Wednesday, August 26, 2009

Westchester DA Indicts Eight In Alleged Equity Stripping Foreclosure Rescue Scam After Joint Probe w/ NYS Banking Dept.; Four Families Victimized

In White Plains, New York, The Journal News reports:
  • Eight people(1) were indicted for a countywide mortgage scheme that defrauded four families and two mortgage lenders of $1.4 million, Westchester authorities announced [Tuesday]. The perpetrators "induced desperate property owners fearing the threat of foreclosure to deed their homes to 'investors' with the promise that they could re-purchase their property in 12 to 24 months," District Attorney Janet DiFiore stated in a news release. "In fact, the defendants colluded to strip the property of its equity by obtaining inflated mortgages based on fictitious purchase prices using 'show' checks to deceive the banks as to the actual purchase price." The arrests followed a nine-month probe by DiFiore's office and the state Banking Department. The targeted families were from Croton-on-Hudson, Yorktown, Cortlandt and Mount Vernon.

Reportedly, Westchester DA Fiore said that four members of the alleged racket were attorneys,(2) and that the four victims who had their home equity ripped off in the sale-buyback deals would have to bring civil lawsuits against the alleged perpetrators to try to get their homes back.(3)

Source: Eight indicted in Westchester mortgage scheme.

For the Westchester DA press release, see Indictment Unsealed In Countywide Mortgage Fraud Scheme (Eight Individuals Defrauded 4 Families For 1.4 Million Dollars).

(1) Arrested were Doreen Swenson, 60, and Herbert "Phil" Hall, 60, of Tarrytown; Mildred Didio, 44, of Manhattan; David Reback, 67, of Rye Brook; Amerigo DiPietro, 59, of Brewster; Eileen Potash, 52, of Queen; Wilma Shkreli, also known as Wilma Gecay, of Westwood, N.J.; and Frank Corgiliano, 44, of Newtown, Conn.

(2) The lawyers were identified as Didio, Reback, Potash, Corigliano. The four lawyers, along with the four others, were indicted Tuesday, each on charges of grand larceny, fraud and conspiracy. They pleaded not guilty. See 4 lawyers indicted in $1.4M NY scam.

(3) See DA: Lawyers taking desperate owners' NY homes.

Ten State AGs, Feds Form Posse To Target Equity Skimming, Bogus Foreclosure Rescue, Straw Purchases, Unethical Lending Practices

The New York Times reports:

  • The group is headed by McKenna and Iowa Attorney General Tom Miller. Other members include the attorneys general of Arizona, Colorado, Illinois, Nevada, North Carolina, Massachusetts, Missouri and Ohio, as well as representatives from the Department of Justice, Federal Treasury, Department of Housing and Urban Development and Federal Trade Commission. McKenna says the task force is the result of meetings on July 15 in Washington, DC, between federal regulators and a number of state attorneys general.

Source: Attorneys General Form Mortgage Fraud Task Force.

(1)Scammers and opportunists need to know that they’re in the crosshairs of a tough, well-armed posse with a presence in every state,” McKenna said. McKenna said that by combining their enforcement powers and expertise, state and federal authorities are in a stronger position than ever before to take on equity skimmers, foreclosure rescuer schemers, straw purchasers and unethical lenders who deceive or discriminate.

Mississippi Couple Cops Pleas In Bankruptcy Fraud-Related, Deed Transfer Foreclosure Rescue Scam; Wife Goes Down For Failing To Turn In Hubby

In Jackson, Mississippi, The Clarion Ledger reports:
  • A Jackson couple will be sentenced Nov. 5 in federal court after pleading guilty to fraud related charges. Robert E. Power Jr. pleaded guilty Friday to conspiracy to commit bank and wire fraud, and bankruptcy fraud. His wife, Deaundrea Power, pleaded guilty to misprision of a felony for failure to report bankruptcy fraud committed by her husband.

  • The couple had operated a business, Yorkshire Financial Services on Ridgewood Road in Jackson, which targeted homeowners at risk of foreclosure. The couple had represented to the homeowners that in exchange for transfer of their property to Yorkshire and a monthly rental payment, the company would negotiate mortgages or refinance mortgages to allow homeowners to remain in their homes, according to the United States Attorney’s Office. But the Powers would then place the property in bankruptcy unbeknownst to the homeowners and either the home would eventually be forclosed upon, or sold through straw buyers, via fraudulent loans, where the Powers would obtain cash money from the sale. As a result of the Powers’ actions, the homeowners lost their homes while the Powers gained a profit from the fraudulent activity, according to the federal investigation.

Source: Jackson couple pleads to fraud charges.

For the U.S. Attorney press release, see Couple Pleads Guilty To Mail Fraud, Bankruptcy Fraud And Falsifying Documents In Bankruptcy Cases. loan modification

Mississippi Feds Hit Title Agents With 38-Count Indictment For Role In Alleged Scam To Fraudulently Obtain $9M+ In Mortgage Loans

From the Office of the U.S. Attorney (Jackson, Mississippi):
  • Acting United States Attorney Stan Harris announced [...] that a federal grand jury has returned a 38 count indictment charging J. Larry Kennedy and Keith M. Kennedy with conspiracy to commit mail and wire fraud, conspiracy to launder money, multiple counts of wire fraud, and multiple counts of money laundering in relation to their roles in a mortgage fraud conspiracy and scheme with Mark J. Calhoun, April Calhoun and Willie Jones to obtain fraudulent loans totaling in excess of $9 million.

For the U.S. Attorney press release, see Former Real Estate Loan Closing Agents Are Charged With $9 Million Mortgage Loan Fraud.

(1) The indictment alleges that between September 2004, and at least through September 2006, while operating in the Jackson-metro area as Loan Closing & Title Services, Inc., the Kennedys were the closing agents involved with the fraudulent mortgage loans charged in the indictment. The indictment alleges that during the conspiracy and scheme, the Kennedys and their co-conspirators provided fraudulent loan documents to various lenders; thereafter, the Kennedys disbursed proceeds from the fraudulent loans to Mark J. Calhoun, April Calhoun, Willie Jones, and their respective companies as fictitious creditors. According to the indictment, as part of the conspiracy and scheme, on some of the fraudulent loans the Kennedys falsely notarized loan documents during the loan closing process that were relied upon by the lenders to demonstrate that the specific borrower personally appeared at the loan closing and signed the closing documents in the presence of the loan closing agent in order to retrieve the mortgage loan proceeds.

Cook County Court Clerk Sits On $18M+ Belonging To Foreclosed Homeowners Who Failed To Claim Surplus Money From Courthouse Sales

In Chicago, Illinois, WLS-TV Channel 7 reports:
  • Cook County Circuit Court Clerk Dorothy Brown says her office has found more than $18 million in mortgage surplus money that belongs to people who lost their homes to foreclosure in the last two decades. The surpluses occur when the bank sells foreclosed homes for more than the homeowners owe. The clerk's database found about 1,900 people are due surplus money. The surpluses mostly involve foreclosures from the 1990s and not the recent subprime mortgage collapse.

Source: Clerk: $18M due to foreclosed homeowners.

