Thursday, May 13, 2010

FTC Adds Forensic Mortgage Loan Audit Scams To Its Watch List Of Foreclosure Rescue Rackets

The Federal Trade Commission recently announced:
  • Fraudulent foreclosure “rescue” professionals use half-truths and outright lies to sell services that promise relief to homeowners in distress. According to the Federal Trade Commission (FTC), the nation’s consumer protection agency, the latest foreclosure rescue scam to exploit financially strapped homeowners pitches forensic mortgage loan audits.

  • In exchange for an upfront fee of several hundred dollars, so-called forensic loan auditors, mortgage loan auditors, or foreclosure prevention auditors backed by forensic attorneys offer to review your mortgage loan documents to determine whether your lender complied with state and federal mortgage lending laws. The “auditors” say you can use the audit report to avoid foreclosure, accelerate the loan modification process, reduce your loan principal, or even cancel your loan.

For more, see Forensic Mortgage Loan Audit Scams: A New Twist on Foreclosure Rescue Fraud.

Brooklyn Judge Strikes Again; Dismisses Foreclosure With Prejudice Where Assignment Of Mortgage Fails To Transfer Title To Promissory Note

In Brooklyn, New York, State Supreme Court Justice Arthur M. Schack has, in a recent ruling, added to the list of foreclosing lenders he has booted from his courtroom for filing lawsuits without having legal standing to do so.(1) According to Justice Schack:
  • The instant June 16, 2009 assignment [of mortgage] from MERS, as nominee for FREMONT, to U.S. BANK is a nullity, because MERS, as nominee for FREMONT, did not assign the note, but only assigned "said Mortgage, and the full benefit of all the powers and of all the covenants and Provisions therein contained and the said Assignor hereby grants and conveys until the said Assignee, the Assignors beneficial interest under the Mortgage."
In addition, he cited upstate New York foreclosure mill operator Steven J. Baum, P.C. for an apparent conflict of interest in that it appears to be in violation of 22 NYCRR § 1200.0 (Rules of Professional Conduct, effective April 1, 2009) Rule 1.7, "Conflict of Interest: Current Clients." According to the court ruling, the Baum firm represents both MORTGAGE ELECTRONIC REGISTRATION SYSTEMS [MERS], as nominee for FREMONT INVESTMENT AND LOAN [FREMONT], the ineffective assignor of the instant mortgage, and plaintiff U.S. BANK, the ineffective assignee of the instant mortgage.

For Justice Schack's ruling, see U.S. Bank, N.A. v Emmanuel, 2010 NY Slip Op 50819 (NYS Supreme Court, Kings County, May 11, 2010).

(1) 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.

Implied Duty Of Good Faith, Fair Dealing & The Collection Of Deficiency Judgments In Foreclosure Actions

Lexology reports:

  • Yet, in Harvest Homebuilders LLC v. Commonwealth Bank and Trust Company, 2008-CA-001897 (01/29/2010), the Kentucky Court of Appeals affirmed a judgment of the Oldham Circuit Court awarding Commonwealth Bank a deficiency judgment against the borrower and an individual guarantor. The Court held that the trial court did not err by awarding the deficiency judgment as the record clearly established that the bank did not breach the implied covenant of good faith and fair dealing imposed in every contract, which “impose[s] on the parties … a duty to do everything necessary to carry” out the contract.

For more, see Must a bank forgo its right of deficiency if it refuses to release its obligors who want to pursue a short sale during a foreclosure action? No. (requires paid subscription; if no subscription, TRY HERE - then click link for the story.)

Wednesday, May 12, 2010

More On Central Florida Foreclosure Mill Operation

In Fort Lauderdale, Florida, The National Law Journal recently ran a story on the state attorney general's investigation into Tampa-based Florida Default Law Group, one of the nation's largest foreclosure mill law firm operators over allegations it "appears to be fabricating and/or presenting false and misleading documents in foreclosure cases," according to the AG's Economic Crimes Division in Fort Lauderdale, which is leading the investigation. A couple of tidbits from the story:
  • Florida Default has paid for improper filings. In October 2008, U.S. Bankruptcy Judge John Olson fined Florida Default $95,130 for "repeated misrepresentations" to the court. The firm had submitted documents claiming that Fort Lauderdale homeowner Fazlul Haque owed his lender, Wells Fargo, $2,114 in prepayment penalties even though the mortgage, while in arrears, was still on its books. Olson realized the fee was illegal since Haque had yet to pay off the delinquent loan. "The notion that the debtor paid off his loan in full to the creditor is absurd," Olson wrote. "It is utterly perplexing to me how the creditor or its law firm could or did assert such claim." In a recent interview with the Daily Business Review, Olson attributed the misrepresentations to "sloppiness" by the foreclosure firm rather than fraud.

  • In 2004, the Florida Bar reprimanded Florida Default president [Michael J.] Echevarria [see Conditional Guilty Plea For Consent Judgment] for not properly supervising lawyers at his prior firm, Echevarria & Associates, according to the Florida Bar. Among the issues in the case, a lawyer at his firm notarized foreclosure-related documents without reviewing the foreclosure files despite signing affidavits affirming he had done so.

