Florida Bar To Consider Review Process For Ethics Breaches By Attorneys Bringing Foreclosure Actions Filed w/ Errors, False Statements

The Sarasota Herald Tribune reports:

• The state group that disciplines lawyers is debating how to deal with reports of attorneys using errors and false statements to retake property in foreclosure cases.(1) [...] A section of The Florida Bar that seeks to give everyone equal access to the courts says stories like those prompted it to push for a special committee to review any ethical violations in foreclosure cases.

• The Equal Opportunity Law section will present its case Friday at the Board of Governor's meeting that letting the behavior go will hurt the image of attorneys. And the resolution will be reviewed and a committee that looks at attorney discipline.

For more, see Foreclosure lawyers scrutinized for ethical violations.

(1) Reportedly, a study this summer that looked at the Sarasota County civil courts system found three of four foreclosure cases that went forward without the proper paperwork. And one Sarasota judge, after the attorney for a foreclosing lender assured her everything was in order, happened to glance at foreclosure paperwork and realized the two properties were in Miami, a few hundred miles outside her jurisdiction, according to the story.

Lack Of Resources, Capabilities, Knowledge Or Manpower Doesn't Stop Some Operators From Pocketing Upfront Fees For Bogus Loan Modification Services

ABC News reports:

• The housing crisis has left millions of homeowners desperately trying to avoid foreclosure, but their plight is only made worse by schemers who promise help but instead seek only to scam. Now the Obama administration is highlighting its multi-agency effort to stop these scams.

***

• One such company targeted by authorities is Nation's Housing Modification Center,(1) a California loan modification company that had civil charges filed against it Wednesday. The company was the subject of a recent ABC News investigation. Former employees of the company told ABC News that it was little more than a "boiler room" operation filled with telemarketers reading from a special script targeted at anxious homeowners facing foreclosure. "They're convincing people to give money to them in advance, promising to do something that they're not doing, that they don't even have the resources, capabilities, knowledge or manpower to do," said former employee Tom Fatica, who said he was fired from NHMC after he questioned the absence of the attorneys and accountants who were supposed to help homeowners.

• Civil charges were also filed against another California company, Infinity Group Services of Orange County.(2)

For more, see Fighting Mortgage Scams: Governments Team Up (State and Federal Officials Try to Stop Scammers Who Prey on Those Facing Foreclosure).

For the FTC press release announcing the two recent lawsuits against these loan modification outfits, and updates on previous suits filed against other firms, see FTC Announces New Enforcement Actions In Continuing Crackdown On Mortgage Relief Services Scams.

(1) For the lawsuit, see FTC v. Federal Housing Modification Department, Inc. (doing business as Nations Housing Modification Center and Loan Modification Reform Association; other defendants: Michael A. Trap, Glenn Rosofsky, and Bryan Rosenberg).

(2) For the lawsuit, see FTC v. Infinity Group Services (d/b/a IGS, Hope to Homeowners, ASKIGS, and ASKIGS, Inc.; other defendants: Kahrami Zamani, individually and as an officer of Infinity Group Services).

Effort To Reign In Loan Modification Rackets "A Giant Game Of Whack-A-Mole"?

Pro Publica reports on the difficulties authorities around the country are having reigning in loan modification rackets, and shines light on one firm that continues peddling its services, despite a flood of homeowner complaints and a number of legal actions brought by various state authorities:

• In a giant game of whack-a-mole, law enforcement agencies at all levels across the country have filed suit against 150 such companies, but they continue to proliferate, and the number of consumer complaints continues to rise. “This is a very big scam,” says California Attorney General Jerry Brown. “They’re all over the place, and as soon as you get one, they migrate to somewhere else.”

• The case of one particularly aggressive firm, 21st Century Legal Services, shows just how ineffective authorities’ moves against the companies often are. Four states have sued 21st Century, and at least three more have open investigations. Over 150 consumers from more than 30 states have filed complaints against 21st Century with the Better Business Bureau. No active firm has more complaints.

• Yet the company forges on. Operating under a new name, Fidelity National Legal Services, it continues to solicit consumers nationwide, even in states where authorities have won court injunctions.

For more, see Why Authorities Haven’t Stopped the Foreclosure ‘Rescue’ Boom.

Oregon AG Indicts Mtg Broker/Loan Modification Firm Owner For Allegedly Cheating Homeowners In Foreclosure; Aggravated Theft, Forgery Among Charges

From the Oregon Department of Justice:

• Attorney General John Kroger [...] announced the indictment of a Salem mortgage broker on charges of mortgage fraud, aggravated theft, forgery and identity theft. It is is the first indictment by the Attorney General's Mortgage Fraud Task Force. "We intend to prosecute mortgage fraud aggressively. If you cheat vulnerable Oregonians facing foreclosure, we will hold you accountable," said Attorney General Kroger.

• Julian James Ruiz III, 38, is the manager and owner of American Home Modifications, a Salem-based loan modification company. He faces 17 counts of first degree aggravated theft, mortgage fraud, identity theft, aggravated identity theft, forgery in the first degree and criminal possession of a forged instrument in the first degree.

For the entire press release, see Mortgage Broker Indicted For Fraud (First indictment by the Attorney General's Mortgage Fraud Task Force).

Mortgage Servicers Drifting Into Upfront Fee Loan Modification Scam Racket??? Media Intervention Helps Undo Screwing Over Of Two Arizona Homeowners

In Phoenix, Arizona, KPHO-TV Channel 5 reports:

• Many homeowners say their banks won't call them back regarding a loan modification; however, some homeowners are paying hundreds of dollars for a loan modification only to have the bank foreclose on them.

• Valley resident Miguel Lozania said he was approved for a loan modification, so he signed his paperwork and sent the bank the $900 fee. "It sounded like it was going to work," he said. "I even got a letter from IndyMac Bank saying they were going to do a modification." IndyMac foreclosed on his house anyway, selling the home for $70,000. Lozania's original loan was for $205,000.

• Another Valley resident, Joan Hoyt, said she wanted to refinance her loan before the interest rate on her current mortgage reset. Her lender, Washington Mutual, said it just needed a $750 application fee; Hoyt paid it. As it turned out, Washington Mutual did not offer the type of loan Hoyt applied for. The bank did not offer a refund of the application fee.

• Homeowners across Arizona have written to 5 Investigates to complain about lenders losing modification documents, changing requirements for modifications and being unable to answer basic questions about the process. Arizona Attorney General Terry Goddard stopped short of saying the banks' behavior is criminal; however, he called the complaints "very troubling." "It may constitute deception on the part of the individual company that's leading these people along," he said.

• Goddard said his office is swamped with complaints that he believes many of the larger banks should have been prepared for. "What we're seeing is a financial industry that doesn't want to handle this problem," he said. He also encouraged people who are having trouble with their modifications to contact his office.

• As for Lozania, five hours before the story was set to air Monday, a spokeswoman for IndyMac's new owner One West Bank called 5 Investigates to say the company had made a mistake, and they are rescinding Lozania's foreclosure. Washington Mutual refunded $750 to Hoyt after 5 Investigates contacted the bank about the investigation.

Source: More Loan Mod Problems Reported (Ariz. AG Terry Goddard: Complaints 'Very Troubling').

Connecticut Law Now Bans Upfront Fees, Requires Licensing & Bonding When Offering Loan Modification Services

In Hartford, Connecticut, The Day reports:

• For the first time in Connecticut, firms and individuals offering debt relief they negotiate with a consumer's creditors will need to be licensed and will be prohibited from charging upfront fees.(1) A new law that goes into effect Thursday is designed to stop a growing number of scams by so-called “debt negotiators” who fraudulently claim to help consumers repay household debt, or credit card or mortgage debt, but instead charge hefty upfront fees, never reduce the debt and sometimes disappear - leaving the already-burdened consumer with even more expenses, and at times an even bigger debt load.

• Attorney General Richard Blumenthal, who authored the new consumer-based legislation, said he's handled more than 100 complaints involving debt negotiators within the past year alone. And he said he's investigating as many as 10 firms for allegedly fraudulently promising to help consumers repay household or credit card debt or a delinquent home mortgage. He declined to name the companies.

For more, see Connecticut clamps down on 'debt relief' companies.

