Recording Artist Sues Lender In Attempt To Fend Off Foreclosure; Says WaMu Reps Put Bogus Info In Loan Application, Tricked Couple Into Signing

In Kaua'i, Hawaii, The Honolulu Advertiser reports:

• A singer who gained popularity in the late 1960s with the song "Hello It's Me" has filed a lawsuit here against a Washington-based bank, asking a judge to stop the financial institution from foreclosing on his Kaua'i home. Todd Rundgren filed the complaint Wednesday in state Circuit Court and alleged that representatives from Washington Mutual misled him and his wife, Michele, when the couple refinanced a loan on their property in Kilauea. The lawsuit, filed by attorney Gary Dubin, lists as defendants Washington Mutual Bank and JP Morgan Chase, which acquired WaMu in September 2008. The Rundgrens are asking for a temporary restraining order to halt foreclosure actions, as well as an undetermined amount in damages and attorneys fees.

***

• The Rundgrens allege they refinanced a mortgage on their Kaua'i home in February 2008 for $3 million. But they said WaMu representatives created a false loan application that exaggerated their gross monthly income and then tricked them into signing the application. [... Dubin] acknowledged that the Rundgrens did not read the mortgage document at the time they signed it, but he said very few people do. "I can tell you this: I never read mine either," he said. "The clients who come to see me, the single word they always use is 'trust.' They trust the loan broker who was so nice to them. They trust that it was a big-looking company."

For the story, see Singer sues bank in foreclosure (Rundgren suit stems from $3M Kauai home refinancing).

Oregon Man Cops Plea To Foreclosure Stripping His Own Home

In Damascus, Oregon, The Oregonian reports:

• After stripping his foreclosed home of everything from the air conditioning system to the kitchen sink, Grigoriy Bogoslavets was convicted of a crime that is often witnessed but rarely reported. The 33-year-old electrician pleaded no contest last month to aggravated theft after stealing more than $50,000 of property attached to his former Damascus home, one of the few such cases in Oregon or across the country to result in prosecution. He will be sentenced Sept. 22.

***

• Departing homeowners' taking off with fixtures that are legally part of the house -- generally anything attached or installed -- is nothing new to real estate brokers. What's changing, especially in the nation's worst housing markets, is the recognition that such acts can be criminal.

***

• Neighbors tipped off police when they saw Bogoslavets return to his former home with a van after vacating the premises. Investigators discovered Bogoslavets had taken nearly everything he could remove, including the kitchen island, fireplace, bathtubs, the doorbell and electrical outlets.

For more, see Damascus man even took the kitchen sink from foreclosed home (if link expires, try here).foreclosure fixture stripping apple

Role Of Licensed Loan Modification Consultants In Nevada Mandatory Foreclosure Mediations An Unanswered Question

In Las Vegas, Nevada, the Las Vegas Review Journal reports:

• Permanent regulations that require licenses for home mortgage modification and foreclosure consultants are expected to become effective [this week], but one important question remains unanswered. Can these licensed consultants represent clients in mediation sessions with mortgage lenders?

For more, see License rules leave questions (Whether consultants can represent clients in mortgage mediation unclear).

In a related story, see Las Vegas Sun: Agency gets authority to set fines for bilked homeowners (Nevada commissioner of mortgage lending adopted rules Tuesday giving his agency authority to license loan modification & foreclosure consultants and to take disciplinary action, including fines up to $10,000 for violations):

• These companies or agents must place the up-front money collected from the homeowner in a trust account and can draw down only when they deliver a service. Education requirements are in place that those in the business must get anywhere from 15 hours to 25 hours of instruction. Bonds must be posted with the lowest amount at $75,000.

California Real Estate Agent Gets 90 Days After Admitting To Forging Unwitting Victim's Name On $900K+ In Loan Documents To Purchase Home

In San Bernardino, California, the Contra Costa Times reports:

• A Chino Hills real estate agent was sentenced to 90 days in jail [last week] after pleading guilty to forging more than $900,000 in loan documents. Anita Mendoza, 44, was accused of forging another person's signature to obtain the loans, which she used to purchase a home in Chino Hills in 2006. In addition to the jail time - which Mendoza can serve on weekends - the Realtor was placed on three years' probation Friday in San Bernardino Superior Court and ordered to attend a counseling program. [...] She will be required to pay back $180,000 lost by a mortgage company victimized in her scheme, Deputy District Attorney Vance Welch said last month. When Mendoza was interviewed by investigators last month, she confessed to forging loan documents to purchase her home.

For the story, see Chino Hills Realtor sentenced to 90 days for loan forgery.

Tennessee Real Estate Operator Screwed Us In Bogus Real Estate Deals, Say Clients

In Dickson, Tennessee, WSMV-TV Channel 4 reports:

• Some families who Jimmy Greene has done business with seem to end up losing their homes. Karen and Doug Young said Greene caused them to lose their house in Dickson to foreclosure. [...] The Youngs wanted to sell their house, and so they signed a contract with Greene and Greene Custom Homes. The deal was that if it didn't sell, Greene would make the payments. But he didn't. "They did not pay for May, June, July or August of 2008, and that was why it was in foreclosure," said Doug Young. They never saw it coming, they said, because Greene intercepted the correspondence from their mortgage company. "All of the contact numbers were changed, down to the e-mail address, so that everything would go to him and we wouldn't know," Karen Young said. The two ended up losing the house.(1) And they aren't the only ones who have said their real estate deals with Greene ended badly.

***

• [Marsha Hargrove] and her husband were buying a home they ended up losing. They had signed a rent-to-own contract with Greene, then found out after two and half years that Greene didn't own the house and all the improvements they made were down the drain.

***

• Deborah Branham's family was renting to own from Greene but found out he wasn't paying the mortgage on the family's house, either. It, too, was in foreclosure, and they lost their $5,000 down payment.

For the story, see Clients Say Company Ruined Homeownership (Greene And Greene Custom Homes Faces String Of Lawsuits).

(1) Reportedly, the Youngs went to court and won, but they have yet to collect on their $25,000 judgment.

Oregon AG Settles Suits With Two Firms, Begins Probe Into At Least Six Others In Effort To Find & Prosecute Crooked Loan Modification Rackets

From the Oregon Department of Justice:

• Attorney General John Kroger [Wednesday] announced a new enforcement effort to protect Oregon homeowners by targeting loan modification companies that engage in deceptive and misleading business practices. [...] The attorney general announced that his Financial Fraud and Consumer Protection Unit has opened more than half a dozen investigations related to loan modification companies and mortgage fraud. Kroger also announced the results of two cases.

• [Wednesday's] settlements are with National Homeowners Assistance Services, Inc. [$4,000 in legal costs reimbursement], based in Lake Forest, Calif., and American Mitigation Group [$4,000 in restitution], based in Newport Beach, Calif. The companies offered loan modification assistance and related services to homeowners facing foreclosure. The companies purposefully used tactics that could confuse homeowners, including implying they were affiliated with government agencies or programs.

***

• [Wednesday's] settlements are one part of an overall Oregon Department of Justice strategy to protect Oregon homeowners. The Department of Justice will vigorously pursue crooked loan modification companies.

For the Oregon AG press release, see Attorney General John Kroger Cracks Down On Loan Modification Scammers (Two California loan modification companies must stop misleading Oregon consumers).

Condo Association Trend Seeking "Blanket Receiverships" In Attempt To Avert Financial Disaster Begins To Take Hold In Central Florida

In Central Florida, the Orlando Sentinel reports:

• Condominiums in Central Florida are cutting back on things like tennis-court lights and are seeking help from the courts because so many condo owners are abandoning their fast-depreciating units and refusing to pay required maintenance fees. "It's a major crisis right now," said Bill Raphan, a supervisor with the state Division of Condominiums.

• Desperate condo associations are starting to seek court-appointed receivers — a trend that started in South Florida but has spread to this part of the state. It's a sign of how dire the situation is, said Donna Berger, executive director of the Community Advocacy Network, a nonprofit group representing more than 1,500 condo and homeowner associations. "The current economic downturn and foreclosure crisis have placed many associations on the brink of disaster," she said.

***

• Last week, state Circuit Judge Alan A. Dickey appointed Seth R. Heller and Co. to collect fees at the Villas. More than 60 percent of the 294 unit owners are delinquent, with individual tabs of as much as $11,000 for some owners of multiple units. Total unpaid fees: $720,000. If those condo owners or their tenants don't pay up soon, they will be held in contempt of court and at some point could face arrest. "Without this order, the association was really facing financial collapse," said Fort Lauderdale lawyer Stuart Zoberg, who represented the Villas board. "And all along you have these landlords laughing, because they are collecting rents, and they still siphon off as much money as they can from their renters without paying association fees."

For more, see Condos sic judges on owners for back fees.

In a related post, see Florida Appeals Court OKs "Blanket Receivership" In Condo Association Battle Against Rent Skimming Unit Owners, Deadbeat Investors.

