South Florida Homeowner Victimized By Foreclosure Rescue Operator

A suburban Miami woman who was victimized by a foreclosure rescue operator is featured today in a story published by Reuters and appearing in the San Diego Union Tribune. Reportedly, she was solicited in June by a "door to door foreclosure rescue operator" who offered her financial help on an $89,000 mortgage on her home. According to the article:

• Nine months later, her $89,000 mortgage has ballooned into a $234,000 loan, her monthly payments have doubled and she faces foreclosure on a house she no longer owns.

For the rest of the story, see U.S. sub-prime crisis exposes mortgage scams.

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Editor's Note:

Hopefully, an experienced, competent South Florida real estate attorney (someone who also knows his/her away around a courtroom and knows how to make legal arguments in front of a judge and jury) will come forward and help the victimized homeowner in this story. Such an attorney will be aware of the fact that just because she signed away her home, it doesn't mean she can't get it back.

Quoting from Guest v. Claycomb, 932 So. 2d 567 (Fla. App. Ct. 5th Dist. 2006), which, in turn, quotes from the Florida Supreme Court decision in Williams v. Grogan, 100 So.2d 407, 410 (Fla. 1958), a Florida appeals court stated:

• "The rule is well established in Florida and elsewhere to the effect that when a person acquires title to property through the influence of a confidential relationship or otherwise obtains an advantage which he should not in good conscience be permitted to retain, a court of equity will prevent the abuse of the confidence and grant relief on the broad principle that one should not be permitted to be unjustly enriched under such circumstances at the expense of another." (quoting from Williams v. Grogan, 100 So.2d 407, 410 (Fla. 1958))

• "The Court proceeded to explain that the court of equity will grant relief in such instances by imposing a constructive trust "which is created by operation of law" and "is not within the statute of frauds and may be proved by parol evidence." Id."

Further, if the financially strapped homeowner who signs away their home never relinquishes possession of the property, Florida law (and the law of many other states as well) is that actual possession of the property serves as notice to subsequent purchasers and encumbrancers of all rights and equities that the person in possession may have, in which case, the woman's ownership rights to her home, as adjudicated by a court, should be superior to the rights of any subsequent purchaser or (foreclosing) mortgagee. Having constructive notice of the woman's occupancy will eliminate any entitlement to claim the status of "bonafide purchaser".

The Florida Supreme Court, in Florida Land Holding Corp. v. McMillen, 135 Fla. 431, 186 So. 188 (Fla. 1938) stated the following:

"This Court had before it a similar set of facts in the case of Marion Mortgage Co. v. Grennan, 106 Fla. 913, 143 So. 761, when this Court said:

• "Actual possession is constructive notice to all the world or anyone having knowledge of said possession, of whatever rights the occupants have in the land. Such possession when open, visible and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises. Carolina Portland Cement Company v. Roper, 68 Fla. 299, 67 So. 115; Tate v. Pensacola G.L. & Dev. Company, 37 Fla. 439, 20 So. 543; McAdams v. Wachab, 45, Fla. 482, 33 So. 702. This court also specifically held in the case of Crozier, et al., v. Ange, 85 Fla. 120, 95 So. 426, that 'where at the time property is mortgaged it is actually occupied by others than the mortgagor, the mortgagee is thereby put upon notice to inquire as to the rights of the occupants.' 19 R.C.L. 421, Sections 201 and 202.

One final point on this case. If a Florida attorney takes on a case like this, and would like the possibility of obtaining a court ordered attorney fee award, he/she may have to assert claims of violations of Federal or Florida consumer protection laws (which entitles an attorney representing a prevailing plaintiff to a fee award to be imposed upon the accused fraudster), in addition to asserting claims of fraud, constructive trust, or any other equitable claims that may be applicable. See my prior post, Voiding A Title Transfer In A Foreclosure Rescue Transaction, which discussed a Nebraska case where the attorney for a dozen victims of a foreclosure rescue operator was granted a $378,000 fee award (imposed on the foreclosure rescue operator) for successfully asserting violations of the Nebraska Consumer Protection Act (in addition to fraud and conspiracy), and which involved the application of a contingency fee risk multiplier in calculating the fee award, which is allowed in Florida on state law claims. The case was Eicher v. Mid America Financial Investment Corp., 270 Neb. 370, 702 N.W.2d 792 (2005).

