Wednesday, October 28, 2009

Country's Largest Builder Used "One Stop Shopping" Model To Construct "House Of Cards" Scheme, Says Homeowner In Class Action Suit

In San Francisco, California, the San Francisco Chronicle reports:
  • A California homeowner filed a class-action suit against Pulte Homes on Friday alleging that the nation's largest home builder fraudulently propped up home prices and sales in a "house of cards" scheme that eventually caused values in its developments to plunge. The lawsuit, filed in U.S. District Court in Northern California, alleges that Pulte's "one-stop shopping" business model, in which it controlled sales, financing, settlement services and appraisals, allowed it to sell homes at inflated prices and give buyers mortgages they could not afford. Since Pulte Mortgage, Pulte's financing subsidiary, quickly sold its loans on Wall Street, it was not affected when buyers defaulted, the suit said.

***

  • Steve Berman, lead attorney in the case and managing partner of Seattle law firm Hagens Berman Sobol Shapiro, said that some of Pulte's developments became "toxic subdivisions with foreclosure signs all over the place, homes not taken care of, and no chance that the prices will go back up." Berman said Pulte lured unqualified buyers - such as the case's named plaintiff, Sodalin Kaing, who earns $21 an hour but bought a house for $518,215 - with the promise of large discounts if they used Pulte Mortgage. Kaing bought a home in the Pulte Aerial of Mossdale development in Lathrop (San Joaquin County).

  • By operating within a closed loop where it controlled all aspects of the transition, Pulte "created an amazing opportunity for itself," Berman said.(1)

For the story, see Suit accuses Pulte Homes of inflating prices.

For the lawsuit, see Kaing v. Pulte Homes, Inc., et al.

(1) According to the story, the suit is on behalf of anyone who purchased a Pulte home in California from Jan. 1, 2005 through March 1, 2007. Homeowners can learn more at www.hbsslaw.com/pultehomes. Berman said he also expects to expand the case to Pulte developments in Nevada and Arizona. The story states.

Berman's firm also has class-action lawsuits pending against KB Homes and Countrywide Financial, its preferred lender, in Federal courts alleging that they conspired to drive up prices, the story states. The firm filed a lawsuit in California, and a lawsuit in Arizona.

Philly DA, Feds Probe "Dream Killer" In Suspected Rent To Own Scam Peddling Shabby Homes To City's Poorest; Victims Paid Thousand$, Now Face The Boot

In Philadelphia, Pennsylvania, the Philadelphia Daily News reports:
  • WIND and rain blew through the shell of a house on Monmouth Street. The ceilings and walls had gaping holes; the shower and broken toilet could be seen from the floor below. There was no front door, no kitchen, no heat. But to Isabel Santos, this derelict Kensington house held the promise of her first real home, her slice of the American Dream.

  • In 2002, Santos signed an "installment-sale agreement" with a Philadelphia company owned by Robert N. Coyle Sr., a real-estate mogul and self-made millionaire, widely known for peddling shabby homes to the city's poorest. Under the agreement, Santos would own the house in five years. Santos and her ex-husband sunk at least $20,000 of their own money to create a home out of rubble. But instead of a deed, Santos recently got slapped with a foreclosure notice, and she and her teenage son, Jose, could soon be on the street. That's because Coyle defaulted on a mortgage he took out on the house. Santos felt swindled.

  • So did dozens of others, the city's downtrodden, many living paycheck to paycheck, who put every last dime into fixing up homes they thought they'd own one day. Now they're just one step away from homelessness. They blame one man - Coyle, a man they call a "dream killer," a "slumlord millionaire." The Daily News has learned that Coyle, 64, is at the center of a massive fraud investigation being conducted by the Philadelphia District Attorney's Office and federal authorities.(1)(2)

For more, including a profile of Coyle and his suspected racket, see Slumlord sold them lies, many say (To tenants, he's a slumlord, a swindler, a dream-slayer; now he's the subject of a fraud investigation).

(1) Among the reported allegations hovering over Coyle are that he:

  • Promised people they could rent to own their homes, without being able to deliver on such a promise,
  • Obtained more than $15 million in bank loans on nearly 300 homes he rented out, then stopped making bank payments and padlocked his Allegheny Avenue rowhouse real-estate office in Port Richmond. The houses are now headed for sheriff's sale,
  • Forged hundreds - possibly thousands - of housing-inspection licenses that allowed him to rent the homes. Many of them had no heat or water, seeping sewage and rotted floors - violations that would've prevented Coyle from getting licenses,
  • Failed to pay the city hundreds of thousands of dollars in property and business taxes and water fees, leaving tenants without water.

(2) Reportedly, at least nine attorneys, some of whom work for nonprofit legal agencies, are fighting to stop the sheriff's sales on behalf of clients who live in Coyle's homes. They argue that their clients have ownership rights, though the banks disagree. According to the story, by law, all home-sale agreements must be in writing. But there are three exceptions: If you are in possession of the property; if you've made significant improvements; and if you've paid some or all of the purchase price for a few years and/or paid off any liens, according to Kelly J. Gastley, staff attorney at Philadelphia Volunteers for the Indigent Program (VIP). What's at stake is "enormous," said Stefanie F. Seldin, a managing attorney for VIP. "The man is evil," she said. "He's taken these folks with limited English proficiency, literacy and means, and sold them a dream. Instead, he sold them a lie." rent to own lease purchase option scams yellowstone

Rain Clouds Hover Over Big NYC Landlords, Tenants, Bondholders, Housing Agency After State High Court Ruling Declaring Stuy Town Rent Hikes Illegal

In New York City, The New York Times reports:
  • Tenants and landlords spent much of [last] Thursday struggling to figure out what the state high court’s ruling on the future of Stuyvesant Town and Peter Cooper Village meant for all types of New Yorkers.(1) Real estate moguls feared the news would cripple their industry, and tenants worried about their rents.

  • Despite the lack of clarity, the ruling by the New York Court of Appeals had an immediate chilling effect on real estate in New York: Landlords questioned whether they could raise rents, and some even went so far as to cancel plans to buy more apartments in buildings with tax subsidies.

***

  • While tenant groups who had spent the last several years fighting the owners of Stuyvesant Town welcomed the news, they also recognized that the ruling may complicate and extend how long it takes for current or past tenants to receive rent rebates. They also feared that conditions would deteriorate as owners deferred maintenance and repairs.

***

  • The problem extends beyond Stuyvesant Town to buildings in the Bronx, Brooklyn and Queens. “They’re not the only landlords who did this,” said Daniel Alpert, managing partner of Westwood Capital, a New York investment bank that was part of a tenants’ bid for Stuyvesant Town in 2006.

***

  • Government agencies scrambled to figure out how they would carry out changes the ruling would require. The state housing agency, the Division of Housing and Community Renewal, could be inundated with petitions from tens of thousands of tenants claiming they had been overcharged by landlords receiving tax breaks, as well as from landlords disputing the claims.

For more, see Stuyvesant Town Ruling Worries Tenants and Landlords Alike.

For the ruling, see Roberts v. Tishman Speyer Properties, L.P.

See also:

(1) Stuyvesant Town and Peter Cooper Village are a combined 56-building, 11,000-unit apartment complex in Manhattan.

Lender Backs Off From Attempt To Illegally Bully Tenant Out Of Foreclosed Home After New Jersey Public Advocate's Office Intervenes

In North Bergen, New Jersey, The Jersey Journal reports:
  • When Rosita Crooke learned her North Bergen apartment building was being foreclosed she contacted the bank. Crooke wanted to keep paying her rent, but instead the bank told her she would have to leave and that the anti-eviction law didn’t apply because of the terms of her lease. She contacted the state Public Advocate’s Office and learned she could stay in her apartment. “After the Public Advocate contacted the bank, the bank sent me a note asking me to pay the rent,” she said. “When I told the bank that I know my rights and I have a right to stay, they didn’t listen to me, but when I got the Public Advocate involved, they finally listened. More people need to know that help is available to them.”

***

  • The state’s anti-eviction law protects tenants whose sole reason for eviction is the building is in foreclosure or there is a new owner.(1)

For more, see Public Advocate helps North Bergen woman (if link expires, try here).