(1) Among other protections and reuirements are: Filing a surety bond, Not refer to state licensing or bonding as an endorsement, Disclose 10-year criminal history on license application, Evaluate likelihood of success in reducing debt or saving a home before contracting with the consumer, Sign a written agreement with the consumer, Provide complete list of services, costs and results to be achieved, Perform services outlined in contract before charging fees, Adhere to fees regulated by the state banking commissioner, Allow a 3-day right of rescission for the consumer to cancel the contract, Comply with state law or have the contract voided and subject to enforcement.

Calif. Bar Official: "The Number Of Attorneys Using Their Law Licenses To Essentially Take Money From Unwary But Trusting Consumers Is Astounding!"

From a recent press release from The State Bar of California:

• The State Bar of California, alarmed by the number of lawyers preying on vulnerable homeowners, [last week] identified 16 attorneys who are under investigation for misconduct related to loan modification. “In my 21 years in attorney discipline, I have not seen a crisis of this magnitude. It is truly unprecedented,” said Interim Chief Trial Counsel Russell Weiner, who is waiving investigation confidentiality in favor of public protection. The waiver, allowed by law, is used only occasionally, but Weiner said the seriousness of the problem demanded a strong reaction by the bar in order to protect consumers. This is the first time the names of more than a few lawyers being investigated have been made public.

• “The number of attorneys using their law licenses to essentially take money from unwary but trusting consumers is astounding,” Weiner added. “There are literally thousands of victims who have lost money they could not afford to lose. Under the circumstances, the need for public information and protection is paramount.”(1)

For more, including the list of the 16 attorneys and their law firms currently the target of a State Bar probe into homeowner complaints about loan modification services, see State Bar takes action to aid homeowners in foreclosure crisis.

For more on the efforts of The State Bar of California in fighting loan modification foreclosure rescue scams engaged in by its members and others, see:

• Punishing Attorneys Offering Bogus Loan Modification Help To Financially Strapped Homeowners A Priority For Incoming State Bar President,
• ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications.

(1) The State Bar suggests that consumers be wary of attorneys offering loan modification services under any of the following circumstances:

• Advertisements of the office do not expressly identify by name the attorney who is responsible for the business;
• Office staff will not readily identify by name the attorney responsible for oversight of the business;
• The attorney in charge of the office is too busy or not willing to meet personally with prospective clients;
• The firm advises a consumer to stop paying the existing mortgage;
• The business, through its advertisements or claims of its representatives, makes claims that sound too good to be true, such as claims of a 90 or 100 percent rate of success in obtaining loan modifications, or claims that a reduction in the mortgage principal is likely to be achieved;
• The business demands payment of a large fee, even before obtaining a prospective client’s basic income and expense information, and information about the existing mortgage and present home value;
• The attorney responsible for the business is not licensed to practice law in the state where the consumer resides.

Nevada AG Calls For More Criminal Prosecutions & Jail Time For Loan Modification Scammers

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

• Nevada ranks number one in the nation for mortgage modification scams. Most of the resources in the Nevada Attorney General's Office have been dedicated to tracking down and prosecuting fraudulent loan modification companies. [...] Right now, the AG's office in Las Vegas has complaints against 128 loan modification companies and has dozens more under investigation.

• Chief Deputy AG John Kelleher says each company has anywhere from 20 to 200 loan modification victims each. [...] Kelleher says he now spends 90-percent of his time putting together complaints against loan modification scammers. He says in one case they served search warrants and the company owner flew to the Philippines. The FBI is tracking that person down right now.

• Attorney General Catherine Cortez Masto wants the scammers to know there is nowhere in the world they can hide. "We are going to hold them accountable. It's a crime to come into this state and take advantage of people who are already victimized because of the economy," she said. The AG wants to charge these companies on anything from theft to mortgage fraud to racketeering. If convicted, the people doing loan modification scams could spent two to 20 years in prison per count. There are an estimated 14,000 victims in Las Vegas. "If you are working in this industry and you are defrauding people, we are going to find you. We are going to prosecute you and we are going to seek jail time," said Kelleher.(1)

For the story, see Nevada AG Targeting Mortgage Modification Scams.

(1) Up until now, the vast majority of prosecutions of loan modification scammers by the various state attorneys general around the country, as well as by the Federal government, have been in the form of civil lawsuits. Civil suits, while easier to bring and win in court for the prosecuting agency than criminal actions (due to the lessened burden of proof in presenting a case), offer no threat of felony conviction and jail time for the scammer.

Michigan AG Criminal Prosecution Yields Guilty Pleas From Three Outfits For Bogus Loan Modification Services

In Lansing, Michigan, The Bay City Times reports:

• Victims of foreclosure fraud schemes by three Michigan companies will be able to receive refunds, state Attorney General Mike Cox announced [...]. SaveMyHome USA, Payment Doctors and the Michigan Economic Reinstatement Program each pleaded guilty to one count of violating the Michigan Credit Services Protection Act, Cox said in a press release.

• According to an undercover investigation by the Attorney General's office, the three companies charged borrowers upfront fees as part of mortgage modification assistance to homeowners facing foreclosure. Charging the fees upfront is prohibited by law, Cox said. The companies claimed they would help homeowners keep their homes by working with their lenders, but in many cases, were unable to do so, and the victims could not get their money back. The companies, which are based in southeast Michigan, had customers all around the state.

Source: State Attorney General seeks to refund victims of foreclosure fraud.

For the related Michigan AG press releases, see:

• Victims of Foreclosure Rescue Fraud to Receive Refunds,
• Cox Charges Five for Foreclosure Rescue Fraud.

Long Island-Based Loan Modification Firm Faces Attack From Both NY AG & Homeowner Class Action Suit For Allegedly Peddling Bogus Foreclosure Help

In New York City, Fox 5 News recently ran a story on Amerimod, a Long Island-based loan modification operator whose activities have prompted a lawsuit in August by New York Attorney General Andrew Cuomo's office, as well as a class-action lawsuit by homeowners in July.

For the story, see Foreclosure Rescue Company Lawsuits.

For the lawsuits filed against Amerimod, see:

• New York AG lawsuit: People v. Amerimod, Inc., The American Modification Agency Inc., and Salvatore Pane, Jr.,
• Class action lawsuit: Joseph, et al. v. The American Modification Agency Inc., et al.

Go here for Amerimod's Answer To Amended Complaint in homeowners' class action lawsuit.

Slumbering Foreclosing Lenders Unable To Document Loan Ownership Beginning To Face Complete Wipeout Of Mortgage Interests Thru "Quiet Title" Actions?

A recent story in The Huffington Post on the "Produce The Note" strategy of defending against foreclosure actions contained the following tidbit:

• In Florida, Jacksonville Area Legal Aid attorney April Charney has been using the missing-note argument since she first identified the lenders' weakness in 2004. She began arguing that those initiating foreclosure proceedings on behalf of securitized pools of mortgage loans had no right to do so, because they couldn't prove they actually owned the debt.

• Five years later, some of those homeowners are still in their homes, she says. Because of the missing ownership documentation, Charney is now starting to file quiet title actions, hoping to get her homeowner clients full title to their homes (a quiet title action "quiets" all other claims).(1)

Source: Who Owns Your Mortgage? "Produce The Note" Movement Helps Stall Foreclosures.

Go here for other posts referencing the work of attorney April Charney.

(1) An earlier post (see Using Statute Of Limitations To Wipe Out Lenders' Right To Foreclose A Mortgage?) referred to a December, 2008 story reported on msnbc.com which alluded to Charney's intent to apply the Florida statute of limitations (see Sec. 95.11(2)(c), 95.281(1)(a), Florida Statutes) to terminate a foreclosing lender's right to foreclose when her clients' cases became ripe for such an attack:

• Charney said that in a number of her cases, once there is no longer an ability for the loan servicer to profit, the foreclosure “just goes to sleep, and unless I’m going to pursue it, nobody’s setting hearings, nobody’s pursuing anything to get it to trial.”

• After five years, which is the statute of limitations to enforce a contract in Florida, she can try to help her clients own their homes mortgage-free, Charney said. The first opportunity for her to help clients do that may arise next year.

• And that legal limbo is where the lion’s share of her cases stand now, Charney said. So far this year, she has achieved two “workouts” and lost two cases. “Many, many, many” of the rest are in sleep mode or getting a single filing each year by plaintiffs’ attorneys just to keep them alive.

