Wednesday, February 18, 2009

Utah AG Busts Alleged Equity Stripping, Foreclosure Rescue Ring; Hurting Homeowners Get Boot From Homes As Unwitting Straw Buyers Left Holding The Bag

From the Office of Utah Attorney General Mark Shurtleff:
  • Four people were arrested [last week] for allegedly defrauding financially troubled homeowners out of more than $1 million in property.(1) The alleged victims were all Polynesian and were offered new mortgages to help save their homes from foreclosure. The defendants allegedly had straw buyers purchase the properties and then took out all of the equity.(2)

***

  • Here is how the scheme allegedly worked: Polynesian homeowners were approached for help after they fell behind on their mortgage payments. The victim would sign a quit claim to give title to the property. Another Polynesian would be asked to purchase the property with the promise that all the mortgage bills would be paid. However, the monthly payments were not paid, the homeowners were evicted and the straw buyers were left with bad credit.

The suspects were variously charged with multiple felony counts of second degree:

  • communications fraud,
  • identity fraud, and
  • racketeering.

For the Utah AG's press release, see Four Arrested In Mortgage Fraud Scheme Targeting Polynesian Victims.

(1) Those arrested were: Elenoa Moala, 46, Salt Lake City, Haloti Moala Liavaa, 42, Salt Lake City, Laura Solorio, 40, Salt Lake City, and Kathryn Thompson, 45, South Jordan.

(2) Should the homeowners victimized by the alleged fraud attempt to void or cancel the deed to the straw buyer, or the mortgage obtained by the straw buyer, central to such an effort (assuming the lender had no actual knowledge of the fraud) would be the ability to charge them with notice of the fraud and/or any other unrecorded rights and equities (ie. equitable mortgage) the victimized homeowners may have had at the time the straw buyer took title and the lender made the mortgage loan. Lack of participation in the fraud, and lack of any actual knowledge thereof, by subsequent purchasers & encumbrancers is not enough to sustain a claim of bona fide purchaser / encumbrancer. In this case, the homeowners' continued possession of the property after signing away the quit claim deed may have triggered a duty to inquire, upon both the straw buyer, and the the straw buyer's mortgagee, into the nature of the homeowners' continued occupancy. See Ault v. Holden, 2002 UT 33; 44 P.3d 781; 444 Utah Adv. Rep. 3; 2002 Utah LEXIS 60 (2002), where the Utah Supreme Court observed:

  • [P]ossession requires [...] inquiry into any rights in the property the possessor may hold. Hottinger v. Jensen, 684 P.2d 1271, 1273 (Utah 1984). Traditionally, in race-notice states like Utah, a purchaser takes subject to rights of parties in possession that are open and visible. See, e.g., Mathis v. Madsen, 1 Utah 2d 46, 57, 261 P.2d 952, 959 (1953); Neponset Land & Livestock Co. v. Dixon, 10 Utah 334, 336-37, 37 P. 573, 574 (1894); Ayers v. Jack, 7 Utah 249, 252-53, 26 P. 300, 300 (1891). In other words, possession by someone other than the seller engenders a duty to inquire on the part of the purchaser into the rights of the party in possession. See Webster v. Knop, 6 Utah 2d 273, 278, 312 P.2d 557, 560 (1957); Salt Lake, Garfield & W. Ry. Co. v. Allied Materials Co., 4 Utah 2d 218, 222, 291 P.2d 883, 886 (1955); Williams v. Barney, 119 Utah 61, 84-85, 224 P.2d 1042, 1053 (1950); Meagher v. Dean, 97 Utah 173, 179, 91 P.2d 454, 456 (1939).

Should a court determine that, had such an inquiry been pursued, the fraud upon the homeowners would have been discovered, both the straw buyer and the mortgage lender could find themselves being charged, by imputation, with notice of the fraud, thereby defeating any claim of bona fide purchaser / encumbrancer that they may assert. For support for the proposition that "the continued exclusive possession of a vendor after his formal conveyance of the legal title is a fact in conflict with the legal effect of his deed, and is presumptive evidence that he still retains an interest in the premises, and is sufficient to put a purchaser upon inquiry [...]", see Pell v. McElroy, 36 Cal. 268, 1868 Cal. LEXIS 186 (Cal. 1868).

For cases, generally, that support the proposition that possession of real estate by one other than the seller is enough to trigger this imposition of the duty to inquire as to possible unrecorded rights and equities of the possessor, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Developers, Construction Lenders Nervous As Buyers Begin To Claim Equitable Liens, File Lis Pendens, Threaten Foreclosure To Force Return Of Deposits

In South Florida, the Daily Business Review reports on a tactic some disgruntled customers of condo developers are using to force a return of deposits paid on purchase contracts that have yet to close:
  • [F]rustrated contract holders [...] have stepped up their fights against construction lenders, claiming they have an equitable interest in the properties where they planned to buy a condo. They are not necessarily interested in foreclosing on projects but hope the new strategy will persuade developers and construction lenders to return their deposits — or, at least, a portion of them.

  • The strategy could be troubling for lenders and developers because a lis pendens casts a cloud over the property title. And banks looking to sell the notes and mortgages secured by the projects may have a hard time finding buyers as a result.

***

  • Several buyers have sued lenders claiming their deposits have seniority over the construction loan because their contracts were signed before the construction loan was obtained.(1) Often, developers had to line up contracts for at least half of a project’s units to secure a construction loan.(2) For that reason, some frustrated buyers are dragging construction lenders into their deposit recovery lawsuits.

For more, see Condo Meltdown: Latest strategy involves pursuing lenders.

For examples of two lawsuits in which disgruntled condo purchasers are, among other things, asserting equitable lien claims, and seeking foreclosure thereof, see:

(1) The story quotes one local attorney involved in the deposit refund litigation as saying: “There is long-standing case law which holds that a buyer who pays money toward the purchase of a home receives an equitable interest in the property, and this interest can be legally superior to any interest in the property obtained by a construction lender[.]”

(2) Even if the construction lender recorded its mortgage in the county records before the contract holders recorded their interests, the contract holders' unrecorded interests (including any possible equitable liens a court may establish) could very well have priority over the recorded interest of the lender. The real estate recording statutes, which determine the priority of interests in property, only protect bona fide purchasers (buyers) and bona fide encumbrancers (lenders). If it can be shown that the lender either:

  • had actual knowledge, or
  • can be chargeable with notice

of the existence of the earlier purchase contracts, a case can be made defeating any claim/defense by the lender asserting bona fide purchaser/encumbrancer status, thereby making the construction loan inferior to the contract holders' equitable liens. See generally, Flanigan's Enters. v. Shoppes at 18th & Commer., Inc., 954 So. 2d 758; 2007 Fla. App. LEXIS 7065; 32 Fla. L. Weekly D 1241 (Fla. App. Ct., 4th Dist. 2007).

Inasmuch as the lender here required the developer to pre-sell half the units in the project before it would fund the loan, it may be tough for the lender to now say it had no knowledge of those existing contracts. I wonder if the purchase contracts contained a subordination clause making the purchasers' interests inferior to a future construction loan??? The story is silent on this point.

The Publicity Continues For The "Produce The Note" Strategy In Fighting Foreclosure

The Associated Press yesterday ran a story on the so-called "Produce The Note" strategy used in defending homeowners facing foreclosures against careless lenders and sloppy, "foreclosure mill, assembly-line" law firms who have contributed to a nationwide mess.
  • Kathy Lovelace lost her job and was about to lose her house, too. But then she made a seemingly simple request of the bank: Show me the original mortgage paperwork.
    And just like that, the foreclosure proceedings came to a standstill.

  • Lovelace and other homeowners around the country are managing to stave off foreclosure by employing a strategy that goes to the heart of the whole nationwide mess. During the real estate frenzy of the past decade, mortgages were sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed.

