Thursday, December 07, 2006

Colorado AG Obtains $1.1 Million Judgment Against Foreclosure Rescue Operator

This 2003 case illustrates how far state Attorneys General can go in going after fraudulent foreclosure rescue operators. These operators have been put out of business and have agreed to pay over $1.1 million in restitution to approximately 80 homeowners.

According to the allegations in the original complaint filed by the Colorado Attorney General:


  • the "rescue" operators, through their unlawful foreclosure "rescue" program, acquired title to over 100 homes from homeowners facing foreclosure under the guise of "rescuing" their homes from foreclosure,

  • the estimated market value of the homes in the Denver metro area exceeded $15 million,

  • the homeowners were misled into signing over title to their homes in exchange for defendants advancing money for back-payments to bring their mortgage payments current and unwittingly became renters in their own home,

  • the homeowners then leased their homes back from defendants with an option to repurchase their houses at an inflated price,

  • consumers believed these complicated transactions were second mortgage loans and not the sale of their homes,

  • within months, numerous homeowners were evicted after entering the "rescue" program,

  • consumers were targeted through door-to-door solicitations and direct mail flyers advertising their "rescue" program as “absolutely free” and with “no cost to you,”

  • in-home sales presentations were made to homeowners through high-pressure sales tactics aimed at convincing the homeowners that defendants’ "rescue" program" would allow families to stay in their homes, rebuild their credit, and keep their monthly payments low,

  • homeowners were required to transfer title to their homes by quit claim and warranty deeds to the defendants and enter into lease option agreements obligating the homeowners to monthly rental payments sometimes hundreds of dollars more than their original mortgage payment,

  • any missed rent subjected the homeowners to eviction and loss of equity,

  • defendants would arrive at the homes with numerous contracts, deeds, and other pre-printed documents, ready to transact business,

  • once the homeowner signed as instructed defendants would take the papers and refuse to leave any copies,

  • homeowners were not given the opportunity to confer with advisors or to rescind the loan transactions within three business days, nor to cancel their credit repair service contract within five days, both rights of cancellation afforded by Colorado law,

  • neither of these rights was disclosed to the homeowners, as required by law. The homeowners were not given numerous other disclosures of their rights, such as their right to redeem the foreclosure, stay in their home 75 days after foreclosure, and the ability to sell their property even after foreclosure,

  • promises of credit repair were unfulfilled and homeowners were unable to refinance their homes, as they no longer had title to their properties.
Of the 120 homeowners who participated in the "rescue" program, approximately 30 retained private attorneys to settle their claims against the foreclosure operators.

For ColoradoAttorney General's 8/07/2003 News Release, click here.

For ColoradoAttorney General's 12/22/2003 News Release, click here.

For ColoradoAttorney General's 12/19/2001 News Release, click here.

For text of the Colorado Attorney General's Original Filed Lawsuit, click here.

Wednesday, December 06, 2006

California Prosecutors Add 26 Charges Against Alleged House Swindling Trio

Three defendants, already facing numerous criminal charges involving a "foreclosure rescue" operation, will now be facing 26 additional charges, according to this report at modbee.com (The Modesto Bee).

Prior reference to this case in this blog was made in my November 21 post.

Links to prior articles on this case:
  1. Novenber 21, 2006
  2. November 17, 2006
  3. July 4, 2005

Tuesday, December 05, 2006

FBI Report on Unlicensed Home Improvement Contractors

This report, found in the November, 2005 issue of the FBI Law Enforcement Bulletin (Volume 74, Number 11), discusses the problems posed by unlicensed home improvement contractors from the perspective of a law enforcement officer. The report, while directed to law enforcement professionals, gives the average consumer insight as to how he can deal with problems arising from hiring an unlicensed contractor.

The author of the report, retired FBI agent George Lyford, was serving as the director of investigations for the Nevada State Contractors Board in Henderson, Nevada when his report was issued.

Family Friend Pleads Guilty to "Equity" Scamming Disabled Philadelphia Family

According to a report by Channel 6 in Philadelphia (WPVI-TV), and reported here at 6abc.com, a family friend, who had volunteered to help a disabled Northeast Philadelphia family, has pled guilty to illegally obtaining a loan secured by the home of that family without their knowledge.

See related stories from the Philadelphia Daily News (no longer available online):

Monday, December 04, 2006

Maryland Woman Signs Over Home For $7,000 To "Rescuer"

In a story originally reported in The Daily Record (Baltimore, MD) and can be found here, a Maryland woman was thrilled to have her home "rescued" from foreclosure, that is, until she found out that she no longer owned her home.

Virginia Homeowner Unknowingly Deeds $230,000 Home To Foreclosure Rescuer For $16,000

In a story originally reported in the Richmond Times-Dispatch, and can be found here, a Virginia homeowner facing foreclosure had no idea he sold his home to a foreclosure rescue operator until he saw a "For Sale" sign in his front yard one morning.