For the story, see Law Firm Probed Over 'False' Documents Filed in Foreclosure Cases (Fla. AG's office has received dozens of homeowner complaints about questionable court documents filed by firm's lawyers, according to a source).

BofA "Despicable" With Approach To Loan Mods & Foreclosures, Say Frustrated Customers; Lender Calls Class Action Suit A Series Of "Sob Stories"

In Las Vegas, Nevada, KTNV-TV Channel 13 reports:
  • Nearly 100 angry homeowners took to the streets Monday, protesting what they call unfair treatment by Bank of America, the nation's biggest bank. They marched from a local law office to the federal courthouse, to show the judge that they mean business. Nevada leads the nation in foreclosures and Bank of America holds more of our mortgages than any other lender. Action News regularly field phone calls and emails from frustrated customers who call Bank of America despicable when it comes to loan modifications and foreclosures. The customer service they describe as slow, lazy and downright incompetent.

***

  • Those are the words of average Nevada homeowners facing foreclosure. They're so fed up, they've filed a class action lawsuit against Bank of America. They call their lender's conduct fraudulent, malicious and egregiously in bad faith. [...] Bank of America is trying to get it thrown out, calling the case a series of "sob stories." Their lawyers warn if the case goes forward, it'll be the "tip of the iceberg" and "floodgates will open" across the country.

For more, see Contact 13 investigates Bank of America.

BofA's "Property Preservation" Contractor Accused Of Stiffing Subs Around The Country Out Of Tens Of Thousand$; Lender Says It's Not Their Problem

In Denver, Colorado, CBS4 reports:
  • It sounded like the ideal business during a recession -- fixing up foreclosed homes for banks. But contractors in Colorado and around the country say they have been bilked. They asked CBS4 investigator Rick Sallinger to look into the company that's supposed to be paying them for their work.

  • The contractors say they're struggling just to stay afloat now. The work they perform is called "property preservation." When a bank forecloses on a home they hire people to lock it up then later fix it up to be sold. Each home has a story, but sometimes not the story one would expect.

***

  • Contractors like [Ricardo & Venita] Curcurella have to put up their own money to maintain and fix up the homes to be sold. They document their work with photos then get reimbursed. "At first it was as simple as bookkeeping," Ricardo Curcurella said.

  • Most of their business at the start came through a company acting as a middle man. It's now called Nomad Preservation Service. Nomad received payment from the Bank of America to preserve the homes. But the Curcurellas still haven't been paid all of their money. In fact, CBS4 found subcontractors around the country who claim Nomad owes them tens of thousands of dollars each. In the Cucurella's case, at least $40,000. "It's caused great financial hardship. We ourselves have been at the brink of eviction, which is kind of ironic," Ricardo said.

***

  • They are not alone. "We would change the door lock, disable the deadbolt," Mike Elder said. Elder is another of the Colorado contractors who did work for Nomad. He figures he secured or fixed up 1,000 homes with $25,000 of his own money. "It's been hard based on the income of this house. I bought a new house, moved, got married. I was questioning whether I was going to lose my home," Elder said.

  • The primary owner of Momad is "Sam" Hussein Farouk Elhaje. CBS4 found he has a criminal record that includes robbery. Elder said he received a threatening phone message from him when he tried to recover the money he says he is owed. "Really, I can fly to Colorado if you actually want to f---ing meet me. But all these threats and b.s. you are throwing around you can give this to you and whoever you want to. I'll beat the living f--- out of you b-----!" Elhaje told Elder. "I was shocked at first then I was quite happy because then I can report a threat," Elder said.

  • CBS4 repeatedly tried to reach Nomad and Elhaje through phone calls and also through e-mails. While contractors say they have not been paid, Elhaje has been busy obtaining expensive cars, according to those CBS4 talked to -- cars like a Viper, Lamborghini, Hummer and two Corvettes. In the end, it could be up to the courts. The Cucurellas and others have taken legal action against Elhaje and Nomad.

***

  • It doesn't sound like help is on the way. Bank of America Field Services wrote CBS4 that it "has met its financial obligations to Nomad. We expect our vendors to fulfill any obligations they have to their subcontractors.' CBS4 spoke to one man who says he is owed $200,000. Lawyers suing Elhaje and Nomad say he recently failed to show up for depositions.(1)

Source: Contractors Say They've Been Bilked By Company.

(1) The story is silent as to whether the subcontractors are slapping BofA with mechanics liens on the properties for the work they're performing, and the payments therefor that they're being stiffed on.

