Tuesday, June 19, 2007

Texas 12 Count Mortgage Fraud Indictment

Regarding the recent 12 count mortgage fraud indictment in a Houston Federal court of former NFL lineman Sean Jones, Texas real estate developer and attorney Jerome Karam, 44, of Friendswood, former loan officers Tommy Jay Trammel, 44, and David Ranostaj, 40, both of Houston, and real estate appraiser Jay Westrick, 44, of Houston, a copy of the grand jury indictment is available. See Indictment - USA vs. Karam, Jones, et al.

Go here for other posts on this story.

Class Action Lawsuit Filed Against Maryland Foreclosure Rescue Operators

The Baltimore Sun today reports:
  • "Two Prince George's families filed a class action lawsuit yesterday seeking to recover millions of dollars in home equity allegedly lost by hundreds of Maryland homeowners in a foreclosure-rescue scheme. The lawsuit, filed in Prince George's County Circuit Court, claims to involve the single largest mortgage fraud in Maryland history and also seeks unspecified damages from six known and several unknown defendants. It indicates that criminal investigations are under way. [...] Named in the complaint filed yesterday are Metropolitan Money Store Corp., a Lanham company that bills itself as a foreclosure consultant and credit services business; Fordham and Fordham Investment Group Ltd. of Lanham; RTE Title & Escrow LLC of Largo; Sussex Title LLC of Rockville; Diane Jones of Capitol Heights; Leticia Nicholls of Takoma Park and other, unknown defendants."

Reportedly, state as well as federal agencies, including the FBI, are investigating.

The Maryland law firms representing the homeowners in this case are Civil Justice, Inc., a Baltimore nonprofit law firm, Legg Law Firm, LLC of Frederick and The Holland Law Firm of Annapolis.

For the whole story, see Class action alleges home equity theft (Foreclosure-rescue firms object of suit).

Go here for more on Civil Justice, Inc. Joy Jackson

New Hampshire Foreclosure Rescue Scam Bill Still Bouncing Around In The Legislature

An Associated Press report out of New Hampshire, reported in the Boston Globe, indicates that there is still some jockeying around with respect to the proposed foreclosure rescue scam legislation that has been bouncing around in the state Legislature for the last couple of months. Since the approval of a Senate bill a couple of weeks ago, the bill was subjected to further tinkering around between negotiators from the state Senate and negotiators from the state House of Representatives. Reportedly, a compromise has been reached. I suspect that, at this point, the bill will be the subject of two more votes (one in the Senate and one in the House) and, if approved by both houses of the state legislature, will then go to the governor for his approval. Among other point, violators of the recently modified proposed statute will be subject to jail time, and a financially strapped homeowner would have a legal right to recover 90 percent of any equity they lost in a pre-foreclosure sale. For more, see Negotiators reach compromise on foreclosure scam bill. See also the Nashua Telegraph, State & New England News Digest - Agreement reached on foreclosure bill)

Five Accuse Real Estate Agent In Alleged Straw Buyer Deals

On Long Island, Newsday reports the story of former local real estate agent Nayana Shah (aka Nina Shah) who is accused of duping five investors into being were straw buyers, using allegedly false statements in separate transactions involving in real estate investment financed with subprime loans. Once the market tanked, she is accused by the investors of leaving them high and dry, saddled with unaffordable mortgages, ruined credit, and, in some cases, homes in foreclosure.

She is accused of using a personal bond that was developed with the investors by being members of the same church, the Long Island Jain Center, where she was president and community leader. Reportedly, Nayana Shah's real estate license has since been canceled by New York State licensing regulators in February 2007, for reasons that are not clear. She has also filed bankruptcy. For more, see Bad real estate deals come between 'friends'.

For updates on Nina Shah, see:

Monday, June 18, 2007

Wisconsin Homeowner In Battle With Foreclosure Rescue Operator To Keep Home

In Wisconsin, the Milwaukee Journal Sentinel reports the story of one financially distressed homeowner (and his wife and four children) who has found himself embroiled in multiple court battles to stave off eviction in connection with a foreclosure rescue transaction he entered into with James A. Black, a Milwaukee police officer (who reportedly does foreclosure rescue as a sideline) and Patrick Blair, Black's investor partner, in an attempt to save his home of 17 years from foreclosure. According to the story:
  • "[The homeowner] said Black bought his house for the price of his outstanding mortgage with the option for [the homeowner] to buy it back within three years - for $4,000 more than investment costs the first year, $6,000 more the second year and $8,000 more the third year. Things soured quickly. Black has twice tried and twice failed to evict Bularz for allegedly late rent payments."

