Thursday, January 11, 2007

Ohio Senior Scammed, $67K in Home Equity Lost

A Cleveland mortgage agent pleaded guilty yesterday of conning a 72 year old Garfield Heights woman out of $67,400 through a home loan scam, and faces up to 8 1/2 years in jail according to a report in The Mortgage Fraud Blog presented by The Prieston Group.

The prosecution was handled by Assistant County Prosecutor Michael Jackson of the Office of Cuyahoga County Prosecutor Bill Mason.

The victim has a civil lawsuit pending against the mortgage agent and her employer.

To read The Plain Dealer (Cleveland, Ohio) report on this story, see Law and Order, and then scroll down to Loan agent robbed woman, 72.

Go here , go here , and go here for other posts on elder financial abuse. zeta elder financial abuse

Utah High Court Reinstates Foreclosure Scammer's Conviction

http://HomeEquityTheft.blogspot.com
The original conviction of a man accused of an upfront fee, mortgage refinance scheme was upheld by the Utah Supreme Court recently. The man was convicted of defrauding over thirty homeowners facing foreclosure, whereby he promised them refinancing options in exchange for an up front fee of at least $400, purportedly to be used for credit reports & appraisals. The money was actually used for his living expenses and he did not perform any of the promised services.

For more details, including links to the original reports, court decisions, and other relevant links, see this report on The Mortgage Fraud Blog, presented by The Prieston Group.

http://HomeEquityTheft.blogspot.com

NACA Class Action Litigation Guidelines Available Here

http://HomeEquityTheft.blogspot.com
The Class Action Guidelines, revised in September, 2006, have been issued by the National Association of Consumer Advocates, and is available at the link below for those attorneys with an interest in consumer protection litigation.

http://HomeEquityTheft.blogspot.com

Wednesday, January 10, 2007

NY Woman Victimized In Purchase Of "Stolen Homes"

HomeEquityTheft.blogspot.com
The New York Daily News reports, in this December 2005 story, of a woman who unwittingly purchased two "stolen homes" and who only learned of her situation when Brooklyn prosecutors called to warn her she was a victim in a $5 million housing scam - and that she didn't own the properties.

One general observation about the "home equity theft" epidemic made in this article, which can't be emphasized enough, is that


  • "while there are thousands of variations, the crimes are often perpetrated by people who forge documents or who dupe homeowners into believing they are refinancing their homes. The cases often end up in court, in complex arrays of lawsuits and countersuits brought by buyers, owners, mortgage companies and title insurers."

The article quotes Jessica Attie, a staff attorney with the Foreclosure Prevention Project of South Brooklyn Legal Services as saying that, "Millions of dollars are being stolen from low-income homeowners." Two years ago, Attie said her nonprofit law firm saw a handful of similar cases. "Now, we get that same handful every week," she said. "It's an epidemic."

(revised 1-20-07)

Possible Sources Of Low Cost Or Free Home Repair Assistance Available Here

HomeEquityTheft.blogspot.com
Homeowners who are "house rich" but "cash poor" are vulnerable targets for home equity theft scam artists, particularly when the home is old and in need of repair. Scam artists masquerading as home repair & improvement salespeople, reverse mortgage consultants, financial consultants, and other pseudo-professionals with self-styled titles (as well as some licensed contractors, licensed mortgage brokers, and investment professionals whose morals range from the unethical to the corrupt) are out there looking for the "next house to steal."

See, for example, the case of Mrs. Mintze, a retired and disabled Philadelphia homeowner who couldn't afford the $3,800 cost of a replacement heater for her home (she owed $25,600 on her home and had $10,500 in unsecured credit cards). She was referred by a heating contractor to a finance company, from whom she ended up with a high rate mortgage for $44,700, which paid for the heater; the balance being used to consolidate her existing debts, pay closing costs ($2,800), and buy two life insurance policies ($2,000; one of which she didn't qualify for due to a pre-exiting health condition). Shortly thereafter, she ended up defaulting on the new mortgage and, within about one year, filed for bankruptcy protection (See In re Mintze, 434 F.3d 222 (3d Cir. 2006) (available on the website for the U.S. Court of Appeals, 3rd Circuit; free, no registration needed).

