Wednesday, December 26, 2007

Careful Use Of Reverse Mortgages Can Help Seniors Get Out Of Bad Loans, Say Legal Aid Lawyers, Elder Advocates

The Wall Street Journal reports:
  • Reverse mortgages used to be a way for homeowners to get extra cash during retirement. Now they're also being used for a more-pressing purpose: helping people who are struggling to meet payments on high-interest-rate loans to keep their homes. The strategy, which is relatively novel but gaining popularity among legal-aid attorneys and housing advocates around the country, calls for persuading lenders to take the cash generated by a reverse mortgage in lieu of foreclosing on older homeowners.

For more, see A Way for Older Homeowners To Back Out of a Bind (Some Find Banks Are Willing To Accept Reverse Mortgages To Retire Troubled Loans) (may require subscription; if no subscription, try here - then click link for story - then "refresh" the page, if needed; or try here, courtesy of the Arkansas Democrat Gazette).

Go here for stories related to potential Reverse Mortgage Problems. zebra

Shortage Of Resources Hinder Mortgage Fraud Investigations; Low Risks, High Profits Luring Many From Other Criminal Endeavors

The New York Times reports:
  • The number of mortgage fraud cases has grown so fast that government agencies that investigate and prosecute them cannot keep up, lenders and law enforcement officials have said. [...] “I don’t think any law enforcement agency can keep up with mortgage fraud, because it’s such a growth industry,” said Chuck Cross, vice president of mortgage regulatory policy for the conference of state bank supervisors, an organization of regulators and bankers. “There’s too many cases, not enough agents.”

***

  • Law enforcement agencies say they are overwhelmed, especially because investigating and prosecuting fraud can be complex and time consuming. The officials say career criminals and organized-crime rings have increasingly turned from other crimes to mortgage fraud because it offers lower risks and high profits. “I could hire a dozen investigators and a dozen prosecutors and only scratch the surface,” said David McLaughlin, a senior assistant attorney general in Georgia who coordinates prosecutions of mortgage fraud.

For more, see Officials Falling Behind on Mortgage Fraud Cases.

Illinois AG Nails 3 More Foreclosure Rescue Operators With Civil Suits

(original post 12-24-07)
From the office of the Illinois Attorney General:
  • Attorney General Lisa Madigan has filed three lawsuits against mortgage rescue companies for allegedly violating the Illinois Mortgage Rescue Fraud Act and the Consumer Fraud and Deceptive Business Practices Act. [...] With today's filings, the Attorney General has sued 11 mortgage rescue companies. Madigan filed suit against Homeowners' Assistance Association, Lender's Foreclosure Relief, Inc., and United Home Savers, LLP, based on allegations that these three companies falsely promised to help consumers save their homes after falling behind on their mortgage payments.

  • Madigan filed the Homeowners' Assistance Association complaint against the company and Casimar Cerniaukas (also known as “Casey Cerni”) and Jim Hamilton. The complaint also names as a defendant Foreclosure LMS, an affiliated company that purportedly trained people to conduct mortgage rescue services. Homeowners' Assistance Association is registered as an Illinois nonprofit corporation and deceptively claims to be affiliated with the City of Chicago 's foreclosure prevention program . The lawsuit alleges that the defendants charged homeowners illegal upfront fees of between $500 and $2,000 for mortgage foreclosure rescue services which either were never authorized by the consumer or proved ineffective.

  • Madigan filed the Homeowners' Assistance Association complaint against the company and Casimar Cerniaukas (also known as “Casey Cerni”) and Jim Hamilton. The complaint also names as a defendant Foreclosure LMS, an affiliated company that purportedly trained people to conduct mortgage rescue services. Homeowners' Assistance Association is registered as an Illinois nonprofit corporation and deceptively claims to be affiliated with the City of Chicago 's foreclosure prevention program . The lawsuit alleges that the defendants charged homeowners illegal upfront fees of between $500 and $2,000 for mortgage foreclosure rescue services which either were never authorized by the consumer or proved ineffective.

  • Madigan's suit against California-based Lender's Foreclosure Relief, Inc., alleges that the defendant charged Illinois homeowners illegal upfront enrollment fees of $1,395 for a “Pre-Foreclosure Workout Program.”

  • The third lawsuit, filed against Florida-based United Home Savers, LLP, alleges that the company similarly required an illegal $1,200 upfront fee for services. Both Lender's Foreclosure Relief and United Home Savers failed to provide refunds for the illegal fees upon consumers' request.

For more, see Madigan Sues Three Mortgage Rescue Companies (Attorney General Seeks to Shut Down Businesses and Obtain Restitution for Distressed Homeowners).

Go here for other posts on foreclosure rescue lawsuits brought by the Illinois AG.

Phoenix-Area Head Foreclosure Rescue Operation Under Federal Scrutiny

(original post - 12-22-07)
In Phoenix, Arizona, we find investigative reporter Josh Bernstein, now with television station ABC 15, shining the spotlight on another apparently shady real estate operation. This time, the company in the spotlight is Mesa-based Financial Enterprises LLC, a foreclosure rescue operation involving Jeremy Michael Head and his business partners.

The focus of the report is an equity stripping transaction, under the guise of a home sale and leaseback, that one local homeowner facing foreclosure unwittingly entered into after turning to Financial Enterprises for help. The homeowner has since filed a lawsuit alleging fraud against the company, naming among others, Jeremy Michael Head, his brother Charles Head, mortgage broker Sonny Rock, and straw buyer Sarah Mattson, who ended up on the title to the victim's home, as defendants.

This operation is reportedly part of the nationwide operation that is currently under criminal investigation. An excerpt from the story:
  • According to documents obtained by the Investigators the FBI has raided several offices across the country, including the offices of Financial Enterprises LLC in Mesa, Arizona. The FBI has seized lavish sports cars, thousands of documents and a condominium in Miami as well. Sarah Mattson's attorney tells ABC15 "the United States Attorney and the FBI have told me there is no doubt my client is going to be indicted."

***

  • The Investigators have learned there are more than 350 victims nationwide, involving more than thirty five million dollars in fraud. The FBI's investigation involves homes from Hawaii to New Jersey. There are more than a dozen victims here in Phoenix and the surrounding area.

For more, including the link to watch the ABC 15 video report, see Valley teacher, former business partners tied to federal mortgage probe.

Go here to read more about the key players in this investigation.

Go here for other posts on the Head nationwide foreclosure rescue operation.

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Go here for earlier posts and links to media reports on a series of investigative reports by Josh Bernstein, then with KCRA 3 in Sacramento, that led to a break up of a local mortgage fraud ring and the Federal indictments of the ring operators.

Update On Unraveling Virginia Real Estate Operation / Alleged Mortgage Fraud Ponzi Scheme

The Virginian-Pilot recently ran stories updating and reviewing their investigation on the Hampton Roads straw buyer financed, real estate flipping operation of Cary McEntee and CM Development. Both are now in bankruptcy court, where McEntee reportedly has testified to falsifying numerous loan documents in a flipping operation fueled largely by so-called "no-doc" mortgage loans. Excerpts from the stories:
  • Financial records, experts' analysis, investor interviews and McEntee's own testimony show CM Development's business model was a prime example of a Ponzi scheme. McEntee offered investors a couple of ways in: He'd either borrow their cash for a short time at a generous interest rate or he'd pay a flat fee for using their names and their good credit to get bank loans. This money, he said, would be used to buy houses in low-income areas, renovate them and rent them out. Yet the rental income on most properties couldn't even cover the houses' mortgages. And the company's constant property sales - it sold houses repeatedly among its investors at ever higher prices to eke out every bit of equity - apparently didn't generate enough to pay the bills.