  • Persuading a judge to compel production of hard-to-find or nonexistent documents can, at the very least, delay foreclosure, buying the homeowner some time and turning up the pressure on the lender to renegotiate the mortgage.(1)

***

  • Tom Deutsch, deputy executive director of the American Securitization Forum, a group that represents banks, law firms and investors, dismissed the strategy as merely a stalling tactic, saying homeowners are "making lawyers jump through procedural hoops to delay what's likely to be inevitable."

  • Deutsch said the original note is almost always electronically retained and can eventually be found. Judges are often willing to accept electronic documentation. And lenders are sometimes allowed to produce other paperwork to establish they are the holder of a loan. Still, assembling such documents to a judge's satisfaction takes time, which to homeowners is the point.

For more, see Homeowners' rallying cry: Produce the note (if link expires, try here).

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, and Go Here.

(1) It should be noted that, technically, it is impossible to renegotiate the loan terms with the foreclosing mortgage company until they have first proven, through the production of the appropriate paperwork, that they have the legal authority to do so. Negotiating the repayment terms with a mortgage company that subsequently is found to have acted with no authority to do so leaves a homeowner with an agreement that is null and void. An illustration of the current confusion existing with mortgage holders and servicers is contained in an account describing an incident where two different mortgage companies filed for foreclosure involving the same mortgage loan. See The Wall Street Journal Law Blog: Foreclosure Mess: Two Different Plaintiffs Claim to Own Same Mortgage.

At least one foreclosure defense attorney has reportedly pointed out that, because of the way mortgages have been securitized, it’s often unclear who actually owns the debt, and further, in many cases, the originating lenders only pledged these loans and didn’t actually transfer ownership of them to the trusts that are supposed to hold them and issue the securities. See 'Angel' of foreclosure defense bedevils lenders (Florida attorney trains hundreds of others to help troubled borrowers). KappaMtgDocsMissing

Nevada Regulators Have Hands Full With Complaints About Foreclosure Consultants, Loan Modification Firms; Lawmakers Look To Close Loopholes

In Reno, Nevada, the Reno Gazette Journal reports:

  • [E]very day, agencies such as the state's Mortgage Lending Division and Consumer Affairs Division are contacted by home owners victimized by fraud. [...] Minorities who have difficulty communicating in English are especially susceptible, said Joe Waltuch, commissioner of the State of Nevada Mortgage Lending Division.

  • "Right now we have a lot of complaints," Waltuch said. "We get complaints daily regarding people who have paid money up front to either a foreclosure or loan modification specialist who claimed they would deal with the lender and help the borrower stay out of default or modify the terms of their mortgage. There have already been a couple of arrests and warrants outstanding for people."

***

  • Waltuch said his state office has the statutory authority to go after foreclosure consultants but not loan modification consultants who work with properties not in foreclosure. He said his agency work in a roundabout way using loopholes available through the Consumer Affairs Division. "It's a Band-Aid," said James Campos, commissioner of the Consumer Affairs Division. "There needs to be a more specific and targeted law in the books." On Feb. 11, the Assembly Commerce and Labor Committee held its first hearing on a bill sponsored by Assemblyman Marcus Conklin, D-Las Vegas, to address regulation of foreclosure and loan modification consultants, including the need for licensing.(1)

For more, see Struggling homeowners: Beware of scams.

(1) It may be that the state bar association should begin looking into some of these loan modification firms and foreclosure consultants. To the extent these operators are purporting to review homeowners' loan documents looking for violations of federal and state consumer & lending laws, those activities may constitute the unauthorized / unlicensed practice of law.

To the extent non-lawyer loan modification firms are teaming up with lawyers to provide these services, some activities (ie. using a person or organization to recommend or promote the lawyers’ services, aiding nonlawyers in the unauthorized practice of law, improperly sharing legal fees with nonlawyers, failing to seek lawful objectives of clients by failing to assess their individual needs, handling legal matters without adequate preparation, etc.) may constitute violations under the state bar's ethics rules.

For evidence of activities of attorneys involved with non-attorney loan modification firms that have caught the attention of state bar asociations, see:

Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law. UnauthPractOfLawKappa

Vacant Multi-Million Dollar Homes Littered Throughout Greenwich, Connecticut

The New York Post reports:
  • It's a gold-plated ghost town. Almost 50 mansions built on spec for the hedge-fund set - and priced from $5 million to upwards of $25 million - sit empty in Greenwich, Conn., where the real-estate market has tanked. [...] Those who still have cash can find spectacular, never-occupied estates in move-in condition, complete with wine cellars for their Bordeaux and Sub-Zero refrigerators for their caviar, [...].

For more, see GREENWICH GHOST TOWN (50 Mansions Are Begging For Buyers).

For addresses and photos, see Greenwich Mansions Begging For Buyers.

Tuesday, February 17, 2009

Minneapolis Non-Profit Solicits, Obtains Sale-Leaseback Offer On Building To Bail Itself Out Of Possible Foreclosure; City Debt To Be Paid In Full

In Minneapolis, Minnesota, Finance and Commerce reports:
  • St. Paul-based Wellington Management Inc. has a deal to buy the Minneapolis home of the nonprofit Green Institute, an environmental consultant/salvage center that has struggled to stay current on loans from the city and its bank. With the sale of the building, “We’ll be completely out of debt, which will be nice,” said Jamie Heipel, executive director of the Green Institute.

***

  • The Green Institute was behind on payments to the city on two loans: a construction loan and a delinquency loan, related to the nonprofit’s ongoing efforts to keep up with payments. As the city of Minneapolis grew frustrated with the nonprofit’s financial struggles, it weighed options including foreclosure on the property.

***

  • Heipel said that the Green Institute will remain a tenant in the building, leasing about 2,200 square feet of office space and about 6,500 square feet for its ReUse Center, a retail operation that sells salvaged building supplies.

  • The Green Institute retained Kraus-Anderson Realty to broker the property. Heipel said the nonprofit ultimately drew three offers on the building, and added that the Green Institute accepted the offer from Wellington last week.(1)

For more, see Green Institute to sell, lease back headquarters from Wellington (Minneapolis-based environmental nonprofit has struggled to stay current on loans).

(1) The fact that the Green Institute hired a real estate broker to market the property (presumably as a sale-leaseback opportunity for an investor), and the fact that it obtained three (presumably arms-length) offers from which to select are factors that could weigh heavily against it if, a couple of years down the road (especially if the building's value at that time is much higher than the current sale price), it changes its mind and decides it wants the title to its building back, and goes to court to try and have the sale-leaseback arrangement recharcterized as an equitable mortgage. For a case where a court ruled against a property seller attempting to invoke the equitable mortgage doctrine four years after the sale in order to reacquire a property it sold for fair value, and which had increased in value subsequently thereafter, see Hamud v. Hawthorne, 52 Cal. 2d 78; 338 P.2d 387; (Cal. 1959).

Another Rent-Paying Section 8 Tenant Caught Up In Foreclosure Eviction May Be Failing To Exercise Special Rights Under Federal Law

In Pittsburg, California, the Contra Costa Times reports:
  • Pittsburg resident Casandra Jackson-Gordon is moving — again. For the second time in less than two years, Jackson-Gordon says she has lost her subsidized rental home to foreclosure. The first time, she also lost her $1,500 security deposit — but the bank offered her $3,500 to move out fast so it could sell the property. That money helped her get into another house. She's hoping the lender that holds the mortgage on her current residence will be equally generous.

***

  • The city of Fairfield[, California], which also has been hard hit by foreclosures, set up a program late last year to help low-income residents whose landlords went into foreclosure by giving them grants of up to $3,000 to cover the security deposit on a new place in the city. Recipients must be documented U.S. citizens without criminal records.

***

  • Like Jackson-Gordon, other residents who receive Section 8 housing assistance also have been forced to move when their landlords lost their houses.(1)

For more, see Renters, too, feeling effects of foreclosure crisis.