"As many as 17 homeowners in the Franklin area may have lost their homes because of foreclosure scams", according to local consumer activist Paula Sherman.

Virginia Group Declares War On Foreclosure Rescue Scams

This artcle, at TimesDispatch.com (Richmond Times-Dispatch) reports of an effort by a local non-profit group who took to Richmond city streets to remove signs connected to foreclosure rescue schemes.

Saturday, December 02, 2006

Feds Gain Conviction In Bankruptcy Fraud "Equity Skimming" Case

A California man was sentenced to serve 24 months in custody by a federal judge in San Diego on 12 counts of bankruptcy fraud and eight counts of knowing disregard of bankruptcy rules and procedure, according to this News Release from the U.S. Attorney's Office.

He was charged with defrauding homeowners and their creditors in a complex scheme which used bankruptcy law protections against foreclosure sales in a corrupt manner.

The evidence at trial proved that he:
  • found and solicited homeowners in severe financial debt who were on the verge of losing their home through a foreclosure sale,

  • made a number of false representations and promises to the homeowners to get them to pay him a monthly fee for his purported services,

  • falsely claimed that he would (1) save the property from foreclosure by legal means, (2) contact lenders to renegotiate the mortgage, (3) assist in arranging refinancing, and (4) take a portion of the monthly fee he received from the homeowners for his services, to be paid to the lender and applied to the mortgage, which he claimed would keep foreclosure from occurring,

  • merely kept the homeowners' money, made no contact with the homeowners' creditors, and did not arrange refinancing, nor use the money to pay down the mortgage to prevent foreclosure.

The only "service" he provided was to prepare and cause to be prepared "bare bones" federal bankruptcy petitions for the homeowners to sign to declare bankruptcy in an effort to illegally stall the foreclosure proceedings.

Washington State Man Suing Company On "Lease-Buyback" Foreclosure Rescue Deal

seattlepi.com reports (Seattle Post Intelligencer) that a Washigton State man filed a civil lawsuit against a local "foreclosure rescue" company for alleged misrepresentations that resulted in the loss of his home to the company through the use of a "lease/buyback" arrangement.

The homeowner's complaint reportedly details the "rescue" company's alleged conduct, and is described in this article.

Reportedly, Washington state and local prosecutors have had successful prosecutions in several cases involving criminal violations regarding this type of scam, and are currently pursuing several more investigations.

This case is being pursued by the homeowner through a private attorney in civil court.

What Is A "Foreclosure Rescue" Scam ?

Jay MacDonald wrote an interesting article for Bankrate.com that provides an interesting discussion on what "foreclosue rescue" is all about and can be read here.

He also lists seven tips to avoid foreclosure scams, which can be read here.

Minnesota attorney Mike Kallas has also written an article appearing on articlerich.com describing the some of the standard "foreclosure rescue" scams, which can be read here.

Friday, December 01, 2006

Ten States Now Have "Foreclosure Rescue" Legislation

This Associated Press article by Lingling Wei of Dow Jones Newswires, and reported in the Houston Chronicle, tells the tale of a Chicago couple who unknowingly signed away the ownership of their home to a "foreclosure rescue" company, under the apparent belief that the company was going to help them get a loan.

The article also reports that "a total of 10 states have legislation in place to deter foreclosure-rescue fraud, including California, Georgia, Missouri, Minnesota, Maryland, Colorado, Rhode Island, New York, Ohio and Illinois, according to Creola Johnson, an associate law professor at Ohio State University."


Click here for the full story.

Chicago Couple Unwittingly Deeds Home to "Foreclosure Rescuer"

chicagotribune.com (Chicago Tribune) reports on an Illinois case involving a "foreclosure rescuer" who reportedly obtained ownership of the home of a financially strapped couple without their knowledge.

The Illinois Attorney General's Office has previously released information on this case in this News Release from their office.

"Foreclosure Rescue" Operators Abusing the Federal Bankruptcy Courts

"Equity Skimming" is one type of fraud commonly utilized by a "foreclosure rescue" scammer, particularly when working with a financially distressed homeowner facing foreclosure who doesn't have a significant amount of equity in their home. It refers to the process by which the scammer collects rent from a property without making the neceesary mortgage payments and the bank or other mortgage holder ultimately forecloses on the home.

Logically, it stands to reason that the longer the "rescue" scammer can delay the foreclosure legal process, the longer he can continue to collect money from the property without making the mortgage payments, thereby increasing the money he makes.

In an effort to extend the period of time that money can be collected from a property that is going through the foreclosure process, some "rescue" scammers have resorted to an abuse of the Federal Bankruptcy system to extend that time period by filing "last minute" bankruptcy petitions, multiple petitions, and by engaging in other conduct constituting abuse of the Bankruptcy Courts.