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In a related story, see The Star Ledger: Protect N.J. renters from eviction from foreclosed homes:

  • The Department of the Public Advocate says its office has assisted more than 160 tenants in the state who were facing unfair eviction from properties under foreclosure. In some cases, renters were sent notices by banks or their representatives informing them they had to vacate the property. Others had utilities shut off, or were evicted by local sheriffs. [...] Meanwhile, the advocate’s office attributes the rise in eviction abuses to the economy. It says in cases of foreclosure, tenants are protected by the state’s anti-eviction laws, but many don’t realize they can’t be forced to move.

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

From the New Jersey Department of the Public Advocate:

(1) The New Jersey Supreme Court has ruled that the New Jersey Anti-Eviction Act protects most tenants from eviction even when the property where they live is in foreclosure or has been foreclosed. Chase Manhattan Bank v. Josephson, 135 N.J. 209 (1994). The state high court opinion in Maglies v. Estate of Guy, 193 N.J. 108; 936 A.2d 414; 2007 N.J. LEXIS 1436 (2007) gives a discussion of the breadth of tenant protection provided by the New Jersey anti-eviction law. See also: Legal Services of New Jersey's Amicus Brief filed in Maglies v. Estate of Guy. RentSigmaSkimming

Cops Identify Pair As Home Robbery Suspects; Sent By Fannie Mae To Winterize House In Foreclosure Despite Earlier Approved & Consummated Short Sale

In Novi, Michigan, HometownLife.com reports:
  • The Novi Police Department has identified two suspects believed to be responsible for the theft of nearly $4,000 worth of jewelry and other items from a home in the Dunbarton Pines subdivision. Novi Police Chief David Molloy said the men work for Moniya Inc, a company that conducts home winterization work.(1) [...] All the property reported stolen was recovered, including the couple's 18-karat gold wedding rings.

  • The theft occurred on Sept. 9, just days before the [homeowner] couple were to be married. The woman said she left her home between 1-5 p.m. on that day, and when she returned she found a note on the door saying the home had been winterized as part of the foreclosure process and the gifts for her bridesmaids, the wedding rings and other items were gone.

  • According to the bride's mother, the foreclosure notice was a mix-up. The couple had bought the home on a short sale on Aug. 21, which was approved by GMAC, but the company failed to notify Fannie Mae that it was a fully satisfied sale. Fannie Mae was under the impression the house was still in foreclosure and subcontracted Safeguard to manage the property and winterize it. Molloy said Safeguard then contracted Moniya to winterize the home and that is when the theft occurred.(2)

Source: Police have suspects in connection with robbery of newlyweds' home.

(1) Reportedly, the suspects are both Detroit men, one 23 years old and the other 51 years old. The 23-year-old has no previous criminal history, while the other man has a history of auto theft. The Novi Police Department is in the process of forwarding its case to the Oakland County Prosecutor's Office for review, the story states.

(2) In a 2008 story, the Nevada Supreme Court approved a damages award of over $1 million (including a punitive damages award of $968,000 - reduced from an original award of $2.5 million) to a homeowner couple who were subjected to a similar indignity resulting from a lender/mortgage servicer screw-up involving the misidentification of a home in foreclosure. See Nevada High Court OKs Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure.

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

Tuesday, October 27, 2009

"Deficiency Balance Paper" Traders Keep Sour Home Loans Alive; "Dracula Blood Suckers" May Haunt Foreclosed Homeowners, Short Sellers w/ Dormant Debt

In South Florida, the Daily Business Review reports:
  • Jeff Baum is at the forefront of a real estate industry trend that is sure to cause more pain for homeowners who thought they had left their troubles behind. Baum, a principal with Green Circle Capital Group in Boca Raton, brokers the sale of nonperforming residential debt between lenders and investors. Those investors buy the debt with the intention of collecting from the former homeowners.

  • I’ve made quite a bit of my living over the last two, three years selling deficiency balance paper,” said Baum. A deficiency balance is the portion of the mortgage loan that wasn’t covered by the sale of the home. That debt becomes an unsecured note similar to other consumer debt such as credit cards.

***

  • After winning a foreclosure action, a lender has up to five years to ask a judge to declare a deficiency judgment [in Florida]. The judgment amount is the difference between the loan and the market value of the home on the day it sold at a foreclosure auction. [...] Judgments are good for 20 years [in Florida], and while people may be broke now, their financial situations could improve in the next two decades, said Richard Zaretsky, a West Palm Beach foreclosure defense lawyer. The dormant debt may come back to haunt them, he said.(1) [...] “Can you imagine, as people’s finances are beginning to improve — boom! — they get hit with a collection action for tens if not hundreds of thousands of dollars,” [another attorney] said. “You are going see a lot of people having to declare bankruptcy.”

For more, see Foreclosed homeowners may still have debt to pay.

(1) The practice has its critics within the lending industry, the story states. Miami-based Republic Federal Bank doesn’t sell deficiency debt, said Jim Angleton, the bank’s senior vice president. But Angleton predicts other lenders will seize the opportunity, according to the story. “As the market declines, it is going to be more in vogue: institutions trying to sell the debt and debt collectors trying to create another niche for themselves,” he said. “Those [debt collectors] are not even bottom feeders, they are subterranean feeders. They are in the Dracula mode of blood sucking.” zombie debt

Watch Out For Local Notaries Providing Document-Running, Check Pick-Up Services For Out-Of-State Loan Modification Rackets

A recent lawsuit filed by the Office of the Wisconsin Attorney General decribes how some out-of-state loan modification rackets allegedly use local notaries to get homeowners to sign up for foreclosure help and pocket upfront fees:
  • Defendant [loan modification outfit] initiates transactions with Wisconsin consumers by telephone. It represents it can assist the consumers to modify their mortgage loan. Defendant then arranges a follow-up visit by a company representative to complete the transaction. Defendant's "company representatives" are Wisconsin notaries hired by defendant to act as its agents. Since April 2009, at least four Wisconsin notaries have filed complaints with DATCP [Wisconsin Department of Agriculture, Trade, and Consumer Protection] regarding defendant's activities.

  • The notaries report receiving email solicitations from defendant where defendant offers to pay them to act as its representative by obtaining signatures from potential customers on sales agreements prepared by the defendant. The notaries also report defendant instructs them to engage in illegal activity including, but not limited to, having customers fill out only a portion of the legal documents they sign and having the notaries fail to provide copies of signed documents with the customers.

  • For example, on March 9, 2009, defendant sent Wisconsin notary Dick Brockman an email "LOAN MODIFICATION PAPERWORK - LEE." [...] In the email, defendant instructs Mr. Brockman: "Remember to have the borrowers just sign and date and only fill out their name, address, phone numbers, social security numbers and mortgage info. The rest of the application is filled out later by the processor...." Defendant further instructs the notary [...]: "DO NOT leave the "Loan Modification Application" with the client. ONLY GIVE the client the *Modification Letter & News Releases*." The news releases referred to [...] are copies of news articles regarding federal mortgage relief programs "Bush Signs Measures for Homeowners, Fannie, Freddie" and "Obama throws $75 billion lifeline to homeowners."

Source: Lawsuit: State of Wisconsin v. 21st Century Legal Services Inc., et al. (paragraphs 9-16).

In a related post on 21st Century Legal Services and their use of local notaries, see Loan Modification Outfit Accused Of Failing To Deliver Services For Strapped Homeowners Also Stiffs Its Notaries, Says One Victim.

Mortgage Servicers' Loan Modification Screw-Ups Drive Homeowners To Court Seeking Redress

The Wall Street Journal reports:
  • Some struggling homeowners are turning to the courts in a bid to force mortgage servicers to consider them for the Obama administration's foreclosure-rescue program, arguing they are eligible for help but haven't received it. The suits are the latest sign of difficulties some borrowers are having with the program, which has helped more than 500,000 people begin trial loan modifications since it was announced in February.

  • The program requires mortgage servicers to screen borrowers for eligibility for modifications before completing a foreclosure. But a growing number of borrowers say this isn't happening, or that their requests for help are improperly rejected by the servicers, which collect loan payments and work with delinquent borrowers.

