Monday, October 01, 2007

Chicago Ex-Con In Trouble Again - This Time For Mortgage Fraud

In Chicago, Illinois, The Chicago Tribune reports:
  • After serving prison stints for rape and armed robbery, Edwin Evans reinvented himself as a financial adviser. Driving around town in a Lexus sedan and pin-striped suit, he promised cash-strapped homeowners that he could help them stave off foreclosure. But after Evans was featured in a 2005 Tribune series on mortgage fraud, federal authorities opened a criminal investigation. On Thursday, prosecutors announced an indictment charging Evans with fraud. Federal prosecutors allege that Evans, 41, used phony documents and bogus credit reports to prepare two home loan applications for a Chicago woman in 2002. A company Evans controlled took unspecified cash payments from those land deals, the indictment said.

[...]

  • Evans specialized in controversial bailout deals, in which a homeowner deeded his house to Evans or an investor for a year, believing the reprieve would allow time to get out of debt and repurchase the home with a fresh mortgage. But the home is often lost in the process, not rescued, court records show. Because the houses typically fall vacant, the crime can threaten entire neighborhoods, as well as the homeowners and lenders.

  • With a dollar sign tattooed on his right hand, Evans had an unlikely pedigree as a mortgage broker. As a teenager, he was repeatedly found delinquent for burglarizing his Morgan Park neighbors. He spent 7 years in Illinois prisons for raping a 14-year-old girl, then 4 more for hijacking a delivery truck at gunpoint. Paroled in 1999, Evans went into the mortgage business.
For more, see Lender accused of fraud (Ex-convict used fake documents in mortgage scheme, U.S. says).

Court Allows Lawsuit Against Foreclosure Rescue Operator To Continue; Says Sale Leaseback May Be An Equitable Mortgage

In a lawsuit filed by a financially strapped homeowner against a foreclosure rescue operator to void a sale leaseback of a home that was entered into with the operator, a Virginia Federal Court recently refused to dismiss the homeowners claims under the Federal Truth In Lending Act ("TILA") and related statutes.

The operator requested a dismissal of the TILA claims on the basis that the foreclosure rescue transaction in question was a sale leaseback and did not involve a consumer debt or formal mortgage agreement. The court observed that the State of Virginia recognizes the "equitable mortgage" doctrine, and recognized that the substance of the foreclosure rescue transaction could well be considered an equitable mortgage under Virginia law. If the sale leaseback is recharacterized as an "equitable mortgage", the transaction could be subject to the TILA and related claims. Accordingly, the court rejected the operator's request to dismiss the homeowner's TILA claims, and is allowing the case to proceed.

The homeowner is represented by the firm Bullock & Cooper, Virginia Beach, Virginia. For a copy of the decision, see Opinion & Order - Clemons v. Home Savers, LLC.

For the longer version of this post, see Virginia Federal Court Says Sale Leaseback May Be A Mortgage, Denies Motion To Dismiss TILA Claims.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.). equitable mortgage yak

More NYC Homeowners In Trouble From Subprime Refinancing

The New York Post recently ran a story about a Staten Island family who ran into trouble when they were approved for a second mortgage loan that they couldn't afford. For more, see Foreclosing In (S.I. Family losing House).

The New York Times recently ran a similar story about two Queens families, each of whom are in position to possibly lose their long-time homes to foreclosure due to a subprime refinance (in one case, the home has been in the family for over 30 years; in the other - close to 45 years). For more, see Urban Tactics - Stranger at the Door.

Two NYC Homeowners Regret Doing Business With Foreclosure Rescue Operators

The New York Daily News recently ran a story on two New York City homeowners in the borough of Queens who expressed their regrets for falling for "rescue" arrangements that were purported to "save their home" from foreclosure. Excerpts from the story:
  • The Rodriguez family slammed the door on many shady firms that came by after their foreclosure was made public, but representatives from a company called Real Financial Solutions made them reconsider. "They looked so innocent. They were real, churchgoing people, she said. "I told my husband, 'These people are the real deal.' I really fell for them."

  • The same was true for C.C., 41, who lost her Cambria Heights home when she tried to refinance with a now-defunct company called Action Funding. "They make you feel like they're your friends," she said. "You'd call them to just say, 'How are you doing?' or 'You want to come to my Thanksgiving dinner?' You feel real at home and safe."

  • A state law enacted in February called the Home Equity Theft Prevention Act hopes to decrease the number of new victims by requiring more disclosure. But it can't help those already in trouble.

For more, see Foreclosure 'rescuer' is your best pal - and then he cons you out of home.

For more on equity stripping scams, generally,see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Accounting Requirement For NY Foreclosure Rescue Operators

Under New York State's Home Equity Theft Prevention Act:
  • Within 120 days of either the eviction or voluntary relinquishment of possession of the residence by the Equity Seller, the Equity Purchaser must provide the homeowner (Equity Seller) with cash payments or consideration of at least 82% of the fair market value of the property. The Equity Purchaser also must make a detailed accounting of the basis for the payment amount, or a lack thereof, to the homeowner on a Homeowner Payment Accounting Form and include written documentation of expenses.

Go here for the Homeowner Payment Accounting Form required to be filed under New York law.

Go here for the Instructions for Homeowner Payment Accounting Form.

Go here for Information on the HETPA (both for consumers and the real estate industry).

The statute, the accounting form, the form instructions and the general information are all made available online courtesy of the New York State Banking Department.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

"'Conflict Of Interest" Probe On Wisconsin Supreme Court Justice Expands

(originally posted 9-30-07)
The Wisconsin State Journal reports:
  • A panel investigating conflicts of interest by Wisconsin Supreme Court Justice Annette Ziegler signaled Wednesday that it plans to expand the probe by further examining Ziegler's ties to West Bend Savings Bank and her statements prior to this spring's election about those conflicts. The three-judge panel ordered Ziegler and the Wisconsin Judicial Commission to provide additional information about a reported $2 million in loans Ziegler and her husband received from West Bend Savings Bank, where J.J. Ziegler serves on the board of directors. In their request for additional information, the judges cited media reports detailing potential conflicts of interest beyond those cited by the commission.