With regard to the application of contingency fee risk multipliers in Florida, see generally, Bell v. U.S.B. Acquisition Company, Inc., 734 So.2d 403 (Fla. 1999), which discusses Florida Patient's Compensation Fund v. Rowe, 472 So.2d 1145 (Fla. 1985), where the Florida Supreme Court discusses what the contingency fee risk multiplier is based on and how it is calculated and applied.

While these cases may be difficult to make (which is why you need a sharp attorney), those having or creating the impression that nothing can be done for the woman featured in the article are simply uninformed. equitable mortgage zebra

Dillon Continues Battle Against Alleged Predatory Mortgage Servicer

The ongoing saga of New Hampshire homeowners Michael Dillon and Jennifer Kresge and their tenacious battle against the alleged predatory mortgage servicing company formerly known as Fairbanks Capital Corporation, now known as Select Portfolio Servicing, Inc. ("Select"), and five other financial institutions is continuing in a New Hampshire court.

A complaint was filed by Dillon alleging, among other things, fraud, intentional misrepresentation, conspiracy, unfair collection practices, unfair and deceptive commercial practices, and violation of the Federal Truth In Lending Act, all in connection with alleged abusive mortgage servicing tactics used in the servicing of Dillon's home mortgage. Attorney Walter L. Maroney, of the New Hampshire, Massachusetts, and Maine law firm Gallagher, Callahan & Gartrell, P.C., represents Dillon and Kresge.

Click here for more on the Dillon matter.

Go here , go here , and go here for posts on questionable mortgage servicing practices. questionable mortgage servicing practices tactics zebra

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Editorial Note:

One allegation in the Dillon lawsuit that caught my eye (and should catch the eye of any attorney who represents and defends homeowners being sued in a foreclosure action) is "Avoidance of Note". Apparently, Mr. Dillon requested evidence that the defendants have actual possession of the promissory note that Dillon signed when he borrowed the money against his house. The Defendants, according to the complaint,

• [h]ave been unable or unwilling to provide Mr. Dillon with evidence that they hold the original of the Note secured by the Mortgage.

The complaint then goes on to state that

• "[i]n the absence of an ability to show that it possesses the original of the Note, neither [the mortgage lenders] ha[ve] a right to enforce the same; nor [do Select or the collection attorney] have any right or capacity to seek to enforce the same on their behalf."

It is my understanding that a mortgage lender generally cannot bring an action to foreclose on a mortgage loan without first either (a) having possession of the original promissory note, signed by the borrower, that they are trying to collect on; or if the note has been lost, destroyed or stolen, (b) bringing legal action to re-establish the lost, destroyed or stolen instrument, which may not be as easy as it sounds. Further, inasmuch as the promissory note typically used in a residential mortgage loan transaction is in such a form that it is legally treated as a "negotiable instrument", the maker of the note (the debtor) is, as a matter of law, entitled to the return of his original note upon full payment. Accordingly, a mortgage lender's failure to present the original note for payment in a foreclosure action is an issue that should always be raised (and pressed) by counsel for a homeowner.

For examples of cases where a mortgage lender was not entitled to foreclose on its mortgage because it didn't have possession of the original note, see State St. Bank & Trust Co. v. Lord, 851 So. 2d 790; (Fla. App. Ct. 4th Dist., 2003), and the cases cited therein.

Given all the turmoil in the subprime mortgage lending industry, with mortgage loans being bought and sold numerous times before ending up in a mortgage pool collateralizing mortgaged-backed securities - then going into default, the increase in foreclosures, and the number of subprime lenders going out of business (and, in the process, dumping their subprime loans at a discount to others - see Frmont Unloads $4 Billion in Whole Loans), it seems to me that there is a significant potential for a large number of foreclosing mortgage lenders who are going to have fits trying to find, much less produce, the actual original promissory note in a foreclosure action. However, unless the homeowner (and legal counsel) know enough to make the demand for the original note (and insist on the original note being produced), either before or after the foreclosure action commences, the situation will end up as nothing more than a lost opportunity for the homeowner to (at least attempt to) effectively defend against a foreclosure action.

