"Business Deals Gone Bad" Defense Lets Thief Off w/ Handslap; Some Screwed Over Scam Victims To Get 41 Cents On Dollar Restitution; Others Get Stiffed

In Kennewick, Washington, The News Tribune reports:

• A Richland real estate developer pleaded guilty Thursday to first-degree theft after being accused of bilking Tri-City residents out of $380,000 they had given him for real estate investments.(1) Armen Lucius B. Weishaar, 49, could be sentenced next week in Benton County Superior Court to up to 90 days in jail and ordered to pay $80,000 in restitution.

• That reflects only a portion of more than $500,000 he is accused of collecting in potentially fraudulent property dealings from people in the Tri-Cities, Western Washington and Arizona.(2) As part of a plea agreement, five Benton County theft charges against Weishaar will be dropped. He originally pleaded innocent to six counts involving two couples and four individuals.

• It's not an ideal outcome, said Benton County Prosecutor Andy Miller. But it was acceptable to most of the Tri-City residents who accused Weishaar of taking their money to invest in real estate but never completing the transactions or returning the cash. [...] The guilty plea gives Weishaar a felony record, which victims wanted, Miller said. It could help protect those he might do business with in the future.

• Miller believed Kennewick police did a good job of investigating allegations and that he had "a very defensible case." But the prosecution still had to prove Weishaar made the deals with criminal intent and that they were not just business deals gone bad [aka "business deals gone bad" defense], Miller said. Neither Miller nor Weishaar's attorney, Sal Mendoza, were sure a jury wouldn't find Weishaar guilty on all charges or innocent of all charges, they said.

For the story, see Richland developer pleads guilty to $380,000 real estate scam.

(1) Some of the alleged victims dipped into retirement money or used home equity to invest with Weishaar, prosecutor Miller said.

(2) According to the story, the $80,000 in restitution will be split only among the Tri-City victims, according to the prosecutor. In addition to the $380,000 Weishaar was accused of taking in Tri-City deals, he also has been accused of taking $124,000 from people in Western Washington and Arizona, the story states. The agreement to pay restitution apparently stiffs the remaining alleged victims.

Unpaid Water Bills Could Lead To Home Condemnation, Resulting In Big Hit For Foreclosing Lenders

Buried in a recent story from Grand Rapids, Michigan on rent-skimming landlords facing foreclosure who are stiffing the local utility on their water bills resulting in water shut-offs is the following excerpt reported by WOOD-TV Channel 8. Those water shut-offs should be of some concern to lenders, who face taking a big hit on account of possible action by local officials arising from the lack of water to the premises being foreclosed:

• The city can condemn an occupied property with no water and undoing that action will take more than simply paying the bill. "We require that that property be brought up to, once it's condemned, brought completely 100% up to code before it can be occupied again," said Virginia Million with the Grand Rapids Housing Commission. That means everything up to code, from electricity to structure, often a tall task on an older property.(1)

Source: Landlord not paying bills? Move (Read the lease before you sign).

(1) Depending on how old the structure is, the cost of bringing a property up to the current building code could cost a small fortune. In real estate markets where that cost exceeds the value of the property, the foreclosing lender could find its loan collateral rendered worthless. Once the property is condemned, it is no longer a question of doing the necessary repairs or otherwise curing whatever the problem was that gave rise to the condemnation. A new certificate of occupancy is necessary which, as the story points out, requires that the home be completely brought up to meet the current building code - not the one in effect when the home was built (which could be 50+ years ago in many places). This means that, in addition to fixing things that need fixing, the property owner will now have to also fix things that, prior to the loss of the certificate of occupancy, didn't need fixing.

Self-Proclaimed "Soverign King" On The Loose In Memphis Hijacking Possession Of & Claiming Title To Vacant Homes In Foreclosure

In Memphis, Tennessee, WREG-TV Channel 3 reports on Michael Cobbs, a self-proclaimed soverign king who is running around town hijacking physical possession of vacant homes and claiming title to them:

• When [Jonah Asher] arrived [at his newly-purchased home], he noticed 'No Trespassing' signs in the yard, the locks were changed, and deeds posted in the windows saying Michael Cobbs owned the property. "Oh it's my house, because I can claim an abandoned home!" Cobbs said. Cobbs didn't pay for the house, because he says, he doesn't have to. "These is abandoned homes, every foreclosure is. If people knew what we knew right now, it'd be the end of American society, because these banks, these realtor companies, they're very evil," Cobbs said.

• Cobbs says man-made laws don't apply to him, because he's sovereign. He filed papers with the Shelby County Register of Deeds declaring that he is exempt from federal, state, and local laws. "This guy thinks he's a sovereign king and he can take what he wants when he wants, and nobody can do anything about it," Asher said.

• "This guy is talking bout I think I'm a sovereign king, I am a sovereign king! And he gonna find out. Yahweh gonna put him out of his house in Mississippi," Cobbs said. Cobbs says he follows the teachings of Yahweh ben Yahweh, the leader of a black supremacist movement. "We study real deep. We learned all of this from Yahweh Ben Yahweh," Cobbs said.

***

• Cobbs says he filed deeds on six properties across Shelby County - from a $500,000 home in Collierville to a $4.6 million motel on Mount Moriah. Cobbs says, he's not done yet. "This ain't the only home I'm gonna take, I'm bout to take over everything I can!" Cobbs said.

• Asher's doing what he can to keep Cobbs out of this house, by changing the locks and boarding up the windows, trying to protect what he's paid for. Cobbs says nothing -- not even a court order -- will keep him away. "Soon as the police and cops leave, we'll be bound to come, and kick the place back in, and take control of it again," Cobbs said. Both sides will have their day in court next week.

• Meanwhile, we're told the Shelby County Attorney's Office and the District Attorney's Office have launched a criminal investigation into Michael Cobbs.

Source: Man Takes Homes Without Paying For Them.

In a related story, see NC3 Investigates: House Stealing Scheme.

Ex-NFLer, Family Win $150K Jury Award In Premature Foreclosure Lockout Case; "Trashout" Firm Accused Of Dumping Trophies, Sports Momentos In Landfills

In Forsyth County, North Carolina, the Winston Salem Journal reports:

• A Forsyth County jury awarded about $150,000 in compensatory damages to a former running back for the Cincinnati Bengals and his family, who filed a lawsuit after their family home in Davie County was foreclosed on and some of their possessions were dumped in landfills.

***

• The case involved Chris Perry, who grew up in Davie County and was a standout running back at the University of Michigan, and his mother, Irene Perry. In 2008, they, along with two others, sued several businesses and people, including Jerry W. Blackwelder, GRP Financial Services and Triad Residential LLC. They alleged in the lawsuit that the defendants took items, including trophies and other sports paraphernalia that Chris Perry had gotten throughout his athletic career, and threw them into landfills in Davie and Davidson counties.

For more, see Forsyth jury awards damages to former Cincinnati Bengals player and his mother.

Mix-Up Over American Indian Artifacts At Home In Foreclosure Results In Alleged Civil Rights Violations, False Imprisonment Suit Against Cops, Others

In Merced, California, the Merced Sun Star reports:

• A Burbank couple is suing the city of Merced, three police officers, an area real estate company and a real estate agent, alleging civil rights violations, false imprisonment and the infliction of emotional distress, among other claims. In the lawsuit filed Feb. 26, Fred Mosbey III and his wife, Tracy Hardy-Mosbey, claim the officers and a representative of real estate company London Properties prevented the couple from removing American Indian artifacts from a home previously owned by Tracy Hardy-Mosbey's mother.

***

• The home was under the threat of foreclosure in 2008. Mosbey said he thought he was working with his mortgage company to stop the foreclosure when his brother-in-law, Antonio Rushing, passed by the house and saw eviction papers stuck on the door. "We had no intentions of losing the house and no intentions of stuff happening like it did happen," Mosbey said.

For more, see Couple files suit after scuffle at distressed home (Retrieval of American Indian artifacts at center of action).