For the msnbc.com story, see 'Angel' of foreclosure defense bedevils lenders (Florida attorney trains hundreds of others to help troubled borrowers) (for the entire story on one web page, try here). EpsilonMissingDocsMtg

Some In Congress Seek To Make "Produce The Note" Strategy Mandatory To Level Playing Field In Defending Against Sloppy Foreclosing Lenders, Servicers

The Huffington Post reports:

• Modern-day home mortgages have been so sliced and diced by rapacious financiers that some homeowners are successfully delaying -- or even blocking -- foreclosures through the simple tactic of demanding that banks produce the original mortgage note, which amazingly enough is often not so easy for them to do. As the foreclosure rate continues to set new highs, a little-noticed legal provision that requires bankers, if challenged, to prove they hold the original mortgage documents before getting possession has spawned a minor homeowner rebellion, alternately called "produce the note" or "show me the note". For homeowners trying desperately to keep their homes, the tactic is one way to buy some time -- and maybe even get the upper hand on the lender.

***

• The fouled-up paperwork or other lack of legal compliance "has resulted in a much higher rate of negotiated [mortgage] modifications" [...], said [North Carolina congressman and House Financial Services Committee member Rep. Brad] Miller. "It gave the homeowner additional defenses and counterclaims that strengthened their hands substantially."

***

• Some in Congress are trying to make it easier for homeowners. Rep. Marcy Kaptur, an Ohio Democrat, introduced a bill in February with Rep. John Conyers (D-Mich.) that would actually prohibit foreclosures unless lenders produced necessary documentation in court, including the note and evidence that the homeowner was, in fact, notified each time the note was transferred.

• "I am encouraging [homeowners] to stay in their homes [and] go through the court proceedings until the institution in question can produce [the] note, because chances are, they can't," Kaptur said in an interview Monday. "Somehow the playing field has to be leveled here, and [the bill] provides a very strong means of doing that." The bill is languishing in the House Financial Services Committee, headed by Rep. Barney Frank (D-Mass.), she said.

For more, see Who Owns Your Mortgage? "Produce The Note" Movement Helps Stall Foreclosures. EpsilonMissingDocsMtg

Connecticut AG: Foreclosures Might Be Void Where Unauthorized Process Servers Are Used To Deliver Legal Papers To Delinquent Homeowners

In Hartford, Connecticut, The Hartford Courant recently reported on state Attorney General Richard Blumenthal slamming some state marshals for charging inflated fees when engaged in process serving in foreclosure actions. Another issue of concern raised by the AG was whether non-marshals were being subcontracted out to deliver the legal papers on the delinquent homeowners.

• Blumenthal also said that [...] state law does not allow the use of non-marshals to deliver most legal papers,(1) comparing the practice to a police officer delegating arrest powers to a non-officer.

***

• [U]nclear is whether any foreclosure actions might be in jeopardy. Blumenthal said that overcharging would not invalidate a lawsuit, but that if legal papers were served on a homeowner by someone other than the marshal who attested that the papers were delivered, then that service might be deemed defective, and that could jeopardize the underlying suit.

For the story, see Blumenthal: Some State Marshals Broke Law By Double-Billing.

(1) According to a recently-issued legal opinion by Attorney General Blumenthal:

• State statutes direct that State Marshals serve legal process without the use of indifferent persons except in narrowly defined circumstances. The sole exceptions to this general rule are for matters where there is express statutory authority for an indifferent person to make service, such as subpoenas, service of notices of lis pendens on a property owner, and service of notices to quit.

• Where there is express statutory authority (such as for service of a subpoena, service of a notice to quit, or service of a notice of lis pendens on a property owner) for use of an indifferent person to make service, the use of an indifferent person is permissible. It is not permissible under any other circumstances.

See: Connecticut AG Legal Opinion issued to Herbert J. Shepardson, Esq., Chairperson, State Marshal Commission (p.19). SewerServiceAlpha

Mortgage Servicer Threatens Foreclosure, Initiates Debt Collection Proceedings Despite Valid Loan Mod Being In Effect, Says Ohio Homeowner In Lawsuit

In Hamilton County, Ohio, The Cincinnati Enquirer reports:

• Carolyn S. Cable thought she had worked out a deal with her mortgage company to save her home from foreclosure after she had multiple brain surgeries and suffered a stroke that made her unable to work. But in a lawsuit filed in Hamilton County Common Pleas Court Friday, the Colerain Township woman alleges that Bank of America reneged on the deal and threatened foreclosure - even sending debt collectors after her. [...] In [her] case, she said a Bank of America representative told her that her loan modification was lost in the computer system.

***

• When she fell behind on her payments in 2008, Countrywide Home Loans - under pressure from the Ohio Attorney General to offer loan modifications - lowered her interest rate and extended the loan term. Her payment went from $524 a month to $401 a month - which Cable said she paid. But then Countrywide went out of business, and Bank of America bought its mortgages. Cable's lawsuit says Bank of America told her the loan modification agreement was still in effect, but then initiated debt collection proceedings against her anyway.

• Cable is represented by the Legal Aid Society of Southwest Ohio. Lawyer Noel M. Morgan also represents a Clinton County couple in an almost identical situation, and said Bank of America's actions have become part of a growing practice by the bank to breach its agreements.

For the story, see Lawsuits: Bank reneged on loan deals.

Conn. AG Slams State Marshals For Double Billing When Process Serving In Foreclosures; Practice Coincided With Possible Attorney Kickback Arrangement

In Hartford, Connecticut, The Hartford Courant reports:

• Attorney General Richard Blumenthal, in a sweeping action against some of the highest-earning state marshals, has concluded that a handful of marshals broke the law when they double-billed for the delivery of papers in foreclosure actions. In a 21-page legal opinion, Blumenthal called on the State Marshal Commission to seek restitution from marshals who overcharged, and he said that his investigation was continuing and could lead to legal action. A Courant story last month reported that marshals collected as much as $1 million in unnecessary fees in foreclosure cases, before the practice was halted this summer. "Piling unlawful fees on property owners facing foreclosure adds both insult and injury," Blumenthal said. "There is a clear and unequivocal message going forward that multiple fees for a single action are illegal and improper and cannot be charged."

***

• The double-billing began in early 2007, with a small group of marshals who regularly worked for the state's two large foreclosure law firms, Hunt Leibert and Bendett & McHugh. The marshals included a three-page lien document known as a lis pendens each time they delivered legal papers in a foreclosure suit, but treated the delivery of that document as an entirely separate action, charging a second service fee and even double-charging for mileage. The practice typically added $30 to $150 to each service. After the fee increases, the firms filed about 30,000 foreclosure suits before abandoning the practice following reports in The Courant and questions from Blumenthal's office. Blumenthal said that not only were the extra fees excessive, but that state law does not even require that the document be served on defendants in a foreclosure suit.

***

• The extra fees in foreclosure cases coincided with an attempt by principals of the two large law firms to set up a separate company, called Connecticut Service Network, that would collect money every time a marshal served a foreclosure suit.(1) In 2007, Blumenthal declared that arrangement illegal. Neither the firms nor the marshals have said why they began charging extra for delivering the lis pendens.

For thr story, see Blumenthal: Some State Marshals Broke Law By Double-Billing.

From the Office of the Connecticut AG:

• Press release: Attorney General Finds Marshals Who Bill Extra For Certain Foreclosure Documents Violate State Law,
• Conn. AG's formal legal opinion to the Chairperson of the State Marshal Commission.

(1) In an earlier story (see Courant Probe: Marshals Charged Unnecessary Fees From 2007 Until Recently), The Hartford Courant reported:

• Principals of the state's two main foreclosure law firms — Hunt Leibert Jacobson and Reiner, Reiner — had quietly set up a private bookkeeping company and were asking marshals to pay money to the new business for every foreclosure suit they served. Marshals working for those firms stood to lose at least half a million dollars a year in payments to the new business, called Connecticut Service Network. But by the time the company started operating, the marshals were offsetting those costs with the extra fees they were charging, The Courant found. SewerServiceAlpha

Final Conspirator In Maryland Sale Leaseback Foreclosure Rescue Scam Gets 46 Months

From the Office of the U.S. Attorney (Maryland):

• U.S. District Judge Deborah K. Chasanow sentenced Cheryl Brooke, age 52, of Upper Marlboro, Maryland [...] to 46 months in prison, followed by three years of supervised release, for conspiracy to commit wire fraud in connection with a scheme in which she and her conspirators offered to help financially vulnerable individuals save their homes from foreclosure, and instead defrauded homeowners and mortgage lenders, announced United States Attorney for the District of Maryland Rod J. Rosenstein.