Addendum:

To read a court order from a Pinellas County, Florida trial court ruling that a certain mortgage servicer "lacked standing" to bring foreclosure actions on behalf of the actual mortgage holders whose loans the mortgage servicer was servicing, (and, accordingly, dismissed twenty foreclosure actions that the mortgage servicer had brought on their behalf), see in re Mortgage Electronic Registration Systems, Inc. (MERS), available online courtesy of Mortgage Servicing Fraud .org, at msfraud.org.
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California To End Sale Of Social Security Numbers

According to a report dated today, the California Progress Report states:

"Assemblyman Dave Jones last week revealed that a state-run web site had been selling access to the Social Security numbers of thousands of California consumers, a practice that began in 2004 and only ended this week when Jones raised objections. According to Jones this is

• "potentially the longest running government Internet breach in California's history."

• “For the past 3 years, the state has been in the data broker business [...]. It has sold Social Security numbers for a mere $6 each to any member of the public with an Internet connection and a credit card. This is a gold mine for identity thieves.”"

For the rest of the report, including a link to legislation proposed by Assemblyman Jones designed, for among other reasons, to stop this practice, see Legislation to End California's Sale of Social Security Numbers (State Sold Thousands Over Three Years on the Internet for $6 A Pop)
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Tax Form Preparation Office Target Of Identity Theft

The story of two Utah identity theft victims is featured in a story published today in The Salt Lake Tribune. The victims allegedly had their personal identification information stolen by employees of one tax return preparation firm where the victims went to have their taxes done.

About two weeks ago, a federal grand jury indicted Heber Uriel Nevarez (currently on the lam) on two counts of bank fraud and two counts of aggravated identity theft, and Juan de Jesus Lopez (currently in custody) on four counts of bank fraud and four counts of aggravated identity theft. Both worked for the firm that prepared the victims' income tax forms.

One victim reports that the identity theft experience has delayed his plans to get a new house for his wife and three grown kids. To read more, see Pair accused of using Latinos' tax preparation information to steal identities (Pair worked at Latino services business in 2006)
(revised 3-25-07 - 11:30 p.m.)
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More On Alleged Mortgage Fraudster Matthew Cox

Accused mortgage fraud operator Matthew Bevan Cox (known in Nashville, Tennessee as Joe Carter) is featured in a story today in the Dickson Herald, published at dicksonherald.com. The story highlights some of his real estate activities in Nashville prior to his apprehension. He currently is in federal custody in Atlanta.

To read more, see Intown developer tied to fraud prosecution (Real estate investor pitched revival of Napier area) (link no longer available).

More On Manufactured Home Dealer Glenn Vaught

The stories of several alleged fraud victims of accused South Carolina manufactured home dealer Glenn Vaught are featured in a story published by The Sun News, at MyrtleBeachOnline.com. Vaught, owner of the now-closed, Conway, South Carolina manufacured home dealer G&E Home Center has been named in two lawsuits by mortgage lenders containing allegations that, in ten deals, he took over $1.5 million in loan proceeds for non-existent homes.

To read more, see Buyers lose more than cash (Mortgage scheme steals dream, home, credit) (no longer available online).

For a prior article in The Sun News on Glenn Vaught, see Conway home seller accused of loan fraud (Horry's manufactured house problems continue to mount) (no longer available online).
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Financial Counselors Overwhelmed With Calls From Homeowners Facing Foreclosure

Financial counselors at the Home Ownership Center of Greater Cincinnati are reportedly swamped with phone calls from consumers facing foreclosures, according to a recent Reuters article reported at CNN.com. In addition, demand for counseling appointments at the Cincinnati offices of Consumer Credit Counseling Service has risen 87 percent from a year earlier. For more, see Mortgage crisis overwhelming credit counselors.
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FBI, Mortgage Bankers Association Working Together To Combat Mortgage Fraud

The FBI, with the cooperation of the Mortgage Bankers Association (MBA), has issued to MBA members an advisory recently covering a number of points designed to combat mortgage fraud. The details of the advisory are aimed at both lenders and consumers who are contemplating engaging in fraudulent real estate transactions and provides consumers suggestions to avoid getting lured into a scam. To read more, see How Not To Become A Mortgage Fraud Statistic, reported by Realty Times.
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Alleged Identity Theft Scam Targets The Dead

An alleged Louisiana mother-son-daughter in law team has been charged in an identity theft scam involving the information of over 100 dead people, according to a report in The Times-Picayune.

The mother, an emergency room clerk at Slidell Memorial Hospital, allegedly sent her son text messages with the names, birth dates and Social Security numbers of hospital patients who had recently died or were near death so he could submit fraudulent credit card applications in their names as soon as they died, authorities said.