There are potential sources of low cost or free home repair help that "house rich, cash poor" homeowners should consider, especially if they would like to avoid having their home equity "stolen" from them. Click the links below to begin a search for possible sources of low cost or free home repair assistance.
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2) AmeriCares HomeFront (serves Connecticut - Fairfield, Hartford & New Haven Counties, and New York - Westchester County);
or you can search these links:

Because these last two lists are "rather long", I suggest that you modify the "key words" in the search box by adding one or more additional key words, and then "re do" the search. The first additional key word should be either your town, city, county, parish, borough or state of residence.

For example, if you're looking for help in "Wichita, Kansas", simply add "Wichita" to the existing key words in the "search box". You should quickly find links that will lead you to sources of help such as the Wichita city government website, who have a loan program where, subject to availability, they offer interest-free loans up to $5,000 that do not require any repayment until you no longer live in the home (many cities and counties offer programs like this one; Mrs. Mintze could have used a loan like this) (Any other additional key words can also be used that one feels is appropriate).

Tuesday, January 09, 2007

South Dakota Supremes Say "No Sale" In Equitable Mortgage Cases

The South Dakota Supreme Court has held that a purported realty sale by its owner to a buyer (ie. foreclosure rescue operator) coupled with a "buy back" (contract for deed) agreement entered into simultaneously is an equitable mortgage, and not a true sale (see Myers v. Eich).

One point that I feel needs highlighting in this case is that in reaching its decision, the South Dakota high court cites both to its own prior decisions (including at least one case over 100 years old) as well as to equitable mortgage cases from other states (ie. Missouri, Washington, Nebraska, South Carolina, New Mexico, Iowa, Rhode Island, New Jersey, Minnesota, West Virginia, Louisiana, and New York).

(Editor's Note: As I read these cases, its becoming quite clear that there may not be anything novel about asking a judge to declare a foreclosure rescue arrangement to be an "equitable mortgage." Lately, I've reported on some recent court decisions (click here for a list of other equitable mortgage posts on this blog) on how this doctrine has been applied in a couple of states; what's notable is that in reaching these decisions, the courts are citing cases that are both pretty old and come from numerous states.)

Click here for a more extensive post regarding this case and the invocation of South Dakota's equitable mortgage doctrine.

Representing the property owner in this case was attorney Thomas K. Wilka of Hagen, Wilka & Archer, P.C., Sioux Falls, South Dakota.

Myers v. Eich is the second equitable mortgage decision by the South Dakota high court in the last five years. The prior case, Adrian v. McKinnie, similarly held that a deed, absolute in form, was an equitable mortgage under facts involving a title transfer of realty with a simultaneous lease back coupled with a purchase option.

Representing the property owner in this case was attorney Michael W. Strain of the Morman Law Office Sturgis, South Dakota

Case Law Citations:

Myers v. Eich, 2006 SD 69; 720 N.W.2d 76; (S.D. 2006)
Adrian v. McKinnie, 2002 SD 10, 639 N.W.2d 529 (S.D. 2002)

Monday, January 08, 2007

"Air Loans" Mortgage Scams

http://HomeEquityTheft.com
According to the FBI, air loans are "non-existent property loans where there is usually no collateral. To read about the "air loans" mortgage scam, see FBI Names Air Loans as Type of Mortgage Fraud, reported by RISMedia at rismedia.com.

One Stolen Wallet = Three Attempted "Home Equity Thefts"

http://HomeEquityTheft.blogspot.com
Anyone interested in knowing how one stolen wallet in a crowded bar can lead to the victimization of its owner, three Chicago property owners, and three mortgage companies should read this January, 2006 story reported in the Chicago Tribune Online Edition at chicagotribune.com.

