Thursday, December 11, 2008

NYC Prosecutors Call For System Changes To Address Deed Theft After Empire State Building "Heist" By Reporter For Local Paper

In New York City, The Daily News reports:

  • The city's top prosecutors called for sweeping changes in the system that let a Daily News reporter "steal" the Empire State building with a fake deed (see: It took 90 minutes for Daily News to 'steal' the Empire State Building). The News' "theft" of the $2 billion Fifth Ave. icon was carried out to reveal a gaping loophole in the city's system for recording property transactions. The loophole: Clerks in the city office of the register are not required to verify information on deeds and mortgages.

For more, see Daily News probe revealing scandalous property loopholes has prosecutors urging change.

More On Hedge Fund Suit Against Countrywide Over $8.4B Bank Of America Loan Modification Settlement

For those interested in reviewing the lawsuit filed in this matter, see:

Go here for links to Exhibits A through G of the above lawsuit (be sure to type in the letters you see in the picture, then click submit - you'll be taken directly to the links):

  • Exhibits A & B - representative examples of the pooling & servicing agreements involved;
  • Exhibits C & D - lawsuits against Countrywide filed by California & Illinois;
  • Exhibit E - Multistate Settlement Term Sheet regarding the settlement of the accusations of the Attorneys General against Countrywide;
  • Exhibit F & G - copies of the California and Illinois judgments.

For some of the media reports on this story, see:

NYC Lawmakers Urged To Establish Right To Counsel In Eviction, Foreclosure Proceedings

In a letter urging the City Council of New York City to pass laws which would establish a right to counsel in eviction and foreclosure proceedings for low income persons, Ann B. Lesk, President of the New York County Lawyers' Association, reminds us of the inherent unfairness in the results emanating from a judicial system where only one party is represented by counsel:

  • [T]he backbone of our judicial system is the concept that adversarial proceedings produce just results. For an indigent person facing eviction or foreclosure, this is a very theoretical proposition. Numerous studies have documented the unsurprising fact that having a lawyer improves the outcome for a litigant. In [New York City] Housing Court, 90 percent of tenants are not represented by a lawyer (in contrast, less than 10 percent of landlords are unrepresented). Unrepresented litigants face a complex set of procedural and substantive rules. They may have defenses of which they are not aware.

For more, see Don't Just Pass The Senior Citizen Right To Counsel Bill - Expand It.

Wednesday, December 10, 2008

Hedge Fund Sues Countrywide Over $8.4B Bank Of America Loan Modification Settlement Of Predatory Lending Charges With State AGs

In New York City, Bloomberg News reports:

  • Countrywide Financial Corp., the home lender acquired by Bank of America Corp., was sued by Greenwich Financial Services Fund over claims an agreement to reduce payments on mortgages by $8.4 billion would hurt investors.

  • The hedge fund claims investors will be harmed by Bank of America’s settlement, reached on behalf of Countrywide, with 15 state attorneys general. The value of trusts that bought 400,000 mortgages will decline under the deal, the fund said.

  • In the proposed class action, or group lawsuit, the Greenwich, Connecticut-based fund demands a declaration that “Countrywide must purchase at par every mortgage loan that it sold to any of the 374 securitization trusts,” David Grais, a lawyer for the fund said today in an e-mailed statement. Grais said Countrywide could owe the trusts $80 billion.

For more, see Countrywide Sued by Fund Over $8.4 Billion Loan Deal.

See also:

1) The Wall Street Journal: Mortgage-Bond Holders Get Voice (Greenwich Financial's William Frey Challenges Loan Servicers Like BofA) (subscription may be required; if no subscription, try here, then click link for story):

  • [T]he new lawsuit, filed in New York state court, doesn't take issue with the actual settlement but focuses instead on who should bear the costs. Noting that the attorneys general accused Countrywide of "widespread predatory lending," the lawsuit alleges that Countrywide plans "to pass most or all" of the cost of the settlement to investors.

2) The American Lawyer (at Law.com): Class Action Demands Countrywide Repay Hedge Funds for Losses.

3) Summons & Complaint: Greenwich Financial Services Distressed Mortgage Fund 3, LLC v. Countrywide Financial Corporation. MortgageServicingIssuesAlpha

Non Profit Lawyers Save Day For 80+ Year Old New Mexico Couple Facing Foreclosure Over $2 In Late Payments

In Albuquerque, New Mexico, the Albuquerque Journal reports:

  • Dixie and Paul Williams have much to be thankful for -- to wit, not being thrown out of their South Valley home for $2 in late mortgage payments. And they're thankful to the lawyers at the Senior Citizens' Law Office who helped make that happen.

  • Senior Citizens law office executive director Angelica Allen said that an order dismissing the foreclosure action against the couple, who are in their 80s and not in the best of health, has been filed in state district court. This time, she said the bank accepted the $4 in mortgage fees that it had previously rejected as payment.