Beacuse of the rampant abuses of the bankruptcy system, the Bankruptcy Foreclosure Scam Task Force of the United States Bankruptcy Court for the Central District of California had a study done and prepared a report on the findings.

The report states that, in recent years, "some people in the Central District of California 'have apparently created whole businesses out of the delay possibilities provided by the automatic stay.' These entities often advertise as 'foreclosure services' or 'mortgage consultants.' "

The report identifies the following five different kinds of bankruptcy foreclosure scams, which have been taken from the Fact Sheet on Final Report of Bankruptcy Foreclosure Scam Task Force:
  • The fractional interest transfer scam. A bankruptcy debtor receives a 5 percent or 10 percent interest in property that is held by another borrower who faces foreclosure. Because the interest is then held by a bankruptcy debtor, the original borrower's creditors cannot foreclose until the bankruptcy judge lifts the automatic stay.
One San Bernardino, Calif., homeowner facing imminent foreclosure was approached by a scam perpetrator, and agreed to sign deeds of trust and grant deeds transferring fractional interests in her property, according to the report. The homeowner paid the foreclosure consultant a few hundred dollars per month. The recipients of the fractional interests included homeless individuals and apparently fictitious people. Eight of them filed for bankruptcy one after the other. Each filing stayed foreclosure on the homeowner's home, causing a 10-month delay between the first filing and the completed foreclosure.
  • Serial filings by related debtors. The same individual or related individuals file several bankruptcy cases in a row to delay foreclosure.
  • Voluntary dismissals of serial Chapter 13 cases. The debtor asks the court to dismiss the case. When a bankruptcy trustee obtains dismissal of a case for failure to appear or make required mortgage payments, the dismissal order usually prohibits the debtor from refiling for bankruptcy within 180 days. A voluntary dismissal avoids this prohibition. The debtor can immediately refile, renewing the automatic stay.
  • Involuntary petition scams. Under certain circumstances, the Bankruptcy Code permits creditors to file "involuntary petitions" against borrowers. In this scam, an entity will file--for a fee--a bankruptcy petition against an individual facing foreclosure, causing the automatic stay to take effect on the individual's behalf.
  • Phony alias amendments to petitions. The bankruptcy petition is amended to add an alias name of the debtor. The alias is actually the name of an unrelated person. The amended petition is recorded or otherwise used to stop eviction or foreclosure proceedings against the unrelated person.
To view the full report, see Final Report Of The Bankruptcy Foreclosure Scam Task Force, United States Bankruptcy Court - Central District Of California; May 1998.

Foreclosure Scammer Guilty of Federal Charges

As reported in suntimes.com (Chicago Sun-Times), an Illinois man pleaded guilty to a scam involving the abuse of the bankruptcy court system as part of a scheme to delay the foreclosures of homes belonging to financially strapped residents. The scam reportedly victimized thirty local homeowners to the tune of approximately $200,000.

As part of the plan to "help" the homeowners and in conjunction with bankruptcy filings, the culprit succeeded at having the homeowners direct their mortgage payments to him. The victims still ended up losing their homes.

This is an example of "equity skimming" that invloves the use of the "automatic stay" provision of the Federal Bankruptcy law to delay the ultimate foreclosure sale of a victim's home. The longer the scammer can delay the foreclosure sale, the longer he can continue collecting the monthly payments from the homeowners/victims, payments that the victims have been duped into believing are being remitted to the proper officials involved in the bankruptcy proceeding.

Mass.Attorney General Tom Reilly Halts Attempted "Home Improvement" Theft

According to a December, 2005 Media Center Information Release from the Massachusettes Attorney General's Office, a Taunton man was stopped from conducting a mortgage foreclosure sale that would threaten the home of a 71-year-old Taunton woman.

According to the complaint, the man allegedly provided a mortgage loan to the woman with the intention of foreclosing on it and taking possession of her home. The loan was provided to the woman in order to bring her house up to city and state sanitary codes after the property was condemned by the Taunton Board of Health.

The complaint further alleges that the man took advantage of his position as a board member of a local a non-profit development organization that was aware that the woman would need to refurbish her home to comply with city and state law. Knowing her predicament, the man allegedly approached the elderly homeowner and offered her help in finding financing and contractors to rebuild her home. In the process, he steered her away from the services of the non-profit organization whose purpose it was to provide assistance in this type of case and of which he was a board member, according to the complaint.

The complaint further alleges that the man made it appear as if he was assisting the woman by obtaining a loan from an independent lender that, in fact, was his company. The complaint also alleges that the man made the loan to the elderly woman with the clear intention to foreclose on it and obtain her home, which she owned for 39 years.

In addition to obtaining a temporary restraining order, the attorney general is seeking a preliminary inunction to stop the foreclosure on the home as well as a permanent injunction against the Taunton man and any of his associates from doing any further business with the homeowner and either void or reform the mortgage loan. Civil penalties and costs were also being sought.