For more, see Panel widens Ziegler conflict of interest probe.

For an earlier media report on this investigation, see Commission faults Ziegler, asks for only reprimand.

Go here for copy of complaint against Judge Ziegler.

Go here for Judge Ziegler's response to complaint.

Story update: (5-28-08) Supreme Court reprimands Ziegler. naughty judges

Sunday, September 30, 2007

Cleveland Neighborhood Fast Becoming Ghost Town; "Foreclosure Destabilization" May Be To Blame In Deaths Of Two

Sunday's Washington Post ran a story written by Jim Rokakis, Treasurer of Cuyahoga County, Ohio in which he describes the plight of one Cleveland-area neighborhood. Below is an excerpt:
  • Twenty years ago, the Slavic Village neighborhood of Cleveland was a tightly knit community of first- and second-generation Polish and Czech immigrants. Today, it's in danger of becoming a ghost town, largely because a swarm of speculators, real estate agents, mortgage brokers and lenders saw an opportunity to make a buck there.

  • You could say it was because of them that 12-year-old Asteve' "Cookie" Thomas lost her life on Sept. 1, shot in Slavic Village when she stumbled into the crossfire of suspected drug dealers. The neighborhood wasn't always a haven for criminals -- not until hundreds of foreclosures destabilized the community. Houses (800 at last count) and then entire streets were abandoned. Crime increased as vacant properties offered shelter to people who had a reason to hide.

  • Another victim was Joe Krasucki. On the night of March 15, his 78th birthday, he thought he heard vandals prying the aluminum siding off his house, where he had lived for 40 years. Looters had already ransacked his neighbor's abandoned property -- a fate that awaits the majority of foreclosed houses in cities such as Cleveland. When Joe went outside to investigate, a gang of teenagers beat him so severely that he died a week and a half later.

For more, see The Shadow of Debt (Slavic Village Is Fast Becoming a Ghost Town. It's Not Alone) (if link expired, try here).

Equity Skimming Part Of The Mess For Virginia Beach Landlord

The reported collapse of Virginia Beach-based landlord, CM Development, that has left it facing foreclosure, with outstanding real estate tax debts, and under the jurisdiction of a Federal Bankruptcy Court has left its tenants in a bad spot, according to a recent story in The Virginian-Pilot.
  • "I won't get my security deposit back," [said one tenant] of the $750 she put down 18 months ago when she moved in. "I can't even find anybody to get it back from. So that's it." CM Development was forced into bankruptcy this summer. Its collapse has left some of the region's most vulnerable residents in a difficult spot. Living in houses that are no longer being maintained, renters have found the company also is holding much of their savings in the form of security deposits, making it harder for them to move.

[...]

  • In some cases, tenants have been evicted because the company stopped paying water bills or because their house was foreclosed upon. [...] Under Virginia law, landlords must return security deposits within 45 days of a tenant moving out. Some CM Development tenants who moved months ago said they still haven't received their money.

Reportedly, a Virginia-Pilot investigation "revealed that CM Development financed itself by selling its properties repeatedly among a group of about 30 investors (ie. straw buyers), who took out ever larger bank loans in their names. In exchange, the company would pay investors money up front, then agree to manage the properties and pay the mortgages and taxes." For more, see CM Development's bankruptcy leaves many In a bind.

Go here for posts and links to other stories on CM Development and Cary McEntee.

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

Foreclosures Leave Tenants In Trouble In Brand New North Carolina Subdivision

In Gibsonville, North Carolina, the Greensboro News Record reports:
  • At least when you rent, you can't lose the roof over your head to a mortgage foreclosure. Can you?

  • Well, that's exactly what is happening to almost two dozen tenants who landed what seemed like a good deal on pre-fab rental homes in a new subdivision east of U.S. 29. Within months of moving in, they recently came home to find the notices .

  • The California-based investor who owns the houses, so new they don't even have grass planted yet, is in foreclosure. The homes will be auctioned off on the courthouse steps in October, and the tenants must move.

  • "There's nobody to call to get my security deposit back," said [one tenant]. "I've got to find a new place, and I'm left with nothing."

[...]

  • Tenants said last week they had repeatedly tried to contact the rental agent for refunds of security deposits of $800 to $900 — with no success. "It's a mess," said [another tenant], who like other tenants paid in cash each month to an agent who came to collect the rent. "I thought it was strange. Then when we got these papers, red flags went up."

Reportedly, a new North Carolina law giving tenants in foreclosed property 30 days' notice doesn't take effect until Oct. 1. For more, see Houses of cards: A pre-fab bubble bursts for renters.

For other stories on tenants unknowingly renting homes in foreclosure, go here, or here, or here.

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Postscript: This appears to be one more example of some real estate investors resorting to equity skimming to salvage what they can in an ill-advised real estate investment that they can no longer afford. In such a practice, the landlord pockets the rent from unwitting tenants while stiffing the mortgage lender out of its mortgage payments. The practice continues until the mortgage lender takes over ownership in a foreclosure sale, where it and the tenants find themselves holding the bag (and in many cases, the tenants are out their security deposits).

In light of a recent story out of Minnesota (see Minnesota Builder, Straw Buyers Possibly Involved In Equity Skimming Scam) involving a developer who allegedly either lease-optioned or sold on a land contract a significant amount of his unsold inventory after first selling the newly built homes to straw buyers, I can't help wondering whether the same thing is going on here. The Minnesota developer, Parish Marketing & Development, is reportedly the subject of a current Federal grand jury investigation. equity skimming unwittingly delta

One Group Of Victims In Need Of "Foreclosure Rescue"

The Dallas Morning News recently reported on the plight of one group of victims in need of foreclosure rescue:
  • Some of the saddest victims of the home mortgage meltdown don't walk away when their home goes into foreclosure. Real estate agents who sell foreclosed homes say they sometimes find pets left behind when the owners clear out. They come to the rescue of starving cats abandoned in vacant houses and desperate dogs chained up in overgrown back yards. "I keep dog food and cat food in my car, and leashes," said Connie Zetterlund, a Coldwell Banker agent who sells foreclosed houses. "I'm running out of people to give animals to." Along with left-behind furniture, vandalism and damage done by copper thieves, she and other foreclosure agents occasionally must cope with the pets that people cast off when their houses wind up in foreclosure.