  • "People are unbelievably frustrated with the way [the modification program] is working because it is so nontransparent, and because there is such a basic distrust of servicers," said Ira Rheingold, executive director of the National Association of Consumer Advocates, a group of attorneys and consumer advocates who work with homeowners facing foreclosure.

For more, see Strapped Borrowers Head to Court (Homeowners Press Mortgage Servicers to Rule They Are Eligible for Loan Modifications) (paid Wall Street Journal subscription required; if no subscription, try here, then click link for the story).

(1) Acording to the story, statistics aren't available, but attorneys say legal action tied to the rescue program is being taken in states including California, Florida, Ohio and Pennsylvania. A lawsuit seeking class-action status in U.S. District Court in Minnesota (go here for press release) wants to halt foreclosures on homeowners eligible for the rescue program until the administration puts in place certain procedural safeguards, such as creating a formal appeals process, the story states [see Advocacy Group Files Federal Suit Seeking To Halt Home Foreclosures In Minnesota; Says New Law Lacks Proper Notice & Appeal Provisions]. South Carolina Supreme Court Chief Justice Jean Toal in May reportedly issued an order requiring that all complaints seeking foreclosure state whether the loan is subject to the rescue program and, if so, why the borrower doesn't have a loan modification.

Judge Stalls Foreclosure Sale Approval; Loan Servicer Failed To Stop Legal Action Despite Agreeing To Loan Modification, Says Homeowner

In Port St. Lucie, Florida, TC Palm reports:
  • A Port St. Lucie couple whose home was bought by their mortgage bank for $100 in a foreclosure action Oct. 9 has won at least a temporary reprieve. In a hearing Wednesday, Circuit Judge Burton Connor ordered a postponement of the final sale pending an evidentiary hearing in the case. Frusner Raphael and his wife, Woline, had requested the foreclosure sale be voided, alleging their lender broke the federal government’s rules.

  • The Raphaels aren’t alone in facing a frustrating situation where the lender says they’re willing to work with the homeowner, but while a modification process is going on the lender continues with the foreclosure.(1) [...] The Raphaels contend that the lender, California-based OneWest Bank, told them on July 13 that they were pre-approved for the modification, which would take about 120 days to complete, but proceeded with the foreclosure anyway.

For more, see Lenders continue foreclosures after agreeing to housing loan modifications.

(1) Another homeowner, Jim Maurer, was approved by Countrywide for a modified fixed-rate mortgage that would lower his monthly payments by $300 starting in February. After he had made a few payments, though, he received the check for his May payment back with a letter saying the amount was not enough. After he contacted the lender, they sent him an application for a new modification, which he refused. “I don’t need another modification,” Maurer said. “I already have one. [...] Bank of America is just rolling over people.” Five months later, Maurer said he has had phone conversations and exchanged letters with people in three different Bank of America divisions, including a senior vice president in the home retention department, but still does not have confirmation the modification is in place. Since June, however, Bank of America has been cashing his checks.

Lender Changes Mind About Backing Out Of Loan Modification Promise After Homeowner Facing Foreclosure Tells Media

In Surprise, Arizona, KPHO-TV Channel 5 reports:
  • A Valley mom is thanking CBS 5 News for saving her home after her bank almost backed out of its loan modification agreement. Heather Caldwell's family was in big trouble, with their Surprise home in foreclosure. Caldwell decided to go to the Wells Fargo Home Preservation Workshop [...] hoping to modify her loan and save the family's home. "Within an hour, we were told everything was fine and we had our new payments and our new interest rate," said Caldwell. "Everything was going to be great."

  • But a week later, Caldwell got some unexpected news when she called a Wells Fargo representative to check on their loan modification. "She was pretty blunt," said Caldwell. "She told me there was nothing she can do to help. 'You've been denied. Your income doesn't meet the qualifications. That's it. You're done.'"

  • Caldwell didn't know what to do next, so she called CBS 5 News for help. Immediately, CBS 5 News placed a call to Wells Fargo's corporate office. "Within an hour, we got a call saying there had been a miscommunication and that there had been mistakes made," Caldwell said. "She said we are going to get it taken care of and get it resolved. Without CBS 5 taking the time to call them and get their attention, they never would have done anything." Wells Fargo offered the Caldwells an even better interest rate than what they were promised at the workshop -- instead of saving $325 a month, they were now looking to save close to $450.(1)

For the story, see CBS 5 Steps In To Save Family's Home (Family Gets Loan Modification They Were Promised).

(1) It seems to me that once the local media outlets get their hands on one of these loan modification screw-up stories and decide to run with it, the loan servicers fold like a cheap suit and grant quick relief to the aggrieved homeowner. The media outlets should consider setting up their own loan modification departments, given the loan servicers' apparent fear of negative publicity they get when these stories come to light.

Monday, October 26, 2009

National Foreclosure Rescue Scam Awarness Campaign Kicks Off In Los Angeles

In Los Angeles, California, Reuters reports:
  • Sun Valley, a sun-baked and struggling corner of Los Angeles, is fertile ground for mortgage rescue scams with its high proportion of subprime borrowers, Spanish speakers and a sharp drop in home values. And it is one of the first places targeted in the homeowner education campaign launched on Monday by U.S. government agencies, local leaders and housing advocates to stop scammers preying on desperate borrowers nationwide.

***

  • In coming weeks, the campaign will go to other hard-hit areas like Miami, Florida, and Columbus, Ohio, and it will target those groups most affected -- senior citizens, Hispanics, African Americans and Asian Americans. While tighter regulation and law enforcement are expected to reduce scamming operations, officials say they expect the best results to come from the first line of defense -- better educated borrowers.

For more, see U.S. schools homeowners to spot loan rescue scams.

Pair Charged With Torture Of Loan Modification Agents; Suspects Believed Victims Swindled Them Under Guise Of Offering Foreclosure Help, Says DA

In Los Angeles, California, Reuters reports:
  • As Los Angeles housing advocates launched a campaign warning of mortgage rescue scams, a couple hit by foreclosure are charged with torturing two loan-modification agents they suspected of fraud, authorities said on Monday. The couple, Daniel Weston and Mary Ann Parmelee, and three other people are accused of luring their two victims to an office where the men were tied up, held for hours and beaten, a spokeswoman for the Los Angeles County district attorney said.

  • Police were called after one of the victims managed to escape, said the spokeswoman, Shiara Davila-Morales. The incident occurred on Wednesday in the town of Glendale, just north of Los Angeles. Weston, Parmelee and the three other defendants each were charged with two counts of torture, two counts of false imprisonment by violence and two counts of second-degree robbery, according to a criminal complaint filed against them.

  • Weston, 52, and Parmelee, 51, both arrested last week and jailed on $1 million bond, shared a house in the suburb of La Canada-Flintridge that is in foreclosure, authorities said. "The two allegedly sought loan modification assistance from the victims but believed that nothing was being done and wanted their money back," a statement from the district attorney's office said. Davila-Morales added that the couple, according to investigators, believed they had been swindled.

For the story, see Torture charged in L.A.-area mortgage rescue case.

Cleveland Legal Aid Leads Northeast Ohio Drive For More Pro Bono Attorneys

In Northeast Ohio, The News Herald reports:
  • The Legal Aid Society of Cleveland is expected to see a 35 percent increase in demand this year from those who need fair and open access to the legal system but cannot afford an attorney. So for the first time, the American Bar Association is sponsoring a National Pro Bono Week Celebration to encourage more lawyers to give their services away for free to help those going through tough economic times.

***

  • There are currently 1,400 attorneys who volunteer for the organization in Northeast Ohio to supplement the work of Legal Aid's 55 staff attorneys. This week, Legal Aid is hosting a series of events in collaboration with bar associations in Ashtabula, Cuyahoga, Geauga, Lake and Lorain counties. [...] One of the main Pro Bono Week events in Lake County will be a training session for attorneys who hope to represent low-income homeowners at mediation in foreclosure cases.

For the story, see Lawyers to give services away.