***

  • The couple, who live on Social Security, had pledged their house as collateral on a Small Business Administration loan in the 1970s and arranged an extension with a new mortgage payment of $1 a year when Paul Williams became ill. The terms of the legal arrangement say the house will revert to SBA or its successor bank upon the deaths of the Williams.

  • The paperwork had changed hands, and the Williams never got any notice of where to send the $1 mortgage payment, legal documents said. The new mortgage holder filed a foreclosure lawsuit against the couple earlier this year when it failed to receive the $1 payments.

For more, see Couple Won't Lose Home Over $2: Order Dismisses Foreclosure Action (subscription required; if no subscription, try here).

Shorthanded Legal Aid Offices Bursting At The Seams With Foreclosure Defense Cases

National Public Radio reports:

  • Everyone accused of a crime is entitled to a lawyer, whether they can afford one or not. But in civil cases, such as home foreclosures, there is no right to an attorney. Legal aid attorneys say some people being kicked out of their homes might have been able to stay if they'd had legal help — help that isn't there for everyone.

***

  • Nationally, "half the people coming to the office at least are being turned away at the door," says Don Saunders, director of civil legal services at the National Legal Aid & Defender Association. That statistic does not count those who never make it to legal aid offices.

  • "The other side has a lawyer," Saunders says. "The bank and the foreclosure process is being brought by a lawyer, and the playing field is clearly not a level one."

For more, see Foreclosures Overwhelm Legal Aid Programs.

Tuesday, December 9, 2008

No "Miracle On 34th Street" As Empire State Building Victimized By "Deed Theft;" Reporter Easily "Swipes" Historic Midtown NYC Edifice Valued At $2B

On 34th Street in New York City, the New York Daily News reports:

  • In one of the biggest heists in American history, the Daily News "stole" the $2 billion Empire State Building. And it wasn't that hard.

  • The News swiped the 102-story Art Deco skyscraper by drawing up a batch of bogus documents, making a fake notary stamp and filing paperwork with the city to transfer the deed to the property. Some of the information was laughable: Original "King Kong" star Fay Wray is listed as a witness and the notary shared a name with bank robber Willie Sutton.

  • The massive ripoff illustrates a gaping loophole in the city's system for recording deeds, mortgages and other transactions.

***

  • Of course, stealing the Empire State Building wouldn't go unnoticed for long, but it shows how easy it is for con artists to swipe more modest buildings right out from under their owners. Armed with a fraudulent deed, they can take out big mortgages and disappear, leaving a mess for property owners, banks and bureaucrats.

Reportedly, the Daily News returned the storied structure back to its rightful owners the day after the heist, which they pulled off on Monday.

For more, see It took 90 minutes for Daily News to 'steal' the Empire State Building.

For a copy of the deed to the stolen structure, see:

Trump "Convinces" Deutsche Bank To Fork Over $13.2M In Construction Cash To Finish Off Chicago Skyscraper

Buried in a recent Between The Bricks column in the New York Post is this blurb on the recent $3 billion lawsuit filed by Donald Trump against Deutsche Bank, in which (according to a recent Wall Street Journal article) the latter was accused of, among other things, "compromis[ing] 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":

  • In one closely-watched bank stand-off, Donald Trump just got a worried Deutsche Bank to blink - and fork over $13.2 million in construction funds towards his soon to be completed spectacular Chicago hotel and condo tower.

  • The lender filed a $40 million suit against him after he slapped them with his own $3 billion lawsuit. Trump claims they damaged his brand by ceasing funding after he invoked his specially worded "force-majeure" clause due to events and circumstances that "are not reasonably" within his control.

Source: Banks Threaten Foreclosures.

B'klyn Foreclosure Sale Set Aside, Judgment Vacated As Process Server Screw-Up Leaves Court With No Personal Jurisdiction Over Defaulting House Owner

A case decided last month in a Brooklyn, New York trial court serves as a valuable reminder to defaulting homeowners (and their attorneys) that, in cases where a foreclosure judgment has already been entered (and even if a foreclosure sale has already taken place), it is still possible to void the sale and the judgment if the process server failed to properly serve the property owner with the lawsuit upon commencement of the legal action.(1)

In this case, service of process upon the defaulting property owner was purportedly effected by resorting to what is referred to as "nail and mail service" (a form of substituted service that apparently is still allowed in New York) whereby the process server affixes one true copy of the the summons and foreclosure lawsuit on the door of the property owner's "actual dwelling place or usual place of abode." Service is completed when a second true copy is mailed to the property owner.

Unfortunately for the process server and the foreclosing lender, the two locations at which the nail and mail service was attempted (at the house that was the subject of the foreclosure action and at a second location) were not the property owner's "actual dwelling place or usual place of abode." In addition, the three affidavits of service that were filed in court by the process server relating to service on the delinquent property owner conflicted with each other.

