Monday, August 13, 2007

Upstate NY City To Auction Properties For Delinquent Taxes; Refuses To Accept Late Payments From Owners

The Buffalo News reports:
  • "The city [of Lockport, New York] is holding a tax foreclosure auction Tuesday, and some of the owners — make that former owners — of the properties to be sold are griping that the city won’t allow them to pay off the back taxes and keep their real estate."
Reportedly, the city's position is that - according to New York law - once a judge signs the foreclosure orders, it is too late to redeem the property by paying the taxes and becomes the property of the city on an interim basis. Niagara County, on the other hand, follows a policy to accept back tax payments even on the day of the auction. For more, see Lockport owners are not allowed to pay back taxes, keep property.

Foreclosure Rescue Sample Scam Ads

For those of you who have ever wondered what the written solicitations look like that some foreclosure rescue operators send to homeowners facing foreclosure, see Sample Scam Ads (available online courtesy of the New York State Banking Department).

For more sample ads and letters, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (Appendix A - Pages 55 t0 62) - (file size - 4.61 MB).

Utah Homeowner Falls For Foreclosure Rescue

The Salt Lake Tribune reports:
  • "Beth Ashby still calls the tidy beige split-entry on nearly 2 acres in South Jordan home. After all, she's the one who bought it six years ago. And she's the one responsible for paying the mortgage. But Ashby says her dream home has been taken away from her. A friend, who she says helped her get back on her feet after she fell behind on her payments, is now the rightful owner. Ashby said he convinced her to "temporarily" deed the property over to him so that he could help her refinance her adjustable-rate loan. Then, she says, he kicked her out."
For more, see Signed Away (Homeowners are warned to beware of attractive-sounding deals that involve turning over the title to a home - even temporarily. You could lose it all, and still be on the hook for the mortgage).

D.C.-Area "Cash Back" Real Estate Investment Program Offering Something For Nothing?

(revised 8-20-07)
Over the last two Sundays, The Washington Post ran stories about an outfit based in Maryland that is offering what could be described as a "cash back" real estate-based investment program that reportedly has hundreds of people enrolled in the program, with a heavy concentration in Prince George's County, Maryland. A June solicitation letter from this outfit said there are more than 700 homes in the program, according to The Post article. Last Sunday's describes the arrangement as follows:


  • "Here's the pitch: There is an invitation-only group of homeowners who have signed up as partners with an organization called Metro Dream Homes, which has offices in the District. Members buy a house, sometimes for more than the asking price and without a down payment. A condition of the sale is that the seller agree to give back 10 to 15 percent of the sales price to the buyer, who in turn pays it into the coffers of Metro Dream Homes. (What does the seller get? A sale, which can be hard to come by these days.)

  • Metro Dream Homes says it will invest that cash in various businesses, including automated teller machines, video advertising and other Web-based ventures that are under the umbrella of its parent group, Metropolitan Grapevine, headquartered in Laurel. Then, according to Metro Dream Homes, the profit from these businesses goes to fund the monthly mortgage payments for the homeowners, on an accelerated schedule that pays off the house in five to seven years. The company also says it will make sizable contributions to charity. After five to seven years of payment-free living, the homeowner is supposed to sell or refinance the house, with the homeowner and Metro Dream Homes sharing the equity."
Last Sunday's story also reports that: "Among the skeptical but tempted is a group of builders in the Fredericksburg area looking at the program as a way to get rid of unsold houses."

Yesterday's story took a closer look at the umbrella group for this program, Metropolitan Grapevine and its chief executive, Andrew H. Williams. Among other things, The Post reports that:


  • "[The Maryland Attorney General] obtained a permanent injunction shutting down Bankcard Group Inc., a Prince George's County-based ATM and bank card business that Williams ran. The company and two of its executives, one of them Williams, were accused of violating Maryland securities laws by operating an unregistered and fraudulent automated teller machine investment program.

  • According to the [2001] press release the attorney general's office put out six years ago, BGI raised as much as $3 million from at least 200 investors. The company purported to sell investors interests in ATMs, the fees generated by the machines, and shares in BGI itself, the attorney general's office said."

The Post attempted to get answers to some questions about the financing process by which the homes are purchased. According to the reporter:

  • "No one involved with the organization has been able to explain to me how the home-sale transactions, made for more than the asking price and with 10 to 15 percent cash givebacks, get through the appraisal and loan-underwriting process. Some of that information is proprietary, Dream Homes executives told me."

For more, see:

Go here for a Metropolitan Grapevine, LLC Press Release.

Go here for other posts on Metro Dream Homes.

New Procedural Requirements In New York State Foreclosure Actions

(originally posted 8-11-07)
As of August 1, 2007, two new requirements are effective in connection with New York State foreclosures involving residential property. On units with not more than three units, the summons must now contain a specific notice to the homeowner that, in essence, stresses the fact that a legal proceeding has been commenced that can result in the loss of his/her home. In addition, in the case of a defendant who is a natural person in a residential foreclosure who has failed to file an answer, a copy of the summons must be mailed to the individual at least twenty days before entry of a default judgment.