***

  • CM Development and its investors received more than $19 million in loans from more than 20 banks over [...] 2-1/2 years. But by March of this year, more than half of the roughly 250 properties controlled by the company sat vacant and efforts to renovate many had stalled.

According to The Virginian-Pilot, McEntee has testified that the company falsified about 80 percent of mortgage loan-related documents, representing to mortgage lenders that property buyers brought money to the real estate closings when they hadn't. Further, these loans reportedly financed CM Development's daily operations and supported McEntee's lavish lifestyle, including his $1 million Church Point home in Virginia Beach, the luxury vehicles he and his wife drove, and the condo he kept at the Oceanfront, according to the story.

According to an earlier Virginian-Pilot story, the unraveling of the flipping operation also spread its negative effects on:

  1. renters, whose rent payments have not been applied to satisfy the typical landlord responsibilities, leaving them to deal with deteriorating living conditions, water shutoffs, foreclosure evictions, and unrefunded security deposits;
  2. contractors and suppliers, who have been stiffed on payments due them for materials and labor, resulting in liens and legal claims against McEntee, CM Development and its investors; and
  3. the surrounding neighborhoods where the flipped homes are located, resulting in code violations, demolition orders, vandalism, vagrancy, and plans to issue criminal warrants to the group’s various property owners for failing to maintain the properties.

While no criminal charges have been brought against CM Development or McEntee at this time, the FBI is reportedly looking into the company. For more, see:

Go here for links to earlier Virginian-Pilot stories on CM Development.

Go here for other posts on the CM Development flipping operation.

Reverse Mortgages: The Next Subprime? Part 1

An opinion column in Salon magazine describes the consideration currently being given by Congress to the reverse mortgage industry, and the concerns raised because of some in the industry being accused of ripping off a significant part of the home equity accumulated by senior citizens over the years by combining a granting of a reverse mortgage with the contemporaneous purchase of deferred annuities [Editor's Note: Another technique used by some scam artists is to combine a reverse mortgage with the making of required home improvements, where the loan salesperson and the home repair contractor are in cohoots]. For the article, see The next subprime: Reverse mortgages.

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

Go here for stories related to Reverse Mortgage Problems. xero zebra

Tuesday, December 25, 2007

Lenders' Subtle Screw-Ups Letting Homeowners Off The Hook On Toxic Refinancings

Reporter Amir Efrati, of The Wall Street Journal, reports:

  • Having buyer's remorse about a mortgage? It can pay to scrutinize the fine print. Amid the housing-market turmoil, homeowners have been increasingly turning to a little-known process for renegotiating or exiting a loan. Even seemingly minor paperwork slip-ups can be enough to get a "rescission" (basically, a loan cancellation) based on the Truth in Lending Act, a federal law requiring disclosure of a loan's key terms. Under a rescission, while a homeowner still owes the principal, the lender won't be able to foreclose. Plus, all loan-related fees and interest that were paid are subtracted from the principal, which can mean substantial savings for the borrower. After a rescission, the borrower must pay off the loan, typically with a new mortgage, or sell the house. Other times, lenders will modify the terms of a mortgage instead of doing a rescission.

  • It isn't for everyone. Borrowers have just three years after the loan is made to make a rescission claim. It is available only to people who refinanced their original mortgage on their primary residences.

  • People who haven't refinanced can still use a bevy of state laws to seek damages from lenders, mortgage brokers, real-estate agents or appraisers who committed similar mistakes (or outright fraud) during loan origination.

***

  • Consumer lawyers say rescissions are on the rise. Pamela Simmons of Simmons and Purdy says the Soquel [California] law firm has done more than 300 this year, up from 200 last year. Until recently, some judges were loathe to cancel loans where the only violations were paperwork mistakes, says Ira Rheingold of the National Association of Consumer Advocates, a group of consumer attorneys. Now that foreclosures are mounting, "courts have gotten more sensitive" to violations, he says.

  • Many seemingly small foul-ups can qualify. If the APR, or annual percentage rate, is off by a fraction of a percent between the preliminary and final loan documents, the loan may be rescindable. Same goes if the total in fees is off by more than $100 (or $35, if the borrower is facing foreclosure).
In one case cited in the story, the lender's failure to provide the homeowner couple with two copies of a disclosure form informing them of their three day right to cancel the loan was enough to get a toxic loan canceled, saving the couple about $60,000. They were then able to refinance their way out of the bad loan with a mortgage with better terms from a different lender.

For more, see How minor mistakes can upend a mortgage (Many seemingly small discrepancies in paperwork can qualify for a loan rescission) (story appears in the Contra Costa Times - may require free registration; or try here - courtesy of the The Press Enterprise)

Go here for other posts on using the Truth In Lending Act to Undo Bad Mortgage Loans.
---------------

For those stuck with bad loans who want to find out if their mortgage lender screwed up with the loan documents, and need a starting point for finding a consumer protection attorney to look over the paperwork, go here , or go here , or go here. (Don't hesitate to ask them if they work on a "contingency fee" basis - where they are entitled to their fee only if they succeed. In the context of consumer protection litigation, your attorney, if successful, will generally obtain a court order compelling the mortgage lender who screwed up to cough up the fee, therby costing you nothing out-of-pocket. Also ask the attorney if there is a charge for an initial consultation - don't be shy!)

These sources may also be a good place to begin a search for a consumer protection attorney if you're stuck with an unreasonable mortgage servicing company. Go here , go here , and go here for posts on questionable mortgage servicing practices and for those who think their mortgage servicing company is screwing them over. undo mortgage loans TILA alpha

Wisconsin Contractor To Pay $500K Or Face Stiff Sentence For Stiffing Subs, Leaving Homeowners Holding The Bag

In Wisconsin, the LaCrosse Tribune reports:
  • A former Onalaska building contractor whose failure to pay $500,000 to subcontractors left four homeowners stuck with the bills was ordered [last week] to make restitution or face a stiff prison term. La Crosse County Circuit Judge Ramona Gonzalez gave Kasimir M. Oganowski, 36, two years on electronic monitoring and 10 years of probation, along with 100 hours of community service each year.

  • But Oganowski will not spend time behind bars, despite calls for prison time by a Department of Corrections agent, the prosecutor and victims. Gonzalez said she would rather see Oganowski repay his victims than live in prison at taxpayers’ expense.

***

  • Oganowski pleaded guilty in September to two counts of felony theft by contractor. He moved earlier this year to Greenwood, Ind., and will be allowed to serve his electronic monitoring there. He must annually pay at least $20,000 in restitution, Gonzalez said. [...] If he fails, she said, he still can receive up to 20 years in prison and extended supervision. [...] Oganowski admitted in court he took money from one project to cover costs on another, and left the homeowners — who also were his close friends — with unfinished homes and potential foreclosures from unpaid subcontractors.

For more, see Man gets probation in fraud case.

For other posts on contractors accused of stiffing subs & homeowners, go here and go here. contractors stiff subs customers zeta

Church Pastor On Denver DA's Radar; May Involve Alleged Straw Buyer Flipping Operation

In Denver, Colorado, the Rocky Mountain News reports:
  • The Denver District Attorney's Office is investigating the Rev. Harold Hicks, pastor of the Mount Carmel Community Baptist Church in northeast Denver, a spokeswoman confirmed [earlier this month]. The nature of the inquiry was not disclosed, but Hicks was the subject of a Rocky Mountain News investigation in July in which two former members of his church said they were unwitting participants in a "straw buyer" real estate scheme.