Role Of Attorneys Representing Homeowners In Mandatory Foreclosure Mediations Questioned

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

• The Nevada legal community is getting behind a new mediation program designed to reduce the state’s ongoing foreclosure problem, but some attorneys are facing criticism for trying to profit from it. [...] One legal advocate for the poor has criticized the program, sayings attorneys are preying on homeowners for a service they don’t need. Many attorneys, however, said it never hurts to have legal representation in the complicated process to keep a home.

• Michael Joe, an attorney and foreclosure specialist for the Legal Aid Center of Southern Nevada, said he has seen attorneys advertise their services for $1,500 to $3,500 to help homeowners in mediation. It’s piggybacking on attorneys’ ads to help homeowners modify loans, he said. Joe called it no different from an attorney waiting outside of a hospital for injured patients who are brought in by ambulance.

***

• Robert Noggle, a real estate and business attorney with Black & LoBello, said attorneys have helped people stay in their homes by working with lenders and helping negotiate short sales. In mediation, attorneys may need to advise the homeowner on what is offered by lenders. Although attorneys aren’t necessary, not every homeowner who goes into mediation has the time or inclination to understand the rules, Noggle said.

For more, see Lawyers’ role in foreclosure mediations sparks debate (At issue: Are homeowners buying what they don’t need?).

In a related story, see License rules leave questions (Whether consultants can represent clients in mortgage mediation unclear).

Mortgage Servicer's Insurance Payment Screw Up Left Texas Couple "Naked" During Hurricane Ike & Stuck w/ Force-Placed Policy, Says Suit

In Galveston, Texas, The Southeast Texas Record reports:

• A Galveston County couple is suing a subsidiary of Citigroup for failing to pay their insurance premium payment on time. Garry and Karrie Higgs' breach of contract suit alleges St. Louis-based CitiMortgage mishandled a payment that was essential to the renewal of their policy with the Texas Windstorm Insurance Association ["TWIA"].

***

• According to the complaint, CitiMortgage was responsible for initiating premium payments from an escrow account. The suit states that CitiMortgage was informed by Nationwide in late July 2008 that the Higgs' coverage was set to expire in two months. Nationwide then established a three-week window for payment. The plaintiffs claim CitiMortgage did not properly heed Nationwide's request, but CitiMortgage claims it made the payment but accidentally mailed it to a wrong location.

• Both Nationwide and the Higgs claim they repeatedly tried to contact CitiMortgage regarding the payment, only to be told by the defendant it was already issued. The payment finally surfaced on Sept. 10, 2008, a week after the deadline and three days before Hurricane Ike. Ike, a Category 2 storm, came ashore and inflicted a significant amount of damage to the plaintiffs' residence. The Higgs say their new TWIA policy did not include the events during Ike and was cancelled. "As a result, CitiMortgage purchased its own force-placed insurance policy and charged the plaintiffs a higher and more expensive premium," the suit says.

For the story, see Galveston couple blames Citigroup for failing to pay TWIA premiums.

Conn. AG Files Civil Suit Against "Renegade Real Estate Ring" Putting Customers Into Unaffordable Mortgages; Referral To Criminal Prosecutors Possible

In Hartford, Connecticut, The Connecticut Post reports:

• Latinos throughout Southwestern Connecticut were victims of a wide-ranging predatory-lending scheme that used a Stamford real estate office to guide them into unaffordable mortgages, Attorney General Richard Blumenthal charged on Tuesday.(1) Many of the 120 or so victims are unable to speak English and about 33 homes have already been lost through foreclosure, said Blumenthal during an interview in which he said the case will be referred to state and federal prosecutors for possible criminal investigation.

• He detailed a "renegade real estate ring" in which customers dealing with Roman Realty, a Century 21 affiliate on Bedford Street, would be taken to an adjacent mortgage company and later have their incomes falsified by a third company for use on loan applications.

For more, see Blumenthal says Latinos were victims of predatory lending scheme.

(1) According to the story, Blumenthal, representing the state Department of Banking and the Department of Consumer Protection, has sued VRM Mortgage Company, Inc. and Roman Realty, Inc. and the companies' owner, Victor Roman, as well as VRM's office manager, Tony Mojica. He's also filed a lawsuit against Jose Flores, the owner of Harvard Financial Services, located on Virgil Street in Stamford.

Ohio AG, Cuyahoga County Task Force Bust 41 People In Alleged Straw Buyer Mortgage Scam Involving 453 Houses, $44M In Fraudulently Obtained Loans

In Cleveland, Ohio, Crain's Cleveland Business reports:

• Four companies and 41 people(1) have been indicted in an alleged mortgage fraud scheme spearheaded in Beachwood. The scam allegedly included 453 homes and $44 million of fraudulent loans. The Cuyahoga County Mortgage Fraud Task Force(2) and the Ohio Organized Crime Investigations Commission allege that Beachwood resident Uri Gofman convinced friends and relatives to invest in his real estate company, Real Asset Fund. He began the business with seed money from Latvia, the officials said in a press release, but used “straw buyers” to purchase homes. The company then falsely claimed that improvements were made to the homes so they could be refinanced, the attorney general's office alleged. The houses were then sold to unqualified buyers.

For more, see Indictments handed up in alleged mortgage fraud scheme.

See also:

• Ohio Attorney General press release: Task Force Cracks Mortgage Fraud Case Involving 453 Homes,
• The Cleveland Plain Dealer: 41 indicted in $44 million county mortgage-fraud scam (Scheme helped bring down home values, worsen blight, prosecutors say).

Go here to see a complete list of the defendants and charges.

(1) The 45 individuals and outfits busted were: Uri Gofman, 36, of Beachwood, Tony Viola, 43, of Cleveland, Igor Gofman, 47, of Beachwood, Samyel Goldshtein, 51, of Highland Hts., Alex Kurlienko, 27, of South Euclid, Kevin Landrum, 30, of Solon, The Real Asset Fund, 2120 Green Rd. South Euclid, Yan Satanovskiy, 61, of Lyndhurst, Irina Satanovskiy, 61, of Lyndhurst, Ester Simkhovich, 35, of Lakewood, New Jersey, Leonid Simkhovich, 31, of Wickliffe, Gennadiy Simkhovich, 52, of Highland Hts., Marina Simkhovich, 47, of Highland Hts., Alexander Vinokur, 39, of Solon, Eric Gesis, 45, of Highland Hts., Tigran Babloyan, 44, of Reminderville, Karka Inc., 2120 Green Rd. South Euclid, James Alexander, 42, of Warrensville Hts., Tiffany Alexander, 39, of Beachwood, Farah Dailey, 30, of Euclid, George F. Gardner III, 38, of Euclid, Donnie Eatmon, 44, of Macedonia, Rochelle Huffman, 35, of Cleveland Hts., Brian P. Jordan, 48, of Cleveland, Crystal McCoy, 53, of Cleveland, Maura McKissic, 32, of Cleveland Hts., Steve Greenwald, 43, of Solon, Zakkiyya Mumin, 32, of Warrensville Hts., Sulieman Mumin, 30, of Warrensville Hts., Troy E. Spencer, 47, Cleveland Hts., Shirley Board (Vannerson), 59, of Cleveland Hts., Nathan Prusak, 35, of Bay Village, Dale M. Adams, 34, of Solon, Miroslav Simkhovich, 35, of Willoughby, Ronald Medley, 45, of Cleveland, Darrin Harsley, 39, of University Hts., Dave Pirichy, 38, of Burton, Linas Puskorius, 51, of Cleveland, Howard Sieferd, 58, of Euclid, James M. Leoni, 35, Lyndhurst, Realty Corporation of America, 815 Superior Ave. Cleveland, Tiffeney Dennis, 35, of Cleveland Hts., Alicia McKnight, 25, of Bedford Hts., Gregory L. Krainess, 44, of Beachwood, JN & DH Investments, 3213 Portman Ave. Cleveland.

(2) Task Force members include:

• Ohio Organized Crime Investigations Commission
• Cuyahoga County Prosecutor's Office
• Ohio Bureau of Criminal Identification and Investigation
• Cuyahoga County Sheriff's Office
• Cleveland Heights Police Department
• Solon Police Department
• Beachwood Police Department
• Pepper Pike Police Department
• HUD Inspector General's Office
• Cuyahoga County Recorder
• Cuyahoga County Auditor
• Cuyahoga County Treasurer
• Ohio Department of Commerce-Division of Financial Institutions
• F.B.I.
• U.S. Attorney's Office
• U.S. Postal Inspector

California Real Estate Agent Cops Plea To Investment Scam That Pulled In $1.25M+; Victims Include Senior Who Invested Bulk Of Life Savings

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

• District Attorney Gregory D. Totten announced [...] that Veronica Sanchez Gallegos, a licensed real estate agent residing in Ventura, pled guilty on August 6, 2009, to one felony count of theft from an elder, five felony counts of grand theft, and admitted a special allegation of taking more than $500,000. In an investigation conducted by the District Attorney's Office Bureau of Investigation, it was determined that Gallegos conducted a fraudulent investment scheme where six victims entrusted her with a total $1,289,000. Victims invested money with Gallegos after relying on false assurances made by Gallegos that their investments were being pooled into short term construction, real estate, and similar “secured” loans [...] and were protected by an escrow fund in the event of default.

