Pennsylvania Attorney Gets 5 To 10 For Torching Family Home

In Pittsburgh, Pennsylvania, The Associated Press reports:

• A 57-year-old attorney has been sentenced to five to 10 years in prison for setting fire to his family home, critically injuring his bedridden daughter. Samuel Pontier says he is remorseful and that he never intended to set his house on fire or harm his daughter, who has cerebral palsy. Pontier pleaded guilty in November to aggravated assault, arson and other charges. Pontier's attorney says the former O'Hara Township councilman was suffering from manic depression and abusing alcohol and prescription drugs when he set the Dec. 29 fire. Pontier's 17-year-old daughter Kristin suffered smoke inhalation and burns to her esophagus. Pontier's estranged wife and their other daughter were not at home when the fire started.

Source: Lawyer gets prison term for setting family home on fire.

For earlier articles on this story, see the Pittsburgh Tribune Review:

• Girl urges lengthy sentence for father,
• Man tells detective why he set fire.

Ohio Judge Knocks $2M Off Akron-Area Fraud Suspect's Still Unaffordable Bond

In Summit County, Ohio, the Akron Beacon Journal reports:

• A Summit County judge reduced the bond Friday to $1 million cash for former Evergreen Corp. President David B. Willan, but afterward Willan's lawyer told the court there still was ''no possibility'' that he could pay that amount to get out of jail. Willan, 37, has been held at the county jail on a $3 million bond since his Dec. 19 arrest. [...] Willan, the principal figure in a 147-count indictment alleging widespread Akron-area mortgage fraud, is charged with multiple first-degree felonies that potentially could mean incarceration for 54 to 319 years, [Common Pleas Judge Thomas A. ] Teodosio noted.

For more, see Bond is reduced for Willan (Former Evergreen executive still can't afford $1 million, lawyer says).

Foe story update, see Evergreen leader fails to raise cash for bond (Lawyer says mortgage-fraud suspect lacks funds, might stay in jail through trial).

Go here for other posts on David Willan and the Akron-area 147 count mortgage fraud indictment.

"A Parent's Love Being Taken Advantage Of" Results In Federal Fraud Indictment, Claims City Councilman

In Uniontown, Pennsylvania, The Associated Press reports:

• A new city councilman took part in a mortgage fraud scheme run by his daughter, federal authorities charged. Marlin Sprouts Jr., 52, a substitute teacher in Uniontown, was charged Friday with conspiracy to commit bank fraud. Sprouts blamed the arrest on a failed real estate venture and vowed to clear his name. He said the charges stem from "a parent's love being taken advantage of." Tiffany Lynn Sprouts opened a brokerage firm several years ago and forged loan applications, tax returns and appraisals to help straw purchasers get more than $2.4 million in loans, authorities say.

For more, see Uniontown councilman charged in fraud.

See also:

• Sprouts scheduled for arraignment on federal charges,
• Feds arrest Uniontown councilman in fraud case ("The FBI agents pounded on my door and came in and said, 'You're under arrest for conspiracy to commit bank fraud.' It was a very ugly blow to me," Sprouts said. ),
• Uniontown official charged in mortgage fraud scheme.

Phoenix-Area Vacant Land Buying Spree Triggered As Builders Unload Lots

In metropolitan Phoenix, Arizona, The Arizona Republic reports:

• Home sales are down, but there's a mini land-buying spree going on in metropolitan Phoenix. Home builders are selling off land that they can't sell homes on in the near future. Investors are buying home lots for bargain prices, which lets them hold onto the properties until the demand for homes picks back up. In the last few weeks of 2007, as many as 8,000 vacant but finished home lots ready for construction sold in the Phoenix area, according to Scottsdale-based land brokerage and consulting firm Nathan & Associates.

***

• [M]any builders who operated primarily as manufacturers and not long-term land developers in the past, need to get the dirt off their books. [...] RL Brown, publisher of the Phoenix Housing Market Letter, tallied 61,000 finished lots sitting empty across the Valley.New-home buyers may not want the lots now, but investors do. The trend is also playing out in other parts of the country where builders loaded up on land during the boom. "A lot of the investment bankers have determined metro Phoenix is one of the safest place to invest based on correction figures," Nathan said.

For more, see Slump fuels home-lot sell-off.

Suspicious Flips Hurting Hernando Beach

In Hernando Beach, Florida, the St. Petersburg Times reports:

• [S]uspicious sales have made "mortgage fraud" a buzzword in Hernando Beach the past two years. Though fraud cannot be proved without a criminal investigation, evidence of improper dealings during this period has been steadily mounting. By analyzing property records, the St. Petersburg Times found dozens of what the FBI calls indicators of mortgage fraud. These include houses, such as the one on Hibiscus, that began to slip into foreclosure almost immediately after their purchase.

***

• [T]he most direct consequence is to the local real estate market. Disinterested, absentee owners often neglect their properties, bringing down the real worth of nearby houses. At the same time, fraudulent prices artificially inflate local property values and discourage buyers. [...] Dishonest investors apparently targeted Hernando Beach because its waterfront houses were expensive enough to hide inflated prices, said county Property Appraiser Alvin Mazourek.

The Times investigation found four area homes that most closely fit the pattern the FBI describes as evidence of mortgage fraud.