Tuesday, May 11, 2010

Massachusetts AG Obtains Indictment Of Attorney Accused Of Using Forged Mortgage Assignments In Attempt To Hijack Payoff Proceeds In R/E Closings

From the Office of the Massachusetts Attorney General:
  • A Marblehead attorney has been indicted by a statewide Grand Jury for allegedly attempting to retrieve over $1.3 million dollars in mortgage funds in connection with a sophisticated mortgage fraud scheme. Leon Gelfgatt, age 49, allegedly used false documents to create the appearance that mortgages on several Massachusetts properties which were scheduled for impending sale had been transferred to a fake company created by Gelfgatt. Gelfgatt allegedly did this in order to obtain the payoff funds sent by real estate closing attorneys when the properties were sold.(1)

For the Massachusetts AG press release, see Marblehead Attorney Indicted in Connection with Orchestrating Multi-Million Dollar Forged Mortgage Assignment Scheme.

(1) According to authorities, between August and November of 2009, Gelfgatt allegedly identified and targeted fourteen high-end properties which were scheduled for an imminent sale. Gelfgatt then recorded seventeen forged mortgage assignments at the Registries of Deeds in Suffolk, Norfolk, and Middlesex Counties. These false mortgage assignments appeared to transfer the mortgage from the correct mortgage company to either Baylor Holdings, Ltd., or Puren Ventures, Inc., which were inactive corporations being offered for sale on the Internet. Gelfgatt created an elaborate system of email addresses, phone numbers, and electronic fax numbers to give the impression that these were functioning and legitimate businesses.

Gelfgatt then waited for attorneys responsible for clearing the title to the properties to reach out to these sham companies to request a “payoff statement”. A payoff statement is a document used by mortgage companies to state the precise amount necessary to pay a mortgage in full. Authorities allege that on two occasions Gelfgatt, in the guise of Baylor Holdings, Ltd., allegedly provided these closing attorneys with false payoff statements. The payoff statements instructed the closing attorneys to overnight the funds required to pay off the mortgages to an office address in Boston. Gelfgatt was arrested after he attempted to retrieve these payoff funds.

Lender Allegedly OK'd Loan Modification, Then Carried Out Foreclosure Sale Anyway, Says West Virginia Homeowner In Lawsuit

In Charleston, West Virginia, The West Virginia Record reports:
  • A Cross Lanes man is suing Countrywide Home Loans, Bac Home Loans Servicing and Federal National Mortgage Association after he claims the companies participated in predatory lending and loan servicer abuse that resulted in the wrongful foreclosure of his home.

  • Bradford Corder purchased a home in September 2002 for $185,000, according to a complaint filed April 13 in Kanawha Circuit Court. Following a divorce, Corder submitted loan modification information to the defendants in January 2010 and was informed on March 11 that he had been approved, according to the suit. Corder claims he spoke with the defendants on March 16 and was told foreclosure on his home was postponed until the loan modification package was provided to the defendants, but on March 17 the defendants proceeded with the foreclosure anyway.

  • As a result, Corder as suffered economic loss, property loss, considerable stress, worry and fear, according to the suit. Corder is seeking actual damages and appropriate civil penalties. He is being represented by Daniel F. Hedges.

Source: Cross Lanes man sues Countrywide, others for wrongful foreclosure.

Couple Forced To Pay Twice For Home Construction Bills After Contractor Pockets Their Payments & Stiffs Subs, Building Material Suppliers

In South Lake Tahoe, California, KGO-TV Channel 7 reports:
  • If you ever have to hire a contractor, you could end up paying twice for the same bill. It's happening to more and more people. [...] Images of the devastating Angora Fire in South Lake Tahoe are still etched in the minds of Howard and Joann Manning. The fire destroyed their home three years ago, but they're still living with the consequences today.

***

  • The couple decided to rebuild their home and in December 2008, the home was completed. They made their final payment to HR Construction and owner Jack Aleshire that month. But then, the Mannings life took an abrupt turn.

  • Within days, Meeks Lumber contacted them demanding money. So did Doug Bolton's Floor Show and Ponderosa Glass. In all, the couple heard from six subcontractors that HR Construction hired to either work on or supply materials for their home. All six said Jack Aleshire of HR Construction left town without paying them. All six held the Mannings responsible for making those payments and all six placed liens on the Manning home.

***

  • [T]here are things you can do to protect yourself. Pay with a two party check made out to both the contractor and subcontractor -- that way you know the subcontractor will get paid. Ask the contractor for a lien release.(1) That releases you from all liens; by law the contractor has to give it to you if you request it. It's something the Mannings are only learning about now.(2)

For the story, see Couple's home in jeopardy due to contractor.

(1) Lien releases should also be obtained from all subcontractors and suppliers, as well as from the general contractor.

(2) According to the story, the California Contractors State License Board received 648 complaints in the 2006-2007 fiscal year about contractors not paying their subcontractors. That number increased more than 3.5 times in the last fiscal year, the story states.

Monday, May 10, 2010

CBS' 60 Minutes On Underwater Homeowners & Strategic Defaults

eCreditDaily reports:
  • 60 Minutes [last night] put the national spotlight on strategic defaults, or homeowners walking away from “underwater” mortgages and into foreclosure, despite being able to make their payments. In a segment that aired [last night], Morley Safer interviewed homeowners mired in negative equity, a spreading “epidemic” for an estimated 11 million homeowners.