Robert Ezell and his mother, Rebecca Stockdale, both of Slidell, Louisiana, were booked with 124 counts of identity theft among a slew of other charges. Ezell's wife, Charlotte Cooper-Ezell, accused of filling out some of the fraudulent credit applications, was booked with 84 counts of identity theft.

For the whole story, see Identity theft targeted the dead (Three arrested; more than 100 names stolen)

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Disbarred Massachusetts Attorney Pleads Not Guilty

Peter L. Schofield, a disbarred lawyer of Grafton, Massachusetts pleaded not guilty at his arraignment earlier this month to nine charges of stealing about $750,000 from former clients, according to an article in the Worcester Telegram & Gazette. The charges include alleged theft of sale proceeds from real estate transactions. To read more, see Lawyer denies stealing $750K - Not guilty plea to theft charges.

Click here for other posts on the Schofield case.
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Home Thieves Zero In On Homes With "For Sale" Signs

Putting a "For Sale" sign on your front lawn could be placing a homeowner's home and personal information at risk, according to a report in CityNews. When a "For Sale" sign goes up on someone's front lawn, scammers will look up the owner's information and use those details to take out a mortgage against the home. To read more, including the story of Toronto, Canada woman Susan Lawrence who had her home stolen from out from underneath her, see Mortgage Fraudsters Targeting Homes With "For Sale" Signs.

Click here to watch the TV report on CityNews.ca, or here for other posts on the Toronto home theft.
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Junk Mail May Fuel Identitity Theft Problem

A recent survey in Northern Ireland indicates that there may be a connection with junk mail delivery and identity theft, according to a report in the Belfast Telegraph. According to the report, the average Belfast household gets 509 unsolicited letters stuffed into their mailboxes annually; this equates to almost 40,000 in a lifetime.

But in an insurance company-commissioned survey of 4,000 people, 85% of those polled admitted to chucking the junk mail in the garbage unopened - thereby leaving valuable personal information available to dumpster divers, scam artists, and other collectors of garbage. For more, see Junk mail ID theft warning.

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New Century Off The Hook On $1 Billion In Bad Loans

New Century Financial Corporation has informed the Securities and Exchange Commission in a filing that it had reached a deal with Barclays Bank PLC that releases New Century from nearly $1 billion in repurchase claims associated with the subprime mortgage lender, according to a report on Housing Wire. For more, see Barclays, New Century Reach Agreement
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Mortgage Lenders Facing $100 Million Lawsuit

In a lawsuit filed in November, Countrywide Financial Corp., IndyMac Bancorp Inc. and 23 other defendants were named as defendants by two dozen homeowners in which they are asking for $100 million in fraud damages and a halt in debt collection and foreclosures, according to a Bloomberg News article published in today's Los Angeles Times website. The homeowners recently increased their money damages demand from $50 million.

The homeowners claim that they were duped into borrowing the money and investing the proceeds. To read more, see Countrywide, IndyMac sued by homeowners.
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Defending Against Eviction And Voiding Title Transfers In Foreclosure Rescue Transactions

Additional posts are available containing a survey of selected state court cases regarding the application of the equitable mortgage doctrine. These cases could be useful in building a case to both void title transfers and defend against homeowner evictions in foreclosure rescue transactions. See Equitable Mortgage Defense In Homeowner-Tenant Evictions:

• Part 6 - a Massachusetts case,
• Part 7 - cases from from Idaho, Ohio, Oregon, Alabama, and South Dakota.
• Part 8 - a couple of Washington State cases. equitable mortgage zebra

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California AG Closely Watching Foreclosure Rescue Activity

California State Attorney General Jerry Brown's office is keeping close tabs for reports of activity by foreclosure rescue operators and their offers to financially strapped homeowners facing foreclosure, according to the chief of the AG's consumer law section and reported by Reuters. To read more, see California alert for mortgage rescue scams.
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Texas Straw Buyer Scammer Convicted

Vernon Cooks, Jr. a/k/a Jibreel Rashad was convicted on all counts of a federal indictment (one count of bank fraud, seven counts of wire fraud, and six counts of money laundering) that charged him with operating a mortgage fraud scheme in the Dallas area, according to the U.S. Attorney's Office in Dallas.

One other co-defendant who was involved in the same scheme has pleaded guilty and is awaiting sentencing. Co-defendant Deirdre Dione Anderson, who was charged with six counts of wire fraud, was acquitted.