Elderly Residents In Mobile Home Park In Foreclosure May Face The Boot With No Place To Go

In Minerva, Ohio, the Canton Repository reports on the Minerva Hillside Terraces, a somewhat dilapidated 20-unit mobile home park owned by a landlord facing foreclosure in which the residents, many of whom are reportedly elderly, live on fixed incomes, and face the boot:

• On Jan. 28, Huntington National Bank, which holds the property’s mortgage, filed for foreclosure. [Landlord David] Audino owes the bank at least $385,000 for two promissory notes he signed in 2001 and 2003 and a note he signed as owner of Dylan Homes in 2003.(1) Residents didn’t know what to expect. “What are we supposed to do? Do we have so many weeks? Or so many days? It’s a constant worry on us,” [resident Martha] Tucker said.

• While Tucker may live in a mobile home park, she isn’t exactly mobile. Tucker lives on a fixed income of $776 a month and says she has little money left over after bills. “Right now, I couldn’t come up with a penny if I had to,” she said.

• Harry Hagan, who moved to Minerva Hillside in 1985, said his trailer would need expensive repairs before it could be moved. Otherwise, he said, “It would fall apart on the road.” And he doesn’t believe the repairs would be worth it. “It would cost me more to move than what the trailer is worth,” he said. “One trailer is worth $1,500, but to move it would be $5,000.”

• The good news is that Huntington hasn’t indicated it plans to close the park, said Attorney Dawn Spriggs of Community Legal Aid in Canton,(2) who represents seven residents at Minerva Hillside. Instead, the bank has appointed a receiver to operate the park while the foreclosure is pending and to help improve the park’s financial condition. “His job is to write a report after a period of time to basically recommend what to do with the park,” Spriggs said. “He has to weigh the liabilities and assets.”

• The bad news, Spriggs said, is that the bank could sell the property, and Minerva Hillside’s new owners could decide to use the land for something other than a mobile home park. And residents can do little to stop it, she said. None of them signed a lease with Audino when they moved in.

For the story, see Minerva trailer park residents fear they're losing their homes.

(1) Reportedly, Audino, who has owned the park since 2001, had also stopped paying the water and sewer bills for the park. He owed the village more than $7,000 in past-due charges and county health officials have deemed the park a public health nuisance, the story states.

(2) Community Legal Aid Services, Inc. is a non-profit Ohio law firm serving the legal needs of low income and senior Ohioans in Columbiana, Mahoning, Medina, Portage, Stark, Summit, Trumbull, and Wayne Counties.

Two Cop Pleas To Using Stolen Personal Information To Mortgage Home Out From Under Elderly Couple; Pocketed $65K, Left Unwitting Victims In F'closure

In Las Vegas, Nevada, the Las Vegas Sun reports:

• Two men pleaded guilty to felony theft charges in connection with a scam in which an elderly couple’s home was mortgaged without their knowledge, Nevada Attorney General Catherine Cortez Masto’s office said []. The couple found out their home, which they owned outright, had been mortgaged when they received a foreclosure notice for not making payments, the attorney general’s office said.

• Thomas Gentile, 56, of Las Vegas, and Justin Sabo, 30, of Huntington Beach, Calif., each pleaded guilty to one count of theft of an amount over $2,500. A third man, Julio C. Martinez, 61, of Las Vegas, pleaded guilty to a gross misdemeanor in connection with fraudulently notarizing documents that allowed Sabo and Gentile to complete the transaction, Cortez Masto’s office said.

• The Attorney General’s Mortgage Fraud Task Force learned that between January and March last year, Sabo and Gentile fraudulently obtained personal information about the couple to obtain a $65,000 mortgage on property they owned. The man was Gentile’s former employer, the attorney general’s office said. The couple had paid cash for their home and didn’t have a mortgage, authorities said. The couple contacted the attorney general’s office when they received a notice of foreclosure for nonpayment.

For the story, see 2 plead guilty in mortgage scam with elderly victims.

For the Nevada AG press release, see Guilty Pleas In Mortgage Scam Against Senior Citizens.

L.I. DA Bags Mortgage Broker For Duping Mother-In-Law Into Signing Land Documents, Leaving Her Facing Foreclosure On Home She Unwittingly Purchased

From the Office of the Nassau County, New York District Attorney:

• Nassau County District Attorney Kathleen Rice announced [] that a Woodbury man faces up to 15 years in prison after tricking his mother-in-law into signing various real estate documents that allowed him to steal more than $600K from several financial institutions and left her facing civil lawsuits in addition to foreclosure proceedings on a nearly-$1 million home she had no idea she owned.(1)

• John Tuozzo, 44, was arrested [] by DA Investigators and charged with two counts of Grand Larceny in the Second Degree, three counts of Falsifying Business Records in the First Degree and Scheme to Defraud in the First Degree. He faces up to 15 years in prison if convicted.(2)

For the entire press release, see Woodbury Man Dupes Mother-in-Law, Steals $600K in Real Estate Scam (Tuozzo had mother-in-law sign documents for near-million dollar mortgage and multiple lines of credit).

(1) John Tuozzo and his wife divorced in 2009, and the property, which is owned solely by Tuozzo’s now-ex-mother-in-law, is being foreclosed on, the Nassau County DA press release states. Reportedly, she is also being sued civilly by several financial institutions for the balance of the money owed after a foreclosure sale.

(2) This case was investigated by the Nassau County District Attorney’s Crimes Against Real Estate Unit (CARE). Created in March 2009, CARE handles everything from mortgage fraud and foreclosure rescue scams to identity theft, senior fraud, and the investigation of unlicensed brokers and lenders, according to the DA's press release.

Florida Woman Dupes Senior Into Signing POA, Then Drains Victim's Home Equity With Reverse Mortgage, Loots Bank Accounts, Say Cops

In Palm Beach County, Florida, The Palm Beach Post reports:

• Evelyn Dick, authorities say, persuaded a 71-year-old North Palm Beach woman to let her get a reverse mortgage on the woman's home, then pocketed more than $34,000. Dick, 50, of suburban West Palm Beach, is charged with grand theft of between $10,000 and $50,000 on a person older than 65.

***

• The woman has told North Palm Beach police Dick befriended her about six months ago. She said Dick urged her to apply for food stamps and had her sign a document. The woman said Dick took her to the TD Bank at 316 Northlake Blvd. and had her stay outside. The woman said she later realized the document was a power of attorney and Dick had moved all the money out of her bank account.

• She said Dick also had obtained a reverse-mortgage. She then withdrew $25,000 and $14,000, a police report said. The woman said she discovered the scam when the U.S. Department of Housing and Urban Development mailed mortgage papers to her and contacted a lawyer who told her to call police, the report said.

Source: Suburban West Palm Beach woman charged with defrauding 71-year-old.

See also, WPTV-TV Channel 5: Woman arrested in reverse mortgage scheme.

Grandson Gets 30 Months For Using Forged POA To Fraudulently Obtain Mortgage On Unwitting Senior's Home, Draining $93K In Equity In The Process

In St. Charles, Missouri, Suburban Journals reports:

• Scott P. Richmond, 38, of O'Fallon, was sentenced [] to 30 months in prison for his participation in two fraud schemes, according to a new release from the U.S. Attorney's Office for Eastern Missouri. Between April 1 and May 31, 2007, Richmond falsified mortgage documents and used a forged power of attorney to mortgage his grandfather's home in St. Charles, according to the statement. Richmond told the lender his grandfather wanted the check representing the loan proceeds, $93,085, to be made payable to him.

For the story, see O'Fallon man sentenced for role in fraud schemes.

NJ AG Charges Two In Alleged POA Abuse In Ripoff Of 88-Year Old Relative, Resulting In Victim's Eviction From Assisted Living Facility For Unpaid Rent

In Trenton, New Jersey, MyCentralJersey.com reports:

• A Franklin school board member and her husband, the township's Republican Party chairman, plan to defend against charges that they stole $100,000 from an elderly relative while overseeing her financial accounts, their attorney said. Nancy and Robert LaCorte were charged in a five-count state grand jury indictment handed up Wednesday, authorities said.(1)

***

• State Attorney General Paula Dow said the relative, an 88-year-old woman, had granted a power of attorney over her financial accounts to Nancy LaCorte, 49, whose name was added to the victim's checking account. The relative's pension and Social Security checks were directly deposited into the account, and LaCorte was required to use the funds for the relative's benefit. Robert LaCorte, 57, a licensed insurance agent, is accused of using $162,552 from the victim's Individual Retirement Account without her knowledge to open two annuity accounts with a life insurance company, Dow said. He allegedly earned more than $11,000 in commissions for opening the accounts. The defendants stole a total of about $100,000 from the annuity accounts and two bank accounts by making withdrawals and transfers to their personal accounts, Dow said.

