Monday, December 18, 2006

Wisconsin Homeowner Claims Deception In "Foreclosure Rescue" Transaction

In this February, 2006 report on jsonline.com (Milwaukee Journal Sentinel), a Milwaukee man claims deception when he sold his home to a foreclosure rescue operator coupled with an agreement to lease back the home and a right to repurchase the home after a certain period of time. The "rescue" operator denied any wrongdoing.

Home Sellers Stiffed On 22 Sales in "Skimming" Scam

Two Indiana men have reportedly been engaged in what can be decribed as "equity skimming" activity over a 12 year period and involving 22 homes, according to this transcript of a TV broadcast report, on theindychannel.com (WRTV6 - Indianapolis).

Court records found by WRTV6's Rafael Sanchez, Call 6 for Help reporter, indicate that two men have purchased 22 homes, using a legal device known in Indiana as a "land contract" (in other states, it is known as a contract for deed, conditional sales contract, installment sale contract). Under this arrangement, the men would take immediate possession of the home with the agreement calling for monthly payments to be made by them to the home seller; the home seller, in turn, would continue making his/her payments on any existing mortgage until the entire purchase price is fully paid.

While the two men never had a problem with taking immediate possession of the homes, they rarely bothered to make the monthly payments that they agreed to make, according to the report.

They, in esssence, have been living practically free for 12 years and have been collecting rent on some of the homes and would continue doing so until they were forced to relinquish the homes by court orders.

Click here for the full story

Click here to watch the Video Report (approx. 4 minutes)

Story also reported here on MortgageFraud.org

Go here for other posts on this alleged scam involving Joseph L. Stanley and Steven Harris.

Sunday, December 17, 2006

Assistance Available For Attorneys Representing Scam Victims

Let's say you are an attorney with some litigation experience and you have an elderly widow, who we will call Mrs. Jones, who is the victim of a "home equity theft" scam walk into your office desparately looking for some legal help in keeping her home of 47 years.

After speaking with her at length, you determine the following:

  • Mrs. Jones is the victim of a classic "foreclosure rescue" arrangement, whereby she unwittingly signed over ownership of her home to someone she describes as "a nice man who showed up at my front door offering to help me with a foreclosure bailout loan" (ie. foreclosure rescue operator) in exchange for him (1) bringing current a low-balance, defaulted home improvement loan mortgage that she obtained two years ago, (2) entering into a one year leaseback of the home to her allowing her to retain temporary possession of her home, (3) giving her a "buy back option", whereby she has the right to buy back her home from "the nice man" at price far above what she sold it to him for,

  • there may be a serious question of whether or not Mrs. Jones understood what documents she was actually signing; she is adamant in telling you that under no circumstance would she ever consider selling her home of 47 years to a complete stranger (she wants to leave the home to her grandchildren) and that "the nice man" told her that all she was doing was "signing some standard loan papers" in exchange for a loan to reinstate a mortgage that was in arrears (you wonder if Mrs. Jones' signature on the deed was procured through fraud),

  • Mrs. Jones knows that she has a big problem but that, even though she has two adult children and several adult grandhildren that could possibly be of some assistance to her, the overwhelming sense of embarassment that she is feeling for doing something her entire family might perceive as being foolish keeps her from telling anybody.

You feel terrible about what was done to Mrs. Jones, and you would really like to help her. The trouble is that you've never handled a case like this, you don't really know how to approach it, and that, if you took the case (on a pro bono basis, of course; after all, Mrs. Jones has no money to pay you), it would take you a tremendous amount of time, time that you don't have, to properly handle the case. At the end of your meeting with her, you tell Mrs. Jones that you're going to look into the situation and get back to her in a couple of days (obviously, you don't have the heart to tell her right away that you can't take her case without at least trying to do a little something to see if you can be helpful).