Highlights from the story, as reported by the Journal Sentinel:

(1) The foreclosure rescue proposal from Officer Black appeared to be the best from a swarm of investors promising to save the homeowner from foreclosure.

(2) Officer Black may have used his status as a cop to "grease the wheels" in his attempt to make the deal and to get possession of the property. Reportedly in one instance, according to the homeowner, in attempting to make the deal in the first place, Black told him "You can trust me. I'm a police officer and want to help you."

(3) After a deterioration in the relationship based on an alleged failure to pay rent and a prior eviction attempt, the homeowner videotaped himself giving a check for the May, 2006 rent to Officer Black's partner, Blair, and getting a receipt. Quoting from the story:

  • "[The homeowner] testified in a May 30 eviction hearing in Waukesha County Circuit Court that it was the second time he had paid May's rent. Black denied getting an earlier payment. Realizing that accepting a check might void the eviction effort, however, Black and Blair tried to undo the videotaped transaction, according to court testimony. Blair called the Waukesha County Sheriff's Department for help, and a deputy told [the homeowner] to return the rent receipt to Blair."

Reportedly, Black had identified himself to the deputy as a Milwaukee police officer.

(5) The homeowner ultimately prevailed in the eviction proceeding, the second eviction attempt made by Black and Blair. The judge dismissed the eviction lawsuit, ruling that homeowner's videotaped payment was made before the expiration of a five-day grace period after an eviction notice.

(6) The homeowner's attorney now says that Officer Black has given notice that a third eviction action is possible over the homeowner's alleged failure to make house repairs. The homeowner has a claim of retaliatory eviction pending against Black.

Other Points:

(7) Wisconsin state Sen. Jim Sullivan is reportedly drafting a law in Wisconsin to regulate foreclosure rescue operators.

(8) Catey Doyle, chief staff attorney at Legal Aid Society of Milwaukee, said her office is awash in homeowner complaints that foreclosure rescuers ripped them off.

For more, see From foreclosure fire into eviction frying pan (Desperate homeowners are targets of buyback plans).

Anatomy of a "Cash Back" Mortgage Scam

In Florida, the St. Petersburg Times published an investigative report of 36-year-old Jeremy Marc Morton, a convicted felon originally from the Detroit area who spent 11 years in a Michigan state prison on cocaine and attempted escape charges before moving to Pinellas County and getting into the real estate business in 2005. The specific area of the business that he got into was the "cash-back-at-closing" area, where he reportedly pocketed over $370,000 in six transactions without having his name ever appearing on documents recorded in the county public records.

The story describes how he approached one local couple, who owned six properties and from whom he agreed to buy them all. It also describes how he made use of two straw buyers, one of whom was also a convicted felon and had been just completed an eight year sentence in a Florida prison and the other being an out-of-town man from Detroit, in whose names the homes were purchased. The transactons involved inflated sales prices, mortgages in amounts that greatly exceeded the amounts paid to the sellers of the six homes, with the excess going to Morton. After the sales, Morton stayed involved with the properties by reportedly equity skimming the properties, collecting the tenant rentals while ultimately defaulting on the mortgages and letting the homes go into foreclosure, with the homes' tenants unwittingly finding themselves subject to eviction. For more, see Foreclosures follow dealmaker (Padded prices on contracts send money to a man who is not even listed as part of the transactions). alpha

Marijuana "Grow Houses" On The Network Evening News

The increased use of single family dwellings being used as marijuana "grow houses" was featured on both the NBC and ABC evening news last Thursday. When considered in the context of the current real estate market that's flooded with desperate home sellers (many of whom having little, no, or negative equity in their properties) looking to unload the homes (many of whom who may be "ripe" for an offer to rent the place for an amount sufficient to cover the payments on an "exploding" subprime mortgage as a way of avoiding foreclosure), don't be surprised if there's an indoor pot farm "coming soon to a neighborhood near you."