In a nutshell, a stolen wallet and its contents ended up in the hands of fraudsters. After assuming the identity of the wallet's owner, they went out and obtained mortgages on three Chicago properties they didn't own, unbeknownst to the true owners of each property.

Each of the three properties ended up with phony mortgages on them. Reportedly,

  • one property owner was able to save her property and clear her property title and straighten out her mess, but declined to say how much it cost her to do so,

  • another property owner was able to forestall a foreclosure sale involving the phony mortgage on his property, but couldn't sell or borrow against it because the mortgage company hasn't released the phony mortgage,

  • a third property owner (for undisclosed reasons) never appeared in the foreclosure action brought by the company holding the phony mortgage on his property; the property (as of the date of the media report) was headed for a foreclosure sale.

Despite the fact that the wallet's owner immediately reported the incident, the incident has cost her a perfect credit rating and her parents about $10,000 in legal bills in fending off the claims from the three mortgage companies (who were also scam victims; reportedly, the wallet's owner got little help from the law enforcement agencies that she met with).

Minnesota Anti Equity Stripping Law

http://HomeEquityTheft.blogspot.com
Minnesota's anti "equity stripping" statute, which was the state's response in curbing the abuses in the foreclosure rescue, foreclosure bailout loan business, became effective on August 1, 2004. It is found in the Minnesota Statutes, Chapter 325N, available here.

Minnesota attorney Brian S. McCool has written an article on Chapter 325N which provides some insight on the basics of this law.

Inspite of the new law, the scams continue, according to this St. Paul Pioneer Press report at twincities.com.

The law, as originally written, is set to expire on December 31, 2009.

Sunday, January 07, 2007

Houston FBI Pursuing Fraudsters With Mortgage Fraud Unit

Mortgage fraud has become so popular in the Houston area that the local FBI office has dedicated a unit within their office solely to fight mortgage fraud. The office currently has open about 25 multimillion-dollar cases involving various types of mortgage fraud.

This information, reported in an article in the Houston Chronicle at chron.com, is part of a larger story about a local individual who filed a civil lawsuit in 2004 against several people involving an alleged "straw buyer" scam. Subsequent to the civil lawsuit, one of the alleged scammers was indicted and arrested by the FBI. Ultimately, the scammer pleaded guilty to wire and mail fraud. Other charges against him were dropped "in exchange for his cooperation" (presumably for his cooperation in prosecuting his cohorts).

One point that I find notable here is that a civil lawsuit by a scam victim apparently preceded a criminal prosecution of the scam artists. This could possibly indicate that, given that criminal investigators may lack the resources to investigate every single case, bringing a civil lawsuit may be a way for "some" (financially well-heeled) victims to publicly bring attention to their cases and "discover" information from the scam artist (which could potentially be used in a subsequent criminal case), in addition to an attempt to recover damages.

Alleged Scam Artists Sued, Class Action Status To Be Sought

http://HomeEquityTheft.blogspot.com
Allegations of a massive mortgage fraud scheme involving as many as 400 investors and an estimated $1.2 billion of property were filed by Temecula attorney Richard Ackerman, on behalf of a client, in a civil lawsuit in Riverside County, California Superior Court on Friday, according to this story in the North County Times.

What I found notable in this story is:

  • While the fraud allegations were made against a local network of alleged real estate scam operators by one alleged victim, the attorney for the alleged victim reportedly will be seeking class action status for the case, an attempt to enable him to pursue this network on behalf of all other potential victims who are similarly situated,
  • The local county prosecutor has not, as yet, filed any charges in this case (although they are reportedly investigating the matter).

(I wonder if an attempt by a private individual to bring a civil lawsuit and seek class action status against those who are allegedly involved in potenially criminal conduct will be helpful or hurtful to a local prosecutor's criminal investigation of those same people regarding the same alleged conduct.)