After she leaves your office, you get onto the Internet and you "Google" a couple of key words to see if you can "stumble into" any information that might shed some light on how to approach Mrs. Jones' circumstances. Interestingly enough, you "stumble into" the following:

  • On the website of The First American Corporation (which is a national title insurance underwriter, among other things), you find an article titled Michigan Appellate Court Sends Warning to 'Foreclosure Consultants', co-authored by Albert Rush and John C. Murray. This article discusses a Michigan case involving a "foreclosure rescue" deal involving a sale of a home by a financially strapped homeowner to a foreclosure rescue operator and a susbequent leaseback of the home to the homeowner. A Michigan Court of Appeals affirmed the decisions of two lower courts in deciding that the deed transfering the home from the homeowner (ie. Mrs. Jones) to the "rescue" operator should not be treated as a deed, but rather, it was deemed to be an "equitable mortgage" (ie. the arrangement was treated as a mortgage loan to the homeowner, and not as a sale to the foreclosure operator with a simultaneous leaseback to the homeowner)

  • You find another article on The First American Corporation website titled When is a Sale-Leaseback an Equitable Mortgage?, co-authored by Gregory A. Thorpe and John C. Murray. This article discusses an Illinois case (not a "foreclosure rescue" deal) involving two sets of sophisticated real estate investors represented by experienced counsel where the court decided that the sale-leaseback involved was not an "equitable mortgage". However (and more importantly), the article sets forth a list of thirteen factors that the Illinois state courts apparently look at when determining whether a sale-leaseback should be respected as such, or whether it should be deemed an "equitable mortgage"

  • On the online newsletter of a Michigan law firm (Lipson, Neilson, Cole, Seltzer & Garin, P.C.), you find a brief summary of a recent Michigan Federal District Court case captioned Court Clobbers Foreclosure Rescue Plan, involving a "foreclosure rescue" sale-leaseback deal. The court found that, not only was the arrangement to be deemed an "equitable mortgage", but additionally, (because the arrangement was treated as a loan) it held that there were violations of the federal Truth in Lending Act ("TILA") and the Home Ownership and Equity Protection Act of 1994 ("HOEPA"), and also held that the lease was void and uncollectible, and that the purported sale leaseback was usurious

  • The online newletter provided a link to the above referenced Federal Court decision, Moore v. Cycon Enterprises, Inc., which was kindly posted on the Internet by the Michigan Bar Association

  • You found a Florida appellate court case, decided in 2006, involving a homeowner who signed over his home to another. In exchange, financing was to be arranged by the new title owner and/or a related party in order to refinance the existing mortgage on the home. Further, the homeowner claimed that there was an oral understanding whereby the now former homeowner would have the title to his home deeded back to him upon either his satisfaction or assumption of the newly arranged financing (the new title owner denied the existence of any such oral agreement). When the time came to deed back the home, the new title owner refused to do so. The homwowner filed suit seeking, among other things, to impose a constructive trust and an equitable lien on the property. The trial court dismissed these claims. The Florida appellate court, in reversing, held that Florida's Statute of Frauds does not bar claims for equitable relief such as these and, accordingly, directed the lower court to allow the case to continue and allow the homeowner the chance to provide oral evidence to support his claim that there was an oral agreement between the parties to deed back the home to him upon him either satisfying or assuming the new financing.

Based on all of the above (including the significant amount of case law cited within the above sources of information), you believe that Mrs. Jones may have a good case to rescind or void the transaction; however, you still have the problem that you've never handled this type of case. Further, you are exclusively a state court practitioner and some of Mrs. Jones potential claims are federal claims, and you're not sure whether they need to be litigated in Federal Court, where you've never practiced, or whether they can be brought in state court. Also, you're still going to have to do a significant amount of case law research (after all, you can't simply "cite stuff that you stumbled into on the Internet" in your briefs). In addition, the state case law involved above may only apply to Michigan, Illinois or Florida (there may not necessarily be similar case law that applies to Mrs. Jones' potential state law claims in your home state).

You would like to help Mrs. Jones but you feel like you're going to have your "back against the wall" if you do take her case.