***

• One 65 year-old victim invested the bulk of his life savings for a total of $284,000 and suffered a net loss of $244,000. Other investors invested amounts ranging from $40,000 to $622,000.

Go here for the Ventura County DA press release.

Queens Woman Accused Of Swiping Deed To Brooklyn Retiree's Home & Emptying His Savings Account; House & Cash Recovered In Civil Suit

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

• A Queens mom in a child support battle offered to help an elderly man with his own Family Court problem - and then stole the deed to his home and cleared out his bank account, officials said. Chandra Myers is facing larceny and forgery charges and a possible 15 years in prison if convicted of scamming Brooklyn retiree Levi Latham. She's accused of using the documents he gave her to forge his signature on a property transfer and using a fake power of attorney to grab his $25,000 savings.

***

• With the help of Legal Aid lawyer Roger Hawke, Latham sued Myers and Citibank and got his house and money back when she didn't bother to show up to court. Myers, 42, isn't in the clear, though. She's been hit with criminal charges by the Brooklyn district attorney and pleaded not guilty during a July 16 hearing. [...] Hawke said his client, a former military man, has still not recovered from the scam. "It's so easy to take the property away but so difficult to correct it," he said.

For the story, see Fake advocate's offer of help turns into horror story as woman swindles elderly gent in $25G scam.

"Helpful" Neighbor Gets 57 Months For Ripping Off Cancer Patient; Stopping Automatic Bank Debit For House Payments Leads To Near Foreclosure

In Fort Worth, Texas, the Star Telegram reports:

• Debilitated by breast cancer, Jody Short of Mansfield was grateful two years ago when a neighbor offered to help care for her after she came home from the hospital. Sixteen months later, Short learned that the neighbor, Janice Gast, whom she considered a friend, had begun using her identity, her credit cards and her bank accounts shortly after she took over Short’s care.

• Gast, 42, was sentenced to prison [last week] after pleading guilty to forging Short’s name on documents and stealing more than $67,000 from her over about a year. State District Judge Sharen Wilson sentenced Gast to concurrent four-year prison terms on charges of felony theft and fraudulent use of identification, and to nine months in state jail on a forgery charge.

***

• [Prosecutor Tiffany] Burks said the worst thing Gast did was stopping the automatic bank debit for Short’s monthly mortgage payments. "Her lender was in the process of filing a foreclosure, so she almost lost her home," Burks said.

For the story, see Neighbor who stole from cancer patient gets 4 years, 9 months in prison. FinancialAbuseOfElderlyAlpha

Upfront Fee Florida Foreclosure Rescue Operator Gets Apparent Hand Slap In Federal Civil Suit; FTC To Suspend $4.1M Judgment After Payment Of $21K

The Federal Trade Commission recently announced:

• The Federal Trade Commission has put a stop to a deceptive foreclosure "rescue" operation that charged homeowners $1,200 based on the false promise that it could save them from losing their homes. The operators of the business(1) are barred from any further deceptive practices under a settlement with the FTC. The agency charged them with violating the FTC Act by falsely claiming that they would prevent homes from being foreclosed in virtually all instances or refund most of the $1,200 fee. In most cases the defendants neither stopped foreclosure nor provided promised refunds.

***

• The order imposes a $4.1 million judgment, which will be suspended upon transfer of $21,694 in bank account funds that were frozen by the court. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

For the entire FTC press release, see FTC Action Stops Foreclosure 'Rescue' Operation.

For linkks to the relevant court documents in this matter, see Federal Trade Commission v. United Home Savers, LLP, et al.

(1) The defendants are Stephanie Dietschy, Darin Dietschy, and United Home Savers, LLC, all based in Florida. loan modification

Westchester DA Indicts Eight In Alleged Equity Stripping Foreclosure Rescue Scam After Joint Probe w/ NYS Banking Dept.; Four Families Victimized

In White Plains, New York, The Journal News reports:

• Eight people(1) were indicted for a countywide mortgage scheme that defrauded four families and two mortgage lenders of $1.4 million, Westchester authorities announced [Tuesday]. The perpetrators "induced desperate property owners fearing the threat of foreclosure to deed their homes to 'investors' with the promise that they could re-purchase their property in 12 to 24 months," District Attorney Janet DiFiore stated in a news release. "In fact, the defendants colluded to strip the property of its equity by obtaining inflated mortgages based on fictitious purchase prices using 'show' checks to deceive the banks as to the actual purchase price." The arrests followed a nine-month probe by DiFiore's office and the state Banking Department. The targeted families were from Croton-on-Hudson, Yorktown, Cortlandt and Mount Vernon.

Reportedly, Westchester DA Fiore said that four members of the alleged racket were attorneys,(2) and that the four victims who had their home equity ripped off in the sale-buyback deals would have to bring civil lawsuits against the alleged perpetrators to try to get their homes back.(3)

Source: Eight indicted in Westchester mortgage scheme.

For the Westchester DA press release, see Indictment Unsealed In Countywide Mortgage Fraud Scheme (Eight Individuals Defrauded 4 Families For 1.4 Million Dollars).

(1) Arrested were Doreen Swenson, 60, and Herbert "Phil" Hall, 60, of Tarrytown; Mildred Didio, 44, of Manhattan; David Reback, 67, of Rye Brook; Amerigo DiPietro, 59, of Brewster; Eileen Potash, 52, of Queen; Wilma Shkreli, also known as Wilma Gecay, of Westwood, N.J.; and Frank Corgiliano, 44, of Newtown, Conn.

(2) The lawyers were identified as Didio, Reback, Potash, Corigliano. The four lawyers, along with the four others, were indicted Tuesday, each on charges of grand larceny, fraud and conspiracy. They pleaded not guilty. See 4 lawyers indicted in $1.4M NY scam.

(3) See DA: Lawyers taking desperate owners' NY homes.

Ten State AGs, Feds Form Posse To Target Equity Skimming, Bogus Foreclosure Rescue, Straw Purchases, Unethical Lending Practices

The New York Times reports:

• Ten state attorneys general and four federal agencies have announced the formation of a task force to combat mortgage fraud. According to a statement issued by Washington state Attorney General Rob McKenna, targets of the enforcement effort include equity skimming, bogus foreclosure rescue, straw purchases and unethical lending practices.(1)

• The group is headed by McKenna and Iowa Attorney General Tom Miller. Other members include the attorneys general of Arizona, Colorado, Illinois, Nevada, North Carolina, Massachusetts, Missouri and Ohio, as well as representatives from the Department of Justice, Federal Treasury, Department of Housing and Urban Development and Federal Trade Commission. McKenna says the task force is the result of meetings on July 15 in Washington, DC, between federal regulators and a number of state attorneys general.

Source: Attorneys General Form Mortgage Fraud Task Force.

(1) “Scammers and opportunists need to know that they’re in the crosshairs of a tough, well-armed posse with a presence in every state,” McKenna said. McKenna said that by combining their enforcement powers and expertise, state and federal authorities are in a stronger position than ever before to take on equity skimmers, foreclosure rescuer schemers, straw purchasers and unethical lenders who deceive or discriminate.

Mississippi Couple Cops Pleas In Bankruptcy Fraud-Related, Deed Transfer Foreclosure Rescue Scam; Wife Goes Down For Failing To Turn In Hubby

In Jackson, Mississippi, The Clarion Ledger reports:

• A Jackson couple will be sentenced Nov. 5 in federal court after pleading guilty to fraud related charges. Robert E. Power Jr. pleaded guilty Friday to conspiracy to commit bank and wire fraud, and bankruptcy fraud. His wife, Deaundrea Power, pleaded guilty to misprision of a felony for failure to report bankruptcy fraud committed by her husband.

• The couple had operated a business, Yorkshire Financial Services on Ridgewood Road in Jackson, which targeted homeowners at risk of foreclosure. The couple had represented to the homeowners that in exchange for transfer of their property to Yorkshire and a monthly rental payment, the company would negotiate mortgages or refinance mortgages to allow homeowners to remain in their homes, according to the United States Attorney’s Office. But the Powers would then place the property in bankruptcy unbeknownst to the homeowners and either the home would eventually be forclosed upon, or sold through straw buyers, via fraudulent loans, where the Powers would obtain cash money from the sale. As a result of the Powers’ actions, the homeowners lost their homes while the Powers gained a profit from the fraudulent activity, according to the federal investigation.

Source: Jackson couple pleads to fraud charges.