  • Records supplied by former member Sherri Wrightsil indicated she bought seven properties for about $845,000, although she was financially unqualified to do so. A company with ties to Hicks rented them out before they went into foreclosure. In addition, Wrightsil lent Hicks $10,000 for a real estate deal. [...] Mortgage broker Jim Spray, who had helped the Rocky review more than 10 pounds of documents supplied by Wrightsil and Deborah Richardson, another former church member, said their names appeared to have been used as straw buyers, paying inflated prices for dilapidated housing units.

***

  • In a separate development, Gerald Johnson, an electrician who worked on Hicks' properties, has stepped forward to charge that Hicks painted over mold in some units he was renting out and covered asbestos with sheet rock. [...] "My anger has been simmering for several years," Johnson said. "I have prayed about this. He should be held accountable for what he has done."

For more, see Pastor under DA's scrutiny (Hicks subject of Rocky report on straw buyer scam).

For the earlier Rocky Mountain News story on their investigation of Rev. Harold Hicks, see Signing on faith (Ex-church members say pastor misused trust to conduct shady real estate deals).

Florida Man Scams Girlfriend Out Of $100K+ From HELOC Account, Say Court Docs

In St. Petersburg, Florida, The Tampa Tribune reports:
  • A 43-year-old St. Petersburg man defrauded his girlfriend out of more than $100,000, most of it by persuading her to open a home equity line of credit ["HELOC"], according to court documents released [earlier this month]. Richard Butler was arrested [...] on a charge of scheming to defraud. Bail was set at $50,000.

***

  • Butler persuaded his girlfriend to open a line of credit to provide him $20,000 so his home would not be foreclosed upon, according to the documents. She opened a $150,000 line at her bank, SunTrust, and gave him $28,000, the documents state. [... Subsequently,] he persuaded her to put her name on a signature card for his bank account at Colonial Bank, though she didn't bank there, according to the documents. When he got his hands on checks for the home equity line of credit, he would sign her name or his name and hers and then deposit the money in the Colonial account, the documents state. He deposited $97,000 in the account at Colonial before withdrawing it for personal use, the documents state.

For more, see Beau's Scam Netted $100,000, Files Say.

Baltimore Judge Orders Flat Fees For Attorneys Clipping Homeowners For Fat Fees In Tax Sale Foreclosures

In Baltimore, Maryland, The Baltimore Sun reported earlier this month:
  • A Baltimore circuit judge ruled [earlier this month] that attorneys handling tax-sale foreclosure cases in the city can charge only flat fees instead of billing by the hour, a move aimed at reducing the amount of money homeowners have to pay to keep their homes. The ruling by Evelyn Omega Cannon, the judge in charge of the Baltimore Circuit Court civil docket, capped a yearlong review that she began after realizing that many requests for fees and expense reimbursement in tax-sale cases were not documented.

  • Her ruling comes as federal authorities look into possible mail fraud and restraint-of-trade violations in tax-sale auctions in the city and a number of counties around Maryland, and at a time when foreclosure rates in Maryland are rising rapidly. [...] In her 51-page opinion, Cannon set the fees at $1,300 or $1,500, depending on how far along the case has gotten ...
For more, see Judge limits lawyers' fees in tax-sale cases (when link expires, go here for story courtesy of LexisNexis). bidding

Slow Refunds Rile REO Investors At H&M Auction

In Stockton, California, The Stockton Record reports:
  • A couple of top bidders in a no-minimum-bid auction of foreclosed homes nearly a month ago in Stockton are not only unhappy that banks didn't accept their bids or even negotiate a sale, they haven't gotten back thousands of dollars in deposits. "It was a waste of my time," said Lewis Stallworth Jr., a Stockton man who put in a top bid of $135,000 for a north Stockton house. "I feel like it was almost a scam. There's no use in going to an auction if they're going to act like that." The Dallas-based auctioneering firm of Hudson & Marshall staged an auction of 61 foreclosed homes Nov. 15 in Stockton, one of a number of auctions last month in Northern California. [...] Stallworth said Hudson & Marshall needs to fix its auction process to make it fair. "It's a simple system," he said. "All they have to do is say, 'This house has a minimum bid,' or whatever, and everybody knows right off the top so they're not wasting your time."

For more, see Rejected top bidders await deposit refunds.

Monday, December 24, 2007

Landlord Holds Connecticut Hostage With Threat To Cut Off Heat, A/C To Agency Offices, Says State AG

A number of Connecticut state agencies have effectively been threatened with the loss of their homes, according to a press release from the office of the Connecticut Attorney General:
  • Attorney General Richard Blumenthal [last week] sued TEN Companies, Inc. for threatening to cut off heating and cooling to 10 key state buildings -- effectively crippling large swaths of state government -- unless the state drops a separate lawsuit seeking $14 million that the company overcharged the state. [...] Because all but one of the 10 buildings have no independent heating or cooling systems, TEN's actions would effectively force a shutdown of vital state agencies, including the State Armory, the Emergency Operations Center, the Department of Environmental Protection and the State Health Lab.

***

  • "We must stop TEN's brazen, blatant extortion -- its thuggish threat to shut down state buildings and cripple critical services as we pursue taxpayer legal rights," Blumenthal said. "A court order must block TEN from holding us hostage. If we fight for $14 million TEN overcharged taxpayers, TEN is prepared to make our buildings uninhabitable and state services undeliverable. TEN's termination of heating and cooling would force shutdown of the State Armory, the State Emergency Operations Center, the State Health Lab, the Department of Environmental Protection and other key state agencies. This company's arrogant disregard for citizen safety and well-being is shameful and shocking. [...] The company's demand that we withdraw our overcharge claims and apologize for bringing them is the height of arrogance and disregard for citizen safety and health -- unfair, unethical, unconscionable and unacceptable."

For more, see Connecticut AG Press Release - Attorney General, DPW, DCP Sue, Seek Injunction To Prevent Cut Off Of Heat, Cooling To State Buildings.

Law Firm, Mortgage Company, Real Estate Broker To Pay $700K Fine In Alleged Connecticut Kickback Racket

From the Connecticut Attorney General's office:
  • Attorney General Richard Blumenthal, Insurance Commissioner Thomas R. Sullivan and Department of Consumer Protection (DCP) Commissioner Jerry Farrell, Jr. [recently] announced that a law firm, mortgage company and real estate broker will pay $700,000 in fines, forfeitures and restitution to settle allegations they engaged in illegal kickback and inducement schemes. Paying the $700,000 are the law firm Reiner, Reiner & Bendett, P.C., of Farmington, Absolute Mortgage Solutions, LLC, of East Hartford and Access America, LCC, DBA Century 21 Access America of Wethersfield. Of the money, $125,000 will pay restitution to about 500 Absolute consumers who overpaid for certain mortgage-related services as a result of one of the schemes.

***

  • "This law firm used service and other sham contracts to camouflage kickbacks and sidetrack state law," Blumenthal said. "Consumers were overcharged because of this underhanded scheme. Reiner and Absolute conspired to conceal illegal payments as fake fees, secretly forcing consumers to cover the cost of kickbacks. The law firm hid illicit payments to Access in phony 'marketing' and 'rental' agreements. These steering schemes increased consumers' costs and denied choice, while unjustly enriching the lawbreakers.

For more, see Connecticut AG Press Release - Attorney General, Consumer Protection, Insurance Dept Announce $700,000 Settlement In Alleged Title Insurance Kickback Scheme.