How should you proceed?

According to their website, the National Consumer Law Center (NCLC), who are nationally recognized as consumer law experts, offers a variety of consulting services on consumer law issues for attorneys nationwide. You may want to consider contacting them, discussing Mrs. Jones' situation with them, and finding out what their services will cost you. They are particularly familiar with "foreclosure rescue" scams (see their exhaustive report on these types of scams - available here).

In addition, you learn that Federal & State consumer protection statutes typically provide for an award of attorney's fees if you prevail in the case. So, to the extent you can prove violations of any state unfair & deceptive trade practices laws in your state, or any violations of Federal law (like TILA & HOEPA), you may end up being entitled to an attorney fee award to be paid by the losing party (The fee, generally calculated as a function of how many hours that you spent on the case multiplied by an hourly rate, subject to court approval, may be increased by a "contingency fee multiplier" in a state court case if you're in a state like Florida that allows for the application of such a multiplier).

All of a sudden you now realize that a case that you initially thought you would have to do for free (if you indeed took the case) is no longer a pro bono case, but rather, a contingency fee case. Needless to say, there is now much more incentive to take Mrs. Jones' case.

Whether or not you ultimately decide to take Mrs. Jones' case is a decision that shouldn't be taken lightly. There may be other issues that you may have to consider that aren't discussed here. However, at least now you are aware that if you do decide to take her case, there may be a financial incentive (provided by the consumer protection statutes) for you to do so and there is technical & advisory support available (NCLC) if you choose to avail yourself of it.

I will conclude here by briefly mentioning the National Association of Consumer Advocates (NACA). NACA is a non-profit association of attorneys and consumer advocates that are private and public sector attorneys, legal services attorneys, law professors and law students whose primary focus is the protection and representation of consumers.

While NACA is generally considered to be a good source for a consumer to use when seeking a consumer protection attorney, state court practioners should not hesitate using the NACA membership as well in cases where he/she is seeking a co-counsel arrangement with someone experienced in both consumer law issues and Federal practice, particularly in cases that may involve Federal claims, such as the TILA & HOEPA claims that may apply in Mrs. Jones case. While this is not necessarily intended as an endorsement of NACA as a whole, I am simply saying that if you're seeking a Federal consumer practitioner to work with (or if you're an individual looking for a consumer lawyer, for that matter), the NACA website may be a pretty decent place to start your search. A list of attorneys who are members of NACA, listed by state, can be found here.

For more on attorneys taking consumer cases, see Use Of Consumer Attorneys To Unwind Predatory Loans.

For other posts on the equitable mortgage, see Equitable Mortgage Doctrine I , II , and III.

Case Law Citations:

London v. Gregory, 2001 Mich. App. LEXIS 1700 (Mi. App. Ct. 2001) (unpublished) (click here for case)

Moore v. Cycon Enterprises, Inc., (Case No. 1:04-CV-800), 2006 U.S. Dist. LEXIS 57452 (W.D. Mi. 2006) (unpublished) (click here for case) or you can access the Michigan Western District Federal Court website directly by clicking here for case (requires PACER registration, login and password)

185 North Wabash, LLC v. Lake Wabash, LLC, No. 1-03-0751 (Ill. App., 1st Dist. Dec. 24, 2003) (unpublished) (copy unavailable)

Robinson vs. Builders Supply & Lumber Co., 223 Ill. App. 3d 1007, 586 N.E.2d 316 (1st Dist. 1991) 223 Ill. App. 3rd 1007 (1991) (click here for case)

Guest v. Claycomb, 932 So. 2d 567 (Fla. App. Ct. 5th Dist. 2006) (click here for case)

(revised 10-7-07)

Thursday, December 14, 2006

"Rebuilding Together" Gives Free Home Repairs To Cash-Poor Seniors

A growing number of seniors are getting help from nonprofit organizations that provide basic home improvements, maintenance and repair, according to this article at latimes.com (Los Angeles Times - no longer available online).