***

• [State attorney general spokesman Peter] Aseltine said the victim, who lives in the Bronx, was evicted from an assisted living facility in Avalon because she was unable to pay her rent, raising suspicion of another relative. That relative discovered that money was missing from the victim's account and took over power of attorney after December 2007, Aseltine said.

For the story, see Franklin couple charged with stealing $100,000 from elderly relative.

For the New Jersey Attorney General press release, see Somerset County Couple Indicted on Charges They Stole $100,000 from an Elderly Relative.

(1) The couple faces charges of conspiracy, theft by unlawful taking, theft by failure to make required disposition of property, misapplication of entrusted property and money laundering, the story states.

Woman Holding POA Charged w/ Theft Of $10K+ From Care Facility-Bound Woman; Nursing Home Officials Call In Cops After Getting Stiffed On Care Expenses

In Evansdale, Iowa, WFC Courier reports:

• An Evansdale woman has been arrested for allegedly misusing more than $10,000 of another person's money. Kathy Jean Helmrichs, 63, of 537 River Forest Road, was given power of attorney for a woman who lives at Manor Care nursing home in Waterloo. Authorities allege Helmrichs didn't pay her ward's nursing home bill and instead spent thousands of dollars on herself, according to court records. Officials at Manor Care called Waterloo police when they became suspicious in April.

For the story, see Evansdale woman arrested in theft case.

Nursing Home Employee Gets Off With Handslap After Copping Plea To Ripping Off 90+ Year Old Couple With Dementia

In Lowestoft, Suffolk (UK), The Lowestoft Journal reports:

• A former worker at a Lowestoft sheltered housing complex has been given a suspended prison sentence after admitting stealing money from an elderly couple with dementia. Lowestoft magistrates court heard [] that the manager at Levington Court in London Road South, Lowestoft, worked with police to set up video surveillance after a report of cash being taken from one of the bedrooms at the centre, which provides sheltered and very sheltered accommodation. Stephen Nelson, of Northgate in Lowestoft, was later identified from video footage and admitted two offences of theft totalling £100.

• Mitzy Bond, prosecuting, said that the serial numbers of notes belonging to the victims, who were both in their 90s, were recorded so that they could be traced. She said that when Nelson's home address was searched by police earlier this month after he was identified on the video footage, a £20 note stolen from the victim's wallet was found. He also admitted stealing another £80 from the couple on an earlier occasion.

For the story, see Lowestoft care worker stole from couple with dementia.

Apartment Building Managers Face Theft Charges After Scoring POA From 94-Year Old Tenant, Then Ripping Him Off For $700K+, Say Cops

In Columbus, Ohio, The Columbus Dispatch reports:

• A nurse and a part-time kindergarten teacher have been charged with the theft of more than $700,000 from a 94-year-old North Side man. Deborah Johnson, 53, of Columbus, the nurse, and Anita Esquibel, 68, of Columbus, the teacher, are accused by Columbus police of stealing more than $700,000 from Peter Svaldi. The two met him at an apartment building near Graceland Shopping Center, said Kevin Craine, attorney for Svaldi's newly appointed guardian. The women were the property managers, said the guardian, Lorelei Lanier.

• The women gained Svaldi's trust, then bought real estate, a car and jewelry with money they took from his accounts after gaining power of attorney, Craine said. "I think this stuff happens a lot more than anybody knows, through power of attorney," Craine said. "I don't know the circumstances how he gave them power of attorney, but he definitely gave it to them. In the wrong hands, it can become a license to steal. "The bank deserves a lot of credit for its vigilance," he said.

For the story, see 2 women accused in rip-off of senior (94-year-old man lost $700,000, police say).

See also, WBNS-TV Channel 10: Women Charged With Stealing Hundreds Of Thousands From 94-Year-Old:

• Police said the man met Johnson and Esquibel because they lived in the same apartment complex. [...] Since the man has no relatives who live nearby, investigators said the theft was almost undetected, until a bank officer noticed the large transactions and called police, Connelly reported.

• Craine said his client is still confused as to exactly what happened to his money. "It took a while for him to understand that a significant portion of his assets had been taken from him, and in fact the psychologist in his evaluation likened it to a grieving process," Craine said.

Convicted Embezzler Now Accused Of Ripping Off 86-Year Old Dementia-Stricken Next-Door Neighbor; Cops Believe Suspect Forged Victim's Name On POA

In Flint, Michigan, The Associated Press reports:

• A convicted embezzler out on parole who snagged more than $9 million in business tax credits from the state of Michigan was charged [] with defrauding an 86-year-old neighbor with dementia. A judge set bail for RASCO CEO Richard A. Short at $9.2 million. Short, 57, faces 24 counts of embezzlement, obtaining money under false pretenses and other charges in connection with money and possessions taken from the elderly woman.

***

• Prosecutors brought the latest charges after finding that Short took money out of the bank account of an elderly woman who lived next door to him. Genesee County Sheriff Robert Pickell said police think Short forged the elderly woman's name on a power of attorney form dated last September. [...] In the latest case, Leyton said it appears Short stole thousands of dollars from the victim as well as items from her home. The woman had lived next door to Short in a mobile home park but moved to a Flint nursing home in January.

***

• Pickell called Short a "predator," saying the elderly woman's dementia was so advanced, "she thought the (police) investigator was her child." [...] He said police also are investigating Short's interactions with other elderly residents in the Westwood Heights mobile home park where he lives in Genesee County's Mount Morris Township.

For the story, see Embezzler who got tax credit faces more charges.

Judge Offers Upfront Fee Loan Modification Scammers Reduced Jail Sentence In Exchange For $38K+ "Upfront" Payment Of Victim Restitution

In Santa Ana, California, City News Service reports:

• Two women pleaded guilty Wednesday to loan-modification fraud and are expected to be sentenced to a year in jail next month if they make $38,340 in restitution, one of their attorneys said. Mary Alice Yraceburu, 46, of Riverdale and Marianne Curtis, 68, of Costa Mesa pleaded guilty to 71 counts each of grand theft, illegally accepting upfront fees, attempted grand theft and conspiracy to commit a crime, according to Orange County court records.

• Orange County Superior Court Judge Robert Fitzgerald offered the pair, who operated a company called Foreclosure Freedom, a year in jail in exchange for the guilty pleas and paying back their victims, Yraceburu’s attorney, Diane Bass said. They must make restitution when they are scheduled to be sentenced April 9, Bass said.

• State Attorney General’s Office prosecutor Angela Rosenau initially offered the two six years in prison and then lowered it to three years in prison, Bass said.

For the story, see Loan-mod scammers face year in jail if victims are paid back.

Brooklyn Judge Bags Foreclosure Mill Law Firm Representing Both 1st & 2nd Mortgage Holders In Legal Action In Violation Of Conflict Of Interest Rule?

In Brooklyn, New York, Kings County Supreme Court Justice Arthur M. Schack is at it again, denying another foreclosing lender seeking foreclosure because of screwed up paperwork. In addition, Justice Schack makes this observation regarding the attorneys of record representing the foreclosing 1st mortgagee and the 2nd mortgagee:

• Finally, for reasons unknown to this court, Ms. Bechakas, the attorney of record for subordinate mortgage defendant MERS, as nominee for FIRST FRANKLIN FINANCIAL CORP., failed to disclose to the Court that she is employed by plaintiff's counsel, Steven J. Baum, P.C.

• My March 17, 2010 examination of the Office of Court Administration's Attorney Registry reveals that Ms. Bechakas, admitted in the Fourth Department in 1991, lists her business address as "Steven J. Baum, P.C., 220 Northpointe Pkwy, Ste G., Amherst, NY 14228-1894." As noted above, Steven J. Baum, P.C. is the attorney for plaintiff LASALLE. The Court is concerned that the simultaneous representation by Steven J. Baum, P.C., of both plaintiff LASALLE and subordinate mortgage defendant MERS, as nominee for FIRST FRANKLIN FINANCIAL CORP., is a conflict of interest in violation of 22 NYCRR § 1200.24, the Disciplinary Rule of the Code of Professional Responsibility, entitled "Conflict of Interest; Simultaneous Representation," in effect when plaintff LASALLE moved in December 2008 for a judgment of foreclosure and sale.