To watch the NBC report, from Diamond Bar, California, see Pot growers plant themselves in the 'burbs (NBC Nightly News by Peter Alexander - 6-14-07).

To watch the ABC report, see The Marijuana Fields Next Door (Cops say organized crime is sending families into the suburbs to grow marijuana) (ABC News by Jim Avila - 6-14-07).

To read the ABC online report, see Marijuana McMansions. (ABC News - 6-14-07).

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To read about the rise and fall of Mitchell Shane Estep, a former Central Florida indoor pot farming entrepreneur, who went around renting dozens of single family homes in upper middle class neighborhoods from landlords (he preferred gated commmunities) and setting up an indoor marijuana farm, or grow house, in each home, becoming a marijuana mogul in the process by the age of twenty five, see Suburbs the new hot spot for pot growers, reported by The Daytona Beach News-Journal.

Landlord-tenant pot farming litigation involving a raid by Federal agents of a rental home even recently made it onto the TV show, The People's Court (no longer available online).

Go here and go here for other posts on Marijuana Grow Houses. pot grow ops alpha

Sunday, June 17, 2007

The Destructive Effect Of Forecloures On Neighborhoods

(orig. post 6-17-07; revised 6-18-07)
The destructive effects of foreclosures on surrounding neighborhoods and the concerns being voiced by the residents in these neighborhoods has been the subject of a number of recent media reports.

For example, KNBC-TV Channel 4 in Los Angeles reports on one Temecula couple who has gone around their neighborhood and photographed about 20 foreclosed properties (all part of the same homeowners' association) that have declined into blight, having brown lawns, overgrown hedges and broken fixtures, and which have homeowners concerned about the decrease in value of their own homes (see Homeowners Concerned About Foreclosure Blight; or watch the KNBC Channel 4 TV report).

The Tracy Press (Tracy, California) reports that in Mountain House, California, authorities point to the abandoned swimming pools in the backyards of houses facing foreclosure, which serve as "breeding beds" for mosquitos, as a contributing factor to the local mosquito problem that has residents concerned (ie. West Nile Virus) and has kept the 19 workers who monitor and control mosquitoes for the local mosquito control district busy (I suspect that abandoned garden ponds and yards flooded by broken sprinkler systems may contribute to the problem as well). As a way of combating this problem, local officials have encouraged local residents to anonymously report abandoned pools to the mosquito control district; they will have mosquito fish dropped into the pools (these fish eat the insects’ larvae before they hatch into adults) (see Mosquitoes up a creek).

The Dallas Morning News reports on the problems in the upscale community of Lake Ridge, in far southwest Dallas County spanning Cedar Hill and Grand Prairie. Reportedly, 88 foreclosures have been posted for this community (currently having 950 homes, with an additional 1,200+ unimproved lots) since January, 2007 compared with 48 in the first six months of 2006. This, plus a number of fire damaged homes (arson suspected in at least one fire) that are currently open to the elements have homeowners concerned for their community and their home values (see Officials say there's hope for troubled Lake Ridge neighborhood).

The Detroit Free Press recently reported that because of the glut of empty houses -- both for sale and foreclosed -- unkempt properties with thigh-high grass, busted shutters, falling roof shingles and litter, debris and mailers all over the porch, lawn and curb are increasing in nearly every community in metro Detroit that decreases everyone's property value (see Unheeded homes - Neglected unsold properties create neighborhood eyesores).

The Oakland Press (Pontiac, Michigan) reports that local officials throughout the county are having a tough time keeping up with all the complaints of overgrown grass in large part because of all the foreclosures. In addition to the unsightliness, officials are concerned that the overgrown grass serves as a haven for rodents and various other species, and as a breeding ground for mosquitoes (see No splendor in the grass of foreclosed properties).

The Miami Herald recently reported the story of the problems in one older Miami-area community, made up largely of long-time, working class and low-income residents, many of whom who are being forced to move from their homes of many years due, in large part, to the subprime mortgage paperwork that they signed without fully understanding (see Foreclosures soar in South Florida, and see also, Foreclosures Are Rising, Hurting The Poor (CBS4 - Miami, FL).