For more, see In foreclosures, pets are often abandoned with home.

Go here for more on pets and foreclosures. copper metal theft zebra

More Trouble With Abandoned Animals In Vacant Building In Foreclosure

In Troy, New York, the Troy Record reports on a dangerous situation that recently confronted a code inspector, an animal control officer and a local cop when inspecting an abandoned building in foreclosure that had an approximately 85-pound pit bull and a puppy in an upstairs bedroom with the door closed:
  • When Animal Control Officer Kevin McDonough and Police Officer Chris McDonald tried to get in the bedroom, the dog attacked, and they were forced to put it down ... . McDonough took the puppy to the Mohawk & Hudson River Humane Society shelter in Menands. It is unclear why the dogs were in the abandoned building, but authorities suspect the building was being used for an illicit purpose, possibly drug related, and the dogs were for protection.

  • There was so much dog feces all over the place [Code Inspector David Sheeran] said he did not even inspect the rest of the building. Crews secured the building and pad locked the doors until they can find the owner. Crews may be forced to don suits and masks and clean out the building, Sheeran said.

For more, see Police shoot attacking dog abandoned in Troy building.

Go here for more on pets and foreclosures. foreclosure side effects zebra

Cops Arrest Alleged Copper Thief At Vacant Foreclosed Home

In Ferndale, Michigan, the Royal Oak Daily Tribune reports:
  • A man paroled from prison last month was charged ... with breaking into a Ferndale house and stealing about 100 pounds of copper pipes. Larry L. Flood, 32, of Detroit, was arrested after neighbors called police a day earlier to report a suspicious man at a recently foreclosed house ..., police said.

[...]

  • "The suspect had taken all of the copper pipes out of the basement," [Ferndale Detective John ] Thull said. "He didn't use any cutting tools, he just twisted the pipes around with his hands until the pipes broke." Police have seen a sharp rise in recent years of thieves stealing all kinds of metal they can sell to scrap dealers. The price of copper has jumped more than 300 percent to about $3.50 a pound over the past four years. The theft of aluminum, and especially copper, is a nationwide problem. Thieves have pried copper loose from public utility wires, cell phone towers, air conditioners and even massive electrical transformers at power company substations.
For more, see Man stole copper from foreclosed home, cops say (Suspect was recently released from prison).

Go here for posts on copper & other metal thefts. copper metal theft zebra

Ohio Fire Chief On Vacant Home Fires

In Youngstown, Ohio, the Youngstown Vindicator recently ran a story on Fire Chief John J. O'Neill Jr. and his comments on the reasons for fires in vacant structures.
  • O'Neill said some arsons are a form of vigilante justice when structures on the demolition list are burned by those who want to clean up their neighborhood and don't want to wait for houses to be torn down. Sometimes, kids torch vacant houses "for kicks," he said. Other causes include squatters who light fires to keep warm, those involved in drug activity, and people who take copper pipes and wire, he said.

He asks for patience from local residents stuck living next to vacant eyesores that are scheduled to be demolished and asks that they not set them ablaze instead. For more, see A plea on arson: Stop (Each year, the city typically has 400 structure fires, half deliberately set). copper metal theft zebra

Saturday, September 29, 2007

Dozen Tenants Victimized In Rental Scam

In Charlotte, North Carolina, WCNC-TV reports:
  • Two former employees of a Charlotte real estate firm allegedly stole tens of thousands of dollars from unsuspecting tenants who believed they were paying rent to their landlord. Brian Augustine, owner of Elite Team Realty, said another employee recently discovered a tenant living in a property that was believed to have been vacant. The tenant told the employee he had paid cash and signed a lease with a woman who said she was an agent for Elite Team. Augustine said he later discovered similar agreements with at least 11 other tenants at properties his firm manages in Cabarrus and Mecklenburg counties.

Reportedly, Augustine discovered that the two employees, a collections manager and a leasing agent, were mother and daughter and terminated their employment several weeks ago after uncovering irregularities in lease agreements and payments. For more, see Ex-employees accused of stealing from tenants.

Go here to watch the WCNC-TV report, Tenants fall victim to bogus rentals.

Go here for other posts on tenant victims of rent scams. unwitting tenant rent scam zebra unwitting tenant rent scam zebra

Residents In Limbo After Mobile Home Park Foreclosure

WBAY-TV Channel 2 (Green Bay, Wisconsin) reports on the plight of 125 mobile home residents in a Fox Valley mobile home park that has reportedly been completely neglected and left in bad shape. The owner of the April Aire Mobile Home Park apparently had been skimming the rent it collected from the residents since he hadn't been making his mortgage payments to the mortgage holder, and recently lost his ownership to foreclosure.

Meanwhile, the local town board is considering an ordinance that could target the park and, at a recent meeting, warned that it could be shut down if it's not cleaned up, effectively forcing everyone to move. On top of all this, no one seems to know what impact the foreclosure will have on them. For more, see Grand Chute Warns Trailer Home Park to Clean Up Its Act.

Go here to watch the WBAY-TV Channel 2 video report.

For story updates, see:

Landlords In Foreclosure May Mean Trouble For Tenants

In Chicago, Illinois, the Daily Southtown recently reported on the potential trouble tenants face when their landlord is stiffing the mortgage lender out of its mortgage payments and facing foreclosure. Among the recent problems for tenants in one building in foreclosure were:
  1. failure to fix plumbing problems, maintain the yard or clean up a sewage backup that forced one tenant to flee the building,
  2. worries that the electricity and gas will be shut off,
  3. driving garbage around to the alley for disposal because the path through the back yard is overgrown,
  4. loss of many belongings, including furniture, important documents and personal mementoes after one tenant's apartment was flooded with sewage,
  5. loss of the family cat for one tenant, which had to be taken to a shelter because pets are not allowed in the tenant's new apartment,
  6. one tenant having to boil water to bathe her two children, ages 4 and 9, after the flood of sewage extinguished the pilot lights in the basement,
  7. putting pots under the sink to catch water that leaks from the plumbing and is rotting the floor.