For the ruling, and a discussion of the applicable New York law, see Lasalle Bank N.A. v Smith, 2010 NY Slip Op 50470(U) (March 22, 2010).

For links to over 30 of Justice Schack's court rulings in which he bounced unprepared foreclosing lenders and their lawyers out of his courtroom for sloppy an/or non-existent paperwork, see Brooklyn Trial Judge Nixes "Rubber Stamp Method" Of Adjudicating Foreclosures; Lenders, Lawyers Lacking Legal Standing To Bring Actions Get Bounced.

Go here for other posts on Justice Schack.

Seattle Jury Convicts Mortgage Scam Head Of 30 Felonies; Led Owner Financing Ripoff That Left Unwitting Home Sellers Holding Worthless Notes

From the Office of the U.S. Attorney (Seattle, Washington):

• WILLIAM S. POFF, 37, of Marshall, Michigan, a former resident of Washington State, was convicted [] in U.S. District Court in Seattle of 30 felony counts of conspiracy, bank fraud, wire fraud, and money laundering offenses. POFF is one of five people(1) arrested in June 2009, in connection with a mortgage fraud scheme that cheated banks and property sellers out of more than several million dollars. [...] In all, between 2005 and 2008, the conspirators used straw buyers to purchase and resell properties, obtaining more than 80 loans totaling more than $18 million.

***

• The conspirators did not just damage banks and financial institutions. Innocent sellers were harmed when they agreed to loan the buyer a portion of the purchase price [ie. owner financing], to be paid back over time.(2) The sellers did not know that the conspirators had already obtained 100 percent financing from commercial lenders. When payments were not made and properties fell into foreclosure, and then were sold for less than the total of all loans secured by the property, the sellers holding private notes were left with nothing.

For the U.S. Attorney press release, see Former Washington Resident Convicted Of Multiple Counts Of Conspiracy, Bank Fraud, Wire Fraud, And Money Laundering In Mortgage Fraud Scheme (Loan Originator Forged Documents, Defrauded Banks and Sellers in Scheme).

(1) The other four already entered guilty pleas in the case: Humberto A. Reyes-Rodriguez, a/k/a Tony Reyes, 43, of Federal Way, Washington, Alexis Ikilikyan, a/k/a Haikanush Ikilikyan, 30, of Auburn, Washington, Micki S. Thompson, 55, of Tacoma, Washington, and Mario A. Marroquin, 39, of Kent, Washington.

(2) This technique for draining the home equity out from under the unwitting home sellers comes right out of the pages of the old "no money down" real estate acquisition books that have been around for decades. As described in these books, you implement this technique by:

• Finding a seller with a home that is free & clear of any mortgages,
• Convincing the home seller to hold a 2nd mortgage for, say, 40% of the purchase price that will be subordinate to a contemporaneously-obtained 1st mortgage,
• Obtaining the 1st mortgage for, say, 80% of the purchase price.

Since the amount of the 1st mortgage proceeds needed to pay off the home seller equals only 60% of the purchase price (remember, he/she has already agreed to hold a 2nd mortgage for the 40% balance), the excess proceeds from the 1st mortgage, equal to 20% of the purchase price, winds up in the buyer's pocket (less closing costs). The buyer walks out with this 20% in cash, along with the deed to a property that immediately finds itself underwater by 20% (80% 1st mortgage plus 40% seller-held 2nd mortgage = 120% loans-to-value).

Foreclosure Rescue Scam Mastermind Found Guilty Of Dozens Of Felonies; Ran Upfront Fee Land Grant Scheme, Sale Leaseback Rent Skimming Racket

In San Diego, California, XETV-TV Channel 6 reports:

• The mastermind of a scam in which about 400 homeowners in San Diego and Riverside counties were tricked into paying nearly $2 million in fees in hopes of beating foreclosure was convicted Tuesday of dozens of felonies. After an eight-week trial, 63-year-old William Hutchings was found guilty of 160 counts of conspiracy to commit grand theft, grand theft, rent skimming and deceitful practices by a foreclosure consultant. [...] Five of Hutchings' co-defendants -- including his wife and ex-wife -- have pleaded guilty, and four are set for trial on May 18, said Deputy District Attorney Stephen Robinson.

• In the scam, which ran from January 2007 to May 2008, the defendants acquired grant deeds to homes in foreclosure, based on untrue or misleading statements that they would prevent homeowners from losing their homes through foreclosure, prosecutors said.(1)

For more, see Foreclosure Scheme Ringleader Convicted of 160 Charges.

(1) According to the story, two methods were used for inducing owners of residences in foreclosure to participate in a so-called land grant program, prosecutors said. One method required homeowners to pay a one-time fee of up to $10,000 to put their property in a land grant. The second method was a lease-back scheme in which homeowners paid the defendants $500 or more and then transferred their property via land grant deeds to the defendants for no consideration and then made monthly payments, purportedly to rent their homes back. In both scenarios, homeowners were eventually foreclosed upon and evicted and retained no legally recognized title to their property, prosecutors said.

Use Of Rubber Check To Pay Off Home Seller's Mortgage Leaves Buyer Facing Foreclosure On Prior Owner's Loan; Title Insurer Steps In To Defend

In Kingsland, Georgia, WTLV NBC-12 and WJXX ABC-25 report:

• Tom Bloomer lives in a quiet, suburban community in Kingsland and said he purchased his house in May 2008. But now, Bloomer said he's found out some information about his home that has him upset. "I stumbled across the fact that my house was on a foreclosure list and is scheduled to be sold on April 6," Bloomer said.

• Bloomer said he has paid his mortgage payments consistently to his lender, Bank of America, and he was surprised to see that Wells Fargo Bank has filed foreclosure against him. "I've talked to the attorneys for Wells Fargo and they say they have rights to the house," said Bloomer. Bloomer is asking 'how could this be?'

• He was told the person who sold him the house almost two years ago gave Wells Fargo a worthless check(1) and now the bank is foreclosing to collect that debt. [...] Attorney Kevin Yackel said the foreclosure is temporarily on hold. "Bloomer was not provided proper notice as required by Georgia law," he said.

• Yackel also said the [title insurance] underwriter is now pursuing a defense to keep Bloomer in his home. Yackel said Stewart Title has presented the documents from the sale/purchase to show that this is a wrongful foreclosure.(2)

For the story, see Kingsland Man Facing Wrongful Foreclosure; Seller Closed with Worthless Check.

(1) It was probably the agent who handled the title closing for the sale who sent Wells Fargo the hot check.

(2) When purchasing a title insurance policy when buying a home, not only does the insurance company agree to indemnify you in the event the title is defective (up to the face amount of the policy), it also agrees to defend you when your title is subjected to a challenge from another party claiming to hold a competing interest in the property (as in this story), and also agrees to pick up the tab for the legal fees and costs associated with such a defense.

(For those prospective real estate purchasers who choose to work with real estate agents in their search for a property, and you want to "test" the agents to see if they know what they are doing, ask them whether you need title insurance in the event you "pay cash" for the home. Every once in a while, you'll come across a "genius" who'll tell you that if you don't need financing to buy the home, you can get away without having to buy title insurance, thereby saving the cost of the premium, thereby reducing your closing costs. If you come across an agent who tells you this, do yourself a favor and get rid of him/her and find someone else. And keep this story in mind when doing so!)

Massachusetts AG Scores $3B In Loan Modifications For Homeowners Nationwide In Settlement Of Countrywide Lawsuit

From the Office of the Massachusetts Attorney General:

• As part of her office’s ongoing initiative to combat predatory lending practices that contributed to our nation’s economic crisis, Attorney General Martha Coakley [] reached a significant settlement with Countrywide Financial Corporation (Countrywide) that will provide an estimated $18 million in loan modifications for Massachusetts homeowners, $3 billion in loan modifications for homeowners across the country, and a $4.1 million payment to the Commonwealth. Countrywide is now owned by Bank of America.