(1) It may be important to note that, in the case of a tenant who receives a Section 8 federal rent subsidy (ie. a "Section 8" tenant), it has been reported that federal law prohibits a new owner, including foreclosure purchasers and foreclosing lenders, from evicting Section 8 tenants unless they first go to court and prove they’re being economically harmed by having a tenant remain in a building, or show other good cause. However, many Section 8 tenants panic and don’t fight eviction notices, not realizing they have these special rights granted by Federal law. For more on this point, see Foreclosures hit tenants (Activists: New owners trample on renters’ rights).

For the specific federal regulation on this point, see 24 CFR 982.310(d)(1). Go here for the regulations (24 CFR 982) regulating the Section 8 rent subsidy program. SkimmingKappaRent

Town Rental Restrictions Leaves Real Estate Investor With Home He Can't Rent

In Northfield, Minnesota, the Northfield News reports:
  • [I]n late 2007, the city council approved a rental ordinance that permits no more than 20 percent of homes in a block to be licensed as rentals. The idea was to limit rentals, which the council said tended not to be kept to the standard of owner-occupied properties.

***

  • Carl Almen has lived in Northfield for 50 years. For almost 10 years he has been a landlord, renting five apartments and two storefronts — all in Dundas. So when he and his wife bought a foreclosure [in Northfield], he never imagined he wouldn’t be able to rent it. “I think it’s the most ridiculous thing I ever heard,” Almen said of the city’s density limits, adding that rule gives the impression that city leaders value homeowners more than tenants and landlords. “What they’re saying is you should be on the back of the bus, and if you’re a landlord, you’re scum. I really resent that.”

  • The ordinance, which Almen says forced him to sell the house, isn’t stopping him from owning rental property. Just not in town. “It will make me not invest in Northfield,” he said.

For more, see Rental code: Keeping homes vacant?

Breaking Into Vacant Foreclosed Houses & Moving In The Homeless "The Modern Underground Railroad," Says Twin Cities' Activist

In Minneapolis, Minnesota, the Twin Cities Daily Planet reports:
  • Poverty rights activists broke into at least a dozen vacant Minneapolis buildings [last] week and helped homeless families move in. “This is the modern underground railroad,” said Cheri Honkala, National Organizer for the Poor People’s Economic Human Rights Campaign, the group organizing the “takeovers.” [Last] week’s actions are part of a growing national movement to illegally open up thousands of vacant, foreclosed homes to provide housing for the growing number of homeless people.

For more, see Neighbors helping neighbors—to break into vacant houses.

Go here for similar efforts by a Miami homeless activists.

Go here for posts on squatters moving into vacant homes, foreclosures. squatter foreclosure zebra

50-State Report On Unfair & Deceptive Acts & Practices Statutes

From the National Consumer Law Center:

Go here for the entire press release.

A permanent link to the report appears in the right-hand sidebar for future reference.

Monday, February 16, 2009

More On World Savings' Whistleblower Paul Bishop

On CBS News' The Early Show this morning, World Savings whistleblower Paul Bishop spoke with Harry Smith about when he first noticed the company was taking on unstable loans. The interview was a follow-up on last night's 60 Minutes story in which Bishop described the kinds of mortgage loans his former employer was making, and how they were making them.

For today's interview (about 5 minutes), see Mortgage Whistleblower.

For last night's story (13+ minutes), see World of Trouble (read story) (watch video).

Go here for other posts on whistleblower suits alleging fraudulent mortgage lending practices.

Ohio Homeowners Facing Foreclosure Fight Back; Claim Lender Has No Right To Sue; Seek Class Action Status

In Sandusky County, Ohio, the Toledo Blade reports:
  • Facing the loss of their home in the tiny northwest Ohio village of Gibsonburg, Jeffrey and Katrina Weickert pleaded for more time. Instead, lawyers for their mortgage holder asked a judge in Sandusky County Common Pleas Court to expedite foreclosure proceedings.

  • Now, Mr. and Mrs. Weickert are using the court system to fight back. They are among thousands of homeowners nationwide who are challenging the right of mortgage servicing companies and trustees to commence foreclosure proceedings. "We have 20 of these cases pending all over northwestern Ohio," said John Murray, a lawyer with the Sandusky firm of Murray & Murray.

  • Few of the complaints deny that homeowners have fallen behind in mortgage payments. Rather, they typically question whether mortgage servicing firms and trustees seeking foreclosure have the right to sue. It's often a legitimate question, said Lauren Saunders, an attorney with the National Consumer Law Center in Washington. In the mortgage craze that led to the economic crisis, proper documentation sometimes wasn't finished on behalf of investment trusts that own most mortgages, she explained.

For more, see Toledo area couple fighting foreclosure in court (More homeowners resist mortgage firms).

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, and Go Here. KappaMtgDocsMissing

ABA Chief Nudges Obama Administration For Cash To Create 1,000 Attorney "Legal Corps" To Supplement Current Legal Aid, Pro Bono Efforts

The ABA Journal reports:
  • Emboldened by the fact that there is not just one, but two lawyers at the executive branch helm, [American Bar Association] President H. Thomas Wells Jr. headed to the White House to see if he could make some progress on ABA initiatives.

***

  • One initiative Wells raised is the creation of Legal Corps, which would direct more lawyers into efforts to represent a broad segment of working people in matters arising out of the economic crisis, such as foreclosures. Legal Corps lawyers would bolster services already being provided by lawyers in local offices supported by federal funding channeled through the Legal Services Corp. and lawyers working on a pro bono basis. The ABA’s initial proposal calls for federal funding to help support some 1,000 salaried lawyers providing services to clients meeting certain economic need criteria.

For the story, see ABA Pushes for 1,000-Lawyer Legal Corps.

Million Dollar Dallas-Area Homes Renting For Less Than $1,000/Month?

In Cedar Hill, Texas, The Dallas Morning News reports on a foreclosure-related scam that has gotten the attention of local police - scammers hijacking vacant homes and renting them out, pocketing cash in the process and leaving the unwitting renters out of luck.

  • [T]he neighborhood had become a victim of the latest housing foreclosure scam. It wasn't the only one. The Lake Ridge development in Cedar Hill had renters living in million-dollar homes for less than $1,000 per month. A subdivision near Singing Hills in southeast Oak Cliff also became a prime target. And there could be more.

***

  • Here's how the scheme works: When a home enters foreclosure, someone files an appeal bond, which delays the court's foreclosure process for 30 to 60 days or longer. With the case tied up, the scammers change the door locks and find people to move in. The scammer collects rent until the homeowner, real estate agent or authorities disrupt the ruse.

  • "It's so novel. It's ingenious, really," said Dallas County prosecutor Stephanie Martin, who won a conviction this week in a groundbreaking case. The scammers typically have a keen knowledge of the foreclosure process and the brazenness to bilk the system, authorities say.

***

  • Despite the recent arrests, [an investigator with the Dallas County district attorney's office] said he doesn't expect the scheme to subside because it's too easy.

For more, see Scammers finding open door at foreclosed homes.

Go here, go here, and go here for other posts on phony landlord rent scams. PhonyLandlordScamZeta

John & Jane Doe Lawsuits Prohibited In Connecticut?

It is not uncommon when a party bringing a lawsuit is ignorant of the name of a defendant, he must state that fact in the complaint and simply designate such a party as a John or Jane Doe defendant.

However, according to a recent decision by a Connecticut trial court, designating such unknown defendants in this manner is not allowed in lawsuits brought in the state courts of Connecticut. In Younger v. City of E. Haven,(1) (Superior Court, judicial district of New Haven, Docket No. CV 085020500S, 2008 Conn. Super. LEXIS 1965 (August 4, 2008, Bellis, J.)), the court ruled that Connecticut practice does not permit actions to be initiated against fictitious defendants, and accordingly, dismissed an action against a defendant designated as John Doe.

