Tuesday, May 29, 2007

More Surprises For Real Estate Investors To Look Out For

KGW-TV Channel 8 in Portland, Oregon recently ran a story about a novel approach used by a homeowner facing foreclosure in addressing his financial situation. For more, see

1) Man uses pigs to trash own house after foreclosure,
2) watch KGW-TV Channel 8 News Report,
3) Follow up report, Charges possible after pigs rescued from foreclosed home.

For more on foreclosures and family pets, go here, and go here. petsII and foreclosures
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The San Francisco Chronicle recently reported a story about the problems landlords face when their tenants turn a rental home into a marijuana "grow room." The story includes the plight faced by one landlord who actually went through this nightmare - the pot-growing tenant actually threatened to sue the landlord -- for mold. For more, see Hard to just say 'no' to marijuana-growing tenants. pot grow ops alpha

Commentary On Ex-Subprime Loan Originators Eyeing Move To Reverse Mortgage Market

For one reverse mortgage blogger's commentary on the recent Reuters' story Ex-subprime loan officers eye booming senior market, about former subprime mortgage loan officers gravitating to the reverse mortgage market, see Subprime brokers rushing out of the soup lines! (Out of work mortgage brokers flock to reverse mortgages).

For a BusinessWeek blogger's thoughts, see The mortgage mess of ... 2012.

Go here for other posts on reverse mortgage problems.

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

NY Lawyers Land Legal Fee Of $1 Million In Pro Bono Case

I stumbled across a recent New York Law Journal article (appearing in New York Lawyer) that reports on a case heard by a New York Federal Court where the lawyers representing a group of waiters, busboys and captains who worked in a restaurant in New York's Chinatown successfully challenged an unfair labor practice engaged in by their employer. While the attorneys (Skadden, Arps, Slate, Meagher & Flom and the Urban Justice Center) reportedly took on the case on behalf of their clients on a pro bono basis (ie. no legal fees charged to the restaurant employees), a federal judge nevertheless awarded the employees' attorneys a legal fee of $957,710; with liability for the payment thereof being imposed on the restaurant who engaged in the unfair labor practice.

For a copy of the Federal Court decision, see Heng Chan v. Sung Yue Tung Corp.

--------------------------------
I make mention of this case because, in the context of foreclosure rescue litigation, I have no doubt that there are some people who wonder how a financially strapped homeowner, someone who can't afford to make his/her mortgage payments, can possibly be able to afford an attorney to sue a foreclosure rescue operator in order to get his/her home back. The reason that there are a growing number of homeowners bringing lawsuits against foreclosure rescue operators is because their attorneys, like the attorneys who represented the waiters, busboys, and captains in the New York labor law case, are suing for violations of statutes that allow a judge to award a successful plaintiff's attorney a legal fee, and impose the obligation for its payment on the party who violated the law.

Examples of such laws are:

1) The Federal Truth In Lending Act (see, for example, Moore vs. Cycon Enterprises, where a Michigan Federal Court ruled that a foreclosure rescue operator violated that law in a purported sale leaseback arrangement with a financially strapped homeowner).

2) State consumer protection and/or unfair and deceptive trade practices statutes (see, for example, Eicher v. Mid America Financial Investment Corp., where the Nebraska Supreme Court affirmed an attorney fee award of $378,000 to the lawyers representing a group of foreclosure rescue victims, and imposed the obligation for its payment on the foreclosure rescue operator, who was found to have violated the Nebraska Consumer Protection Act).

3) In addition, there is at least one state that allows for a similar award of attorney fees by a court for violation of the state usury laws involving consumer loans and credit sales (see, for example, Smith v. Eisen, where an Arkansas appellate court ruled that a homeowner was entitled to an award of her attorney's fees to be paid by a pawn shop owner; in this case, the court found that a sale of a home with a contemporaneously executed buyback arrangement between the homeowner and a local pawn shop owner was nothing more than a usurious loan secured by an equitable mortgage).
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I am also compelled to mention one other case reported on this blog in the past. In this case, the Washington, D.C. law firm Hogan and Hartson LLP obtained a substantial jury verdict, including $3.3 million in punitive damages, against a foreclosure rescue operator in the Washington, D.C. metropolitan area for violating the D.C. Consumer Protection Act (see Hogan & Hartson Wins $3.3 Million Verdict in Pre-Foreclosure Scam Case). While the news release does not discuss attorney fee awards (and presumably the D.C. statutes allows for an attorney fee award on top of the damages award), it is not unreasonable to believe that the law firm will, at a bare minimum, share in a part of the $3.3 million punitive damage award. Assume a cut of between 20% and 40%, and you can do the math yourself.