NJ AG: Fugitive Pair Abused Trust In $600K+ Sale Proceeds Ripoff From Financially Unsophisticated Homeowners Facing Foreclosure

In Trenton, New Jersey, The Trentonian reports:
  • A pair of suspected frauds from Ewing charged with stealing $600,000 in a mortgage foreclosure scam that targeted poor people are fugitives of justice, New Jersey authorities said [last week] in calling on the public to turn in the pair. Wayne Betha, 39, and friend Joann Smith, 42, were indicted by a state grand jury on theft, money laundering, conspiracy and tax charges [last week] for allegedly ripping off 11 families forced to sell their homes [...].(1)

***

  • These defendants are charged with preying on people who had to sell their homes due to financial hardship, taking advantage of their trust and lack of financial sophistication,” said state Attorney General Anne] Milgram. “They stole from people who had little of nothing to spare.” Smith and Betha allegedly took the profit from home sales and put them in their own personal accounts for their use, deceiving the sellers into believing that they were not entitled to all of the profits from their home sale. Most of the sellers, who were not identified, were having serious financial problems and could not continue paying their mortgage.(2)

For more, see Milgram: Frauds stole $600K from the poor and are on run.

From the Office of the New Jersey Attorney General:

(1) The state attorney general alleges that the two, acting as real estate agents, stole more than $600,000 from clients who signed on to have Smith sell their homes. They’re also charged with defrauding three mortgage companies of $641,800 by falsifying the earnings of applicants for three home loans, the story states. Also indicted was their real estate company, S&B Properties Management and Maintenance, which allegedly was run from Smith's home.

(2) According to the NJ AG, the couple allegedly used a variety of schemes to fraudulently divert proceeds from the home sales into bank accounts maintained by Smith and S&B, which they allegedly used to launder the stolen funds. They represented to sellers and title companies that monies were owed to them for expenses, including property renovations and repairs that were never done and exorbitant consultant fees that they claimed the sellers had authorized. Many of the checks issued by the title companies handling the property sales were written to the home sellers, but Smith convinced the sellers to sign the checks over to her for payment of business expenses and fees. It is alleged that, in several instances, the defendants falsely indicated on HUD forms and tax forms that the sellers directly received all of the profits from the home sales.

They also omitted to tell sellers that they were agreeing in mortgage closing documents to pay large, unauthorized “seller’s concessions or seller’s assists” to the buyers. The victims were not financially sophisticated. They did not understand the details of the property closings and, because of their financial woes, were anxious to be free of the obligation of paying mortgages they could no longer afford. Smith and Betha allegedly took advantage of these facts to steal the victims’ profits from the home sales.

Minnesota Feds: Sale Buyback Foreclosure Rescue Scam Leaves Unwitting Investors, Homeowners, Lenders With $2.5M+ In Losses

In Minneapolis, Minnesota, the Star Tribune reports:
  • A Mound man who allegedly defrauded six Northwest Airlines pilots and a flight attendant out of $1.5 million in a real estate investment scheme has been indicted by a federal grand jury on conspiracy, mail fraud and tax charges. The indictment, made public Thursday, accuses Timothy Lynn Beliveau, 41, of using two firms he owned to skim the equity from distressed homeowners who had turned to his companies for help in avoiding foreclosure.(1)

***

  • From 2004 until July 2007, the indictment says, Beliveau conspired to "fraudulently induce" investors into buying real estate at inflated prices with borrowed money as part of a "mortgage reconveyance" program. But Believeau and an unnamed coconspirator then spent the money raised from investors for their own use. In addition, the indictment says Beliveau raised more than $1 million from real estate investors that he then used to pay personal expenses.

***

  • The government says Beliveau preyed on people facing foreclosure by promising to sell their homes to investors who would let them remain in the homes and repurchase them on contracts for deed while they worked to restore their credit. In fact, the process "artificially increased the purchase price of the homes and therefore made it extremely difficult for the homeowners to reacquire them," the indictment says.(2) [...] "Ultimately, the defendant's scheme occasioned losses to approximately 14 investors, the investors' mortgage lenders and 35 distressed homeowners in an amount exceeding $2.5 million," the indictment says.

For more, see Mound man indicted in real estate scheme (Timothy Beliveau is accused of preying on people whose homes were being foreclosed).

From the Office of the U.S. Attorney (Minneapolis):

For an earlier post on a 2007 story reporting on the screwing over of the Northwest Airline pilots in this story, see Foreclosure Rescue Scam Leads To Civil Lawsuits, Federal Criminal Investigation; "Pilot-Straw Buyers" Left In Hot Water & Financially Ruined.

(1) Reportedly, Beliveau owned American Alliance Mortgage Group, which had offices in Minnetonka, Plymouth, Roseville, Wayzata, Edina and Hudson, Wis., and U.S. Housing & Financial Services LLC, "which held itself out as a company that assisted distressed homeowners in foreclosures," the indictment says.

(2) Among those homeowners who were screwed over was Telsche Paulson. After her husband died and her downstairs tenants moved out, the 87-year-old fell behind on mortgage payments on the Minneapolis duplex she'd lived in for 50 years. Beliveau's company sent her a letter offering to save her home from foreclosure. Like most of the distressed homeowners who turned to Beliveau for help, Paulson ultimately lost the house. Although she won a lawsuit against Beliveau and his ex-wife, Shelley Milless, they said in court filings that they had no money left. sale leaseback

Florida AG: Foreclosure Rescue Operators Screwed Homeowners In Foreclosure Out Of $1.9M+ Using Bogus Sale Leasebacks Designed To Strip Home Equity

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum [last week] filed a lawsuit against a Miami-Dade County business, its owners and several straw buyers for their participation in an equity skimming scheme that victimized at least 20 South Florida homeowners. Xolutex, Inc., and principals Ceasar F. Tavaras and George Ibanez are named in the lawsuit, which claims the equity losses as a result of the scheme exceeded $1.9 million.(1)

***

  • According to the lawsuit, the defendants allegedly sought homeowners who were in various stages of foreclosure proceedings and met with them under the guise of offering foreclosure rescue and credit counseling. Homeowners were then lured into the scheme where straw buyers would purchase the homes for inflated home prices, maximizing the money they could skim from the homeowners. To facilitate the straw buyers’ ability to qualify for these loans, Xolutex and its principals allegedly helped falsify loan applications.(2) Additionally, Tavaras and Ibanez allegedly convinced the homeowners to sign documents which caused virtually all of the equity in the homes to be paid to Xolutex.

***

  • The Attorney General is [...] seeking [among other things] full restitution on behalf of all victimized consumers, civil penalties of $10,000 for each violation of the Florida Unfair and Deceptive Trade Practices Act.(3)

For the entire press release, see Attorney General Sues South Florida Business for Equity Skimming Scheme.

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

(1) Also named as defendants are: Paola Pino, Laura Ibanez, and Guillermo Gomez.

(2) If there is proof beyond a reasonable doubt that the operators prepared, or otherwise knew of, falsified loan applications, this would appear to be an easy case for the South Florida Feds to piggyback off of by bringing subsequent criminal charges in Federal court.

(3) Since this matter was brought by the Florida AG as a civil case (as opposed to a criminal prosecution), there is no threat of jail time for the defendants in the event the allegations against them prove true.

Rhode Island Attorney: Entire Practice Now Devoted To Putting Heat On MERS By Challenging Its Legal Standing On Behalf Of Homeowners In Foreclosure

In Providence, Rhode Island, The Providence Journal reports:
  • A Providence lawyer, George E. Babcock, said his entire practice is now devoted to challenging the legal standing of a private mortgage registration service, the Mortgage Electronic Registration Systems, Inc., known as MERS, to foreclose under Rhode Island law.(1)

***

  • Despite being on the losing end of an Aug. 25 decision by Providence Superior Court Judge Michael A. Silverstein, which he has appealed to the Rhode Island Supreme Court, Babcock said he is still filing “two or three” MERS lawsuits a week for clients hoping to stop foreclosure proceedings. Babcock estimates he is pursuing a total of about 100 MERS cases.

For more, see Mortgage transfers spur R.I. lawsuits.

For NBC Nightly News interview with attorney George E. Babcock (video approx. 2:16), see Lawyer Practices "Foreclosure Stoppage."