The approach of designating defendants in this manner is quite common in mortgage foreclosure actions, where an encumbered property is often in the occupancy and possession of unknown tenants. It appears that, to the extent the foreclosing lender's attorney fails to ascertain the true names of all the occupants in possession of the foreclosed home and simply designates them with a fictitious name, a good argument could be made (based on Younger v. City of E. Haven, and the cases cited therein) that the foreclosure action and/or subsequent eviction proceedings should be dismissed, and that any judgment arising therefrom should be declared void for lack of personal jurisdiction, as to those unnamed "John & Jane Doe" occupants. Just something to think about when fighting off foreclosure evictions on behalf of Connecticut tenants.

For the longer version of this post, see "John & Jane Doe" Immune From Connecticut Civil Lawsuits?

(1) Link may require free registration at LexisOne Free Case Law.

Sunday, February 15, 2009

CBS' 60 Minutes On World Savings' Whistleblower

CBS' 60 Minutes ran a story Sunday night featuring the story of Paul Bishop, a plainspoken former loan salesman who is blowing the whistle on his former employer, one-time subprime lending giant World Savings, about the kinds of loans they were making to homeowners who couldn't afford to repay, and how they went about making the loans. While working at World, he reportedly told executives what they didn't want to hear about three years before the real estate market exploded. According to him, they responded by canning him. He has since filed a lawsuit against them. He now tells his story to 60 Minutes.

For the report (13+ minutes), see World of Trouble (read story) (watch video).

For the initial report on this story from KPIX-TV Channel 5 in May, 2008, when Bishop first filed his lawsuit against World Savings, see Oakland Bank's Lending Sparks Ex-Employee Lawsuit (read story) (watch video).

Go here for other posts on whistleblower suits involving alleged fraudulent mortgage lending practices.

Federal Judge, State Bar Slam Attorney For Stiffing Clients Referred By Loan Modification Firm; Lawyer/Foreclosure Consultant Ties Now Facing Scrutiny

San Francisco Weekly reports:
  • Thanks in part to a recent SF Weekly column detailing the latest exploits of longtime con man Paul Noe II, a federal judge recently announced he would advise federal, state, and municipal prosecutors to investigate a suspicious statewide "foreclosure assistance" operation that targeted defaulted homeowners in the San Francisco Bay Area.

  • "I am referring these matters to the State Bar of the State of California, to the State Bar of the State of Nevada, to the United States Attorney in the Central District of California, and to the district attorney of Los Angeles and San Bernadino and Orange Counties, so that they can make an investigation of this matter, and do what is required under the law of the State of California," U.S. District Judge Manuel Real said during a Jan. 13 hearing.

  • Real had just heard allegations that Mitchell Roth, a longtime attorney of Noe's, had filed multiple lawsuits on behalf of clients, then failed to show up in court to prosecute the cases. The filings were submitted on behalf of customers of a Noe front company called United First, Inc. whose business model involved convincing desperate homeowners that they might have grounds for a so-called "missing title" lawsuit. These suits would supposedly be based on the legal theory that banks had lost track of buildings' titles when mortgages were bundled into securities, and thus had no right to foreclose.

***

  • Rick Jurgens, an advocate with the National Consumer Law Center in Washington, D.C., reviewed a copy of a Roth/Noe contract SF Weekly sent him, and noted: "Bogus doesn't begin to define it ... To have these for-profit enterprises come in and throw a deal that's just there to squeeze the last penny out of a victim's pocket is really horrifying to see."

A September 23, 2008 article in San Francisco Weekly contained a description of an arrangement entered into by the loan modification firm and one homeowner needing help:

  • Under the arrangement, [the homeowner] would enter a joint venture with the company and add United First to his homeowners' insurance policy, retain Sherman Oaks–based attorney Mitchell Roth as legal counsel, and pay the firm an initial $2,250, then $1,750 per month. According to the contract, the monthly payments are supposed to end "upon termination of legal proceedings," or whenever Roth stops representing Lopez.

For more, see Justice Closing in On Notorious 'Foreclosure Assistance' Firm.

**************

In related stories on California attorney Mitchell Roth, see:

The State Bar of California: On Application Of State Bar, Superior Court Assumes Jurisdiction Over foreclosure Law Practice:

  • State Bar of California prosecutors [February 11] obtained a Superior Court order effectively shutting down the Sherman Oaks, San Diego and Riverside law offices of attorney Mitchell Roth.

Metropolitan News Enterprise: State Bar Takes Over Ex-Judicial Candidate’s Law Offices:

  • The State Bar of California [Thursday] disclosed that it has taken over the Sherman Oaks, San Diego and Riverside law offices of attorney Mitchell Roth. [...] The State Bar alleged that an estimated 2,000 clients were referred to Roth by a company doing business as United First, which is not a law firm. Roth’s phone message informs callers that the office has been temporarily closed and refers foreclosure clients back to United First.

The National Law Journal: Three offices of attorney declared a 'vexatious litigant' are shut down:

  • The State Bar of California has shut down three Southern California offices of attorney Mitchell W. Roth, who was recently declared a vexatious litigant by a federal judge in Los Angeles, according to the State Bar.

The San Diego Daily Transcript: State bar shuts down foreclosure law practice (subscription required):

  • State Bar of California prosecutors Wednesday obtained a Superior Court order effectively shutting down the Sherman Oaks, San Diego and Riverside law offices of attorney Mitchell Roth.

**************

For a five-page, heavily footnoted, ethics alert recently issued by The California State Bar Association Committee on Professional Responsibility and Conduct addressing the relationship between lawyers and loan modification & foreclosure consultants (and addresses the above-referenced conduct), see ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications.

Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law. UnauthPractOfLawKappa

Cincinnati Bar, Ohio Supreme Court Slam Attorneys Teaming Up With Upfront Fee Loan Modification, Foreclosure Rescue Operators

In a 2008 court decision, the Ohio Supreme Court disciplined three attorneys for professional misconduct in connection with working with the customers of foreclosure rescue operator Foreclosure Solutions, L.L.C. Among the types of conduct that landed the attorneys in hot water were:
  • using a person or organization to recommend or promote the lawyers’ services,
  • aiding nonlawyers in the unauthorized practice of law,
  • improperly sharing legal fees with nonlawyers,
  • failing to seek lawful objectives of clients by failing to assess their individual needs, and
  • handling legal matters without adequate preparation.

For the specific facts and surrounding circumstances that led to the filing of the complaints with the Cincinnati Bar Association by the homeowners facing foreclosure, see Cincinnati Bar Assn. v. Mullaney, 119 Ohio St.3d 412, 2008-Ohio-4541 (2008).

Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law. UnauthPractOfLawKappa

California Bar Committee Issues Ethics Advisory Cautioning Attorneys Teaming Up With Loan Modification Firms

The California State Bar Association Committee on Professional Responsibility and Conduct has issued an ethics alert addressing the relationship between lawyers and loan modification & foreclosure consultants.
  • [T]here is evidence that some foreclosure consultants may be attempting to avoid the statutory prohibition on collecting a fee before any services have been rendered by having a lawyer work with them in foreclosure consultations. Many of the proposed relationships between these foreclosure consultants and lawyers violate the Rules of Professional Conduct and other ethical rules and, therefore, could result in lawyer discipline.

  • The purpose of this Ethics Alert is to remind California lawyers of several ethics rules that may apply in the event a foreclosure consultant or another non-lawyer requests assistance from a lawyer and/or refers potential distressed homeowner clients to the lawyer.