Whether you are a financially strapped homeowner, an experienced or aspiring foreclosure rescue operator, or an attorney thinking of representing either, I hope the foregoing has given you some insight as to:

1) How foreclosure rescue victims can go about retaining the services of an attorney for the purpose of undoing a foreclosure rescue arrangement and either getting back their homes, or otherwise salvaging the equity in their homes, and

2) who will end up footing the bill for the foreclosure rescue victim's legal fees in a successful litigation.

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Go here for other posts referencing Eicher vs. Mid America Financial Investment Corp.

Go here for other posts referencing Smith vs. Eisen.

Go here for other posts referencing Hogan & Hartson. equitable mortgage yak

Monday, May 28, 2007

How Reliable Is The Reported Foreclosure Data?

A recent Los Angeles Times story questions the reliability of published foreclosure data that is commonly referred to by the media and relied on by government officials when attempting to establish policy. For example, strong criticism has been directed toward Realty Trac, an Irvine, California firm that has become perhaps the most widely cited authority in the field. Reportedly, Realty Trac's methodology in counting foreclosures may result in one house being tallied several times as a foreclosure.

The following excerpt reflects, in part, the frustration of some:
  • "This is highly misleading, the company's critics say. A Colorado housing official recently called RealtyTrac's numbers "ridiculous and irresponsible." The Mortgage Bankers Assn. chastised Congress for depending on the company's data. RealtyTrac's competitors are becoming increasingly vocal about what they see as its overstatements but are sometimes arguing among themselves as well."No one is measuring the truth," said Mark Zandi, chief economist for Moody's Economy.com. "This is a problem when formulating policy.""
For more, see Getting a fix on foreclosure data (Some people are losing their homes in this queasy market, that's for sure. But how many? No one agrees).

NYC, Chicago, Cleveland Getting Clobbered By Home Foreclosures

In New York City, The New York Times recently ran a story of the financial problems being faced by some New York City residents in keeping up with their mortgage payments. Reportedly, in 2007, filings of new foreclosure actions have doubled in Queens, Brooklyn and Staten Island, according to one industry tracker. She said that the average number of weekly filings in both Queens and Brooklyn jumped to about 120 in each borough from about 60 a year ago. For more, see Fighting Off Foreclosure.

In Chicago, Crain's Chicago Business reports that "Cook County is on pace to record at least 30,000 and as many as 36,000 foreclosure filings this year, according to Cook County Circuit Court Judge Dorothy Kinnaird, who presides over the Chancery Division, which handles foreclosures." For more, see Foreclosures Still Raging In Chicago Area (Defaults could nearly double in '07 as pain spreads across region).

In Cleveland, a story by WKYC-TV Channel 3 reports on how hard the problem of home foreclosures has been hitting Cleveland and northeast Ohio. Go here to watch the Video - Foreclosure: Growing problem in Northeast Ohio.

Urgent Need For Mortgage Counselors In NYC

Commentary on the DMI Blog reports of the urgent need for cash to build the capacity of foreclosure prevention specialists throughout New York City. The author states:

  • "Each person facing foreclosure represents hours upon hours of intensive intervention. And those in the trenches doing foreclosure prevention work will end up turning away more people than we can help because there simply aren't enough staff people and training supports (Read "dollars") to handle the need. If those struggling to overcome real estate scams and grotesque "exotic" loan terms represent a forest fire, then the fire fighters have been equipped with cups of water to meet the blaze. An estimated 15,000 foreclosure actions will be filed against New York City homeowners this year ..."

For more, see Foreclosure Prevention in NYC: Throw Money at It

Flexibility To Restructure Subprime Mortgages Lacking In Most Cases

The Associated Press reports:
  • "Federal banking regulators are giving lenders more flexibility when they restructure high-interest rate mortgages given to home buyers with poor credit. The effort by the Office of Thrift Supervision and other agencies is aimed at softening the impact of the housing market’s slowdown and bolsters the argument of lawmakers who say mortgage reforms may not be needed."

Reportedly, the efforts of federal regulators are limited, however, by the fact that "lenders independent of federal authority originated more than 50 percent of subprime loans in recent years. Those loans were then often bundled into securities and sold to institutional investors."

In addition, regarding the difficulty in restructuring home mortgages that have been packaged into securities and sold off to institutional investors, Reuters reports:

  • "Little can be done to change the terms of subprime mortgages to prevent foreclosure because of the way loans that were packaged and sold to Wall Street investors, mortgage industry executives said Monday."

Reportedly, the complexities involved in the financing structures that slice up and package different parts of the mortgage loans into bonds sold to investors, make it extremely difficult to restructure the troubled mortgages. Other complications that make restructuring difficult involve income tax issues, REMIC issues, and financial accounting issues.

For more, see:

Competitors Take Pot Shots At B of A's New "No-Fee Plus" Home Loan

Syndicated columnist Kenneth Harney writes:
  • "Call it the "too good to be true" mortgage: Bank of America's new "no-fee plus" home loan program has competitors searching for sleight of hand tricks and gimmicks. But Bank of America says that its new program is for real, and comes with none of the usual grab bag list of origination, processing, title or closing costs."