For follow up story, see Real-estate investors bought on faith (1-13-07)

revised 1-29-07

California Laws Regulating Foreclosure Rescue & Equity Skimming Available Here

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California has two statutes, both passed in 1979, that regulate home sale transactions involving homeowners facing foreclosure, investors purchasing from these financially strapped homeowners, and mortgage foreclosure consultants. It is the state's response for curbing the abuses associated with foreclosure rescue and foreclosure bailout loan situations.

1) California's Home Equity Sales Contract Act, which was explicitly passed:
  • "To provide each homeowner with information necessary to make an informed and intelligent decision regarding the sale of his or her home to an equity purchaser; to require that the sales agreement be expressed in writing; to safeguard the public against deceit and financial hardship; to insure, foster, and encourage fair dealing inthe sale and purchase of homes in foreclosure; to prohibit representations that tend to mislead; to prohibit or restrict unfair contract terms; to afford homeowners a reasonable and meaningful opportunity to rescind sales to equity purchasers; and to preserve and protect home equities for the homeowners of this state" (Section 1695(d)(1)),

can be found at Section 1695 through Section 1695.17 of the California Civil Code.

2) California's Mortgage Foreclosure Consultants Act, which was explicitly passed:

  • "To require that foreclosure consultant service agreements be expressed in writing; to safeguard the public against deceit and financial hardship; to permit rescission of foreclosure consultation contracts; to prohibit representations that tend to mislead; and to encourage fair dealing in the rendition of foreclosure services" (Section 2945(c)(1)),

can be found at Section 2945 through Sction 2945.11 of the California Civil Code.

3) In addition, California also has a statute prohibiting rent skimming (equity skimming) and can be found at Section 890 through Section 894 of the California Civil Code.

revised 1-19-07

Rhode Island Mortgage Foreclosure Consultant Law Available Here

Rhode Island passed two new laws in 2006 designed to curb the abuses associated with foreclosure rescue situations. One law regulates the activities of so-called foreclosure consultants; the other addresses the activities of foreclosure purchasers, those who purchase realty from property owners facing foreclosure.

The Mortgage Foreclosure Consultant Regulation became effective immediately upon passage, can be found in Title 5, Chapter 79 of the Rhode Island Statutes, and encompasses Sections 5-79-1 through 5-79-9 (each section has its own link).

In addition, the new statute regulating Mortgage Foreclosure Purchasers can be found in Title 5, Chapter 80 of the Rhode Island Statutes and encompasses Sections 5-80-1 through 5-80-9 (each section has its own link).

Saturday, January 06, 2007

Brooklyn DA Indicts Three In Theft Of Dying Senior's Home

Kings County (Brooklyn), NY District Attorney Charles J. Hynes has recently obtained indictments against three men for allegedly using forged documents in the theft of a now-deceased, elderly cancer victim's home. Two have been taken into custody. The third is on the lam.

A fourth defendant, the notary public who notarized a power of attorney used in the alleged theft, has been charged with lying on a notary public renewal application, in which he denied that he was a convicted felon.

For more details, go here on The Mortgage Fraud Blog, presented by The Prieston Group.

Go here for Brooklyn DA's Press Release.

Maryland Home Equity Theft Law Available Here

Maryland's equity stripping prevention, home equity theft protection act was signed into law on May 26, 2005 by Governor Robert Erlich to protect homeowners at risk of foreclosure, from self-styled foreclosure rescue consultants who promise to help them avoid foreclosure but end up
  • owning the home themselves, or
  • stripping off the property owner's built-up home equity in some other manner.

The law can be found in Title 7 of the Maryland Real Property Law. (More specifically, the law is contained in Title 7, Subtitle 3 - Protection of Homeowners in Foreclosure (Sections 7-301 through 7-321). Each section of the statute has its own link.

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Friday, January 05, 2007

Arkansas Appellate Court Finds Usury In "Sale - Buy Back" Deal

In a case decided about three weeks ago, an Arkansas Court of Appeals recently invoked the "equitable mortgage" doctrine in finding that a "sale-buyback" deal was really a disguised usurious loan secured by an equitable mortgage in a dispute between a pawn shop owner and his customer.