Rebuilding Together is a national nonprofit organization that makes free repairs to seniors' homes.

Rebuilding Together's 12 Southern California branches repaired more than 424 houses last year. Donated materials were installed by teams of about 30 volunteers on each house.

The article describes the plight of several senior homeowners who, housing experts say, are like thousands of other older, low-income residents in Southern California who have significant equity in their homes, if not outright ownership, but have trouble maintaining them.

This sounds like a program that may help seniors avoid the home repair and mortgage scams (and other home equity theft scams) that may jeopardize their home equity because of a need to finance basic home repairs.

Click here for the full story (no longer available online).

Click here for the organization map to find a Rebuilding Together Affiliate in your area.

Wednesday, December 13, 2006

FBI Arrest Two For Allegedly Robbing Dozens Of Their Home Equity

In this November, 2005 story, two California men were charged with 10 counts of mail fraud by operating a foreclosure rescue scheme that targeted commercial lenders and Southern California homeowners.

This story, reported in a November 30, 2005 FBI Press Release (Los Angeles Division), indicated that the "homeowners were asked by the defendants to sign various documents including loan applications, trust and grant deeds, while being assured they would not lose title to their homes" and that "the defendants promised the deed would either be held in escrow or that the title would be returned to them once their credit was fixed", according to the indictment.

According to this July 20, 2006 U.S. Department of Justice Press Release, three additional defendants have been named in this matter. This scheme victimized more than 100 homeowners and allegedly caused losses of at least $12 million, according to Federal authorities.

FBI Snags Skimmers in "Rescue" Fraud; 168 Properties Involved

This 2003 story again shows the Federal Government in action in prosecuting another "equity skimming" / "foreclosure rescue" operation. Originally appearing in The Record (Northern New Jersey) and can be read here, this article reports on two New Jersey men who defrauded distressed North Jersey homeowners by promising to assume responsibility for their mortgages but failing to pay them.

The men persuaded troubled homeowners to sign over ownership of their homes to companies controlled by the two men. In exchange, the two men allegedly offered to pay home-related debts, prosecutors said. The former homeowners, who remained in their homes as tenants, then made monthly rental payments to the scammers' companies.

As in other "skimming" stories, the scammers simply pocketed the rental income received from the now former homeowners-turned-renters without making any payments on the existing mortgages on the homes, according to authorities, who cited that, at one point, the men controlled properties with a single-month rental value of $82,000.

FBI's "Operation Payback" Stings Alleged Equity Skimmers

This 2001 story is an example of the kind of "sting" operation law enforcement agencies conduct in going after foreclosure rescue operators. Originally appearing in the Dallas Morning News, and can be found here, the article reports on the Federal indictment of two Texas men who allegedly conned dozens of financially strapped homeowners who were in default on their mortgages and facing foreclosure into paying them an upfront fee, coupled with remitting their monthly mortgage payments to them. They, in exchange, were to negotiate with the banks and mortgage companies to reinstate the mortgages and remit to these financial institutions the monthly payments they were receiving from the homeowners.

Needless to say, the alleged scammers reportedly did nothing other than pocket the monthly payments received from the homeowners. Dozens of Dallas homeowners ended up on the street.

Tuesday, December 12, 2006

Low Cost Legal Services Available to Eligible Consumers

For those victims of consumer frauds (ie. foreclosure rescue scams, deed thefts, home improvement scams, home repair scams, etc.) who are looking for looking for low cost legal services, LawHelp.org may be a good starting point in finding these services. LawHelp.org helps low and moderate income people find free legal aid programs in their communities, and answers to questions about their legal rights.


The Legal Services Corporation (LSC) website is another source of civil legal assistance to those in need. LSC funds 138 legal aid programs with 700 offices around the nation to help poor Americans gain equal access to the judicial system. For a list of those legal services providers that are funded by LSC throughout the country click here, then pick "All States" & "All Counties" from the two dropdown menus, then click "Proceed" (those providers with website links can be found here).