***

  • Distressed homeowners may need legal assistance. California lawyers should be wary, however, of non-lawyers – such as foreclosure consultants – who, seeking to capitalize on the vulnerability of distressed homeowners, offer to provide distressed homeowners assistance in renegotiating their loans and/or assessing and protecting their legal rights. These non-lawyers may propose arrangements that would violate one or more of a lawyer’s ethical obligations. They may attempt to loop California lawyers into their businesses with promises of large numbers of referrals and/or "easy money," that is, fees for the lawyer for little or no work. They may request that a lawyer pay them a referral or marketing fee. They may propose an agreement to split legal fees obtained from the distressed homeowners. They may request that the lawyer enter into a joint venture with them and a distressed homeowner. They may request that a lawyer approve loan modification documentation. They may request that a lawyer serve as the general counsel to their business in order to provide legal advice to homeowners. They may ask that the lawyer file a frivolous lawsuit on behalf of a homeowner with whom the lawyer has had little or no contact in order to buy time so that the foreclosure consultant will have more time to negotiate a loan modification directly with a homeowner’s lender. [... M]uch of this conduct – accepting referral fees, fee splitting, forming a business with a non-lawyer that performs legal services, helping a non-lawyer engage in the unauthorized practice of law, filing frivolous lawsuits – violates the Rules of Professional Conduct and/or ethics rules set forth in the Business and Professions Code. A California lawyer should consider carefully the applicable ethical rules before agreeing to participate in any such venture involving people acting as foreclosure consultants or in a similar capacity. Failure to do so may result in lawyer discipline.

For the entire five-page, heavily footnoted, advisory, see ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications.

To file a complaint with the State Bar Association against a California attorney for violating state ethics rules, or a loan modification firm for engaging in the unauthorized practice of law, see Overview Of Attorney Discipline System (go here for a Complaint Form).

Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law. UnauthPractOfLawKappa

Legal Aid Saves Ohio Couple From Foreclosure; Files Suit Against Loan Modification Firm & Attorney Team For Taking Money For Bogus Help

In North Avondale, Ohio, the Kentucky Post reports on the case of Chris and Dorthy Gillium, a financially strapped couple who was facing foreclosure on their home when the decided to retain the services of a loan modification firm that was working in tandem with an attorney to purportedly help homeowners avoid foreclosure.
  • [B]ecause the Gilliums were [...] desperate for help, they turned to American Foreclosure Professionals in Mason. Chris said that for a $950 fee paid in advance, the firm guaranteed that one of their attorneys could help him and his wife rescue their mortgage and stay in their home.

  • "The attorney took the first step that any attorney does in a lawsuit and filed an answer," said Noel Morgan, of the Legal Aid Society of Southwest Ohio. "That's all he did." The next thing Chris knew was that the house was scheduled for a foreclosure sale conducted each week by the Hamilton County Sheriff's Office.

  • "The mortgage company put us in default," Chris said. Attorneys with the Ohio Attorney General's Office put the Gilliums in touch with Legal Aid. Morgan began working the case and had the default judgement set aside. He's still working on trying to negotiate new loan terms for the couple.

  • However, that's not all that Morgan did. "We've got a malpractice claim against the attorney for professional negligence," Morgan stated. "We have consumer sales or deceptive sales claims against the mortgage rescue firm and similarly against the mortgage broker who set it up."

  • Those cases are still pending, but for now the Gilliums are still in their dream home and singing the praises of the help that they received. "God, through the Legal Aid Society, is the reason that me and my wife are still sitting in our home right now," Chris said.

For the story, see Caution Urged When Hiring Foreclosure Rescue Firms. UnauthPractOfLawKappa

CBS Evening News On South Florida Loan Modification Firm Currently Facing Civil Charges From State AG

The CBS Evening News recently ran a story on South Florida loan modification firm Outreach Housing, which summarized their approach to financially strapped homeowners with this excerpt:
  • [F]or homeowners the pitch went like this: They would pay Outreach Housing an upfront fee of about $1,200. They would then stop paying their lender and instead pay Outreach every month an amount equal to two-thirds of their monthly mortgage.

  • That's money homeowners like Frank Kosa believed they would go toward their mortgage while Outreach worked with his bank to reduce his payment. "They said 'don't worry about anything. Don't pay anything. We are taking care of everything,'" said Kosa. But they didn't. Instead, as victim after victim told CBS News, they got taken.

  • According to a lawsuit filed by Florida Attorney General Bill McCollum, Outreach Housing was engaged in a "systematic pattern" of "fraudulent," "unfair" and "deceptive" practices, leaving behind at least 600 victims.

For more, see Scams Rampant In Foreclosure Fraud Hotbed (CBS Evening News: Growing Number Of Scams Target Homeowners Struggling To Keep Homes); or go here for CBS News video, Inside Mortgage Rescue Scams.

For the Florida Attorney General's 10-16-08 press release announcing the filing of the lawsuit against Outreach Housing, see Broward Foreclosure Debt Mitigation Company Sued for Deceptive Practices.

Go here for other posts on this case.

Saturday, February 14, 2009

Vacant Home Hijackers On The Radar For Dallas-Area Cops, Prosecutors

Buried in a recent story from Dallas County, Texas on scammers hijacking vacant homes involved in the foreclosure process and renting them out, The Dallas Morning News references these recent efforts to prosecute the alleged perpetrators:
  • [O]n Thursday, a judge convicted pastor Jackie Lewis, 53, of Cedar Hill, on one count of securing execution of a document by deception in connection with renting a foreclosed home in Cedar Hill. The charge is normally a third-degree felony, but because of a 1994 theft conviction, he could face two to 20 years in prison. His sentencing is scheduled for March 6.

***

  • DeSoto, Cedar Hill and Lancaster investigators have all arrested [Morris] Mosley on charges related to the foreclosure scheme. Late last month, [police] arrested Mosley outside a southeast Oak Cliff home that Mosley wanted to rent out. He's being held on two counts of suspicion of burglary of a habitation and one count of securing execution of a document by deception. Mosley, 48, is being held at Lew Sterrett Justice Center. His trial is set for April 20.

For the story, see Scammers finding open door at foreclosed homes.

Go here, go here, and go here for posts on phony landlord rent scams. PhonyLandlordScamZeta

The Work Of An Eviction Deputy Not Without Surprises

In San Diego, California, the North County Times reports on the experiences of two San Diego County sheriff's deputies in connection with foreclosures. The two men are among seven deputies in North County tasked with removing people from their homes.

  • [T]here are surprises. [One deputy] said that last year he walked into an Encinitas place and found the body of a man who had committed suicide. [He] also found a note, in which the man had written that he had no place to go. Another deputy said he served notice on a house, and found four kids at home and Mom at work. But this was the day and time to kick the residents out, so deputies had to call social workers to take the kids into protective custody.

In another incident, deputies escorted a pregnant woman with a the little girl at her knee out of her home. It didn't matter that she had no car to drive, nowhere to go, and that her baby was due the next day.

For more, see With evictions on the rise, deputies make the rounds to clear residents out of homes.

Go here and go here for other posts on the encounters of police and sheriff's deputies carrying out home evictions. DeputyEvictionTheta

2nd Floor Walkway In 15-Unit Building In Foreclosure Comes Crashing Down; Structure Condemned, Residents Forced Out

In Truro Township, Ohio, The Columbus Dispatch reports:
  • After years of complaints about code violations and management problems at an apartment complex in Reynoldsburg, a second-story walkway there collapsed yesterday just as a construction crew prepared to fix it, Truro Township Fire Battalion Chief Allen Deaver said. The incident occurred at the White Birch Crescent Apartments. One woman suffered minor injuries. Nine families living in the 15-unit building [...] have been relocated, Deaver said.

***

  • "We'd come home every day, and you could see it just keep sagging and sagging," [one resident] said. "Then all of a sudden we heard this 'bam.'"[...] The building, one of 14 in the apartment complex, was condemned by the city's chief building officer [...] after the walkway fell.

***

  • White Birch Crescent Apartments was one of six complexes owned by Columbus Properties Limited Partnership that have been battling foreclosure. It was placed in [a receiver's] care by a federal court order until the original owners could find a responsible buyer.(1)

For the story, see 2nd-floor walkway caves during Reynoldsburg apartment building repair (15-unit building condemned; 1 woman hurt).

(1) While the building involved was a landlord-owned rental building, the incident could just as easily happen in a condominium. Given the financial problems many condo associations are having paying its bills (like the landlord in this story ) while its unit owners are suffering with foreclosure problems and maintenance fee delinquencies, one may want to think long and hard before buying a condo in a multi-story, decades-old building that may have hidden (or possibly not-so-hidden) deferred maintenance surprises.