• Transactions on these properties, all of which are now in foreclosure, began with a purchase by a Spring Hill investor named Kathy Schmidt or one of her companies - Soni Homes Inc. or Gulf Coast Instant Equity Inc. Schmidt then resold them to someone associated with a now-defunct Tampa company, Real Estate Exchange Partners Inc. People involved with that company included president Steven Michaelson and Robyn Michaelson, both of whom face foreclosure on properties throughout the Tampa Bay area. Though their relationship is not clear, they list several common addresses in property records. Neither could be reached by the Times at any of the several telephone numbers listed in public documents.

For more of the St. Petersburg Times investigative report, including the recent sales history of the four suspicious flips decribed in the story, see When the price is wrong (Sometimes, a sudden jump in the price of a house could indicate mortgage fraud).

See also, St. Petersburg Times Editorial on the suspicious Hernando Beach real estate transactions: Time to check rumors about mortgage fraud.

Suing A Mortgage Servicer? 20 Reasons For Having Them Fork Over The PSA

In The Bankruptcy Litigation and Consumer Rights Blog, consumer bankruptcy litigation attorney Max Gardner writes:

• Every time I file a civil action against a mortgage servicer the very first document I want is a copy of the “Pooling and Servicing Agreement.” This is the legal document that creates the securitized trust of mortgage loans and also strictly provides for the duties of all entities who are assigned the responsiblity of servicing loans for the Trust.

For 20 of the reasons you need to request through formal discovery in any mortgage-related lawsuit the PSA Agreement and why it is relevant, see Max Gardner’s Top Reasons for Wanting a Pooling Servicing Agreement.

Go here for more posts on homeowners and their attorneys who are using Federal & state consumer protection statutes to try and undo bad mortgage loans. undo mortgage loans TILA alpha questionable mortgage servicing practices tactics yak

Erie, Pa. Federal Mortgage Fraud Probe Yields More Charges; New Arrest

In Erie, Pennsylvania, the Erie Times News reports:

• A second key figure in the ongoing federal investigation into suspected mortgage fraud in the city of Erie looks to be poised to plead guilty to fraud and money-laundering charges. The U.S. Attorney's Office in Erie on Thursday filed criminal charges against Frank Kartesz II. Kartesz, 39, of Harborcreek Township, is accused of one count each of mail fraud and criminal conspiracy to commit mail fraud, wire fraud and bank fraud. The government alleges Kartesz was part of a scheme in which he and others bought run-down houses and sold them at artificially inflated prices. Most of the buyers were low-income people who knew little about the home-buying process.

***

• Kartesz is the second person charged in the federal probe so far. His business partner in K&D Enterprises, Robert L. Dodsworth, pleaded guilty to fraud charges in November. [...] Most of the sales under investigation occurred in low-income Erie neighborhoods, and most of the financing was arranged through subprime mortgages.

For more, see New arrest in fraud case.

Go here for earlier posts on this Federal mortgage fraud probe.

Straw Buyer/"Cash Back" Mortgage Fraud Suspect Survives Suicide Attempt; Gets 5 Years In Federal Pen

In Minneapolis, Minnesota, the Pioneer Press reports:

• The co-owner of LHS Mortgage Inc., the defunct Burnsville brokerage at the heart of a major Twin Cities mortgage fraud scheme, was sentenced Thursday to five years in prison. Ronald Joseph, 49, of Prior Lake, is the fourth and last person to be sentenced in connection with a large fraud operation involving straw homebuyers, sham loan documents with inflated sale prices and kickback payouts to various players. [...] The LHS scandal gained wider attention last year when a closing agent, Jill Lehn, 40, also of Prior Lake, was arrested and then wrote an article entitled "Tips On How To Ruin Your Life" as a cautionary tale. Lehn and two other defendants in the LHS Mortgage scheme already have been sentenced.

• In court Thursday, Joseph discussed his recent suicide attempt with U.S. District Court Judge Donovan Frank. According to his attorney, Joseph Friedberg, his client was so despondent over his actions that he drank antifreeze while out on bail about a month ago so that his wife and children could collect on a $1 million life insurance policy. Friedberg said he intervened.

For more, see Mortgage scheme leads to jail (LHS co-owner Joseph gets 5 years for homebuying fraud operation).

See also:

• Minneapolis Star Tribune: Credit River Township man sentenced in fraud scheme (He and three others obtained millions in fraudulent loans. For his part, Ronald Joseph was sentenced to 63 months in prison, the minimum recommended),
• Shakopee News: Owner of LHS Mortgage Inc., sentenced.

For earlier posts on this story, go here , and go here.

Homeowner/Victims Get Payment Extension In Wraparound Mortgage, Pennsylvania Ponzi Scheme

In Lancaster County, Pennsylvanis, Lancaster Online reports:

• At the urging of state and federal officials, 14 lenders have agreed to continue accepting lower payments from victims of the Personal Financial Management mortgage scam. The original deal reached in October by the lenders and attorneys for the victims was to expire at midnight Thursday. But the state Banking Department announced late Thursday afternoon that 13 lenders had agreed to extend the relief through May. [...] A 14th lender[...] agreed to extend the relief through February. While that's only about half of the 27 lenders involved, those participating lenders are dealing with four-fifths of the victims — 650 of 811."This agreement gives homeowners time to work out permanent solutions," said Secretary of Banking Steve Kaplan in a prepared statement.