Presumably, homes that are sold in foreclosure actions where these new rules apply but are not complied with may be subject to being voided after the sale has taken place, thereby:
  1. creating new opportunities for attack by attorneys representing New York homeowners whose homes have been foreclosed,
  2. creating more paperwork for the New York attorneys (and their staff) representing foreclosing mortgage lenders, and
  3. creating a new source of headaches for overworked New York title examiners who now have two more issues to consider when passing judgment on the condition of the title to a home in which a referee's deed (ie. the type of deed used in a NY foreclosure sale) appears in the chain of title (as if New York's Home Equity Theft Prevention Act hasn't caused enough headaches for them!).

For more, see New Requirements for Residential Mortgage Foreclosures (published on the Real Property Law Section Blog - New York State Bar Association).

For links to several online articles on some other legal requirements in connection with New York foreclosures, see Overview Of The New York State Home Equity Theft Prevention Act.

Thanks to Bill Collins at Crossroads Abstract - Rochester, NY for bringing the new law to my attention.

Sunday, August 12, 2007

Florida Appeals Court "Bitch-Slaps" Miami Law Firm For Class Action Conduct

The Miami Herald reports:
  • "Prominent attorney Hank Adorno -- already under Florida Bar investigation for his role in Miami's fire-fee scandal -- on Wednesday was blasted by the Third District Court of Appeal for what the judges called his ''reprehensible conduct'' in the now infamous case. In a unanimous opinion that upheld a lower-court decision invalidating Miami's $7 million fire-fee settlement with just seven people, the appeals court ripped into Adorno, who had represented the so-called ''lucky seven.'' The Adorno & Yoss firm stood to earn a $2 million share of the $7 million payout, while some 80,000 taxpayers got nothing."

As best as I can figure this case, a lawsuit seeking class action status against the City of Miami was settled prior to such status being granted; only the named plaintiffs shared in the proceeds of the financial settlement. However, the amount of the financial settlement appears to have been reached "as if" the case was a class action lawsuit, thereby resulting in approximately $84,000 in plaintiffs' monetary claims being settled for $7 million (no - this is not a "typo").

For more, see Judges: Miami fire-fee attorney acted reprehensibly (The Third District Court of Appeal has upheld a lower-court ruling invalidating Miami's $7 million fire-fee settlement. The appeals court also had choice words for attorney Hank Adorno.).

For a longer version of this post, including a link to the actual court case, see Florida Appeals Court "Bitch-Slaps" Miami Law Firm For Class Action Conduct, on the companion blog, The Home Equity Theft Reporter Cases & Articles.

New Hampshire Predatory Mortgage Servicing Fighter Meets The Clinton Campaign

The Concord Monitor reports on an encounter that took place between the predatory mortgage servicing industry's worst enemy, Michael Dillon, and the Senator Hillary Clinton presidential campaign at a campaign stop in Derry, New Hampshire earlier this week. Dillon is currently embroiled in a legal battle against the mortgage servicing company Fairbanks Capital Corporation (which underwent a name change to Select Portfolio Servicing after they reached a $40 million settlement with the Federal Trade Commission in a lawsuit alleging predatory servicing practices). He, too, alleges predatory mortgage servicing practices.

According to the story, Dillon felt that the Clinton campaign wanted to use him as a poster boy for evertything that's wrong with the mortgage industry, rather than specifically focus on the issue of predatory mortgage servicing. He charges that a campaign staffer subtly attempted, in his words:
  • "to steer our conversation with Senator Clinton away from the actual important issue of mortgage servicing fraud . . . and towards what would rapidly deteriorate into a whining, sympathy sucking 'poor me' yetch in front of not only a United States senator but several hundred of our assumed peers."
Dillon expressed his feelings fully about the Clinton's campaign event a few days later on the blog Blue Hampshire (see Clinton Speaks, Homeowners Mourn).

For more of the Concord Monitor story, see Not exactly the poster-boy they were looking for (Mortgage critic didn't like Clinton event).

For a recent Concord Monitor article on Dillon's fight against Select Portfolio Services / Fairbanks Capital, see Taking on an industry (After a mortgage lender tried to foreclose on his home, Michael Dillon made it his mission to set the record straight on his own).

For Dillon's website, check out GetDShirtz.com.

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

One Bakersfield Neighborhood Symbolizes Area Subprime Foreclosure Problem

Media outlets in Bakersfield, California have recently reported on one development in Oildale that has been particularly hit hard by the subprime mortgage fiasco. Two streets in the development contain 45 homes; 20 of them are reportedly in some stage of default, with six already foreclosed on. All of the homes in foreclosure were bought with subprime mortgages, according to the media reports. For more, see:

KGET-TV Channel 17

watch KGET-TV Channel 17 report, or read their online story, Housing market is all down.