Go here for other posts involving legal issues related to title insurance. title insurance legal issues

Florida AG Announces Criminal Racketeering Charges In Phony Docs Mortgage Scam

From the Florida Attorney General's office:
  • Attorney General Bill McCollum and Office of Financial Regulation Commissioner Don Saxon [Friday] announced that criminal charges of racketeering, conspiracy to commit racketeering and grand theft were filed against a mortgage brokerage business and a law firm, both formerly located in Leon County, as well as three employees of the brokerage business and the firm. Belinda Dearing Mortgage and law firm Stephen C. Willis, P.A., were named in the charging document as well as Belinda Dearing Willis, Terinda Denise Watson and Clifford Lee Cummings.

***

  • The law firm of Stephen C. Willis, P.A., also known as the Willis Law Firm, participated in the fraud by deceptively reporting the amount of down payments and closing costs and by giving misinformation about how the lender’s loan proceeds were distributed when closing the transactions and preparing the settlement statements for the U.S. Department of Housing and Urban Development.

For more, see Racketeering Charges Filed Against Mortgage Company, Local Law Firm (Elaborate scheme to defraud included fraudulent application documents, fictitious bank statements).

Akron-Area Mortgage Fraud Indictments Linked To Strip Joint, Say Prosecutors

In Summit County, Ohio, the Akron Beacon Journal reports:
  • Summit County prosecutors, who on Thursday announced a 147-count indictment in an alleged mortgage fraud and money laundering scheme, say they have linked the multimillion-dollar operation to the purchase of an Akron strip club. Stripped, a nightclub on Brittain Road south of Tallmadge Avenue, was run by Brianna Fullerton, the girlfriend of a key figure in the investigation — Evergreen Investment and Evergreen Homes President David B. Willan. Fullerton and Willan were among the 17 indicted Thursday and are tied by public records to Stripped and companies that purchased the club in May 2006.

For more, see Prosecutors say purchase of strip club, fraud linked (Girlfriend of key figure ran business, official says; seven plead not guilty on Friday).

Go here for other posts on the 147-count indictment.

Countrywide Steered Homeowners Into Risky Loans, Says Lawsuit; Class Action Sought

In Los Angeles, California, The Associated Press reports:
  • Several people who took on home loans from Countrywide Financial Corp. are suing the company, claiming they and other borrowers were steered unnecessarily into taking on risky loans with built-in payment hikes, which ultimately led them to go bankrupt or lose their homes. The seven plaintiffs filed an amended complaint Friday against the Calabasas-based company and several of its subsidiaries. Among the allegations are claims that Countrywide tried to “induce as many borrowers as possible into expensive and dangerous subprime loans, because such loans are the most lucrative for Countrywide.” The lawsuit, which was originally filed in U.S. District Court in Los Angeles in September, seeks unspecified damages and class-action status.

For more, see Countrywide Financial steered borrowers wrong.

Go here, Go here and Go here for more on recent Countrywide problems with consumers.

Repeat Mortgage Fraudster Violates Probation; Gets 25 Years In Prison

From the office of the Florida Attorney General:
  • Attorney General Bill McCollum [last week] announced that a Broward County man was sentenced to 25 years in prison after he violated terms of his criminal probation by committing mortgage fraud. Nicholas Dimonda was originally prosecuted more than 10 years ago for orchestrating a mortgage fraud scheme that defrauded banks, private investors, homeowners and a nationwide title insurance company out of more than $1 million. Dimonda was convicted in 1999 of multiple criminal charges including grand theft, racketeering and forgery and was sentenced to jail time and 14 years of house arrest and probation, which was violated in 2005 when he became involved in a new mortgage fraud scheme.

***

  • Dimonda convinced another individual to open a mortgage brokerage company in Hallandale, FL, then named his minor daughter as an officer of the company, assumed the identity of the original owner of the company, and continued to broker mortgages under the false identity. As part of the fraudulent mortgage brokering he engaged in, Dimonda often falsified employment records for individuals to qualify them for loans they otherwise could not have obtained.

For more, see Repeat Mortgage Fraud Offender Sent Back to Prison (Broward County man violated terms of criminal probation with new mortgage fraud scheme).

Sunday, December 23, 2007

Subprime Mess Great News For White-Collar Criminal Defense Bar?

The Recorder (appearing at Law.com) reports:
  • From a fees standpoint, white-collar defense lawyers couldn't be blamed for casting hungry eyes at the subprime mortgage mess. Take New Century Financial Corp. In February, just as the mortgage meltdown began, the Orange County, Ca.-based subprime lender announced it would restate earnings by an as yet undetermined amount. That caught the Securities and Exchange Commission's attention. A federal grand jury in the Central District of California fired off a subpoena. That has quickly translated into a classic white-collar boondoggle, generating work for defense lawyers at multiple big firms.

***

  • The question on defense lawyers' minds beyond New Century is whether large-scale investigations will surface elsewhere in California. So far, they haven't. Defense lawyers chalk much of that up to the slow pace with which the government responds to any scandal du jour. When federal prosecutors do wade into the subprime mess, though, white-collar lawyers wonder whether they will merely ramp up simple fraud cases against brokers, or if more complicated investigations against subprime lenders and investment banks are in the offing.

For more, see Subprime Loans Could Yield Lots of Work for White-Collar Defense Lawyers.

Fraud Ring Member Admits Forging Signatures On Mortgages

In Northern New Jersey, The Associated Press reports:
  • Another guilty plea in a Paterson mortgage scam. Frank Corallo admitted he forged signatures on mortgages he'd helped falsify. The bogus mortgages helped otherwise unqualified buyers purchase houses whose value was artificially inflated by an appraiser who was in on the scam. Banks were left holding more than $1 million in worthless loans. Authorities say the scheme was run by Mahwah real estate mogul Michael Eliasof. He has already pleaded guilty to conspiracy to commit wire fraud. Eliasof used white-collar professionals to sell the properties while bribing public employees to keep poor tenants in substandard housing.

Source: Another Man Pleads Guilty In N.J. Mortgage Scam.

Go here for other posts on the Michael Eliasof flipping scam operation.

California Contractor Charged With Screwing Fifteen Homeowners Out Of $670K

In Santa Ana, California, The Associated Press reports:
  • An Orange County contractor accused of bilking homeowners out of $670,000 in payments has been captured in Kansas. Authorities say Ira Jay Messing, 60, was arrested Dec. 3 in Wichita, Kan. Messing ran a design and remodeling company that accepted about $670,000 in payments from 15 homeowners to install sunrooms in their residences between 2003 and 2005. But county prosecutors say little or no work was ever done. Instead, Messing allegedly used the money to complete other contracts. He eventually closed his company and filed for bankruptcy last year. Messing is being held at a county jail on $1 million bail. He's set to be arraigned [...] on charges of diverting construction funds and grand theft.

For more, see OC contractor accused of bilking homeowners arrested in Kansas.

For other posts on contractors accused of stiffing subs & homeowners, go here and go here. contractors stiff subs customers zeta

Nine Home Repair Contractors Screwed Illinois Homeowners, Says State AG

From the office of the Illinois Attorney General:
  • Attorney General Lisa Madigan filed lawsuits [last] week against nine separate home repair businesses operating around the state, alleging that they defrauded Illinois consumers of more than $625,453 in down payments by performing substandard work or no work at all.

***

  • In each suit, Madigan's office is seeking a permanent injunction preventing the defendants from engaging in the home repair trade, restitution to consumers, a civil penalty of $50,000 per defendant, additional penalties of $50,000 for each act committed with intent to defraud and an additional $10,000 for each act committed against a senior citizen, and costs.

For more, see Madigan Sues Nine Illinois Businesses For Alleged Home Repair Fraud (Reminds Consumers to Make Informed Decisions When Choosing Contractors).