For more, see Deal extended in mortgage scam.

Go here and go here for other posts and links to earlier media reports on the Pennsylvania wrap around mortgage Ponzi scheme involving companies operated by WesleySnyder.

Seniors Tapping Home Equity With Reverse Mortgages On Upswing

The Florida Times-Union ran a story recently on the increase in senior citizens using reverse mortgages to access the accumulated equity in their homes. For those seniors considering a reverse mortgage, you may want to check out Mortgages work in reverse (Homeowners who take out loans based on their equity are multiplying).

For other posts related to reverse mortgages and potential pitfalls to avoid when getting one, go here , and go here. reverse mortgage yak

Oregon Cop Targeting Foreclosure Rescue Operators; Calls Scams "Aggravated Theft"

In Portland, Oregon, Willamette Week reports:

• Detective Liz Cruthers, who investigates white-collar crimes for the Portland Police Bureau, says she’s spending much of her time learning the intricacies of what law enforcement officials term “mortgage rescue fraud” and chasing down the perpetrators.

• Cruthers says many “foreclosure consultants” are, in fact, scammers trying to dupe panicked homeowners out of the equity in their homes. “My contention is that ‘mortgage rescue’ is really aggravated theft,” says Cruthers. “What these people are doing is a crime.” She has helped lawmakers prepare a bill for the upcoming legislative session that would shut down one of the most common scams—vultures who assume a delinquent home loan and rent the property back to the original homeowner.

Reportedly, the Oregon Legislature will be taking up a bill addressing foreclosure rescue when its monthlong session begins Feb. 4.

• Shane Jackson, a lobbyist for the Oregon Coalition of Mortgage Originators, says his group and others in the lending industry favor the bill because it cracks down on rescue scams.

For more, see Rescue Me (A Portland Cop is targeting foreclosure vultures. Next week, the Legislature will, too).

Go here for Portland Police Bureau's Fraud detail.

Go here and go here for other posts on deed theft by forgery, swindle, etc. deed theft yahtzee

Loan Officer Cops Plea In Equity Stripping Of Unwitting Elderly Couple's Home

(Original post 1-31-08)
In Cumberland County, Pennsylvania, The Patriot News reports:

• Former midstate banker Constantine "Dean" Gekas' scheme to cheat an elderly West Shore couple out of their home fell apart in a Cumberland County courtroom Monday. Moments before he was to be tried on fraud charges, Gekas pleaded guilty to theft by unlawful taking and two counts of false swearing in exchange for a 2-year probation sentence. The plea deal struck with Senior Assistant District Attorney Daniel Sodus also requires Gekas, 44, [...], to sign over the East Pennsboro Twp. home he tried to steal from the late Chester and Lois Jasek. Sodus said the deal is designed to make the Jasek estate financially whole.

***

• Investigators said the Jaseks unwittingly signed the deed to their home over to Gekas [...] in July 2004 when he provided them with a $103,000 personal loan. At the time, the value of the Jaseks' home [...] was conservatively estimated at $260,000, Sodus said.

• Sodus said the fraud began when the Jaseks sought a bill consolidation loan through Integrity Bancorp Mortgage Co., where Gekas was a loan officer. Their loan request was approved, Sodus said, but Gekas told the couple it had been denied. Gekas then told them he could provide a loan, Sodus said. He said that while closing on that loan, Gekas had [Mr. & Mrs.] Jasek, who were in their late 70s and early 80s, respectively, sign the deed over to him. Only later did the Jaseks, who had to pay $500 a month on the loan, realize Gekas owned their house, Sodus said.

• Investigators said [Mr.] Jasek sent Gekas a $103,000 check to try to pay off the loan in April 2005, but Gekas refused to accept it. The Jaseks stopped making the loan payments, and Gekas filed a landlord-tenant action to evict them.

• Sodus said the false swearing charges are based on statements Gekas made during hearings on that civil complaint [...] during which he denied trying to deceive the Jaseks. The plea deal requires Gekas to sign over the house to a third party to be chosen by the district attorney's office, who will sell the property, Sodus said.

• He said Gekas, who said he now works for a financial firm in Scottsdale, Ariz., will receive $98,000 from the sale to satisfy some liens against the house. Defense lawyer George Matangos said Gekas must pay off an additional $60,000 in liens. All remaining sale proceeds will go to the Jasek estate, which is pursuing a lawsuit against Gekas, Sodus said.

Reportedly, between the time of the July, 2004 scam and the time of Gekas' sentencing, the elderly Mr. and Mrs. Jasek passed away. For the story, see Man takes deal for probation in house theft (no longer available online).

See also, Former banker pleads guilty in fraud case.

For more on Dean Gekas, see (March 2. 2008) Council approves plan for luxury apartments (no longer available online):

• In May 2006, the council approved a $2.5 million plan for five 4,000-square-foot town homes that project developers Constantine "Dean" Gekas and Scott Kuhn expected to sell in the $650,000 price range. But then Gekas, formerly of Wormleysburg, was charged with defrauding an elderly couple of their West Shore home. In January, Gekas pleaded guilty to theft by unlawful taking and two counts of false swearing in Cumberland County Court. He was sentenced to 2 years' probation.