KBAK-TV Channel 29

watch the KBAK-TV Channel 29 report, or read their online story, Housing crisis hits Bakersfield.

Go here for other posts on Bakersfield, California.

Possible Attorney Fraud Causes Two Lawyers To Skip Town

In two unrelated cases, media outlets have reported the following stories.

The Island Packet (South Carolina) reports:
  • "A Beaufort attorney, who police say stole $2.4 million from a client, was found [last week] trying to cross the Canadian border back into the United States after being the focus of an 18-hour Coast Guard search, according to authorities. Michael Timothy Jordan, 45, whose real estate law office is in Professional Village Circle on Lady’s Island, was arrested today on a felony breach of trust charge filed with the Charleston County Sheriff’s Office, according to a release from U.S. Customs and Border Protection."

For more, see Missing attorney arrested at Canadian border (Police say Michael Timothy Jordan stole $2.4 million from a client).

See also, Missing Boater Found On Canadian Border, Charged With Fraud (WCIV-TV Channel 4, Charleston, SC).

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Law.com reports on the story of Connecticut attorney Jonathan Hoyt, who has reportedly skipped town and has been missing for about four weeks after writing a confession letter to his son, also an attorney working in the Hoyt law office, admitting to embezzling funds from the firm's clients. According to the story, the following is an excerpt from the confession letter:

  • "I have embezzled funds from my clients. Like most lawyers who fall into this trap I always did it with the idea that I would repay the funds, but of course once I started down this slippery slope there was nothing but failure waiting for me at the end."

Reportedly, the letter is dated July 7, one day after attorney Jonathan Hoyt, 58, was last seen in The Hoyt Law Group's Clinton, Connecticut office, according to police. For more, see Missing Lawyer Admits Embezzlement in Confessional Letter.

For story update on Jonathan Hoyt, see Missing lawyer found dead in Iowa (Jonathan Hoyt, the once-respected lawyer who vanished in July after embezzling some $700,000 from his clients, has been found dead in a rented room in Cedar Rapids, Iowa, police report) (New Haven Register, 10-31-07).

Stories On Vacant & Abandoned Homes From Around The Country

The wire is loaded with stories on vacant and abandoned homes from all over the country, with the problems that accompany such homes. The following are links to a sample of these stories.

-----------------------

Greater Sacramento, California: State issues pool alert to contain W. Nile virus (The problem is twofold - The volume of foreclosed or abandoned homes has risen as the real estate market stalls. And scores of mosquitoes in the county have tested positive for West Nile virus).

Visalia, California: Not all abandoned homes are vacant.

Lodi, California: Aerial [pesticide] spraying set for tonight in Lodi.

Port St. Lucie, Florida: Empty houses in PSL causing concerns.

Indianapolis, Indiana: Lots of empty new houses on market, expert says.

Minneapolis - St. Paul, Minnesota: Police busy with copper worth more than pretty penny (Thieves breaking into vacant homes and ripping off the copper tubing).

Knoxville, Tennessee: Foreclose and rot.

Saybrook Township, Ohio: Old buildings a worry in Saybrook.

Kennewick, Washington: Foreclosures Trouble Code Enforcement Officers (It Takes Time to Find Who's Responsible).

Metro Detroit, Michigan: The Eyesore Next Door - Neighbors plead: Clean up the blight (Cities look for new approaches).

South Beloit, Illinois: Not mowing could mean losing green (Those with unruly lawns can expect an upkeep tab taped to their doors).

Chula Vista, California: Chula Vista orders upkeep of seized homes.

Tracy, California: Foreclosures spur neighborhood blight.

Metro Chicago, Illinois: Big homes, large loans raise rate of foreclosure (Number set to triple in Highland Park).

Lockport, New York: Neighbor raises a stink over house.

Lubbock, Texas: Foreclosure Items Cause Eye Sore In West Lubbock.

Servicemembers' Rights Invoked To Postpone Foreclosure

In Pennsylvania, the Pittsburgh Tribune-Herald reports:
  • "Allegheny County's acting sheriff said Tuesday he postponed the sheriff's sale of a Brookline man's home because the homeowner said he was in the military on active duty. Acting Sheriff Bill Mullen said Scott Marx called the sheriff's office to say he was in the military. His house [...] was scheduled to be sold Monday at the monthly sheriff's sale. The Servicemembers Civil Relief Act prohibits the foreclosure sale of real estate of a person on active duty, unless the creditor has obtained a court order approving the sale, foreclosure or seizure of the real estate."

For more, see Sheriff's sale delayed for serviceman's home.

Go here for other posts on the Servicemembers Civil Relief Act.