For more, see A True "No Fee" Mortgage? (reported by Realty Times)

Alabama Feds Gets Gulity Plea In Mortgage Fraud; $9 Million In Losses, Says FBI

(modified 8-17-07)
The Alabama Press-Register reports that real estate investor Darlene Hill, 50, of Mobile, Alabama, pleaded guilty in a Mobile Federal Court to wire fraud in a mortgage fraud scheme that bilked banking institutions and mortgage companies out of mortgage loan proceeds that resulted in a net loss to the lenders of $9 million, after money recovered from foreclosure sales is factored in. The scam involved was the standard "straw buyer" scam were investors with good credit were recruited and paid a fee for signing their name to bogus loan applications. Reportedly, it was unclear whether those people realized that their conduct was criminal. None of them was charged with a crime.

Other participants in the scam were:
  • Mortgage broker Antonio Harrison of Mobile, who has admitted to submitting fraudulent loan applications to Regions Mortgage, loan closer Jocelyn Easter of Mobile, who served as closing agent on most of the fraudulent loans, Kathy Frye of Eight Mile, an office manager at title insurance agency Harris Title, who assisted in the scheme by notarizing signatures of straw buyers even though they did not appear in person for the closings and who also acknowledged that she was was aware that title insurance was not being issued even though funds were allocated for that purpose at the closings.

For more, see Mobilian uses accomplices to bilk mortgage companies.

For copy of indictment, see Indictment - USA vs. Hill, et al.

For story updates, see

California Authorities Charge Bogus Appraiser With 142 Felonies

KFSN-TV Channel 30 in Fresno, California reported last week that Phillip Contreras, 54, is accused of posing as a licensed real estate appraiser and forging his boss' signature on dozens of home appraisals. He's charged with 142 counts of forgery, grand theft, identity theft and doing business without a license. He is currently free on $1,770,000 bond. For more, see Valley Man Faces 140 Felony Charges in Real Estate Fraud Case.

Ohio Feds Get Guilty Verdict Against Title Insurance Agency Owner

In Cincinnati, Ohio, The Enquirer reports that a federal jury has convicted title insurance agent Stephanie Corsmeier, who owned and operated American Security Title Company, on 11 counts of fraud and conspiracy to money launder in connection with a mortgage fraud investigation. Employee Stacey Lester, of Loveland who was also indicted on the same 11 counts, was found not guilty on all 11 counts by the jury. The indictment listed 42 real estate deals involving American Security Title from 2002 to 2004.

The investigation was conducted by a taskforce of federal agencies including the FBI, the IRS and U.S. Postal Service, which began investigating mortgage fraud in the sale of low price homes in the Cincinnati area. Over three dozen individuals have pleaded guilty to charges since the probe began. For more, see Title Company Owner Guilty (Was party to mortgage fraud).

For the 11 count indictment, see Indictment - U.S.A. vs. Corsmeier (drop me a line at HomeEquityTheft@yahoo.com and I'll email you the indictment - be sure to put "Indictment - U.S.A. vs. Corsmeier" in the subject line).

Missouri Feds Convict Title Insurance Agent Of Stealing $3 Million+ In Escrow Funds

The St. Louis Post-Dispatch recently ran a story that should serve as a caution to anyone using the services of title agents to handle closing / escrow services in connection with real estate transactions. It tells the story of one Missouri victim who had $50,000 stolen by title insurance agent Norvel Brown who, when added to the thefts from other victims, made off with over $3 million in escrow money that he was entrusted to hold for others. A Missouri Federal judge sentenced him last week to 63 months in prison and 3 years probation. He also has been ordered to pay over $3.2 million in restitution to his victims.

Reportedly, Missouri doesn't restrict what title agents do with escrow money. According to Doug Ommen, the new director of the Missouri Department of Insurance, "What we have seen in the St. Louis area is, the agencies get into a squeeze because of competition. [...] They have been dipping into those funds that do not belong to them, to cover expenses. [...] It's shocking to me that there are no restrictions on the use of those funds."

Missouri insurance regulators also warned recently that some companies that sell title insurance to homeowners have two sets of prices - one for sophisticated buyers and a second for everyone else. For more, see

Colorado Feds Get Indictment In Alleged $4.5 Million Mortgage Fraud

The Rocky Mountain News reports that James S. Taylor, of Aurora, Colorado, has been indicted by a federal grand jury in Denver on 12 counts of bank fraud, fraud by wire, radio or TV, and money laundering. The charges against Taylor, made by the grand jury in February, involves the alleged fraudulent obtaining of over $4.5 million in residential home loans in Aurora, Littleton and Lakewood. According to the indictment, the following lenders were defrauded:
  • First Franklin Financial Long Beach Mortgage Co., Fort Worth Mortgage, First National Bank of Arizona, Accredited Home Loans, Countrywide Home Loans, Express Capital Lending and Fremont Investment & Loan.