For more, see Foreclosures & Walking Away: 60 Minutes Eyes an ‘Epidemic’.

For the CBS 60 Minutes' piece, see Mortgages: Walking Away (or for the 60 Minutes' transcript, see Strategic Default: Walking Away from Mortgages (60 Minutes: A Million Have Walked Away; Trend Could Undermine the Fragile Economic Recovery).

Arizona AG Shuts Down Foreclosure Help Outfit That Allegedly Promised To Buy Clients' Defaulted Loans From Lenders, Then Re-Work Payment Terms

In Scottsdale, Arizona, KPHO-TV Channel 5 reports:
  • State regulators have shut down a mortgage rescue company that CBS 5 investigators exposed one week ago. [... Homer] Becker and thousands of other homeowners said they handed over $1,595 each to Guardian [Group], which was supposed to buy their homes from the bank and then sell them back to the homeowners at a reduced price.(1) However, dozens of Guardian clients told CBS 5 that the company just took their money.

***

  • Last week CBS 5 exposed some complaints against Guardian Group. When CBS 5 reporters showed up at the company's Scottsdale office to ask questions, the receptionist ran out the back door. A sign hung on the entrance said the office was closed due to technical difficulties. But a cease and desist order issued Thursday by state regulators means Guardian is effectively out of business.

For the story, see Company Shuts Down After CBS 5 Investigation (Guardian Group Accused Of Operating As Unlicensed Mortgage Broker).

(1) 5 Investigates discovered that the plan was laid out in a power point presentation the company sent to desperate homeowners. Go here for Guardian's Principal Reduction Presentation.

Flood Of Foreclosure Fraud Complaints Overwhelms DA's Office; Financially Strapped Victims Told To Prosecute Cases Themselves By Filing Civil Suits

In Riverside County, California, The Press Enterprise reports:
  • A nonprofit organization representing 23 faith congregations in Riverside and San Bernardino counties demonstrated Friday, calling for county government to give higher priority to fighting foreclosure fraud with prosecutions and education. [...] Speaking for the grassroots organization, called Inland Congregations United for Change, Tim Lucas, a member of St. Catherine of Alexandria Church in Riverside, said they are asking the district attorney's office, the assessors office and the board of supervisors for help.

***

  • Lucas complained that the district attorney's real estate unit does not have enough staff to handle its workload. Also Lucas complained that the district attorney has told the group that the majority of foreclosure fraud complaints should be prosecuted as civil rather than criminal cases. He said that would require victims, many of which are of modest means, to hire lawyers.(1)

  • In response to the criticism, Ryan Hightower, spokesman for the Riverside County district attorney, said "We work with the resources we have and make the most of them." He said real estate fraud already is a high priority for the office and every complaint is evaluated on an individual basis for possible criminal prosecution. There are 350 cases in some stage of investigation or prosecution, Hightower said.

For the story, see Group demands action on foreclosure scams (DEMONSTRATION: The Riverside County DA's office says fraud is a high priority and is investigating 350 cases).

(1) It's not uncommon for authorities to claim that such incidents are "civil cases," suggesting the victim would need to file a civil lawsuit against the scammer to seek a remedy. California case law has clearly addressed the notion that some scammers have that they can insulate themselves from prosecution by using terms and conditions contained in legitimate-looking business contracts to screw over consumers. The rule in California is cited in, among other cases, People v. Frankfort, (1952) 114 Cal.App.2d 680, 700; 251 P.2d 401 (case law links are found at Findlaw.com - may require free registration):

  • The simple answer to this argument is that "The People prosecuting for a crime committed in relation to a contract are not parties to the contract and are not bound by it. They are at liberty in such a prosecution to show the true nature of the transaction." (People v. Chait, 69 Cal.App.2d 503, 519 [159 P.2d 445]; People v. McEntyre, 32 Cal.App.2d Supp. 752, 760 [84 P.2d 560]; People v. Jones, 61 Cal.App.2d 608, 620 [143 P.2d 726]; People v. Pierce, supra, p. 605.)

In People v. Jones, 61 Cal.App.2d 608, 620 [143 P.2d 726], a California appellate court made this observation:

  • Defendant argues that the deal with each "seller" was a civil transaction; [...] Cloaked in the draperies of his corporation and pretending to act in its behalf, he boldly approached his unsuspecting victims.

***

  • Although each deal in its incipiency bore the color and trappings of a normal, civil contract, yet when subjected to a postmortem it exhaled the stench and disclosed the carcass of a fraud. (People v. Epstein, 118 Cal.App. 7, 10 [4 P.2d 555].) There appears no sign of good faith at any turn. Each taking and appropriation was a grand theft. The use of the corporate name and the promises made in accomplishing his purpose were a camouflage of such common variety that no excess of genius was required to discern the fraud. Parol evidence of all that occurred was admissible to show the intention of defendant. (People v. Robinson, 107 Cal.App. 211, 221 [290 P. 470].)