In another case, the tenant did not know the house he had been renting for seven years was under foreclosure until the sheriff's department woke him up one morning in May to evict him, he said. "From that point on, all hell broke loose," the 50-year-old veteran said. "They told me to stand outside, and they started throwing all my things out." The tenant said he was homeless for more than a week after his unexpected eviction and lost nearly everything he owned. "I lost a lot of things that were sentimental, and that really hurt me," he said.

Calls to the tenants organization from renters who are living in foreclosed buildings have snowballed, according to [John Bartlett, executive director of the Chicago-based Metropolitan Tenants Organization]. He said eviction, utility disconnection and recovering security deposits are among their top concerns.

Although Illinois renters whose landlords default on their mortgage payments soon will be protected from eviction under a state law that will give them until the end of their lease or 120 days to find a new home, the new law will not protect them from the above listed possible problems that can arise in foreclosure situations, which are not covered by the new law.

For more, see Tenants stuck when landlord loses property.

For other stories on tenants unknowingly renting homes in foreclosure, go here, or here, or here.
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The new Illinois state law, which goes into effect on January 1, 2008, can be found either at Public Act 95-0262, or at 735 ILCS 5/15‑1701. equity skimming unwittingly delta

Unwitting Tenants Being Left Holding The Bag In Home Foreclosures

Given the high rate of foreclosures in California, The San Jose Mercury News recently ran a story of how these foreclosures are affecting unwitting California tenants who find themselves being required to leave a rented home that they have dutifully paid rent on throughout the period of their occupancy. Some of the highlights from the story:
  1. Nearly 9,500 California properties were sold in foreclosure auctions in August, according to ForeclosureRadar.com. Of those, 44 percent were not owner-occupied, the company said.
  2. [M]any renters don't know the whole story [about the foreclosure of the home they are renting] until they're being informed by a bank's agent that they need to move in 30 days or face eviction.
  3. [One real estate agent] said she has seen cases where landlords rented property to new tenants just before the home's foreclosure auction date, collecting a deposit and rent "knowing that the house would be gone in two weeks," she said. "It's unbelievable what people do, unbelievable."
  4. In most cases, once a property has been foreclosed upon and the ownership changes, tenants' leases are wiped out, and they must vacate within 30 days (60 days if they've lived in the property more than one year).
  5. Tenants in San Jose rent-controlled units would get 90 or 120 days, depending on how tight the rental market is.
  6. Another exception is in rent-controlled units in cities with "just cause" eviction laws that do not list foreclosure as one of the causes for eviction, such as Berkeley, East Palo Alto, Hayward, Oakland and San Francisco (see Some Foreclosing Lenders Conducting Illegal Tenant Evictions In Oakland).
  7. Many tenants don't know that lenders newly in possession of foreclosure properties will typically offer "cash-for-keys" payments of $1,000 or more to tenants who agree to vacate in about two weeks and leave the property clean, said Sean O'Toole, founder of ForeclosureRadar.com. The payments save lenders the time and expense of evictions, and also some cleaning costs. Tenants still have the right to recover their deposits from their former landlords.

For more, see Renters left hanging after foreclosures.

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

Friday, September 28, 2007

Recent Prosecutions Involve $80+ Million In Fraudulently Obtained Loans, Say South Florida Feds

From the office of the U.S. Attorney - Southern District of Florida:

  • United States Attorney [Alexander] Acosta announced several recent mortgage fraud prosecutions, including two cases this week charging 18 individuals in mortgage fraud schemes that resulted in the issuance of more than $50 million in fraudulent loans.
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1. United States v. Henry Quintero-Lopez, Lazaro Villalba et. al.

This joint federal-state investigation, spearheaded by the Internal Revenue Service and the Broward County Sheriff’s Office, culminated in a 70-count indictment, unsealed [yesterday], charging 15 defendants in a wide-ranging mortgage fraud scheme. This scheme yielded 12 fraudulent loans, totaling approximately $8,300,000.

Among the named defendants, and their alleged conduct, listed in indictment are:

  • Defendants Henry Quintero-Lopez (aka Henry J. Quintero) and Lazaro Villalba - orchestrated the scheme through which they located properties for sale, offered the owners full asking price, and inflated the contract purchase price submitted to the lender to allow their companies, New World International and D& H Investments of South Florida, to receive as a “fee” moneys in excess of the true purchase price.

  • Defendant Joaquin M. Perea, the owner of J.P. Accounting Service in Miami, Florida provided fraudulent pay stubs, IRS forms W-2 ,verification of employment and verification of deposit forms for the straw buyers involved in this scheme,

  • Defendants, mortgage brokers Antonio Ramos, at Home Mortgage Finance Group in Miami, and Ruben Jimenez, at Lenders Choice Mortgage Services in Miami were provided the bogus documents, who knowingly used the bogus documents to obtain mortgages in the name of the straw buyers,

  • Defendants Eric Garcia (aka Raul Eric Garcia) and Martine Yanisse Castrillon were licensed State of Florida registered trainee appraisers who knowingly prepared fraudulent appraisals at the request of Quintero-Lopez and Villalba,

  • A handful of straw buyers who, according to the indictment, were paid a fee and knowingly participated in the fraud, are also named as defendants. They are: defendants Felipe M. Nunez, Michelle Volcy, Luc Bruna, Maykel Clavero-Gonzalez (aka Maykel Clavero), Iray Ponte, Nidia Rodriguez-Rial (aka Nidia Rodriguez), and Iliana Lima - who were paid thousands of dollars by Quintero-Lopez and Villalba to sign the purchase documents and appear at the closings to have the properties placed in their names.

  • Defendant Dahomey Talavera is listed as the incorporator of corporation D & H Investments of South Florida, Inc.

