousands of homeowners faced with foreclosure by outlining the TILA and RESPA violations that occurred at the lenders level—bottom-line this effort will allow the homeowner to stay in their home."
(2) According to another local media report, the lawsuit also accuses Outreach Housing of engaging in the unauthorized practice of law.

Wednesday, November 12, 2008

Investigative Report Uncovers Unhappy Customers Of Central Florida "Sale Leaseback" Foreclosure Rescue Operator

In Central Florida, the St. Petersburg Times recently ran an investigative report on a local foreclosure rescue operator promoting sale leaseback arrangements to homeowners facing foreclosure in which title and all rights to the home would be transferred to a so-called "family trust'' with an unrelated trustee.

[O]f the 106 people who signed up for [owner of Foreclosure Prevention Corp. Gideon] Rechnitz's "foreclosure prevention program,'' nearly half lost their homes anyway. Many were confused by the legal documents he asked them to sign and were unable to meet the stringent rental and buyback conditions.(1)

***

The most complex — and confusing — part of the program was the transfer of ownership. Instead of simply selling to Rechnitz, the homeowner signed a warranty deed that gave title and all rights to a "family trust,'' with Rechnitz or his Garco Inc., listed as trustee. That meant Rechnitz could sell the property or do anything else he wanted with it.

Keeping the seller's name on the trust also was a major benefit to Rechnitz. The bank might not realize the property had been sold, and thus Rechnitz could make payments without triggering a due-on-sale clause, requiring the mortgage to be immediately paid in full.(2)

For more, see Homeowners' safety net really wasn't.

(1) According to the story, closing statements obtained by the Times show that the homeowners received no money from the sale, partly because they were assessed extra fees that included several thousand dollars for "preforeclosure administration'' that went to Profitmax — a company of which Rechnitz, 61, is the sole officer and director. Reportedly, sellers were also assessed a fee of as much as $3,000 that went to Recnitz' associate Thomas S. Cook for "foreclosure intervention.'' Cook sometimes notarized the legal documents himself even though state law forbids notary publics from notarizing transactions in which they have a financial interest, the story states. At least one homeowner's closing statement shows he was assessed $31,415 for "reinstatement'' and $6,100 in fees to Cook and Rechnitz, according to the report.

(2) Based on the details in the story describing the sale leaseback deals with some of the homeowners facing foreclosure, the deals described therein could be ripe for recharacterization as equitable mortgages (and, possibly in some cases, usurious equitable mortgages), even if no fraud on the part of the foreclosure rescue operator is proved. (Go here for posts on some of the case law on equitable mortgage and usury in Florida).

Further, as of October 1, 2008, the recently passed Florida Foreclosure Fraud Protection Act (HB 643) creates a rebuttable presumption that any foreclosure rescue transaction in Florida involving a lease option or other type of repurchase agreement is an equitable mortgage (see Florida Statute Sec. 501.1377(6)).

3rd Defendant In "Money Store" Foreclosure Rescue Scam Pleads Guilty; Seven Remain

In Greenbelt, Maryland, WTOP Radio reports:

Federal prosecutors say a Hyattsville woman has pleaded guilty to conspiring to defraud homeowners facing foreclosure. Thirty-one-year-old Carlisha Dixon leaded guilty on Thursday to conspiracy in a scheme that falsely promised to help homeowners keep their homes and repair their credit. Dixon is the third defendant to plead guilty and one of 10 people charged in the scheme.

Dixon worked for a company that helped Lanham-based Metropolitan Money Store offer foreclosure consultation and credit services to homeowners with financial problems. Prosecutors say she acted as a straw buyer and fraudulently signed loan documents. Prosecutors attribute $200,000 to $400,000 in losses in the conspiracy to Dixon.

Source: Woman pleads guilty in foreclosure fraud scheme.

See also, U.S. Attorney (Maryland) press release: Third Defendant Pleads Guilty in Metropolitan Money Store Mortgage Fraud Scheme (Ten Defendants Now Charged in Scheme to Take Title of Homes from Financially Distressed Homeowners and Secretly Use Home Equity for Personal Benefit).

Go here and go here for other posts on the alleged Metropolitan Money Store foreclosure rescue scam.

Go here for criminal prosecutions of foreclosure rescue operators. joyjackson

Tuesday, November 11, 2008

Consumers Take It On The Chin With Recent Federal Appeals Court "Truth In Lending" Rulings

1) Law.com reports:

A provision in the Truth in Lending Act that excuses minor inaccuracies on the part of lenders is not an "affirmative defense" that must be specifically raised by the defendant, but instead is a "general defense" that cannot be waived, the 3rd U.S. Circuit Court of Appeals has ruled.

The ruling in Sterten v. Option One Mortgage Corp. could prove to be a significant boon to banks by relaxing the rules for reaping the benefits of a TILA amendment that was designed to prevent creditors from being subject to "extraordinary liability" for small disclosure discrepancies.

For more, see 3rd Circuit: Truth in Lending Act Provides Unwaivable Defense (Panel rules 'tolerances for accuracy' provision is not an affirmative defense).