Tuesday, August 25, 2009

Upfront Fee Florida Foreclosure Rescue Operator Gets Apparent Hand Slap In Federal Civil Suit; FTC To Suspend $4.1M Judgment After Payment Of $21K

The Federal Trade Commission recently announced:
  • The Federal Trade Commission has put a stop to a deceptive foreclosure "rescue" operation that charged homeowners $1,200 based on the false promise that it could save them from losing their homes. The operators of the business(1) are barred from any further deceptive practices under a settlement with the FTC. The agency charged them with violating the FTC Act by falsely claiming that they would prevent homes from being foreclosed in virtually all instances or refund most of the $1,200 fee. In most cases the defendants neither stopped foreclosure nor provided promised refunds.

***

  • The order imposes a $4.1 million judgment, which will be suspended upon transfer of $21,694 in bank account funds that were frozen by the court. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

For the entire FTC press release, see FTC Action Stops Foreclosure 'Rescue' Operation.

For linkks to the relevant court documents in this matter, see Federal Trade Commission v. United Home Savers, LLP, et al.

(1) The defendants are Stephanie Dietschy, Darin Dietschy, and United Home Savers, LLC, all based in Florida. loan modification

Queens Woman Accused Of Swiping Deed To Brooklyn Retiree's Home & Emptying His Savings Account; House & Cash Recovered In Civil Suit

In Brooklyn, New York, the New York Daily News reports:
  • A Queens mom in a child support battle offered to help an elderly man with his own Family Court problem - and then stole the deed to his home and cleared out his bank account, officials said. Chandra Myers is facing larceny and forgery charges and a possible 15 years in prison if convicted of scamming Brooklyn retiree Levi Latham. She's accused of using the documents he gave her to forge his signature on a property transfer and using a fake power of attorney to grab his $25,000 savings.

***

  • With the help of Legal Aid lawyer Roger Hawke, Latham sued Myers and Citibank and got his house and money back when she didn't bother to show up to court. Myers, 42, isn't in the clear, though. She's been hit with criminal charges by the Brooklyn district attorney and pleaded not guilty during a July 16 hearing. [...] Hawke said his client, a former military man, has still not recovered from the scam. "It's so easy to take the property away but so difficult to correct it," he said.

For the story, see Fake advocate's offer of help turns into horror story as woman swindles elderly gent in $25G scam.

Mississippi Man Gets 20+ Years In Mortgage Fraud, Investment Scam; Used Recruits To Buy Property Using Bogus Financial Info, Title Work, Appraisals

From the Office of the U.S. Attorney (Jackson, Mississippi):
  • James Wynn Threatt of Brandon, MS, was sentenced in U.S. District Court to serve 250 months (20 years and 10 months) in federal prison in relation to a $ 3.5 million mortgage fraud conspiracy [...]. James Wynn Threatt owned numerous properties in the Jackson-metro area, and engaged in the business of selling properties. [...] Threatt would recruit persons to purchase residential properties as investments with the understanding that those properties would thereafter be rented to various tenants which he would select.

  • In order to get the purchase money from the lenders, defendant Threatt caused numerous false representations to be made regarding the financial situations of these “investors” and the value and condition of the properties. Threatt helped these “investors” complete their loan applications and supporting documents – such as financial statements and tax returns – needed to get the money to fund these purchases. Threatt caused false information to be submitted to lenders on HUD-1 Settlement statements, and when necessary Threatt fraudulently enhanced financial statements for the investors and also fraudulently modified tax returns to make the borrower appear creditworthy and acquire the funding and in an effort induce the lender to fund the loans.

  • Further, Threatt fraudulently altered appraisals to misrepresent the value or condition of the property that would collateralize the loan, and he fabricated title opinions and title work and created fictitious title certificates which falsely represented no existing encumbrances to properties that in fact were already pledged as collateral to other banks on other loans. Threatt also sold the same piece of property to multiple individuals, fraudulently representing to each that he was conveying clear title to the property.

For the entire press release, see James Wynn Threatt Sentenced To Over 20 Years Imprisonment In Fraud Cases.

"Helpful" Neighbor Gets 57 Months For Ripping Off Cancer Patient; Stopping Automatic Bank Debit For House Payments Leads To Near Foreclosure

In Fort Worth, Texas, the Star Telegram reports:
  • Debilitated by breast cancer, Jody Short of Mansfield was grateful two years ago when a neighbor offered to help care for her after she came home from the hospital. Sixteen months later, Short learned that the neighbor, Janice Gast, whom she considered a friend, had begun using her identity, her credit cards and her bank accounts shortly after she took over Short’s care.

  • Gast, 42, was sentenced to prison [last week] after pleading guilty to forging Short’s name on documents and stealing more than $67,000 from her over about a year. State District Judge Sharen Wilson sentenced Gast to concurrent four-year prison terms on charges of felony theft and fraudulent use of identification, and to nine months in state jail on a forgery charge.

***

  • [Prosecutor Tiffany] Burks said the worst thing Gast did was stopping the automatic bank debit for Short’s monthly mortgage payments. "Her lender was in the process of filing a foreclosure, so she almost lost her home," Burks said.

For the story, see Neighbor who stole from cancer patient gets 4 years, 9 months in prison. FinancialAbuseOfElderlyAlpha

Four Face Federal Charges In Alleged Straw Buyer Mortgage Fraud Scheme Designed To Assist Struggling Oklahoma Homebuilder Unload Unsold Inventory

In Muskogee, Oklahoma, Tulsa World reports:
  • Four people, one of them a Tulsa firefighter, were arraigned [last] week in federal court in connection with an alleged mortgage conspiracy that defrauded lenders and homeowners. Home builders Gerald Wayne Snow Sr., 68, of Broken Arrow and his son, Gerald Wayne Snow Jr., 40, are charged with wire fraud and criminal forfeiture. The younger Snow, a captain in the Tulsa Fire Department, has been placed on administrative duty until the matter is resolved, a Fire Department official said. Mortgage agents Ayo Dineji Olaniyan, 33, of Joplin, Mo., and Gaile Diana Cates, 37, of Tulsa face the same charges. Olaniyan worked for Key Mortgage Corp. and Cates for Olympia Funding and Gateway Mortgage. All of the defendants pleaded not guilty.

  • The defendants allegedly approached potential home buyers to buy homes built by Storybook Homes(1) and C&J Homes, both operated by the Snows. The deal was sweetened when the defendants offered to cover the down payment, closing costs and even to pay off debts or give cash back, the indictment alleges. The scheme involved inflating the buyers’ bank account balances so that lenders would approve loans. The home prices also were inflated on loan documents to secure loans beyond the actual purchase price, records show.

For more, see Tulsa firefighter, three others arraigned in alleged mortgage conspiracy.

(1) According to the story, records show that Storybook Homes is the defendant in numerous foreclosure cases in Wagoner County.