According to Brooke's plea agreement:

• [Miachael K.] Lewis, Brooke, and co-conspirator Winston Thomas specifically targeted individuals who owned and had equity in their homes, but were facing foreclosure on their homes because of their inability to make monthly mortgage payments. The goal of the conspirators was to steal the homeowners’ equity out of their property by inducing the homeowners to sell their property to co-conspirator Earnest Lewis and converting sale proceeds to the use of the conspirators. Lewis and his co-conspirators did this by fraudulently representing to the homeowners that their “lease/buy-back program” would help the homeowners to keep their homes.

For the entire U.S. Attorney press release, see Final Conspirator Sentenced in Mortgage Fraud Scheme That Targeted Victims Through Local TV Ads (Defendants Ordered to Forfeit Over $2 Million).

For the earlier press releases announcing the sentencing of the three other conspirators, see:

• Winston Thomas: Senior Loan Officer Sentenced in Mortgage Fraud Scheme That Targeted Victims Through Local TV Ads,
• Michael K. Lewis: Leader of Mortgage Fraud Scheme Sentenced to 6 ½ Years in Prison - Targeted Victims with TV Ads,
• Earnest Lewis: Fourth Conspirator Pleads Guilty and Agrees to Forfeit $2 Million in Mortgage Fraud Scheme Targeting Victims with TV Ads.

Loan Officer Gets 37 Months For Role In Maryland Foreclosure Rescue Equity Stripping Scam Peddling Bogus Sale Leaseback Deals To Desperate Homeowners

From the Office of the U.S. Attorney (Maryland):

• U.S. District Judge Deborah K. Chasanow sentenced Winston Thomas, age 43, of New Carrollton, Maryland today to 37 months in prison, followed by three years of supervised release, for failure to file federal tax returns and for conspiracy to commit wire fraud in connection with a scheme in which he and his conspirators offered to help financially vulnerable individuals save their homes from foreclosure, and instead defrauded homeowners and mortgage lenders, announced United States Attorney for the District of Maryland Rod J. Rosenstein.

Thomas was one of the participants in the foreclosure rescue, equity stripping conspiracy headed by Michael K. Lewis, and included Cheryl Brooke and Earnest Lewis.(1)

• [Michael K.] Lewis and Thomas, a senior loan officer with a mortgage lender, told the homeowners that the “good credit” of Earnest Lewis would be used to temporarily refinance their homes, that they had to sign their homes over to Earnest Lewis and that they could repurchase the homes in roughly one year, or once they regained their financial footing. During the interim, they could remain in their homes only by paying inflated “rent” and fees, which payments were directly debited from their bank accounts to an account belonging to co-conspirator Cheryl Brooke’s company “In the House Technologies.” Brooke then made payments to Earnest Lewis and Thomas, with the remaining funds being used by Michael K. Lewis and Brooke for their personal benefit.

For the entire press release, see Senior Loan Officer Sentenced in Mortgage Fraud Scheme That Targeted Victims Through Local TV Ads.

(1) For an earlier press release on the sentencing of both Lewis brothers, see Leader of Mortgage Fraud Scheme Sentenced to 6 ½ Years in Prison - Targeted Victims with TV Ads.

Washington Man Gets Two Months For Abusing POA, Leaving Mentally Impaired 78-Year Old Woman Homeless

In Kitsap County, Washington, the Kitsap Sun reports:

• A Bremerton man has been sentenced to two months in jail for a mortgage theft scheme that left an elderly woman without a home, according to documents filed in Kitsap County Superior Court. Tony Thomas, 55, pleaded guilty to second-degree theft Sept. 4. He’s serving 30 days in the county jail, and then must serve another month of jail alternatives, according to the sentence handed down by Judge Anna Laurie.

• Thomas and the elderly woman, who he had power of attorney over, received a $100,000 mortgage in December 2007 for the purposes of remodeling the woman’s home, court documents said.(1) But criminal charges were filed in September 2008 when at least $60,000 of the money came up missing, and the woman lost her home. The woman had decreased mental capacity, the documents said.

Source: Man Sentenced to 2 Months in Mortgage Scam.

(1) According to an earlier story, Bremerton Police detectives said the elderly woman's home had long since been paid for at the time the mortgage was obtained. see Mortgage Scam Costs Elderly Bremerton Woman Her Home.

Illegal Use Of POA To Rip Off Homes, Other Assets Of The Elderly & Vulnerable Now Tougher To Pull Off In NYS ... Hopefully

In New York City, Time Magazine reports:

• Misappropriation of an elderly person's assets by someone legally authorized to oversee them may now be a lot tougher to pull off in the State of New York. New legislation that went into effect Sept. 1 — in the form of a radically changed power-of-attorney (POA) document — couldn't have come at a better time. "Financial abuse is one of the fastest growing areas of elder abuse," says Andrea Lowenthal, an elder-law and estate-planning attorney in New York.

***

• In [some] instances, a health-care aide or housekeeper with ulterior motives might procure a POA and persuade a gullible senior to sign it. The signature of the principal was basically all that mattered then. Now things are different.

For more, see New Legal Protections for the Elderly. FinancialAbuseOfElderlyAlpha

Oregon Regulators To Crack Down On Self-Titled "Specialists" & "Advisers" Having Little Or No Professional Training

In Portland, Oregon, The Oregonian reports:

• State regulators are trying to clamp down on the use of misleading financial services and insurance credentials that they say leave seniors vulnerable to abuse and fraud. The Oregon Department of Consumer and Business Services is proposing new rules that would ban the use of "specialist," "adviser" or similar titles by salespeople who lack legitimate professional training. Salespeople could face fines as much as $20,000 for using designations that aren't backed by organizations with stringent requirements.

***

• "People call themselves all kinds of things they really aren't," said Kevin Anselm, head of enforcement at the department's Division of Finance and Corporate Securities. "It's been more of a problem on the insurance side than the securities side." Among the troubling designations: special senior adviser, real estate specialist and foreclosure specialist.

For more, see Oregon regulators take aim at financial services designations (if link expires, try here). FinancialAbuseOfElderlyAlpha

Calgary Woman Faces Sentencing For Using POA To Sell, Rip Off Proceeds Of, Hospitalized Disabled Cousin's Home & Vehicle

In Calgary, Alberta, the Calgary Herald reports:

• A city woman, ordered by the court last year to repay $180,000 after she bilked her disabled cousin of all his valuable assets, now faces jail time. Joy Marie Barkley, 54, was scheduled to be sentenced [...] on one count of theft over $5,000, but the case was adjourned [...] when a forensic report was not ready.

• Court heard Ron Kaake had given power of attorney to Barkley in 2006 when he was placed in a long-term care facility with complications from multiple sclerosis. But when the bed-ridden man's condition improved after a year in Dr. Vernon Fanning Centre [...], he discovered Barkley had sold his vehicle and condo and then gambled away the proceeds.(1)

For more, see Calgary woman faces jail time after robbing disabled cousin.

(1) According to the story, Crown prosecutor Susan Kennedy told the court that Barkley sold Kaake's 2004 Toyota Sienna to a Calgary dealership just a week after Kaake was hospitalized with serious complications stemming from his chronic illness. Four days later, the woman sold her cousin's home in Cochrane and deposited the proceeds into his bank account, but withdrew the entire amount during the next 12 months and spent the money for personal use. DeedContraTheft

Mom Accuses Bankrupt Daughter Of Wiping Out Life Savings, Using Unwittingly Signed Deed To Sell Home & Pocket Proceeds

In Nashville, Tennessee, NashvillePost.com reports:

• Donna Jones, a former employee of admitted embezzler and Ponzi scheme operator Michael J. Park of Brentwood, appeared before the U.S. Bankruptcy Court [last week]. [...] As to claims by Jones that she had not transferred assets in the last three years, that [...] is in dispute.