For the rest of the story, see Aurora man indicted in real estate fraud.

For indictment details, see Indictment - U.S.A. vs. Taylor.

Sunday, May 27, 2007

Massachusetts AG Lawsuit Revolves Around Use Of "Liar's Loans"

Buried in an Associated Press article making the rounds in various print media outlets is a reference to a lawsuit filed by the Massachusetts Attorney General against real estate broker Roberta Roninson, her brokerage office, Champagne & Associates, and Rachel Noyes, a bartender-turned-mortgage broker for using “unfair and deceptive tactics to target and deceive low-income consumers into committing to mortgages they could not qualify for or afford.” The suit reportedly claims that the women made thousands of dollars in fees for putting together home purchases and financing that were bound to fail.

The general subject of the article focuses on the use of "stated income" mortgage loans (referred to by some as "liar's loans"), and describes how the defendants were reportedly holding "free seminars" that were drawing as many as 40 to 50 people in an effort to recruit home buyers. While the comapnies named in the lawsuit are out of business, Robinson has reportedly opened a new real estate brokerage under the name, Opulent Realty Inc. Noyes, the bartender-turned-mortgage broker, apparently has skipped town, and is now reportedly in Florida.

For more, see Drawn into real estate frenzy, a neighborhood finds loans too good to be true (reported, among other places, in the San Diego Union-Tribune).

California Woman Charged With Stealing Her Mother's Home Equity

In California, the Victorville Daily Press reported recently that Renee Ray, 53, of Victorville, was arrested and charged with forgery, filing a false or forged document and financial elder abuse in connection a scheme where she allegedly forged her mother’s signature to remove her name from the deed to their house in order to refinance the home. As soon as the mother, from Compton, caught on, she notified San Bernardino County District Attorney’s office Real Estate Fraud Unit. Reportedly, Ray is said to have refinanced the home three separate times, eventually raising the amount of the loan to $272,000 without ever telling her mother about the deed or the $145,000 she walked away with, according to officials. Bail for Ray was set at $500,000. For more, see Daughter arrested for forging signature.

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

California Woman Convicted In Upfront Fee Refinance Scam

In California, Diana Maria Lozano, of Hollister, pleaded no contest on Wednesday to one felony count of obtaining money by false pretenses in a plea bargain with the San Benito County District Attorney's Office. She bilked a local family out of $9,600 and forced them into foreclosure in a home refinance scam. She originally faced additional charges of grand theft by embezzlement and two counts of forgery, which were apparently dropped by prosecutors in the plea agreement.

The mechanics of the scam simply involved Lozano, who held herself out as an employee of a local finance company that she no longer worked for, talking the family into giving her a $2,100 upfront payment to begin payments on a purported refinance, and then to continue to make payments to Lozano of $500 to $1,000 a week. Lozano pocketed the payments and failed to make payments on an existing mortgage, forcing the home into foreclosure. (I guess you can call this scam a form of equity skimming, but without the need to actually take title to the property and "skim" the rent from a subsequently-placed tenant; the money being "skimmed" in this case comes right from the homeowner without him relinquishing title). For more, see Hollister Con Artist Convicted (Hollister Free Lance).

Massachusetts Woman Falls For "Upfront Fee" Foreclosure Rescue

WCVB-TV Channel 5 in Boston recently reported the story of a Lawrence, Massachusetts homeowner facing foreclosure who received fliers in the mail, telling her that a company purportedly called Fresh Start Program, in Tampa, Florida could straighten out her problems. For a $1,200 fee, they would negotiate a new deal with her mortgage company. She paid the fee and got nothing in return (other than a foreclosure notice from her mortgage lender saying she had to come up with $8,000 to keep her home).

Go here to watch WCVB-TV News report (by reporter Amalia Barreda).

For online story, see Woman Falls Victim To 'Mortgage' Program (Resident On Verge Of Losing Home). Mortgage Assistance Solutions

Weekend Identity Theft Blotter

This week's identity theft related stories:

Saturday, May 26, 2007

Connecticut AG Closing In On Legal Action In Predatory Lending Scheme

In Connecticut, TheDay.com reports:
  • "Connecticut Attorney General Richard Blumenthal said Friday that his office has had preliminary discussions with the chief state's attorney and is close to taking legal action in a local predatory lending scheme that has affected dozens of individuals, many of them Hispanic. Those individuals now are facing foreclosure and ruined credit after they were approved for home loans they could not afford based on false information."

TheDay.com ran a story last Sunday (Predatory Lending Shatters Dreams Of Dozens Of First-Time Home Buyers) reporting that in a number of transactions it reviewed, houses that consumers purchased appear to have been sold at inflated prices, and false information may have been used to qualify buyers for high-interest, variable loans in the sub-prime housing market. Reportedly, "[e]ach transaction involves the same group of individuals — [loan originator] Jose Guzman; Elizabeth Athan Real Estate, which employs Guzman's daughter, Isaura Guzman; New London lawyer Alan Messier and Trumbull lawyer Maurizio Lancia."