Among the duped mortgage lenders are Lehman Brothers Bank, FSB, New Century Financial Corporation, Master Financial Incorporated, WMC Mortgage Corporation, and First Franklin Financial Corporation.

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

2. United States v. Richard Weldon Crowder, II, Gary Mark Mills, and Karen Lynn Sullivan - Go here for Charging Document (Criminal Information)

The United States Attorney filed an Information charging the following defendants with conspiracy to commit bank fraud for their participation in a multi-million dollar mortgage fraud conspiracy:

  • Richard Weldon Crowder, II, a licensed mortgage broker and the former owner of America’s Best Mortgage Services, Inc., located in Coconut Creek, Florida,

  • Gary Mark Mills, a licensed title attorney and the owner of Four Star Title Inc., located in Deerfield Beach, Florida, and

  • Karen Lynn Sullivan, a former loan officer for Wachovia Bank.

In total, the defendants are alleged to have caused the fraudulent purchase of approximately seventeen (17) different luxury condominiums, involving more than $42,000,000 in fraudulently obtained mortgage loans from:

  • Wachovia Bank, Washington Mutual Bank, Chevy Chase Bank, and Colonial Savings FA.

The scheme also involved use of phony documents, false information, straw buyers, etc.

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Two other recent prosecutions announced by the U.S. Attorney Acosta:

United States v. Yvette Scott Patterson, et. al.

This investigation resulted in charges against eleven defendants involved in a massive mortgage fraud scheme involving 41 fraudulent loans, totaling over $10,000,000. Although two of the defendants remain fugitives, nine have been convicted. Eight pled guilty and one defendant was convicted at trial and sentenced in June 2007 to 120 months in jail.

United States v. Richard Layfield

Defendant Richard Layfield pled guilty on June 11, 2007 to bank fraud. Layfield, a local real estate developer, is scheduled to be sentenced on October 29, 2007 for obtaining just under $24,000,000 in fraudulent mortgages. Layfield knowingly failed to disclose $17 million in money judghments against him when applying for and obtaining the mortgages from Fremont Investment & Loan.

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Go here for the U.S. Attorney Press Release - U.S. Attorney Announces Recent Mortgage Fraud Cases And New federal-State Mortgage Fraud Initiative To Crack Down On Mortgage Fraud Violators.

See also, Statewide crackdown on mortage fraud (Miami Herald - 9-27-07).

North Florida Feds Get Guilty Pleas in Cash Back Mortgage Scam, Involved $17.7 Million In Fraudulently Obtained Mortgages

WJXT-TV Channel 4 in Jacksonville, Florida reports:

  • Two men accused of obtaining about $17.7 million in fraudulent mortgage loans have pleaded guilty to federal charges of conspiracy to commit wire and bank fraud, according to the U.S. Attorney's Office. Justin D. Barker, 31, and Robert W. Hulbert, Jr., 45, both of Jacksonville, could face up to 30 years in prison and a fine of $1 million.

[...]

  • Hulbert, as the manager of the Jacksonville branch of Nations Title Agency of Florida, operated as the closing agent for the transactions. At the closings, Hulbert would disburse funds from the lenders, providing the sellers with checks in the amount of the original sales prices, and providing the remainder of the loan funds -- the proceeds of the fraud -- to one or more of the conspirators.

For more, see 2 Plead Guilty To $17.7 Million In Mortgage Fraud.

Utah TV Sports Anchor Pleads Guilty In Mortgage Fraud

In Provo, Utah, the Deseret Morning News reports:

  • A television sports anchor has pleaded guilty to communication fraud Tuesday and agreed to testify against others in what officials are calling a multimillion-dollar fraud and conspiracy ring. Dave Fox, anchor/reporter for Channel 2 news, and Mark Atkin both pleaded guilty Tuesday in 4th District Court, signing a plea agreement in which they admitted that in April and January of 2006, the men signed loan papers to get homes that they said they would live in but never actually intended to. The plan was to buy the homes and turn them around and sell them as quick investments.

  • As part of [a] plea deal, Atkins and Fox ... agreed to testify against other individuals involved much more deeply in the alleged housing conspiracy ring. [...] The ring — which allegedly involves real-estate appraisers, mortgage brokers, title insurance agents, investors and in some cases the homeowners — is working together to defraud mortgage companies out of millions of dollars by artificially and fraudulently inflating the values of the homes, then trying to sell them.

For more, see TV sports anchor pleads guilty, will testify in fraud.

For story update, see KUTV's Fox apologizes for mortgage fraud, will return as sports anchor (10-12-07).

Protesters "Storm" Ocwen Financial In Pouring Rain; Demand Halt In Predatory Practices

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Dozens of people poured out of a big yellow school bus in Wednesday's rain to protest what they said was Ocwen Financial's predatory lending practices. The group, members of ACORN, crowded into the lobby of Ocwen's headquarters, chanting loudly and demanding to talk to the chief executive of one of the country's largest subprime loan servicers. CEO William Erbey had ignored a letter ACORN sent to him in July asking for a meeting, protest organizer Brian Kettenring said.

  • "This is kind of a poke in the eye to get his attention," Kettenring said. "I'm the Michael Moore of foreclosures." ACORN - Association of Community Organizations for Reform Now - wants Ocwen to stop foreclosures and evictions immediately, restructure loans based on borrowers' incomes and ability to pay, and offer to lock in the initial interest rate for the remaining terms of the loan for borrowers who cannot afford monthly payments that are about to reset at much higher interest rates.

For more, see Homeowners, activists insist lender modify mortgages.

Go here to watch WPEC-TV Channel 12's coverage of the protest.

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

National Mortgage Company To Alter "No Closing Costs" Ads

The Arizona Daily Star reports:

  • A national mortgage firm known for its extensive radio advertising campaign has agreed to make changes to its marketing. Lenox Financial Mortgage has agreed not to claim the company can provide loans with "no closing costs" unless it also discloses that not everyone will qualify. An "assurance of discontinuance" signed by company President John Shibley and filed in Maricopa County Superior Court says any future advertising will include disclaimers and other qualifying information.