For the U.S. Attorney press release, see Couple Pleads Guilty To Mail Fraud, Bankruptcy Fraud And Falsifying Documents In Bankruptcy Cases. loan modification

Maryland Federal Judge Grants "Money Store" Equity Stripping Foreclosure Rescue Scam Lawsuit Class Action Status

In Greenbelt, Maryland, the Maryland Daily Record reports:

• The criminal prosecution of the massive Metropolitan Money Store mortgage fraud, which has yielded 10 guilty pleas since the first indictment(1) was handed up last summer, has grabbed headlines as a particularly egregious example of the foreclosure rescue schemes that prey on people already hard-hit by the recession. But as the criminal case winds down — ringleader Kurt Fordham(2) received a 10-year sentence last month and his co-conspirators’ punishments will be meted out this fall — a civil lawsuit on behalf of the hoodwinked homeowners that predates the U.S. Attorney’s intervention is picking up steam.

• In a July decision published this week, a U.S. District Court judge in Greenbelt turned back arguments from the only two defendants who have not defaulted in the civil case and certified it as a class action. The class, consisting of perhaps more than 200 Maryland, Washington, D.C., and Virginia residents who signed up with MMS or one of its affiliates, lost more than $60 million in the equity-stripping scheme, according to the homeowners’ lawyers.

***

• But, [attorney Philip Robinson admitted in an interview Wednesday, the case is complicated by its many “moving pieces,” such as the ongoing criminal prosecutions, other litigation and the collapse of the corporate defendants. [...] In the end, Robinson says, there might not be a whole lot to give back to the cheated class members.

For more, see Federal judge certifies class action against Metropolitan Money Store.

For the class action lawsuits, see:

• Proctor v. Metropolitan Money Store, et al.,
• Winston v. Regional Title & Escrow LLC.

Go here for updates on the Metropolitan Money Store federal class action lawsuit.

(1) See U.S. v. Joy Jackson, et al.

(2) Fordham, his wife and MMS President Joy Jackson and their accomplices convinced homeowners to transfer to title of their houses to straw buyers for a year, during which time they set to swiping their existing equity through fraudulent loan applications and bogus settlement costs, the plaintiffs allege.

Maryland Lawmaker To Cough Up $109K For Violating State Law Regulating Sale Leaseback Foreclosure Rescue Scams

In Anne Arundel County, Maryland, The Capital Gazette reports:

• A state lawmaker from Severna Park who lost a lawsuit earlier this year must pay $109,000 in damages and attorney fees, a county judge has ruled. That is 10 times more than what a jury ordered Del. Tony McConkey to pay in April after determining that the Republican knowingly violated a state law designed to protect homeowners in foreclosure. After hearing numerous motions July 27, Circuit Court Judge D. William Simpson decided that McConkey owes his victim $34,000 - rather than the $10,800 ordered by the jury - and owes her attorneys $75,000 in legal fees.(1)

• Despite the drastic increase in the judgment, McConkey yesterday continued to praise the jury's verdict, noting that it did not believe he was perpetrating a foreclosure rescue scam or otherwise trying to defraud Teresa Milligan of her money. "I still feel vindicated," said McConkey, pointing to how the jury found that he did not breach his fiduciary duty to Milligan.(2)

For more, see Lawmaker must pay $109K judgment (Judge increases damages, tacks on attorney fees for McConkey).

(1) Attorney Michael Morin and Milligan's other attorney, Peter A. Holland, argued in court on July 27 that McConkey owed them $126,061 in legal fees for more than 450 hours of work. Judge Simpson said their rates - $275 an hour for Morin and $300 for Holland - were reasonable, but that some of the work they performed was on counts on which the jury found in favor of McConkey. He cut the legal fees to $75,000.

(2) "You have to be remarkably self-centered - virtually delusional - to see a $109,000 judgment as a vindication," attorney Michael Morin said. "Ms. Milligan will be paid," he added.

Federal Suit Says Wells Fargo Illegally Cut Illinois Homeowner's HELOC; Class Action Status Sought

In Chicago, Illinois, Reuters reports:

• An Illinois homeowner accused Wells Fargo & Co, the largest U.S. mortgage lender, in a lawsuit of summarily cutting home equity lines of credit by undervaluing customers' houses. In a federal lawsuit filed in Chicago on Wednesday that seeks class-action status, homeowner Michael Hickman accused the bank of using "dubious" computer models that systematically undervalue homes, depriving customers of credit.

***

• In his complaint, Hickman said that because the new limit was just above what he had borrowed, his "credit utilization rate" increased, damaging his credit rating and boosting his borrowing costs. The lawsuit says that San Francisco-based Wells Fargo violated the U.S. Truth-in-Lending Act and Illinois consumer fraud laws. It seeks punitive damages and several other remedies.

For more, see Homeowner sues Wells Fargo over equity credit lines.

Go here for a six-page letter of guidance issued by the U.S. Office of Thrift Supervision which generally explains what obligations lenders have in connection with the freezing of home-equity lines of credit.

In a related story, see Sarasota Herald Tribune: Some home-equity lines of credit can't be rescinded. Frozen HELOC

Arizona Bankruptcy Judge Orders Wells Fargo Exec Into Court To Explain Mortgage Servicer's Loan Modification Policy

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

• A federal bankruptcy judge has ordered a top Wells Fargo executive to testify in court about the bank's loan modification policies. The order came in response to a Phoenix woman's complaint that Wells Fargo had ignored her modification request. "I sent them everything they asked for, and then when I called to follow up they said, 'What paperwork? What modification? We don't know what you're talking about,'" said Bobbi Giguere.

• Giguere said she applied for a modification after she lost her job in December. Instead, she said she received a notice of foreclosure while she thought she was still trying to work out a deal with Wells Fargo. Now Judge Randolph Haines wants a senior officer at Wells Fargo to defend the charges.

For the story, see Judge To Bank: Explain Mortgage Policies (Judge Orders Wells Fargo Executive To Testify About Loan Modification Policies).

Florida AG Brings Civil Suit Against Another Central Florida Loan Modification Foreclosure Rescue Outfit

From the Office of the Florida Attorney General:

• Attorney General Bill McCollum [Friday] sued a Kissimmee-based company over allegations it targeted Hispanics in a foreclosure rescue fraud scheme. JPB Consulting Inc. and its president, Juan P. Bordali, allegedly charged up front fees of more than $1,000 per customer to homeowners about to lose their homes, but never performed any services. Charging fees up front before completing foreclosure rescue services is a direct violation of Florida’s Foreclosure Rescue Fraud Prevention Act. [...] An investigation conducted by members of the Attorney General’s Economic Crimes Division, working as part of the Attorney General’s Mortgage Fraud Task Force, determined that JPB Consulting and Bordali marketed the company’s services primarily to those in the Hispanic community(1) using posters and signs in neighborhood stores and flyers handed out on sidewalks and street corners. The company also used radio and TV ads to solicit clients.

• According to the lawsuit, unsuspecting consumers were charged up front fees ranging from over $1,000 to $3,500 and were promised foreclosure relief. No foreclosure rescue services or loan modifications were performed by defendants. The Attorney General’s investigation further revealed the company was advised by a law firm in February that it was acting in violation of the law, but the company continued to collect the illegal up-front fees. The Attorney General’s Office knows of over 30 victims, but believes the company may have hundreds of clients.(1) JPB Consulting, Inc. is also known as JB Consulting, which sometimes does business under the name “Mortgage Modification Solutions.”

For more, see Kissimmee Foreclosure Rescue Company Sued for Fraud (Company purportedly targeted the Hispanic community with foreclosure rescue scam).

For the lawsuit, see State of Florida v. JPB Consulting, Inc., et al.

(1) Among the Florida AG's allegations is that the foreclosure rescue operator violated Section 2-2.002, Florida Administrative Code (2008), Advertising in Languages other than English (see Lawsuit, paragraph 49):

• [B]y advertising to homeowners in Spanish but providing contracts drafted only in English, defendants have violated Section 2-2.002, Florida Administrative Code (2008) and have thus committed acts or practices in trade or commerce which offend established public policy and are unethical, unscrupulous or injurious to homeowners in violation of Sec. 501.204(1), Florida Statutes (2008).

(2) Homeowners who feel they may have been screwed over by this outfit are urged to file complaints against them with the Florida Attorney General's Office. Complaint forms are available online:

• In English at: http://myfloridalegal.com/webfiles.nsf/WF/MRAY-7V5H7X/$file/JPBAffidavit.pdf, and
• In Spanish at: http://myfloridalegal.com/webfiles.nsf/WF/MRAY-7V5H8H/$file/JPBAffidavitSpanish.pdf.

Minnesota Title Agent Cops Plea To Swiping $400K+ In Clients' Escrow Funds From Real Estate Transactions

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

• A Brooklyn Center man pleaded guilty [last week] in U.S. District Court to using as much as $1 million from clients of his mortgage title company for his own benefit. Terry Louis Lemke, 40, owns All Metro Title. He pleaded guilty to one count of wire fraud and one count of money laundering. As part of a plea agreement, Lemke says he knowingly and intentionally defrauded clients from June 2006 through 2007, a statement from the U.S. attorney's office said. The All Metro Title clients thought the money was being deposited into an escrow account as part of real estate transactions.