(1) Formed in 1995 by the mortgage finance industry, MERS was created to increase profits and efficiency by eliminating the need to record changes in mortgage ownership at local government property registries, the story states. MERS is a corporation that also acts as a nominee for lenders and their successors.

In a separate, unrelated lawsuit [see Homeowners In Foreclosure Being Clipped For Illegally Inflated Legal & Appraisal Fees, Says Lawsuit], the following all star lineup of mortgage lenders have been named and identified as allegedly the controlling shareholders of MERS:

  • Citigroup, Inc., the now-deceased Countrywide Financial Corporation (now owned by Bank of America), Fannie Mae & Freddie Mac (both of which are sucking wind financially, and are currently operating under the control of the Federal government), GMAC-RFC Holding Company, LLC, (doing business as GMAC Residential Funding Corporation), HSBC Finance Corporation, JP Morgan Chase & Co., the late Washington Mutual Bank (now owned by JP Morgan Chase & Co.), and alleged "ghetto loans" peddler, Wells Fargo & Company. EpsilonMissingDocsMtg

Sunday, October 25, 2009

Judge Slams Sloppy Lender Unable To Prove Note Ownership; Voids Debtor's $461K Home Loan; Docs Signed By Multiple Hat-Wearing VP Sinks Servicer, MERS

In White Plains, New York, The New York Times reports:
  • [B]anks and borrowers still do battle over foreclosures on an unlevel playing field that exists in far too many courtrooms. But some judges are starting to scrutinize the rules-don’t-matter methods used by lenders and their lawyers in the recent foreclosure wave. On occasion, lenders are even getting slapped around a bit.

  • One surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn’t proved its claim to a delinquent borrower’s home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That’s right: the mortgage debt disappeared, via a court order.(1)

  • So the ruling may put a new dynamic in play in the foreclosure mess: If the lender can’t come forward with proof of ownership, and judges don’t look kindly on that, then borrowers may have a stronger hand to play in court and, apparently, may even be able to stay in their homes mortgage-free.

***

  • [On behalf of his homeowner/client, Manhattan consumer bankruptcy lawyer David B. Shaev] asked for proof that U.S. Bank was indeed the holder of the note.(2) All that was provided, however, was an affidavit from Tracy Johnson, a vice president at PHH Mortgage, saying that PHH was the servicer and U.S. Bank the holder.

  • Among the filings supplied to support Ms. Johnson’s assertion was a copy of the assignment of the mortgage. But this, too, was signed by Ms. Johnson, only this time she was identified as an assistant vice president of MERS, the Mortgage Electronic Registration System.

For more, see If Lenders Say ‘The Dog Ate Your Mortgage’.

For an earlier related New York Times story, see The Mortgage Machine Backfires.

Go here for other posts on multiple corporate hat-wearing vice presidents involved in foreclosure actions.

(1) PHH appealed the judge’s ruling late last week, the story states.

(2) Reportedly, Mr. Shaev said that when he filed the case, he had simply hoped to persuade PHH to modify his client’s loan. But after months of what he described as foot-dragging by PHH and its lawyers, he asked for proof of PHH’s standing in the case. Mr. Shaev reportedly said he was shocked when the judge expunged the mortgage debt. EpsilonMissingDocsMtg

Antics Of Multiple Corporate Hat-Wearing Vice Presidents Featured In Recent Research Paper

Those facing foreclosure seeking a guide to looking up public records online in an attempt to detect possible forgeries, fabrications, and certain fraud contained in recorded, error-ridden mortgage and mortgage-related documents committed by multiple corporate hat wearing vice presidents (and their confederates) working for loan servicers and others may find a research paper recently posted on the Internet worth a look.

For more, see Foreclosure Fraud - Guide to Looking up Public Records for Fraud.

For an earlier report that featured the antics of multiple hat wearing vice presidents, see Sue First & Ask Questions Later! (A Pew Mortgage Investigations Report On the Predatory Servicing Practice of False & Forged Signatures Employed by Ocwen & Others). EpsilonMissingDocsMtg

Sacramento Feds Bust Up Massive Indoor Pot Farm Operation; Group Allegedly Used Mortgage Fraud To Finance 51 Grow Houses; Fifty Went Into Foreclosure

In Northern California, The Sacramento Bee reports:
  • Federal prosecutors announced 18 indictments Thursday in a pot cultivation and mortgage fraud scheme that purchased homes in Elk Grove and Sacramento and converted them into bustling "grow houses" for tens of thousands of marijuana plants. Nine people are in custody. Authorities are searching for other indicted suspects who may have fled from the Bay Area to China. The individuals were charged with orchestrating bogus real estate transactions to buy 51 houses in the Central Valley, then establish indoor pot-growing operations using sophisticated lighting and irrigation and stealing thousands of dollars' worth of electricity.

  • "They came into our cookie-cutter residential neighborhoods and created cookie-cutter marijuana factories," said Gordon Taylor, assistant special agent for the U.S. Drug Enforcement Administration in Sacramento. [...] Ultimately, the growers abandoned the houses. Fifty of the 51 went into foreclosure. "This organization just walked away … leaving the loan companies and the communities holding the bag," Taylor said.(1)

For more, see 18 indicted in Central Valley marijuana, mortgage scheme.

From the Office of the U.S. Attorney:

(1) Since 2006, authorities in the Sacramento region have arrested dozens of suspects in indoor marijuana growing operations. Along the way, they discovered homes totally retrofitted for marijuana production, according to the story. In the latest case, Taylor said, suspects cut into main electrical lines in Sacramento and Elk Grove, "bypassed the electric meter and created their own circuit boxes" to steal some $4,000 in electricity a month, the story states.

Central Florida "Caregiving" Pair Convicted Of Duping Senior Out Of Title To Home Gets 10 Years For Grand Theft; Ordered To Return Ownership To Victim

In New Port Richey, Florida, the St. Petersburg Times reports:
  • For four years, Eloise Mudway has waited for justice for the people who promised to be her caregivers but ended up mistreating her and stealing her home. On Thursday, the 92-year-old woman watched as a judge sent them to prison for 10 years. Joseph and Cynthia Clancy, convicted last month of grand theft of a person 65 or older, also were ordered to transfer ownership of the Hilltop Drive home back to Mudway.

***

  • It's still unclear what will become of the property, which went into foreclosure and is in disrepair. Because of the debt on it, Cynthia Clancy's attorney speculated that by transferring the deed back to Mudway, the mortgage holder could call the debt due. Nevertheless, Circuit Judge Shawn Crane ordered it back to Mudway, calling that the right thing to do.

For more, see Pasco couple sentenced to 10 years for stealing elderly woman's home. DeedContraTheft

Wisconsin AG Jumps Into Fray With Civil Charges Against Alleged Loan Modification Racket Currently Under FBI Probe, Targeted By Other States

In Dane County, Wisconsin, the Milwaukee Journal Sentinel reports:
  • A California company offering to help distressed homeowners lower their mortgage payments has been sued by the Wisconsin attorney general's office for violating state law. In a civil complaint filed [...] in Dane County Circuit Court, the state accuses 21st Century Legal Services Inc., of Rancho Cucamonga, Calif., of instructing notaries it used to do business in Wisconsin not leave copies of signed agreements with customers and to obtain fees in advance of providing service. Both of those actions are against the law in the state, the lawsuit alleges.

  • The lawsuit also says the company violated Wisconsin's no-call law, made misrepresentations in the course of conducting sales and failed to disclose the names of representatives making face-to-face solicitations. The lawsuit cites an instance in which 21st Century Legal Services sent a representative to the home of a Wisconsin woman in May about a loan modification. She paid $1,866.70 for the service but never heard from the firm or its representative again. Her loan was never modified and her home now is in foreclosure, the lawsuit says.

For more, see State sues company that offers help to distressed homeowners.