Convicted Loan Modification Scammer Buys His Way Out Of Jail Time By Coughing Up $10K+ In Victim Restitution Prior To Sentencing

From the Office of the Nevada Attorney General:
  • Attorney General Catherine Cortez Masto announced [] the sentencing of William Vargas in connection with his involvement with a mortgage foreclosure rescue company, Federal Housing Aid, whose operation included a call center in the Philippines.

  • District Court Judge Michael Villani sentenced Vargas to a year in the Clark County Detention Center, but suspended the sentence pursuant to a plea agreement. Vargas was allowed to enter a plea to a gross misdemeanor charge of attempted theft but was required to pay half of the restitution owed prior to sentencing. Vargas is required to pay total restitution of $21,000 to the victims of his crime.(1)

For the Nevada AG press release, see Defendant Sentenced In Mortgage Rescue Scam Operated From The Philippines.

(1) According to the press release, Vargas would contact homeowners facing foreclosure and offer to stop the foreclosure proceeding and save their credit. The victims entered into an agreement to pay an up front fee ranging from $700.00 to $1,500.00 as compensation for effecting a solution to the foreclosure. Once these fees were forwarded to Federal Housing Aid, no further action was taken. The homeowners, some of whom were over the age of 60, were never provided with assistance in resolving their problems and, in fact, ended up losing their homes.

Indiana AG Files Suit Against Alleged Foreclosure Assistance Racket Accused Of Taking Over Financially Distressed Homes & Failing To Pay The Mortgage

In Noblesville, Indiana, WRTV-TV Channel 6 reports:
  • The state has filed suit against a man in the wake of numerous complaints about foreclosure rescue programs. [...] Investigators said Daniel Shrader worked as an agent for at least 10 such companies, including Northstar Homes, Orion, Great Homes LLC, Prizm Partners, Regal Partners and the Oakbay Group, along with a website offering foreclosure help, indy-housebuyers.com.

  • According to the complaint, Shrader and the companies took over homes but failed to pay the mortgage, and failed to follow state rules on providing services that would help people save their homes from foreclosure. [...] A Hamilton County judge on Friday ordered Shrader to a pay delinquent mortgage payment for one of his customers. He then had to be chased down by a state investigator waiting to serve him with a lawsuit seeking an injunction against his business practices.

For the story, see State Reports Rash Of Foreclosure Rescue Complaints (Suit Filed Against Agent For 10 Companies).

For story update, see State Seeks Injunction Against Foreclosure Rescue Rep (State: Man Didn't Live Up To Assistance Promises).

Sunday, May 09, 2010

Lender Exercises Setoff Rights To Drain Cash From Unwitting Couple's Bank Account

In Atlanta, Georgia, Next Student Student Loan Blog reports:
  • An Atlanta couple has found themselves with their savings wiped out after their bank, Wells Fargo, cleared out their checking account in order to pay a piece of what bank officials maintain is an outstanding student loan (“Suddenly, Bank Account Was Gone,” The Atlanta Journal-Constitution, May 1, 2010).

  • After Hope and Matt Hughes had problems trying to make a purchase with their debit card last month, they discovered that Wells Fargo had cleaned them out, withdrawing $4,059.82 — everything they had — from their checking account. They were also hit with $385 in overdraft fees for debit-card purchases they had made on the day their checking account was emptied.

  • Wells Fargo appropriated the funds under its right of “setoff,” a prerogative held by most banks that allows a bank to take money from a customer’s savings or checking account in order to pay off any other account — a home mortgage, credit cards, student loans — that the customer holds with the bank that’s overdue.

For more on a bank’s license to help itself to your money, see Wells Fargo Empties Customer’s Checking Account to Pay Delinquent Student Loan.

Indiana AG Targets Now-Defunct California Company In Alleged Upfront Fee Loan Modification Scam

In South Bend, Indiana, the South Bend Tribune reports:
  • [I]ndiana Attorney General Greg Zoeller has filed a lawsuit [...] against [USA Mortgage Aid Inc.], a purported business that Zoeller says has swindled hundreds of Indiana residents out of hard earned money. Zoeller was in South Bend [] to file the suit in the St. Joseph County clerk's office and also to urge residents to beware of likewise scams.

  • Since the foreclosure crisis, many businesses have popped up, touting themselves as "mortgage rescue," companies," Zoeller said. The M.O. is usually the same: money up front, help later. [...] Zoeller said [] USA Mortgage Aid Inc. violated several state consumer protection laws by demanding the money and by not being properly bonded. The attorney general's office also accuses the company of misrepresenting its positions and lying to consumers about having in-depth industry knowledge. [...] According to the California secretary of state website, USA Mortgage Aid, based in Irving, Ca., is now a dissolved company.

For the story, see Indiana attorney general files lawsuit against purported foreclosure aid company (Mishawaka man reports losing $1,700).

For the Indiana AG press release, see Action taken to curb foreclosure scams.