The property owner (through counsel) presented an unrebutted affidavit to the court stating that she never lived at either of the two locations, and, for an 18 year period that included the dates on which service was purportedly attempted, she lived at another address.

In reaching his decision setting aside the foreclosure sale and vacating the judgment, Kings County Supreme Court Justice Martin Schneier reminds us of this basic, fundamental precept of law:

  • It is "axiomatic that the failure to serve process in an action leaves the court without personal jurisdiction over the defendant, and all subsequent proceedings are thereby rendered null and void" (McMullen v. Arnone, 79 AD2d 496, 499 [2d Dept. 1981]), irrespective of the question of merit. [emphasis added in bold]

For the decision, see HSBC Bank USA, N.A. v Fleurimond, 2008 NY Slip Op 52320(U), Sup Ct, Kings County (November 18, 2008).

Go here for other posts on foreclosures involving faulty notifications to property owners.

(1) As simple as serving a defendant in a lawsuit may appear to the unitiated, the statutes that apply (other than in cases where the process server actually hands an individual defendant the summons and complaint in a face to face encounter) can be somewhat nuanced (particularly when a corporate defendant is involved). It may be a good idea for foreclosure defense counsel to review the statutes regulating service of process and, (in my view) more importantly, take the time to familiarize oneself with some of the case law applying the service of process statutes to become aware of the types of facts and circumstances that have resulted in a finding of faulty service. Such instances can open up opportunities for counsel to void a foreclosure judgment and, where a foreclosure sale has already taken place, void said sale, thereby forcing the foreclosing lender to go back to "square one" of the legal action and start over again.

In my humble judgment, process servers screw up (either innocently, or intentionally - ie. "sewer service") more often than many may think. Accordingly, the careful scrutiny of the process server's actions (reviewing the affidavits of service for errors & inconsistencies, eliciting oral testimony under oath from the process server) is something deserving of serious consideration. SewerServiceAlpha foreclosure faulty notice

Monday, December 8, 2008

Alleged Hampton Roads Equity Stripping Scam Operation Leaves Homeowners Out On The Street, Straw Buyers Holding The Bag

In Hampton Roads, Virginia, The Virginian Pilot reports:

  • [T]he alleged scammers presented themselves as saviors of financially distressed - often first-time - homeowners, promising to repair their credit and save their homes. Instead, they recruited straw buyers to purchase the properties - in the process taking out bigger mortgages - and walked away with the proceeds. That left two classes of victims in the dust: dispossessed homeowners and empty-handed straw buyers stuck with inflated mortgages.

***

  • The figure at the center of the operation [...] is Shanita Lacy, owner of a Virginia Beach-based company called Clean Slate Financial Services. Settlement documents indicate that she pulled out more than $750,000 in equity from the nine properties identified so far.

For more, see Deals with Beach company put some owners out of homes.

For story update (12-5-08), see More report losing homes to 'credit repair' deals.

Washington State Victim Of Alleged Sale Leaseback Foreclosure Rescue Scam Goes To Court To Save Home Of 35 Years

In Bellevue, Washington, KING-TV Channel 5 reports:

  • Karen Handlin has been narrowly saved from eviction – for now. She’s filed a first-of-its-kind lawsuit in Western Washington to save the house her family has owned for 35 years. Handlin almost lost it to foreclosure and then, she says, to a company called Alternative Investors, which claimed it could rescue her from foreclosure.

For more, see Investigators: Alleged foreclosure rescue scam goes to court (read text) (watch KING5 video).

Sunday, December 7, 2008

Texas A Handy Haven For Those Seeking To Dodge Debts?

Bloomberg News reports:

  • Homeowners fleeing underwater mortgages in California and Florida know where to come up for air: Texas.

  • "Texas is an extremely friendly place to live if you owe money and do not want to pay,'' said Marjorie Britt, a bankruptcy attorney with Britt & Catrett PC in Houston. "If you have a lot of money and even more debt and want to shelter your assets, you can live fairly normally.''

  • Distressed borrowers can hang on to luxury cars, a primary residence, paychecks, retirement accounts, and even jewelry that creditors might claim elsewhere, Britt said.

For more, see Deadbeat Homeowners Tap Texas Bankruptcy Laws to Duck Creditors.

Court Denies Dismissal Of Suit Accusing County Of Screw Up In Giving Proper Notice To Owner In Tax Foreclosure Action

In Hopewell, New York, the Daily Messenger reports:

  • A state Supreme Court justice has denied Ontario County’s attempt to dismiss a lawsuit that claims the county and its treasurer mishandled the foreclosure of the Akropolis Family Restaurant.

***

  • The lawsuit alleged the county and county Treasurer Gary Baxter failed to follow correct procedures in the foreclosure auction of the Akropolis Family Restaurant in May 2007. The civil suit claimed Baxter and the county violated the civil rights of Hetelekides by mishandling the process regarding notification and other issues.