For the entire Massachusetts AG press release, see AG Coakley Secures $3 Billion in Loan Modifications for Homeowners Nationwide in Agreement with Mortgage Lending Giant Countrywide ($18 million in relief for Massachusetts homeowners; $4.1 million payment to Commonwealth).

For copies of the Massachusetts AG's lawsuit against Countrywide and the settlement filed by the Attorney General's Office, see:

• Complaint - Commonwealth of Massachusetts v. Countrywide Financial Corporation et al.,
• Final Judgment by Consent (March 24, 2010).

BofA To Begin Cutting Loan Balances On Underwater Homes? Massachusetts AG "Arm-Twists" Lender Into Agreeing To Offer Debt-Reduction Workout Plan

The Wall Street Journal reports:

• Under pressure by Massachusetts prosecutors, Bank of America Corp. said Wednesday it would reduce mortgage-loan balances as much as 30% for thousands of troubled borrowers, in what could presage a wider government effort to encourage banks to offer debt reduction to ease the mortgage crisis.

***

• The bank's move is part of an agreement to settle claims over certain high-risk loans made by Countrywide Financial, which the bank acquired in mid-2008. The Massachusetts Attorney General's office, which was negotiating with the bank, said it was prepared to file suit had the agreement not included principal reductions.(1)

For more, see BofA Bows to Pressure to Cut Loan Balances.

See also:

• The National Law Journal: BofA Subsidiary Agrees to $3 Billion Home Loan Modification Deal (Massachusetts Attorney General Martha Coakley brokered a $3 billion loan modification deal with Bank of America subsidiary Countrywide Financial Corp.).
• The Wall Street Journal's Dvelopments Blog: How Bank of America’s Mortgage Write-Down Program.

(1) For the Massachusetts Attorney General press release, see AG Coakley Secures $3 Billion in Loan Modifications for Homeowners Nationwide in Agreement with Mortgage Lending Giant Countrywide ($18 million in relief for Massachusetts homeowners; $4.1 million payment to Commonwealth).

For copies of the Massachusetts AG's lawsuit against Countrywide (now owned by Bank of America) and the settlement filed by the Attorney General's Office: see

• Complaint - Commonwealth of Massachusetts v. Countrywide Financial Corporation et al.,
• Final Judgment by Consent (3/24/2010).

Lender VP Blows Whistle On Employer On Loan Mods; Says Bank Not Interested In Working Out House Payments; Homeowners Get Runaround On Toll-Free Number

ABC World News reports:

• A vice president for one of the nation's biggest banks claims customers looking for help in lowering their mortgage payments are often told to call an 800 number -- where he says representatives then give homeowners the runaround. David Muir gets answers from a vice president of one of the biggest banks. The bank executive spoke to ABC News on the condition that ABC News not show his face or name him, because he feared coming forward would cost him his job.

For more, see Whistle-Blower: Banks Give Homeowners the Runaround (800-Numbers Lead to Runaround as Banks Refuse to Modify Mortgages).

Title Insurer's Escrow Officer, Local Office Supervisor Played Roles In Pulling Off $30M Fraud, Says Convicted Mastermind Who Headed Scam

In San Diego, California, BusinessWeek reports:

• Employees of Fidelity National Financial Inc.’s Chicago Title Corp. unit helped carry out a $30 million fraud, the convicted mastermind of the scheme said at the start of a civil trial against the title insurer. Rollo “Rick” Norton, a financial planner who pleaded guilty to mail fraud in connection with the scam, told a San Diego Superior Court jury that an escrow officer and a local office supervisor at Chicago Title knew what they were doing was wrong and “I was part of it.”

• Chicago Title and Chicago Title Insurance are accused, together with Norton, of conspiracy and fraud by 19 people who say they lost their investments in a San Diego condominium project through sham real estate transactions. The investors claim insiders at Chicago Title helped Norton prepare and sign fraudulent documents.

For more, see Chicago Title Assisted San Diego Fraud, Mastermind Tells Jury.

BofA Files Suit To Pin Title Insurer With $500M+ In Loan Losses For Providing Unconventional Lien Protection Plan

The Los Angeles Times reports:

• During the subprime loan era, it's well documented that lenders took all kinds of shortcuts -- such as failing to verify borrowers' employment or income -- to sell mortgages. Now Bank of America Corp., the nation's biggest mortgage lender, is saying the nation's second-largest title insurer did much the same thing and should be on the hook for more than $500 million in losses.

• In a lawsuit filed earlier this month, BofA alleged that First American Corp. in Santa Ana relied on home buyers to tell them about liens on their properties and other matters, rather than conducting traditional title searches. The shortcut was part of a program called QuickClose that BofA said in its suit did not require "title searches in connection with loans processed under the program." The bank said in the suit that the insurer has not made good on more than 5,000 mortgages it was supposed to protect.

***

• The bank's efforts to curb its losses in the mortgage fallout are indicative of what's going on in the industry, said banking analyst Bert Ely. "Every time you have a disaster everybody sues everybody else, and mortgage financing was a disaster," he said. "You have lots of losses floating around, and companies are looking to others to eat their losses."

***

• The title insurance policies that First American sold to Bank of America were uncommon in the industry, Ely said. "The American Land Title Assn. has openly opposed these types of lien protection plans," Ely said. "First American was offering a product that at least more than a few in the industry weren't comfortable with."

For the story, see BofA seeks to pin losses on title insurer (The banking giant sues First American Corp., alleging that it failed to do proper title searches. That led to $500 million in mortgage losses, the suit says).

Atlanta Man Cops Plea In Attempt To Use Stolen IDs To "Buy" His Own "Underwater" Investment Homes In Short Sale Scam

In Atlanta, Georgia, The Atlanta Journal Constitution reports:

• An Atlanta man pleaded guilty Tuesday to bilking the FDIC of $2.2 million in a bogus real estate short-sale scheme. Brent Merriell, 37, admitted in federal court to lying to the FDIC and selling 14 homes he owned facing foreclosure to identities he’d stolen, court authorities said.

***

• When he defaulted on all 14 home loans in October 2009, Merriell put the homes on the market as a short sale, asking the FDIC to forgive $2.2 million in loan payoffs so his “buyers” could purchase them at a greatly reduced price.

***

• But Merriell tried to give forged and counterfeited sales contracts and loan commitment letters – generated from seven stolen identities – to the FDIC to complete the sales. He was arrested before the sales went through and before his actions could affect the credit of his seven victims, authorities said.

For the story, see Atlanta man guilty of "cheating FDIC" in short sale scam.

FTC, California & Missouri AGs Slam "Lawyer Renting" Loan Modification Racket; Score $980K In Seized Assets, Put Outfit Out Of Business

The Federal Trade Commission announced:

• The operators of a mortgage foreclosure “rescue” company will be banned from selling mortgage relief services under a settlement with the Federal Trade Commission and the states of California and Missouri, which sued them in 2009 as part of a federal-state crackdown on mortgage loan modification and foreclosure relief scams.

• Boasting a “proven track record” and the “highest standards of business ethics,” U.S. Foreclosure Relief Corp., George Escalante, Cesar Lopez, and Adrian Pomery falsely claimed they helped 85 percent of their clients get their loans modified, and that they would get loan modifications to make consumers’ homes much more affordable, according to the FTC complaint. They also allegedly violated state laws against charging advance fees for foreclosure consulting services. The court immediately barred the practices and froze the defendants’ assets.(1)

• The FTC has added as defendants H.E. Servicing, Inc., Brandon L. Moreno, and his law firm, Cresidis Legal, and charged all of the defendants with two more law violations: falsely claiming a lawyer would negotiate the terms of consumers’ home loans, and falsely promising refunds if they failed. The settlement order resolves the case against the original defendants and H.E. Servicing. The case continues against Brandon L. Moreno and Cresidis Legal, a professional corporation.

For the FTC press release, see Defendants Banned from Mortgage Foreclosure 'Rescue' Business (Surrendered Cash, Jewelry, and Vehicles for Consumer Refunds).

For earlier post on this story, see Report: Loan Modification Firm Used Craigslist To Round Up "Lawyer Renting" Prospects; "Rents" Ranged Between $125-$300 Per File.

For links to available court documents, see FTC, et al. v. U.S. Foreclsoure Relief Corp., et al.