Saturday, August 11, 2007

Deceased Mother's Home In Foreclosure, Soldier Can't Get Leave To Settle Her Affairs

The Bakersfield Californian reports that a 23 year old member of the U.S. Army currently stationed at Fort Dix, New Jersey recently suffered the premature loss of his 46 year old mother. Desiring an extended hardship leave to settle his mother's affairs, the Army instead gave him a few days of emergency leave, enough time to help pack up his mother's belongings. Meanwhile, the house payments went unpaid and his family received a foreclosure notice on his mother's home (in which he also lived) in late July. For more, see Grieving soldier stuck in hardship (Sergeant couldn't get leave to save late mother's home) (no longer available online).

Editorial Note

Inasmuch as the soldier was also living in the home, and the home could conceivably now belong to him through inheritance, does anyone know if he has any rights in a case like this to stop a foreclosure sale by invoking the Federal law, Servicemembers' Civil Relief Act? Go here for other posts on the Servicemembers' Civil Relief Act.

Some Upstate NY Homeowners Losing Home Equity To GE Pollution, Says Lawsuit

The Albany Times-Union recently reported on a situation in Fort Edward, New York that, according to a lawsuit, is driving down home values in a section of town - chemical contamination emanating from a General Electric capacitor plant. Reportedly, 42 homeowners have joined in a lawsuit against General Electric and the town of Fort Edward. According to Dennis Prevost, who grew up about 120 yards from the plant and is vice president of Hudson River Citizens Along the River's Edge, a not-for-profit group that has been pushing for the plume to be cleaned up more aggressively:
  • "Here, GE is doing only what the law requires in a polluter-friendly state. Fort Edward is being treated like a red-headed stepchild."

For more, see Pollution upsets homeowners (Fort Edward residents say General Electric is moving too slowly to remove TCE, an industrial solvent).

Ex KC Councilwoman Going Solo At Federal Fraud Trial

(revised 8-15-07)
The Kansas City Star reports:
  • "Former Kansas City Councilwoman Saundra McFadden-Weaver will be the lone defendant facing trial next week on mortgage fraud charges. Her last remaining co-defendant, Emanuel M. Kind, pleaded guilty today and agreed to cooperate with prosecutors in the case against her. Kind, 52, had lived in the Lee’s Summit house at the center of the case. He pleaded guilty to single counts of conspiracy and wire fraud. Another defendant, Ricky L. Hamilton, pleaded guilty to similar charges Tuesday and also agreed to cooperate against McFadden-Weaver."

For more, see Last McFadden-Weaver co-defendant pleads guilty in fraud case.

Go here for other posts on this mortgage fraud case.

California Contractor Skips Town With Customer Deposits; One Homeowner Left Without A Home

KBAK-TV Channel 29 (Bakersfield, California) reports:
  • "At least eight families in Arvin [California] say they paid a contractor to build homes or make room additions -- and the work has never been done. The families say they paid thousands to contractor Salvador Arevelo Moreno, and he has disappeared without finishing the jobs. [...] The Salinas family paid Moreno $50-thousand dollars to tear down their old house and build a new one. The old house was demolished, but the new house has never been built."

Go here to watch the KBAK-TV report.

To read the online report, see Arvin families complain contractor did not finish jobs they paid for.

Friday, August 10, 2007

San Jose Couple Charged In Alleged $8.5 Million Mortgage Fraud Flipping Scam

In California, The San Jose Mercury News reports:
  • "[F]ormer Century 21 Su Casa real estate agent [Thien Chi Vuong] and his wife [Thanh Tuyen Tran, aka Kim Tran] were arrested on charges of bilking lenders in a year-long, $8.5 million real estate scam, the latest result of an ongoing investigation of complaints against the East Side real estate brokerage. [...] According to the district attorney's office, Vuong allegedly acted as his wife's real estate agent when she bought 10 houses in San Jose last year for a borrowed $8.5 million. Vuong and Century 21 Su Casa collected commissions and fees on the deals, and Tran rented out the properties at below-market prices, the district attorney's office said in court filings. [... Su Casa] closed its doors and filed for bankruptcy in June under the weight of nearly two dozen lawsuits. [...] The criminal case stems from a civil suit filed earlier this year by Landmark Home Mortgage."

Reportedly, every one of the 10 houses were purchased with 100% financing ("no money down") and five of the properties are already in default, according to prosecutor's office. They were charged with conspiracy and grand theft in a series of real estate deals that allegedly netted them more than $500,000.

For more, see Couple accused of bilking lenders (`Flipping Scheme Alleged In East Bay Housing Market). In a companion story, see How the fraud allegedly worked.

See also, San Jose Realtor, Wife Arrested For Alleged Fraud (KPIX-TV Channel 5, San Jose, CA).

Arizona Man Sentenced In Alleged Equity Skimming, Foreclosure Rescue - Bankruptcy Fraud Scam

The East Valley Tribune reports:
  • "A Chandler man who tricked couples out of their homes and then filed bankruptcy in the couples' names was sentenced on Wednesday in U.S. District Court to 33 months in prison and ordered to pay $86,000 in restitution.Mario G. Bernadel, 48, pleaded guilty last year to two counts of fraudulently filing bankruptcy petitions on behalf of people who had no idea he was doing it."