Monday, August 24, 2009

Maryland Federal Judge Grants "Money Store" Equity Stripping Foreclosure Rescue Scam Lawsuit Class Action Status

In Greenbelt, Maryland, the Maryland Daily Record reports:
  • The criminal prosecution of the massive Metropolitan Money Store mortgage fraud, which has yielded 10 guilty pleas since the first indictment(1) was handed up last summer, has grabbed headlines as a particularly egregious example of the foreclosure rescue schemes that prey on people already hard-hit by the recession. But as the criminal case winds down — ringleader Kurt Fordham(2) received a 10-year sentence last month and his co-conspirators’ punishments will be meted out this fall — a civil lawsuit on behalf of the hoodwinked homeowners that predates the U.S. Attorney’s intervention is picking up steam.

  • In a July decision published this week, a U.S. District Court judge in Greenbelt turned back arguments from the only two defendants who have not defaulted in the civil case and certified it as a class action. The class, consisting of perhaps more than 200 Maryland, Washington, D.C., and Virginia residents who signed up with MMS or one of its affiliates, lost more than $60 million in the equity-stripping scheme, according to the homeowners’ lawyers.

***

  • But, [attorney Philip Robinson admitted in an interview Wednesday, the case is complicated by its many “moving pieces,” such as the ongoing criminal prosecutions, other litigation and the collapse of the corporate defendants. [...] In the end, Robinson says, there might not be a whole lot to give back to the cheated class members.

For more, see Federal judge certifies class action against Metropolitan Money Store.

For the class action lawsuits, see:

Go here for updates on the Metropolitan Money Store federal class action lawsuit.

(1) See U.S. v. Joy Jackson, et al.

(2) Fordham, his wife and MMS President Joy Jackson and their accomplices convinced homeowners to transfer to title of their houses to straw buyers for a year, during which time they set to swiping their existing equity through fraudulent loan applications and bogus settlement costs, the plaintiffs allege.

Maryland Lawmaker To Cough Up $109K For Violating State Law Regulating Sale Leaseback Foreclosure Rescue Scams

In Anne Arundel County, Maryland, The Capital Gazette reports:
  • A state lawmaker from Severna Park who lost a lawsuit earlier this year must pay $109,000 in damages and attorney fees, a county judge has ruled. That is 10 times more than what a jury ordered Del. Tony McConkey to pay in April after determining that the Republican knowingly violated a state law designed to protect homeowners in foreclosure. After hearing numerous motions July 27, Circuit Court Judge D. William Simpson decided that McConkey owes his victim $34,000 - rather than the $10,800 ordered by the jury - and owes her attorneys $75,000 in legal fees.(1)

  • Despite the drastic increase in the judgment, McConkey yesterday continued to praise the jury's verdict, noting that it did not believe he was perpetrating a foreclosure rescue scam or otherwise trying to defraud Teresa Milligan of her money. "I still feel vindicated," said McConkey, pointing to how the jury found that he did not breach his fiduciary duty to Milligan.(2)

For more, see Lawmaker must pay $109K judgment (Judge increases damages, tacks on attorney fees for McConkey).

(1) Attorney Michael Morin and Milligan's other attorney, Peter A. Holland, argued in court on July 27 that McConkey owed them $126,061 in legal fees for more than 450 hours of work. Judge Simpson said their rates - $275 an hour for Morin and $300 for Holland - were reasonable, but that some of the work they performed was on counts on which the jury found in favor of McConkey. He cut the legal fees to $75,000.

(2) "You have to be remarkably self-centered - virtually delusional - to see a $109,000 judgment as a vindication," attorney Michael Morin said. "Ms. Milligan will be paid," he added.

Federal Suit Says Wells Fargo Illegally Cut Illinois Homeowner's HELOC; Class Action Status Sought

In Chicago, Illinois, Reuters reports:
  • An Illinois homeowner accused Wells Fargo & Co, the largest U.S. mortgage lender, in a lawsuit of summarily cutting home equity lines of credit by undervaluing customers' houses. In a federal lawsuit filed in Chicago on Wednesday that seeks class-action status, homeowner Michael Hickman accused the bank of using "dubious" computer models that systematically undervalue homes, depriving customers of credit.

***

  • In his complaint, Hickman said that because the new limit was just above what he had borrowed, his "credit utilization rate" increased, damaging his credit rating and boosting his borrowing costs. The lawsuit says that San Francisco-based Wells Fargo violated the U.S. Truth-in-Lending Act and Illinois consumer fraud laws. It seeks punitive damages and several other remedies.

For more, see Homeowner sues Wells Fargo over equity credit lines.

Go here for a six-page letter of guidance issued by the U.S. Office of Thrift Supervision which generally explains what obligations lenders have in connection with the freezing of home-equity lines of credit.

In a related story, see Sarasota Herald Tribune: Some home-equity lines of credit can't be rescinded. Frozen HELOC

Arizona Bankruptcy Judge Orders Wells Fargo Exec Into Court To Explain Mortgage Servicer's Loan Modification Policy

In Phoenix, Arizona, KPHO-TV Channel 5 reports:
  • A federal bankruptcy judge has ordered a top Wells Fargo executive to testify in court about the bank's loan modification policies. The order came in response to a Phoenix woman's complaint that Wells Fargo had ignored her modification request. "I sent them everything they asked for, and then when I called to follow up they said, 'What paperwork? What modification? We don't know what you're talking about,'" said Bobbi Giguere.

  • Giguere said she applied for a modification after she lost her job in December. Instead, she said she received a notice of foreclosure while she thought she was still trying to work out a deal with Wells Fargo. Now Judge Randolph Haines wants a senior officer at Wells Fargo to defend the charges.

For the story, see Judge To Bank: Explain Mortgage Policies (Judge Orders Wells Fargo Executive To Testify About Loan Modification Policies).

Florida AG Brings Civil Suit Against Another Central Florida Loan Modification Foreclosure Rescue Outfit

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum [Friday] sued a Kissimmee-based company over allegations it targeted Hispanics in a foreclosure rescue fraud scheme. JPB Consulting Inc. and its president, Juan P. Bordali, allegedly charged up front fees of more than $1,000 per customer to homeowners about to lose their homes, but never performed any services. Charging fees up front before completing foreclosure rescue services is a direct violation of Florida’s Foreclosure Rescue Fraud Prevention Act. [...] An investigation conducted by members of the Attorney General’s Economic Crimes Division, working as part of the Attorney General’s Mortgage Fraud Task Force, determined that JPB Consulting and Bordali marketed the company’s services primarily to those in the Hispanic community(1) using posters and signs in neighborhood stores and flyers handed out on sidewalks and street corners. The company also used radio and TV ads to solicit clients.

  • According to the lawsuit, unsuspecting consumers were charged up front fees ranging from over $1,000 to $3,500 and were promised foreclosure relief. No foreclosure rescue services or loan modifications were performed by defendants. The Attorney General’s investigation further revealed the company was advised by a law firm in February that it was acting in violation of the law, but the company continued to collect the illegal up-front fees. The Attorney General’s Office knows of over 30 victims, but believes the company may have hundreds of clients.(1) JPB Consulting, Inc. is also known as JB Consulting, which sometimes does business under the name “Mortgage Modification Solutions.”