Editor's Note:

According to the story, Gekas still has to fork over $60K as part of his criminal case. Since he is now on probation, and reportedly working for a "financial firm" and living in Arizona, a state with many elderly retirees, let's keep our fingers crossed and hope this guy doesn't scam another elderly couple to come up with the $60K.

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

Go here and go here for other posts on deed theft by forgery, swindle, etc. deed theft yahtzee whale foreclosure rescue

Abrupt Shutdown Of Property Management Firm Triggers Police Probe Into Possible Embezzlement; Tenants & Landlords Left In Lurch

In Montpelier, Vermont, The Times Argus reports:

• Many tenants, landlords and contractors who worked with a Montpelier property management company under police investigation said Tuesday they saw problems going back as far as eight months ago. A series of interviews and e-mails received this week has revealed that Parkside Property Management, which oversaw and managed scores of properties in Vermont and New Hampshire that included low- to moderate-income tenants on fixed incomes and sometimes disability payments, stopped paying bills, wrote checks that bounced, neglected basic maintenance on many of its properties and became increasingly more difficult to reach – by phone, e-mail or in person – up until it closed its doors abruptly fewer than two weeks ago.

• Members of the local law enforcement community are trying to determine why the four-year-old company closed, and who is responsible for a crisis that has put many absentee landlords, some located as far away as South Carolina, Texas and Florida, into the hot seat to find alternate means of collecting rents and tending to tenants.

• Montpelier police have opened an embezzlement investigation, and have named a suspect employed at Parkside, James Pumpelly of Barre. Police have declined to comment on the specifics of the investigation. However, no arrests have been made, and so far no charges have been filed.

For more, see Montpelier property management firm, under probe by police, had extensive problems.

Next Two Years' Foreclosures To Remain Higher Than Usual, Treasury Official Tells Senate

Reuters news service reports:

• Treasury Undersecretary Robert Steel said on Thursday that foreclosure rates on American homes will be higher than usual for the next two years as will the number of homeowners facing hardship. In prepared remarks to the Senate Banking Committee, Steel noted the risks a housing downturn poses to growth, but said the U.S. economy was basically strong.

For more, see Foreclosures to stay high: Treasury's Steel.

Super Bowl Bailing Out Some Arizona Homeowners Facing Foreclosure?

Conde Nast Portfolio.com reports on how some Arizona homeowners are looking to this Sunday's Super Bowl being played in Glendale, Arizona as a way to help relieve current financial burdens:

• Hoping to stave off foreclosure or losses, some in the Phoenix area are renting out homes for high prices—or whatever they can get. [...] Searching for a bailout, [Phoenix-area homeowner Danielle] Sullivan found a website that promised to rent her house to cash-flush Super Bowl fans. A week later she held a check for $3,200—four nights’ rent for a place twenty miles away from the University of Phoenix stadium in Glendale, Arizona, where the big game will be played Sunday.

Not all property owners have had the same luck, however:

• “It’s not a way out, but a way to stop some of the bleeding,” [investor Mike Roberts] says. Roberts began asking $10,000 for [a] rental, then lowered it to $7,000 with no results. Now, he says, he’ll let it go for a mere $3,500. But by midweek, he hadn’t even had one call on the property. “I can’t sustain too much more. If I don’t get it rented we’re looking at just a few months.”

For more, see Arizona Homeowners Eye Super Bowl as Lifeline.

Pittsburgh-Area Firehouse Faces Foreclosure; Threatens Shutdown

In Carnegie, Pennsylvania, the Pittsburgh Post Gazette published another story on the continuing financial problems facing the Carnegie Volunteer Fire and Rescue Bureau:

• From the onset of last Thursday's town hall meeting, Carnegie Council President Bob Kollar made it clear that the session's purpose was to figure out how to save the financially troubled Carnegie Volunteer Fire and Rescue Bureau. However, after three intense hours it was clear there are no easy answers and a lot of exasperation on all sides.

• Three months behind on its mortgage and facing an annual payment on a pumper truck, fire and rescue bureau officials have threatened to close unless the borough comes through with an infusion of money. The firemen, who asked for a dedicated fire protection tax of up to two mills in summer 2006, contend they've been ignored. At the meeting, they stood along the rear wall of the room in a show of unity.

For more, see Carnegie desperately seeking funds to help fire, rescue bureau survive.

Go here for earlier posts on the Carnegie, Pa. Fire and Rescue Bureau.

Add Horses To The List Of Those Losing Their Homes To Foreclosure

In Minnesota, the Minneapolis Star Tribune reports:

• The ever-worsening story of foreclosures in America now counts among its victims the family dog, the pet cat and even the farmer's horse. [...] "I'm getting skinny horses in here that people have walked away from," said Drew Fitzpatrick, director of the Minnesota Hooved Animal Rescue Foundation, based in Zimmerman, Minn. It used to be that for every abandoned horse there was a story of mental illness, divorce or cancer of its owner, said Fitzpatrick. "Now it's bankruptcy and ARM foreclosure. Rural America is really starting to get punched."