The fraud scheme involved was your basic straw buyer scam involving:

• Recruiting and paying straw buyers to use their names and credit to purchase homes that Cooks was going to rent to others,
• Promises that Cooks would pay all closing costs, mortgage payments and taxes associated with the properties until he transferred them out their names, within six months to a year after closing,
• Use of bogus appraisals to support the inflated sales prices of the homes,
• Use of fraudulent loan applications and other supporting documents, including fraudulent tax returns, W2s, and employment, rent and deposit verifications, to be submitted to the mortgage lenders so that the straw borrowers would qualify for the inflated loans,
• Use of the fraudulently-obtained proceeds to pay off the original, bona-fide sellers, keeping the rest of the money for himself,
• Ultimately defaulting on the mortgage loans in the straw buyers’ names, thereby leaving them stuck "holding the bag."

Source: U.S. Attorney Press Release, Federal Jury Convicts Real Estate Investor In Mortgage Fraud Scheme.

For story update, see Co-defendant in City Hall case sentenced in mortgage fraud (Dallas: House flipper gets 11 years in jail, denies wrongdoing) (The Dallas Morning News - 10-19-07).

U.S. Senate Hearings On Subprime Mortgage Lending

The U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing today to address the current turmoil in the subprime mortgage market.

Click here for the televised subprime lending Senate proceedings.

Click here for Opening Statement of Chairman Chris Dodd - Hearing on "Mortgage Market Turmoil: Causes and Consequences"

Click here for list of witnesses and links to their prepared statements.
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Subprime Mortgage Loan "Autopsies"?

When big Wall Street firms in the business of pooling real estate loans into mortgage-backed securities end up getting stiffed on loans that go sour, did you ever wonder who gets called in to do the "autopsy" on the bad mortgage?

Did you ever wonder who these big firms call in to perform a "physical" on the mortgage loans they're buying before actually buying them in the first place?

A recent Fortune Magazine article, appearing at CNNMoney.com features Clayton Holdings, described as "a tiny $240 million Shelton, Conn., company that performs an important service: reducing subprime risk for such clients as Bear Sterns, Goldman Sachs, and Morgan Stanley."

When a loan goes bad, the article reports:

• Clayton's forensic analysts get to work, looking for fraud and other slip-ups that can get its clients off the hook for big investment losses.
  

(Presumably, only for the loans that go bad after the early payment default / buy-back period expires. After expiration of this period, the Wall Street firm can still generally demand that the mortgage lender buy back the bad loan if there was fraud or underwriting errors involved in originating the loan.)

Before buying a pool of mortgages from a mortgage lender in the first place, the article reports:

• [W]all Street firms use Clayton to visit lenders and pore through a sampling of the loans they're buying before pooling them into mortgage-backed securities and selling them off to investors.

.....

• Generally, Clayton tests between 15 percent and 25 percent of the mortgages for sale. (Considering the industry's current mess, Wall Street firms will probably be asking for bigger samples in future securitizations.)

To read more, see CSI: Subprime (Before big Wall Street firms sell off bundles of mortgages, they turn to tiny Clayton Holdings to investigate.)
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California Man Charged In Identity Theft Involving Alleged Real Estate Fraud

An Apple Valley, California man, who was arrested in December and charged with identity theft in connection with the purchase of a home and a vehicle using a stolen identity, was charged again last week with six felony charges involving identity theft and forgery using the same stolen identity in connection with three separate escrows he allegedly opened on properties within San Bernadino County, according to a report in the Victorville Daily Press. For more see Apple Valley man charged with identity theft and forgery.
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Toronto Woman Victim Of House Theft, Cost $50K To Recover It

A Toronto woman attempting to sell her home had it swiped instead. A "For Sale" sign in her front yard may have made her a target of house thieves. It took her close to a year and $50,000 to get it back. To read the full article reported in The Vancouver Province, see Beware fraudsters stealing homes (You can lose your house without even realizing it).
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Fremont To Dump $4 Billion In Subprime Mortgage Loans

Fremont General Corporation said today that its investment and loan subsidiary has entered into agreements to sell approximately $4 billion of its subprime residential mortgage loans at an unspecified discount, according to Housing Wire. To read more, see Fremont Unloads $4 Billion in Whole Loans.