For more, see Kissimmee Foreclosure Rescue Company Sued for Fraud (Company purportedly targeted the Hispanic community with foreclosure rescue scam).

For the lawsuit, see State of Florida v. JPB Consulting, Inc., et al.

(1) Among the Florida AG's allegations is that the foreclosure rescue operator violated Section 2-2.002, Florida Administrative Code (2008), Advertising in Languages other than English (see Lawsuit, paragraph 49):

  • [B]y advertising to homeowners in Spanish but providing contracts drafted only in English, defendants have violated Section 2-2.002, Florida Administrative Code (2008) and have thus committed acts or practices in trade or commerce which offend established public policy and are unethical, unscrupulous or injurious to homeowners in violation of Sec. 501.204(1), Florida Statutes (2008).

(2) Homeowners who feel they may have been screwed over by this outfit are urged to file complaints against them with the Florida Attorney General's Office. Complaint forms are available online:

Sunday, August 23, 2009

Minnesota Title Agent Cops Plea To Swiping $400K+ In Clients' Escrow Funds From Real Estate Transactions

In St. Paul, Minnesota, the Star Tribune reports:
  • A Brooklyn Center man pleaded guilty [last week] in U.S. District Court to using as much as $1 million from clients of his mortgage title company for his own benefit. Terry Louis Lemke, 40, owns All Metro Title. He pleaded guilty to one count of wire fraud and one count of money laundering. As part of a plea agreement, Lemke says he knowingly and intentionally defrauded clients from June 2006 through 2007, a statement from the U.S. attorney's office said. The All Metro Title clients thought the money was being deposited into an escrow account as part of real estate transactions.

  • In the plea agreement, Lemke admits to defrauding more than $400,000 and possibly as much as $1 million, the statement said. Specifically, the statement says, on June 23, 2006, Lemke electronically transferred $193,226.76 from Lehman Brothers Bank in Colorado to an All Metro Title account. On the same day, he paid $20,746.18 from the All Metro account to a personal credit card bill, the U.S. attorney's office said.

Source: Brooklyn Center title firm owner admits to fraud (As part of a plea agreement, Terry L. Lemke said he diverted money from clients to himself). EscrowRipOffKappa

Backpeddling Begins For City Officials Whose Foreclosure Program Referred Strapped Homeowners To Forensic Loan Audit Outfit With History Of Complaints

In Carson, California, The Daily Breeze reports:
  • Carson's elected officials are distancing themselves from a city foreclosure program that has steered strapped homeowners to a private firm with a history of complaints. The company, ABS Business Solutions, charges thousands of dollars in up-front fees to perform mortgage "audits." It is illegal to charge up-front fees for foreclosure counseling, and numerous nonprofit groups will do it for free.(1)

  • Councilman Elito Santarina, who serves on the city's foreclosure protection subcommittee, said he wanted a full explanation of what went wrong from the program's coordinator, Sai Momoli.(2) "I'm so furious. This is ridiculous," Santarina said. "All I wanted was to do something good for the people. I wish I knew every detail and I wish I knew I had been a part of this. No, I do not know anything about this. I am out of it."

For the story, see Carson officials distancing themselves from foreclosure program.

(1) The Breeze recently reported that the Carson Foreclosure Crisis Response Team was referring Carson residents to ABS, which the Attorney General's Office has targeted for failing to register as a foreclosure consultant. The Breeze also reported that several former ABS customers have posted complaints about the company online, claiming that it had taken fees of more than $3,000 and then had done nothing to prevent their foreclosures. See Carson mortgage program is under fire.

(2) According to an earlier story, the city's Foreclosure Crisis Response Team was launched last October, when local resident Sai Momoli urged the City Council to invest $300,000 in his foreclosure prevention program. Momoli touted his connections to Marie McDonnell, a Massachusetts-based mortgage consultant. See Carson mortgage program is under fire.

Consumer Lawsuits Against Companies Alleging Violations Of Federal Debt Collection, Credit Reporting Laws Surge In 2009

Credit.com's John Ulzheimer writes:

  • The issue at hand seems to be two-fold. First, more consumers view litigation as an investment in their own credit future. These are the folks who are fed up with the typical credit dispute protocol, which might work fine for 98 percent of disputes, but isn’t 100 percent effective. The percentage who can’t seem to have legitimate errors removed from their credit reports using the bureau’s required methods are starting to find it necessary to escalate their efforts into the courts in order to regain their good credit names.

  • The second bunch seems to be coming from the shake down artists.

For more, see Debt Collectors and Creditors Beware: FCRA and FDCPA Lawsuits Skyrocket.

Unconventional Purchase From Homebuilder Leaves Unwitting Washington Couple Facing Foreclosure, Despite Making All House Payments

In Richland, Washington, The News Tribune reports:
  • For 21 months, Tonya and Timothy Stapleton paid the mortgage, insurance and taxes on their new $220,000 Horn Rapids house on time. But today [last Friday] Tonya plans to go to the Benton County Justice Center to make sure her home isn't auctioned in a foreclosure sale.(1)

  • The Stapletons found out their house was in jeopardy about seven months ago, when the bank notified them the man they had been sending their payments to had stopped paying the bank. She was on her way home from the grocery store when her husband called and told her the news. "Needless to say, my heart sunk and I went into panic mode," she said.

  • The Stapletons bought their house from Steve Schlam, formerly of Redmond, Ore., who built at least 20 houses in the Horn Rapids area of Richland. Schlam had a loan for the house through IndyMac Federal Bank, and the Stapletons wrote their checks out to him so he could make the bank payments. But in January they found out Schlam hadn't made a payment since October, although the Stapletons had continued paying him, not knowing anything was wrong. When they confronted him, he refunded their January payment but no more.

For more, see Dream home turns to nightmare for Richland couple.

(1) For story update, see Couple resume fight for Richland house after auction:

  • Tim and Tonya Stapleton attended the foreclosure sale at the Benton County Justice Center on Friday, where their Horn Rapids home was to go up on the auction block. [... T]he home went "back to beneficiary," meaning OneWest Bank, which holds the loan on the house, bought it for the low bid of $189,000. Tonya said she was relieved with that outcome, because a third party didn't end up with her home.

Dispute Between Concrete Firm & Supplier Leads To Foreclosure Threat For Unwitting Homeowner; Gets Hit w/ Mechanics Lien Over Contractor's Unpaid Bill

In Lansing, Michigan, the Lansing State Journal reports:
  • In May, Maurice Jones hired a local company to replace about 340 square feet of driveway at his home on Norburn Way in Lansing. The cement got poured. Jones paid in full. Done deal, right? Not quite. Three weeks ago Jones got a certified letter from Shafer Redi-Mix of Albion. Here's what it said:

  • "We supplied concrete to McClain Concrete, for improvements to your property. To date we have not been paid by McClain Concrete and, in accordance with the Michigan Lien Act we're forced to file a mechanic's lien against your property. If this situation cannot be rectified promptly, we will be forced to commence with foreclosure ..."