***

• The problem has been exceedingly acute for horse owners, who were already facing high feed costs because of rising commodity prices and the recent elimination of horse slaughterhouses in America. That market -- a federal ban recently closed the last three such slaughterhouses in the United States -- once provided horse owners with an option that paid about $600 per horse, when there was nowhere else to turn. Reports have cropped up of horses wandering the Florida Everglades and coal mines in Kentucky, where owners too poor to care for them have set them free to forage on their own. A horse owner recently euthanized more than 80 horses, most of them Shetland ponies, in Grey Eagle, Minn., northwest of St. Cloud, because of rising feed costs and her own poor health. [...] Fitzpatrick, of the Hooved Animal Rescue Foundation, said she took a call this week from the sheriff in Morrison County in central Minnesota, who reported a herd of horses running free in the area. "He just said it looks like another foreclosure," she said.

For more, see Four walls no more for 4-legged friends (As more Minnesotans lose their homes to foreclosure, many are finding they're also forced to give up their pets and livestock).

See also, Pioneer Press: All the Dying Horses: Neglect cases soaring in Minnesota (Horse neglect and starvation are on the rise in Minnesota, the result of a suddenly sour economy. Some experts call it the Hobby Horse Syndrome. Drew Fitzpatrick, who devotes her life to rescuing the animals, is less polite) (when this link expires, try here) for the same story).

For more on foreclosures and family pets, go here, and go here. petsII and foreclosures

Current FBI Subprime Probe Of 14 Firms May Expand

Reuters news service reports:

• The FBI's investigation of 14 corporations in a crackdown on improper subprime lending could expand to other companies, but the complex probes may take some time before any charges are brought, a federal law enforcement official said on Wednesday. "Like any white-collar crime investigation, these are very complicated, time-consuming investigations involving the examination of numerous records and interviews of various people. They don't happen in a short period of time," the FBI official said. FBI officials told a briefing on Tuesday the investigations covered corporations across the financial services industry, ranging from mortgage lenders and investment banks to developers and subprime lenders.

***

• [FBI spokesman Bill] Carter said the FBI around the country has 34 mortgage fraud task forces and working groups that include other federal agencies and state and local law enforcement officials.

For more, see FBI's subprime crackdown may expand to more firms.

See also, The New York Times: F.B.I. Opens Subprime Inquiry.

California Legislature Nixes Proposed Foreclosure Bill

In California, The Associated Press reports:

• California's state senate narrowly defeated a bill Wednesday that targeted the growing problem of foreclosed homes sitting vacant for months, drawing squatters and creating blight. Lenders would have been fined $1,000 a day for not maintaining vacant properties, and they would have had to give four months' notice before mortgage payment increases of 10 percent or more. "The purpose of this bill is very simple: to keep people in their homes," said the bill's sponsor, Don Perata, a Democrat from Oakland and the Senate leader.

***

• Thieves have looted empty homes, stripping them of electrical appliances or valuable copper wiring and pipes that can be sold as scrap. In Sacramento last month, one household was robbed in the midst of moving out of a foreclosed property.

For more, see California Foreclosure Bill Fails.

Feds vs. NY AG: Lending Fraud Probe Turf Battle Emerging?

The Wall Street Journal reports:

• Tensions are beginning to rise between state and federal authorities as the number of agencies investigating mortgage fraud continues to grow. New York Attorney General Andrew Cuomo is in a tussle with the Office of Federal Housing Enterprise Oversight, the federal regulator that oversees mortgage giants Fannie Mae and Freddie Mac. Their dispute is over who should be the investigating allegations of fraudulent appraisals and mortgage fraud.

• The interaction of state and federal oversight has long been a political hot potato. Friction is expected to increase as rising number of participants -- including the Justice Department and Securities and Exchange Commission -- probe the mortgage area.

For more, see Tensions Rise in Lending Probes (subscription may be required - if no subscription, go here). OFHEO

Another Subpoena For Countrywide; Florida AG Probes Servicing Practices, Possibly "Sticking People" In Bankruptcy, Lending Practices

The Wall Street Journal reports:

• Countrywide Financial Corp. confirmed yesterday that it received a subpoena from the Florida attorney general seeking information on its business practices. The subpoena adds to the problems for the Calabasas, Calif., lender, which has drawn the ire of bankruptcy judges, borrowers and consumer groups for months. Florida Attorney General Bill McCollum is seeking information on how Countrywide handles borrower payments as well as materials related to sales practices and standards for making loans. Mr. McCollum is also investigating whether Countrywide has charged excessive fees to borrowers in the foreclosure process. In an interview, he noted that even bankruptcy judges have flagged these fees and expressed concern that Countrywide "may be sticking people at the end of the process."

For more, see Subpoena Deepens Countrywide's Woes (subscription required; if no subscription, try here, then click link for story, then "refresh" browser if needed).

NJ Legislator Seeks Subpoena Power To Probe Foreclosure Rescue Industry

In New Jersey, PolitickerNJ.com reports:

• Assemblyman Neil M. Cohen [yesterday] announced the introduction of legislation that would give an Assembly panel subpoena powers to investigate the largely unregulated and potentially exploitative foreclosure consultant industry that has cropped up in the wake of the nation's subprime mortgage lending meltdown. "We will need these broad powers to get to the bottom of what's happening in New Jersey's foreclosure consultant industry," said Cohen (D-Union), chairman of the Assembly Financial Institutions and Insurance Committee. "It's very likely that shysters and scam artists are bilking New Jersey homeowners on the brink of foreclosure out of their hard-earned equity."