The Denver Post reported on a 100-villa, Aurora, Colorado community that is actually making a comeback from being devastated by mortgage fraud and mass foreclosures two years ago by a group of ex-convicts who turned the community "into their personal cash drawer, buying homes for inflated prices, obtaining 100 percent loans from distant lenders and splitting the excess proceeds." (see Villas close on better future).

Marijuana "Grow House" Report

The following links are to recent stories throughout the country involving the use of single family homes as "grow houses", or "indoor pot farms":

Go here for links to other stories on indoor pot farms.

Go here and go here for other posts on Marijuana Grow Houses. pot grow ops alpha

Weekend I.D. Theft Blotter

The following are this week's stories related to identity theft:

Saturday, June 16, 2007

Elderly Florida Woman Victimized In Home Repair Scam

A North Port, Florida woman in her mid-80's who lives in Holiday Park paid two men, claiming to be contractors, more than $80,000 for home repairs found to be unnecessary or not even done, reports the Charlotte Sun-Herald. Based on inspections, the value of the work completed was approximated at only about $7,000. North Port police have reportedly said that they will charge the two men-- Michael Richardson, who uses the alias Gisbel Antonio Nunez-Melendez, and Joel Kelly Hill-- with theft from a person 65 years or older, a felony (prison up to 30 years, fine up to $10,000, and restitution). The quote of the day, made by the victim in this case, was "I used to think that people who fell for scams were just being stupid." For more, see North Port woman reportedly scammed (Unlicensed repairmen charged $80,000 for repairs).

See also, Elderly North Port woman scammed out of savings (Fox Channel 13, Tampa, FL).

33 States, D.C., Allow "Credit Freezes" In I.D. Theft Battle

The Washington Post reports:

  • "Thirty-three states and the District of Columbia allow consumers to place a "security freeze" on their credit files, and more states are considering similar legislation."

For more, see States, Uncle Sam Combating Identity Theft.

Go here for Consumers Union's detailed list of state laws related to data privacy (includes links to individual laws and instructions on how consumers can file a credit freeze).

Go here for list of pending legislation on "credit freezes."

Free Counseling To Avoid Foreclosure

The Fort Worth Star-Telegram reports:
  • "Consumers struggling with subprime mortgages will be the target of public-service ads this summer offering free counseling to avoid foreclosure. The radio and TV spots by NeighborWorks America, in partnership with the Homeownership Preservation Foundation, warns people facing foreclosure against inaction and supplies a toll-free number, 888-995-HOPE, said Marietta Rodriguez, national director of NeighborWorks' homeownership programs. The campaign, which starts June 25 using donated airtime, will run for three years in English and Spanish."

For more, see Ads to tell borrowers about option plans.

Friday, June 15, 2007

Washington Mutual Laying Off 120

The fallout from the subprime mortgage lending market continues in California as the East Bay Business Times (Pleasanton, California) reports:
  • "Washington Mutual, whose Long Beach Mortgage unit is a leading subprime lender, is closing its fulfillment office ... in Dublin. The move will affect 120 workers, who were notified of the layoffs on June 1, according to WaMu spokesman Tim McGarry. The layoffs do not affect WaMu's larger operations in Pleasanton. "We are reducing overall staff in response to overall demand," McGarry said. The work will be transferred to a similar facility in Anaheim."

For more, see WaMu lays off 120 in Dublin.

Foreclosure Rescue 101

BusinessWeek posted an article online yesterday that captures the essence of the mechanics used by many foreclosure rescue operators:
  • "Within days of showing up on [lists of new foreclosure cases compiled from public records by private companies], desperate homeowners are beset by hordes of supposed white knights."
  • "The outfits are sophisticated, carefully targeting owners whom the tax records show have been in their homes for years, a sign they may be sitting on a nice chunk of equity."
  • "Most commonly, the rescuers then coordinate what they say is a refinancing through a designated investor, or they arrange a deed transfer with a rent-to-own plan that will supposedly allow the owners to buy back their homes down the road. But usually buried within the stack of closing documents is a so-called quit claim, or deed of gift, in which the homeowners effectively sign their houses over to the investor. At that point, the rescuers charge the former owners rent high enough to ensure they can evict them and pocket the equity built up in the property."
  • "Some of these operations are quite complex. A number of firms recruit staff through real estate seminars or late-night TV infomercials to work either as "door knockers," who pay visits to distressed homeowners, or as "bird dogs," who serve as fake buyers."