Bernanke's Boyhood Home Falls To Foreclosure

The Wall Street Journal reports:
  • Travis Jackson walks through his modest ranch house, admiring the kitchen's built-in spice rack and the red-oak floors. He draws back the curtains, and sunlight illuminates the pride on his face. The young banker just bought Federal Reserve Chairman Ben Bernanke's childhood home at a foreclosure sale. [...] Mr. Bernanke's family sold the property more than a decade ago. It ended up on the block late last year after its former owners fell behind on their mortgage payments.

For the story, see Fed Chief's Boyhood Home Is Sold After Foreclosure.

Foreclosed Homeowner Commits Suicide As Sheriff's Deputy Stood Outside Home About To Carry Out Eviction

In Colorado Springs, Colorado, The Gazette reports:
  • Wayne "Mike" Anderson knew what the knock at the door of his Stratmoor Valley home meant: He was being evicted. He wasn't ready to leave. Unemployed, awash in debt and hiding an October foreclosure from loved ones, the 55-year-old shot himself Wednesday morning as a sheriff's deputy stood outside. His live-in girlfriend was at work. She never knew they were being forced out, friends said.

***

  • Friends believe Anderson, who they say used to work as a surgical nurse, began sliding into depression after losing his job about two years ago. Unable to find work in his field, Anderson turned to the same risky borrowing that helped plunge the country into a foreclosure crisis, borrowing against the modest split-level home [...] his parents bought in 1969 and left him in their will.

For more, see Facing eviction, a man killed himself while a deputy stood at door.

Go here and go here for other posts on police incidents during home evictions.

Go here for other posts on evictions and suicide. suicide homeowner foreclosure zeta DeputyEvictionTheta

Federal Class Action Suit Targets Use Of "Chinese Drywall" Used In Building Florida Homes

The South Florida Business Journal reports:
  • A federal lawsuit alleges that fly ash residue from Chinese power plants was used in drywall that's the subject of growing scrutiny in Florida. The suit, which seeks class action status in U.S. District court in Fort Myers, alleges 10 million square feet of the drywall was used in Florida homes. If true, the allegation indicates more than 200,000 sheets of the drywall were used in the state – enough to build 800 to 2,000 homes, depending on their size.

***

  • The federal suit claims that the defendants, [...] negligently manufactured and sold the defective drywall, which was "unreasonably dangerous" in normal use because it caused corrosion to air-conditioning and electrical components, and caused coughing and irritation of sinuses, eyes and throats. It goes on to state that, “when combined with moisture in the air, these sulfur compounds create sulfuric acid.”

For more, see Class action lawsuit filed over Chinese drywall.

In related stories from The Wall Street Journal, see:

Go here for links to recent media reports on the problems with "Chinese drywall."

California AG Warns Against "Property Tax Reduction" Scams

In Sacramento, California, the Office of the California Attorney General announces:
  • Attorney General Edmund G. Brown Jr. [Thursday] issued a Consumer Alert to California homeowners about a “blatant and costly scam” targeting homeowners with declining property values. “This blatant and costly scam holds out hope to homeowners that their property taxes will be reduced if they pay hundreds of dollars to a middleman to have their property re-evaluated,” Attorney General Brown said. “In point of fact, homeowners can seek relief directly from their county assessor free of charge. Homeowners should be on high alert.”(1)

For the entire press release, see Attorney General Brown: Homeowners Should be on High Alert for Property Tax Scams.

(1) According to the press release, companies are sending deceptive mailers to homeowners offering help in reducing property tax assessments, if the homeowner pays the company hundreds of dollars in fees. The companies use official-sounding names such as “Tax Adjusters,” “Tax Readjustment” or “Tax Review” to make victims believe the company is a government agency.

Race Bias In Twin Cities' Mortgage Lending, Says Report

In Minneapolis, Minnesota, the Twin Cities Daily Planet reports:
  • Lenders discriminate. Housing is segregated. Communities of color are hit harder by the foreclosure crisis than anyone else. That’s the ugly face of racial discrimination in the Twin Cities revealed in a 54-page report released by the Institute on Race and Poverty at the University of Minnesota Law School.

  • People of color “continue to receive home loans on worse terms and at a higher cost than similarly situated white borrowers, according to “Communities in Crisis: Race and Mortgage Lending in the Twin Cities”. Higher incomes did not protect people of color from lending disparities, with high-income black, Latino and Asian applicants denied loans at higher rates than low-income white borrowers.

For more, see Report documents mortgage discrimination in Twin Cities.

Go here, Go here, and Go here for other posts on alleged discrimination in real estate transactions. DiscriminationPredatoryLendingAlpha

County Commission Votes Against Clipping Landowners With Upfront Tax Penalties When Entering Into Natural Gas Leases

In Bradford County, Pennsylvania, WNEP-TV Channel 16 reports:
  • Drilling for natural gas is becoming very profitable for landowners in the northern tier but in Bradford County it looked as though farmers and landowners would be penalized just to begin the drilling, whether there was gas or not. [Last week] all that changed.

  • Bradford County commissioners voted two-to-one to prevent landowners from having to pay a penalty for natural gas drilling on their property. [...] Now, those landowners won't have to pay up until natural gas is actually pumped from their properties.

  • It's a victory for many of the property owners who were at the county courthouse in Towanda [...]. Some would have had to pay a lot of money as a penalty for allowing natural gas drilling on land that got a tax break. "Farmers just don't have the money. It's just that plain and simple. They don't have the money," said Commissioner John Sullivan. Farming is a way of life for Sullivan and so many others in Bradford County. That's why he voted to change how the state's Clean and Green Law is interpreted.

For more, see Commissioners Side with Landowners. MineralRightsAlpha

Broward Sheriff Uses Roadside Checkpoints To Crack Down On Unlicensed Home Improvement Contractors

In Broward County, Florida, WTVJ-TV Channel 6 reports:
  • It’s a scenario that happens too often in South Florida when residents and businesses are duped after hiring unlicensed contractors, but now the Broward Sheriff's Office is making sure you get what you pay for. With the help of city, county and state partners, BSO was able to set up a commercial vehicle observation checkpoint Tuesday morning [...]. The operation started with a commercial vehicle observation checkpoint. BSO deputies in marked units and on motorcycles stopped commercial vehicles not displaying the proper license numbers on the sides of their vehicles. [...] Deputies said two men were arrested during Tuesday's vehicle checkpoint.

Source: BSO Cracks Down On Unlicensed Contractors.

More Trouble For Shaky Auto Dealerships

In the San Francisco Bay Area, The Oakland Tribune reports:

  • Four GMC Pontiac Buick dealerships, located in Dublin, Newark, Colma and San Jose, have abruptly closed their doors, as a fresh wave of shutdowns and consolidations roils the ranks of Bay Area auto dealers in the new year. About 100 employees lost their jobs because of the closure of Dublin Buick Pontiac GMC in Dublin and the shutdown of Fremont Pontiac GMC in Newark. Those East Bay operations closed Jan. 29.

For more, see More Bay Area auto dealerships closing.

*************

In Central New York, The Syracuse Post Standard reports:

  • Since 2007, 11 car dealerships eight in Onondaga County have closed in Central New York.
    The 2007 Verizon Yellow Pages listed 46 new-car sales operations, handling 92 franchises. One veteran dealer estimated that the eight lost dealerships in Onondaga County sold about 15 percent of the cars there during an average year.

For more, see Area has lost 11 car dealerships.

****************

In Gilroy, California, The Gilroy Dispatch reports:

  • After 60 years in business, Gilroy Pontiac Buick GMC has run out of gas, leaving 26 people without a job and causing other auto dealers and city officials to wonder who's next.(1)

For more, see Car dealership giant falls.