Reportedly, prosecutors said that Bernadel persuaded two Valley married couples facing foreclosure to sign their homes over to him under the pretext that this would keep the foreclosures off their credit reports. Once he owned the homes, Bernadel rented the homes and "skimmed the rent" by pocketing the cash received from the tenants without applying any of it to the existing mortgages. The bankruptcy fraud element kicked in when he filed bankruptcy petitions in the homeowners' names without their knowledge, thereby halting the foreclosure actions and extending the period of time that he could continue skimming the rent the the homes. The foreclosure process ultimately was allowed to continue to completion, at which point the homes were foreclosed.

For more, see Chandler man sentenced for bankruptcy fraud.

See also:

Thursday, August 09, 2007

KCRA 3 TV Sacramento-Area Mortgage Fraud Investigative Reports Continue

The most recent KCRA 3 TV report on investigative reporter Josh Bernstein's Elk Grove, California mortgage fraud investigation is available here.

Mario Fellini, one of the mortgage brokers at the center of KCRA 3's investigation has surrendered his license and is no longer allowed to operate as a mortgage broker in California.

Reportedly, this action has no effect on a currently ongoing FBI and IRS investigation into the alleged falsification of more than $9 million worth of loan applications by Fellini and his business associates. KCRA 3 reports that sources close to the investigation say the investigation continues to move forward and will likely go before a grand jury in a matter of weeks. In addition to Fellini, others that have reportedly had some connection with the alleged mortgage fraud scheme are:
  • Jim Martin, Gabriel Viramontes, Joseph Gallo and Jennifer Huang; and the firms Freedom Capitol Mortgage, VFM Investment Group, and Esnian Mortgage & Realty Network.
Go here to watch the latest KCRA 3 TV report. To read KCRA 3's online report, see Mortgage Broker Under Fire Surrenders License (Offices Raided By FBI).

Go here for prior posts on the KCRA 3 investigation, which include links to KCRA 3 Josh Bernstein's previous investigative reports on this alleged mortgage scam.

Federal Grand Jury Investigating Central Florida Foreclosure Rescue Operator

The Orlando Sentinel reports:
  • "A federal grand jury is investigating an alleged "foreclosure rescue" scheme that targeted Hispanics across Central Florida, leaving scores of homeowners facing eviction. Federal investigators said this week that they are taking aim at a now-defunct Tampa company known as 4 Solutions Inc., which allegedly siphoned off hundreds of thousands of dollars in homeowner equity from dozens of families. The company is accused of luring homeowners into deals that promised to prevent foreclosure, but instead duped them into giving up their homes. [...] Anthony Suarez, an Orlando lawyer representing more than two dozen of the homeowners, said the lost home equity for his clients could top $900,000."

Reportedly, 4 Solutions closed its doors when the grand-jury investigation started several months ago. In one case, a husband and wife who were victimized were never in danger of foreclosure. They wanted to tap into their home equity to help pay the mortgage while the wife was on pregnancy leave.

For more, see Hispanics feel victimized after 'foreclosure rescue'.

For a Tampa Tribune story on 4Solutions, see Foreclosure Prevention Company Is Under Investigation (8-4-07):

  • Carmen Maria Oliveri was arrested by Tampa police June 7 on charges of 'grand theft of $100,000 or more' and 'organized fraud over $50,000.' According to the arrest report, in August 2005, Carmen Maria Oliveri 'entered into a scheme to defraud' a homeowner. The report states that 'Jose and Carmen Oliveri presented terms of a loan without disclosing to the victim that he was signing over the rights to the property' to 4 Solutions. The company sold the property without the person's knowledge.

Go here for 4 Solutions website (no longer available online).

Go here for other posts on 4Solutions.

Ohio AG Conducts Foreclosure Rescue Sweep; Hauls Six Upfront Fee Operators Into Court

From the Ohio Attorney General:
  • "Attorney General Marc Dann today filed lawsuits against 6 different companies for preying on Ohioans with false promises of saving their homes from foreclosure. The attorney general’s investigations produced evidence that these companies may have violated at least five different consumer laws: Consumer Sales Practices Act (CSPA), Telephone Solicitation Sales Act (TSSA), Home Solicitation Sales Act (HSSA), Debt Adjusters Act (DAA), and the Credit Services Organization Act (CSOA). “Today, along with filing lawsuits against 6 foreclosure rescue firms, I am issuing a warning to companies who think they can get away with exploiting families who face the prospect of losing their homes: Stop Now or my office will stop you,” Attorney General Dann said [on Wednesday]."