Included in the story are references to foreclosure rescue operator D and D Home Loans and owner W. Michael Robinson, of Virginia (referred to here in a prior blog post), and Real Estate Investor's Advantage (REIA), a reportedly now-defunct Fort Washington, Maryland outfit run by Nathaniel X. Arnold, who recruited "individuals with good credit to be both door knockers and bird dogs in these transactions. In return, they would be paid a flat fee or a cut of the profits." To become part of this group, individuals would attend an REIA seminar (and pay a fee of $1,995).

For more, see The Foreclosure "Rescue" Racket (As soon as a lender raises the red flag, scammers descend. Here's how they wind up holding the deed).

Foreclosures Hammering One South Florida Neighborhood

The Miami Herald recently reported the story of the Bunche Park neighborhood of Miami Gardens which is in the process of being ravaged, as house after house is lost to foreclosure. Highlights of the article:
  • "[C]ardboard signs tacked on light poles offer reverse mortgages to the elderly and foreclosure rescue services to others. Piles of furnishings dot the streets, the evidence of evictions."
  • "Bunche Park is a magnet for foreclosure because so many older people live there, says Miami Gardens Mayor Shirley Gibson. The neighborhood was set aside after World War II for black soldiers and their families, many of whom own their property mortgage-free. During the housing boom, the equity in their modest homes grew exponentially. Now, Gibson says, she hears of children and other relatives who tap into their inheritance early and don't make payments. ''It's heartbreaking, because what are you going to do? We can't get in the home and tell the grandmother not to let her child take the home,'' Gibson said."

For more, see Foreclosures soar in South Florida.

See also, Foreclosures Are Rising, Hurting The Poor (CBS4 - Miami, FL).

Subprime Mortgage Lending For Dummies

A recent article in The Motley Fool provided the following analysis of the subprime mortgage lending mechanics that has left the mortgage and real estate market mired in the current quagmire:
  • "Sure, it's easy enough to see the problem now. You only need to follow the money trail for what passed as a viable business model for a few years: Crummy loan broker handed money to bad credit risk (often with ginned-up financials). Loan originator held nose, got compliant appraiser to OK the inflated price, then flipped loan to Very Clever Men on Wall Street.

  • Very Clever Men bought toxic-waste loans, chopped them into bits, recombined them into tranches of varying yields -- differentiated by risk -- and sold these, now marked with disturbingly sanguine credit ratings, to eager bagholders across the world who were hungry for yield and oblivious to the hidden time bombs within. Along the way, marking mortgage "securities" to market, booking illusory profits on unpaid interest from option ARMs, taking inadequate reserves, and other accounting hocus pocus helped many companies in the food chain post record "profits."

  • It was a perfect perpetual motion machine, until it stopped swirling. When non-performing loans and foreclosure rates climbed, the apparatus started to grind, smoke, and hiss."

For more, see Housing Collapse Squishes Bear.

More On Wall Street Hedge Funds Holding Bets On The Tanking Of Subprime Market

The possible crossfire that many subprime mortgage borrowers in trouble may find themselves in is the subject of a recent article by The Associated Press and is making its way around numerous media outlets around the country. The crossfire is between the big Wall Street hedge funds who bet that the subprime mortgage market would go south (and who are against any form of loan modifications because they only get to "cash their bets" when the market goes south), and the Wall Street mortgage-backed securities packagers, who are beginning to modify the troubled loans in their securitizations to help stabilize the subprime market and help keep borrowers in their homes. For the story, see Dispute among Wall Street titans could affect foreclosures.