For more, see Judge rules for Akropolis owner.

For other stories on the Acropolis foreclosure, see:

Go here for other posts on foreclosures involving faulty notifications to property owners. foreclosure faulty notice

Saturday, December 6, 2008

Phoenix Man Found Guilty For Filing Fraudulent Lien Releases On Home, Then Pocketing $850K In Subsequent Refinance

From the Office of the Arizona Attorney General:

  • Attorney General Terry Goddard [last week] announced that Delanie Belfield Ross, 39, of Phoenix, has been found guilty by a Maricopa County Superior Court jury on three counts of felony fraudulent schemes and practices and one count of theft.

  • According to court documents, Ross, along with his wife, Veronica Cooper Ross, and his brother-in-law, Willard Cooper, fraudulently obtained mortgage loans for the purchase of a $3.2 million Paradise Valley home in 1994.

  • After taking possession of the house, Delanie Ross recorded fraudulent releases of the liens on the loans with the Maricopa County Recorder. He then represented the house as being owned free and clear to potential investors and obtained an $850,000 line of credit from a private family of investors, using the house as collateral.

For the Arizona AG's press release, see Phoenix Man Found Guilty of Felony Fraud and Theft.

For the original indictment in this matter, see State of Arizona v. Ross.

Traveling Real Estate Investment Seminar Teaches Sale Leaseback, Foreclosure Rescue Deals: Media Report

In Bellevue, Washington, KOMO-TV Channel 4 reports:

  • A newspaper ad for the Robert Allen Institute's free seminar promised to teach participants how to become millionaires. "Banks are desperate to unload foreclosed properties," the ad's copy read. So KOMO News attended the free seminar in Bellevue, undercover camera in tow.

Reportedly, participants were told they could learn how to knock on a homeowners' door and convince them to surrender the title, then offer to broker a deal to allow the homeowner to rent back their home with an option to buy back the house.

For the video report, see The truth behind 'the best investment ever'.

Go here to read the text of the story.

Friday, December 5, 2008

Partnership Deal Results In 78 Year Old Connecticut Man's Eviction From Home, Losing Farm & 50% Interest In Property; Now Living Out Of Car

In Greenwich, Connecticut, the Greenwich Citizen reports:

  • After 43 years of operating Purdy's Farm on King Street, Delmo Zanette effectively became a farmer without a farm at midnight Oct. 31. Not by choice -- at least by his account.

  • The 78-year-old Zanette was ordered to vacate the property by court order resulting from a legal battle that began four years ago and ended on Oct. 7 when the court finally ruled against him and in favor of Ronald Pecunies and Arthur K. Watson Jr. - his business partners and now adversaries in the case.

***

  • "I was 100 percent owner of the farm and somehow they got hold of 50 percent of my real estate," said Zanette in a phone interview this past week with the Greenwich Citizen. "I was too trusting, I did not have a lawyer I trusted them implicitly ... but somewhere things didn't go right."

***

  • Zanette says with the closing of the farm, he is now surviving on income from his monthly Social Security check of $574 and hopes to raise additional money by having tag sales of antiques and a collection of some farm artifacts and books he owns. Despite having some family in the area, Zanette says he is living out of his Suburban and periodically on the couches of family and friends. [...] Currently, Zanette is still 50 percent owner in the properties, which are now on the market with Weichert Realty, listed for $2.6 million.

For more, see A Farmer Without a Farm: What to Do?

Florida Pastor, Wife Charged With Swindling Elderly Couple Out Of $100K+ In Alleged Real Estate Sale, Refinance Scam

From the Florida Department of Financial Services:

  • Florida Chief Financial Officer Alex Sink announced [Wednesday] that additional charges have been filed against a Jensen Beach pastor and his wife in an ongoing investigation by the Department of Financial Services, Division of Insurance Fraud (DFS), into allegations the couple bilked investors throughout central and south Florida out of more than $8 million in fraudulent real estate schemes.(1)

  • In the newest charges, Rodney and Shalonda McGill are accused of duping an elderly couple out of more than $100,000 worth of property and cash.

For the rest of the press release, see CFO Sink's Call For Additional Information Results In New Charges For Jensen Beach Pastor, $500,000 Additional Bond.

(1) According to the press release, the McGills already face charges of Racketeering, first degree; Conspiracy to Commit Racketeering, first degree; Grand Theft, first degree; Grand Theft, third degree; and Obtaining a Mortgage by False Representation, third degree, for saddling investors with more than $1.15 million in mortgage loans by “flipping” properties in Martin and St. Lucie counties that the McGills sold using fraudulent loan applications. The additional charges announced Wednesday, two counts of grand theft in the first degree, mean the McGills face up to 30 years each in prison as well as penalty enhancements provided by Florida law for theft from persons over the age of 65, the press release states.