Reportedly, AG Blumenthal's office received additional complaints from homeowners since last Sunday's article and that his office is building a case and is close to initiating legal action. For more, see Predatory Lending May Draw Legal Action By AG (Blumenthal Asking People Who May Be Victims To Call Him).

Go here for other posts on this investigation.

Arizona Feds Get 38 Count Indictment Against Alleged Mortgage Fraud Ring

The Arizona Republic is reporting that a 38 count indictment was handed up by a Phoenix federal grand jury charging twelve people with conspiracy, money laundering and fraud for their roles in an alleged mortgage fraud ring stretching from Arizona to Nevada to California.

The defendants are accused of using phony incomes, Social Security numbers, bank accounts and assets to get loans for upscale homes and luxury cars, defrauding lenders out of $8 million in the process. Those indicted are:
  • Lutrell Maurice Sharpe, 39, (the alleged ringleader) , Charles Dozzell, 63, of California, and Arizona residents Alonzo Love, 33; Breanna Carmela Davis, 25; Misti Lenoir-Stewart, 28; and Autumn-Leigh Bruce, 24; Nevada residents Micah Bowens, 38; Jennifer Sue Sellers, 29; Marcus V. Dozzell, 33; Gina Marie Greco, 37; and Kristy Lynn Murdock, 28.

According to one official familiar with the case, the case began about 18 months ago with a tip about people borrowing huge amounts of money for homes and cars even though they had no jobs. For more, see Suspects indicted in loan scheme (12, including ex-con, tied to ring in 3 states).

For story update, see Mortgage Fraud Leaders Sentenced To Prison.

Indiana Feds Indict Fort Wayne Mortgage Broker

In Indiana, the Journal Gazette reports that Justin L. Stuckey, a Fort Wayne mortgage broker, has been indicted on federal wire fraud charges as part of fraudulently obtaining $5.5 million in mortgages that resulted in nearly 150 home foreclosures. The indictment, handed up by a federal grand jury on Thursday, follows a civil lawsuit filed 16 months ago by nationwide mortgage lender ABN Amro Mortgage Group in an Indiana Federal Court against Stuckey and several others involved in the deals. Both cases allege Stuckey, as owner and operator of Maximum Mortgage in Fort Wayne, obtained fraudulent loans through ABN Amro for investors buying rental properties from landlord Rex Wells and Wells’ company, Alliance Property Management. For more, see:

Wisconsin Mortgage Broker Agrees To Plead Guilty & Cooperate; Feds Continue Investigation

In Wisconsin, The Janesville Gazette reports:
  • "Federal prosecutors say a Lake Geneva mortgage broker swindled lending companies out of more than $4 million through the sales of 19 Walworth County properties. James J. Lytle, 33, used "straw buyers" and fraudulent loan applications to obtain properties, collect seller fees and then let the properties go into foreclosure, often at a loss to the banks, according to a plea agreement he signed May 15. Lytle is expected to plead guilty June 27 to a charge of wire fraud, a felony punishable by up to 20 years in prison and a $250,000 fine."

As part of the plea agreement, Lytle will cooperate (and possibly earn a "get-out-of-jail-free card") with investigators and testify before a grand jury if there are others charged. For more, see:

Michigan Feds Get Guilty Plea In Mortgage Fraud

HomeTownLife.com reports that Scott Edward Ashley has been sentenced to more than four years in prison after pleading guilty to defrauding three banks of nearly $4 million in a mortgage scheme. Ashley, of Canton, Michigan and who is deaf, living off of disability benefits, and who, with his wife, reported a joint income of less than $25,000 per year from 1998 to 2001, obtained $3.8 million in home financing in 2002 by claiming he earned more than $1 million annually and that he had made a $1.3 million down payment on a Bloomfield Hills home. For more, see Man headed to prison for $4m mortgage scam.

Friday, May 25, 2007

California Regulators Seek To Strip Mortgage Broker Of License

In California, media articles report that the California Department of Real Estate is trying to bar local broker Hendrix Montecastro from the industry, accusing him and his company, Stonewood Consulting Inc., of arranging inflated real estate appraisals in order to pocket huge commissions.

Montecastro already faces a number of civil lawsuits from investors accusing him of sucking them into a massive mortgage scam. Montecastro and a half dozen other defendants have been accused of running a real estate investment scheme that led the investors to buy multiple houses and that Montecastro then squeezed millions of dollars out of the resulting home equity. The investors claim to have been left holding the bag, owning houses with unaffordable mortgage payments. For more, see:

NYS Consumer Advocates Propose Laws To End Abusive Home Lending Practices

New Yorkers for Responsible Lending, a statewide consumer-oriented coalition, unveiled proposed new legislation this week in Albany, New York to end abusive subprime lending and foreclosures. The coalition, comprised of 131 civic and community groups from across New York State, called on state legislators and the governor to pass the bill this legislative session before any more New Yorkers lose their homes. For more, see Groups Call on State Lawmakers & Governor to End Abusive Subprime Lending.