For more, see Homeowner stuck in middle of cement squabble. StiffingContractorsTheta

Saturday, August 22, 2009

Ohio AG Tags Home Improvement Firm With Allegations Of Shoddy, Incomplete Work; Accused Of Pocketing Upfront Customer Money, Failing to Give Refunds

From the Office of the Ohio Attorney General:
  • Ohio Attorney General Richard Cordray filed a lawsuit [last week] charging Akron Asphalt, a driveway paving company, with failing to deliver promised services and performing shoddy work. The complaint, filed in the Summit County Court of Common Pleas, charges the company with several violations of Ohio consumer law. "We received several complaints from consumers who said this company took their money without delivering promised results," Attorney General Cordray said. "After investigating the company's business practices, we discovered that it routinely failed to deliver and did unprofessional work."

  • The Attorney General's Office currently has four unresolved consumer complaints against Akron Asphalt. In the complaints, consumers said they hired the company for asphalt installation, grading work, seal coating and other driveway repairs. They paid anywhere from $750 to $4,000 but said the company failed to complete the work and refused to refund their money.

For the entire press release, see Cordray Sues Akron Home Improvement Company for Fraud.

For the lawsuit, see State of Ohio v. Sands, Akron Asphalt.

Condo Renters Live In Limbo In Boston "Triple Decker" As Investor/Landlords Stiff Mortgage Lenders & Go AWOL

In Boston, Massachusetts, Open Media Boston reports:
  • Wanda Castle does just about everything the owner of a Boston triple-decker would do to maintain her property, including basic repairs and paying for water and electricity in common areas of the building. And if this were a normal situation, Ms. Castle – who has lived in this building on the Roxbury/Jamaica Plain border as a tenant for two and a half years - would be paying a regular, stable, rent to live there.

  • But the situation is anything but normal. Wanda Castle, her fourteen year old daughter, and her neighbor Inell Mendez, are living in limbo as the banks and mortgage service companies that own the three separate condo units of this triple-decker figure out what to do with these properties sitting on the edge of foreclosure; known in banking parlance as “non-performing assets.” The mortgages, apparently, are in default, but according to Ms. Castle, she and her neighbors have not received an official notification of foreclosure or eviction.

For more, see Tenants Left In Limbo by Missing Condo Owners; Advocates Call On Banks To Help Create Housing Coops. RentSigmaSkimming

Penn. Man Accused Of Torching Home In Alleged Attempt To Use Insurance Proceeds As A "Foreclosure Bailout" Of Delinquent Mortgage; Blames God For Fire

In Lackawanna County, Pennsylvania, WNEP-TV Channel 16 reports:
  • They say desperate times mean desperate measures, and perhaps the saying can apply to an arson case in Lackawanna County. Tuesday police arrested Manfred Lennartz, 60, of Jermyn. Investigators said he torched his own home to avoid foreclosure. Lennartz insists the fire that destroyed his home near Chapman Lake was an accident. "It was an act of God," he said. "They should have arrested God, because a tree fell on my power line," Lennartz said as he was led from the Lackawanna County courthouse.

  • Police said he did it for the insurance money. The home was destroyed by fire in the early morning hours of March 23. Investigators said the home was supposed to go up for sheriff's sale the very next day. Neighbors who spoke to police said the fire started around 1 a.m. One neighbor told police he saw Lennartz's small, black car pull away from the home moments before flames engulfed the house.

For the story, see Man Charged with Torching Home.

NYC Cop Charged With Attempted Section 8 Rent Subsidy Ripoff

In New York City, The Associated Press reports:
  • A New York City police officer has been arrested on charges she forged pay stubs to be eligible for city subsidized housing. The Manhattan District Attorney's office says Simone Smith was charged Wednesday with welfare fraud and forgery and has been placed on modified duty. She became an officer in 2007. The city's Department of Investigation says Smith submitted pay stubs claiming she earned only $32,258 in 2008, when she really made over $58,000. DOI says Smith, who's lived in Section 8 housing since 1998, stood to get more than $7,000 in rental subsidies she wasn't eligible for. She faces four years in prison if convicted.

Source: NYPD cop arrested on welfare fraud charges.

"Blowout Bash" Promoter Suspected Of Hijacking Vacant Million Dollar Homes For Sale Or In Foreclosure To Throw All-Night Teen Parties

In San Diego County, California, North County Times reports:
  • When the market got down, apparently, so did some kids. But the party may be over for a jailed San Marcos man, charged Wednesday with breaking into upscale but empty North County homes to throw large and destructive bashes for profit. Jovan Peter Araujo, 21, pleaded not guilty to two felony counts each of burglary and vandalism.

  • Prosecutors suspect he was organizing and promoting blowout bashes, breaking into vacant homes and ---- putting the "band" in abandoned? ---- threw parties, charging party-goers $5 a head to attend. Fallbrook Sheriff's Detective Jeff Lauhon said Araujo and friends allegedly scouted secluded million-dollar homes that were either for sale or in foreclosure. [...] "They'd go out and find houses that were vacant, no neighbors, long driveways ---- you know, ideal party houses," Lauhon said. Authorities say the crews used MySpace to alert teens about upcoming parties, and provided phone numbers for kids to call on the day of the party to get the address. Officials say the raves ---- all-night dance parties ---- left trashed homes in their wake, with unsuspecting real estate agents and property owners shocked to find the mess.

For the story, see San Marcos man charged with throwing parties in vacant upscale homes.

In a related story, see Deputies target ‘party crews’ (Vacant homes trashed by throngs of revelers).

Association With Legal Profession Bad For Pit Bulls' Image, Or Vice Versa???

Texas attorney John Browning, a partner in the Dallas office of Gordon & Rees, LLP, offers his commentary on the topic of lawyer advertising in a recent issue of The Southeast Texas Record:
  • As anyone who's ever watched daytime or late night television can attest, "classy" is not a word one would associate with most lawyer advertising. Whether they're calling themselves things like "The Hammer," riding in tanks or promising you big money for your injuries (whether you know you've been injured or not), lawyers in many commercials come across as well, kind of sleazy.

***

  • Some states restrict advertising that reflects poorly on the legal profession, such as the Florida Supreme Court's decision to discipline the lawyers who used a pit bull logo and "1-800-PIT-BULL" phone number in their advertising. Ironically, the only non-lawyer who had complained was a pit bull breeder who felt that being associated with lawyers was bad for the dogs' image!

For more commentary on lawyer advertising, see Legally Speaking: Low Points in Lawyer Advertising.

For the Florida Supreme Court's "pit bull" ruling (imposing discipline on two attorneys for using television advertising devices invoking the pit bull breed of dog which, according to the court, "demean all lawyers and thereby harm both the legal profession and the public’s trust and confidence in our system of justice"), see Fla. Bar v. Pape, 918 So. 2d 240; 2005 Fla. LEXIS 2287 (2005).

Friday, August 21, 2009

Federal Court Ruling May Complicate Loan Modifications As Investors In Securitized Trusts Assert Their Rights Against Mortgage Servicers

The New York Times reports:
  • A federal judge in Manhattan has rejected an argument by Countrywide Financial seeking certain protections from investor lawsuits under new legislation intended to encourage modifications of home loans. Countrywide, the big mortgage company, had argued that the legislation automatically voided its pledges to buy back loans from investors if those loans were modified for troubled borrowers.