From the Wisconsin Department of Justice:

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

In a related story on 21st Century Legal Services, see NBC Los Angeles: Scam Alert: Beware of Loan Modification Fraud (21st Century Legal Services, Fidelity National Legal Services under federal investigation):

  • [T]wo ex-employees tell NBC that the majority of 21st Century clients never got their loans modified. [...] Complaints [...] caught the attention of the attorneys general in Ohio, Indiana, Arkansas and North Carolina. All four states banned 21st Century from doing business in their states. But authorities say 21st Century Legal Services changed its name to Fidelity National Legal Services and continued signing up new clients. Ex-employees say Fidelity was run out of the same office as 21st Century; was owned by the same woman, Andrea Ramirez; and even used the same ads to snare customers.

Idaho Finance Regulator Targets Alleged Loan Mod Racket Accused Of Unlicensed Activity & Scamming Upfront Fees From Homeowners With C & D Order

In Boise, Idaho, the Idaho Press Tribune reports:
  • The Idaho Department of Finance announced [...] it issued a cease and desist order against a Meridian-based International Co-op LLC, a mortgage loan modification company, for engaging in unlicensed mortgage loan modification activities and for illegally charging distressed Idaho homeowners exorbitant upfront fees. Gavin Ge, director of the Idaho Department of Finance, said the department has received complaints from three Idaho homeowners who had paid the company $1,500 to $2,000 on the company's representation that it would assist the homeowners obtain mortgage loan modifications. "On top of the company's failure to obtain a license, the affected Idaho homeowners received nothing for their money and are worse off than they were before," Gee said.

For the story, see Officials: Meridian-based company preyed on distressed homeowners.

From the Idaho Department of Finance:

Saturday, October 24, 2009

Tenants Face Boot From Building In Foreclosure; Water Service Shut Off, Power Next; Emergency Aid Unavailable Until Health Dept. Issues Vacate Order

In Cincinnati, Ohio, WLWT-TV Channel 5 reports:
  • Their water has been shut off, the electricity is next and it's all because of a landlord who stopped paying his bills. It's the latest example of how the foreclosure crisis is turning the lives of families upside down. [...] "I can't do my dishes. My dishes (have) been sitting here since yesterday," Westwood apartment complex resident Melody Sanders said. [...] "I like taking showers every day, and I don't like for my daughter to be dirty, and without water you can't even take a shower," Sanders said.

  • The water in her apartment building was turned off on Monday. The gas and electricity are next. "For the gas and electric alone, he owes $4,400. And we ain't even got an estimate on how much he owes for the water," Sanders said.

  • She said the landlord owes even more on the building itself, which Legal Aid of Cincinnati said is headed into foreclosure. [... Attorney Noel] Morgan said his office is working with the residents to try and help them find financial aid to move into a more livable building. However, that process takes time and Sanders is out of patience. [...] Part of the delay with getting those people moved is that the emergency aid isn't triggered until the Health Department issues a vacate order. That won't happen until sometime after the electricity is turned off next Monday. People who live there just have to make due until then.

For the story, see Landlord Behind On Bills; Tenants Suffering (Water Already Off; Power To Be Shut Off Next). RentSigmaSkimming

NYC Builder Behind On Bills Spells Trouble For Young Family In Newly-Built, Near-Empty Condominium Building In Foreclosure; Power Shutoff Threatened

In Staten Island, New York, the Staten Island Advance reports:
  • Dr. Kevin Schargen, his girlfriend, Melanie, and their 10-month-old son live in a pretty new apartment with a terrace, hardwood floors and a kitchen with granite countertops. But the doorman is gone and there is no janitor to call about the leak in the ceiling [ie. future mold problem?] of their son's nursery. The 30-year-old veterinarian has less than a handful of neighbors, and Consolidated Edison has threatened to turn off electricity to the common areas in the St. George building by Nov. 2 -- a major worry for Dr. Schargen, who lives on the fifth floor. [... D]r. Schargen feels as though he's on his own since Leib Puretz, one of the most prolific developers in the borough in recent years, defaulted last spring on the 57-unit condominium, where only about a half-dozen units sold before foreclosure began. [...] Dr. Schargen bought his two-bedroom unit last year for $565,000, moving in a few days after his son's Christmas Eve birth.(1)

For more, see Condo building goes kaput (Condo building The Pointe dragged down by developer's default, to young family's dismay).

(1) Dr. Schargen is seeking damages of more than $800,000 in a lawsuit over the purchase of his condominium, according to the story.

Another Homeowner Says Loan Servicer Screw-Up Left Her Facing Foreclosure; Has Proof Payments Were Made, She Says; Media Helps Get Temporary Sale Stay

In Fontana, California, KABC-TV Channel 7 reports:
  • A Fontana woman faced the prospect of losing her home this week because of a mix up involving her loan payments. [... Abiaha] Brockman is in the middle of a mortgage mess. The Fontana home Abiaha bought 10 years ago is supposed to be sold this Friday as a foreclosure, even though Abiaha says she was making her house payments with automatic bill pay through an escrow service. Abiaha has documentation that last year's payments were made on time to her lender, Homecomings Financial.

  • "I was current April, current May with Homecoming, current June, current July and August," explained Brockman. But when Homecomings became GMAC last year, her payments were misplaced and her troubles began. "Three weeks earlier, I got a default letter that my house was in default for $12,288," said Brockman.

***

  • [T]his mortgage mess may have a happy ending. After several calls to GMAC Mortgage in Pennsylvania and MGC Mortgage in Texas, Eyewitness News did negotiate a postponement of the sale of Brockman's home. "It took a year to do this, and you guys showed up and did it in a day. Thank you," said Brockman. Now it's up to Brockman to negotiate loan modification with GMAC, and she has 30 days to work on it.

For the story, see Fontana woman escapes losing her home.

California Mayor Accused In Alleged Real Estate Scam That Sunk Church

In Huron, California, The Fresno Bee reports:
  • Huron's longtime mayor allegedly paid less than half the agreed-upon price for a piece of property, then illegally sold the land to a church -- which ended up collapsing as a result of the bad deal, court records say. The details are contained in a search warrant affidavit in the case, which was made public Monday in Fresno County Superior Court. The search warrant was for the residence of Huron Mayor Ramon Dominguez, 62. [...] Dominguez faces charges of grand theft and receiving stolen property.

Dominguez is accused of paying about $8,600 out of a $20,000 purchase price for the property bought on an installment payment basis from a third party - then selling the property, pocketing $29,000 in installment payments from his buyer, the church, out of a $40,000 sale price. He allegedly stiffed his seller on the balance owed on his installment payments, allowing the land to fall into foreclosure.

For more, see Huron mayor illegally sold land, records show (Church reportedly bought lot and folded from losses). DeedTheftContra

Accused Scammers Boosted Real Estate Holdings By Ripping Off $270K+ From Vulnerable Seniors, Say Cops

In two separate stories, police have recently arrested three caretakers for ripping off their vulnerable, elderly clients and applied much of the loot toward advancing their real estate holdings.
  • Schuylkill County, Pennsylvania - Woman Charged with Stealing from the Elderly: A former worker at a nursing home in Schuylkill County is accused of stealing from the elderly. Michelle Connors, 37, of Girardville was arraigned on felony theft charges. Prosecutors said Connors became friends with 90-year-old Mary O'Connell and stole more than $160,000 from the elderly woman's bank account. Connors became power of attorney for the woman and had full access to all her money. O'Connell looks like anyone's grandmother but she's alone in the world with no relatives. Police said Connors used that to become O'Connell's friend and then drained the elderly woman's bank account. "I didn't think much about it. I didn't think power of attorney was a big deal," McConnell said about giving Connor power of attorney. "I think a little different about it now. It's a big deal!" Police said Connors bought jewelry, a car, furniture and even paid off her house with the stolen cash.

  • Rich Square, North Carolina - Caretakers Face Extortion Charges (A married couple faces charges of extorting $110,000 from an elderly woman in Northampton County, or they threatened to let her die alone): A married couple faces charges of extorting $110,000 from an elderly woman, or they threatened to let her die alone. Rich Square police in Northampton County say Mary King and her husband Charlie were caretakers for 83 year-old Bessie Harper. Police say Mary King would give Harper blank checks of hers and ask her to sign them. If she did not, the King's said they would stop helping her and make sure no one else would help her and that she would die alone. Harper's other caretaker and power of attorney, Annie Helton, noticed a significant amount of money was missing and called police. Police say the Kings were using the money to build a house. Police also say they claim the money was a gift and that they did not get it through threats.