To get a view of the current climate in the mortgage lending business from the perspective of a loan originator, see the blog, Blown Mortgage.
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Employees Flee New Century Financial Subsidiary

35 employees from the Boca Raton, Florida office of mortgage lender Home 123 Mortgage, a New Century Financial Corporation subsidiary, have left the company and joined Boca-based WCS Lending. Reportedly, most of the remaining employees of Home 123's Boca office have also joined other firms.

Reportedly, the abrupt fleeing came after New Century gave the Home 123 Boca office's division manager a notice to vacate the office and stop accepting loan applications last Friday. To read more, see:

• WCS adds lenders from Home 123 (South Florida Business Journal)
• Boca mortgage officers jump ship from New Century Financial (South Florida Sun-Sentinel)

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Wells Fargo Lays Off 444 In Subprime Unit

Wells Fargo & Co. is eliminating an additional 444 jobs in their subprime lending division, which stems from their recent decision to tighten up their mortgage lending underwriting guidelines. They cut loose about 70 positions earlier this year. See Wells Fargo cuts jobs, in the Monterey Herald

This news comes on the heels of a layoff of between 400 and 600 at Argent Mortgage Company, see When mortgage workers are axed; watch your back (The Journal News), and a layoff of about 350 people at NovaStar Financial Inc., see NovaStar will cut work force 17 percent (The Kansas City Star).

Editor's Note: articles no longer available online.

Legislation Pending To Require Loan Originator's Name On Mortgages

North Carolina lawmakers are considering N.C. House Bill 313, which would require carrying the name of the mortgage broker or loan originator on the actual mortgage or deed of trust that is recorded in the public records as a way to help the state regulate mortgage loan originators. See Proposed Legislation (Efforts to curb foreclosures) (Charlotte Observer)
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Florida Non Profit Law Firm Swamped With Foreclosure Cases

Jacksonville Area Legal Aid is so swamped with foreclosure cases that it can't take on more clients, according to a recent article in The Florida Times-Union, at jacksonville.com. It has recently asked the city's Housing Commission for a $250,000-a-year grant to hire more attorneys. The Housing Commission also is considering a separate proposal that would let people borrow up to $5,000 at zero interest so they can keep making mortgage payments if an illness, job loss or death in the family puts home ownership in jeopardy. To read more, see Foreclosure cases swamp Legal Aid (Jacksonville is asked to help people keep homes)
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Investigation Reveals Questionable Lending Practices In Lawrence

A Boston Globe article published in August, 2006 describes an investigation that Globe staff writers did into mortgage fraud in Lawrence, Massachusetts. They reported that in almost all cases that they examined, "monthly mortgage bills were hundreds of dollars more than borrowers could afford. The buyers soon faced foreclosure and ruined credit ratings that will probably hound them for years." To read more, see Housing dreams turning into nightmares (Mortgage fraud cases detailed in Lawrence)
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Washington Loan Officer Gets 68 Months In Mortgage Scam

J. Anthony Hansen, of Tacoma, was sentenced to 68 months incarceration, $70,600 in restitution and a $10,000 fine, according to a recent Press Release from Washington State Attorney General Rob McKenna's office.

He was accused of stealing more than $44,000 from 68 homeowners as part of a program to pay off their mortgages. He used the pretense that he was enrolling the homeowners in a Mortgage Payment Acceleration Program, and charged them on average $600 for the service. In fact, no one was enrolled by Hansen.

To read more, see Mortgage loan officer sentenced for theft and money laundering.
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Subprime Mortgage Lenders Lay Off Hundreds

Two subprime mortgage lenders have announced layoffs of several hundred of its employees.

NovaStar Financial Inc. announced a 17 percent reduction of its 2,000-strong work force, which equates to about 350 people in Missouri, California, and Ohio. To read more, see NovaStar will cut work force 17 percent (The subprime lender reacts to the downturn of mortgage market) (The Kansas City Star)

Argent Mortgage Co. has announced the close of its local shop in White Plains, New York and has resulted in layoffs estimated at between 400 and 600 of its employees, who reportedly learned of their fate via e-mail. Shortly after the announcement, the workers were asked to leave the premises, with extra security looking on. To read more, see When mortgage workers are axed; watch your back (The Journal News).

Editor's Note: articles no longer available online.

Another Atlanta Attorney Indicted In Mortgage Fraud

Closing attorney Mary Reagan was arrested and made her initial appearance in Atlanta Federal Court yesterday. She and three co-defendants, Adriene Newby-Allen, aka Cassandra Miller, and Brinson Allen, both of Alpharetta; and James Howard Bailey III, of Houston, have been indicted on charges of conspiracy, bank fraud and wire fraud.