Deed Thief Strikes S. Florida Couple; Regain Title After Year & A Half Of Aggravation

In West Palm Beach, Florida WPTV Channel 5 reports:

  • You've heard of horse thieves, well how about house thieves? It's a wild west kind of scam that can lead to the loss of what's probably your most valuable asset. Your house. And it turned out to be a nightmare situation for a Loxahatchee couple.

Reportedly, it took extensive investigative work on the part of the police and the homeowners to get the home back, but not after a year and a half, almost $4000 dollars in court costs, time from work, the aggravation and the stressful nights. The homeowners also reportedly lost their homestead exemption and their homeowner's insurance as a result of their home's title being taken out of their name.

For the story, see House thieves, who can steal your home.

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

Thursday, December 4, 2008

Equitable Mortgage Defense Invoked In Lease-Purchase Agreement; Judge Denies Tenant Eviction, Says Foreclosure Is Required To Boot Renter

In Sarasota, Florida, local real estate attorney Jefferson F. Riddell writes in the Bradenton Herald on the fear (for a landlord) that a court will not allow a property owner to evict a tenant under a lease-purchase arrangement:

  • [T]he fear was realized recently when the seller under a lease purchase type document went to county court in Sarasota to evict the tenant for failure to make monthly payments. The judge scrutinized the document, concluded that it was an agreement for deed and required the seller to foreclose it in circuit court like a mortgage.

  • Cost to the seller for the foreclosure was about $2,000 instead of the nominal cost of a tenant eviction, and the buyer was able to stay in the property rent free for months while the foreclosure was being completed.

Source: Watch out for lease purchase agreements.

More Failed "Contract For Deed" Deals, More Homebuyers, 3rd Party Investors Left Holding The Bag

In Centerton, Arkansas, The Morning News reports:

  • James and Patricia Leach of Bentonville couldn't believe their luck in September 2006 when they were approved to buy a home. [...] But two years, two months, and $51,000 later, they are packing their belongings and moving across town to a home they are renting.

  • The Leaches are one of at least two dozen local families who recently discovered the homes they thought they purchased through the Real Estate Co. of Arkansas actually belong to someone else.

***

  • Financing was arranged through Greenleaf Companies of Springfield, Mo. Greenleaf, through its contractor Bentonville-based Real Estate Co., was a third party that arranged for real estate investors across the nation to purchase homes, which were then resold to local families through a contract for deed.

For more, see Home Deal Fails For Centerton Families.

Go here for other posts on Greenleaf Companies and The Real Estate Co.

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

Las Vegas Family Of Four Gets Screwed Over In Lease-Purchase Of Home In Foreclosure

In Las Vegas, Nevada, the Las Vegas Review Journal recently reported the story of a family of four who had relocated from Hawaii, and who had entered into a lease-purchase agreement for the purchase of the family home. Unbeknownst to the family, the home was in foreclosure.

For the rest of the story, see THE FACES OF HARD TIMES: 'We put our trust in people' (Alleged scam involving lease-purchase of foreclosed home sends family back to Hawaii). ThetaTenantRentSkimming

Wednesday, December 3, 2008

Ratings Agencies Face Charges Of Civil Rights Violations In Complaint Filed With HUD; Actions Allegedly Facilitated Discriminatory Subprime Lending

Syndicated real estate columnist Kenneth Harney recently reported:

  • In what is apparently the first legal action of its kind, an association of community-based organizations has filed a federal civil rights complaint against two of the three largest Wall Street ratings agencies,(1) charging that their inflated ratings on subprime mortgage bonds disproportionately caused financial harm to African-American and Latino home buyers across the country.

  • The complaint,(2) filed by the National Community Reinvestment Coalition, alleges that Moody's Investor Services and Fitch Ratings Ltd. enriched themselves by assigning high ratings to bonds backed by mortgages "that were designed to fail" because of "unfair payment terms and insufficient borrower income levels."

For more, see Civil rights complaint filed against rating agencies.

See also, NCRC press release: NCRC Files Civil Rights Complaint Against Fitch and Moody’s (Civil penalties and equitable relief sought for consumers and communities injured by rating agencies’ role in foreclosure crisis).

(1) According to the column, a third rating agency with heavy involvement in the subprime boom, Standard & Poor's Corp., was not named in the complaint, but has been "in discussions" with the coalition, according to David Berenbaum, the group's executive vice president. If the discussions with S&P prove "unsatisfactory," he said, the company could be the subject of a separate action, the column states.

(2) The coalition reportedly filed its complaint with the Department of Housing and Urban Development's fair housing and equal opportunity unit. After a review, the department could either dismiss the allegations or refer the case to the Justice Department of the incoming Obama administration for litigation next year. If HUD fails to respond adequately, the coalition says it may file a federal civil lawsuit.