  • The ruling is a win for holders of mortgage-backed securities who sued Countrywide in December after the company, now a unit of Bank of America, agreed to modify thousands of loans in a settlement with state attorneys general. The opinion, by Judge Richard J. Holwell of Federal District Court in New York, was made public on Tuesday. The case against Countrywide is being closely watched by pension funds, insurance companies and other investors in mortgage securities who contend that loan servicing companies that agree to change the terms of mortgages are breaching contractual obligations to owners of those loans.

***

  • Bank of America, which took over servicing of the investors’ loans when it bought Countrywide in 2008, is defending the case. It argued that the matter belonged in federal court and that any contractual obligations to repurchase modified loans were trumped by the Helping Families Save Their Homes Act of 2009. Under that law, servicing companies that agree to modify loans receive some protection from liability arising from the loan changes.

For more, see Countrywide Loses Ruling in Loan Suit.

(1) Reportedly, Judge Holwell ruled that the immunity granted under the legislation did not prevent Countrywide’s investors from trying to enforce their rights under the mortgage securities contracts. The investors must prove that Countrywide’s pooling and servicing agreement covering their loans does indeed require it to repurchase mortgages the bank modifies, the judge said, ruling that the case belongs in state court.

Indianapolis Feds Indict Ex-Waiter For Alleged Role In Running Massive Mortgage Fraud Scam Involving 110+ Fraudulent Real Estate Deals

In Indianapolis, Indiana, The Indianapolis Star reports:
  • A former waiter who became a high-profile Indianapolis real estate investor in the easy-money era of the 2000s has been indicted by a federal grand jury in a mortgage fraud case that set off mass home foreclosures on the Eastside. Robert Andrew Penn, 44, was charged with conspiracy to commit wire fraud, wire fraud and conspiracy to launder money, the U.S. attorney's office in Indianapolis announced Monday.

  • Penn, now living in Naples, Fla., had owned and operated several businesses that borrowed $12.6 million from 2003 to 2005 to carry out what officials allege were 114 fraudulent real estate transactions, including the highly publicized Windsor Village deal. Its collapse pushed dozens of homes in the modest Eastside Indianapolis neighborhood into foreclosure.

For more, see Investor indicted in mortgage fraud (Case is linked to string of foreclosures on Eastside).

Canadian Authorities Turn Over Apprehended Fugitive Accused Of Running Loan Modification Racket To State Department For Shipment Back To California

In Niagara Falls, Ontario, The Niagara Falls Review reports:

  • A U. S. man wanted in California for fraud and larceny has been arrested at the Rainbow Bridge. Canada Border Services Agency notified their U.S. counterparts Thursday that a 25-year-old man was being returned stateside. U.S. Customs and Border Protection was told the man was living in Toronto under an assumed name when he was arrested in July and charged with importing false documents.

  • CBP officers verified the man was the subject of a U.S. Department of State Diplomatic Securities Service warrant for passport fraud and is also wanted on nine felony counts of larceny. According to the CBP, the suspect had operated a business named Legal Support Services which offered foreclosure prevention services to clients on the brink of foreclosure. Charged with various offences is Amir Rashidifar. Rashidifar was turned over to agents with the Diplomatic Security Service pending extradition to California.

Source: Man sent to U. S. on fraud, larceny charges.

In a related story, see Niagara Gazette: Customs agents make second arrest for fraud:

  • U.S. Customs and Border Protection agents have made a second arrest in connection with a California mortgage fraud case. Mary Margaret DelVecchio, 28, of San Jose, California, was taken into custody Wednesday at the Rainbow Bridge. DelVecchio had been deported from Canada earlier in the day for violating her visitor status. Customs agents said DelVecchio is wanted on nine felony counts involving theft of personal information, false personation and conspiracy to commit a crime. Agents said DelVecchio admitted that she is the girlfriend of Amir Rashidifar, who was arrested by CBP Officers on Aug. 13 for similar outstanding warrants in California.

Would-Be First Time Homebuyers Begin Running Out Of Time For $8K Income Tax Credit

The Baltimore Sun's Real Estate Wonk blogger writes:

  • Determined to get the $8,000 tax credit for first-time buyers?(1) Keep in mind that the Nov. 30 deadline isn't about signing a contract -- you need to get to closing no later than that day. So says the IRS, which specifically uses the word "close."(2) This matters because you'll want to allow at least 30 days -- and probably more like 60 -- for a normal transaction to go from contract to closing. Even if there's nothing unusual about the home you're buying, you could find yourself delayed by issues relating to the loan, the appraisal, the home inspection -- you name it. That goes double if you want something more complicated, such as a foreclosure. What if you're having a home built for you? The IRS says you have to be physically occupying the place by Nov. 30. More Q&As here.

  • Some real estate sites, wanting to remind you that "now is the time to buy," have countdown clocks. [...] Do you feel the pressure? Or do you have a "whatever will be will be" philosophy on the credit? (Or perhaps you're purposely waiting until the credit's gone?) The Wall Street Journal, sounding a cautionary note,(3) profiles a first-time buyer who recounts all the things he did wrong in the rush to get the $8,000. For instance, getting into a bidding war on a foreclosed home he saw only briefly, and not "taking into consideration taxes, homeowners' association fees, and the cost to fix up and maintain a distressed property."

For the story, see The clock is ticking on the $8,000 tax credit.

(1) Believe it or not, an individual need not actually be a first time homebuyer to qualify for the First Time Homebuyer Credit. Any individual who has not owned another principal residence at any time during the three years prior to the date of purchase can qualify for the credit. So, for example, if you owned a home and lost it to foreclosure, say, four years ago, and have since been either renting, shacking up with your girlfriend or boyfriend (or both) at their place, living in your mother's unheated/un-air conditioned basement, or otherwise freeloading off of somebody, you are considered to be a "first time homebuyer" for purposes of qualifying for the First Time Homebuyer Credit. Also, a taxpayer who owned a principal residence outside of the United States within the last three years is not disqualified from taking the credit for a purchase within the United States. For more infomation, See Internal Revenue Service: First-Time Homebuyer Credit Questions and Answers: Basic Information (Who is considered to be a first-time homebuyer? Would I be considered a first time homebuyer if I owned a principal residence outside of the United States within the previous three years?).

By the way, the credit is claimed on new IRS Form 5405, First-Time Homebuyer Credit, and filed with your 2009 federal income tax return. According to this form, the credit is available on the purchase of a house, houseboat, housetrailer, cooperative apartment, condominium, or other type of residence, provided you make it your main home (the one you live in most of the time).

Also, for those thinking of rushing out and buying and living in a tent, a tree house, an old dilapidated recreational vehicle or mobile home, or other form of "low cost housing" in order to "game the system" and grab the $8,000 income tax credit, the amount of the credit is limited to 10% of the home's purchase price, if the purchase price is less than $80,000. For more information, see IRS Form 5405. For those seeking to "game the system" anyway, see IRS Warns Taxpayers to Beware of First-Time Homebuyer Credit Fraud.