For other posts on homeowners left in the lurch due to actions by builders/contractors, go here, go here, and go here. contractors stiff subs customers alpha

Operation AC/DC "Stings" Unlicensed Florida Contractors

In Belleview, Florida, the Ocala Star Banner reports:
  • On Friday, sheriff's deputies, along with the State Attorney's Office, the Department of Business and Professional Regulation and the county's building department, organized a sting operation in an effort to crack down on unlicensed contractors. Labeled Operation AC/DC, deputies conducted the sting with the permission of a Silver Springs Shores homeowner who allowed his home to be used as bait for the probe.

Officials had arrest warrants for 14 unlicensed contractors. All the people arrested Friday were charged with unlicensed electrical contracting. Some were also charged with contracting without a license. For more, see Sheriff's deputies drop the hammer on unlicensed contractors.

Lehigh Valley Home Improvement Contractors In Hot Water

In eastern Pennsylvania, The Express Times reported earlier this month:
  1. Michael Caprista, 45, of Nazareth, is sentenced to 90 days in jail and is required to pay $163,000 of restitution. He admitted taking money for poor or incomplete work from more than 20 customers and businesses in the Lehigh Valley and northwest New Jersey.
  2. Robert Paul Westwood, 38, who previously lived in Bethlehem and operated Quality Construction and R&C Contracting in Nazareth, pleads guilty in Lehigh County Court to two counts of felony fraudulent business practices. He admitted to ripping off nine customers for more than $150,000.
  3. Ronald A. Schmidt, 50, of Easton pleads no contest to taking $10,500 from a customer for work he never completed.

Source: Cracking Down on Crooked Contractors.

Go here for other posts on builders & contractors accused of stiffing customers. contractors stiff subs customers alpha

Failure To Complete Work Leads To Arrest Of Repair Contractor

In Harrington, Delaware, WBOC-TV Channel 16 reports:
  • Harrington police have arrested a 49-year-old Smyrna man for home improvement fraud. Police [...] charged Steven M. Hewes for one count of home improvement fraud. Police say that on Nov. 5 they were notified of an agreement between Hewes and the victim to remodel the victim's home. According to police, the victim paid Hewes a down payment, however, Hewes failed to complete the work.

Source: Smyrna Man Charged With Home Improvement Fraud.

Go here for other posts on builders & contractors accused of stiffing customers. contractors stiff subs customers alpha

Saturday, December 22, 2007

10 Florida Lawyers Disciplined For Conduct In Real Estate Transactions, Handling Clients' Money

The North Country Gazette reports:
  • The Florida Supreme Court in recent court orders disciplined 23 attorneys, disbarring three, suspending 14, placing three on probation, reprimanding six and ordering three to pay restitution. Some attorneys received more than one form of discipline.

Among the disciplined attorneys are the following ten Florida attorneys (or now former attorneys, as the case may be) for "playing fast & loose" with clients' money and/or committing legal or ethical violations in connection with conduct in real estate transactions, according to the media report:

1) Michael Allen Bryant, suspended for 18 months, and ordered to pay restitution of $6,120.92. Bryant committed multiple ethical violations in acting as a closing agent for transactions involving the sale of a client’s home by (1) failing to disburse money in accordance with the closing statement, (2) by failing to apply funds entrusted to him for the purposes for which they were entrusted and (3) by failing to promptly give the client the money he owed her. He also failed to see that a second mortgage was duly recorded and participated as the settlement agent in what amounted to a fraud on his client,

2) Laureen Adele Cameron, to receive a public reprimand from The Florida Bar Board of Governors; placed on probation for two years; and directed to complete The Florida Bar’s trust accounting workshop. Among other things, Cameron failed to respond to a Bar subpoena for trust account records and violated Bar rules regulating trust accounts,

3) Ronald Clyde Denis, suspended for 10 days, and ordered to undergo an office procedures and record-keeping analysis. Without proper supervision from Denis, his non-lawyer assistant sent a demand letter to an insurance company on behalf of a client for the $10,000 policy limits shortly before the statute of limitations was about to run. No lawsuit was filed. The company responded with a $1,000 settlement offer, which the client refused. Denis then closed the file, took no further action on the case and didn’t inform the client,

4) Kevin Alan Fuller, reprimanded and directed to attend "Ethics School" (Editor's query: what's ethics school???). Among other things, Fuller failed to competently represent a client by not taking the necessary steps to enforce a company’s Claim of Lien, resulting in the lien expiring,

5) William Garcia, permanently disbarred. In September, Garcia pleaded guilty to 13 felonies including grand theft, money laundering, obtaining a mortgage by false representation and false reporting by bank officers with the intent to defraud. He received a sentence of 10 years reporting probation. Multiple counts were not prosecuted in a plea arrangement that included Garcia agreeing to both give up his law license in Florida and not to seek one in any state and to be liable for $500,000 in criminal investigation costs,

6) Mark T. Guariglia, permanently disbarred, and additionally ordered to pay restitution to The Florida Bar’s Clients' Security Fund for any payments made as the result of his misconduct. After not complying with a subpoena for trust account records, Guariglia’s bank, in response to a subpoena, produced them. The records showed he had misappropriated thousands of dollars of clients’ funds, using the money from recent deposits to satisfy obligations incurred in prior periods (Ponzi scheme???) and also using funds for his own purposes. In one case, he misappropriated $155,700.53,

7) Robert Michael Marasco, ordered to receive a public reprimand and placed on probation for two years. During the probation, a certified public accountant will monthly review Marasco’s trust account records. Additionally Marasco will undergo an office procedures and record-keeping analysis. An audit revealed that Marasco was negligent in bookkeeping resulting in his trust account not being in substantial compliance with Bar rules,

8) Peter William Martin, suspended for three years, and ordered to pay restitution totaling $29,990 to two clients. Responding to a Bar complaint that he had misappropriated $19,500 from a client, Martin failed to produce trust account records and bank statements. A year later, he sent a check to the former client for $19,500 but could not account for another $9,900 belonging to the client. In another case, there was a shortage of $20,000,

9) Martin Kirby Watson, St. Petersburg, disbarred. He also agreed to make reasonable efforts to reimburse the Clients' Security Fund of The Florida Bar if payments are made as a result of his conduct. Watson was hired in February 2006 to administer a trust and will with assets of $523,074.17. In June 2006, he requested the personal representative of the estate write a check for $288,712.52 to be put in his trust account for final distribution of estate proceeds. He distributed only $50,000 and by the end of 2006, no distribution of the remaining funds had been made. Watson has not returned all the money,

10) Alberto Jose Xiques, suspended for three years. Xiques wrote a check from his operating fund for $55,136.39 to pay for the mortgage documents and intangible tax on a mortgage and security agreement in the sale of a Miami property. The check, which was not honored twice for insufficient funds, should have come from Xiques’ trust account. Additionally, on the same day, he wrote a check for $8,112.50 on his operating account to the clerk of the circuit court for state tax/stamps on the deed for the transaction. The tax on the sale of the property should have been $81,000. Civil complaints later dismissed by Gibraltar Private Bank and Trust Co. indicated Xiques did not have sufficient funds in trust accounts to cover obligations in one case and did not timely pay a mortgage and record it in another.

For more, see Florida Supreme Court Disbars Three Attorneys.

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If a Florida attorney is representing you and screws you out of money or property through dishonest conduct, go to The Florida Bar's Clients' Security Fund for more information.
For other states, see:

Ohio AG On Anti-Meth Initiative

Ohio Attorney General Marc Dann has announced this month initiatives he is pursuing with some local Ohio law enforcement agencies in stepping up the pressure to bust up meth lab operations throughout Ohio. For more, see:
  • Ohio AG Press Release (12-17-07) - Attorney General Marc Dann, Clermont County Sheriff A.J. Rodenberg, and Highland County Sheriff Ron Ward Announce New, Aggressive Anti-Meth Effort,
  • Ohio AG Press Release (12-14-07) - Attorney General Marc Dann and Ashtabula County Sheriff William Johnson Announce Aggressive Anti-Meth Project.