For the court ruling, see Sterten v. Option One Mortgage Corp. (3rd Cir., 11-4-08).

---------------

2) Jurist's Paper Chase (University of Pittsburgh School of Law) reports:

The US Court of Appeals for the Ninth Circuit [recently] ruled that the federal Truth in Lending Act does not provide for statutory relief for a lender's failure to conspicuously disclose certain information about a loan to the borrower and to give the borrower certain information before offering the loan.

For more, see Ninth Circuit rules subprime borrower due no damages for lender disclosure failures.

For the court ruling, see McDonald v. Checks-N-Advance, Inc. (in re Ferrell) (9th Cir., 8-22-08).

-----------------

3) In a story posted here in October, the National Law Journal reported:

In a boon for the mortgage lending industry, a federal appeals court has said the Truth in Lending Act does not allow for rescission of mortgages on a class action basis. The 7th U.S. Circuit Court of Appeals, in a 2-1 decision [...], averts the potential of significant damages for creditors accused of violating disclosure requirements in some of the exotic mortgage vehicles that exacerbated the mortgage market meltdown and has Congress contemplating ways to restore credit market confidence.

The Circuit decision joins an earlier ruling by the 1st and 5th Circuits and one California state appellate court that have held that the Truth in Lending Act (TILA) does not allow claims for rescission in a class action format.

For more, see Mortgage Lenders Fight Off Rescission Class Action in 7th Circuit.

For the court ruling, see Andrews v. Chevy Chase Bank (7th Cir., 9-24-08). UndoMortgageLoans TILAdelta

Slicing & Dicing Left Building Loan Compromised, Says Trump In Suit Seeking $3B Damages From Lenders After Refusal To Extend Debt On Chicago 'Scraper

The Wall Street Journal reports:

Donald Trump filed suit against the lenders on his unfinished Chicago skyscraper, plunging the project into legal turmoil and highlighting the credit crunch's pervasive effects on real estate. Mr. Trump is suing to extend a $640 million senior construction loan on the 92-story Trump International Hotel & Tower from a group of lenders led by Deutsche Bank AG. [...] Mr. Trump asked for $3 billion in damages.(1)

***

Deutsche Bank originated the construction loan in 2005 and sold off most of it to others, retaining less than $10 million of exposure on that loan. The suit alleges [among other things] that Deutsche Bank compromised the senior construction loan by selling pieces off to "so many institutions, banks, junk bond firms, and virtually anybody that seemed to come along," that the lending group is unable to come to a consensus on how to deal with the matter.(2)

For more, see Trump Files Suit Against Lenders (Developer Seeks to Extend $640 Million Loan on a Chicago Skyscraper).

Editor's Note:

If anyone has a digitized copy of this lawsuit, please don't hesitate to e-mail me a copy of it, if it's not too much trouble. The lawsuit's index number is 026841/2008, filed in NYS Supreme Court - Queens County last Thursday (November 8).

(1) Possibly seeking a "home court" advantage in the litigation, Trump filed the lawsuit, not in Chicago where the skyscraper is being built, but in New York State supreme court in Queens County, NYC.

(2) This appears to have left Trump similarly situated with the thousands of average homeowners facing foreclosure who, arguably, have had their home loans equally compromised by similar "slicing and dicing" that has left bits and pieces of their loans in the hands of a myriad of investors scattered around all over the place.

Lehman Maintained Squeaky Clean Image In Subprime Mess By Hiding Behind Sleazy Sub?

In New York City, The Village Voice published an investigative report on how Lehman Brothers, the so-called "white shoe" Wall Street investment banking firm maintained its squeaky clean image as it made huge profits in the filth and the sludge of the subprime sewer.

[I]t was a sweet proposition while it lasted. But like any racket, the subprime business had its seamier side. And for that, Lehman kept its squeaky-clean image by turning to a less holy subsidiary. Call her Aurora.

When the mortgage market collapsed and the huge investment bank failed last month, it dragged other financial markets down with it. Lehman's executives walked away with buckets of cash.

But buried beneath the bank, way down at the bottom of the pile, are people like Brooklyn lawyer Philip Grant and Bart Christofferson, an excavator in Utah. They live 2,000 miles apart, but they have one thing in common: They were both worked over by a Lehman Brothers subsidiary called Aurora Loan Services.

For more, see Wall Streetwalkers: The Sleazy Lehman Brothers Subsidiary (Lehman Brothers maintained its squeaky-clean image by relying on its seamier subsidiary. Just call her Aurora).

Go here for the entire story on one web page.

Bronx Tenant "Caught Stealing" Stiffing Landlord? Agrees To Cough Up $11M In Back Rent

In New York City, the New York Post reports:

The New York Yankees have agreed to fork over $11 million to the city in back rent - money the team probably would have preferred to spend on an ace starting pitcher for next season. The team underpaid the city the equivalent of Mike Mussina's salary between 2003 and 2006, according to an audit by City Comptroller William Thompson.

For more, see $11M Ballpark Figure (Yankees Can't Slide On The Rent).