For more, see Cohen Seeks Subpoena Power to Investigate Foreclosure Consultants (Measure Would Aid Assembly Financial Institutions and Insurance Committee In Thorough Examination of Largely Unregulated Industry).

Go here to view the pending state foreclosure rescue legislation (which is a reintroduction of a bill from the last legislative session), New Jersey Assembly Bill A281 - Foreclosure Rescue Fraud Prevention Act.

Massachusetts Lawyers Claim Foreclosure Rescue Regs Forcing Them To Turn Away Certain Cases

Massachusetts Lawyers Weekly reports:

• Lawyers complain that a new [Massachusetts] regulation designed to protect property owners from corrupt foreclosure-rescue schemes is unfairly preventing them from representing clients in need of their services. Until [Massachusetts] Attorney General Martha Coakley clarifies whether her office truly intended to bar lawyers from accepting retainers in certain foreclosure cases, a number of practitioners told Lawyers Weekly they begrudgingly will continue to turn away would-be clients. "There aren't too many lawyers out there who are going to take on a case if they can't accept an advance fee from a potential client," said Peter T. Clark of Mansfield. "This is a big problem right now because, right or wrong, that's how a lot of lawyers who do not want to face significant sanctions are reading these regulations."

For more, see Lawyers: unclear foreclosure regs forcing them to turn down business (Claim that new rule bars acceptance of retainers in certain types of cases).

Hawaii Lawmakers Considering Foreclosure Rescue Legislation

In Honolulu, Hawaii, KHNL-TV Channel 8 reports:

• Homeowners facing foreclosure are susceptible to scams that promise to rescue their home. A new bill would provide some protection. But state officials are warning people the best protection is to stay alert and aware. [...] Stephen Levins at the Department of Commerce and Consumer Affairs says, "There's a real problem in Hawaii with people trying to steal equity out of homeowners. They generally target people facing foreclosure." [...] Lawmakers are hearing a bill (House Bill 3104 and Senate Bill 3026) that would help protect consumers.

For more, see New Bill Would Protect Against Mortgage Fraud.

To view the pending companion bills, see:

• HB 3104 (bill status) (bill text), and
• SB 3026 (bill status) (bill text).

Oregon Couple, Others Victimized In "Craigslist" Rent Scam

KPTV Channel 12 in Oregon reports:

• An Oregon City couple said a Clackamas mortgage company scammed them out of their hard-earned cash. And the company has received other complaints as well. Lynn and Ed King-Wohlhuter said they found an advertisement on Craigslist.org, claiming a Clackamas company was willing to buy homes and allow perspective buyers with poor credit to buy the homes back on lease options. The couple said they borrowed $3,000 after the company’s representative said he would buy them a house in Georgia so they could be closer to family. But the couple said after paying the money, the company’s owner refused to return their calls and never made good on the deal. They said they may now lose everything.

For more, see Couple Claims Mortgage Company Scammed Them Of Thousands.

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

Real Estate Agent's Alleged Disclosure Failure Lands In Litigation

The NBC Today Show ran a story on, and an in-studio interview with, a California homebuyer last Friday who is suing her real estate agent for the agent's alleged failure to disclose market value information during the homebuying process that, according to the homebuyer, resulted in overpaying in the purchase of her home by as much as $105,000.

While NBC appears to sell this story as a lawsuit based on buyer's remorse, it seems clear to me that the reality is that the lawsuit is based, at a minimum, on the alleged professional negligence on the part of the real estate agent for failing to meet the legal duties he/she has to the buyer. Typically, the real estate agent has an obligation to disclose to the homebuyer upon first substantive contact whether he/she (the agent) will be representing the homebuyer (as a Buyer's agent - with heightened legal duties to the buyer), or the seller (as a Seller's agent - with lessened legal duties to the buyer) in the real estate transaction.

In this case, it appears (as too often happens) that there may have been some confusion as to what capacity in which the real estate agent was operating. If the agent was operating as a Buyer's agent, and the allegations in the lawsuit prove true, he/she may have a serious problem.

For more, see Home buyer who overpaid sues real estate agent (With housing boom going bust, will more purchasers follow suit?) (Go here to watch video).

For a related story, see Real Estate Agents' "Well-Kept Secret" Creates Havoc For Homebuyers.

Real Estate Agents' "Well-Kept Secret" Creates Havoc For Homebuyers

A 2007 article appearing in International Real Estate Digest reports on the potential financial loss homebuyers face when retaining the services of the wrong real estate agent:

• When Joel Stern of Silver Spring, Maryland was ready to buy a new home he did not know about a well-kept secret in the real estate industry, a secret that can wreak financial and emotional havoc on a home buyer at the most crucial point of his real estate transaction. The secret is that only one out of every three agents provides the mandatory disclosure form that spells out whom the agent represents in the transaction at first meeting or early in the process.

• Two thirds of the agents defy their state laws, which generally require them to provide disclosure, in writing, at their first substantive meeting with a potential client. The general counsel for National Association of Realtors, Laurie Janik, said she was 'so extremely disappointed' in the findings from research the association undertook in 2005 to learn just how the agents were performing in the marketplace.

Syndicated real estate columnist Kennth R. Harney has pointed out in a past article on Mr. Stern's situation that:

• When agents fail to provide the written disclosures mandated by most states, clients may be misled into paying too much, foregoing contractual protections such as contingency clauses, and generally ending up dissatisfied with the outcome of the transaction. Some buyers or sellers end up angry enough to sue.