Detroit Braces For Annual Halloween Arson Spree; 40K+ Recently-Emptied Foreclosed Homes Could Present Tempting Targets

In Detroit, Michigan, ClaimsJournal.com reports:
  • For the five years that the wood bungalow next door has been empty, Darlene Banks has kept an eye on it as Halloween approaches. She wasn't expecting anyone to burn it weeks sooner. But the dilapidated house on Detroit's east side went up in flames one weekend in early October, along with 10 other houses on six adjacent streets -- an apparent challenge to the city's annual mobilization to prevent arsons over the Halloween period that has become infamous as Devils' Night.

  • The stakes are even higher this year, as the city already devastated by the exodus of jobs and unemployment of around 27 percent moves toward the Halloween weekend. Along with tens of thousands of long-vacant homes and buildings, the more than 40,000 others recently emptied by the foreclosure crisis could present tempting targets. [...] Known as "Mischief'' and "Cabbage'' nights in other parts of the country, Devils' Night in Detroit once brought pranks such as egging houses. But the tricks took a sinister turn in the late 1970s.

For more, see Detroit Braces for Halloween Arson Spree.

In a related story, see The Detroit News: Insurers declare war on arsons in Detroit ($1M pledged to fight rising number of torched homes).

Friday, October 23, 2009

Attorneys Begin Going Down In Ongoing California State Bar Loan Modification Probe; 700+ Investigations Active

The State Bar of California announced this week:
  • The State Bar’s loan modification task force announced [Wednesday] that it obtained the resignations of three California attorneys as a result of misconduct related to their loan modification activities.(1) It also placed another attorney on inactive status, charging his work poses a threat to the public, and has undertaken similar efforts against two other lawyers.(2)

  • In addition, James Parsa, a southern California lawyer who extensively advertises his loan modification work, resigned [Wednesday]. He faced interim suspension from practice as a result of a 2001 misdemeanor conviction for sex with a child under 18 that he never reported to the bar. Parsa, 44, has advertised heavily throughout California for the past several months, offering to help homeowners facing foreclosure. Although he provided evidence to the bar that he was in fact working on cases, an investigator uncovered two 2001 misdemeanor convictions for sex with an underage girl. The bar court ordered that Parsa be placed on interim suspension. His resignation will make the suspension moot.

***

  • Last month, it released the names of 16 attorneys it was investigating for possible misconduct related to loan modification.(3) Four of the six who resigned or face inactive enrollment were on that list.

For more, see Attorneys Resign Over Loan Modification Activities.

(1) The attorneys who resigned from the State Bar are:

  • CAMERON EDWARDS, Alliance Law Center in San Diego, resigned Sept. 25,
  • RONALD RODIS, of Rodis Law Group and America’s Law Group in Newport Beach, resigned Oct. 13 (Rodis Law Group and America’s Law Group were named in this Temporary Restraining Order With Asset Freeze in a separate legal action brought by the Federal Trade Commission),
  • JEFFREY NEMEROFSKY, U.S. Advocacy Law Group and U.S. Financial Products, in Laguna Niguel, resigned Oct. 16.

(2) Those the bar is seeking to place on involuntary inactive status for posing “a substantial threat of harm to (their) clients or the public” under Business & Professions Code §6007(c) are:

  • PAUL LUCAS, of Lucas Law Center in Aliso Viejo. The State Bar petitioned to put him on inactive status Sept. 21; Lucas did not reply to the petition and the State Bar Court has taken the matter under submission (Lucas, his firm, and others were named in this separate legal action brought by the Federal Trade Commission),
  • SEAN RUTLEDGE, of United Law Group in Irvine, has a hearing Oct. 23; the bar filed its petition Sept. 22. The bar earlier charged him with seven counts of misconduct in handling a loan modification for a client who paid an advance $3,500 fee. Rutledge never took any action to negotiate with the client’s mortgage lender, the bar charges.

In addition, CHRISTOPHER L. DIENER, of Irvine, principal attorney for Home Relief Services LLC, was placed on inactive status Oct. 9, due to the State Bar Court judge's finding that he poses a substantial threat of harm to his clients and the public. Diener is also a target in a recent lawsuit brought by the California Attorney General in connection with his loan modification activities. See Questionable Short Sale Services Alleged By California AG In Recent Suit Against Group Accused Of Squeezing Homeowners For Upfront Fees For Loan Mods.

(3) According to their press release, The State Bar's 10-person loan modification task force has 738 active investigations underway. The task force was created in March after receiving thousands of calls from homeowners complaining that lawyers have done no work after taking fees purportedly to help avoid foreclosure. For those interested in The Bar's view on attorney participation in loan modifications, see ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications.

Consumer Advocate: Mortgage Servicers Prefer More Profitable Foreclosures To Loan Modifications

From a press release from the National Consumer Law Center:
  • Why have several recent programs designed to encourage loan modifications failed to slow America’s still-worsening home mortgage foreclosure crisis? A new report from the National Consumer Law Center (NCLC) discloses that mortgage servicers – including many large banks – have found it cheaper to foreclose on homeowners than to offer loan modifications that would benefit homeowners and investors.

For the entire press release, see Avoidable Foreclosures Continue Despite Servicers' "Loan Modifications" (New Report Describes How Little Noticed Incentives Prompt Banks to Deny Relief to Homeowners).

Thanks to nationally recognized mortgage servicing fraud watchdog Mike Dillon at GetDShirtz.com for the heads-up on the report.

Go here for Mr. Dillon's commentary on a variety of mortgage servicing fraud issues.

Florida Condo Associations Begin Seeking Blanket Receiverships On Delinquent Vacant Units Not Yet In Foreclosure In Battle To Stay Financially Afloat

In Miami, Florida, The Miami Herald reports:
  • Condo owners behind on maintenance fees, beware: Condo boards are becoming more aggressive in collecting delinquent fees. One board even wants to try an untested strategy -- forcing renters into empty units to pay off deadbeat accounts. The board at the Jade Residences at Brickell Bay, a luxury condo of 341 units, is asking a Miami-Dade judge for permission to rent vacant units belonging to owners who aren't facing foreclosure but are behind on fees, which pay for the basic needs of the building such as water, power, insurance or even a new roof. As the collection crises for condo boards deepens, the forced-rental program is the latest example of associations becoming pushier -- and more creative -- in their attempts to wring revenue from delinquent homeowners and idle units.

***

  • Current renters in Jade already turn over rent payments to the association when their landlords fall behind, dictated by a lease addendum landlords must sign before renting their condos. But [association attorney Guillermo] Mancebo says Jade and other condos need help with units that are lying fallow. In Jade's petition, Mancebo is asking the court to appoint a blanket receiver to manage the forced rental program. He's also asking the court to include units not yet in foreclosure by the association.(1)

For more, see Condo board tries new tactic to collect delinquent fees (A condo association is trying a novel legal strategy to collect delinquent association fees).

(1) In a court order last week, one Miami-Dade Circuit Court judge has already allowed a blanket receiver for another condominium complex to collect rents on units not in foreclosure by the association, the story states.

Suspect In Alleged N. Virginia Mortgage Scam Nabbed In Turkey; Lender Losses Estimated At $50M; Racket Used Rent-To-Own "Lure" To Reel In Naive Buyers

In Loudon County, Virginia, the Loudoun Independent reports:
  • Former Ashburn real estate agent Diane Atari was apprehended in Turkey on Oct. 14, ending a global search after she fled the country in July following a 12-count indictment against her. Atari was detained after local officials contacted INTERPOL for assistance. She is in a Turkish prison awaiting extradition. Authorities had previously believed she was in Jordan, where her ex-husband has family.

***

  • Atari, 42, is accused of fraudulently fixing clients’ credit and inflating their income on financial records – enabling them to be approved for higher credit so these clients could buy homes they could not otherwise afford. She was indicted on ten counts of using false statements to obtain credit, one count of money laundering and one count of racketeering on July 13.