Maryland AG Moves To Halt "Free Rent" Investment Racket That Resulted In 100+ Tenants Being Bounced Out Of Homes

In Baltimore, Maryland, The Baltimore Sun reports:
  • The Maryland attorney general's office moved Thursday to halt an alleged pyramid scheme by a Gambrills company and its owner, who are accused of bilking about 500 people out of hundreds of thousands of dollars by promising commissions, free rent and cars in exchange for recruiting more investors.(1) The plan started to fall apart when rent checks bounced and the investors were evicted. More than 115 people paid several thousand dollars into the company for an apartment, and most have been tossed out, according to authorities.

***

  • Among those allegedly duped [...] were Helen Martin, a 59-year-old social worker, and her two daughters who together lost more than $11,000, including scholarship money and savings. They said they were lured by the promise of better housing, and they felt assured by testimonials from a network of friends and family.

For more, see 'Free rent' pyramid scheme ordered to halt operations (More than 115 people evicted).

For the Maryland AG press release, see Securities Division Orders Halt to "Free Rent" Pyramid Scheme, and go here for the AG's cease and desist order.

(1) The Maryland Attorney General's office says the people were allegedly scammed out of hundreds of thousands of dollars in a pyramid scheme that included promises of a year's free rent in exchange for upfront payments toward a supposed business venture. The securities division of the attorney general's office issued a cease-and-desist order against Diversified Marketing Consultants Inc., its owner, Lamondes D. "Monte" Williams of Clinton, and related companies Digital-Zone Electronics Warehouse and Mainline Properties LLC., the story states. The division contends the operation raised more than $800,000. Williams was reportedly convicted in 2005 of running a similar scheme. According to the story, his most recent troubles triggered a probation violation hearing scheduled for Friday in Prince George's County Circuit Court, according to court records. In the previous case, he was reportedly sentenced to five years in prison and three years of probation and ordered to pay $146,000 in restitution.

Ohio AG Cautions Consumers Against Racket Targeting Payday Loan Customers For Debt Collection Ambush

From the Office of the Ohio Attorney General:
  • In a new twist on an old scam, con artists are now targeting recipients of payday loans using debt collection tactics. Attorney General Richard Cordray [] warned Ohioans to verify callers and money owed before paying out to debt collectors.

  • My office recently received notice that con artists are posing as debt collectors attempting to collect on payday loans in Ohio,” said Cordray. “The ploy is dangerous because scammers aim to catch consumers off-guard by calling out of the blue and demanding repayment. Even if the consumer has not borrowed money, the natural instinct for some will be to respond to this ambush by paying a debt that they do not owe. In this situation it is absolutely imperative that consumers ask for a letter stating the debt owed and then verify the source. Under no circumstance should consumers rush to make payment or give out any personal information including banking and credit card information.”

For the entire Ohio AG's press release, see Legitimate Debt Collector or Con Artist?

NJ Appeals Court: NY Lawyer Unlicensed In NJ Representing Homeowners In Settling F'closure Cases Subject To NJ Jurisdiction In Legal Malpractice Suit

The New Jersey Law Journal reports:
  • A New York lawyer who represented clients in a New Jersey real estate case [involving the representation of a couple who she knew to be New Jersey residents, for the purpose of settling pending or impending foreclosure actions in a New Jersey court for New Jersey properties] without crossing the Hudson is nonetheless subject to New Jersey's jurisdiction in a legal malpractice suit, a state appeals court said [].

  • Overturning a judge below who "relied almost exclusively on the absence of credible evidence of defendant's physical presence in New Jersey," the Appellate Division said personal jurisdiction was warranted because the lawyer was hired to stop a pending New Jersey foreclosure action, pertaining to four properties in the state, which provided sufficient minimum contacts.

  • What's more, subjecting the defendant to jurisdiction in New Jersey is reasonable because the minimal inconvenience she will experience is outweighed by the state's substantial interest in regulating the unauthorized practice of law within its borders, the court said in Halley v. Myatt, A-1378-09 (N.J. App. Div. May 3, 2010).(1)

For more, see N.J. Malpractice Suit Can Proceed Against Lawyer Who Did Work From New York.

(1) Reportedly, the couple was represented by Leena Khandwala, a clinical teaching fellow at the Seton Hall University School of Law, Center for Social Justice, a pro bono and clinical program designed to give its law students hands-on experience while providing pro bono legal services for economically disadvantaged residents in the region.

Saturday, May 08, 2010

Condo Converter Accused Of Unloading Mold-Infested Apartments On Unwitting Buyers, Leaving Unit Owners With Unaffordable $4M Remediation Price Tag

In Redmond, Washington, KOMO-TV Channel 4 reports:
  • What many thought would be a dream condo ended up instead with a moldy mess. And to make things worse? The person the condo owners believe is responsible is nowhere to be found.

***

  • Thirteen homes in this community have been hit with water intrusion and mold. The problem appeared a few years ago, so homeowners commissioned an independent study. It found the problem was there since the apartments were converted to condos in 2006, and should have been fixed then.

  • We tried tracking down the developer, which was an LLC out of Las Vegas. It has since been dissolved, according to state records. Sources say the owner-operator moved to Mexico when the market went soft.