Plaintiffs In WaMu Suits May Be Left Holding The Bag; "Almost Nothing" Says FDIC Rep Referring To Assets Left In Receivership For Aggrieved Homeowners

In Seattle, Washington, a recent column in Seattle Weekly describes the problems homeowners suing Washington Mutual for violations of lending and consumer laws may face now that WaMu has been seized and put into receivership by the FDIC.

  • [The search for redress is made even tougher by the amount of money left in the receivership—"almost nothing," according to Andrew Gray, [an] FDIC spokesperson.

  • Some lawyers [...] are pushing on regardless, waiting to see what happens. Others are dropping their claims. "We're probably not going to go ahead in light of how treacherous and difficult that's going to be," says [a local attorney who filed a class-action suit against WaMu over what he claims were hidden and excessive fees].

For more, see Wronged by WaMu (After the crash, there’s little recourse).

Felonious Rent Skimming, Foreclosure Fraud Charges In Alleged Land Grant "Rescue" Scam Ruled Constitutional, Says California Judge

In San Diego, California, CW Channel 6 reports:

  • Felony civil code violations alleging rent skimming and foreclosure fraud against five people accused of victimizing hundreds of San Diego County homeowners are constitutional, a judge ruled Friday.(1) [...] The defendants face a total of 172 charges, including conspiracy and grand theft.

***

  • At a hearing in May, Deputy District Attorney Stephen Robinson alleged that the defendants offered to help homeowners keep their property by placing them in "land grants," when in fact the transactions were bogus and left them even worse off than they were before.

For more, see Foreclosure Fraud Charges.

Go here for more on this alleged Southern California land grant, foreclosure rescue scam.

(1) According to the story, Superior Court Judge Charles Rogers denied a legal challenge to the charges against William Hutchings, 62, and his wife Xiaoke Li, 45; Shawna Landis, 36; Diego Gil, age unknown, and Edgar Martinez, 30.

Are Lenders Proactively Offering Borrowers Cash In Exchange For Waiving TILA Violations?

An "Ask The Lawyer" Q & A article appearing last month in the Atlanta Journal Constitution posed the following question:

  • I received a letter from my lender stating that a Truth in Lending Disclosure Statement was not prepared and provided to me prior to closing my loan. I was sent forms to sign and was told that I would be sent $250, for my inconvenience when the forms were completed and returned. Is my lender buying me off for a measly $250? Can I get more? Isn’t it a pretty big offense to not provide the Truth in Lending Disclosure?

For more, see Settle for $250, or go for a possible $1,000 (Latter payoff for lender’s failure to provide form less likely, bigger hassle). missing mortgage foreclosure docs gamma

Tuesday, December 2, 2008

Loan Modification Firms Drawing Attention From NY Feds, State AG

In New York City, Crain's New York Business reports:

  • [W]ith citywide foreclosures up 50% over a year ago, some of the same bankers and brokers who sold unaffordable, subprime loans are now joining the rapidly growing ranks of mortgage modification consultants.

  • While some members of what an online ad called one of the “fastest-growing job markets in the country” run legitimate businesses, housing advocates say many are taking people's money and doing little or nothing in return. The burgeoning industry has caught the attention of the FBI's New York office and the state attorney general.(1)

***

  • Frequently, they ask homeowners for thousands of dollars up front, which is illegal in 12 states, including New York, unless the fee is made to a lawyer or nonprofit. As part of the sales pitch, homeowners are often advised to stop making mortgage payments,(2) putting their homes in further jeopardy of foreclosure.

For more, see Mortgage holders are marks (Loan modification specialists take money, do little in return).

(1) Other law enforcement agencies are zeroing in. The Illinois attorney general last month filed seven lawsuits against modification firms that failed to negotiate workouts for clients. The Colorado attorney general has filed 15 cease-and-desist orders against such companies. State AGs in Tennessee and Florida have also targeted loan modification firms in lawsuits alleging, among other things, that their activities constitute the unauthorized practice of law.

(2) For whatever its worth, advising homeowners to violate the terms of their loan (by advising them to stiff their mortgage lenders) may give rise to a claim of tortious interference with a contract (or a tortious interference with a business relationship) by the mortgage lender and/or mortgage servicer being stiffed, and subjecting the loan modification firm to potential liability for dispensing the "sage" advice. See generally, White Plains Coat & Apron Co., Inc. v. Cintas Corp., 2007 NY Slip Op 3591; 8 N.Y.3d 422; 867 N.E.2d 381; 835 N.Y.S.2d 530; 2007 N.Y. LEXIS 847 (2007):

  • It is a familiar proposition that one "who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract." Restatement (Second) of Torts § 766.