If two unmarried people buy a house together, IRS Notice 2009-12 provides guidance for allocating the first-time homebuyer credit between taxpayers who are not married.

(2) In cases involving certain so-called "rent-to-own" and other deferred payment situations where a seller retains legal title to the home until all payments are made, an actual "closing" may not be necessary for a would-be first-time homebuyer to qualify for the tax credit, provided that the arrangement causes a sufficient passing of the "benefits and burdens" of home ownership from the seller to the would-be buyer. The IRS addresses the passing of the "benefits and burdens" of ownership in the following Q&A (See First-Time Homebuyer Credit Questions and Answers: Basic Information):

  • Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer's payment obligations?
    .
    A. If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

In some so-called "rent-to-own" situations in which a would-be homebuyer enters into a purchase contract with the seller that calls for an extended closing date (ie. a "slow close"), and where the homebuyer obtains immediate possession of the premises and begins making "rent" payments to the seller in the interim, he/she may be entitled to the tax credit in such a situation, provided a sufficient amount of the "benefits and burdens" of ownership (as described in the IRS Q&A, above) have passed to him/her.

(3) See The Wall Street Journal: Rookie Home Buyer Mistakes (Rushing to grab the tax credit and caught up in a bidding war over a distressed property, a first-time home buyer omits the basics).

Wisconsin Mortgage Broker License Eligibility Nearing An End For Drug Dealers, Embezzlers, Extortionists, Forgers, Killers & Other Assorted Felons???

The Milwaukee Journal Sentinel reports:
  • Drug dealers, embezzlers and extortionists would be among the felons banned for life from obtaining a mortgage broker's license, according to legislation introduced Tuesday by Rep. Jon Richards (D-Milwaukee). The bill, which has 11 co-sponsors in the Assembly and Senate, also would slap the lifetime prohibition on those convicted of felonies involving theft, forgery, perjury or deceit. Richards said in March that he would bring the legislation after the Journal Sentinel reported that more than 340 admitted criminals - including drug dealers, burglars, thieves and a killer - held broker's licenses last year. Brokers take loan applications - documents that contain a person's detailed financial history - and arrange mortgage loans.

For more, see Bill would ban some felons from mortgage broker licenses.

Arizona Mortgage Broker Cops Plea In Loan Fraud Conspiracy; Will "Sing" To Feds In Prosecution Of Alleged Cohorts; Foreclosing Lenders Take $1M Hit

From the Office of the U.S. Attorney (Phoenix, Arizona):
  • Jake David Abegg Whitman, 33, of Mesa, Ariz., pleaded guilty on August 18, 2009, to one count of Conspiracy to Commit Bank Fraud and seven counts of Bank Fraud. Whitman played a leadership role in the underlying conspiracy, which involved 19 unimproved residential properties in the greater Phoenix area. The objective of the conspiracy was to obtain mortgage loans that were substantially larger than the actual value of the properties—often by hundreds of thousands of dollars. Whitman owned 10 of the properties and served as branch manager of the mortgage broker, Academy Mortgage, that processed the loans.

  • As part of the conspiracy, Whitman worked with a hand-picked appraiser to obtain inflated appraisals for the properties. He also recruited buyers to purchase the properties at those inflated prices. The buyers typically lacked the income and assets to provide the down-payment or to make the mortgage payments. To overcome this, Whitman secretly supplied the down-payment to the buyers (without disclosing this arrangement) and also provided “cash back” to the buyers at closing. The properties eventually went into foreclosure and cost lending institutions nearly $1,000,000 in losses. Whitman is cooperating with authorities in the prosecution of others.(1)

For the entire press release, see Mortgage Officer Pleads Guilty To His Role In Cash-Back Mortgage Fraud Scheme.

(1) According to the press release, Whitman’s plea is part of an initiative called “Operation Cash Back” in which 40 defendants were indicted and arrested, including many real estate professionals, in June 2008. To date, 18 have entered guilty pleas.

Residents In Western Pennsylvania Mobile Home Park Face Eviction After Land Owner Loses Property To Foreclosure

In Robinson, Pennsylvania, the Pittsburgh Tribune Review reports:
  • Off Route 22 in Washington County, doors and loose siding on empty trailers rattle in the summer breeze, and 12 families find themselves facing an eviction order. Many tenants of Maple Grove Trailer Park in Robinson live month-to-month on fixed incomes; some are slowed by age or illness; others own trailers too old to move or that can't be moved because of additions and renovations. But on Aug. 5, a constable handed out papers saying they had until Thursday to move, on the orders of the latest in a succession of owners.(1)

***

  • Under the state's Mobile Home Park Rights Act, the residents' legal rights could hinge on their lease and the new owners' plans for the property, said Kenneth Hirsch, a professor at the Duquesne University School of Law. "As long as it's a trailer park, the residents have the right to stay on forever as long as they comply with park rules and pay their rent," Hirsch said. "The exception is if the new owner intends to close down the trailer park. That has to be at the end of the lease period, and they have to be given more than 15 days." No applications for development or a change in use at the park have been filed with the township, Dorsey said. However, if the lease is for less than a year or the tenants are staying from month to month, the 15-day notice could be legal, Hirsch said.

For more, see Maple Grove Trailer Park residents ordered out by new owner.

(1) According to the story, the trouble began after the trailer park's previous owner David Dewald died of cancer in 2007 and his wife, Celeste, took over, residents said. Financial trouble sent the property into foreclosure, and it was sold to Bayview in a sheriff's sale in July 2008, said Capt. Jim Altman, who oversaw the Washington County Sheriff's Auction.

Thursday, August 20, 2009

Beware Of Mortgage Loan Servicers Bearing Gifts: Hi-Credit Score Homeowners Get Slammed After Receiving Loan Mods Despite Never Missing House Payment

A recent story in The Oregonian serves as a cautionary tale to those "high credit score" homeowners who are current on their mortgage payments, but nevertheless considering seeking a loan modification:
  • Here's a twist: What if your lender actively encouraged you to modify your loan -- and then reported you as delinquent, prompting credit card companies to treat you as a deadbeat? That's what happened to two local CitiMortgage Inc. customers. Both spent hours on the phone trying to straighten out the mess, and one is still unresolved.(1) It's still the Wild West out there when it comes to staving off foreclosure.

For the details of how two Oregon homeowners were (temporarily) screwed over on their credit histories after receiving loan modifications they were encouraged to take from their loan servicers, despite never having missed any mortgage payments, see Modifying loans creates credit mess, not relief.

In related stories, see:

(1) I have been informed that, subsequent to the original publication date of this story in The Oregonian, the remaining unresolved credit report mess for one of the homeowners has now been cleaned up by CitiMortgage (apparently, the folks over at CitiMortgage read The Oregonian). An example of a mortgage lender or loan servicer feeling shamed by the media spotlight into doing the right thing, maybe???

Loan Modification Nightmares Begin to Pile Up

McClatchy Newspapers reports:
  • A story Sunday on how lenders aren't following through on promises of modifying distressed mortgages, prompted an outpouring of comments and e-mails from others with similar tales of woe.