***

  • The total loss on the fraudulently obtained mortgages is estimated to be more than $50 million, said [public information officer for the Loudoun County Sheriff’s Office Kraig] Troxell. The long-term effect is going to be huge, according to investigators. Atari, owner and operator of ACR Consulting Company and Atari Management Company, both located in Loudoun County, offered “rent-to-own” services for customers looking to become homeowners. These customers were generally unable to qualify for mortgages due to bad credit or low income. Atari allegedly signed agreements with these mortgage victims with the understanding that the company would try to fix the victims’ credit.

For more, see Real Estate Agent Fled Country Following Indictments; Apprehended in Turkey. rent to own lease purchase option scams yellowstone

GAO To Probe Foreclosing Lenders Leaving Abandoned Homes In Legal Limbo

In Cleveland, Ohio, the Cleveland Plain Dealer reports:
  • Federal investigators will scrutinize the practice of lenders or mortgage companies walking away from homes they have foreclosed on. The U.S. Government Accountability Office plans to delve into these so-called bank walkaways - something some consider an alarming trend in the foreclosure crisis.

***

  • Walkaways can happen when lenders or mortgage companies foreclose on a house but don't buy it or take it to sheriff's sale to see if someone else will. Without a sale, the homes can become abandoned trouble spots in neighborhoods. Meanwhile homeowners who have already moved out may be stunned to later learn the house is still in their names and they face back taxes and code violations.(1)

For the story, see Feds to probe 'walkaways' by some mortgage lenders.

Go here for other posts on homes being left in legal limbo.

(1) They also face possible jail time if they allow violations to go uncorrected. responsibility code violations foreclosure

Thursday, October 22, 2009

Walls Closing In On Beleaguered Owners Of 11,000 Unit NYC Apartment Complex As State High Court Hammers Landlord For Illegal Rent Increases

In New York City, The New York Times reports:
  • The state’s highest court dealt a financial blow on Thursday morning to the already beleaguered owners of the sprawling Stuyvesant Town and Peter Cooper Village complexes in Manhattan when it ruled that they improperly began charging market rents on thousands of apartments.

  • The ruling by the Court of Appeals may mean that the current owner, a partnership of Tishman Speyer Properties and BlackRock Realty, and the former owner, Metropolitan Life, may have to pay an estimated $200 million in rent overcharges and damages to tenants of about 4,000 apartments. In a majority ruling (two of the six judges dissented), the court said the owners improperly raised rents beyond certain set levels at the complexes while receiving tax breaks from the city for major renovations.

  • The decision could also affect landlords of as many as 80,000 apartments across the city who may also have improperly raised rents and deregulated apartments while receiving special tax breaks.

  • But the immediate and most devastating impact was on the Tishman Speyer partnership, which was already facing extreme financial difficulties after paying a record $5.4 billion in 2006 for the properties near the East River. The owners are running out of cash to pay building loans, and analysts have said it is highly likely the partnership will default by December. If the owners are forced to reimburse tenants, analysts say it would only hasten the path to default.

For more, see Court Deals Blow to Owners of Huge Apartment Complex (The Court of Appeals has ruled that the owners of Stuyvesant Town may have to pay an estimated $200 million in rent overcharges and damages to tenants of some 4,000 apartments).

For the ruling, see Roberts v. Tishman Speyer Properties, L.P.

In a related story on this massive 56-building, 11,000-unit New York City apartment complex, described by some as an alleged "predatory equity" deal designed to force tenants from their homes, see The Wall Street Journal: An Apartment Complex Teeters (High-Profile Tishman/BlackRock Property in New York in Danger of Default).

Central Florida Chief Judge "Objects" To Foreclosure Defense Attorney's "Attempts" To Gum Up "Rocket Docket;" Jurist: "It's Just A Stall"

In Central Florida, St. Petersburg Times' staff writer James Thorner blogs:
  • A piece I wrote last week about Tampa Bay foreclosure defense attorney Mark Stopa [see Delaying foreclosure can lead to ethical 'heebie jeebies'] has attracted what could be unwanted attention from the top judge in Pinellas/Pasco County civil court. Judge Thomas McGrady summoned yours truly to his office this morning and gently, but pointedly, objected to Stopa's technique of delaying foreclosures by filing motions to dismiss lenders' lawsuits.

  • McGrady described a court system that's drowning in foreclosure cases. Just three years ago 12 judges who deal with foreclosures handled about 800-1,000 open cases. These days each judge juggles about 3,400 cases. So McGrady clearly didn't appreciate attempts to gum up the works further. He said foreclosure cases are rarely dismissed, and lawyers who use the tactic have little chance of succeeding.(1) Even if the lender's case is thrown out, they almost always refile. "It's just a stall," McGrady said.(2)

  • The judge went further. While appreciating that lawyers need to make a buck, he recommended most home owners NOT hire an expensive defense attorney if their goal is simply to postpone repossession of their house. The calendar is so jammed that many people wouldn't be thrown out of their homes for more than a year after they stopped paying their mortgage.

Source: Pinellas County chief judge "irritated" by foreclosure lawyer tactics.

(1) One reason why at least some of these foreclosure cases aren't dismissed, I suspect, is that some judges, knowing that the underfinaced homeowners can't afford the legal firepower necessary to seek a review of their rulings by an appeals court of any lousy, erroneous rulings, will simply rationalize a dismissal of the homeowners' motions (judges who take this rubber-stamp approach to adjudicating foreclosures, thereby keeping their "foreclosure rocket docket" moving deserve nomination for The Broken Gavel Awards). Further, some of these same judges may figure that the homeowners can't afford to pay for the posting of the appeals bond necessary to halt the foreclosure sale while the appellate court conducts its review of their rulings. Without posting the bond, the homeowners get booted from their homes while an appeal is pending, thus rendering a request for an appellate court review of a ruling impractical for them (assuming, of course, they could afford to appeal the ruling to a higher court in the first place).

(2) The solution seems simple. If the motions to dismiss filed by the foreclosure defense attorney are frivolous, the judge should simply sanction the attorney filing the motions. If not, then due consideration should be given to the motion. EpsilonMissingDocsMtg

More On MERS, Standing-Lacking Lenders & Their Multiple Corporate Hat-Wearing Vice Presidents

In a recent story in CounterPunch on the problems the Wall Street mortgage securitization industry faces resulting from courts refusing to let foreclosure actions go forward, and changes in financial reporting requirements imposed by the Financial Accounting Standards Board, writer Pam Martens offers this description about one of the companies in the middle of this entire mess, (and everyone's favorite mortgage electronic registration system), MERS:
  • In recent years, MERS has become less of an electronic registration system and more of a serial defendant in courts across the land. In a May 2009 document titled “The Building Blocks of MERS,” the company concedes that “Recently there has been a wave of lawsuits filed by homeowners facing foreclosure which challenge MERS standing…” and then proceeds over the next 30 pages to describe the lawsuits state by state, putting a decidedly optimistic spin on the situation.

  • MERS doesn’t have a big roster of employees or lawyers running around the country foreclosing and defending itself in lawsuits. It simply deputizes employees of the banks and mortgage companies that use it as a nominee. It calls these deputies a “certifying officer.”(1) Here’s how they explain this on their web site: “A certifying officer is an officer of the Member [mortgage company or bank] who is appointed a MERS officer by the Corporate Secretary of MERS by the issuance of a MERS Corporate Resolution. The Resolution authorizes the certifying officer to execute documents as a MERS officer.”

She also offers this observation on the mortgage securitization trusts that have been foreclosing on the sliced-up loans it holds without possessing the proper paperwork:

  • Astonishingly, representatives for the trusts have been foreclosing on homes across the country, evicting the families, then auctioning the homes, without a proper paper trail on the mortgage assignments or proof that they had legal standing. In some cases, the courts have allowed the representatives to foreclose and evict despite their admission that the original mortgage note is lost. (This raises the question as to whether these mortgage notes are really lost or might have been fraudulently used in multiple securitizations, a concern raised by some Wall Street veterans.)

For more, see The Next Financial Crisis Hits Wall Street, as Judges Start Nixing Foreclosures (New Shockwaves From Courts and Accounting Board).

(1) Known around here as a "multiple corporate hat-wearing vice president," or a "dummy" or "straw" vice president.