Loan Modification Firms Swarm Courthouses To Find Leads; Cash-Strapped Homeowners Find Mailboxes Stuffed With Junk Mail, Salespeople On Doorstep

A recent editorial in The New York Times makes this observation:

  • The demise of the subprime mortgage industry has been hard on predatory brokers, too. They feasted for years on bad loans until reality crashed down and the money ran out, and there they were: sharks without a frenzy.

  • Now they are circling again. Predators of every sort have regrouped and returned to their old ways, this time as loan-modification companies, inserting themselves between hard-strapped homeowners and banks, offering to work deals — for cash up front.

***

  • Troubled homeowners know all about the relentlessness of the loan-rescue racket: it fills their mailboxes and sends salespeople to lurk on their doorsteps. Foreclosure filings are public records, and loan modifiers routinely swarm courthouses to find leads.

  • Loan counselors at the Long Island Housing Partnership, a respected nonprofit in Hauppauge, N.Y., tell of scammers crashing its housing workshops, posing as troubled borrowers, then working the crowd with sales pitches.(1)

For more, see Return of the Predators.

(1) Some state attorneys general have already started going after these loan modification firms. For example, there are ongoing efforts by the state AGs in Illinois, Tennessee, Colorado, and Florida. Further, state AGs in Tennessee and Florida have reportedly also included allegations of unauthorized practice of law in their actions against loan modification firms.

Foreclosure Rescuers, Loan Modifiers Circle San Joaquin Valley Homeowners In Financial Trouble

In the San Joaquin Valley region of California, the Merced Sun Star reports:

  • The foreclosure sharks are circling the San Joaquin Valley. [...] With Stockton, Modesto, Merced and Fresno all ranking among the nation's leading cities for foreclosures, the market invites commercial exploitation. Hundreds if not thousands of San Joaquin Valley homeowners are being besieged by letters, phone calls and even door-to-door visits that purportedly offer escape from financial harm.

  • Barbara Galvan, for instance, resides in southeast Fresno and said she has never missed a mortgage payment. Nonetheless, as her adjustable rate keeps rising, she's been getting the hard sell from purported rescuers. "I'm getting lots of calls," Galvan said. "They want me to pay $3,000 or $4,000 up front. I tell them, where will I get $3,000 if I can't pay my mortgage? They say, I could put it on my credit card."

For more, see Housing crisis: Foreclosure scams abound in Valley (Organizations promise help but homeowners need to read fine print).

See also, Beware of 'vultures' as foreclosures grow:

  • [San Joaquin] Valley officials report that homeowners are getting pounded by letters, phone calls and personal visits from individuals and businesses claiming they have an easy answer to financial problems. For fees of $3,000 or $4,000, they'll unlock the key to saving your home. loan modification

Pittsburgh Homeowner Out $2,800 Paid To Upfront Fee Foreclosure Rescue Firm In Exchange For Failed Loan Modification Promise

In Pittsburgh, Pennsylvania, KDKA-TV Channel 2 reports:

  • [S]tephanie and her husband have been unable to keep current on their mortgage payment which carries a 12 percent interest rate. Three months ago, they gave a Florida foreclosure help company $2,800 in hopes the company could convince their lender to modify their loan.

***

  • Stephanie says the company assured her of a 90 percent chance of a modified loan, but three months later her lender told them that wasn't in the cards. Now the company won't return her calls and has reneged on their money-back guarantee. "I can't even get a call back, much less money back," Stephanie said.

For more, see Couple Facing Foreclosure Fleeced By Company (read story) (watch KDKA video).

Monday, December 1, 2008

Lack Of Legal Standing Apparently Not A Concern To Some Foreclosing Lenders; Would Rather Play The Odds That Homeowners Won't Contest Legal Actions

Buried in a recent article in the Connecticut Law Tribune is this excerpt, which may reflect the arrogance of some mortgage lenders and their general contempt for the legal system when bringing foreclosure actions against homeowners even though they lack the legal standing to do so:

  • [Attorney Patrick] Begos’ firm [Begos, Horgan & Brown] has attempted to carve out a niche with banks to review their troubled loans and to ensure that the banks had standing to file foreclosure proceedings.

  • Earlier this year, firm member Christopher Brown got a case against his homeowner client dismissed in New Haven Superior Court because Brown showed that the plaintiff mortgage company couldn’t prove it held the mortgage at the time it filed suit.(1)

  • Despite that outcome, banks didn’t bite on Begos’s pitch, telling him that they would rather play the odds that most homeowners won’t contest foreclosures in court.(2)

Source: Adapting On The Fly (Solos, small firms make quick changes in bad economy).

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.

(1) See Connecticut Law Tribune: Shaky Standing (Foreclosure cases identify shoddy record-keeping in mortgage industry).