  • Homeowners face a $4 million price tag to fix the place, something no one can afford. "That, on top of an underwater mortgage… it's like throwing money into a bottomless pit," said homeowner Jason Ing. One other option: walk away and let the banks foreclose. Something the Bailes family feels could be their only option. "I feel like we're getting screwed, basically," Jessica Bailes said. "The fact that we can't get a hold of this developer."

For the story, see Condo owner: 'I feel like we're getting screwed.'

Residents In Dilapidated Mobile Home Park In Foreclosure Threatened With Immediate Boot Over Unpaid Water Bill

In Jacksonville, Florida, The Florida Times Union reports:
  • Among the dozens of ravaged homes, trash piles and overflowing sewage in a once thriving Jacksonville neighborhood stand eerie monuments to a time when the streets bustled with people. [...] About 40 people, a quarter of them children, still live in the Westport Mobile Home Park on 103rd Street near Interstate 295. The JEA plans to cut water and sewer service Monday over the owners’ delinquent $4,800 account, JEA records show. The JEA told residents last week the park will then be considered uninhabitable. The city can seek to have them removed within 30 days over safety issues.

  • Poverty-sticken residents wept when asked about their future. Some vowed to stay and fight, despite being circled by squalor. Those who own their homes can’t move them because the structures are too old.

***

  • The park’s owners, including St. Augustine businessman Farid Ashdji, have faced foreclosure since May 2009 after being cited for owing $1.3 million, court records show. [...] The city has cited the owners for safety and code violations and condemned dozens of properties stripped by vandals. The owners have not responded and face fines, said Renee Brust, a city spokeswoman. Brust said the city does not relocate people but can offer temporary assistance to residents who seek help.

For more, see Jacksonville residents to lose neighborhood ('It may not look like much, but it’s a home for my babies’).

For story update, see Residents of Jacksonville mobile home park get some time (Families at the Westport Mobile Home Park faced losing water and sewer service Monday; future remains uncertain):

  • About 40 people living in a nearly destroyed Jacksonville mobile home park got a break in plans to have their water and sewer service cut next week when the owners paid a delinquent $4,800 JEA bill late [Friday] afternoon.

City Of Atlanta, Management Company Work To Relocate 180 Residents Left Stranded In Dilapidated, Foreclosed Apartment Complex

In Atlanta, Georgia, the Atlanta Journal Constitution reports:
  • Josephine Roberts has to move – right away – out of the rundown southwest Atlanta apartment that has been her home for 25 years. “It’s probably for the best,” Roberts, 65, told the AJC on Thursday after meeting with an apartment management company that is trying to relocate the 180 people stranded in the Hidden Pines apartments after the bank foreclosed on the property. “The conditions [at Hidden Pines] are not [safe] living standards. I don’t think we, as a people, should live in this type of environment… It was unbelievable.”

***

  • This property is not safe,” said Mitzi Bickers with the Mayor’s Office for human services. Bickers said city workers discovered the Hidden Pines residents when crews were dispatched to investigate reports that broken pipes were spewing untreated sewage. She said several senior citizens and pregnant women were moved Friday while the others will leave over the next few weeks.

For more, see Atlanta trying to relocate residents in foreclosed apartments.

Novice Homebuyer May Be Out $8K After Unwittingly Signing Contract Sans Loan Contingency On Foreclosure, Then Discovers Mortgage Insurance Unavailable

In Edmonton, Alberta, CTV Edmonton reports:
  • A young woman is now fighting for her life savings after a housing venture went through the cracks. Brenda Vanner says she cashed in her RRSPs [Registered Retirement Savings Plans] and her savings to make an offer on a property that was up for foreclosure. "It seemed like a good deal and a real good property to buy," she said. But days before the deal was set to close, the woman says she was denied mortgage insurance because of deficiencies on the property.

  • The 23-year-old signed a contract with no conditions, and may now be out $8,000. "I was naive. I took for granted that someone was looking out for me and I will never do it again. I just want to make sure it won't happen to someone else."(1)

For more, see Young woman fights for life savings after housing venture plummets.

(1) This story illustrates the importance of being properly advised before signing a real estate contract, as well as having the premises thoroughly inspected for defects (preferably by an inspector the buyer obtains on his/her own, not referred by anyone who has a vested interest in seeing the transaction consummated (ie. seller or commissioned real estate or mortgage broker/salesperson). For a story on what can happen when a buyer gets the wrong inspector, see Contra Costa Times: Brentwood leader's company crumbles in wake of questionable home inspections (A Brentwood councilman's contracting firm has collapsed under the weight of impending lawsuits over home inspections gone awry, underscoring the perils for homeowners and firms alike in a largely unregulated industry)).

Tenant Gets 12 Years For Operating Indoor Pot Farm From Basement Of Rented Home

From the Office of the Monmouth County, New Jersey Prosecutor:
  • On April 12, 2010, Michael Papazoglou, 30, of Freehold Township, N.J., was sentenced to a 12 year State Prison term for the first degree crime of Maintaining or Operating a Controlled Dangerous Substance Production Facility. The charge stems from the November 18, 2008, arrest of Papazoglou and four others at Papazoglou’s rented Freehold residence.