Go here for other posts on "lawyer renting" loan modification rackets (ie. a loan modification outfit that uses an attorney or law firm as a "front" for its activities where the attorney does little or no work, and has little or no contact with the financially distressed client desiring a loan modification, typically used to avoid prohibitions under law against clipping homeowners for upfront fees).

(1) According to the press release, the order imposes a $8.6 million judgment against George Escalante and his two companies, U.S. Foreclosure Relief and H.E. Servicing. The judgment will be suspended except for $980,000 in cash, jewelry, and vehicles that Escalante and his companies have surrendered to lenders or the court-appointed receiver. The order also imposes $3.3 million and $3.4 million judgments against Cesar Lopez and Adrian Pomery, respectively, which will be suspended due to their inability to pay. The full amount will become due immediately if they are found to have misrepresented their financial condition.

For information about refunds to victims, please visit the court-appointed receiver’s Web site, http://www.heservicingreceiver.com.

Minnesota AG Tags Two Out-Of-State Outfits With Civil Suits Alleging Upfront Fee Loan Modification Ripoffs

From the Office of the Minnesota Attorney General:

• Minnesota Attorney General Lori Swanson today filed two lawsuits against separate out-of-state mortgage modification companies for violating a 2009 state law that prohibits companies that offer to negotiate or modify the terms or conditions of an existing home mortgage from requesting advance payments from homeowners. These are the first lawsuits filed under the new law.

• “Homeowners who contact their lenders to modify their mortgages often face unreturned phone calls, lost paperwork, and other red tape. This and the bad economy have created an opening for mortgage modification companies to swoop in and take advantage of people,” said Attorney General Swanson.

• The lawsuits were filed against: American Modification Consultants, LLC of Philadelphia, Pennsylvania, d/b/a American Mitigation Consultants; and INQB8 LLC of Scottsdale, Arizona, d/b/a Discount Mortgage Relief.(1)

For the Minnesota AG press release, see Attorney General Swanson Files Two Lawsuits Against Mortgage Modification Companies For Violating New State Law (Lawsuits Are First Ones Filed Under 2009 Law Designed To Protect Consumers From Abuses By Mortgage Modification Companies).

(1) The lawsuits allege that the companies violated Minnesota law by charging advance fees to homeowners and then failed to deliver the promised services. American Mitigation Consultants charged homeowners advance fees of up to $1,250; and Discount Mortgage Relief charged homeowners advance fees of up to $3,000, according to the Minnesota AG's press release.

Minnesota Regulator Initiates Action Against Unlicensed Loan Modification Operator; Says Outfit Failed To Pay Promised Refunds On Failed Workouts

In St. Paul, Minnesota, Finance & Commerce reports:

• The Minnesota Department of Commerce has initiated civil disciplinary action proceedings against a St. Louis Park firm for allegedly offering loan modification services without a license. Last week, the department sent a “notice of and order for hearing” to Todd Jacobson of LMS and Associates, listed to an office on Wayzata Boulevard in St. Louis Park. A prehearing conference is scheduled for May 5 before an administrative law judge.

***

• Over a six-month period last year, the Department of Commerce charges, the firm sent out invoices for roughly $251,000 on 105 files and collected nearly $139,000. The Department of Commerce contends that the firm was not doing what it said it could do: “The Department’s investigation revealed that Respondent was not successful in performing the services as represented and failed to issue refunds as represented in the contracts that the customer signed.”

For the story, see Allegations aimed at local loan-mod firm (Commerce department says company had no license).

Loan Servicer Cries Foul; Says Its Being Squeezed By Hedge Fund's Attempt To Jam Foreclosure Suit On 11,000 Unit Complex

In New York City, the New York Post reports:

• The company that controls troubled Manhattan apartment complex Stuyvesant Town-Peter Cooper Village told hedge fund Appaloosa to back off [], saying the New Jersey bondholder has no right to try to scuttle the property's foreclosure proceedings.

• In a brief filed with Manhattan federal court, CW Capital -- which represents holders of the $3 billion defaulted mortgage -- argued that the hedge fund must gain the support of 25 percent of bondholders to have a say in the foreclosure.

• CW also accused Appaloosa of trying to hold up the foreclosure to "maintain its stream of payments" on its bonds, which were bought "at a steep discount" when it was clear foreclosure was coming.(1) Late last month, David Tepper's hedge fund filed a motion to stop recent foreclosure proceedings on StuyTown, saying the move would hurt its investment.

Source: CW Capital: Back off, Appaloosa.

For the follow-up to this story, see The New York Observer: Hedge Fund to Special Servicer: Stop the ‘Revisionist History’ On Stuy Town:

• The hedge fund angrying up the waters in Stuyvesant Town's foreclosure has filed a testy response in federal court to the firm controlling the 11,200-unit property, complete with colorful legal vituperation.

(1) Until the foreclosure process is completed, the loan servicer is typically required to continue coughing up monthly payments to the investors in the mortgage backed securities, despite the fact that it no longer collects the mortgage payments from the complex's defaulting landlord. The longer the foreclosure process drags out, the longer the loan servicer gets squeezed.

Jailed Connecticut Man Awaiting Trial On Related Larceny Charges In Upfront Fee Ripoff Ordered To Pay $230K In State AG Civil Suit

From the Office of the Connecticut Attorney General:

• Attorney General Richard Blumenthal has won a judgment compelling a Hartford loan company owner to pay $230,150 in restitution and penalties for allegedly taking money and failing to provide promised loans and services. The settlement bans Michael Petriccione from the commercial loan business in Connecticut and obligates him to pay $165,150 in restitution to 13 consumers and $65,000 in penalties to the state.

***

• Blumenthal sued Petriccione and his two companies, Mediations, Inc. and Innovations NE, LLC, in April 2008 for allegedly collecting more than $165,000 in deposits and upfront fees, but never delivering promised loans or services. The judgment empowers Blumenthal’s office to seek seizure of property and other assets that Petriccione has or may acquire in the future.

***

• Petriccione is currently in jail awaiting trial on separate larceny charges stemming from the case. [...] Through his companies, Petriccione claimed to provide investment loans of $100,000 to $700 million and “mediation services.” His companies also claimed to have legal and “placement” skills, and Petriccione represented that he was a Connecticut attorney. He is not licensed to practice law in Connecticut.

For the Connecticut AG press release, see Attorney General Wins $230,000 Judgment Against Hartford Loan Company Owner.

Coalition Of Advocates, Gov't Agencies, Law Enforcement Launch Website Targeting Scams Involving Loan Mods, Sale Leasebacks, Phony Re-Fi Rackets, Etc.

The Sarasota Herald Tribune reports:

• This month, a coalition of government agencies, law enforcement offices and advocates known as the Loan Modification Scam Prevention Network(1) is attempting to push back against the fraudsters by launching a Web site called preventloanscams.org.

• "Homeowners at risk of foreclosure can be easy prey for home loan-modification scammers," said John Trasvina, assistant secretary for fair housing and equal opportunity at the U.S. Department of Housing and Urban Development, in a statement. "Often, dishonest individuals lure vulnerable homeowners into foreclosure rescue scams by making false promises. Scammers frequently claim they can lower mortgage payments or stop the foreclosure process."(2)

For more, see New Web site aims to track fraud in loan modifications.

(1) According to its website, the lead organizations of the effort include Fannie Mae, Freddie Mac, the Lawyers' Committee for Civil Rights Under Law (Lawyers' Committee) and NeighborWorks America, among others, with representatives from key governmental agencies, such as the Federal Trade Commission, the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Justice, the U.S. Treasury Department, the Federal Bureau of Investigation, and state Attorneys General offices, as well as leading non-profit organizations from across the country.

This new, broad coalition includes a two-part response. First, NeighborWorks is leading a national media and outreach campaign to educate homeowners and the public on potential scams. (Please visit the NeighborWorks' website on this effort http://www.loanscamalert.org/.)

Second, the Lawyers' Committee is leading an effort to increase reporting and prosecution of alleged scammers to support ongoing enforcement efforts at the federal, state and local levels.