Go here for other posts on the tug-of-war among the Wall Street giants. MortgageServicingIssuesAlpha

Thursday, June 14, 2007

Ex-NFL Lineman, Others, Charged In Mortgage Fraud Scheme

(orig. post 6-14-07; revised 6-19-07)
KHOU-TV Channel 11 in Houston, Texas is reporting that former Hoston Oiler defensive end Sean Jones has been indicted in a multimillion dollar mortgage fraud scheme, along with a number of others. The Channel 11 online report states:
  • "Jones, Jerome Karam, 44, of Friendswood, TX, a real estate developer and licensed Texas lawyer, Tommy Jay Trammel, 44, and David Ranostaj, 40, both of Houston and former loan officers with Southwest Bank of Texas, Bank of Houston and Whitney National Bank, and Jay Westrick, 44, of Houston, a real estate appraiser, have been charged in a 12 count indictment for their alleged involvement in a mortgage fraud scheme that allegedly reached every aspect of a real estate loan: seller, buyer/borrower, loan officer, appraiser, escrow officer, and title company."

For all the details, see Former Houston Oiler accused in fraud case.

See also, Former NFL star Sean Jones indicted on fraud charges.

For copy of grand jury indictment, see USA vs. Karam, Jones, et al.

Michigan "Cat House" Owners Arrested

As a follow-up to the Michigan "cat house" post earlier today, the Traverse City Record-Eagle reports:

  • "Benzie sheriff's officials on Tuesday arrested Todd Joseph Bukowiecki, 38, and Jane Ellen Bishoff, 52, on 10 misdemeanor animal cruelty charges [...] Eleven more cruelty counts were to be sought Wednesday, authorities said."

Over 60 animals were found in a home that was believed lost in foreclosure by the former owners.

For more, see Couple faces numerous animal cruelty charges.

Go here for more on pets and foreclosures.

NACA Class Action Guidelines

On a housekeeping note, the link in the right sidebar of this page to the National Association Of Consumer Advocates' Class Action Guidelines has now been fixed.

Illinois Man Charged With Theft Of Proceeds Of Elderly Woman's Home

In Illinois, the Northwest Herald reports:
  • "A judge has issued a $1.5 million arrest warrant for a Bartlett man who failed to appear in McHenry County court Tuesday on charges of allegedly bilking an elderly Huntley woman out of more than $350,000. Charles Landwer, 44, faces charges of theft, theft by deception, financial exploitation of an elderly person and fraud, all charges to which he has pleaded not guilty. [...] Authorities allege that Landwer kept the proceeds to the sale of a 70-year-old woman’s house, instead of investing it as promised."

Source: Warrant issued for man charged with theft.

Another Tenant Falls Victim To Equity Skimming, Foreclosure

In Tennessee, a Seymour couple who had paid nearly $30,000 under a lease with an option-to-buy contract for a small commercial building from which they started and operated a fitness center business, and who claim that they personally increased the value of the property by running a successful and prominent business and by making capital improvements, reportedly investing well over $200,000 into the property, expect to be evicted from the premises tomorrow by the bank who recently foreclosed on the premises, according to a story in The Daily Times.

The total purchase price on the arrangement was to be for $212,000. Four months after signing the lease, and unbeknownst to the couple, however, the then-property owner took out a mortgage for $560,000 on the property and, shortly thereafter, defaulted on his mortgage payments. The couple unwittingly continued making the lease payments to the owner, and the owner continued skimming the equity in the property by pocketing the rent without paying on the recently-obtained mortgage. Reportedly, the lease-option contract stated that the agreement was “subordinate to any existing or future liens against the property”, thereby allowing the property owner to get a new mortgage on the property, with the mortgage having legal priority over any rights the couple may have had in their leasehold interest (and thereby allowing for them to legally "have the rug pulled out from under them").

For more, see 'Forced out of business'.

For posts on other stories of tenants unwittingly renting homes in foreclosure, go here and go here, and go here. alpha

Postcript

While this story involved a lease of commercial property, it nevertheless serves as a cautionary tale to residential tenants renting homes and condos. With all the residential property currently in foreclosure, I expect to see more and more "lease-option" scams, where a real estate investor facing foreclosure (or a "professional equity skimmer", for that matter) (1) purports to lease-option a home to an unwitting tenant, (2) pockets a significant amount of upfront cash for the option, (3) "squeezes out" as much monthly rent as possible without paying the mortgage until the mortgage lender finally forecloses, and (4) leaves the tenant "holding the bag."