(2) Even if the homeowners fail to contest foreclosures, a lender's lack of legal standing in bringing an action leaves open a possible future attack that the foreclosure judgment obtained in a court that lacked jurisdiction is void, thereby raising the possibility that judgments obtained and foreclosure sales that have already taken place could be voided or otherwise set aside. Reportedly, the issue of void foreclosures where lenders allegedly lacked legal standing has recently been raised in a Massachusetts lawsuit. The suit seeks to set aside past foreclosures involving two lenders, halt any actions they currently have in the pipeline, and seeks class action status. See Thousands Of Foreclosures Are Void, Says Massachusetts Class Action Demanding Lenders & Their Lawyers Prove Note Ownership. missing mortgage foreclosure docs gamma

The Best Defense Is A Good Offense, Says Homeowner's Foreclosure Attorney

In Orlando, Florida, Central Florida News Channel 13 reports:

  • Matt Englett, the lawyer of a Longwood man who lost his job and is in foreclosure, is working to modify his client's loan and do whatever it takes to make sure his client has a place to live. "I can take a 90-day uncontested foreclosure, and I can drag it out for two or three years if we have to," Englett said.

***

  • Englett warned just because lenders contact you and make you think they are working with you to modify your loan, look into taking action anyway. If not, the lender may go ahead and take your home before you know it.

For more, see Take Action Against Your Lender During Foreclosure. missing mortgage foreclosure docs gamma

Prince George's State's Attorney Nearing Indictment On 20 Mortgage, Foreclosure Fraud Cases; Lawyers, Loan Officers, Others In The Cross Hairs

In Upper Marlboro, Maryland, The Maryland Daily Record reports:

  • The Prince George’s County State’s Attorney’s Office hopes to send a message to potential perpetrators of mortgage fraud: “Not in this county.” Operating since September, the office’s new Mortgage and Foreclosure Division is hoping to bring 20 cases to indictment soon, said Assistant State’s Attorney April Richardson.

  • Richardson said the division is moving forward against loan officers, title companies, lawyers and brokerages thought to have participated in mortgage scams.

For more, see Mortgage fraud unit targets lawyers, loan officers.

The Call For Home Loan Modification Rights In Bankruptcy Proceedings Continues

The Honorable J. Rich Leonard, a jurist who currently toils in the U.S. Bankruptcy Court for the Eastern District of North Carolina, recently wrote in The Washington Post advocating for a change in the cuurrent bankruptcy law to allow for the modification of troubled home mortgages in bankruptcy proceedings. In his article, Judge Leonard reminds us of the following:

  • [H]omeowners are the only ones who cannot modify the terms of their secured debts in bankruptcy. Corporate America flocks to bankruptcy courts to do precisely this -- to restructure and reamortize loans whose conditions they find onerous or can no longer meet. Airlines are still flying and auto parts makers still operating because they have used this powerful tool of the bankruptcy process. Lehman Brothers will surely invoke it.

  • But when the bankruptcy code was adopted in 1979, the mortgage industry persuaded Congress that its market was so tightly regulated and conservatively run that it should be exempted from the general bankruptcy rules permitting modification.

For more, see Give bankruptcy judges the power to alter mortgages.

For a similar position espoused by the Honorable Keith M. Lundin, a judge in the U.S. Bankruptcy Court in the Middle District of Tennessee, see:

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:

  1. creating fictitious loans with bogus loan closings,
  2. selling the same legitimate loan to multiple investors, and
  3. 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).

See also:

(1) According to the story, after attending the seminars, families are told that a $1 million "Royal Hawaiian Treasury Bond" will be sent to the homeowners' bank with a letter explaining that it will cover the outstanding balance of the mortgage. The companies tell the homeowner that because they are members of the "Hawaiian nation," the bank will no longer be able to demand money from them because they are the land's "rightful owners," the story states.

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.

See also:

(1) According to the U.S. Attorney press release, those charged in this alleged scam are: LAWRENCE ALBERS, 51; AL CASSIANO JR., 41; ALISON EDELMAN, 30; RONY PHILIPPE EXANTUS, 45; ROBERT ALEXANDER GUERRERO, 33; VICTOR GUERRERO, 35; ANSY GUERRIER, 29; GARY JACQUES, 33; JEFFREY JACQUES, 25; MICHAEL McENROE, 37; JOHANNY MENDEZ, 26; SANDRA SAM, 44.

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:

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.

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.

See also:

(1) According to a Queens district attorney press release, those charged are Norman Barabash, 63, Bellerose; Shamim, a.k.a. Sam, Choudhury, 35, Jamaica, N.Y.; Gulam, a.k.a. Zack, Chowdhury, 22, Lawrence; John D’Emic, 59, Brooklyn; Daisy Guzman-Saavedra, 38, Yorktown Heights; Nazrul Islam, 23, Jamaica, N.Y.; Alan Morris, 58, New Hyde Park, N.Y.; Boris Nektalov, 23, Flushing; Rajendar Persaud, a.k.a., Rommel Persaud, 35, Verbank, N.Y.

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.