NY AG Files Suit In Buffalo Home Flipping Scam

New York Attorney General Andrew M. Cuomo announced on Wednesday the area’s first major house flipping lawsuit against
  • "East Coast Capital (ECC), LLC and others of defrauding unknowing investors through an elaborate Ponzi scheme involving over 50 properties throughout Buffalo. In the scheme, high returns are paid to investors with money paid from other investors instead of actual profits from the real estate venture. ECC duped investors by promising high returns if they invested in distressed real estate by providing mortgages that – also unknown to the investors – grossly exceeded the market value."

For more, see:

NY AG's Press Release - East Coast Capital’s Ponzi scheme netted over $2 million while blighting Buffalo neighborhoods

The Buffalo News - Cuomo suit alleges plan to defraud investors in ‘house flipping’ scam (no longer available online).

S. Florida Church Members Victimized By Foreclosure Rescue

WFOR-TV Channel 4 in South Florida recently ran a story about Broward County victims of an equity stripping, foreclosure rescue scam who, according to their attorney George Castrataro with the non-profit law firm Legal Aid Service of Broward County, were targeted by National Forecloure Management at the homeowners' place of worship. Reportedly, one of the church members worked for the foreclosure rescue operator and referred other members having financial trouble to the operator. The church itself reportedly had no involvement in the scam. The company running the scam is reportedly out of business and the company owners, including someone listed on corporate public records as Wyman Roberts, can't be found.

Go here and click screen to watch the Channel 4 story.

To read the online story, see Church Members: We Were Scammed Out Of Our Homes.

See Editor's Note in Florida AG Investigating Foreclosure Rescue Operators for comment on the legal issues of usury and equitable mortgage in a Florida foreclosure rescue, sale leaseback transaction.

Go here for available case law for fighting foreclosure rescue operators in Florida.
equitable mortgage yak

S. Florida Cop Charged With Stealing Dead Uncle's Home Equity

The Miami Herald is reporting that Leon K. Lewis, a 22-year Miami-Dade corrections officer, was charged this week with first degree grand theft, forgery and uttering a forged document. The charges were made in connection with an alleged forgery of Lewis' uncle's signature to take a mortgage out on the uncle's North Miami-Dade home, according to authorities. The uncle has reportedly been dead 13 years. For more, see Corrections officer arrested in mortgage fraud.

Thursday, May 24, 2007

Washington Foreclosure Rescue Victim Fights Back

In Washington State, KIRO-TV Channel 7 in Seattle reports a story of a Lynwood family facing forecloure who was approached by a forecloure rescue operator with an offer to help them "save" their home through a sale leaseback arrangement. In such an arrangement, the operator takes title to the home, and the financially strapped homeowner rents it back with an agreement to buy it back from the operator in the near future. Unfortunately, things didn't work out as expected.

Seattle Attorney Melissa Huelsman has filed a complaint on behalf of the family against the operator contending the entire deal was set up to fail from the beginning. For more, see Hazards Of Foreclosure Rescues.

Go here for Channel 7 video describing types of foreclosure rescue.


Editor's Note

Washington State is one of the states that I know of that appears to have plenty of case law (albeit somewhat old) that could support the proposition that these foreclosure rescue, sale leaseback arrangements are nothing more than secured loans / equitable mortgages that are "clothed" or otherwise "disguised" as an absolute transfer of title. As such, the financially strapped homeowner would still be treated as the "true owner", even though leagl title may have been purportedly transferred to a rescue operator through the execution of a deed. Further, the only way that a rescue operator could get ownership and possession of the home in this context is through a foreclosure sale, and not through eviction. Unfortunately, many operators are getting away with obtaining possession through eviction, only because there are not enough private attorneys around with the expertise to handle these types of cases. Hopefully, the Washington State Attorney General's office takes a look at this.