The alleged fraud reportedly involved inflated appraisals, false credit applications, and income, employment and asset misrepresentations.

The government alleges Reagan disbursed loan proceeds in a manner inconsistent with the closing statements (HUD-1) she prepared and also is alleged to have prepared multiple closing statements (double HUD-1 scam). She allegedly received $40,000 in kickbacks.

According to one news report, "Reagan is among a growing number of real estate lawyers being federally prosecuted in Atlanta for closing real estate loans that were found to be fraudulent." In 2005, former Stone Mountain lawyer Chalana W. McFarland got a 30 year prison sentence for her role in a mortgage fraud scheme.

Two other lawyers, Andrew E. Wolf, of Wolf & Associates, and Cumming attorney J. Christopher Halcomb, await sentencing for their roles in another mortgage fraud case.

To read more, see:

• Local woman arrested on mortgage fraud charges (Atlanta Business Chronicle)
• Lawyer arrested in bank fraud probe (Daily Report)
  

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Is FHA Going Into The Subprime Mortgage Lending Business?

The answer is a definite maybe. According to recent articles by syndicated columnist Kenneth Harney, the Federal Housing Administration (FHA) "is actually expanding its business nationwide for credit-impaired and first-time home purchasers" and "which recently has seen a doubling of customers refinancing out of private, subprime loans into its insured mortgage programs."

FHA loans do not offer all of the features that the subprime mortgage industry has become known (some would say notorious) for. For example, the maximum loan under FHA is currently just under $363,000 in high cost areas, but reportedly, Federal legislation is expected to be introduced this year that will propose to have the FHA loan limits match the limits of Fannie Mae (FNMA) and Freddie Mac (FHLMC) - currently $417,000. To read more, see

• It's Time to Take Another Look at FHA Loans (The Ledger (Lakeland, Florida, at theledger.com) and
• FHA May Have Loans for Many Home Buyers Frozen out of Subprime (Realty Times)

Click here to watch a March 15, 2007 U.S. Senate subcommittee hearing on FHA solvency and reform proposals, and commentary on the subprime mortgage lending problems (Courtesy of C-Span)
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More On Subprime Mortgage Lending

For those interested in the current problems in the subprime mortgage lending industry, (be sure you have the most recent version of the Real Player media player) watch the following C-Span TV interviews (no longer available online):

• C-Span's Washington Journal interview with Doug Duncan, Chief Economist with the Mortgage Bankers Association, who offers his views on the subprime market, and
• C-Span's Washington Journal's interview with Michael Crittenden, Congressional Quarterly, Reporter, who discusses how federal regulators and legislators are looking at more oversight in the subprime mortgage market as well as reaction from the Federal Reserve and other banking regulators and members of Congress.

For more on the troubled subprime lender New Century Financial Corporation, see:

• Ohio Moves to Shut Down New Century Financial, and
• Subprime Lender On Verge Of Bankruptcy

For other stories related to the trouble in the subprime mortgage lending industry, see:

• When mortgage workers are axed; watch your back (The Journal News - no longer available online) - Argent Mortgage Company's branch in White Plains, NY lays off hundreds of employees.
• How Sub-prime Crisis Could Hurt Home Sales (Realty Times)
  

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Federal Fraud Allegations Against Atlanta Attorneys Dismissed

Atlanta Federal prosecutors quietly dismissed mortgage fraud charges last week against attorneys Michael A. Brochstein of the Atlanta firm Brochstein & Bantley and sole practitioner Russell H. Hippe III, according to an article in the Daily Report. They had been under federal indictment since October 2005.

Sharel L. Payne, a third attorney who was indicted along with Brochstein and Hippe, remains under indictment. The government has certified her case as ready for trial along with five other co-defendants, including accused ringleader Nathan Parker. The case involves a now seemingly standard alleged straw buyer, flipping scam (ie. "recruited middlemen [used] to masquerade as fictional, or “straw,” buyers and sellers using fictitious or misappropriated identities, use of faulty appraisals and fictional, quick sales to inflate artificially the value and prices of Atlanta real estate").

To read more, see Charges against two attorneys dismissed (A third attorney who voluntarily surrendered her law license still is under federal indictment in the bank fraud case)

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