(2) According to its website, the mission of the Loan Modification Scam Prevention Network is to target the unscrupulous and sometimes criminal third-party scammers, con-artists, and thieves who target financially distressed homeowners. Some of these operators, individuals and companies posing as "loan modification specialists," are the very people who previously peddled subprime loans. While waiting for the promised relief, homeowners not only lose their money but often fall deeper into default and lose valuable time. Among the various scams employed by the alleged "rescuers" are:

• phantom foreclosure counseling,
• lease-back or repurchase scams,
• fraudulent refinance,
• fraudulent loan modification,
• bankruptcy foreclosure, and
• reverse mortgage fraud.

Florida Regulator Moves To Shut Down Unlicensed Loan Mod Outfits Throughout State; Hammers Seven Firms & Their Principals With C&D Orders

In Tampa, Florida, The Tampa Tribune reports:

• State regulators cracked down on loan modification businesses [], serving one Tampa company with a cease and desist order. The company, Clear Image Financial Group, Inc., is located [...] in Tampa. Its principals, Jeff S. Stampfli, Christopher Jones, and Tasha Armstrong Merkling, were served by Florida's Office of Financial Regulation with orders to stop work immediately.(1)

***

• The orders charge that the company is acting in violation of Florida laws that prohibit unlicensed businesses or individuals from providing loan modification services. The state also accuses the company of charging money upfront for services, which is against Florida law.(2) [...] Regulators say they planned to issue another cease and desist order to another Tampa company.(3)

For the story, see State cracks down on loan modification companies in Tampa.

For the Florida Office of Financial Regulation press release, see Tampa Loan Modification Company & Their Principals Served With Immediate Final Order To Cease & Desist.

(1) In other recent actions by the Florida Office of Financial Regulation, see:

• Fort Myers Loan Modification Companies and Their Principals Served with Immediate Final Order to Cease and Desist (The Florida Office of Financial Regulation (OFR) issued and served an Immediate Final Order to Cease and Desist all loan modification services to:
  
  • The Elite Financial Management Group, Inc., HPA AKA Home Protection Agency, Capital Group and Associates, Inc. of 9200 Bonita Beach Road, Suite 210, Bonita Springs, FL 34135 and its principals Michael Poka and Steven K. Itwaru.
  • Modification Consulting Services, L.L.C., SWFL Consulting & Marketing, L.L.C. of 4760 Tamiami Trail North, Suite 27, Naples, FL 34103 and its principals Lake M. Walton, III, Juan Jimenez and Abby L. Jelley.),

• Orlando Loan Modification Companies and their Principals Service with Immediate Final Order to Cease & Desist (The Florida Office of Financial Regulation (OFR) issued and served Orders to Cease and Desist all loan modification services to:
  
  • Loan Modification Rescue Team, 132 East Colonial Drive, Orlando, Florida 32801, and its principals Marijo Bilobrk, Alicia Sanchez, and Kasey Creighton.
  • Homeownership Preservation Group, at 1801 Sandy Creek Lane, Orlando, Florida 32826, and its principals Barney W. May, Donald A. Morris, and Gabrielle Hatfield.
  • LendAmerica, at 111 E. Monument Avenue, Suite 316, Kissimmee, Florida 34741, and its principals Marino Pena, and Yesenia Rosario.).

The orders charge that the companies are acting in violation of Florida laws (F.S. Chapter 494) prohibiting unlicensed businesses or individuals from providing loan modification services.

(2) According to the story, Stampfli, co-founder and CEO, said his company has reached out to state regulators to make sure the company is in compliance and that the state has not communicated well. Stampfli and others at the company have the proper license, but other employees do not, the state agency said. As for the upfront fees, Stampfli said his attorneys have assured him the company is in compliance with that part of the law, too. The law states that fees can't be charged until "material benefits" have been delivered. Stampfli said that's a legal interpretation and that he feels his clients receive that benefit before they pay, the story states.

(3) The other Tampa company is Home Loan Crisis Center, LLC, of 6207 North 40th Street, Tampa, FL 33610 and its principals Guy Travis Wilson, II and Sunnie E. Finkle, according to a Florida Office of Financial Regulation press release.

South Florida Feds Squeeze Plea Deals From Pair In Vacant Land Sale Scam That Reeled In 1000+ Victims, Netted $10.6M

From the Office of the U.S. Attorney (Miami, Florida):

• Jeffrey H. Sloman, United States Attorney for the Southern District of Florida, [and others] announce[] that defendants Daniel Stephen and Patricia De Pons pled guilty to conspiracy to commit mail fraud in connection with a vacant land sale scheme that defrauded more than 1,000 victims out of $10.6 million.

For more, see Fraudsters Plead Guilty To $10.6 Million Land Sale Scheme (More than 1,000 victims defrauded).

Low-Ball Property Appraisals, "Double Escrow" Flipping/Flopping Arrangements Lead To Massive Ripoffs Of Underwater Lenders In Short Sale, REO Deals

In Stanislaus County, California, The Modesto Bee reports:

• The hottest form of mortgage fraud in the Northern San Joaquin Valley involves bogus property valuations. [Interthinx vice president of industry relations Anne] Fulmer said a lot of the fraud involves the resale of foreclosed bank-owned homes and "short sales," in which homes facing foreclosure are sold for less than their outstanding mortgage. [...] Fulmer said there are "flopping" schemes going on involving short sales and bank-owned homes. These essentially trick banks and lenders into agreeing to sell homes for substantially less than what they're worth.

Here's one way that scheme works, according to Fulmer:

1. A bank repossesses a home, then hires a real estate agent to resell the property.
2. That agent secretly creates a limited liability corporation that offers to buy the property for a very low price.
3. Meanwhile, other interested buyers also submit bids for the home, offering considerably more than the LLC's bid.
4. But the dishonest agent tells the seller (which in this case is the bank) only about the low bid from the LLC. It illegally keeps the other bids secret.
5. Figuring that the LLC's bid is the best deal available, the bank agrees to sell for the low price just to get the foreclosed home off its books.
6. Then the agent immediately resells the house on behalf of the LLC to one of the other bidders for the house.
7. Say the home's fair market value is $150,000. The agent and LLC persuade the bank to sell it for $100,000. Then the legitimate home buyer pays the agent and LLC $150,000, netting the agent and LLC a quick $50,000 at the bank's expense.

• "We call that double escrow," said Craig Lewis, president of Prudential California Realty in Modesto. "It is happening. ... These listing agents are not disclosing all the offers to the seller." Or at least that's the widespread suspicion.(1)

For more, see Stanislaus County tops for cheaters targeting lenders.

(1) According to the story, real estate agents who suspect their clients' home purchase offers never were presented to sellers rarely investigate or report their suspicions to the state Department of Real Estate or their board of Realtors. They can't call the seller because it's a violation of the Realtor's Code of Ethics to call the seller directly, the story states.

Agents can file complaints about suspected fraudulent activity by their colleagues, the story states, but they almost never do, according to Chuck Bukhari, president of the Central Valley Association of Realtors. "All the agents are complaining verbally (about other agents involved in short sales and bank-owned properties). Unfortunately, nobody is willing to report it in writing," Bukhari said. "I'm shocked as much as you are. Nobody is coming forward. As president, it bothers the heck out of me." Bukhari said "there are a few names everybody's mentioning" when real estate agents discuss fraud among themselves. But rather than filing formal complaints, he said, honest agents simply "avoid these people."

Oregon AG Scores 1st Conviction Under New Law Targeting Loan Modification Scams, Mortgage Fraud; Defendant Gets 61 Months, Ordered To Pay $469K

From the Oregon Department of Justice:

• Oregon Attorney General John Kroger [] announced the conviction and sentencing of a Salem mortgage broker on mortgage fraud, theft, identity theft and tax evasion charges.(1) [...] Julian James Ruiz III (DOB: 4/28/1971) was sentenced to 61 months in prison after pleading guilty to 2 counts of Aggravated Theft in the First Degree; 1 count of Aggravated Identity Theft in the First Degree; 1 count of Identity Theft in the First Degree; 1 count of Mortgage Fraud; 1 count of Forgery in the First Degree; 1 count of Tax Evasion; and 1 count of violating House Bill 3630, which prohibits collecting advance fees for loan modifications.