In Mr. Stern's case, he reportedly found out two weeks after receiving an accepted purchase offer that the Buyer's agent he thought he had was actually working for the seller on the home he chose to purchase. He only found out when his brother, with 40+ years experience in commercial real estate, looked over the paperwork and found that the agent waited until the contract signing to declare her status on the legally required printed agency disclosure form as a seller's agent, according to the story. Further, it turns out that the contract Stern signed was for a home listed by his buyer's agent boss (who also happened to be the agent that Stern had his then-current home listed for sale with), and waived his contingency to sell his own home first, the story states.

Stern currently has a lawsuit pending in a Maryland appeals court against brokerage firm Weichert Realtors as well as the agents involved in which he seeks the return of a $34,000 deposit that he lost in the deal, and $300,000 in punitive damages.

For more, see The Well-kept Secret That Harms Home Buyers.

See also, Kenneth R. Harney: Agents Falling Short On Disclosure.

For recent court cases involving real estate agents being successfully sued (or successfully reversed an unfavorable ruling) in connection with a breach of fiduciary duty and/or failure to satisfy a variety of disclosure requirements, see:

• Washington, DC: Jenkins v. Strauss, 931 A.2d 1026; (D.C. 2007),
• California: Michel v. Moore & Associates, 156 Cal. App. 4th 756; 67 Cal. Rptr. 3d 797; (Cal. App. Ct. 2007),
• Louisiana: Waddles v. LaCour, 950 So. 2d 937; (La. App. Ct. 2007),
• Vermont: Vastano v. Killington Valley Real Estate, 2007 VT 33; 929 A.2d 720 (Vt. 2007),
• Washington State: Ruebel v. Camano Island Realty, Inc., No. 58533-9-I, (unpublished) (Wn App. Ct. 2007).

For a related story, see Real Estate Agent's Alleged Disclosure Failure Lands In Litigation.

Investors Beat Out Of $6M, Company Looted, Say SW Florida Suits

In Lee County, Florida, The News Press reports:

• Real estate agent Samir Cabrera sold a piece of land on Daniels Parkway to a group of investors minutes after he bought it himself in April 2006, cheating the investors out of $6 million and then looting what was left until the property was in foreclosure, two lawsuits allege.They paint a picture of self-dealing, a phony promissory note and fraudulent business practices at the height of the real estate boom in Lee County. But Cabrera’s lawyer says his client did nothing wrong and the deal went sour only because the real estate market turned bad. The case is coming to a head as the two sides spar over whether Cabrera and the companies he controls should be able to go forward with a deal to sell what’s left of the property.

For more, see Lawsuits allege fraud in land deal gone bad (Investors cheated of millions, they say) (if link expires, try here).

To view one of the lawsuits, see Mengle v. Cabrera GP, LLC.

Go here for earlier posts on Samir Cabrera.

Subprime Resets Crushing Southern California Towns

In Southern California, North County Times reports on the tough times two towns are going through as a result of mortgage foreclosures flooding the area. Reportedly, one out of every 17 homes in in the northeast section of the city of Oceanside entered foreclosure last year. 30 miles northeast and across the Riverside County line in the city of Murrieta, one of every nine homes entered the foreclosure process last year.

• Many of the foreclosed families here said they were sent into foreclosure when their subprime loans graduated from the initial "teaser" rate -- a low interest rate generally offered for only the first two or three years of a 30-year mortgage -- to a higher adjustable interest rate.

For more, see Foreclosure mess emptying Oceanside neighborhoods, hurting those who've stayed.

Alleged $1.28M Mobile Home Investment Swindle Nothing More Than Unrepaid Loans, Says Fraud Suspect

In Bartow, Florida, The Ledger reports:

• Pamela Akins Pitts admits she owes a few people money from some failed mobile home sales deals. But she says she does not owe the $1.28 million for which she has been charged with defrauding nine people."These people were my friends," said she recently during an interview in the Polk County Jail. [...] Arrested Dec. 21, Pitts, 48, is sitting in jail facing charges of scheming to defraud more than $100,000, three counts of grand theft over $100,000, two counts of grand theft over $20,000, grand theft over $300, and violation of Florida's money laundering act.

For more, see No Fraud, Just Loans, She Says.

Inflating Sales Prices & Home Values Gets Pennsylvania Mortgage Broker 37 Months

In Pittsburgh, Pennsylvania, The Associated Press reports:

• A mortgage broker who prosecutors say cost lenders between $400,000 and $1 million was sentenced to more than three years in federal prison. William D. Edgar, 49, of Verona, operated America's Mortgage Outlet in Monroeville. Besides serving 37 months in prison, U.S. District Judge Gary Lancaster ordered Edgar to pay $174,000 in restitution. He pleaded guilty to conspiracy and bank and wire fraud last year and has already repaid $90,000.

For more, see W. Pa. mortgage broker sentenced in scam.