Suits were filed against the following companies doing business in six Ohio counties: American Housing Authority, Inc. (Newport Beach, California), American Housing Financial, Inc., (Phoenix, Arizona), Cary Lavensky d/b/a Home Restoration Services (Cleveland, Ohio), F.A.S., LLC d/b/a Foreclosure Assistance Solutions and Mortgage Second Chance (Clearwater, Florida), Foreclosure Solutions, LLC (Cincinnati, Ohio), Richard Pinnix d/b/a Pinnix Business Services (Shaker Heights, Ohio), United Foreclosure Managers, LLC (Youngstown, Ohio).

For more, see Ohio AG Press Release - Foreclosure Rescue Scams Sweep (Attorney General Dann Files 6 Suits Against Companies For Foreclosure Rescue Scams)., or

See also, Attorney general's office sues six foreclosure rescue companies (Cleveland Plain Dealer), and Ohio Foreclosure Rescue Scams Sweep (All American Patriots).

For copies of the newly filed lawsuits (available online courtesy of Ohio Attorney General Marc Dann), see:

Go here for other posts on Ohio upfront fee foreclosure rescue services.

Go here for other posts on American Housing Authority and Brandon Roberts.

Ohio AG Aiming Regulatory Rifle At Credit Ratings Agencies

Global Pensions reports:
  • "Three credit rating agencies could find themselves in court if the attorney general of Ohio believes there is a case to prosecute over their part in mortgage securitisation marketing. Marc Dann, attorney general of Ohio, has accused Fitch, Moody’s and Standard & Poor’s of leading pension funds to believe that triple A rated tranches of collateralised debt obligations (CDOs) were near risk free."

What part, if any, that the credit ratings agencies played in the subprime mortgage mess is an issue that Ohio AG Dann apparently would like to pursue further.

For more, see Ohio threatens ratings lawsuit.

Attorneys Gearing Up For Subprime Litigation Explosion

From Financial Week:
  • "Here come the lawyers. With the casulties mounting from turmoil in the subprime lending sector and mortgage-backed securities markets, plaintiffs’ lawyers and defense counsel are gearing up for the inevitable lawsuits. They’ll have plenty of clients to choose from. [...] Virtually every party involved in the huge Wall Street securitization machine that financed the late, great housing boom is a potential target—the lenders who originated the loans, the brokers who bought them, the underwriters who pooled them and carved them up into securities, the rating agencies that rated the securities, and the bond insurance companies that guaranteed them."

For more, see Vulture investors feed on subprime carrion: The lawyers (And don’t forget the lawyers: Suits alleging bad, bad things hit lenders, packagers, raters).

For an example of the gearing-up efforts, see American Conference Institute Organizes Subprime Litigation Conference. (DSNews - 8-13-07)

Did Homebuilders Getting Into The Mortgage Lending Business Help Fuel Subprime Problem?

BusinessWeek.com recently ran a story about how homebuilders who got into the mortgage lending business to finance their own sales has reprtedly fueled the subprime mortgage lending mess. The story states:
  • "In addition to spitting out subdivisions, many of which now stand half-empty, builders jumped into the mortgage business to a degree they never had. Wall Street provided the same encouragement it offered other lenders. Even as the housing supply began to exceed demand last year, builders kept sales brisk by pushing adjustable-rate, interest-only, and other risky loans. In some cases they attracted clientele who couldn't afford conventional mortgages. In others, builders allegedly violated federal lending standards to get customers to sign on the dotted line."

Among those homebuilders getting a mention in the story is Beazer Homes USA Inc., which is currently the subject of a Federal investigation, as well as a number of lawsuits in connection with the lending practices of its mortgage financing arm. For more, see Bonfire Of The Builders (By rushing into the mortgage business big-time, homebuilders helped fuel the housing crisis).

Go here for other posts on Beazer Homes USA.

Wednesday, August 08, 2007

Real Estate Brokerage Suspends Realtors Under Indictment

The Los Angeles Times reports:
  • "Two Beverly Hills real estate agents indicted for their alleged participation in a mortgage fraud scheme have been suspended by their employer, Prudential California Realty, and ordered not to conduct any real estate transactions until the federal case has been resolved. Joseph Babajian and Kyle Grasso are among the top-producing real estate agents in Southern California, and often work together. [...] Prudential California, whose parent is Warren E. Buffett's Berkshire Hathaway Inc., said it would transfer all of Babajian's and Grasso's listings to other agents."

For more, see Two Beverly Hills agents suspended by brokerage (no longer available online).

Go here for other posts on the indictment.

Georgia Appeals Court Recharacterizes Sale Leasebacks As Usurious Loans

A Georgia Court of Appeals recently found that transactions entered into by a finance business with customers needing "fast cash," that were structured as sale leasebacks of personal property owned by the customers, were nothing more than disguised illegal payday loans subject to usury, and not true sales of property. Implicit in the Georgia court's decision was that the "substance over form doctrine", when applied to recharacterize a sale leaseback transaction as a secured loan, operates in the same manner and without regard to whether the subject property being sold and leased back is personal property or real property.

For the long version of this post, see Georgia Appellate Court Recharacterizes Sale Leasebacks As Usurious Loans, on the companion to this blog, The Home Equity Theft Reporter Cases & Articles.