Monday, November 10, 2008

Fraud, Forgery Account For About 20% Of Its Losses, Says Title Insurer

Reuters reports:

The shares of major U.S. title insurers tumbled on signs the nation's housing crisis will lead both to higher claims and to reduced demand for insurance that homeowners need to protect themselves and their lenders.

***

[Fidelity National Financial Inc.] said fraud and forgery cases have grown more numerous, and now account for about 20 percent of claims.

Source: Title insurers tumble on housing woes.

Ontario Cops Catch Up With Forgery Suspect; Charge Man With Pocketing $105K+ In Alleged Refinance Scam

In Ontario, California, the Contra Costa Times reports:

A Riverside man has been arrested on suspicion of grand theft and forgery in the conning of an Ontario woman in May out of more than $105,000 in a home-mortgage fraud. Arthur Lee Harris, 35, was arrested Oct. 15 after evading Ontario police for more than five months. [...] Nestor Miguel Reyes, 33, of Covina - who is accused of aiding Harris in the scam - was arrested in August on suspicion of perjury, theft and forgery.

***

Earlier this year, Harris posed as a finance broker. He would befriend people, gain their trust and assist in refinancing houses, Ontario police Detective Al Parra said in August. Customers would later discover their house had been refinanced, but for thousands of dollars more than they originally signed.

Reyes would pose as an escrow officer who processed the loans and recorded forged loan documents, authorities said. Virtually every document that was filed was forged, Parra said.

Source: Man accused of bilking Ontario woman out of home.

For an earlier report on this story, see The San Bernardino Sun: Woman loses $105,000; 2 suspected in fraud case.

Go here, go here, go here, and go here for other posts related to deed theft or refinancing scams by forgery, swindle, etc. DeedTheftAlpha

Staten Island Senior Charged With Forging Eviction Notices In Attempt To Illegally Give Tenants The Boot

In New York City, the Staten Island Advance reports:

His wife had been hit with $5,300 in fines for illegally converting a house in Port Richmond into several smaller apartments, and it was time for the tenants to leave. But rather than go through the legal eviction process, authorities say 76-year-old Paul Ciliento took matters into his own hands in June -- by forging his own eviction notices, and signing a city marshal's name to them.

Ciliento was arrested [this week] on charges of forgery and criminal impersonation -- offenses that could land the septuagenarian in prison for up to seven years if he's convicted at trial.

For more, see Port Richmond landlord accused of forging eviction notices (Ruse reportedly was exposed when a tenant called marshal's office to ask for more time).

Sunday, November 9, 2008

FBI Seizes Records Of Pa. Man Accused In Alleged Scam Involving The Forging & Filing Of Phony Mortgage Satisfactions That Bilked Investors Of Millions

In Pittsburgh, Pennsylvania, the Pittsburgh Tribune Review reports:

The FBI has seized the financial records of a defunct Monroeville investment firm owned by a missing man who allegedly bilked investors out of millions of dollars. Frank Guzik Jr., 39, a Derry resident who operated East Haven Development until he disappeared this year, "apparently has fled the country," according to court filings in Allegheny County.(1)

***

Federal agents apparently are centering their investigation on mortgage transactions that may have been forged by Guzik. [...] "There is some legitimate concern that any number of mortgage satisfactions may have been fraudulently filed," [certified fraud examiner Joseph] Labriola wrote.

***

[Three area couples have] filed separate lawsuits in Allegheny County this year against Guzik and East Haven. The Westmoreland couples allege that forged documents had been filed in court to falsely indicate that their East Haven investments -- totaling more than $300,000 -- had been repaid.

For more, see Monroeville business owner from Derry allegedly flees.

(1) According to the story, Guzik has not been seen since March, when he boarded an airplane at Pittsburgh International Airport and disappeared. Guzik told family and friends he was going on a cruise. Before he left, Guzik cleaned out his office, burned his files and destroyed his computers, said Sean Kerrigan of Trafford, a business associate, the article reports.

Nevada AG Charges Three In Alleged Refinance Scam; 69 Year Old Victim Faces Possible Foreclosure

From the office of the Nevada Atttorney General:

Attorney General Catherine Cortez Masto, announced today the arrests of Roxanne Lynette McCoy and Shanease Renee Bauman, employees of Proserve Mortgage. The arrests were made in connection with an alleged scheme involving the submission of forged loan application documents to a bank for a mortgage loan, after being informed by the victim, Jeri Cooper, age 69, that she could not afford the loan and did not want to complete the loan application process. A third suspect, Laticia Renee Carter, also a Proserve Mortgage employee, remains at large.

***

The State alleges that, as a result, the elderly victim is being held responsible for payment of the loan and now faces possible foreclosure.

According to the Nevada AG's press release, the Defendants are each charged with multiple felonies including:

one count of Forgery,
one count of Obtaining Signature by False Pretenses,
one count of Theft, and
one count of Mortgage Lending Fraud.

For more, see Attorney General Announces Arrests In Mortgage Loan Scam Against Senior Citizen.