• Martha Stinson, Jones' mother, says her daughter regularly deposited checks into her and her late husband's checking account only to move it back out within 24 hours. Stinson says that her daughter did not have power of attorney and that she trusted her daughter at the time. [...] Stinson, who now lives in a trailer home in Burns, was dealing with her husband's brain cancer, which proved fatal, at the time and did not question what her daughter told her. She now regrets that as her life savings has been completely wiped out.

• Another issue within the family, and questioned in U.S. Bankruptcy Court, is a quitclaim deed placed by Jones on her parents' home. Jones gained $25,000 from the sale of the house in 2008, but her mother states that her husband signed the quitclaim deed while undergoing intensive chemotherapy and did not know what he was signing.

For the story, see Perjury suspected in alleged Ponzi conspirator case (Central figure in investment scheme gave answers under oath that others aren't buying). DeedContraTheft

Use Of Phony POA To Sell Murdered Retiree's $1M Home, Loot Bank Accounts Among Charges Facing Slay Suspects

In Palm Springs, California, The Desert Sun reports:

• Five men accused in the stabbing death of a Palm Springs retiree to steal his identity and his financial assets [...] were ordered to stand trial on murder and other charges. Kaushal Niroula, 27, San Francisco attorney David Replogle, 60, Miguel Bustamante, 26, Daniel Garcia, 26, and Craig McCarthy, 29, face charges of murder, conspiracy to commit murder and conspiracy to commit a robbery in connection with the Dec. 5 slaying of 74-year-old Clifford Lambert. Niroula, Replogle and Garcia also face several charges stemming from the alleged fraudulent sale of Lambert's home and the emptying of his bank accounts. [...] Following Lambert's death, [attorney] Replogle allegedly created a false power of attorney document that allowed the co-defendants to empty the victim's bank accounts and sell his $1 million home for less than $300,000. A judge subsequently halted the sale.

For more, see Suspects in Palm Springs retiree's murder to stand trial. DeedContraTheft FinancialAbuseOfElderlyAlpha

In-Home Health Care Aide Facing Foreclosure Sentenced For Ripping Off $15K+ From 93-Year Old Patient

In Martinez, California, the Contra Costa Times reports:

• An Oakley woman has been sentenced to jail and probation for stealing more than $15,000 from a 93-year-old Rossmoor woman who employed her to provide in-home care. Teresa Bryant pleaded no contest [...] to felony financial abuse by a caretaker and was sentenced in Contra Costa County's court dedicated to crimes involving elderly victims to 60 days in jail and three year's probation. [...] Bryant told the court that she was in financial straits and facing foreclosure on her home when she forged 42 checks from the victim's account between May and August, [prosecutor Jason] Peck said.

For the story, see Oakley woman sentenced for theft from Rossmoor women. FinancialAbuseOfElderlyAlpha

Financially Strapped Real Estate Operators Charged With Torching Their $1M Home; Roof Collapse Nearly Kills Firefighters

In Tracy, California, the Tracy Press reports:

• A husband and wife are suspected of burning down their $1 million home in Tracy last summer — a blaze that almost killed several firefighters. Police [...] arrested 31-year-old William “Billy” Tipton Jr. and issued an arrest warrant for his wife, 37-year-old Frayba Tipton, on suspicion of arson, forgery and insurance fraud. Billy Tipton faces additional charges of grand theft and two more counts of defrauding an insurance company. [...] Not only did the fire destroy many of the family’s possessions, it also nearly killed several firefighters when it weakened the beams supporting a heavy slate roof that collapsed just 30 seconds after a fire chief ordered his crew out of the burning house.

***

• Billy Tipton — who used to own a branch of West Coast Realty and Mortgage in Tracy without a real estate or broker’s license — was taken into custody Friday night. [...] Frayba Tipton — owner of A+ Realty and Mortgage — is free of her own recognizance, but was ordered to appear in court with her husband on Thursday.

• The charges filed against the pair come as no surprise to several people who knew them. For the past few years, an architect, a graphic designer, several banks and at least two insurance companies were looking for the Tracy family for either money or an explanation. Public record paints a picture of a couple so dependent on the housing market that they lost virtually all of their property wealth when the economy tanked. They let several properties lapse into foreclosure as their income as real estate agents and brokers suffered from a dearth of buyers. Lawsuits demanding payment from Frayba and Billy Tipton show that the couple has had trouble keeping up with the bills for the past year or so.

For more, see Husband and wife suspected of Fagin Drive arson.

Obama Administration Meets With 12 State AGs In Effort To Squash Foreclosure Rescue Scams; FTC Considers Nationwide Ban On Upfront Fees For Loan Help

The Washington Post reports:

• The Obama administration vowed Thursday to squash scams targeting homeowners on the brink of foreclosure, reviving a five-month-old pledge as millions of borrowers remain at risk of losing their homes. A group of high-ranking government officials, including Treasury Secretary Timothy F. Geithner, Attorney General Eric H. Holder Jr. and attorneys general from 12 states, met privately in Washington on the issue. It was a first meeting of its kind on the matter for federal and state authorities, who discussed methods for coordinating crackdown efforts, government officials said.

***

• The Federal Trade Commission is considering rules banning firms from charging upfront fees for such services. Some states already prohibit that practice.

For more, see Administration Pledges to End Housing Scams. loan modification

California AG Bags Three Suspects In Refinancing Scam; Allegedly Fleeced 70+ Borrowers Of $950K+; Victims Left With $30M In Loans w/ Unwanted Terms

From the Office of the California Attorney General:

• Continuing his fight against mortgage scams, Attorney General Edmund G. Brown Jr. [...] announced that agents from his office have arrested Michael McConville, and two of his associates(1) for their roles in a "criminal conspiracy" to steal nearly $1 million from borrowers seeking to refinance their homes.(2)

• McConville and his co-conspirators lured dozens of borrowers into refinancing home loans by falsely promising low interest rates and brokers' fees, and other attractive terms. They then negotiated different terms with lenders, forged the victims' signatures on the final loan documents and collected hefty brokers fees - ranging from $20,000 to $57,000 - that were never disclosed. Only when the borrowers received true copies of the loan documents after the refinance did they discover that their names had been forged. In total, defendants stole over $950,000 from more than 70 borrowers, leaving victims holding $30 million in loans with terms they did not agree to.

***

• McConville and his associates provided homeowners closing documents bearing terms promised, but which the lender never approved. After homeowners signed those documents, key pages were removed and replaced with pages bearing the terms that the lender had actually agreed to. The homeowners' signatures were forged on the replacement pages, and ALG forwarded the forged documents to the escrow company.

***

• As a result of this scheme, homeowners suffered devastating financial losses. Some were forced to sell their homes, come out of retirement, or tap into retirement savings. Others paid significant prepayment penalties -- in one case, over $21,000. Borrowers often never received the significant amounts of cash-out they were promised.

For more, see Brown Arrests Three Mortgage Brokers for Stealing Nearly $1 Million from Borrowers.

(1) The alleged conspiracy was made up of:

• Michael McConville, 31, of Simi Valley, sales manager of ALG, Inc, a Los Angeles based mortgage company. He is being held on $2 million bail;
• Garrett Holdridge, 23, of Palmdale, California and Texas, loan officer for ALG, Inc. Holdridge is being held on $2 million bail;
• Alan Ruiz, 28, of Huntington Beach, a loan officer for ALG, Inc. He is being held on $2 million bail.

The charges include:

• 28 counts of grand theft, by violating Penal Code section 487, subdivision (a);
• 14 counts of forgery, by violating Penal Code section 470, subdivision (d);
• 1 count of elder abuse, by violating Penal Code section 368, subdivision (d);
• 1 count of conspiracy to commit grand theft, by violating Penal Code section 182, subdivision (a)(1);
• 3 special allegations of aggravated white-collar crime in excess of $500,000, by violating Penal Code section 186.11, subdivision (a)(2); and
• Taking in excess of $3,200,000, by violating Penal Code section 12022.6, subdivision (a)(4) and (b).