For the court decision itself, see Clay v. Oxendine, 285 Ga. App. 50; 645 S.E.2d 553, (Ga. App. Ct., 1st Div., 3-27-07).

Florida Students Being Evicted Due To Landlord's Failure To Pay!

The Independent Florida Alligator (Gainesville, Florida) reports:
  • "[University of Florida] anthropology senior Sean Reilly knew it was coming since January. And then one day in July, he said, the eviction notice was on his door. [...] It's a common occurrence - tenants don't pay and are subsequently evicted. But what's different about Reilly's eviction story, and the stories of other UF students living around Gainesville, is that his eviction came from the landlord's failure to pay, not his.

Reportedly, Reilly's foreclosed condo was owned by Jose Andrade of Weston, Florida, who at one point, owned 11 condos in the complex. He now only owns one, according to the story. The complex was a rental complex until a couple of years ago, when it was converted into condominium units, resulting in the units being sold off separately. Reportedly, the complex has gone downhill since the conversion. For more, see Property foreclosures leave tenants evicted.

For other stories on tenants unknowingly renting homes in foreclosure, go here, or here, or here. unwittingly equity skimming alpha

Equity Skimming On The Rise In Massachusetts

The Boston Herald is reporting on:
  • "a growing problem in the Bay State’s foreclosure crisis: tenants who pay rent regularly, but still lose apartments when banks foreclose on landlords’ buildings."

This problem generally arises when a real estate investor who gets in over his head and can't afford the mortgage payments on an investment property decides to stop making his mortgage payments, and at the same time, gets a tenant to unwittingly remit monthly rent payments without knowledge of the loan default. The owner/landlord, resigned to allowing the bank to foreclose on the investment property, will continue to "skim the rent" from the home until the place is finally auctioned off and he/she loses the title to the home.

The problem can also occur when an investor or homeowner, after getting in over their heads on their mortgage payments, unwittingly signs over title to the home to a "professional equity skimmer" (possibly someone offering purported foreclosure rescue services ) who promises to continue to make the loan payments, and instead proceeds to find a tenant for the home, pocket the rent, and stiff the bank.

For the Boston Herald story, see Why Us?: Tenants say they’re foreclosure victims (if link expires, try here).

For other posts on tenants stuck holding the bag in foreclosure evictions, go here and go here, and go here.

Statutes specifically addressing the practice of equity skimming (aka rent skimming) exist in some states, as well as in Federal law (12 USC 1709-2). alpha

Boston Tenants Picket Deutsch Bank, Say Foreclosure Evictions Unfair

BostonNow reports:
  • "Protesters gathered outside Deutsche Bank's office in Beacon Hill [Monday], claiming the financial institution has been unfairly evicting residents of buildings in foreclosure. [...] Deutsche Bank said in a statement that it was not responsible for the evictions, saying the bank is only a "trustee" whose responsibility is "largely an administrative one." The bank said it intends to provide the tenant group with the names of those actually controlling the properties."

The tenants' gripe appears to revolve around the fact that they are being evicted from their (rented) homes, even though they have dutifully paid all the rent payments due pursuant to their rental arrangement with their now ex-landlord.

For more, see Tenants picket bank.

Massachusetts Lawmakers Considering Proposals To Protect Tenants In Foreclosure Evictions

The Boston Herald reports:
  • "State lawmakers are weighing a proposal to make banks that foreclose on rental units honor renters’ leases, aiming to help tenants caught in the middle of property seizures. A mortgage-reform bill currently before the Legislature would prohibit parties that acquire homes through foreclosure from automatically voiding tenants’ leases. Current law generally doesn’t require lenders or private investors who purchase homes at foreclosure to honor landlord-tenant agreements. Instead, as the Herald first reported Saturday, lenders who’ve been seizing Bay State rentals from landlords who fall behind have been evicting even tenants who paid rent on time."
For more, see Bill would help renters after foreclosures.

Editor's Note: The tenants who paid their rent on time and who are being evicted anyway after foreclosure are victims of equity skimming, where their prior landlord pocketed their rent without paying on the mortgage. The Massachusetts legislature should probably also consider going after those landlords and pass legislation (if they haven't already) making equity skimming illegal, the way some other states have, and similar to the law contained in the Federal statute, and then vigorously enforce it.

Tuesday, August 07, 2007

Resolving Foreclosures Thwarted By Securitization

The New York Times recently ran a story on the confusion and complications that homeowners facing foreclosure are running into when attempting to work out a financial resolution on their home mortgage obligations. According to the story:
  • "[T]he very innovation that made mortgages so easily available — an assembly line process known on Wall Street as securitization — is creating an obstacle for troubled borrowers. As they try to restructure their loans, they are often thwarted, lawyers say, by strict protections put in place for investors who bought the mortgage pools. This impasse could exacerbate the housing slump, pushing more homeowners into foreclosure. That would lead to a bigger glut of properties for sale, depressing home prices further. 'Securitization led to this explosion of bad loans, and now it is harder to unwind and modify them even where it is in the best interests of both the borrower and the investors,' Kurt Eggert, an associate professor at the Chapman University School of Law in Orange, Calif., said in an interview. 'The thing that caused the problem is making it harder to solve the problem.' Creating difficulties is the complex design of mortgage securities."