  • [Arizona] Attorney General Terry Goddard acknowledged that a majority of the company's customers were, in fact, offered mortgages that refinanced existing loans without closing costs. But he said that wasn't the case universally.

Shibley, in his ads, has called the idea of no-fee mortgages "the biggest no-brainer in the history of Earth."

As part of the agreement with the Arizona AG's office, Lenox agreed to foot the $95,000 bill for the cost of the AG's investigation. For more, see Lenox mortgage to alter 'no closing costs' ads.

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Go here for other posts on so-called "no cost mortgages." yield spread

Thursday, September 27, 2007

Three Charged In Theft Of Seven Homes From Detroit-Area Seniors

In Detroit, Michigan, The Detroit News reports:
  • Calling them "heartless and cruel", Wayne County officials announced charges against three men accused of swindling three senior citizens out of $600,000 through deed fraud and identity theft.

Charged in the felonies are:

  • Paul Rhodes, 35, of Novi (being sought by cops, faces seven counts of fraud, money laundering and larceny by conversion and faces up to 10 years in prison);
  • Nelson Sumpter, 42, of Pittsfield Township (41 felony counts; including uttering and publishing, forgery, false pretenses over $20,000, identity theft, larceny by conversion and money laundering - can face up to life in prison as habitual offender); and
  • Omar Sumpter, 35, of Sterling Heights ( four counts of identity theft, money laundering, and false pretenses - faces up to 10 years in prison).

The lead prosecutor in the case explained how the swindle worked:

  • "They would claim to be real estate professionals who help homeowners to sell their property to potential investors. They tell the home owners that they need their signature to line up investors. They then copy or scan the signature to grant themselves power of attorney. Then they sell the house and keep the money. The victim not only doesn't receive any money, they also lose their home."

According to the prosecutor, the three victims (all of Detroit) included a 72 year old woman, a 76-year-old woman, and a 66-year-old man who lost five homes in the swindle. For more, see 3 accused of swindling homes from seniors.

See also, Wayne County Prosecutor Press Release (Wayne County Deed Fraud Task Force) - Prosecutor, Register of Deeds, and Wayne County Sheriff Announce New Identity Theft and Deed Fraud Charges.

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Last November, a media story from Philadelphia, Pennsylvania reported on similar problems with deed theft in that city. To get the attention of a couple of Pennsylavnia political heavyweights, an investigative reporter at a local television station did a story where she went out and "stole" the homes of Pennsylvania Governor Ed Rendell, Philadelphia Mayor John Street, Pennsylvania Speaker of the House John Perzel using phony deeds. To see the looks on their faces when the investigative reporter showed them she was the new owner of their homes, see Fake Deeds Steal Homes (NBC 10 - Philadelphia).

To read the online story, see Investigators: Homes Stolen With Fake Deeds.

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

Go here for other deed theft posts. deed theft zorro yak elder financial abuse

Nebraska Mortgage Company Claims Charges Of Predatory Lending Practices Unfair

A report by The Associated Press appearing in the Omaha World-Herald reports:
  • An Omaha-based mortgage company plans to fight state allegations of misconduct and will try to keep its state mortgage banking license. [...] On Sept. 14, the state of Nebraska sued Advantage Mortgage Service and its owners, alleging predatory lending practices. State investigators said Advantage's tactics included falsifying closing documents, borrowers' signatures, charging hidden and excessive brokerage fees to borrowers and breaking other state lending and consumer protection laws.

For more, see Omaha-based mortgage company says allegations are unfair and wrong.

For earlier media reports on this story, see:

For related court documents in this case, see:

Maine Benefactor To Return Foreclosed Home Back To Owner

WCSH-TV Channel 6 in Portland, Maine reports on the story of a Fairfield widow with nine children who was facing foreclosure and about to lose her home. According to the story:
  • Local businessman Brent Burger organized a web-based campaign called Nine Days For Nine Children. The website resulted in more than $30 thousand dollars in donated building materials, hundreds of volunteers and monetary donations from as far away as California.

The end result is that Burger bought the home at the foreclosure sale and is now supervising the volunteers renovating the home, which will be given back to the family. The renovations will be completed by Sunday, September 30th. For more, see Volunteers Help Family Of Ten Return Home.

Go here to watch the WCSH-TV Channel 6 video.

For story update, see Family Of Ten Gets A Helping Hand From Neighbors (WCSH-TV Channel 6 - 9-30-07), or go here for Channel 6 video report.

Wisconsin Land Owner Threatened With Foreclosure For Failure To "Put In Her Two Cents"

In Hayward, Wisconsin, the Sawyer County Record reports:
  • Hayward resident Violet Jacobson was rather chagrined recently when she opened a letter from Washburn County treasurer Janet Ullom informing her that unless she paid the two cents balance due on her 2006 real estate taxes by Sept. 30 “plus interest,” the county would foreclose on her five acres near Stone Lake.

  • When I saw the letter, I thought ‘What did I do wrong?’” Mrs. Jacobson said. “I was disgusted. In two years, they could take the land away from me” and put it up for sale.
    It’s ridiculous,” she added with a laugh. “They (county personnel) didn’t look at it. I would spend 41 cents for a stamp to send them two cents.”

For more, see Local landowner threatened with foreclosure -- over two cents.

Foreclosing On Minnesota Farmers A Way To Great Wealth?

On the website of television sports network, ESPN, appears a list of the most hated franchise owners in major league sports. Listed at #12 on the list is the Minnesota Twins baseball team owner Carl Pohlad. The accompanying blurb on Pohlad contains this excerpt:
  • Pohlad started his banking fortune, now valued at $2.6 billion, by foreclosing on the land of Minnesota farmers during the Great Depression.

For more, see (no longer available online) ESPN Page 2 - The owners we love to hate.