(2) According to the press release, AG Brown recently sued Michael McConville and his brother Sean for their part in the "Property Tax Reassessment" scam which targeted Californians looking to lower their property taxes. Tens of thousands of mailers were sent out that featured official-looking logos and demanded hundreds of dollars in payments for property tax reassessment and reassessment appeal services. The statements warned homeowners that if payments were not received by the "due date" they faced late fees or would have their file marked "non-responsive" or "ineligible for future tax reassessments." See Brown Sues to Block Property Tax Rip-Off .

Maine Regulators Warn Of Scammers Posing As State Agency Employees To Target Homeowners With Foreclosure Help

In Augusta, Maine, WBZ-TV Channel 38 reports:

• The Maine State Housing Authority says homeowners who've been receiving recorded phone messages from someone using its name should be wary of a scam. Callers tell homeowners to call the "Maine Housing Authority" to help with foreclosures or to refinance their mortgage. Housing Authority Director Dale McCormick says the calls are not coming from the state agency, which does not make automated calls offering foreclosure assistance. McCormick says scam artists using sophisticated computer software can make it appear a call is coming from a legitimate organization. State officials say anyone receiving these calls should not give out any personal information such as Social Security number or credit information.

Source: Maine Agency Warns Of Possible Scam. loan modification

Ex-L.I. Lawmaker Accused In $82M Mortgage Scam Now Charged w/ Forging Lender Endorsement On Check To Illegally Pocket Insuance Cash For Burned Home

In Suffolk County, New York, The Southampton Press reports:

• Former Suffolk County Legislator George O. Guldi was indicted for a second time this year Thursday, September 17, in a Riverhead courtroom, on unrelated felony insurance fraud charges stemming from a fire that destroyed his Westhampton Beach home nearly a year ago. Mr. Guldi was indicted in August for his alleged role in a $82 million mortgage fraud scheme.

***

• Prosecutors said that Mr. Guldi submitted a claim to the insurance company after his house burned down and received a check for $853,000, money that was supposed to be used to rebuild the home, which is now in foreclosure. If the home was not rebuilt, Countrywide Home Loans would have applied the insurance money to the outstanding mortgage. Prosecutors said that about $163,000 is now left in the bank account in which Mr. Guldi had deposited the $853,000 check. They also said that he forged the endorsement of Countrywide Home Loans when he deposited the check. Prosecutors froze the account.

For more, see Prosecutors charge Guldi with insurance fraud.

Maryland Accountant Cops Plea To Ripping Off $1M+ From Escrow Account, Then Torching Offices Of Employer/Law Firm After Getting Canned

In Dundalk, Maryland, WBAL-TV Channel 11 reports:

• Federal prosecutors said a former accountant for a Dundalk real estate law firm pleaded guilty to stealing more than $1 million and burning the firm's offices. George Perez, 33, of Dundalk pleaded guilty Wednesday to theft and arson charges. Prosecutors said the April 2007 fire caused $800,000 in damage to the law firm six days after it fired Perez.(1) Federal prosecutors said Perez was hired in January 2004 to track money from foreclosure sales and disbursements in the firm's escrow account. From December 2005 to April 2007, Perez was accused of transferring $1,044,309 into personal accounts, using the money to pay gambling debts and buy real estate.

Source: Fired Accountant Guilty Of $1M Theft, Arson.

For the U.S. Attorney (Maryland) press release, see Former Accountant of Dundalk Law Firm Admits to Stealing over $1 Million and Arson (Defendant Disappeared for Almost a Year After Failing to Appear in Court).

(1) According to the U.S. Attorney press release, the fire caused substantial damage not only to the law firm’s offices, but also to other businesses that occupied the building, including offices of a physician, an accounting firm and a pharmacy. A firefighter who responded to the fire was injured and taken to the hospital to be treated for burns he suffered. He was released after treatment. EscrowRipOffKappa

Tenants Stripped Of Community Privileges As Rent Skimming Landlord Pockets Cash, Stiffs Condo Association Out Of $10K+ In Monthly Maintenance Fees

In West Palm Beach, Florida, WPBF-TV Channel 25 reports:

• The home has everything Xavier Melendez could want for his young family. "Really quiet, really peaceful," he said about the West Palm Beach community. He finds the rent fair and he said he paid it faithfully for two years. Then something strange happened. "I couldn't have a pizza. I can't use the facility. I can't go to the pool," Melendez said. No one, not even a relative, can visit them in the Terracina community. It's all because the owner, Micki O'Callaghan, is in foreclosure.

• WPBF 25 News first reported on O'Callaghan in June.(1) The Homeowner's Association Security Chairperson, Doug Prince, said she's more than $10,000 behind in dues. [...] "She's just putting the money in her back pocket and not paying her bills," said Prince, who said O'Callaghan is renting out five houses in the community which are in foreclosure.(2)

For the story, see Renters Of Homes In Foreclosure Lose Privileges (More Tenants Come Forward Against Landlord).

(1) For earlier WPBF-TV Channel 25 stories on Micki O'Callaghan, see:

• Renter Forced Out Same Week She Moved In,
• Renter Feels Duped As Eviction Looms.

(2) Rent skimming (referred to as equity skimming in Florida), as defined in Section 697.08, Florida Statutes, constitutes a felony of the third degree, punishable as provided in Sections 775.082, 775.083, or 775.084, Florida Statutes. RentSigmaSkimming

Illinois AG Brings Civil Suit Alleging Deceptive Practices In Equity Stripping, Home Repair Scam That Duped 36 Chicago Homeowners

In Chicago, Illinois, the Chicago Tribune reports:

• The Illinois attorney general's office filed suit in Cook County Circuit Court on Tuesday against a Chicago man and five home repair and mortgage companies for allegedly defrauding 36 Chicago homeowners, including two who lost homes to foreclosure. The complaint charges Mark Diamond and several companies to which he is linked with coordinating a scheme to strip almost $1.3 million in equity from the homes of elderly and African-American homeowners on the city's West and South Sides.(1) The actions allegedly violated the state's consumer fraud act.

***

• The suit charged that Diamond offered to refinance mortgages at lower interest rates or lower monthly payments and encouraged homeowners to take equity out of their homes for repairs, with the work performed by the affiliated companies. After persuading homeowners to sign the checks over to Diamond, he pocketed a portion of the funds instead of completing the repairs, the state said. The state also accused Diamond of putting homeowners into mortgages they could not afford and, in some cases, forging consumers' signatures on loan documents. As a result, 12 consumers have defaulted on their mortgages and two people have lost their homes to foreclosure, the state said.

Source: Chicago man and five companies are sued in consumer fraud case (Lawsuit says Mark Diamond defrauded elderly and African-American homeowners on the city's West and South Sides).

For the Illinois Attorney General press release, see Madigan Cracks Down On Chicago Mortgage And Home Repair Fraud Scheme ($1.3 Million Swindled from Elderly, African-American Homeowners in Subprime Loan Scam).

(1) According to the story, also named in the suit were three home repair and remodeling companies, United Construction of America Inc., United Residential Services and Real Estate Inc., and Skyway Builders #1 Inc.; and two finance companies, OSI Financial Services Inc. and Harbor Financial Group Ltd. Diamond is president of United Residential Services and OSI Financial Services and "fronts for all the companies," the lawsuit reportedly said. StiffingContractorsTheta

Miami Man Gets 88 Months For Role In Impersonating Unwitting Homeowners & Ripping Off Their HELOC Accounts

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

• Henry “Uche” Obilo, age 30, of Miami, Fl., was sentenced to 88 months in prison, followed by three years of supervised release, for his role as a leader in a home equity line of credit fraud scheme(1) that has been linked to more than $36 million in attempted fraud and almost $11 million in actual losses. To date, investigators have identified more than 180 victims. Obilo was ordered to pay restitution of $577,149.33.

***

• According to court records, Obilo and other co-conspirators used fee-based web databases to search for potential victim account holders with large balances in home equity line of credit (HELOC) accounts. This information included name, address, date of birth, and social security number. [...] Armed with a victim’s personal information, the conspirators, [...] called the victim’s financial institution, impersonated the victim, and transferred the majority of the available money from the HELOC account into an account from which a wire transfer could be sent. The conspirators would then wire transfer hundreds of thousands of dollars to domestic or overseas accounts controlled by members of the conspiracy.(2)

For the U.S. Attorney press release, see Miami Man Sentenced to 88 Months in $11 Million Bank-Fraud Conspiracy.