In Smith v. Eisen, a dispute arose out of a transaction in which the customer "signed over" title to her home to the pawn shop owner in exchange for a sum of money and, simultaneously with this purported sale, an agreement between the parties was entered into entitling the customer to repurchase the property for twice the amount of the “sale.”

In addition to finding that the transaction was a usurious loan secured by an equitable mortgage, the court ruled that the customer was also entitled to an award of her attorney's fees to be paid by the pawn shop owner (Arkansas law generally provides for an award of attorney’s fees in usury cases involving consumer loans and credit sales).

In reaching its decision, the court made the following observations:
  1. "the “seller’s” obvious financial troubles;
  2. her expressed intent to keep the property;
  3. her remaining in possession of the property;
  4. the substantial disparity between what she paid for the property and the “purchase” price; and
  5. the immediate renegotiation of a contract for resale
all point to the conclusion that none of the parties intended for the property to come into the hands of [the pawn shop owner] any more than was necessary to secure the loan and for [the pawn shop owner] to make a profit from such loan."
"Also relevant were
  1. [the customer's] ninth-grade education,
  2. her medical disabilities, and
  3. her lack of sophistication in business matters in comparison to [the pawn shop owner's]."
See Smith v. Eisen, at page 18.

Representing the homeowner in this case was Robert R. Cloar, a member of the National Association of Consumer Advocates ("NACA"), of Fort Smith, Arkansas.
Other Arkansas consumer attorneys who are members of NACA are listed here.
Eligible Arkansas residents can check out the non profit Arkansas Legal Services Partnership, a partnership of two nonprofit Legal Services Programs that work together to provide free civil legal assistance to low-income residents and the elderly throughout all 75 counties. Click here for the branch office nearest to you.

Click here to search for other equitable mortgage posts on this blog
Case Law Citatations:

Smith v. Eisen, 245 S.W.3d 160, Ark. App. Ct., 2006 Ark. App. LEXIS 858, December 13, 2006.

Go here for links to some other Arkansas cases where judges have delved into the particulars of a financial arrangement to expose its usurious nature (ie. where a financial arrangement was used as a cloaking device to disguise a usurious loan).

Go here for other cases involving attempts to cloak usurious loans, usurious schemes.

Northeast Ohio Prosecutors Crack Down On Mortgage Fraud & Predatory Lending

59 defendants were indicted Wednesday on 269 charges of racketeering, forgery and theft involving a mortgage fraud scheme in the Cleveland metropolitan area, according to the office of Cuyahoga County Prosecutor Bill Mason. Additional indictments are pending.

The story, reported here at Cleveland.com (the online presence of Cleveland's The Plain Dealer), describes the indictments as "part of a long-awaited crackdown on shady real estate and lending practices that have left homes abandoned and helped Cuyahoga County rack up one of the highest foreclosure rates in the nation."

An assistant county prosecutor was hired by County Prosecutor Mason's office last year to focus on crimes such as mortgage fraud and predatory lending.

In a prepared statement, Mason said "You predators are now put on notice. Those of you who engage in deception in the lending process will face criminal charges."

There is no indication in this article, however, as to whether Mason's policy will be extended and applied to predatory "foreclosure bailout loans" made to financially strapped homeowners attempting to save their homes from forced sale. Such loans are often "disguised" as sale-leasebacks by "foreclosure rescue" companies in the belief that structuring the transaction in this way enables an investor to avoid usury statutes, eliminate the hassle of foreclosure proceedings and homeowners' redemption rights, and provide for an effective way for the investor to either:

  • earn interest income on their investment in an amount that exceeds the maximum allowed by law, or
  • acquire a financially desperate property owner's home equity at well below market value.

For The Plain Dealer follow up story, see:

Fraud Squad - Indictments send a sign that local law officers are serious, but pervasive predatory lending demands more urgent action

Click here for the Channel 3 story, at wkyc.com

Click here to watch/listen to Channel 3 video news report

(Revised 1-6-07, 1-20-07)