(1) These stories serve as a reminder for those either trading in, or buying, a used car to exercise extreme caution when selecting a dealership with which to do business. For a description of the kind of trouble awaiting an unwitting consumer who does business with the wrong dealership, see Folding dealers shock car buyers with unpaid liens ("It's becoming a serious problem because the consumer, through no fault of their own, may be facing financial ruin just because they purchased a car," [California state Senator Ellen] Corbett said.).

Friday, February 13, 2009

Fannie, Freddie Foreclosure Suspensions Extended Through March 6

The Associated Press reports:
  • Government-controlled mortgage finance companies Fannie Mae and Freddie Mac said Friday they have immediately suspended all foreclosure sales involving occupied single-family and 2-4 unit properties through March 6, to give troubled borrowers more time to work with loan servicers to avoid losing their homes. The move, which doesn't apply to vacant properties in foreclosure, is ahead of the Obama administration's roll-out of its national foreclosure prevention and loan modification program.

For more, see Fannie Mae, Freddie Mac again suspend foreclosures.

Florida AG Hits Orlando Loan Modification Firm With First Lawsuit Under New State Foreclosure Fraud Law

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum today announced that his Economic Crimes Division has filed a lawsuit against an Orlando company allegedly providing loan modification services to homeowners facing foreclosure -- the first lawsuit filed under the new Foreclosure Rescue Fraud Protection Act. According to the lawsuit filed today in Orange County, FMA Servicing, Inc. and its owners are in violation of the law which, among other provisions, prohibits a company providing foreclosure-related rescue services from charging consumers any up-front fee.

***

  • An investigation conducted by the Economic Crimes Division revealed that FMA Servicing, which does business under the name Financial Management Advisors,(1) allegedly charges an up-front fee as high as $2,500 to homeowners seeking loan modification services. Additionally, the lawsuit claims the company misrepresented relationships with lenders and falsely advertised the presence of attorneys and certified public accountants on staff. The Attorney General has also filed a motion seeking to temporarily prevent FMA Servicing from charging up-front fees.

***

  • Florida Statutes 501.1377, which took effect on October 1, 2008, protects homeowners who are in foreclosure or nearing foreclosure from companies offering potentially fraudulent foreclosure "rescue" services. Specifically, the statute governs companies providing foreclosure-related rescue services including loan modification and short sale services. These companies are prohibited from charging homeowners an up-front fee for these services and must provide homeowners with a written agreement.

For more, see McCollum: First Lawsuit Filed Under New Foreclosure Rescue Fraud Law (Orlando company sued for allegedly engaging in fraudulent foreclosure rescue services).

For the lawsuit, see State of Florida v. FMA Servicing, Inc., et al.

(1) Other defendants named are Edward Billings, Joseph Esposito, and Salvatore Esposito. They face civil charges of violating:

  • §§501.1377(3)-(4), Florida Statutes, (2008), Violations Involving Homeowners during the Course of Residential Foreclosure Proceedings;
  • §817.06(1), Florida Statutes, (2008), False Advertising;
  • §817.41(1)-(2), Florida Statutes, (2008), Misleading Advertising; and
  • §865.09(3), Florida Statutes (2008), Fictitious Name Act.

Three Financial Giants Declare Foreclosure Moratorium On "Some" Foreclosures

Reuters reports:
  • Citigroup Inc, JPMorgan Chase & Co, and Morgan Stanley said they had placed a moratorium on foreclosing on some home loans to give the government time to launch a $50 billion mortgage relief program.

***

  • Citigroup said its moratorium, which started on February 12, will last until either President Barack Obama has finalized the details of a program for modifying mortgages, or until March 12, whichever comes first. It applies to mortgages that Citi owns, to borrowers living in their homes. Morgan Stanley's moratorium started this week, and will last until March 6. It applies to the bank's Saxon unit, which collects payments on loans. JPMorgan Chase & Co said its moratorium will last through March 6, which it believes is enough time for the Treasury to announce a new mortgage modification plan.

For the story, see Big banks place moratorium on some foreclosures.

Detroit-Area Sheriff Sued Over Foreclosure Moratorium

In Wayne County, Michigan, the Detroit Free Press reports:
  • A mortgage company today sued Wayne County Sheriff Warren Evans, saying the sheriff has no legal basis to halt the sale of foreclosed homes. The lawsuit, filed in U.S. District Court in Detroit, on behalf of Towne Mortgage Co. in Troy, asks Judge Paul Borman to order Evans to start holding the sales again. [...] Evans announced last week that he believes the federal Troubled Asset Relief Program, approved by Congress last fall, trumps state law and preempts him from selling foreclosed homes.

For more, see Evans is sued over foreclosure plans.

For Sheriff Evans response to Towne Mortgage's announcement, see Full statement from Sheriff Warren Evans.

Hawaii Feds Bust Four Foreclosure Rescue Operators In Alleged Equity Stripping, Sale-Leaseback Scam Targeting Financially Strapped Homeowners

In Honolulu, Hawaii, the Honolulu Advertiser reports:
  • The two top executives of a Honolulu mortgage company were indicted by a federal grand jury for allegedly coordinating a scheme that bilked banks and troubled homeowners out of hundreds of thousands of dollars, court documents show.(1)

***

  • They are accused of targeting homeowners on the brink of foreclosure — including some who were members of Calvary Chapel Pearl Harbor — and offering relief if the homeowners agreed to a temporary sale of the house to a third party "investor" who worked for John Dimitrion, according to court documents.

  • The four allegedly told the homeowners they could remain in their homes and their title would be returned to them after a set period of time. Homeowners paid John Dimitrion $20,000 for the service, thinking their mortgage payments would be handled by Dimitrion's company, court documents said.

  • John Dimitrion and his associates applied for larger loans than what the homeowners owed and allegedly stole the proceeds by funneling the money into fake escrow accounts created by Julie Dimitrion, the documents said. In each case the homeowner was unable to make the payments on the larger loan, the documents show.

For more, see Honolulu mortgage company executives indicted in scam (Company's founder, wife, 2 others accused in home loan scheme).

(1) According to the story, John M. Dimitrion, founder and chief executive of Mortgage Alliance LLC and his wife, Julie A.B. Dimitrion, the firm's chief financial officer, were indicted with Rick Kealoha Pa Jr. and Benjamin Yoshito Thompson after they allegedly defrauded homeowners and lending institutions by promising to stave off foreclosure.

Philly DA Announces Issuance Of Arrest Warrants In Alleged Deed Theft Operation; Among Targeted Victims Were The Non-English Speaking & The Deceased

From the Philadelphia, Pennsylvania District Attorney's Office:
  • District Attorney Lynne Abraham [Wednesday] announced that arrest warrants have been issued for fifteen people for engaging in a continuing conspiratorial and criminal enterprise to steal homes, [...] among other crimes.(1)

***

  • The Grand Jury investigation revealed that generally, this ring forged and recorded deeds to abandoned or otherwise uninhabited properties, transferring these properties from their true and rightful owners to codefendants, or fictitious person, and then "sold" these properties to unsuspecting victims. [...] In each case of fraud, the lawful owner was totally unaware, and never consented to the "sale" of his property. In many instances the true and lawful owners of the property were dead for a number of years. Often the conspiratorial ring targeted immigrant, non-English speaking citizens specifically because of the lack of sophistication with the laws and procedures of the transfer of property in this state.

For the entire press release, with the list of addresses of the stlen homes, see Fifteen Arrest Warrants Issued in House Stealing Cases Based on Grand Jury Presentment (More than 80 Properties Illegally Sold Victimizing Legal Homeowners and Unsuspecting Buyers).

For Philadelphia Daily News' coverage on these charges, see:

  • 15 charged as house thieves ("House-stealing is a regular and cottage industry in the city," Abraham said);
  • Stealing houses (Abraham says that as many as 500 fraudulent sales are being investigated);
  • Hot line for house thefts (The DA's Office has set up a special hot line - 215-686-9901 - for those who are victims of "house stealing," in which scammers prey on homeowners by forging documents for empty homes, then selling them to another buyer).

For an old NBC10 television story on the deed theft problem in Philadelphia, see Stolen Homes.