(1) Others involved in the scheme include: Abel Nnabue, age 34, of Dallas, who was sentenced to 54 months on Jan. 30, 2009; Precious Matthews, age 27, of Miami, who was sentenced 51 months on Feb. 13, 2009; Brandy Anderson, age 31, of Dallas, who was sentenced to 2 years of supervised probation and 40 days of community confinement on Feb. 20, 2009; Ezenwa Onyedebelu, age 21, of Dallas, who was sentenced to 37 months on Feb. 27, 2009; Daniel Orjinta, age 43, of Nigeria, who was sentenced to 42 months on March 6, 2009; Paula Gipson, age 34, of Dallas, Texas, who was sentenced to 15 months on Sept. 4, 2009. The conspiracy’s ringleader, Tobechi Onwuhara, age 30, of Dallas, has an outstanding warrant for his arrest and remains a fugitive. Information about Onwuhara is available on the America’s Most Wanted website: http://www.amw.com/fugitives/brief.cfm?id=59947.

(2) The conspirators used caller-ID spoofing services, prepaid cell phones and PC wireless Internet access cards, and transferred victims’ home telephone numbers in order to impersonate the victim and avoid identifying themselves, according to the U.S. Attorney's office.

City Concerned About Effect On Tenants From Unwinding $5.4B Purchase Of 11,000+ Unit Apartment Complexes Gone Bad

In New York City, The New York Times reports:

• Three years ago, the sale of the 110 red-brick apartment buildings at Stuyvesant Town and Peter Cooper Village in Manhattan represented the most expensive American real estate deal in history.(1) Now the buyers are running out of time and money. Jerry I. and Rob Speyer and their partner, BlackRock Realty, who paid $5.4 billion for the quiet middle-class redoubt near the East River, have seen the property lose more than half of its value, and the income from rent — down 25 percent from its peak — covers less than half of their debt payments. Real estate analysts say they expect that by December, the partnership will run out of an additional $890 million set aside for apartment renovations, landscaping and interest payments, and that the owners are at “high risk” of default on $4.4 billion in loans.(2)

***

• Stuyvesant Town and Peter Cooper Village are in trouble. City officials have been monitoring the looming crisis and how it might affect a complex that has served as an oasis of affordability in Manhattan for middle-class New Yorkers. Some 6,875 of the 11,227 apartments at the complexes are rent regulated. “We are absolutely keeping an eye on it,” said Rafael E. Cestero, the city’s housing commissioner. “It’s an iconic complex.” Referring to the people who were part of the original real estate transaction, he went on, “Those folks are going to take their lumps. We are looking at how we can ensure that the rent-stabilized units and the families that live there and families that could live there in the future could be insulated from the unwinding of this deal.”(3)(4)

For the story, see Buyers of Huge Manhattan Complex Face Default Risk.

(1) The residential complex, the largest of its kind in New York City, covers approximately 80 acres, or a full 10 city blocks, between First Avenue and Avenue C, and 14th Street and 23rd Street, and consists of 110 apartment buildings comprising 11,200 units, which house at least 20,000 people.

(2) The purchase of Stuyvesant Town and Peter Cooper Village was one of the more scrutinized of its deals in recent years, the story states. The winning bid presumed the partnership could increase profits by renovating and deregulating apartments, but the owners have been unable to quickly convert apartments to market rates.

(3) “Residents are increasingly concerned that the maintenance of the buildings is slipping, even as they are getting hit with a flurry of potential charges for major capital improvements,” said Daniel R. Garodnick, a city councilman who lives in Peter Cooper Village.

(4) The underwater landlords in this story have gone to the New York Court of Appeals (the state's highest court) to appeal a recent state intermediate appellate court ruling that could result in them having to pay more than $200 million to repay the tenants in these complexes for illegal rent increases over the last four years in connection with improperly deregulating more than 3,000 apartments while receiving special property tax breaks from the city. See:

• The New York Times: Big Landlord Found to Have Wrongly Raised Rents,
• The New York Times: New York Landlords Fight as Rent Refunds Loom.
• For the court ruling, see Roberts v Tishman Speyer Props., L.P., 2009 NY Slip Op 01595 [62 AD3d 71] (March 5, 2009).

NC AG On Loan Modification Foreclosure Rescue Scammers: "These Creeps Are Out There, Crawling Out From Under Rocks & Taking People's Money"

In Greenville, North Carolina, The Daily Reflector reports:

• State Attorney General Roy Cooper on Tuesday warned local homeowners and business leaders to be wary of home mortgage assistance scams, one of several topics he covered at a luncheon hosted by the Greenville-Pitt County Chamber of Commerce at the Brook Valley Country Club.

***

• His office is trying to push buyers and lenders to work complicated financial issues out together through the use of qualified counselors, he said. [...] However, since scammers know counselors are being used, they are presenting themselves as such to borrowers, getting money up front and not helping them, Cooper said. His office has tackled about 130 foreclosure scams, he said.

• “You know that these creeps are out there, crawling out from under rocks and taking people's money,” Cooper said. The attorney general's office received seven scam complaints in 2007, 82 in 2008 and 353 scam complaints this year, he said. North Carolina was one of the first states to make it illegal to take money up front for home mortgage foreclosure counseling, and state attorneys are using the law in courts now to try to end the scams, Cooper said.

Source: AG Cooper visits with chamber, Boys & Girls Club.

Queens Co-Op Board Of Directors Accused Of Taking Out $12M In Mortgages On Building Without Unit Owners' Consent

In Elmhurst, New York, the New York Daily News reports:

• Shareholders of an Elmhurst co-op are locked in a legal tug of war with its board of directors, accusing it of taking out $12 million in mortgages without their knowledge. Shareholders of the Continental, at 87-10 51st Ave., said they only found out about the two $6 million loans when they got court papers in June warning that the co-op was heading into foreclosure because of an unpaid bill. "We didn't know about either mortgage," a shareholder told the Daily News, speaking on condition of anonymity. "There have been no financial statements and no meetings."

For more, see Legal battle looms at Continental co-op over 12M in mortgages: Shareholders say without approval.

Vegas Man Claims "Adverse Possession" In Attempt To Justify Hijacking, Then Renting, Vacant Home In Foreclosure

In Las Vegas, Nevada, KTNV-TV Channel 13 reports:

• The foreclosure captial of the country is becoming a hot bed for scam artists, but one family in the Valley is taking action to try to take back its home from a man who may have rented it out illegally. You could liken it to squatting without the tenants knowing they're squatting.

***

• Steven Humes thought he had found a great deal on Craigslist to rent a house when he moved to Las Vegas a couple of months ago, but what he really found may have been a great scam. "They gave us a key; we went inside; we looked at the property, and decided 'oh this is great, loving it, 735 a month, loving it, great,'" says Steven.

• John Bartlett also had a key, as well he should. He owns the home, even though it's going into default, but much to his surprise, when he went with a real estate agent to show it, his key didn't work. That's because a so-called property manager had changed the locks and rented out a home he didn't have rights to. [...] Action News went to the property manager's office, but he wasn't there, and the secretary wouldn't call him. Days later, he did call, then e-mailed, saying the house was abandoned, and that he claimed it under an old law known as adverse possession.

For the story, see Foreclosure flim-flam, or right to rent? KappaPhonyLandlordScam

Wells Fargo Cans Squatting Senior VP For Using $12M Beachfront REO As Party House

In Malibu, California, The Los Angeles Times reports:

• Moving to contain a public relations mess, Wells Fargo & Co. fired a top executive accused of using a bank-owned Malibu beach house to entertain her family and friends. Cheronda Guyton, a senior vice president responsible for commercial foreclosed properties, broke company rules barring personal use of bank property, Wells Fargo said in a statement Monday. The Times reported last week that Guyton had been spotted by neighbors spending time at the Malibu Colony home with her family this summer. At a party in August, guests were ferried to the beach house from a yacht, residents of the enclave said.

***

• Wells Fargo's quick action after The Times' report last week reflects the bank's recognition that the case could become a liability, especially in light of its acceptance of federal bailout money, ethics experts said.

***

• Wealthy real estate shoppers who had gotten wind of the house being held by the bank said they were frustrated they could not offer to buy it. Local real estate agents said they began to get calls from eager would-be buyers -- but the house wasn't for sale.