In one case with what seemed to be an egregious fact pattern, the Washington State Supreme Court refused to rule that a sale buyback arrangement was anything other than an equitable mortgage. The court stated, "To hold otherwise would permit the exaction from [the property owner] of usurious interest or defeat his equity of redemption and force him to relinquish his rights in the real property without consideration, which would be unconscionable." Phillips v. Blaser 13 Wn.2d 439, 125 P. 2d 291 (Wa. 1942)

For a summary of some of the Washington State court cases that treat financing arrangements that require financially strapped homeowners to sign away the deed to their home as nothing more than secured loans / equitable mortgages, see:

equitable mortgage yak

New Jersey Bill S-2699 Regulating Foreclosure Rescue To Be Considered

Buried at the bottom of an article on PoliticsNJ.com is a reference to proposed New Jersey Senate Bill S2699, the Foreclosure Consulting and Anti-Fraud Act, which deals with the regulation of foreclosure rescue activities and which apparently says, among other things, "that only licensed, non-profit debt adjusters can provide foreclosure consulting services in New Jersey." According to the bill's sponsor:
  • "Right now, we've got rogue operators advertising on telephone poles with empty promises to help debt-ridden families save their homes from foreclosure. [...] Unfortunately, these scam artists are taking advantages of families in crises and we've got to put a stop to it fast."

Go here for more on the regulation of foreclosure consultants in NJ.

Editor's Note

The New Jersey Assembly also has a bill it is considering, Assembly Bill A4214, the Foreclosure Rescue Fraud Prevention Act regarding the regulation of foreclosure rescue activities.

Washington State Feds Get Convictions In Foreclosure Sale Bid Rigging Scam

The Yakima Herald Republic reports that "A former auctioneer who was the key figure in a bid-rigging scandal that ensnared several Yakima businessmen was placed on three years of probation Tuesday."

Reportedly, Bacil "Base" Shirley was caught in a bribery investigation of a Federal government employee, who was wearing a wire, in connection with manipulating bids for foreclosed U.S. Department of Agriculture properties. Once caught red-handed, Shirley then apparently "bought" a "get out of jail free card" from the Feds by agreeing to cooperate with them in the investigation, prosecution, and conviction of three Yakima, Washington bid-rigging businessmen who specialize in the purchase of foreclosure properties as rental investments or for resale. The businessmen were Doug Lemon, Walter D. Nelson, and Ronald G. Frank.

For more, see Ex-auctioneer gets probation in bid rigging.

Editor's Note

Bid rigging at foreclosure sales is an issue I haven't been able to find any recent reports on (until the one referenced above). It may simply be that this method of ripping off homeowners in foreclosure of their home equity doesn't happen anymore (I doubt it), possibly because most foreclosures that make it to the courthouse auction currently involve homes that are worth less than what is owed on them (ie. they're "upside down"), or it may be that it isn't high on law enforcement's list of priorities.

In any event, the U.S. Department of Justice has investigated and brought prosecutions in the past. What follows are links to some pretty old USDOJ Press Releases where the Justice Department announced prosecutions & convictions in connection with foreclosure sale bid rigging in New York City and Northern Virginia.

Other foreclosure sale / bid rigging stories:

.

Another Civil Lawsuit Filed In Alleged S. California Mortgage Scam

In Southern California, the North County Times is reporting that a sixth lawsuit has been filed that accuses Murrieta resident James Duncan of fraud on the order of tens of millions of dollars. According to the article:

1) Plaintiffs in the six lawsuits have alleged that a group run by Duncan and Murrieta-area resident Maurice McLeod encouraged clients to borrow on credit cards and liquidate retirement funds in order to invest with the group.

2) Several dozen clients of Stonewood Consulting, a target of the earlier lawsuits, bought as many as five houses apiece using 100 percent financing, according to publicly available property records.

3) Temecula attorney Richard Ackerman, who is representing plaintiffs in four of the six lawsuits, said lenders are foreclosing on a total of more than 100 houses, hollowing out neighborhoods in the Copper Canyon area of western Murrieta and other neighborhoods around the SCGA golf course in eastern Murrieta.

4) Duncan, McLeod and former Stonewood chief executive Hendrix Montecastro haven't responded to dozens of requests seeking comment since the first lawsuit was filed Jan. 5.

5) No criminal charges have been filed in the matter.

For more, see Sixth lawsuit alleges money laundering.

Go here for prior posts on this story.
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Jobless Subprime Originators Drifting To Reverse Mortgage Market

Reuters reports:
  • "Between 12,000 to 15,000 displaced mortgage lenders may begin to seek employment in the growing market for reverse mortgages, an increasingly popular home equity loan for homeowners who are 62 years old or older, Goldman, Sachs & Co. and Wells Fargo Home Mortgage executives said at a mortgage conference."
This prospect has some bankers concerned that a rapid growth in this market may make it vulnerable to the fraud and increased litigation that has plagued the subprime market. One observer, a vice president at Goldman, Sachs & Co. in New York, asks:
  • "As you look at what's going on in the subprime market, are those the types of folks who are really appropriate for pursuing reverse mortgages?"

For more, see Ex-subprime loan officers eye booming senior market.

Go here for other posts on reverse mortgage problems.

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

Ex-NY Attorney Charged In Mortgage Scam

In Westchester County, New York, the North Country Gazette is reporting:
  • "A disbarred Harrison attorney has been charged with grand larceny and identity theft involving the sale of property. Rafael Pantoja, 48, of Lake St., Harrison, has been arranged on a 14 count indictment which included one count of first degree grand larceny, three counts of second degree grand larceny, six counts of first degree identity theft, all felonies, and other related charges."