Michigan "Cat House" Another Casualty Of Foreclosure, Say Cops

In Michigan, in a case of what authorities are calling "the worst case of animal abuse in Benzie County’s history", more than 60 abandoned cats were found without food or water in a house that cops believe was lost in a foreclosure, according to the Traverse City Record-Eagle. According to the story:
  • "Sheriff's officials were working Tuesday to contact former homeowners Todd Bukowiecki, 38, and Jane Bishoff, 52, to question them in an animal cruelty case. Detectives believe the suspects lost the three-bedroom ranch home to foreclosure and left the animals behind."

For more, see Authorities discover 60 abandoned cats in house.

Go here for more on pets and foreclosures.

Maryland To Contribute Over $100 Million In Mortgage Assistance

The Baltimore Business Journal is reporting:

  • "[Maryland] Gov. Martin O'Malley said Wednesday he was forming a task force aimed at preventing home foreclosures and curbing predatory sub-prime lending deals. [...] Declaring June "Home Ownership Month," O'Malley announced the creation of the Maryland Homeownership Preservation Task Force to look into the problem. The group is expected to present its findings in October. The state is also contributing $111 million in mortgage-assistance and education efforts, Housing Secretary Ray Skinner said in an interview. Skinner said the state expects to issue up to $100 million in taxable bonds, in increments of $20 million, that it will be able to use as a "lifeline" for homeowners facing foreclosure. "
For more, see State task force to tackle home foreclosures, predatory lending.

See also, Md. moves to avoid foreclosures (O'Malley announces public-private plan for refinancing, counseling).

Wednesday, June 13, 2007

Dodging The Income Tax On Foreclosure & Real Estate "Short Sales"

An article by Kevin McCormally of Kiplinger.com is the first article in a mainstream media outlet that I have seen that, when discussing the income tax consequences of a both a foreclosure sale and a real estate "short sale" (when a mortage lender forgives or cancels a portion of a loan secured by property that is worth less than the full outstanding mortgage balance), also mentions one of the most frequently applicable exceptions to the rule (found in Section 108 of the Internal Revenue Code).

The general rule is that when a lender cancels a portion of the mortgage loan, the homeowner has to include the amount cancelled as income. One exception to this rule, referred to as the insolvency exception, essentially says that to the extent you are insolvent, you don't have to include the cancelled portion of the loan as income. The article even points out that the taxpayer is to use IRS Form 982 to claim the exception.

The article concludes with a sound word of advice:


  • "If you benefit from debt forgiveness after a foreclosure or short sale, be sure to make a careful inventory of your assets and liabilities at the time. You'll need it to claim an exception under the insolvency rule."
For more, including an illustration of how the exclusion works, see Lose Home, Pay More Tax (As foreclosures soar, a cruel tax rule rears its head).

See also:

Go here for other posts on this subject.

Connecticut "Stings" 160 Home Repair Contractors

WVIT-TV (NBC 30) in West Hartford, Connecticut reports that the Connecticut State Department of Consumer Protection has been conducting an undercover sting by soliciting bids from home repair companies that it suspected were unregistered with the state. According to the report:
  • "One hundred sixty contractors were invited to a state-owned sting house and 150 turned out to be unregistered. The other 10 offered contracts that were missing something, because state law requires that they tell the homeowner what the contract period is going to be, when they can expect work done and when money is due."

To date, only four arrests have been made (all from Still River Home Maintenance in New York); the rest will have hearings that may result in fines of $2,000, and possible arrest if they decline to appear. For more, see Four Arrested; Others To Get Fined In Home Improvement Sting.

Go here to watch Channel 30 TV report (by reporter Doug Greene).

California Attorney Gets Off With A Hand Slap In Misconduct Towards Clients

In the "conflict of interest" department, Modesto, California attorney Thomas Patrick Hogan, who also owns real estate and financial services companies, has been punished by the State Bar of California with a hand slap for misconduct in dealing with four clients, according to a story in The Modesto Bee. With respect to his dealings with one client, Hogan used his financial services company to secure a loan for a client facing foreclosure, earning $16,487 in fees from the loan transaction and $6,750 in legal fees, but did not advise the client that she could seek advice from an independent lawyer. Hogan received a public reproval and will be on probation for two years (the story is silent as to whether Hogan was ordered to pay any restitution to any of his clients). For more, see Modesto lawyer disciplined on misconduct allegations.