Wednesday, September 26, 2007

KCRA 3 Investigation Results In Federal Mortgage Fraud Indictments

A Federal and state mortgage fraud investigation involving four Sacramento-area men who were suspected of falsifying millions of dollars in loan applications so investors could qualify for loans they couldn't afford, and triggered by a KCRA 3 investigation by Investigative Reporter Josh Bernstein, has resulted in a 120 count Federal grand jury indictment of the four men on various charges. According to the KCRA 3 report:

  • In an indictment unsealed Tuesday, a federal grand jury charged James Roy Martin [Jim Martin], 36, Mario Fellini III, 38, Gabriel Richard Viramontes, 44, and Joseph Salvatore Gallo, 34, with bank fraud and conspiracy to launder money, [U.S. Attorney McGregor W.] Scott said. Martin, Fellini and Gallo were also indicted on charges of making false statements in loan applications, and Martin, Fellini and Viramontes were indicted on mail fraud charges, Scott said.
Go here to watch Josh Bernstein's report. To read the KCRA 3 online story, see Four Indicted In Mortgage Fraud Investigation (Charges Follow Extensive KCRA 3 Investigation).

For a copy of the grand jury charges, see Indictment - U.S. v. Martin, et al.

See also, the U.S. Attorney Press Release, and Four indicted in mortgage scheme (Sacramento Bee).

Go here for other posts on this investigation.

Easy Credit Creates Mini Ghost Town In One Section Of NYC & Foreclosure Rescue Scams Throughout City

The New York Times reports:
  • Along the streets of Far Rockaway, many recently built two- and three-family town houses sit waiting for even one family to move in. Some have boarded-up windows, while others have clumps of garbage in driveways that have never seen a car. Desperate developers hoping to cover their bets — and stem their losses — tape up both For Rent and For Sale signs inside windows that face nearly deserted streets. The same blocks were once home to sprawling single-family houses with wraparound porches. But during the superheated real estate market of just a few years ago, longtime residents sold out to developers who rapidly demolished the old to build rows of plain vanilla town houses sold, it seemed, to anyone who could sign a mortgage application. But as the market cooled and credit got tighter, many of the new homes sat empty. On a few blocks, developers have built nothing but plywood walls to hide the weed-choked lots after the old houses were torn down.

In addition, The Times article had this excerpt on the plight of homeowners facing foreclosure who have fallen victim to foreclosure rescue scams:

  • The people who can legitimately help them are already overwhelmed and not looking for new clients. The people who are not legit are looking for them and they treat them nice. That is why people end up signing papers now not even thinking about it.
In the case of one married couple, a friend of the husband’s "offered to help them save the house. Instead, ..., they wound up signing over the deed to him and had the house sold out from under them."

For more, see Risky Loans Help Build Ghost Town of New Homes (if link expired, try here).

Arizona Foreclosure Rescue Operator Files For Chapter 11 Bankruptcy

The Arizona Daily Star reports:


  • As more homeowners end up in foreclosure, one investor in distressed properties has ended up in financial trouble, too. Deed and Note Traders LLC, which has operated a foreclosure rescue service under the name HomeSavers, filed for Chapter 11 bankruptcy Sept. 7.

[...]

  • [S]ome investors who provided financing to Deed and Note Traders said the bankruptcy filing might ... have to do with dubious business practices. Previously, under the HomeSavers program, the company offered to buy houses from people on the brink of foreclosure, and allowed sellers to continue to live in the properties through rent-to-own arrangements.

  • Last year, Deed and Note Traders agreed to pay fees and restitution of $400,000 after being sued by the state Attorney General's Office for using deceptive tactics and luring customers into rental deals they couldn't afford [see Arizona AG Press Release]. In the settlement, Deed and Note Traders agreed to stop conducting its rent-to-own foreclosure rescue program and allow customers still living in their homes to repurchase the houses at a discount.

  • One of the company's largest unsecured creditors ... said Deed and Note Traders has also been unfair to investors.

[...]

  • Another distressed property buyer, HomeVestors, is getting plenty of calls in Tucson, said Fred Hubbard, a local franchisee of the Dallas, Texas-based firm. The company does not offer rent-to-own deals for its sellers because of the potential for legal complications, Hubbard said. "There's been a lot of abuse in lease-backs," he said.
For more, see HomeSavers' parent files for bankruptcy.

For other stories on Deed and Note Traders, see:

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Another Financially Troubled Homebuilder Stiffs Customers & Subs

WGCL-TV Channel 46 in Atlanta, Georgia reports on the problems some new home buyers in brand new subdivisions developed by Tradewinds builders may face. In the case of one recently married new home buyer couple who just moved into their first home:
  • Just weeks after moving into the house in Clayton County, lien letters started arriving in the mail. [The homeowners'] liens totaled about $22,000 all because the builder had not paid contractors. Court documents show long lists of contractor liens on Tradewinds properties in several Georgia locations.
As new homebuyers, they weren't aware of the need for title insurance and say it was never offered to them. When CBS 46 Investigates tried to reach Tradewinds at their headquarters, they discovered newspapers covering the windows and the doors locked. For more, see CBS46 Investigates: The Broken American Dream.

Go here to watch the WGCL-TV Channel 46 story.

Go here for other stories of builders stiffing subcontractors & customers. contractors stiff subs customers alpha

Final Defendant Sentenced In Central Florida Foreclosure Rescue Scam

The Saint Petersburg Times reports:
  • The judge's message was clear: If Amy Hudd Paukner had stood trial with co-workers charged with running a massive mortgage fraud scheme, she would be in federal prison now like the rest of them. "I think you deserve to go to jail, quite candidly," U.S. District Judge James D. Whittemore said to Paukner on Monday. But Paukner, 36, has chronic multiple sclerosis. So Whittemore sentenced her to time served. Others received sentences ranging from a year and a day to five years.

  • In March, a federal jury convicted five Tampa residents that Paukner worked with for scamming homeowners into selling their homes to avoid foreclosure.

For more, see Of 6 in scam, one goes free (The woman with multiple sclerosis aided in defrauding owners facing foreclosure).

For prior post on this story, see Florida Foreclosure Rescue Operators Found Guilty In Federal Fraud Trial.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).