• In the plea agreement, Lemke admits to defrauding more than $400,000 and possibly as much as $1 million, the statement said. Specifically, the statement says, on June 23, 2006, Lemke electronically transferred $193,226.76 from Lehman Brothers Bank in Colorado to an All Metro Title account. On the same day, he paid $20,746.18 from the All Metro account to a personal credit card bill, the U.S. attorney's office said.

Source: Brooklyn Center title firm owner admits to fraud (As part of a plea agreement, Terry L. Lemke said he diverted money from clients to himself). EscrowRipOffKappa

Cook County Court Clerk Sits On $18M+ Belonging To Foreclosed Homeowners Who Failed To Claim Surplus Money From Courthouse Sales

In Chicago, Illinois, WLS-TV Channel 7 reports:

• Cook County Circuit Court Clerk Dorothy Brown says her office has found more than $18 million in mortgage surplus money that belongs to people who lost their homes to foreclosure in the last two decades. The surpluses occur when the bank sells foreclosed homes for more than the homeowners owe. The clerk's database found about 1,900 people are due surplus money. The surpluses mostly involve foreclosures from the 1990s and not the recent subprime mortgage collapse.

Source: Clerk: $18M due to foreclosed homeowners.

Backpeddling Begins For City Officials Whose Foreclosure Program Referred Strapped Homeowners To Forensic Loan Audit Outfit With History Of Complaints

In Carson, California, The Daily Breeze reports:

• Carson's elected officials are distancing themselves from a city foreclosure program that has steered strapped homeowners to a private firm with a history of complaints. The company, ABS Business Solutions, charges thousands of dollars in up-front fees to perform mortgage "audits." It is illegal to charge up-front fees for foreclosure counseling, and numerous nonprofit groups will do it for free.(1)

• Councilman Elito Santarina, who serves on the city's foreclosure protection subcommittee, said he wanted a full explanation of what went wrong from the program's coordinator, Sai Momoli.(2) "I'm so furious. This is ridiculous," Santarina said. "All I wanted was to do something good for the people. I wish I knew every detail and I wish I knew I had been a part of this. No, I do not know anything about this. I am out of it."

For the story, see Carson officials distancing themselves from foreclosure program.

(1) The Breeze recently reported that the Carson Foreclosure Crisis Response Team was referring Carson residents to ABS, which the Attorney General's Office has targeted for failing to register as a foreclosure consultant. The Breeze also reported that several former ABS customers have posted complaints about the company online, claiming that it had taken fees of more than $3,000 and then had done nothing to prevent their foreclosures. See Carson mortgage program is under fire.

(2) According to an earlier story, the city's Foreclosure Crisis Response Team was launched last October, when local resident Sai Momoli urged the City Council to invest $300,000 in his foreclosure prevention program. Momoli touted his connections to Marie McDonnell, a Massachusetts-based mortgage consultant. See Carson mortgage program is under fire.

Consumer Lawsuits Against Companies Alleging Violations Of Federal Debt Collection, Credit Reporting Laws Surge In 2009

Credit.com's John Ulzheimer writes:

• According to Jack Gordon, CEO of WebRecon LLC, a service that tracks FCRA [Fair Credit Reporting Act] and FDCPA [Fair Debt Collection Practices Act] filings, “we’re on pace to eclipse 8,500 such lawsuits in 2009. That’s a record for any one year.”

• The issue at hand seems to be two-fold. First, more consumers view litigation as an investment in their own credit future. These are the folks who are fed up with the typical credit dispute protocol, which might work fine for 98 percent of disputes, but isn’t 100 percent effective. The percentage who can’t seem to have legitimate errors removed from their credit reports using the bureau’s required methods are starting to find it necessary to escalate their efforts into the courts in order to regain their good credit names.

• The second bunch seems to be coming from the shake down artists.

For more, see Debt Collectors and Creditors Beware: FCRA and FDCPA Lawsuits Skyrocket.

Unconventional Purchase From Homebuilder Leaves Unwitting Washington Couple Facing Foreclosure, Despite Making All House Payments

In Richland, Washington, The News Tribune reports:

• For 21 months, Tonya and Timothy Stapleton paid the mortgage, insurance and taxes on their new $220,000 Horn Rapids house on time. But today [last Friday] Tonya plans to go to the Benton County Justice Center to make sure her home isn't auctioned in a foreclosure sale.(1)

• The Stapletons found out their house was in jeopardy about seven months ago, when the bank notified them the man they had been sending their payments to had stopped paying the bank. She was on her way home from the grocery store when her husband called and told her the news. "Needless to say, my heart sunk and I went into panic mode," she said.

• The Stapletons bought their house from Steve Schlam, formerly of Redmond, Ore., who built at least 20 houses in the Horn Rapids area of Richland. Schlam had a loan for the house through IndyMac Federal Bank, and the Stapletons wrote their checks out to him so he could make the bank payments. But in January they found out Schlam hadn't made a payment since October, although the Stapletons had continued paying him, not knowing anything was wrong. When they confronted him, he refunded their January payment but no more.

For more, see Dream home turns to nightmare for Richland couple.

(1) For story update, see Couple resume fight for Richland house after auction:

• Tim and Tonya Stapleton attended the foreclosure sale at the Benton County Justice Center on Friday, where their Horn Rapids home was to go up on the auction block. [... T]he home went "back to beneficiary," meaning OneWest Bank, which holds the loan on the house, bought it for the low bid of $189,000. Tonya said she was relieved with that outcome, because a third party didn't end up with her home.

Dispute Between Concrete Firm & Supplier Leads To Foreclosure Threat For Unwitting Homeowner; Gets Hit w/ Mechanics Lien Over Contractor's Unpaid Bill

In Lansing, Michigan, the Lansing State Journal reports:

• In May, Maurice Jones hired a local company to replace about 340 square feet of driveway at his home on Norburn Way in Lansing. The cement got poured. Jones paid in full. Done deal, right? Not quite. Three weeks ago Jones got a certified letter from Shafer Redi-Mix of Albion. Here's what it said:

• "We supplied concrete to McClain Concrete, for improvements to your property. To date we have not been paid by McClain Concrete and, in accordance with the Michigan Lien Act we're forced to file a mechanic's lien against your property. If this situation cannot be rectified promptly, we will be forced to commence with foreclosure ..."

For more, see Homeowner stuck in middle of cement squabble. StiffingContractorsTheta

Ohio AG Tags Home Improvement Firm With Allegations Of Shoddy, Incomplete Work; Accused Of Pocketing Upfront Customer Money, Failing to Give Refunds

From the Office of the Ohio Attorney General:

• Ohio Attorney General Richard Cordray filed a lawsuit [last week] charging Akron Asphalt, a driveway paving company, with failing to deliver promised services and performing shoddy work. The complaint, filed in the Summit County Court of Common Pleas, charges the company with several violations of Ohio consumer law. "We received several complaints from consumers who said this company took their money without delivering promised results," Attorney General Cordray said. "After investigating the company's business practices, we discovered that it routinely failed to deliver and did unprofessional work."

• The Attorney General's Office currently has four unresolved consumer complaints against Akron Asphalt. In the complaints, consumers said they hired the company for asphalt installation, grading work, seal coating and other driveway repairs. They paid anywhere from $750 to $4,000 but said the company failed to complete the work and refused to refund their money.

For the entire press release, see Cordray Sues Akron Home Improvement Company for Fraud.

For the lawsuit, see State of Ohio v. Sands, Akron Asphalt.

Association With Legal Profession Bad For Pit Bulls' Image, Or Vice Versa???

Texas attorney John Browning, a partner in the Dallas office of Gordon & Rees, LLP, offers his commentary on the topic of lawyer advertising in a recent issue of The Southeast Texas Record:

• As anyone who's ever watched daytime or late night television can attest, "classy" is not a word one would associate with most lawyer advertising. Whether they're calling themselves things like "The Hammer," riding in tanks or promising you big money for your injuries (whether you know you've been injured or not), lawyers in many commercials come across as well, kind of sleazy.

***

• Some states restrict advertising that reflects poorly on the legal profession, such as the Florida Supreme Court's decision to discipline the lawyers who used a pit bull logo and "1-800-PIT-BULL" phone number in their advertising. Ironically, the only non-lawyer who had complained was a pit bull breeder who felt that being associated with lawyers was bad for the dogs' image!

For more commentary on lawyer advertising, see Legally Speaking: Low Points in Lawyer Advertising.

For the Florida Supreme Court's "pit bull" ruling (imposing discipline on two attorneys for using television advertising devices invoking the pit bull breed of dog which, according to the court, "demean all lawyers and thereby harm both the legal profession and the public’s trust and confidence in our system of justice"), see Fla. Bar v. Pape, 918 So. 2d 240; 2005 Fla. LEXIS 2287 (2005).