For more, including the details of his alleged conduct, see Disbarred Attorney Arrested In Mortgage Scam.

Wednesday, May 23, 2007

Federal Appeals Court Reverses New York Mortgage Fraud Conviction

Ruling that a New York Federal trial judge should have recused himself in the case, the U.S. Court of Appeals for the 2nd Circuit today reversed the convictions of Robert J. Amico and Richard N. Amico, two brothers convicted in the largest case of mortgage fraud ever prosecuted in western New York. For more, see Judge tosses Amico verdicts (The Rochester Democrat and Chronicle).

Go here for the appeals court decision - U.S.A. vs. Amico.

For story update, see Brothers plead guilty to mortgage fraud (10-3-07).
(updated 10-11-07)

Mortgage Bankers, Brokers Pointing Finger Of Blame At Each Other For Subprime Woes

The Associated Press reports:
  • "The heads of trade groups representing mortgage bankers and brokers traded barbs Tuesday over who's to blame for the housing market's woes. The head of the mortgage banking industry's trade group claimed brokers profited from a home loan boom but didn't do enough to examine whether borrowers could repay."

In response, the head of the National Association of Mortgage Brokers reportedly said,

  • "It is truly unfortunate [Robbins] has attempted to shift blame away from Wall Street, federally chartered banks, state-chartered lenders and underwriters for the subprime situation we find ourselves in today."

The mortgage broker head also added that, based on the testimony at congressional hearings, "most residential mortgage loans are quickly sold into the secondary market -- in fact most lenders are really just brokering the transaction but afraid or ashamed to admit it." For more, see Mortgage bankers, brokers squabble (Each blames other for subprime woes) (Chicago Tribune)

NY AG Investigating Mortgage Fraud; Focus On Illegal Pressure On Appraisers

Bloomberg.com is reporting:>
  • "New York Attorney General Andrew Cuomo issued a subpoena to the real estate appraisal unit of First American Corp. in his investigation of whether mortgage brokers pressured appraisers to inflate property values."

The unit, eAppraiseIT LLC, reportedly appraises up to 15,000 homes a year in New York. For more, see New York Subpoenas First American Appraisal Unit.

For story update, see First American Issued Phony Appraisals, Charges NY AG; Execs Knew It & Did It Anyway, Says Suit.

Go here for other posts on the NY AG's investigation of First American / eAppraiseIT.

Virginia Foreclosure Rescue Operator Targeted In Lawsuits

The Virginian-Pilot reported this week that "At least three lawsuits have been filed against mortgage company D and D Home Loans and others by people who say the broker tried to trick them out of their homes."

Virginia attorney Tanya Bullock has filed the actions on behalf of all three plaintiffs, and claims in court papers that the company's actions "expose a classic foreclosure rescue scam." The transactions involved are apparently the "sale-leaseback" variety, where the operator takes title to the home in foreclosure and promises the homeowner the chance of repurchasing it in the future.

One victim reportedly said that references to Scriptures and Christian values by D and D President Warren Mike Robinson inspired trust. Said the victim, "I'm African American. They're African American and look successful. I felt as if I was in the hands of my people."

One of the lawsuits, originally filed in a Virginia state court and subsequently removed to a Virginia Federal Court, alleges violations, makes legal claims and requests relief based on the following:

  • Equitable mortgage doctrine, Federal and state Real Estate Settlement Procedures Act, Federal Truth in Lending Act ("TILA"), Federal Home Ownership Equity Protection Act ("HOEPA"), Federal Reserve Board Regulation Z, fraud, intentional misrepresentation, and deceit, breach of contract, breach of fiduciary duty and negligence, conversion, unjust enrichment, breach of the implied covenant of good faith & fair dealing, conspiracy, constructive trust & resulting trust, several other state law claims.
For more, see Three plaintiffs say firm tried to dupe them out of homes.

(I had problems uploading the plaintiff's complaint that is currently in Federal court; if you want a copy, let me know at HomeEquityTheft@yahoo.com and I'll e-mail it to you.)

(This is an updated version of a post originally appearing on May 21, 2007.) equitable mortgage yak

Recent 1031 Exchange Intermediary's Bankruptcy Filing Highlights Lack of Industry Oversight & Regulation

A recent article on the Florida Association of Realtors website reports:
  • "The bankruptcy of a national 1031 exchange firm has jeopardized some real estate deals. It’s also highlighted a problem in the like-kind exchange system – a lack of federal oversight on this legal way to shield capital gains from the IRS."

For more, see 1031 exchange firm declares bankruptcy.

For those investors who are thinking of getting rid of one intermediary and transferring their investment funds to another, see Can I fire my Qualified Intermediary...?