Go here, Go here, Go here, go here, go here, and go here for other posts related to deed or refinancing scams by forgery, swindle, etc.

(1) Those charged are Carlos Quiles, Ivan Delgado, Troy Baylor, Richard Smith, Kenneth Lyons, Lenora Irene Jackson, Rebecca A. Robinson, Tyrone Davenport, Juanita Torres, Alberto Rodriguez, Daralease Brown, Vincent Wilder, David Lespier, Maria Roman, Zoraida Cuevas and Marino Rodriguez. They face numerous counts of:

  1. Corrupt Organizations, 18 Pa.C.S.A. §911 ( F-1);
  2. Criminal Conspiracy, 18 Pa.C.S.A. §903 (F-3);
  3. Theft by Unlawful Taking or Disposition, Pa.C.S.A. §3921 (F-3);
  4. Theft by Deception, 18 Pa.C.S.A. §3922 (F-3);
  5. Forgery, 18 Pa.C.S.A. §4101 (F-3);
  6. Perjury, 18 Pa.C.S.A. §4902 (F-3);
  7. Burglary, 18 Pa.C.S.A. §3502 (F-1);
  8. Criminal Trespass, 18 Pa.C.S.A. §3503 (F-2 );
  9. Tampering with Records or Identification, 18 Pa.C.S.A. §4104 (M-1);
  10. Securing Execution of Documents by Deception, 18 Pa.C.S.A. §4114 (M-2); and
  11. Tampering with Public Records or Information, 18 Pa.C.S.A. §4911 (F-3). DeedGammaTheft

Nevada Dems, GOP Lawmakers Supportive Of Proposed State Foreclosure Mediation Bill

In Carson City, Nevada, the Las Vegas Review Journal reports:
  • Conservative Republicans expressed tentative support [Wednesday] for a Democratic bill to require banks and other lenders to participate in mediation hearings with homeowners who are in danger of losing their homes to foreclosure. "This bill represents intervention into the private sector that I would generally be uncomfortable with," said Sen. Warren Hardy, R-Las Vegas. "But these are not normal circumstances and I want to be part of the solution."

***

  • Under the proposal, people in danger of losing their homes would apply to the Administrative Office of the Courts, at the Nevada Supreme Court, and request a mediation hearing. Lenders would be required to attend or send a representative who has the power to renegotiate loans. "We recognize the importance of this issue to the citizens of the state," Chief Justice Jim Hardesty said. "This is an all-hands-on-deck crisis."

For more, see Republicans offer tentative support for Buckley's foreclosure mediation bill.

Elderly Homeowner In Foreclosure Allegedly Victimized By Predatory Loan Commits Suicide

In East Palestine, Ohio, The Youngstown Vindicator reports:
  • A 72-year-old woman who feared she’d lose her home to foreclosure hanged herself to death, the family lawyer said. [She] died the morning of Jan. 24 at her home, just days after receiving her second summons and foreclosure complaint from her mortgage lender, said Atty. Robert B. Holman of Bedford.

***

  • The foreclosure complaint was filed Jan. 6 in Columbiana County Common Pleas Court by Chase Home Finance in Columbus. [...] In a 31-page counterclaim lawsuit,(1) Holman names as third-party defendants Lake Erie Title Agency in Dayton, North Coast Capital Funding in Cuyahoga Falls and SML Corporation, a real estate agency in Hudson, Ohio.

For more, see Family says suicide caused by foreclosure action (Lawyer: Couple in their 70s and on fixed income was given a 30-year, $160,000 loan).

Go here for other posts on foreclosures and suicide.

(1) Holman alleges in the lawsuit filed on behalf of the [homeowners] that [they] were the victims of a predatory lending scheme. He said the bank, mortgage company and title insurance company used an inflated appraisal of $200,000 to create an over-inflated mortgage loan, thereby putting [them] on the path to financial ruin. He said the property [...] had a market value of $80,000. suicide homeowner foreclosure zeta

North Carolina Couple Loses Home To Foreclosure After Loan Modification Firm Allegedly Beat Them Out Of $1,300

In Raleigh, North Carolina, WRAL-TV Channel 5 reports on a local couple who found themselves stuck with an "exploding" adjustable rate mortgage on their home that doubled their house payment within six months of obtaining the loan, and who needed help:
  • That was beyond what they could handle, so the Mizers looked for refinancing. They tried 40 lenders, but all of them turned down the family down. Then they got a letter from mortgage restructuring firm Augustus, Rae & Reed that claimed to have a "95.5 percent resolution success" rate in stopping foreclosures. “I remember us hugging (and saying) ‘Baby, we're going to get to keep the house,’ (and) telling the kids we're going to be able to keep the house," Mizer said.

  • The company charged more than $1,300 upfront and told the Mizers not to communicate with their lender. Company representatives said they would handle everything, according to Mizer, who said that was the last time she heard from the company. One month later, the family's bank started foreclosure proceedings and told them it had never been contacted by Augustus, Rae & Reed. The Mizers lost their house.

For the story, see Facing foreclosure? Watch out for scammers.

Unwitting Investor Involved In Alleged $100M Mortgage & Investment Fraud Left Holding The Bag

Buried in a recent News10.net story on an alleged $100 million mortgage and investment fraud operation based in Sacramento, California is this excerpt describing one of the apparently unwitting investors who was duped into participating in the investment program:
  • One Sacramento-area investor who asked not to be identified told News10 she and her husband bought four properties in California, Arizona and Florida through Loomis [Wealth Solutions] with the promise that Loomis would cover the mortgage, taxes and homeowners dues with the rents collected. The investor said three of the four properties were never rented and Loomis stopped making payments in August. She said the couple is left with at least $250,000 in losses and four pending foreclosures on their credit.

For the story, see Sacramento Fraud Fugitive a "Big Fat Liar?"

For more on this story, see Two Fugitives Nabbed In Alleged Mortgage & Investment Fraud Scam Involving 100s Of Homes, Many Now In Foreclosure; Lender Losses About $100M, Say Feds.

Avoiding Income Taxes On Debt Cancellation Not Automatic; Must File Required Form; New Law Applies Only To Loans Used To Buy, Improve Primary Home

In a story from KUSA-TV Channel 9 (Denver, Colorado), IRS National Taxpayer Advocate Nina Olson is reported as giving this reminder on avoiding income taxes on the cancellation of debt when homeowners lose their primary residence to foreclosure, or when the debt cancellation is incident to either a loan modification or a short sale of the their primary residence:
  • [T]he amount of debt that is cancelled is actually taxable income under the tax laws, unless there is a rule that it is not taxable. In 2007 Congress passed a law that says if you lost your home to foreclosure and you used the mortgage to buy or improve your home, then the amount of cancelled debt would not be taxable to the extent that you used it to buy or improve your home.(1)

For more, see Taxpayer advocate offers tips for homeowners.

Go here for more on Dodging The Income Tax On Real Estate Foreclosure & Short Sales.

(1) What this means is that if a homeowner refinanced a home, took cash out, and blew it on a vacation, a wedding, or used it to pay off car loans, credit card balances, student loans, medical bills or anything else other than making home improvements, then to that extent, the homeowner is out of luck and will owe taxes on the cancelled debt attributable to the amount blown, acording to the new law passed in 2007.

However, even if the debt cancellation does not qualify for favorable tax treatment under the new law, it might nevertheless qualify for similar favorable tax treatment under already existing law (in connection with debt cancellation (a) by reason of filing for bankruptcy, or (b) when the taxpayer was insolvent, or (c) in a number of other circumstances). For more on this point, see IRS Publication 525 (pages 19-20 - "Canceled Debts") and IRS Publication 908 (pages 21-23 - "Debt Cancellation"). If qualified, this favorable tax treatment is available to anyone, is not limited to homeowners, and applies to cancellation of any debt (ie. car loans, credit cards, etc.) and IRS Publication 4681: Canceled Debts, Foreclosures, Reposessions and Abandonments. short sale income tax