North Carolina AG Adds Rent Skimming Rackets, "Subject To" Deed Conveyances To Its "Foreclosure Rescue" Radar

In Charlotte, North Carolina, The Charlotte Observer reports:

• Like others across North Carolina, [77-year-old Ruth Barbour] fell victim to a type of mortgage scheme that's become more common as businesses target homeowners desperate to get out of their houses. [...] The businesses, which say they buy and close on homes quickly, have captured the attention of state regulators and legislators, who are now considering legislation that would make tracking these cases easier.

***

• Typically, this is how the scheme works: A distressed homeowner, who can't sell his house and may be facing foreclosure, agrees to sell his home to a company in exchange for a small cash settlement and the title to the house. The homeowner doesn't realize he is still named on the mortgage. The company brings in a renter, who pays a significant deposit. The company may or may not continue to pay the mortgage. When it can no longer find a renter, it abandons the property, for which the original homeowner is still liable.

• It's the latest in a number of schemes that regulators are battling as distressed homeowners look for a way out of an overwhelming mortgage or impending foreclosure. The N.C. Department of Justice has been cracking down on foreclosure “rescue” outfits that require an upfront payment and promise to work with a lender to modify a delinquent loan. Now it's also taking aim at businesses that promise to take over mortgage payments if the homeowner signs over the deed or title (ie. deed conveyances that are "subject to" one or more existing mortgages on the home being deeded over).(1) About four dozen of these businesses, which sometimes use the slogan “We Buy Homes,” operate in Charlotte and around the state, according to the Better Business Bureau of Southern Piedmont.

For more, see Home scam stings owners (Businesses advertise as buyers. They take over a home's title but not the mortgage, and some can leave distressed owners in foreclosure).

(1) Typically, these transactions are consummated without regard to any "due on sale" restriction that may be contained in the existing mortgage(s) that the property is subject to, and sometimes involve transfers to a newly formed trust in an attempt to conceal the deal from the existing lenders as long as possible.

"There Is Zero Time To Waste" Says Indiana AG In Continuing Effort To Eliminate Loan Modification Scams Targeting Hoosiers

In Indianapolis, Indiana, The Indianapolis Star reports:

• The Attorney General's Homeowner Protection Unit has filed a lawsuit in Hamilton County against a Jacksonville, Fla.-based foreclosure consulting company. The lawsuit against National Foreclosure Counseling Services Corp., also known as American Financial Corp.,(1) includes 11 consumers from Allen, Hamilton, Johnson and Marion counties and reported losses of more than $10,000.(1) The lawsuit says the company asked for up-front fees and failed to modify mortgages.

***

• The lawsuit claims the company did not obtain a required $25,000 surety bond to demand payment upfront from customers, and failed to register as a business in Indiana. The release says attorney generals in Florida, Illinois and Minnesota have also filed similar lawsuits against the company. "Considering the economic climate we are in, there is zero time to waste on this issue. We are taking an aggressive stand and we won't wait for more people to be victimized or lose their homes through these illegal practices," Zoeller said in the press release.

For more, see Zoeller sues another 'foreclosure consultant'.

For the Indiana AG press release, see Attorney General Greg Zoeller urges Hoosiers to avoid illegal foreclosure consultants.

For the lawsuit, see State of Indiana v. National Foreclosure Counseling Services Corp.

(1) Other defndants: Robert Dallavia and Raymond Paulk, both of Jacksonville, Florida. The suit alleges violations of the Indiana:

• Credit Services Organizations Act, Ind. Code 8.24-5-15-1 et seq.;
• Mortgage Rescue Protection Fraud Act, Ind. Code 8.24-5.5-1 et seq., and
• Deceptive Consumer Sales Act, Ind. Code 8.24-5-0.5-1 et seq.

(2) The lawsuit is the eighth filed by Attorney General Greg Zoeller against what a press release issued by his office calls "illegal foreclosure consultants." Three of the first seven cases have reached resolutions in which the sued companies agreed or were ordered to pay restitution:

• A settlement was reached in June with You Walk Away, Inc., located in California. In exchange for the case being dismissed, You Walk Away agreed to pay $4,000 in restitution to four Indiana consumers and $2,000 to the State for costs and fees.
• On June 29, a Delaware County court ordered California-based American Mitigation Group, Inc. to pay $4,064.45 in consumer restitution payments to five Indiana consumers and $33,000 to the State for civil penalties.
• On July 27, a Marion County Superior Court ordered Foreclosure Relief Agency, LLC. to pay $53,002.34 in consumer restitution to 52 Indiana consumers and $2 million in civil penalties to the State of Indiana.

"Zero Tolerance" For Loan Modification Scams, Says Missouri AG As Civil Charges Brought On Outfit Allegedly Charging Upfront Fees & Failing To Deliver

In Kansas City, Missouri, Missourinet.com reports:

• Missouri has filed suit against a Kansas City firm, claiming that it is preying on people who are desperate to save their homes. Attorney General Chris Koster has filed suit against Premier Credit Services of Kansas City and principals Michael and Angela Eads. Koster accuses the couple of promising homeowners facing foreclosure that they could drop their interest rate, lower their house payment and repair their credit.

• Koster says his office has mounted a "zero tolerance" campaign against mortgage fraud. "There's no doubt that the mortgage fraud scams that we're seeing are spiking as a result of the economy," Koster says. "In the first six months of this year, we have seen twice as many complaints come into the Attorney General's office as we saw in all of 2007 and 2008 combined."

• Koster accuses Premier of engaging in two practices that should be red flags for fraud: charging up-front payments and portraying themselves as being part of the federal government.

Source: AG files suit against KC firm, claiming mortgage fraud.

For the Missouri AG press release, see Attorney General Koster files lawsuit against Kansas City company (Continues Zero Tolerance Campaign against mortgage fraud).

Townhome Buyer Sues Developer For Refund As Crime, Foreclosures, Questionable Sales, Unwanted Renters Plague Failed Complex

In Riviera Beach, Florida, the South Florida Daily Business Review reports:

• When Pamela Hart paid $275,000 for a townhouse in one of Cornerstone Group’s new developments in Riviera Beach, she thought she was making a great purchase. The 59-year-old county employee said she received a $10,000 discount when she bought what she believed was the last unit for sale in Sonoma Bay. But in 2007 soon after moving in, she said she learned that most of the units were vacant and that she had moved into a development plagued by crime, foreclosures, questionable sales and some unwanted renters.

• After trying to get out of what she describes as a “living hell” that makes her fear for her safety and unable to sell her unit, she recently filed a lawsuit in Palm Beach Circuit Court against Cornerstone’s Sonoma Bay Inc. seeking to return the unit and unspecified punitive damages. Hart claims the developer marketed the property as an owner-occupied community but turned it into a rental community that is poorly maintained and is dangerous to live in.

***

• According to the lawsuit, Sonoma Bay has rented some of the 60 developer-owned units in the 302-unit community to low-income renters under the federal Section 8 program. The city of Riviera Beach has an ordinance that prohibits developers from renting to recipients of Section 8 vouchers, the lawsuit said.

For more, see Buyer wants money back for townhome ‘hell’.

For the lawsuit, see Hart v. Sonoma Bay, Inc.

Residents In Western Pennsylvania Mobile Home Park Face Eviction After Land Owner Loses Property To Foreclosure

In Robinson, Pennsylvania, the Pittsburgh Tribune Review reports:

• Off Route 22 in Washington County, doors and loose siding on empty trailers rattle in the summer breeze, and 12 families find themselves facing an eviction order. Many tenants of Maple Grove Trailer Park in Robinson live month-to-month on fixed incomes; some are slowed by age or illness; others own trailers too old to move or that can't be moved because of additions and renovations. But on Aug. 5, a constable handed out papers saying they had until Thursday to move, on the orders of the latest in a succession of owners.(1)

***

• Under the state's Mobile Home Park Rights Act, the residents' legal rights could hinge on their lease and the new owners' plans for the property, said Kenneth Hirsch, a professor at the Duquesne University School of Law. "As long as it's a trailer park, the residents have the right to stay on forever as long as they comply with park rules and pay their rent," Hirsch said. "The exception is if the new owner intends to close down the trailer park. That has to be at the end of the lease period, and they have to be given more than 15 days." No applications for development or a change in use at the park have been filed with the township, Dorsey said. However, if the lease is for less than a year or the tenants are staying from month to month, the 15-day notice could be legal, Hirsch said.

For more, see Maple Grove Trailer Park residents ordered out by new owner.

(1) According to the story, the trouble began after the trailer park's previous owner David Dewald died of cancer in 2007 and his wife, Celeste, took over, residents said. Financial trouble sent the property into foreclosure, and it was sold to Bayview in a sheriff's sale in July 2008, said Capt. Jim Altman, who oversaw the Washington County Sheriff's Auction.