Go here for some methamphetamine information resources.

Go here and go here for other posts on home based meth labs. meth lab zeta

Tennessee Gets $1.1M In Fed Funds To Fight Meth

In Tennessee, The Murfreesboro Post reports:
  • U.S. Rep. Bart Gordon has helped to secure $1.1 million in federal funding to help state and local officials fight methamphetamine production and abuse. “Strong state and federal laws are making an impact on meth production, but we still have too many meth labs in Tennessee,” said Gordon. “Last year, Tennessee had more meth lab seizures than all but four states. Law enforcement needs better ways to detect clandestine meth labs and more resources to educate the community about the dangers of meth abuse.”

For more, see Gordon secures $1.1 M to combat meth In Tennessee.

Go here for some methamphetamine information resources.

Go here and go here for other posts on home based meth labs. meth lab zeta

More On Neighborhood Meth Labs

The following are stories, some recent - some not-so-recent - related to the operation of local neighborhood meth labs:

Hollywood, Florida: Hollywood homes evacuated as suspected meth lab found (Cops find home used as a meth lab, and which also contained several high-powered weapons, ammunition and grenades. Police evacuated between 40 and 50 homes in a two-block area).

Dundee, Minnesota: Cleaning up the meth mess (Describes what a remediation company is up against when a home is assessed and declared to be contaminated by meth),

Upton, Kentucky: Task force takes down another meth lab (Greater Hardin County Drug Task Force agents assisting Kentucky State Police reported a third meth lab within a week being found inside Hardin County. Local drug task force agents report finding more than a dozen labs within the past month),

Powell River, Canada: Police launch meth lab raid (Cops raid and dismantle a small methamphetamine lab in a rental house, resulting in the evacuation of some of the building's tenants),

Berkeley County, South Carolina: Berkeley County Deputies Bust Meth Lab (Several nearby business, including a day care, under voluntary evacuation as a precaution),

Phelan, Alabama: 4 Phelen residents arrested in meth bust (Hazmat unit decontaminated the area and the four suspects before locking them up & holding them on a $1 million property bond),

Charleston, West Virginia: Man indicted for running meth lab (Police say suspect was using lithium in a rare manufacturing process called "the Nazi method," a highly dangerous technique that poses significant explosion risk. Authorities evacuated neighbors around the home for more than 12 hours while a crew dismantled the lab and cleaned up the dangerous materials. A bomb squad was called in as a precaution.).
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For the kinds of health and safety concerns arising from using homes to manufacture methamphetamine, not to mention the kind of damage such operations can inflict on a home, see:

Go here for some methamphetamine information resources.

Go here and go here for other posts on home based meth labs. meth lab zeta meth lab yak

Friday, December 21, 2007

President Signs Into Law 3-Year Suspension Of Taxability Of Mortgage Debt Cancellation Income On Foreclosure & Short Sales

The Associated Press reports:
  • U.S. President Bush on Thursday signed a measure to provide financial relief for financially strapped homeowners facing foreclosure or in bankruptcy. The bill gives a tax break to homeowners who have mortgage debt forgiven as part of a foreclosure or renegotiation of a loan. No taxes would be owed on the value of any debt forgiven or written off. Currently such debt forgiveness is taxable income. "When you're worried about making your payments, higher taxes are the last thing you need to worry about," Bush said in a bill-signing ceremony. He stood along side members of his Cabinet and lawmakers who pushed the measure.

For more, see Bush comes to aid of homeowners.

See also IRS Publication 4681: Canceled Debts, Foreclosures, Reposessions and Abandonments.

According to a Fact Sheet issued by the White House, "This Act [The Mortgage Forgiveness Debt Relief Act of 2007] will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. Under current law, if the value of your house declines, and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as income that can be taxed." short sale income tax

WaMu Under Federal Inquiry, Says Report

In Washington State, the Seattle Post Intelligencer reports:
  • The Securities and Exchange Commission is looking into Washington Mutual Inc.'s mortgage lending practices, deepening a controversy over whether the Seattle-based company pressured appraisers to come up with inflated values to justify making home loans. The Wall Street Journal, citing unnamed sources, reported late Thursday that the SEC wants to know whether "the company properly accounted for its loans in financial disclosures to investors of the company." Washington Mutual confirmed the inquiry in a statement issued Thursday.

For more, see SEC starts inquiry of WaMu (Federal panel to study mortgage lending practices).

For The Wall Street Journal story, see SEC Probes WaMu on Appraisals (Regulator Checks Handling Of Loans Possibly Based On Inflated Valuations). (may require subscription, if no subscription, go here - then click link for story).

For a related post on the alleged pressuring of appraisers by WaMu, see First American Issued Phony Appraisals, Charges NY AG; Execs Knew It & Allowed It Anyway, Says Suit.

Atlanta Scam Results In $6.8M In Fraudulently Obtained Loans From Bear; May Reflect Recklessness With Which Mortgage $ Was Handed Out

The Wall Street Journal reports:
  • Skyrocketing foreclosures are a testament to how easy it was to borrow from mortgage lenders in recent years. It may also have been easy to steal from them, to judge from a multimillion-dollar fraud scheme that federal prosecutors unraveled here in Atlanta. The criminals obtained $6.8 million in mortgages from Bear Stearns Cos., including a $1.8 million mortgage to Calvin Wright, a New Yorker who told the investment bank that he and his wife earned more than $50,000 a month as the top officers of a marketing firm. Mr. Wright submitted statements showing assets of $3 million, a federal indictment alleged.

  • In fact, Mr. Wright was a phone technician earning only $105,000 a year, with assets of only $35,000, and his wife was a homemaker. The palm-tree-lined mansion they purchased with Bear Stearns's $1.8 million recently sold out of foreclosure for just $1.1 million. Bear Stearns, meanwhile, posted the first quarterly loss in its 84-year history as it wrote down $1.9 billion of mortgage assets yesterday.

For more, see Fraud Seen as a Driver In Wave of Foreclosures (Atlanta Ring Scams Bear Stearns, Getting $6.8 Million in Loans). (may require subscription; if no subscription, go here - then click link for the story).

For a related opinion column, see Mortgage tale is a dopey one (The Denver Post) ("Banks around the world have written down more than $100 billion in bad mortgages").

Cleveland-Area Prosecutor Indicts 30 In Widespread Fraud Racket

In Cuyahoga County, Ohio, WKYC-TV Channel 3 reports that 30 people have been indicted in what Cuyahoga County Prosecutor Bill Mason called "the biggest foreclosure scam Cuyahoga County has ever tackled." The indictments were announced Thursday and charged that a scheme involving 51 houses in neighborhoods throughout the county were involved. According to the story:
  • Six of the 30 indicted were charged under RICO laws, accusing them of engaging in a pattern of corrupt activity. [...] Mason says today's indictment is part of a larger enterprise involving more than 60 million dollars in fraudulent loans by various people and more than 500 pieces of real estate. The value of the properties involved in today's indictment is nearly $5 million. Forty of the houses are in foreclosure or tax delinquent status. The indictment alleges Otis Bevel, his family, and several others were in the business of fraudulently purchasing homes. They ordered, picked up and passed on false or fictitious loan documents to title companies to submit to lenders so that a customer would purchase real estate which they were not qualified to purchase, said Mason.

For more, see Prosecutor: Biggest local foreclosure scam ever (read story) (watch video).