To find an LSC-funded program by specific state, select your state here.


Examples of the type of legal aid help that is available to eligible consumers throughout the country


In Delaware, the Legal Services Corporation of Delaware handles a variety of consumer and housing type cases, including consumer fraud, foreclosures, and evictions.

In Illinois, the Legal Assistance Foundation of Metropolitan Chicago has been providing free legal aid to eligible individuals in a variety of cases, including (through their Home Ownership Preservation Project) representing clients facing the loss of their homes through foreclosure or tax sale, focusing on homeowners who have been victimized by predatory lending or by some other type of fraud or overreaching. Illiinois Legal Aid provides a search engine allowing an individual to locate low cost legal assistance throughout the state based on their zip code.

In Nevada, Clark County Legal Services (Las Vegas) handles many types of cases, including those involving consumer fraud scams and housing issues. A list of sources of low cost legal assistance to eligible individuals all over Nevada can be found at NevadaLawHelp.org.

In Ohio, Ohio Legal Services provides a search engine that individuals can use to find low cost legal help throughout the state by county, zip code or by keyword.

In Massachusetts, Massachusetts Legal Services also provides a search engine that can be used to find legal assistance throughout the state by county, city, or town. A list of sources of low cost legal assistance throughout Massachusetts can be found here.
In Florida, Legal Services Of Greater Miami, Inc. has served Miami-Dade & Monroe Counties for 40 years. Click these links for samples of the types of real estate consumer fraud cases they handle:
For individuals in any state, using LawHelp.org and/or the Legal Services Corporation website should facillitate your search for low cost legal services throughout the country.

Eligibility requirements for these legal services providers are generally based on income. Be sure to ask what the eligibility requirements are in your area. These organizations generally handle only civil cases. Legal services in criminal cases to those who cannot afford an attorney are provided by your local county Public Defender's office.


For those seeking legal assistance but don't qualify for low cost Legal Aid, The National Association of Consumer Advocates provides a list of their members on their website who practice "consumer law" and may possibly be a source of legal assistance. Their membership list, by state, can be found here. Click the "View Details" button next to the specific attorney's name to find their contact information.

Keep in mind that, generally speaking, violations of Federal & State Consumer Protection Laws are written in a way so as to encourage private attorneys to take on Consumer Fraud cases on behalf of individuals (either rich, poor, or in between) on a "contingency fee basis", where he/she only gets paid if the case is won.

What that means, in the context of a consumer fraud case, is that if a private attorney takes your consumer fraud case and wins, the attorney can ask the judge to order the company you sued to pay your attorney his/her legal fees.

Bottom line is that, win or lose, even being represented by a private attorney experienced with consumer fraud matters on this basis should cost you little or nothing (whether you're rich, poor, or in between), even though you may not otherwise qualify for a local Legal Aid Attorney (who generally represents only those who are elderly, low-income, disabled or children).
In conclusion, keep in mind that not all attorneys handle all types of cases. You may have to contact several legal services providers to find one who handles the "predatory lending", "consumer fraud" and/or "real estate / foreclosure prevention" issues that typically exist in "foreclosure rescue", "home equity theft", and home improvement and repair scams.

Q & A About Home Equity Loan Fraud

This manual, published by Consumer Action (California) for community and consumer advocates working to educate senior, low income and minority home owners, warns about the dangers of home equity loan fraud. Topics covered include:
  1. home improvements,
  2. hiring a contractor,
  3. warning signs of fraud, and
  4. the possibility of losing your home through a home equity loan.

It specifically describes, in easy to read language, some of the ways homeowners have been defrauded by mortgage fraud scams and gives some homeowner tips when considering having home repairs & improvements done on your home. One important warning is that even if you do not borrow money for the repairs, most home repair contracts can result in a lien on your home.

While written by a California consumer advocacy group (presumably for California consumers), the information in this manual is generally valuable for consumers throughout the U.S.