State High Court Task Force Issues Report & Recommendations On Florida Foreclosure Crisis

In Tallahassee, Florida, the Miami Daily Business Review reports:

• Florida Supreme Court task force is calling for uniform mandatory mediation for all residential foreclosure cases in the state to deal with the tide of foreclosures that has swamped courthouses. The proposal, obtained by the Daily Business Review, calls for all circuits to implement a mediation process modeled on a program used by the Miami-Dade Circuit Court and two others, where lenders pay for the mediation and borrowers provide their financial information to the lenders.

***

• If the proposals are adopted by the Florida Supreme Court, it would be the first instance of a uniform statewide effort in Florida to handle the glut of foreclosure cases clogging courthouses. [...] In cases where borrowers aren’t located, the task force also recommends a new form for process servers to fill out to demonstrate they undertook a diligent search to find the borrowers.(1)(2)

For the story, see Mandatory mediation urged to help streamline process.

See also, The Wall Street Journal: Florida Court Wants Mandatory Mediation on Foreclosures.

Go here for the Florida Supreme Court Task Force's Final Report And Recommendations On Residential Mortgage Foreclosure Cases.

(1) This recommendation reflects the apparent concern the task force has in curbing "sewer service" by unscrupulous process servers. See Miami Daily Business Review: Judge grapples with her discovery of 15,000 unserved foreclosure cases.

(2) Other recommendations include: adopting uniform statewide forms and procedures; creating a central statewide foreclosure Web site to provide basic information now "strewn haphazardly across the Internet"; consumer education on avoiding foreclosure scams; and aggressive prosecution by the Florida Bar of attorney misconduct.

Overleveraged Apartment Buildings Falling Into Foreclosure Threaten Tenants, Jeopardize Neighborhoods Throughout NYC

In The Bronx, New York, Crain's New York Business reports:

• Linda Kemp remembers when the hallway floors at Robert Fulton Terrace were waxed regularly, when tulips, not weeds, bloomed in the garden, and when mold wasn't growing in the bathrooms of apartments in the 18-story complex that once was the envy of the Morrisania section of the Bronx. [...] That was before April 2007, when New York real estate investor Mark Karasick spent $44 million to acquire the building and its sister property two miles north, Fordham Towers.

• Tenant leaders suspected that Mr. Karasick, whose deals are often seeded by San Francisco-based private equity vehicle SFF Realty Fund, had grossly overpaid for his prize and that income from the two buildings' 490 rent-regulated units would not come close to covering expenses. Canada-based bank CIBC lent Mr. Karasick $36.5 million for the deal in 2007 [...].(1) In a letter to Bronx Rep. Jose Serrano last October, the bank's general counsel called tenant concerns “unwarranted.” But cuts in service—maintenance staff was slashed from nine to three—had immediately followed the sale. Then, this past May, the tenants' prediction came true: Robert Fulton and Fordham Towers fell into foreclosure.

***

• Now, hundreds of other rent-regulated buildings in New York City purchased at the height of the real estate boom may end up in similar distress. Optimistic underwriting enabled investors, often backed by private equity, to snap up rental buildings at bloated prices in highly leveraged deals. In many cases, the new landlords had unrealistic expectations for raising rents, and now some 70,000 units are in jeopardy. That's left government officials seeking ways to stem what some are calling the greatest threat to the city's neighborhoods since the widespread landlord abandonments of the "70s. “It's a looming disaster, and if it explodes to even half the level of the prediction, it's going to be a huge problem,” says Emily Yousouf, an ex-investment banker and former president of the city's Housing Development Corp. who is consulting for the Partnership for New York City and the Rockefeller Foundation on the issue. “It's not only the tenants who suffer and the buildings that go downhill, but suddenly the neighborhoods deteriorate as well.”

For more, see Bronx is burning over failed deals (Overleveraged buyers of rent-regulated apartments create one big mess across city).

See also:

• The New York Times: Struggling Landlords Leaving Repairs Undone,
• New York Daily News: Tenants stuck in dilapidated buildings as landlords flee.

Go here for other stories on overleveraged NYC apartment buildings.

(1) Reportedly, a CIBC spokesman would not comment on the financing, since the bank sold the loan to J.P. Morgan Chase, which in turn packaged it as part of a commercial mortgage-backed security that includes more than $3 billion in loans for apartment buildings, office complexes and retail strips. Overleveraged NYC Buildings

Man Ripped Off Absentee Owners Of Title To Mortgage-Free Properties, Pocketing Proceeds Of Fraudulently Obtained Mortgages In The Process, Say Feds

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

• United States Attorney A. Brian Albritton announces the arrest yesterday of Edwin M. Lugo-Abreu (age 34, of Orlando) on an indictment(1) charging him with mortgage fraud. If convicted on all counts, Lugo-Abreu faces a maximum penalty of 20 years in federal prison. According to the indictment, Lugo-Abreu devised a scheme to defraud E-Loan, The Lending Group Inc., and WMC Mortgage Corporation by falsifying and fraudulently applying for mortgage financing and fraudulently transferring title ownership of properties used to secure the mortgage financing.(2)

For the U.S. Attorney press release, see Orlando Man Arrested For Mortgage Fraud Conspiracy.

(1) Three other individuals, Alexis Izazaga, Carlos Valentin and Yariel Valentin, have entered guilty pleas and been sentenced in connection with this scheme.

(2) The indictment alleges that Lugo-Abreu identified properties that were unencumbered by mortgage liens that were owned by absentee owners and used bogus quit claim deeds to fraudulently transfer the titles thereto out of their names (Indictment, paragraphs 7-11). DeedContraTheft

Ex-Real Estate Agent Gets 15 Years In I.D. Theft, Mortgage Fraud Scam; One Unwitting Victim Left Broke

In Minneapolis, Minnesota, the Star Tribune reports:

• Former Twin Cities real estate agent Larry Maxwell received a 15-year prison sentence Thursday from a Hennepin County judge who said Maxwell's extensive mortgage and identity fraud scheme merited the term. Judge Regina Chu could have sentenced Maxwell to about 10 years in prison, but she said the gravity of his conduct and his "total lack of remorse" made the longer sentence appropriate. Maxwell has been in custody since a jury convicted him in April after a six-week trial.(1)

• Chu also ordered Maxwell to pay restitution in an amount to be determined to John Foster, who spoke for 45 minutes about how Maxwell's theft of his identity left him broke and depressed. [...] For Foster, of Plymouth, the ordeal began in 2006 when he received a mortgage statement by mail for a north Minneapolis house about which he knew nothing. A Bloomington property also was purchased in his name, and he and his wife say they lost their good credit as well as retirement and college funds as a result of the scheme.

For the story, see Fraud earns ex-real estate agent a 15-year sentence (Judge says lack of remorse merited a longer prison term. He also was fined $500,000).

(1) Reportedly, the jury convicted Maxwell of nine counts of theft by swindle, six of aggravated forgery, two of identity theft and one of racketeering. Two other participants in the scheme pleaded guilty earlier.

NYC Convicted Deed Thief, Welfare Cheat Now Faces New Charges In Alleged Straw Buyer Scam

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

• Old con men never die - they just find a new scam. Herbert Steed, who famously went to jail in the '90s for collecting welfare while living large in a Trump Tower pad,(1) is now charged with a fresh $1.5 million mortgage ripoff. The 78-year-old fraudster faces up to 65 years in prison for allegedly using fake buyers to purchase properties in Harlem and Richmond Hill, Queens.(2) [...] In addition to the federal charges, Steed is awaiting sentencing for forging a deed and stealing a Queens woman's house.

For more, see Herbert Steed, who once collected welfare while living in Trump Tower, charged in mortgage scam.

(1) According to the story, he applied for and received public assistance in the early '90s when he was living in a spacious 37th-floor Trump Tower apartment with marble baths. Steed plunked down a $27,000 deposit, which he allegedly swindled from a tour group, to land the swank pad, which he shared with a 23-year-old girlfriend. On his welfare application, Steed claimed he had no job and no income and lived in a small apartment in Queens. Steed was tried and convicted for the scam. He was sentenced to 5-to-15 years in prison for scamming welfare and the tour group. He was paroled in 1999 after serving the minimum.

(2) According to the story, the federal court complaint states that $206,000 from the alleged dirty deals went to Home Mergers LLC, a shady foreclosure firm. It in turn wrote a check for $20,000 to an entity Steed controlled called Pan African Tours. Prosecutors said Home Mergers was run by Maurice McDowall, a Brooklyn man who last year pleaded guilty to swindling dozens of people out of their homes in foreclosure rescue, equity stripping scams. He was sentenced to 10 years in prison.

Another Foreclosure Screw Up Forces South Florida Family Into Temporary Homelessness

In Homestead, Florida, NBC Miami reports:

• You know times are tough when people are getting kicked out of their house when it’s not even for sale. That’s what happened to Anna Ramirez after she found all of her stuff out on the front lawn of her Homestead home last week and a strange man demanding she get out of his newly purchased house. The eviction came after Ramirez’s home was mistakenly auctioned off to the highest bidder by her bank, Washington Mutual. [...] What's worse is her husband, daughter and grand children were also kicked out by Homestead and Miami-Dade police officers, said Martha Taylor, who witnessed the unexpected eviction.