17 Indicted In Alleged Akron Fraud Racket; 147 Count Indictment Announced

In Summit County, Ohio, local media outlets report the announcement of a 147-count indictment which outlines the alleged schemes involving a group of Evergreen companies in Akron, and Carnation Banc, a local mortgage-banking company. The alleged schemes reportedly claimed 500+ victims. The indictments were the result of a mortgage fraud investigation conducted by an Ohio joint state/local task force. According to the reports:

  • On Thursday, investigators announced the indictment of 17 suspects, including Evergreen's President, David Willan, and six other company employees. "David Willan sold more than 300 homes in a two-year period," said Summit County Prosecutor Sherri Bevan Walsh. "Currently, 42.7 percent of those homes have been foreclosed." Those foreclosed properties are valued at more than $6 million, Walsh said. Also indicted were four employees of Carnation Banc.

***

  • It was an extensive two-year investigation into Akron-area mortgage fraud — about 800,000 pages of documents and thousands of manpower hours costing taxpayers millions. [... The indictment] alleg[ed] a web of predatory borrowing and securities scams that allegedly bilked investors, homeowners and lenders out of at least $16 million.

***

  • A captain from the [Summit County] Sheriff's Office was assigned to lead the investigation. The state provided financial assistance. The Ohio Attorney General's Office provided an investigator and a forensic accountant. The task force also included Sheriff's Office detectives, Summit County prosecutors, Cuyahoga Falls detectives and an Akron police detective.

It appears that Carnation Banc's president Craig Conner won the race to the prosecutor's office, reportedly waiving the reading of his indictment, pleading guilty to 22 felonies, and agreeing to start singing against his now former alleged confederates (no doubt an attempt at getting an easier sentence), according to prosecutor Walsh.

For more, see:

Go here for other posts on this story.

Ohio Landlord Faces Federal Equity Skimming Charges; Allegedly Pocketed Tenant Rent, Allowed HUD-Insured Mortgages To Go Into Default

In a recent press release, Gregory A. White, United States Attorney for the Northern District of Ohio, announced that a federal Grand Jury in Cleveland returned a nine-count indictment charging three individuals and one property management company with various offenses involving fraud against the United States Department of Housing and Urban Development (HUD).

Among the charges was a charge of equity skimming, in which, according to the press release:

  • The indictment [...] alleges that the defendants defrauded HUD by failing to make timely payments on the HUD-insured mortgages for [two housing projects], resulting in additional multi-million dollar losses to HUD. Moreover, the defendants used project funds to pay personal expenses and other unauthorized expenditures in violation of regulatory agreements between the projects and HUD. The total loss to HUD was more than $5 million.
Charged in the indictment were Martin L. Shulman, 54, his wife, Gail R. Shulman, 53, Keyetta L. Williams, 35, and S.B.G. Management, Inc., the management company that the Shulmans operated. For more, see the U.S. Attorney News Release.

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For those looking for some Federal case law applying federal equity skimming statutes in cases where Federal authorities have prosecuted landlords / property owners who collected rent from real estate and stiffed FHA-insured or VA-guaranteed mortgage lenders, see:

For a California state appellate court case convicting a property owner for pocketing rent while stiffing mortgage lenders and allowing houses to go into foreclosure, in violation of the state's rent skimming statute, Section 890 through Section 894 of the California Civil Code, see People v. Lapcheske (Cal. App. Ct. 1999) (may require free registration).

Go here for Sample Indictment -- Equity Skimming, 18 U.S.C. § 157 (Source: U.S. Attorney Criminal Resource Manual - Title 9 - #882).

Former Texas Preacher Cops Plea In Mortgage Scam; Remains In Hot Water

In Brazoria County, Texas, The Facts reports that former Lake Jackson preacher Harold Higgins , 50, of Missouri City will serve five years’ probation and must pay $18,000 restitution after pleading guilty to three charges Thursday as part of a plea agreement. He was accused of perpetrating a straw buyer scheme on potential homeowners and bilking a woman out of about $10,000. Higgins pleaded guilty to hindering a secured creditor, misdemeanor theft and engaging in organized criminal activity. He has already paid about half of the restitution.

This plea deal with the Brazoria County prosecutor does not get Higgins out of hot water, however. According to the story:
  • Higgins was arrested last week in Harris County after being indicted, along with 36 others, and is accused of participating in a similar mortgage scheme there. One of those indicted in Harris County, Obbie Toliver, was named in Higgins’ Brazoria County indictment, though he was not indicted here.

For more, see Former preacher pleads guilty.

For more on the Harris County indictments, see Dozens Charged In Alleged Houston-Area Straw Buyer Fraud Scam.

Ohio Chief Justice Calls For Pro Bono Legal Assistance For Homeowners Facing Foreclosure

In Ohio, a post on the Cleveland Plain Dealer blog reports:
  • Ohio Supreme Court Chief Justice Thomas J. Moyer wants lawyers in the state to provide free assistance to people on the brink of losing their homes. He has called on attorneys to help homeowners facing foreclosure to negotiate deals with lenders to stem the crisis that is threatening the nation's economy as well as the livelihood of hundreds of thousands of people. The push follows a series of meetings Moyer held Thursday and earlier this week with state and county officials and representatives from legal aid organizations. Attorney General Marc Dann, who attended one of the meetings, is lending Moyer his support.

***

  • Many people scoff at efforts to help those caught up in the foreclosure mess, criticizing those who took out loans they cannot repay. But Dann said the crisis threatens entire communities. Foreclosed homes often sit empty, leading to lower values for nearby homes and increasing neighborhood crime rates. It also diminishes the amount of property taxes available for such public services as road improvements and law enforcement.

For more, see Chief Justice Thomas J. Moyer asks lawyers to aid in Ohio foreclosure cases.

For follow-up post, see 200+ Ohio Attorneys Step Up In Response To State Chief Justice Call For Volunteers.

Go here for stories on how homeowners are using the Federal Truth In Lending Act to undo toxic mortgage refinances.

Editor's Note:

As was shown on the ABC News' Nightline program last Friday night, attorneys representing homeowners facing foreclosure need not do it "for free", but rather, can do it on a "contingency fee" basis. (In such an arrangement, the attorney's fee is limited to whatever money is recovered, whether by settlement or judgment - including statutorily mandated, court ordered attorney fee awards - from the mortgage company for violating, in this context, one or more of a slew of consumer protection statutes. Such an arrangement costs the homeowner facing foreclosure nothing out of pocket.). Nightline featured, among others, North Carolina attorney Max Gardner, who practices consumer bankruptcy litigation and, according to his website, takes on consumer bankruptcy clients on a contingency fee basis.

For a BusinessWeek feature story on consumer bankruptcy attorney Max Gardner, see Bankruptcy Boot Camp (How one man is training an army of lawyers to fight predatory lenders):

  • "[G]ardner's model advocates scouring for violations [of applicable law] that occur during the lending process and while the borrower is in bankruptcy protection."

For an earlier post on attorneys obtaining court-ordered legal fee awards in pro bono cases, see NY Lawyers Land Legal Fee Of $1 Million In Pro Bono Case.

For more on last Friday night's Nightline program, see:

Thursday, December 20, 2007

Boca Builder Facing Foreclosure; May Leave Dozens Of Stiffed Subs, 30+ Homebuyers Holding The Bag

In Palm Beach County, Florida, the Daily Business Review reports:
  • Bank of America is eager to recover $20.5 million it lent to Boca Raton-based developer Sterling Communities to build a luxury community of single-family homes in Lake Worth. [...] Sterling, headed by president Paul W. Asfahl, owes money to numerous subcontractors who worked at Talavera, a community northeast of State Road 7 and Lake Worth Road with 77 single-family homes with starting prices ranging from $700,000 to $1.5 million. The contractors are among 86 defendants named in the lawsuit.