Among the problems: (1) some homeowners have problems simply identifying who holds their mortgages, (2) others find the loan servicing companies handling the loan payments are unresponsive due, in part, to the threat to their profits, (3) some lawyers say that even if facts indicate that a fraud may have been committed, the various parties protect each other by refusing to produce documents.

One Marietta, Georgia consumer protection attorney said that he has had cases where homeowners received foreclosure notices from entities that could not prove ownership of the mortgage loans in default and believes that many people are no longer living in their homes as a result of possible flawed foreclosure actions.

According to the article, "more than 60 percent of home mortgages made in the United States in 2006 went into securitization trusts." For more, see Mortgage Maze May Increase Foreclosures.

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

More On Indictments Of Beverly Hills Real Estate Agents And Appraisers

(Originally posted 8-4-07; revised 8-7-07; 8-8-07)

The Los Angeles Times reported last week on the indictments of high-profile Beverly Hills real estate agents Joseph Babajian and Kyle Grasso, with Prudential California Realty, along with appraisers Lila Rizk of Trabuco Canyon and Scott Robinson of Dana Point. They are charged with joining in a sophisticated scheme that lenders said cost them more than $40 million in fraudulent loans for homes in some of Southern California's most expensive neighborhoods.

Prosecutors filed a two part indictment. For Part 1, see U.S. vs. Babajian, et al - Part 1 (22 pages, .83 MB approx.).

Unfortunately, Part 2 of the indictment is a little too large for me to upload on this humble blog of limited resources. If you want Part 1 & 2, you can drop me an e-mail at:


and I'll be glad to send it to you (Be sure to put the words "U.S. vs. Babajian, et al - Part 1 & 2" in the subject line). Alternatively, you can go directly to the document link on the U.S. Courts' PACER website and get it there directly (link #2 - "Part II Indictment"; 63 pages; approx 2.5 MB - $2.40 cost). PACER registration required.

For the initial L.A. Times story, see Brokers to Westside elite accused of fraud (2 Beverly Hills agents and appraisers are indicted in a scam that allegedly inflated home prices and loan amounts).

For the L.A. Times follow-up story, see Two Beverly Hills agents suspended by brokerage.

Go here for the official FBI Press Release - Westside Real Estate Agents And Appraisers Indicted In Multi-Million Dollar 'Property-Flipping’ Fraud Scheme.

Go here for all posts on this story.

Federal Appeals Court Recharacterizes Sale-Buyback Arrangement As An Equitable Mortgage

In an opinion issued about two weeks ago, the U.S. Court of Appeals for the Eleventh Circuit affirmed lower court rulings in a Georgia case saying that, under the specific facts of the case, the contemporaneous execution of a warranty deed to a tract of land to a purported buyer and a contract giving the seller of the tract an option to purchase the land within a time certain was not a true sale, but rather, it created a mortgage in which the seller remained as the true owner of the property and the buyer in the arrangement was treated as a mortgage lender (the funds paid by the buyer were treated as a loan).

This case involved the application of Georgia state law and provides attorneys representing homeowners facing foreclosure, at least in Georgia (and possibly in Alabama, Florida, and elsewhere), some additional ammunition in battling foreclosure rescue operators in so-called "home rescue" or "home saver" arrangements. For the long version of this post, see Federal Appeals Court Upholds Equitable Mortgage Doctrine In Georgia Case.

For the case itself, see Christopher v. Cox (In re Cox), Case #04-1589, 11th Cir., July 27, 2007. equitable mortgage yak

Massachusetts Foreclosure Rescue Operator To Pay $10K Civil Penalty; $100K Restitution

(original post - 8-3-07)
In Massachusetts:
  • "Attorney General Martha Coakley has obtained a consent judgment in Middlesex Superior Court against Walter Ribeck, a Newburyport man who targeted financially distressed homeowners facing foreclosure. The judgment resolves an August 2006 lawsuit, which alleged that Ribeck posed as a "loan specialist" who could help destitute homeowners avoid foreclosure and keep their homes, but instead arranged transactions that would allow him to buy the home in order to re-sell it for a profit. Under the terms of the settlement, Ribeck is prohibited from engaging in foreclosure rescue transactions. The settlement further requires Ribeck to pay $100,000 in restitution to two homeowners by eliminating the profits from the transactions he arranged, and a $10,000 civil penalty."

For more, see Massachusetts AG Press Release - Attorney General Martha Coakley Obtains Consent Judgment Against Newburyport Man For Operating Foreclosure Rescue Schemes.