***

• Ramirez and her family had three hours to get out of the house, police ordered. They had to stash their belongings at multiple locations and shacked up with a friend for the night as cops chained the doors of their home.

• With Taylor's help, Ramirez appeared before a judge two days later to explain what happened. "I had all my stuff scattered everywhere," she said. "They did this in front all my neighbors. It was so embarassing." A mistake in the Miami-Dade Clerk's Office appears to be behind the mishap, which landed Ramirez homeless for more than 24 hours.

• The sale was eventually reversed by a Miami-Dade judge, allowing Ramirez to return to her old digs. Ramirez said she wants to sue for the damage to her furniture.(1) Ramirez has lived in the house for three years and recently refinanced the home with the bank.

For the story, see My Bad! Woman's House Mistakenly Auctioned by Bank (A Homestead woman's home was auctioned to the highest bidder).

(1) In a related post where the Nevada Supreme Court approved a court judgment of over $1 million for a homeowner involved in a similar mortgage lender/loan servicer screw up, see Nevada High Court OKs Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure.

For the Nevada Supreme Court decision, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (September 11, 2008).

Claims Of Deception, Illegal Practice Of Law Unfounded, Says NY-Licensed Attorney In Response To Connecticut AG Probe Into Loan Modification Firm

In East Berlin, Connecticut, the Connecticut Law Tribune reports:

• Kent Gross said he can’t be done with Connecticut soon enough. For him, it’s become impossible to do business here. The New York-licensed attorney said [First Legal Group, a] company he helped set up in East Berlin to assist homeowners facing foreclosure has been unfairly targeted by state grievance officials and Attorney General Richard Blumenthal.

***

• “To come out and say we misled people and that no work was done on the files is ridiculous,” Gross said from Florida last week. “There’s proof that we did work, and it’s voluminous.” He said an online case management system accessible by clients provides that proof. Gross, the managing attorney for First Legal Group, said there were actually 38 Connecticut clients who paid $69,000 in fees. He said the company would start refunding money and returning case files to clients late last week, and he stressed his cooperation with the Statewide Grievance Committee and the Attorney General’s Office.

• And the claims of illegally practicing law in the state are unfounded, Gross said. “None of us are Connecticut lawyers and none of us said we are,” Gross said. “I basically don’t practice law. I deal with the executive officers at banks to work on modifications.”(1)

For more, see Modifying Loans Or Scamming Homeowners? (Attorney-run, Florida-based foreclosure service comes under fire in Connecticut).

(1) According to the story, Chief Disciplinary Counsel Mark Dubois revealed the company’s business practices in a lawsuit filed by his ofice stop First Legal Group, a Florida-based outfit, from operating in Connecticut. Dubois also raised the specter of possible larceny charges. Dubois targeted Gross and Florida attorney Nicola Zagarolo as the leaders of the company. Two Connecticut attorneys got involved with the business after Dubois first contacted First Legal Group in July, Dubois said. Hartford attorneys Evan Fitzpatrick and Andrew Cates worked as local counsel to provide “limited legal services,” designed to make the operation seem more legitimate in case clients needed to make court appearances, Dubois said. Both attorneys are recent law school graduates who passed the bar last summer. Their contract provided $100 payments for every Connecticut client the company attracts and to receive an additional $100 for each court appearance. Both attorneys backed out of the arrangement when they began to feel uneasy about the business model.

Missouri AG Accuses Mobile Home Operator Of Pocketing Buyers' Money & Failing To Deliver Homes; Also Allegedly Swiped Proceeds Of Brokered Sales

From the Office of the Missouri Attorney General:

• Attorney General Chris Koster has charged Edna Kay Jackson of Kirbyville with 12 felony counts for allegedly deceiving people who did business with her to buy or sell mobile or modular homes. The charges, filed in Greene County, accuse Jackson, doing business as Dogwood Homes, of taking money for the purchase of homes and not delivering either the homes or the clear titles to homes to the customers. Jackson is also charged with brokering homes for individuals and not giving them or their bank the money from the sale.

For the Missouri AG press release, see Attorney General Koster files criminal charges against Taney County woman (Attorney General charges her with 12 counts related to defrauding modular and mobile home sellers, buyers).

Maryland Homebuilder Gets 12 Years For Pocketing Customer Deposits & Loan Proceeds, Failing To Build Homes

In Prince George's County, Maryland, The Washington Post reports:

• A District Heights developer was sentenced Monday to 12 years in prison for collecting more than $1 million from banks and home buyers for houses that were never built. Leon Coleman promised 11 buyers that he would build homes in Kings Grant, a new subdivision in Upper Marlboro, but he never built them. Instead, prosecutors said, Coleman pocketed $206,000 and used some of the rest of the money to buy land and pay closing costs.

***

• In 2005, the Maryland attorney general's office won a civil lawsuit against Coleman and his wife, Emma, who were ordered to pay about $500,000 in fines and to repay about $1 million of the money they obtained. The Colemans never complied. The Prince George's County state's attorney's office pursued the case as a criminal matter after being contacted by the home buyers.(1)

For more, see Developer Gets Prison for Theft From Buyers.

(1) According to the story, would-be buyer Glenn Miller said his savings are depleted, his credit score has plummeted and his dream of sending his daughter to college has nearly evaporated. Ranah Harris Johnson, another buyer, said she believes that the stress caused her to miscarry one of her twins. Another buyer, Jennifer Lewis-Gooden, said "a very fragile marriage fell apart" in part because of the couple's financial turmoil.

Would-Be First Time Homebuyers Begin Running Out Of Time For $8K Income Tax Credit

The Baltimore Sun's Real Estate Wonk blogger writes:

• Determined to get the $8,000 tax credit for first-time buyers?(1) Keep in mind that the Nov. 30 deadline isn't about signing a contract -- you need to get to closing no later than that day. So says the IRS, which specifically uses the word "close." This matters because you'll want to allow at least 30 days -- and probably more like 60 -- for a normal transaction to go from contract to closing. Even if there's nothing unusual about the home you're buying, you could find yourself delayed by issues relating to the loan, the appraisal, the home inspection -- you name it. That goes double if you want something more complicated, such as a foreclosure. What if you're having a home built for you? The IRS says you have to be physically occupying the place by Nov. 30. More Q&As here.

• Some real estate sites, wanting to remind you that "now is the time to buy," have countdown clocks. [...] Do you feel the pressure? Or do you have a "whatever will be will be" philosophy on the credit? (Or perhaps you're purposely waiting until the credit's gone?) The Wall Street Journal, sounding a cautionary note,(2) profiles a first-time buyer who recounts all the things he did wrong in the rush to get the $8,000. For instance, getting into a bidding war on a foreclosed home he saw only briefly, and not "taking into consideration taxes, homeowners' association fees, and the cost to fix up and maintain a distressed property."

For the story, see The clock is ticking on the $8,000 tax credit.

(1) Believe it or not, an individual need not actually be a first time homebuyer to qualify for the First Time Homebuyer Credit. Any individual who has not owned another principal residence at any time during the three years prior to the date of purchase can qualify for the credit. So, for example, if you owned a home and lost it to foreclosure, say, four years ago, and have since been either renting, shacking up with your girlfriend or boyfriend (or both) at their place, living in your mother's unheated/un-air conditioned basement, or otherwise freeloading off of somebody, you are considered to be a "first time homebuyer" for purposes of qualifying for the First Time Homebuyer Credit. Also, a taxpayer who owned a principal residence outside of the United States within the last three years is not disqualified from taking the credit for a purchase within the United States. For more infomation, See Internal Revenue Service: First-Time Homebuyer Credit Questions and Answers: Basic Information (Who is considered to be a first-time homebuyer? Would I be considered a first time homebuyer if I owned a principal residence outside of the United States within the previous three years?).

By the way, the credit is claimed on new IRS Form 5405, First-Time Homebuyer Credit, and filed with your 2009 federal income tax return. According to this form, the credit is available on the purchase of a house, houseboat, housetrailer, cooperative apartment, condominium, or other type of residence, provided you make it your main home (the one you live in most of the time).

Also, for those thinking of rushing out and buying and living in a tent, a tree house, an old dilapidated recreational vehicle or mobile home, or other form of "low cost housing" in order to "game the system" and grab the $8,000 income tax credit, the amount of the credit is limited to 10% of the home's purchase price, if the purchase price is less than $80,000. For more information, see IRS Form 5405. For those seeking to "game the system" anyway, see IRS Warns Taxpayers to Beware of First-Time Homebuyer Credit Fraud.

If two unmarried people buy a house together, IRS Notice 2009-12 provides guidance for allocating the first-time homebuyer credit between taxpayers who are not married.

(2) See The Wall Street Journal: Rookie Home Buyer Mistakes (Rushing to grab the tax credit and caught up in a bidding war over a distressed property, a first-time home buyer omits the basics).