Tuesday, September 25, 2007

Congress Considers "Forced Mortgage Modifications" For Homeowners In Bankruptcy; Elimination Of Credit Counseling For Ch. 13 Homeowners In Foreclosure

In a story that may be unpleasant news to some mortgage lenders, mortgage servicing companies, and some foreclosure rescue operators, Inman News reports:
  • Legislation that would allow bankruptcy courts to modify the terms of a homeowner's mortgage loan could save 600,000 homes from foreclosure, the bill's sponsor claims. HR 3609, the Emergency Home Ownership and Mortgage Equity Protection Act of 2007, would repeal a legal provision that prohibits bankruptcy courts from modifying the repayment terms of home mortgages. Bankruptcy courts already have the power to modify payments on other secured debts, including mortgages on other properties. "Responsible lenders who made loans on reasonable terms have nothing to worry about in bankruptcy court, but predatory lenders will end up with the loans they should have made in the first place," said bill sponsor Rep. Brad Miller, D-N.C., in a press release.
For more, see Bill would let bankruptcy courts impose loan mods (Moody's: Subprime servicers modify only 1% of loans).

See also, House bill would let courts alter mortgages (Reuters) or here for same article) (ABC News).

Postscript: Section 5 of the proposed legislation, if passed, would eliminate the credit counseling requirement for homeowners facing foreclosure who have filed Chapter 13 bankruptcy.

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

More On Minnesota Builder Subject Of Grand Jury Investigation; Straw Buyer Scam, Equity Skimming Suspected

Another story on Eagan homebuilder Parish Marketing and Development is reported in the Pioneer Press. Among other things, the article reports:
  • Two hundred homes Parish constructed in the south metro are entering foreclosure, drawing the attention of local and federal authorities. The U.S. attorney's office has convened a grand jury to investigate the real estate deals and Parish's role in them. An Apple Valley bank officer and a real estate closer from Elko New Market recently pleaded guilty in U.S. District Court to mail fraud in connection with millions of dollars in mortgage deals under investigation. Their attorneys allege Parish is at the center of the elaborate mortgage scheme now under federal investigation. They link the developer to their clients, who admit bilking lenders and borrowers in that scheme.

  • [Bank officer Ramiz] Saadeh, 30, of Apple Valley, and Kristopher Robbins, 27, of Elko New Market, each pleaded guilty to one count of mail fraud this month. Robbins, a self-employed notary and real estate closer, and Saadeh waived their rights to an indictment and are cooperating "in the investigation and prosecution of other suspects," according to their plea agreements. Saadeh's and Robbins' plea bargain stated that the scam involved 200 homes.

Reportedly, the scam involved, among other things, straw buyers buying multiple homes from homebuilder Parish with fraudulently obtained mortgage loans. Many of the homes reportedly ended up being rented to tenants with options to buy, or sold to buyers under contracts for deed. Payments made by the tenants or contract buyers that were to be applied to the existing mortgages weren't and now the homes have either been foreclosed or currently face foreclosure.

For more, see Mortgage scam threatens 200 homes with foreclosure.

Go here for other posts on Minnesota homebuilder Parish Marketing and Development.

Go here for other posts on "rent to own" scams.

For other stories on tenants unknowingly renting homes in foreclosure, go here, or here, or here. rent to own lease purchase option scams zebra equity skimming unwittingly epsilon

Foreclosure Rescue Operator Violates State "Rescue" Statute; Court Invokes Equitable Mortgage Doctrine

A Minnesota Federal Court last week ruled that, in a sale leaseback transaction involving the home of a financially strapped homeowner and a foreclosure rescue operator, the rescue operator violated a number of provisions of the Minnesota statute regulating foreclosure rescue transactions, Chapter 325N.

Further, inspite of the fact that the sale leaseback transaction between the foreclosure rescue operator and the financially strapped homeowners did not involve any formal paperwork evidencing the existence of a consumer debt or mortgage , the court ruled that the evidence presented supported a finding that the sale leaseback of the plaintiff's home was an equitable mortgage, rather than a true sale leaseback.

For the longer version of this post, see Federal Court Finds Violations Of State "Foreclosure Rescue" Statutes; Invokes Equitable Mortgage Doctrine In Homeowners' Favor.

For the court's opinion in this case, see Jones vs. Rees-Max, LLC, et al. (Sept. 17, 2007).

Representing the homeowner in the Federal action were attorneys Kristine K. Nogosek and Robert B. Bauer, with the firm Severson Sheldon Dougherty & Molenda, PA., Apple Valley, Minnesota.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.). equitable mortgage yak

Upstate New York Homeowner Stung By Upfront Fee Foreclosure Rescue Scam

In Rochester, New York, WHEC-TV Channel 10 reports:
  • Kristy Farrand's house has been in her family for half a century but when her lender wrongly put her home in foreclosure, she feared she might lose it. She was flooded with letters from companies offering assistance. Desperate, she answered one that promised to help her avoid the loss of her property. She took $1300 out of her 401k to pay the upfront fee. More than a year later, all they've done is put her deeper in debt.

For more, see I-Team 10: Foreclosure chasers (if link expired, try here).

Failure To Read "Junk Mail" Lands One Maryland Homeowner In Foreclosure

The Baltimore Sun reports:
  • John Woodard says the notice from his new mortgage company looked like typical junk mail. But it wasn't. It was a letter telling him that his recently refinanced loan had been sold to another lender. By the time the Rosedale homeowner realized he had been paying the wrong lender, he owed thousands of dollars in late fees and he soon racked up more in lawyer bills from fending off foreclosure. "My mortgage company never notified me to send the checks somewhere else," he said. "I did get something in the mail from the new company, but it looked like an advertisement so I thought it was junk." Woodard's story is a cautionary tale in the age of bankrupt mortgage companies and failing lenders.

For more, including the potential problems homeowners face when mortgage lenders go out of business and (1) loan payments get lost or misdirected or (2) lenders fail to pay your home's real estate taxes and insurance out of your mortgage escrow account, see The mortgage handoff (With lenders struggling and home loans shuffling, it's up to homeowners to keep tabs on their mortgages) (Try here if link expired).