CBS News "60 Minutes" On The Subprime "House Of Cards"

CBS News' 60 Minutes ran a story last night on the problems in the housing and financial markets that are reverberating throughout the country. The story begins:

• It was another nervous week for the world's financial markets and for Wall Street. In the last six months, Americans have seen their investments shrink, their property values plummet, and the country edge closer towards a recession. At the heart of the problem is something called the subprime mortgage crisis, which began last summer and continues to ricochet through the economy. It sounds complicated, but it's really fairly simple. Banks lent hundreds of billions of dollars to homebuyers who can't pay them back. Wall Street took the risky debt, dressed it up as fancy securities, and sold it around the world as safe investments. It sounds like a shell game or Ponzi scheme; in some ways it was, a house of cards rife with corruption, greed, and negligence.

The story is set in Stockton, California, referred to as "the foreclosure capital of America."

For more, see House Of Cards: The Mortgage Mess (read transcript) (watch video).

Go here to watch Steve Kroft's Reporter's Notebook for his observations on this story.

NY AG Slaps Subpoena On Mortgage Quality Control Reviewer; Firm To Cooperate, Gets Limited Immunity From Prosecution

The New York Times reports:

• A company that analyzed the quality of thousands of home loans for investment banks has agreed to provide evidence to New York state prosecutors that the banks had detailed information about the risks posed by ill-fated subprime mortgages. Investigators are looking at whether that information, which could have prevented the collapse of securities backed by those loans, was deliberately withheld from investors.

• Clayton Holdings, a company based in Connecticut that vetted home loans for many investment banks, has agreed to provide important documents and the testimony of its officials to the New York attorney general, Andrew M. Cuomo, in exchange for immunity from civil and criminal prosecution in the state.

***

• The Clayton agreement is the latest development in Mr. Cuomo’s efforts to uncover abuses in the mortgage business. In November, he sued a subsidiary of First American, a real estate services company, accusing it of inflating appraisals in an effort to secure business from Washington Mutual, the nation’s largest thrift.

For more, see Loan Reviewer Aiding Inquiry Into Big Banks. Cuomo OFHEO Fannie Mae Freddie Mac

Minneapolis-Area Community Sues Foreclosing Lender Over Vacant Home/Neighborhood Eyesore

The Minneapolis Star Tribune reports:

• A north Minneapolis neighborhood is taking on mortgage giant CitiMortgage in a test case attempting to make careless lending an act for which lenders can be held liable in Minnesota. The lawsuit filed Wednesday for the Hawthorne neighborhood reflects a growing national effort to hold lenders legally responsible for the damage caused by shaky loans that go to foreclosure.

***

• In Hawthorne, the lawsuit alleges that CitiMortgage used "negligent and improvident lending practices" to finance the purchase last March of a two-story white frame house on 31st Avenue. N. The neighborhood wants to buy the house from CitiMortgage for a redevelopment project but said it can't get a response. Meanwhile, the lawsuit alleges, the property has become a neighborhood eyesore that has attracted housing tags and 911 calls. It is seeking damages, a monitored alarm system and compliance with the city housing code.

Reportedly, CitiMortgage bought back the property at an October sheriff's auction, but since that time, the house has remained empty, and the police have responded to calls for burglaries and a fire at the premises. The housing tags were for unmowed grass and weeds and rubbish.

For more, see Neighbors sue lender over house left vacant (A north Minneapolis neighborhood aims to hold a lender accountable for alleged careless lending with action that could break new legal ground).

Chicago $29M Condo Conversion/Straw Buyer/Mortgage Fraud Scam Gets Broker Nine Years

The Chicago Sun Times reports:

• Mohammad "Mike" Taghie Kakvand, the ringleader in a mortgage scheme that resulted in abandoned, crime-ridden Chicago apartment buildings, was sentenced Tuesday to nine years in prison. Kakvand bought 33 apartment buildings in Rogers Park and on Chicago's South Side between 1997 and 2004, but didn't renovate them. Units were sold as rehabbed condos at inflated prices, using straw buyers who defaulted on $29 million in loans. The plot displaced renters, and left decaying buildings prone to squatters, drug dealers, fire and water damage.

***

• "The damages caused not only to the lending institutions, but to the community, are immeasurable," said U.S. District Judge William Hibbler, who ordered Kakvand to pay $8.4 million in restitution.

For more, see Slumlord gets 9 yrs. ('I know many people were harmed,' Kakvand tells judge).

See also, Broker in mortgage scam gets 9 years.

Renters Face Eviction Despite Making All Payments; Evidence Points To Possible Rent Skimming, Lease Option Scam

In Shelby, Tennessee, the Shelby Times-Gazette reports:

• Several Shelbyville families [...] are suddenly faced with losing the roofs over their heads -- even though they have been making their house payments on time. The families claim they have been victimized by several individuals from Murfreesboro who are purchasing properties from American Value Homes and setting up two-year leases with purchase option agreements. They claim they were led to believe that the money they were paying was going toward the purchase price of their homes. But instead, the money was apparently not paid to the finance companies and the homes that the families are living in are now being placed in foreclosure and auctioned off by banks.

• What makes matters worse for the families is that they say none were ever informed about the foreclosures. They only learned of their situation when auction notices were published by the Times-Gazette, or when the bank told the occupants they had seven days to get out.

For more, see Fraud claimed in home deals.

For other posts involving rent skimming (aka equity skimming) and lease/option scams, see Tenants Unwittingly Renting Homes In Foreclosure I , II , III , and IV; and "Rent To Own" Scams I. equity skimming unwittingly gamma rent to own lease purchase option scams zebra