For some of their stories, see More nightmares from the world of mortgage modifications (Borrowers still have little chance of getting payments lowered).

Bogus Fee Complaints Continue Rolling In Against Loan Servicer Despite Settlement In Class Action Lawsuit

ConsumerAffairs.com reports:
  • Four months after [Goldman Sachs-owned] Litton Loan Services settled a class action accusing the company of imposing bogus late fees,(1) complaints about Litton continue to roll into ConsumerAffairs.com. Some consumers allege that Litton failed to timely post payments to their accounts, the main issue in the class action. Still others get the run-around from the mortgage servicing company on the possibility of receiving a loan adjustment, leading to confusion and, in many cases, the threat of foreclosure.

***

  • In April, Litton settled a class-action lawsuit alleging that the company failed to credit borrowers' mortgage payments in a timely fashion, then turned around and charged late fees for the purportedly tardy payments. In some cases, consumers' accounts were put into default. The suit covered all homeowners whose mortgage transaction was transferred or sold to Litton between October 2002 and February 2009, and who were charged erroneous late fees within 60 days of the transfer.(2)

For more, see Litton Loan Complaints Continue Following Settlement (Distressed homeowners target Goldman Sachs subsidiary).

(1) According to the story, in July 2007, a federal judge in California certified a class of plaintiffs alleging claims under the Real Estate Settlement Procedures Act, or RESPA. The case was settled in April; as part of the agreement, Litton agreed to create a settlement fund containing $537,500, from which plaintiffs can draw up to $60 each. The narrow definition of the class and relatively small settlement amount likely left some consumers disappointed, but it at least signaled that Litton was willing to put the issue to rest.

(2) Litton Loan Servicing has recently been targeted by ACORN's "Home Wreckers" campaign targeting mortgage lenders that aren't adjusting loans under the Obama administration's $75-billion Making Home Affordable program and other home-saving efforts from the federal government. See Los Angeles Times: ACORN protests Litton Loan Servicing outside foreclosed home in L.A.

NYC Convicted Deed Thief, Welfare Cheat Now Faces New Charges In Alleged Straw Buyer Scam

In New York City, the New York Daily News reports:
  • Old con men never die - they just find a new scam. Herbert Steed, who famously went to jail in the '90s for collecting welfare while living large in a Trump Tower pad,(1) is now charged with a fresh $1.5 million mortgage ripoff. The 78-year-old fraudster faces up to 65 years in prison for allegedly using fake buyers to purchase properties in Harlem and Richmond Hill, Queens.(2) [...] In addition to the federal charges, Steed is awaiting sentencing for forging a deed and stealing a Queens woman's house.

For more, see Herbert Steed, who once collected welfare while living in Trump Tower, charged in mortgage scam.

(1) According to the story, Steed applied for and received public assistance in the early '90s when he was living in a spacious 37th-floor Trump Tower apartment with marble baths. Steed plunked down a $27,000 deposit, which he allegedly swindled from a tour group, to land the swank pad, which he shared with a 23-year-old girlfriend. On his welfare application, Steed claimed he had no job and no income and lived in a small apartment in Queens. Steed was tried and convicted for the scam. He was sentenced to 5-to-15 years in prison for scamming welfare and the tour group. He was paroled in 1999 after serving the minimum.

(2) According to the story, the federal court complaint states that $206,000 from the alleged dirty deals went to Home Mergers LLC, a shady foreclosure firm. It in turn wrote a check for $20,000 to an entity Steed controlled called Pan African Tours. Prosecutors said Home Mergers was run by Maurice McDowall, a Brooklyn man who last year pleaded guilty to swindling dozens of people out of their homes in foreclosure rescue, equity stripping scams. He was sentenced to 10 years in prison.

Another Foreclosure Screw Up Forces South Florida Family Into Temporary Homelessness

In Homestead, Florida, NBC Miami reports:
  • You know times are tough when people are getting kicked out of their house when it’s not even for sale. That’s what happened to Anna Ramirez after she found all of her stuff out on the front lawn of her Homestead home last week and a strange man demanding she get out of his newly purchased house. The eviction came after Ramirez’s home was mistakenly auctioned off to the highest bidder by her bank, Washington Mutual. [...] What's worse is her husband, daughter and grand children were also kicked out by Homestead and Miami-Dade police officers, said Martha Taylor, who witnessed the unexpected eviction.

***

  • Ramirez and her family had three hours to get out of the house, police ordered. They had to stash their belongings at multiple locations and shacked up with a friend for the night as cops chained the doors of their home.

  • With Taylor's help, Ramirez appeared before a judge two days later to explain what happened. "I had all my stuff scattered everywhere," she said. "They did this in front all my neighbors. It was so embarassing." A mistake in the Miami-Dade Clerk's Office appears to be behind the mishap, which landed Ramirez homeless for more than 24 hours.

  • The sale was eventually reversed by a Miami-Dade judge, allowing Ramirez to return to her old digs. Ramirez said she wants to sue for the damage to her furniture.(1) Ramirez has lived in the house for three years and recently refinanced the home with the bank.

For the story, see My Bad! Woman's House Mistakenly Auctioned by Bank (A Homestead woman's home was auctioned to the highest bidder).

(1) In a related post where the Nevada Supreme Court approved a court judgment of over $1 million for a homeowner involved in a similar foreclosure screw up, see Nevada High Court OKs Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure.

For the Nevada Supreme Court decision, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (September 11, 2008). ForeclosureLockOuts

State High Court Task Force Issues Report & Recommendations On Florida Foreclosure Crisis

In Tallahassee, Florida, the Miami Daily Business Review reports:
  • Florida Supreme Court task force is calling for uniform mandatory mediation for all residential foreclosure cases in the state to deal with the tide of foreclosures that has swamped courthouses. The proposal, obtained by the Daily Business Review, calls for all circuits to implement a mediation process modeled on a program used by the Miami-Dade Circuit Court and two others, where lenders pay for the mediation and borrowers provide their financial information to the lenders.

***

  • If the proposals are adopted by the Florida Supreme Court, it would be the first instance of a uniform statewide effort in Florida to handle the glut of foreclosure cases clogging courthouses. [...] In cases where borrowers aren’t located, the task force also recommends a new form for process servers to fill out to demonstrate they undertook a diligent search to find the borrowers.(1)(2)

For the story, see Mandatory mediation urged to help streamline process.

See also, The Wall Street Journal: Florida Court Wants Mandatory Mediation on Foreclosures.

Go here for the Florida Supreme Court Task Force's Final Report And Recommendations On Residential Mortgage Foreclosure Cases.

(1) This recommendation reflects the apparent concern the task force has in curbing "sewer service" by unscrupulous process servers. See Miami Daily Business Review: Judge grapples with her discovery of 15,000 unserved foreclosure cases.

(2) Other recommendations include: adopting uniform statewide forms and procedures; creating a central statewide foreclosure Web site to provide basic information now "strewn haphazardly across the Internet"; consumer education on avoiding foreclosure scams; and aggressive prosecution by the Florida Bar of attorney misconduct.