• Ruiz was stripped of his mortgage license and permanently barred from working in the industry. The judge also ordered Ruiz, manager and owner of American Home Modifications, a Salem-based loan modification company, to pay $469,500 in restitution to more than 100 victims.(2)

For the Oregon AG press release, see Mortgage Broker Sentenced To Prison (Julian James Ruiz III pleads guilty to multiple counts of theft, mortgage fraud and tax evasion and is sentenced to 61 months in prison).

(1) This is the first criminal case completed by the Attorney General's new Mortgage Fraud Task Force. The Mortgage Fraud Task Force was created by Attorney General Kroger in late 2009 to combat fraud in the mortgage and foreclosure relief industries.

(2) See also, the Statesman Journal: Mortgage fraud costs man his freedom (Dealings will send him to prison and ban him from license):

• Several of Ruiz's former clients spoke at the sentencing. "He took advantage of our trust because we did not know English. We considered him a friend," said Veronica Villasana, who addressed the court in Spanish with the help of an interpreter. "He promised to help me, but he did not," said Julian Ortiz, who also spoke through an interpreter. Ortiz said he was charged $2,500 for loan modifications services and is now on the verge of losing his home.

Indiana Court Denies Bank BFP Status; Leaves It Holding The Bag As Unrecorded Rights Of Occupant In Possession Trumps Lender's Recorded Mortgage

The following facts have been extracted from a recent ruling by the Indiana Court of Appeals:

1. Benjamin purchased his home in Gary, Indiana in 1965 and has lived there ever since.
2. In July of 1987, as part of his retirement planning, Benjamin conveyed his home to son David Thomas by quit claim deed with the understanding that it remained Benjamin's home and that he could recover title at any time upon request.(1)
3. In October of 1995, David conveyed Benjamin's home by quit claim deed to another of Benjamin's sons, Richard Thomas.
4. Benjamin and Richard agreed that Richard would return title to the home to Benjamin upon request.
5. At no time did Benjamin relinquish possession of the home.
6. In June of 2001, following a family dispute, Benjamin requested that Richard convey title of the home back to him, but Richard refused to do so.
7. On August 1, 2001, Benjamin filed a notice of intention to hold a mechanic's lien on the home for $200,000.
8. On September 12, 2001, Benjamin filed a quiet title suit against Richard but did not record a lis pendens notice at the time or at any time thereafter.
9. On December 6, 2001, Richard obtained a $118,000 loan from Trustcorp in exchange for a mortgage on the home. Richard was unemployed and living in Georgia at the time and, in connection with the loan application process, submitted a release of mechanic's lien that bore what purported to be Benjamin's signature but was not.
10. Additionally, the release instrument indicates only the presence of Richard as signatory and refers to the lien instrument as bearing the designation "2001 003334" when the actual designation on the notice was "2001 060516."
11. Trustcorp did not contact Benjamin regarding the purported release, and the loan agreement was completed.
12. As it happened, Richard never made any payments on the mortgage loan.
13. On July 3, 2002, Benjamin filed suit to foreclose his mechanic's lien on the home, a suit that included Trustcorp as a defendant.

Question:

Does Trustcorp's recorded security interest in Benjamin's home as a mortgagee have priority over Benjamin's earlier acquired, but unrecorded, interest in the home that he has occupied since 1967 (remember that Benjamin is not the owner of record, and he failed to record a lis pendens against the home when he initiated an action to quiet title in order to recover the title from his deadbeat son, Richard, who was the title holder of record)?

Answer:

Even though Trustcorp presumably had no actual knowledge of the oral understanding between Benjamin and his sons about the ownership of the home, and presumably had no actual knowledge of Richard's intent to drain the equity out of the home by pocketing the proceeds of the Trustcorp mortgage loan (and thereby screwing over his father out his home equity that had been built up over 35+ years), the Indiana appeals court affirmed the lower court in ruling that Trustcorp was not entitled to the protection of the recording statutes as a bona fide purchaser. Accordingly, the court ruled that Benjamin's earlier-acquired, but unrecorded, ownership rights in the home pursuant to the oral understanding he had with his sons trumped Trustcorp's later-acquired recorded mortgage, and further ruled that Trustcorp's mortgage was invalid.

For the longer version of this post, with excerpts from the court ruling applying Indiana law in this case, see Failure To Inspect Property & Inquire Into Rights Of Parties In Possession Prior To Making Loan Leaves Indiana Lender With Voided Mortgage.(2)

For case law in other states addressing the effect of possession and a real estate purchaser's or lender's duty to inquire into the rights of the occupants when seeking the protection of the recording statutes as a bona fide purchaser, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

For some of the basics on the bona fide purchaser doctrine, generally, see The Bona Fide Purchaser for Value of a Legal Estate Without Notice.

(1) While this ruling doesn't explicitly say it, courts have typically held that this type of oral arrangement gives rise to a trust implied by law, commonly referred to as a "resulting trust," where the grantee is deemed to hold title to the property on behalf of the grantor/beneficiary, even though there is nothing in writing to this effect.

(2) For other court cases on the application of the bona fide purchaser doctrine where real estate buyers/lenders end up screwing themselves by failing to inspect the subject property and inquiring into the rights of persons in possession prior to closing on the purchase/mortgage loan (and risked having their interests ultimately voided), see:

• Illinois: Lender's Failure To Inquire Into Possession Disqualifies It For Bona Fide Purchaser Protection In Suit To Undo Foreclosure Rescue Sale Leaseback Scam,
• Colorado: Lack Of Knowledge Or Partcipation In Fraud Not Enough To Sustain Bona Fide Purchaser Status In Equity Stripping, Foreclosure Rescue Deal,
• Minnesota: Stone v. Jetmar Props., LLC, A06-851, 733 N.W.2d 480; 2007 Minn. App. LEXIS 80 (Minn. App. 2007) ("A prospective purchaser is obligated to discover anyone in possession of the land at issue and to inquire into the nature and extent of the occupant's interest"),
• Minnesota: Claflin v. Commercial State Bank, 487 N.W.2d 242; 1992 Minn. App. LEXIS 532 (Mn. App. 1992) (Lender's mortgage voided due to its failure to inspect premises and inquire into rights of persons in occupancy),
• United Kingdom: Mortgage Voided As Lender Fails To Make Inquiries Of Persons In Possession; Unrecorded Rights Of Occupants Take Priority Over Lender's Recorded Lien (involved the imposition of a constructive trust upon the real estate that was mortgaged).

Loan Officer Gets Five Months In Sale Leaseback, Foreclosure Rescue Scam; Equity Stripping Victim Hopes To Recover Title To Home

In Honolulu, Hawaii, KITV-TV Channel 4 reports:

• It’s been nearly five years since the Fagaragan family of Ewa Beach realized that the people who promised to save their home from foreclosure had actually stolen it. Thursday, one of the people involved in that mortgage fraud case was sentenced to prison while the Fagaragans still hope to regain full ownership.

• The family was nearly evicted by the mortgage con, and has been living in limbo ever since. Theirs was one of the first homes stolen in what became a common scheme. Mortgage companies promising to save a family from foreclosure actually fooled them into signing title over to a straw buyer and then sucked out the equity with more loans against the property.

• Debbie Aurelio Fagaragan was in court Thursday as one of the thieves, 31-year-old Vance Yukio Inouye, was sentenced to five months in prison with four months of the time to be served on weekends.(1)

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• Debbie Aurelio didn't comment to reporters Thursday. Her Legal Aid attorney hopes the defendants will pay enough restitution to satisfy the banks. The judge Thursday ordered Inouye to pay $274,000. Of that, $200,000 will go to GMAC to pay off a loan the Inouyes took out on the house, the other $74,000 for the Fagaragan family. “They want their home back is what they really care about,” said Legal Aid attorney Russ Awakuni.(2)

For the story, see Mortgage Fraud Defendant Gets 5-Month Sentence (Vance Inouye Brokered Mortgage And Put Wife On Title).

(1) According to the story, Inouye’s wife, Patricia Inouye, who is still the official title holder of the Fagaragan home, has never been charged. Still be to be sentenced are Inouye's bosses, John and Julie Dimitrion, owners of "Mortgage Alliance." They pleaded guilty to the Fagaragan fraud and two other similar straw buyer schemes.

(2) Awakuni said the family still must negotiate with the Inouyes' attorneys to get Patricia Inouye to sign the home's title back to the Fagaragans and negotiate with banks to arrange affordable loans, the story states.