For more, see Wells Fargo fires executive accused of using bank-owned Malibu home (Cheronda Guyton, a senior vice president responsible for commercial foreclosed properties, had been seen by neighbors using the Malibu Colony house lost by victims of Bernard Madoff's Ponzi scheme).

See also:

• The Wall Street Journal's Deal Journal blog: Wells Fargo CEO Speaks Out on Malibu Foreclosure Fracas,
• The Malibu Times: Colony party home on the market for $21. 5 million (The Wells Fargo executive who threw lavish, loud parties at the foreclosed Malibu Colony home during the summer has been fired).

Sentencing Continues For Participants In Maryland-Based Equity Stripping Foreclosure Rescue Scams Peddling Bogus Sale Leaseback Arrangements

From the Office of the U.S. Attorney (Maryland):

• U.S. District Judge Roger W. Titus sentenced Richard Allison, age 38, of Camp Springs, Maryland, an attorney and employee of the U.S. Census Bureau, [...] to 18 months in prison followed by five years of supervised release for conspiracy to commit mail and wire fraud, in connection with a mortgage fraud scheme(1) which falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Titus also sentenced co-conspirator Carlisha Dixon, age 32, of Hyattsville, Maryland [...] to five months in prison and five months home detention, followed by five years of supervised release for the conspiracy. Judge Titus also entered an order of restitution against Dixon of $180,000 and deferred restitution for Allison pending a hearing on October 7th to determine the amount and allocation of restitution among the victims.

***

• Using the [victimized] homeowners’ properties, the conspirators applied for mortgages to extract the maximum available equity from the homes. They prepared and submitted fraudulent loan applications to mortgage lenders to obtain fraudulently inflated loans on the target properties in the straw buyers’ names. At settlements, the conspirators imposed numerous fees and required “seller contributions” which were far in excess of industry standards; they imposed fees for services which were not performed, disclosed or explained to the homeowners; and they transferred the sale proceeds out of the escrow accounts into the conspirators’ business and personal bank accounts and converted a substantial portion of those funds to their personal use.

For the entire U.S. Attorney press release, see Lawyer and Conspirator Sentenced in Metropolitan Money Store Mortgage Fraud Scheme.

For the indictment, see U.S. v. JoyJackson, et al.

With regard to the ongoing civil class action lawsuits involving Metropolitan Money Store and its associates:

• Go here for Notice to Class Members & Request to Opt-In/Participate,
• Go here for the Metropolitan Money Store class action website.

(1) Ten defendants, including a lawyer, mortgage broker, real estate agent, loan processor, company officers and family members have pleaded guilty in this scheme. Kurt Fordham, age 39, of Fort Washington, Maryland was sentenced on July 10, 2009 to 10 years in prison for his participation in the scheme. Fordham was personally responsible for over $13.5 million of losses to mortgage lenders and used over $800,000 of fraudulently obtained proceeds to pay for his wedding. The remaining defendants are scheduled to be sentenced within the next three months.

Punishing Attorneys Offering Bogus Loan Modification Help To Financially Strapped Homeowners A Priority For Incoming State Bar President

In Los Angeles, California, The Los Angeles Times reports:

• Crooked lawyers have long besmirched the profession's image, but the scale of their involvement in the loan modification scandals plaguing California homeowners has taken an unprecedented toll, the incoming president of the State Bar of California says. The proliferation of complaints against lawyers who said they could help rescue clients threatened with foreclosure has hurt tens of thousands of people and confronted the bar with a mounting and costly disciplinary burden, said Howard Miller, a partner with the Los Angeles plaintiffs' firm of Girardi & Keese. "There are at least hundreds, and perhaps more, perhaps thousands, of lawyers in California who deliberately reached out to obtain money from people at the most vulnerable point in their lives and, as near as anyone can tell, did nothing to help them," Miller said, vowing to make a priority of punishing such misdeeds during his yearlong tenure.

***

• Miller was a key supporter of a new rule of professional conduct requiring attorneys to tell clients if they don't carry malpractice insurance. [...] The estimated tens of thousands who lost nonrefundable deposits to unscrupulous lawyers advertising their loan-modification services could have benefited from the knowledge that those attorneys were, for the most part, uninsured, Miller said.

For more, see New head of State Bar of California assails mortgage modification scammers (Los Angeles attorney Howard Miller lambastes lawyers who claimed to be offering help to homeowners facing foreclosure but did nothing except take their money).

Kansas Supreme Court Leaves MERS, 2nd Mortgage Holder Holding The Bag; OK's Foreclosure Sale By First Mortgagee Despite Lack Of Notice To Either Firm

Housing Wire reports:

• A ruling by the Kansas Supreme Court determined Mortgage Electronic Registration Systems (MERS)(1) was not a “necessary party” in a mortgage foreclosure proceeding initiated by a first lien holder. [...] The court’s ruling involves a case where MERS was listed as the mortgagee of a second-lien mortgage originated by Millenia Mortgage Corp. When the primary lien holder, Landmark National Bank went to court to seek foreclosure action, MERS wasn’t notified. Although Millenia was notified, it already sold its interest in the loan to Sovereign Bank.

• Representatives from the second lien loan were not present at the hearing. The lower court allowed Landmark to proceed with the foreclosure and sell the property at sheriff’s sale. In response, Sovereign and MERS attempted to vacate the judgment, which was denied by the trial court. The ruling to deny the motion was upheld by the state’s court of appeals and later, its supreme court. In its ruling, the supreme court said that MERS was not a “contingently necessary party.”

• It added since Sovereign Bank didn’t register its interest with the county’s register of deeds, it had no rights in the foreclosure proceeding.(2)

For more, see Court Ruling Upholds Foreclosure Sale Despite MERS’ Appeal.

For the Kansas Supreme Court ruling, see Landmark Nat'l Bank v. Kesler, No. 98,489, 2009 Kan. LEXIS 834 (August 28, 2009), affirming Kansas Court of Appeals in Landmark Nat'l Bank v. Kesler, 40 Kan. App. 2d 325, 192 P.3d 177, 2008 Kan. App. LEXIS 138 (2008).

(1) MERS acts as the representative for lenders and services in county land records for mortgages registered with the company. MERS keeps track of the loan, even when servicing rights are traded or sold, and notifies lender and servicer clients of action against the property.

(2) The proceeds of the foreclosure sale in this case exceeded the amount owed to the foreclosing first mortgage holder. The balance of the proceeds, after distribution of the amount owed to the foreclosing lender (generally referred to as the surplus funds or the overage, among other descriptive references), is then typically distributed to any subordinate lienholders in an amount not to exceed the balance of their claims; the remainder, if any, then goes to the foreclosed upon homeowner. Interestingly, according to the facts as laid out in the Kansas Supreme Court’s ruling, it appears that the foreclosed upon homeowner walked off with the entire foreclosure sale surplus; neither MERS nor the second mortgage holder participated in the distribution of these proceeds. EpsilonMissingDocsMtg

Bogus Loan Fees, Failure To Act In Good Faith Among Allegations In Elderly Ohio Couple's Attempt To Fight Foreclosure Of Home Of 40+ Years

In Stark County, Ohio, The Canton Repository reports:

• A mediator has been asked to resolve a foreclosure dispute that has come close to chasing a North Canton couple in their mid-80s from their home. Stark County Common Pleas Court Judge Taryn Heath referred a foreclosure against William and Bette Hammen to the Community Mediation Center. Representatives for the Hammens and their mortgage company are scheduled for an Oct. 29 hearing. The couple has been on the verge of losing their house several times during the past 18 months.

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• CitiMortgage launched foreclosure proceedings in February 2008 because the Hammens hadn’t paid their mortgage. [...] Since then, the couple has been declared incompetent, assigned a guardian and received legal aid. That has helped them begin to turn the tables on the foreclosure process.

• Heath moved the Hammens’ case to mediation after lawyers argued that lenders broke federal lending laws, assessed “illegal, improper or excessive” loan fees, and failed to act in good faith when creating a $100,000 mortgage and a home-equity loan for the couple in 2006. The Hammens have lived in the house since 1965. They didn’t have a mortgage until 2002, according to court filings. But since 2002, the couple has entered into three standard mortgages and three open-ended mortgages.

For the story, see North Canton couple’s foreclosure referred to mediator.