***

  • At Talavera, Sterling has closed on about 49 homes, according to Palm Beach County public records. [...] Dozens of contractors are named in Bank of America’s suit, including Certified Security Systems, which is owed about $60,000, Florida Builder Appliances, $35,000; Production Plumbing, $41,828; and Dobson Construction Services and Roofing, about $31,000. [...] A subcontractor, who spoke on condition of anonymity, said Sterling paid him for his services but the checks bounced. Several homebuyers who had deposits to purchase Talavera houses are also named in the lawsuit.

For more, see Bank of America files foreclosure suit against builder Sterling Communities.

To view the lawsuit, see Bank of America v. Sterling Communities at Talavera, LLC, et al.

Go here for other posts on builders & contractors accused of stiffing customers & subcontractors. contractors stiff subs customers alpha

"Billy The Kid" Cops Guilty Plea In North Jersey Flipping Scam

In Northern New Jersey, The Star Ledger reports:
  • An unlicensed real estate appraiser known as "Billy the Kid" pleaded guilty yesterday for his role in a mortgage scam used to flip dozens of rundown properties rented by low-income families on federal assistance. William Ottaviano, 41, of Branchville admitted inflating the value of dozens of multifamily houses in a series of sales orchestrated by Michael Eliasof, a Paterson real estate manager who pleaded guilty last month in the scheme that officials said netted as much as $2.5 million. The operation has been tied to Garfield's long-time municipal court judge, William Colacino Jr., who has not been charged, but has been named as an unindicted co- conspirator in the ongoing criminal investigation.

***

  • The case revolves around the sale of dilapidated residential properties throughout the city of Paterson that were quickly sold at inflated prices to obtain higher mortgages from banks. The houses were rented by tenants receiving federal Section 8 assistance, but most of the houses, sold to buyers with no money down, ended up in foreclosure.

For more, see Home appraiser pleads guilty in flipping scam (Paterson plot reportedly netted $2.5 million).

Go here for other posts on this flipping scam.

Cook County Prosecutors Charge 15 In Alleged Cash Back Fraud Racket Involving At Least 9 Homes Worth $4M+

In Chicago, Illinois, The Southtown Star reports:
  • In what authorities say is a symptom of the excesses in the subprime mortgage market, 15 people have been charged with fraud involving at least nine homes valued at more than $4 million. The scam - led by a mortgage broker and a real estate agent - involved "straw buyers" taking out mortgages on homes for more than the asking price, Cook County prosecutors said. They said the extra money allegedly was divvied up among the participants. [...] The "common thread" was Durrel Castile, 26, and Andrew Lewis Jr., 34, Assistant State's Attorney Karyn Stratton said.

For more, see 15 people charged in mortgage scheme.

Illinois Feds Charge 3 For Fraudulently Obtaining FHA-Backed Mortgages

In Rockford, Illinois, the Rockford Register Star reports:
  • A Rockford loan officer and two others were charged today with generating thousands of dollars in commissions by creating fake documents to get unqualified families loans backed by the Federal Housing Authority. Mitchel A. Fuchs, 40, also known as Mike Fox, was charged with mortgage fraud in a 14-count indictment. Also charged were 25-year-old Jessica L. Gibson of Loves Park, who was Fuchs’ mortgage-loan processor, and Frank G. Anast, 58, of Rockford, who was self-employed in computer work.
According to the allegations:
  1. Fuchs created fictitious cashier’s checks and bank checks to give the appearance that his customers had invested their own funds in the properties they were buying,
  2. Fuchs paid Anast to create fictitious pay stubs and W-2s for Fuchs’ loan customers,
  3. Fuchs and Gibson altered pay stubs and W-2s for other customers, changed credit reports and created fake investment statements.

The case is being prosecuted by office of the U.S. Attorney for the Northern District of Illinois.

For more, see 3 charged in another mortgage fraud ring.

Illinois Loan Officer Gets 20 Months In FHA Mortgage Scam

In Rockford, Illinois, the Rockford Register Star reports:
  • A former Rockford loan officer was sentenced to 20 months in federal prison and fined nearly $500,000 for her part in a five-person mortgage fraud ring that ran from 2001 to 2003. Rhonda Torossian, 46, of Rockford was sentenced today in federal court. She was the third of the five to be sentenced and the first to receive prison time in the scheme where the group falsified Social Security numbers, created fraudulent employment verifications, bank checks and credit letters so families could receive mortgage loans insured by the Federal Housing Authority.

For more, see Ex-Rockford loan officer's sentence includes no chance of parole.

Alaska Feds Nail 9 In Alleged Mortgage Fraud Operation

In Anchorage, Alaska, KTUU-TV Channel 2 reports:
  • Federal prosecutors say they have uncovered the largest case of mortgage fraud in state history. [...] Prosecutors say in Anchorage shady deals and swindling had a group of real estate wrong doers cashing in. They charged nine people on 64 counts including conspiracy, wire fraud, bank fraud and false statements. [...] The group's ring leader is said to be 34-year-old broker Lance Lockard. Authorities caught up to Lockard Friday in Florida.
Reportedly, in one of the alleged schemes, seven homes on one street and six more on another street only a block away, were all financed to the same person at the same time. Two of the alleged scam members are accused of arranging 12 different lenders so each would be in the dark that the same buyer was involved on each one.

The alleged scam members pocketed $1.7 million and lenders have lost $1 million to date with more foreclosures pending, according to the charges. The prosecutors from the U.S. Attorney's office in Anchorage say that the overall racket involved every level of professional in a real estate transaction.

For more, see Feds bust mortgage swindlers (read story) (watch video).

See also,

California Loan Coordinator Admits Lying To Grand Jury In Federal Fraud Probe

In Northern California, the San Francisco Chronicle reports:
  • An Alameda County man pleaded guilty Monday to lying to a federal grand jury that is investigating subprime mortgage fraud in San Joaquin County, prosecutors said. John Ngo, 27, of Dublin, a former senior loan coordinator for Long Beach Mortgage Co., admitted receiving payments from the company's sales representatives to get loan applications approved despite knowing that many of the applications were fraudulent, said the office of U.S. Attorney McGregor Scott in Sacramento.
Acording to prosecutors, Ngo admitted that he lied about having pocketed money from a mortgage broker who referred loan applications to the company. He had actually received about $100,000, mostly to "put in the fix" in the approval process, insuring that bogus applications were given the green light. Prosecutors say Ngo has agreed to cooperate with the investigation, in which prosecutors are seeking to nail several others currently under indictment.

Ngo was nailed amid a federal probe into Stockton's Iftikhar Ahmad, who is currently under indictment for allegedly illegally flipped houses in the Stockton area. For more, see:

Florida Closing Agent Gets 3 Years In Scam Involving $17M+ In Fraudulently Obtained Mortgages

In Jacksonville, Florida, The Florida Times-Union reports:
  • The manager of a title agency in Jacksonville was sentenced to three years in federal prison Monday for being part of a mortgage scam that collected millions of dollars from dishonest loans on upscale homes. Robert W. Hulbert, 46, was the closing agent on some mortgages and arranged loans on two properties he bought personally, according to a news release from the U.S. Attorney's Office. Hulbert managed the Jacksonville branch of Nations Title Agency of Florida.
Prosecutors say the fraudulently obtained mortgages totaled $17.7 million, of which scam members pocketed about $4 million. The case was prosecuted by the U.S. Attorney's Office in Jacksonville. For more, see: