Wednesday, February 28, 2007

Equitable Mortgage Defense In Eviction Actions - California

Another post involving an eviction action where the person being sued for eviction is claiming to be the owner of the property by invoking the equitable mortgage doctrine as a defense is now posted. For more information, see Equitable Mortgage Defense In Homeowner - Tenant Eviction - Part 3 Addendum.

The post involves a California Supreme Court case where, in an ejectment action, the person in possession of the property and being sued for eviction successfully challenged the title of the "purported" owner who brought the ejectment action by invoking the equitable mortgage doctrine. The purported owner, who actually had the title to the property in his name, was deemed to be nothing more than a mortgage holder and, accordingly, was not entitled to seek eviction against the party in possession, who was considered the true owner of the property.

This case may be of great value to homeowners facing foreclosure (and attorneys representing them) who may have entered into arrangements with foreclosure rescue operators where the homeowners "sold" or otherwise signed over their title to the operator, simultaneously entered into a leaseback agreement, and who ultimately found themselves being evicted by the operator.

While the case was decided in California (and may be of interest primarily to those in California), those in states outside of California may be well advised to investigate the existence of similar court cases in their jurisdictions.

While I understand that, in California, the existence of the Home Equity Sales Contract Act (Section 1695 et. seq. of the California Civil Code) was designed to eliminate many of the abuses that California homeowners facing foreclosure have experienced from some real estate foreclosure investors, this law has apparently not put an end to the home equity theft abuses ocurring in California. See:

It may be that asserting claims under California's equitable mortgage doctrine by a California homeowner involved in a foreclosure rescue situation may be an alternative approach (rather than making claims under California's Home Equity Sales Contract Act) in seeking relief in a court of law. equitable mortgage zebra

Mississippi City Shows Commitment To Fighting Mortgage Fraud

The city of Madison, Mississippi, with a current population of approximately 25,000, has chosen to follow what may be a growing trend among considerably larger, local law enforcement agencies around the country in hiring personnel assigned exclusively to investigating mortgage and real estate related fraud, according to City enlists investigator to tackle fraud claims, an article in The Clarion-Ledger, reported at clarionledger.com. Typically, municipalities will investigate these types of crimes through their Economic Crimes Unit, which lumps together all white-collar crime investigations.

Examples of other municipalities with personnel dedicated specifically to fighting mortgage and real estate related crimes are:

1) Wayne County, Michigan Sheriffs Office, which has a Deed Fraud Unit with three full time deputies assigned to combat deed fraud in the Detroit metro area (see New Arrests Made In Deed Scam)

2) Cuyahoga County, Ohio Prosecutor's Office, which hired an assistant county prosecutor to focus on crimes such as mortgage fraud and predatory lending in the Cleveland metro area (see Dozens facing loan charges)
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Tuesday, February 27, 2007

How "Flippers" Target Novice Real Estate Investors

A recent article in Realty Times describes how organized illegal flipping groups target novice real estate investors and lists precautions one can take to avoid getting sucked into one of these deals. For more, see Illegal Flipping Targets Investors, Too.
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Attorney Details How Some Builders Use "Straw Buyers" & Bogus Appraisals To Unload Inventory Of Unsold Homes

In a recent article in the Springfield (Missouri) Business Journal, a local attorney details to a reporter how some area homebuilders are using "straw buyers" and phony appraisals to dump their inventory of unsold homes and how, in the process, buyers are being duped into financing the purchases with mortgages well in excess of the property’s market value. To read more, see Attorney reveals details of alleged mortgage fraud.

To read of one homebuilder, currently under two indictments, who alllegedly used this type of arrangement to sell his inventory, see my February 25 post, Kansas Broker Cops Plea In Fraud Scam; Developer In Hot Water, which includes links to the two Federal grand jury indictments.
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Monday, February 26, 2007

North Carolina Regulators Focusing Their Fight On Mortgage Fraud

Officials with the North Carolina Banking Commission are looking to changes in their battle on mortgage fraud to stem the serious foreclosure problem currently existing in the state, according to an article in The News & Observer, at newsobserver.com.

The Commission:
  • has proposed rules to improve lending practices for nontraditional mortgages such as interest-only loans and option-payment ARMs,
  • has hired three more investigators, and
  • is realigning its investigations and examination of lenders and brokers to focus on lenders with high rates of foreclosure.

A concern of the Commission is that, because originating mortgage lenders get paid up front and often sell the loan to another lender, the original lender may be less inclined to make sure the customer will be able to pay the loan over the long haul.

One regulator seems to suggest that, through the use of "Wite-Out or cut-and-paste documents", it has become too easy for originating lenders to "pad a home buyer's bank account", "[change] a potential home buyers' annual income", and otherwise "falsify loan applications". "[Letting] family members with good credit sign for a relative's home" is also a concern.

For more, see Lenders may face new rules.

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Overview Of The New York State Home Equity Theft Prevention Act

Chicago Title Insurance Company has an overview of the New York State Home Equity Theft Prevention Act ("HETPA") on their website, at titleinsuranceny.com. Click here for Chicago Title on HETPA.

For other online resoures on HETPA, see
For online resources on New York real estate and title insurance law issues, see Chicago Title's online reference library:
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Sunday, February 25, 2007

Suspect Charged With Bilking Funds From 88 Year Old Woman

A story of elder abuse began to unfold when Katherine Garcia-Herzog appeared in court Tuesday on charges that she took advantage of an 88-year-old Fiddletown, California woman.

In addition to allegations of credit card use without authorization, it is believed that the proceeds of a reverse mortgage on the alleged victim's home was illegally diverted by the suspect for her own use.

For more, see Prison wife charged with elder abuse, reported by the Ledger-Dispatch at ledger-dispatch.com.

Go here for other posts on reverse mortgage problems. zebra

Kansas Broker Cops Plea In Fraud Scam; Developer In Hot Water

James Sparks, of Lawson, Missouri, pleaded guilty in a Kansas Federal Court on Friday to a single count of conspiracy to commit mortgage fraud, according to an Associated Press article appearing in The Wichita Eagle, at Kansas.com. As a mortgage broker, he obtained loans for prospective home buyers by falsifiying financial information, rent verification and other necessary loan documents, and by using inflated property valuations from appraisers who allegedly were also part of the scheme.

His co-defendants in this indictment include Kansas City area developer F. Jeffrey Miller, as well as participants Stephen W. Vanatta, Hallie Irvin, and Sandra Harris. All are currently awaiting trial.

According to Federal indictments, the alleged scam in this story is nothing more than a continuation of a prior alleged scam in which Miller was indicted for in May, albeit with seven other participants/co-defendants.

For the entire article regarding the more recent case, see Broker pleads guilty to mortgage fraud. See also:

For additional information on this case, including allegations of:

  • soliciting home buyers with credit problems,
  • promising to put them into homes with no money down and builder financing,
  • unilaterally increasing home prices prior to closing,
  • forging buyers' signatures,
  • a "file cleaning party", where defendants purged and destroyed files of incriminating evidence with full knowledge of the ongoing federal investigation into the operation,
  • the discovery that James Sparks, above, was cooperating with Federal investigators,

see 18 page Indictment - U.S. vs. Miller, Sparks, et. al. (Miller #2)

For details of the earlier indictment of real estate developer F. Jeffrey Miller, including a request of forfeiture in excess of $25 million, see 19 page Indictment - U.S. vs. Miller, et. al. (Miller #1)

State Legislatures Across The Country Consider Pending Fraud Bills

Mississippi
The Mississippi state legislature is considering the passage of two bills to combat the mortgage fraud problems occurring in the state. See Rep. Martinson joins in fight against rising mortage fraud

Utah
House Bill 25 passed the House unanimously on January 26 and is now on its way to the state Senate for consideration. Under provisions of the bill, mortgage fraud would become a second-degree felony with a possible sentence of 1 to 15 years in the Utah State Prison. See Legislation makes mortgage fraud a felony.

In addition, a Senate bill, SB199, has been introduced and which would allow regulators to investigate and fine unlicensed people who misrepresent themselves as real estate agents, brokers, real estate appraisers or mortgage officers. See Utah Senate bill takes aim at mortgage fraud.

Colorado
State Attorney General John Suthers unveiled proposed legislation targeting appraisal and mortgage fraud that is fueling record foreclosures in the state on January 8. See New bill targets appraisal, mortgage fraud

Arizona
Arizona Lawmaker Introduces Legislation To Aid Prosecutors In Pursuing Mortgage Fraudsters, and

Bill targeting cash-back mortgage deals moves forward

Michigan
Michigan lawmakers considering laws to combat identity theft. See ID theft attacked by GOP's Caul, Dem Angerer

Texas
House Bill 716 is pending in the legislature and would establish specific punishments for mortgage fraud, including imprisonment for up to 20 years and fines of up to $10,000 for knowingly making false statements. The law would apply both to consumers and to mortgage industry insiders. See Tougher mortgage fraud penalties eyed.
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Saturday, February 24, 2007

Two Plead Guilty In Combined Foreclosure Rescue/"Straw Buyer" Mortgage Fraud Scam

(revised 8-16-07)
Two out of five defendants charged in an alleged $12.9 million real estate scam combining a foreclosure rescue scam with a "straw buyer" mortgage fraud scam in which more than 100 Southern California financially strapped homeowners ended up losing their homes have pleaded guilty to their roles in the operation.

Martha Rodriguez entered her guilty plea yesterday, and her cousin, Cynthia Valenzuela, pleaded guilty last week, prosecutors said. Both are scheduled for sentencing on Aug. 20.

The three remaining defendants, Edward Seung Ok, Maria G. Juarez, and Rodriguez' common-law husband, Vladimir Stefanovic, face trial in July.

To read more on the current guilty pleas, see Seal Beach escrow operator pleads guilty in fraud case, reported by The Orange County Register, at ocregister.com.

For an earlier report on this case, see Defendants Face Prison Time for Calif. Foreclosure Scam, reported by DSNews.com.

Click here to read the Stipulated Statement of Facts in the Cynthia Valenzuela Plea Bargain Agreement, pages 15 through 21, describing the specific allegations of foreclosure rescue coupled with a subsequent mortgaging of the victims' homes using straw buyers, and ultimately defaulting on the newly obtained mortgages.

Go here for updated posts on this story.
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Disabled Women Allege Theft Of Home Equity

Two Lodi, California women, blind since infancy and never able to work are on the verge of losing their home that they purchased free and clear only a few years ago, according to two online articles reported at Recordnet.com. Both are alleging to have been victimized by a former caretaker, whom both women befriended in 2004 when the caretaker was sent to the women's home by a home health-care agency two or three times a week for housekeeping and errands.

They allege that the caretaker convinced them to mortgage the home and then turn over most of the money to her, expecting she would make the mortgage payments. The caretaker acknowledges to receiving a $20,000 loan from the women. The balance of the mortgage loan, however, is listed at $320,000.

The filing of an 11th hour bankruptcy petition stopped a scheduled foreclosure sale last week. Local police are reportedly investigating whether a crime was committed. To read more, see:


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Predatory Mortgage Servicing Practices

A recent consumer article by Jack Guttentag provides a list of some of the common abusive practices engaged in by predatory mortgage servicers. To read more, see Home-loan servicing gone awry.

For a story of New Hampshire homeowner Michael Dillon and his nightmare experiences with alleged predatory mortgage servicer Fairbanks Capital Corporation, now known as Select Portfolio Servicing, see Mortgage Go-Betweens Snag NH Consumers.

Or click here to listen to the New Hampshire Public Radio report on Michael Dillon's circumstances.

Mr. Dillon has a website devoted to his experiences with Fairbanks, at www.getdshirtz.com

Other consumer articles on this subject are:

Can I fire my mortgage servicer?
It's simple common sense -borrowers need proof of payment!

Click here for a Federal Trade Commission FTC Consumer Fact Sheet on Mortgage Servicers.

Go here , go here , and go here for posts on questionable mortgage servicing practices. questionable mortgage servicing practices tactics zebra
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Friday, February 23, 2007

Two NY Attorneys, 4 Others Accused Of Foreclosure Rescue Scam

Attorneys John Lewis and Angelyn Johnson are among six people who have been charged with selling the house out from under a financially strapped Rosedale, New York woman in a foreclosure rescue arrangement involving forgery, according to online articles on EmpireStateNews.net and the North Country Gazette.

According to the Queens County District Attorney, the attorneys have each been charged with second degree grand larceny, second degree forgery, second degree criminal possession of a forged instrument, first degree scheme to defraud and first degree falsifying business records, and face 15 years in prison if convicted.

The charges are the result of a joint ten month investigation between the DA's office and the NYPD’s Special Fraud’s Squad.

For more, see Mortgage fraud scheme broken up, and Attorneys Arrested In Real Estate Scheme.
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Ex-Lawyer Indicted For Stealing From Former Clients

A Worcester County, Massachusetts grand jury handed up a nine count indictment last week charging disbarred real estate lawyer Peter L. Schofield of Grafton of stealing about $750,000 from former clients, according to an article in the Worcester Telegram & Gazette News, reported at telegram.com.

The thefts from at least two of the alleged victims was of money representing the sale proceeds from real estate transactions. The indictment lists eight other victims. To read more, see Grand jury indicts ex-lawyer (Thefts from clients alleged totaling about $750,000).
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North Carolina AG Suing Foreclosure Rescue Operator

A story of an alleged victim of a foreclosure rescue scam is the subject of a report by WCNC-TV in Charlotte, North Carolina. The scam involved was an upfront fee scam, whereby the operator took a fee of $840 from the homeowner facing foreclosure in exchange for guarantees that the operator would help the homeowner communicate with their mortgage company and refinance the mortgage.

Reportedly, the homeowner got nothing in return. The North Carolina Attorney General's Office received numerous complaints against the operator, Mortgage Assistance of the Carolinas, and are currently suing the company.

To read the story, see Consumer warning: Home foreclosure nightmares.

Click here to watch the WCNC-TV video report.

For a brochure describing the types of foreclosure rescue scams, how they work, and the forms of legal challenges a consumer can make in defending against them, see Saving Older Americans from Foreclosure Rescue Scams.
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Feds Obtain 30 Count Indictment In "Straw Borrower" Scam

An Albany, New York federal grand jury has indicted Anthony Andersen of Florence, Massachusetts last Friday on 30 counts of mortgage fraud and money laundering, according to an online article on EmpireStateNews.net. Andersen recruited others who allowed him to use their names and identifying information to apply for and obtain loans from Union Planters Bank on property he either owned or controlled, according to the allegations.

The indictment alleges that:
  • shortly before the loan closings, Andersen would put the title to these properties in the name of the straw borrowers;
  • he also represented to the straw borrowers that he would maintain control of the properties;
  • he told the straw borrowers that he would be responsible for the loans;
  • he also agreed that he and/or entities controlled by him would re-acquire from the straw borrowers title to the properties shortly after the loan closings; and
  • unknown to the lender, he would pay the straw borrowers for allowing him to use their names and identifying information to obtain the loans.
  • Andersen misrepresented the properties' values and profitablity, the borrowers' identities and qualifications, and the intended distribution of the loan proceeds.

To read the article, see Mortgage fraud, money laundering indictment handed up.

Click here for the 30 Count Grand Jury Indictment against Anthony Andersen.

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Cincinnati Scammer Sentenced In "Straw Buyer" Flipping Scheme

Troy S. Clements was sentenced Wednesday in a Cincinnati, Ohio Federal Court to 24 months in prison for his role in a loan scheme that defrauded mortgage lenders out of $2.3 million, according to a report in The Enquirer, at Cincinnati.com. The sentencing came as a result of Clements' agreeing to plead guilty to one charge of bank fraud and one charge of money laundering last September in lieu of demanding a jury trial (originally a 21 count indictment). This is the latest conviction resulting from a joint mortgage fraud investigation by the local U.S. Attorney's Office, FBI, IRS, Secret Service, and the U.S. Postal Inspection Service involving over $50 million in properties in the Greater Cincinnati area.

The victimized financial institutions include ABN Amro Mortgage Group, Inc., Washington Mutual Bank, and Chase Manhattan Bank (now a part of J.P. Morgan Chase Bank of Columbus, Ohio. Other victims include Southstar Funding, LLC and Ashore Funding, Inc., two private mortgage lenders, as well as the homebuyers themselves who were duped into believing that the financing being arranged was legitimate, no money down, 100% financing.

To read the article, see Two years in prison for mortgage fraud. To read the court filings, which detail the grand jury's probable cause findings as to the fraud see:

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Sub Prime Mortgage Market Compared To "The Titanic"

Commentator Richard Benson makes an interesting comparison between the current state of the subprime mortgage market and the ill-fated oceanliner, The Titanic in a recent online article at GoldSeek.com.

The expected fallout includes sub-prime mortgage lenders either closing down shop or seeking bankruptcy court protection, and homeowners being trapped in a house they either can’t sell or refinance.

To read more, see Subprime Titanic Hits Iceberg: Wall Street Abandons Ship.

For a prior post on this problem, see Is The Sub-Prime Mortgage Market In Trouble?

Other Sources On This Issue:
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Michigan Usury Law

For those readers who were recently "Google searching" for something on the Michigan usury statutes, I came across a four year old article that possibly may be of some interest to you. For more, see Michigan Usury Law (Mortgage Loans), by Jack Murray.
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Thursday, February 22, 2007

Arizona Deed Theft Ring Out Of Business

The operations of a six member deed theft ring was the subject of a recent article in The Arizona Republic, reported at azcentral.com.

The scheme was very straightforward. The ring would "steal a house" by recording a forged deed to the property, unbeknownst to the true owner, and then proceed to obtain a mortgage loan against it. Needless to say, the ring would take the mortgage proceeds and start the process over with another property. The true owners would only find out about the fraud when the mortgage lender, who was duped into making the loan, attempts legal action.

Reportedly, seven families were fleeced out of half a million bucks. Four of the six ring members were recently sentenced by authorities, including ex-real estate agent Lesley Romero, whose real estate license was revoked.

The other two ring members, Jessica Alvarado and Robert Mora, have yet to be apprehended and are currently on the lam. To read the article, see Beware of mortgage-fraud scam.

For links to recent stories on deed theft by forgery in Detroit and Boston, see Detroit Area Law Enforcement Targeting Deed Theft With Dedicated Units.

For a Philadelphia story, click here to see an NBC Channel 10 deed theft video report.

For a Chicago story, click here to see a CBS 2 video report on deed theft.

For a Lee County, Florida story, click here to see an NBC 2 deed theft video report.

For similar stories over the last couple of years, see this collection of deed theft by forgery reports on The Mortgage Fraud Blog, presented by The Prieston Group.

Go here for other deed theft posts. deed theft zorro
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Indiana Foreclosure Rescue Legislation Pending

Indiana Senate Bill 390, which proposes to regulate foreclosure rescue consultants and purchasers, is currently working its way up the Indiana state legislature. One feature in the proposed bill, which is similar to the newly enacted statutes in Illinois and New York, is that there is a provision requiring a "foreclosure purchaser" to pay to a homeowner 82% of the proceeds of any resale of property.

Click here to view Indiana Senate Bill 390.
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North Carolina Modular Home Dealer Fined $1 Million For Fraudulently Financed Home Sales

The now-defunct CMR Properties and Home Finance Group of Fayetteville, North Carolina has been court-ordered to pay fines and penalties of approximately $1 million in connection with legal action brought by the state Attorney General's office, where the company was alleged to have misled dozens of families, many of whom had less than perfect credit, into buying modular homes they couldn't afford and falsified loan application and appraisal forms, according to WTVD Channel 11 (Raleigh - Durham - Fayetteville) on their website at abc11tv.com.

The fallout of the scam includes homeowners either facing foreclosure or stuck with making house payments on a home they can't sell or refinance.

For the full story, including the Channel 11 video report, see Home Dealer Ordered to Pay.
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