***

  • The investigation revealed that Papazoglou had been growing the marijuana plants in the basement of the residence, that a decision had been made to move the marijuana plants elsewhere, and that Wheeler and Farmer were responsible for transporting the marijuana plants to the new location. On the day of the arrests, Wheeler rented the UHaul truck and traveled to Freehold where he met with Farmer, Papazoglou and another, unidentified man. The four men then loaded the marijuana plants and growing equipment into the U-Haul truck so that the production operation could be resumed at a different location.

For the Monmouth County Prosecutor's press release, see Freehold Man Receives 12 Year Prison Term For Operating A Marijuana Production Facility.

(1) On December 7, 2009, Jeremy Wheeler, 30, of Tuftonboro, N.H., and Jamil Farmer,26, of New York City, N.Y., also appeared before Judge Reisner and entered guilty pleas to second degree Possession of a Controlled Dangerous Substance With Intent to Distribute. On February 19, 2009, Wheeler was sentenced to a six year State Prison term. On January 29, 2009, Farmer was sentenced to a five year State Prison term. Based upon the factual bases provided by Papazoglou, Wheeler and Farmer during the entry of their guilty pleas, related charges against Stephanie Federico, 19, of Hoboken, N.J., and Alysson Woolley, 25, of Long Branch, N.J., which were contained in the same indictment were dismissed. marijuana grow house

Friday, May 07, 2010

New Wave Of Foreclosures Currently On Hold As Lenders Drag Feet In Dealing With Delinquent, Underwater Condo Owners

A recent column in Barron's addressed the problem of mortgage lenders dragging their feet on condominium foreclosures in order to avoid taking title to units in order to avoid becoming responsible for footing the bills for the HOA's maintenance fees:
  • IF A CONDOMINIUM OWNER is behind on his mortgage, he usually isn't paying his condo association dues either. And that, oddly, could be helping to prevent the already roaring rate of U.S. condominium foreclosures from becoming even worse.

***

  • In the most troubled markets -- think Florida, California, Nevada, Arizona and parts of the Midwest -- some condos are three years in arrears on association fees. When a bank takes ownership, it risks having to pay those fees, plus any that accrue until it resells the unit. Fourteen U.S. states now have "super lien" laws mandating that a lender pay at least part of the owed dues when it seizes a property. Ohio legislators are even fighting to make association liens in their state superior to first mortgages. In states where there's no law mandating payment, condominium associations must sue the lenders to recoup any dues shortfall, and they're not always successful.

  • For lenders, the simplest way to delay -- or avoid -- paying the dues is by postponing foreclosure until a buyer turns up who's willing to shell out the accrued dues if the property is priced low enough. But in the current market, especially in the worst-hit areas, that can take a very long time.(1)

For more, see The Condo Conundrum (Lenders reluctance to pay overdue condo fees is merely postponing a new wave of U.S. foreclosures). (requires paid subscription; if no subscription, TRY HERE; or TRY HERE, then click link for the story).

(1) A new tactic in dealing with delinquent condo units where mortgage lenders are now being challenging to foreclose or get out of the way (essentially being required to decide to either take title to the financially upside down unit, or release their mortgage) was recently reported in Florida. See:

Blanket Receiverships Come To Daytona Beach In Fight Against Deadbeat, Rent Skimming Condo Owners Stiffing Associations On HOA Fees

In Daytona Beach Shores, Florida, The Daytona Beach News Journal reports:
  • At the peak of the area's housing boom four years ago, Chicago native James Dolan bought a unit at the nine-story Oceanside Inn here when it converted from a hotel to a condo-tel. [...] But, since then, the housing bust has cost him plenty. The owners association recently passed its second special assessment, on top of monthly maintenance fees, to make up for other owners who are in foreclosure or walked away and are not paying their fees.

***

  • The frustration is widespread. So, the owners association, the inn's hired management firm and a local attorney sought and won a rare legal ruling that should help them recover the $154,000 owed by 23 of the building's 123 owners. Circuit Court Judge Richard Graham recently approved the appointment of a "blanket receiver" for the Oceanside Inn. It's the first such ruling in the 7th Judicial Circuit, attorney Jason Harr said.(1)

  • "It's groundbreaking in this district. It's been approved in other districts, but it's never been asked for and the court has never approved it here prior to when we did it," he said. "It's given a life preserver to the association that was in dire straits. There are some owners who owe as much as $16,000."

For the story, see Condo associations gain weapon to collect fees from deadbeats.

Go here for other posts on blanket receiverships.

(1) The story states that the blanket receivership order allows the association to include all delinquent units in one filing, and that similar blanket receivers have been approved in just a few Florida jurisdictions. "It's up to each judge to interpret the statutes in each case," one lawyer said. "But, it's a new strategy, a new argument, novel and it is catching on."

Lenders Refuse To Finance Condo Sale Where 15%+ Of Members Delinquent On HOA Fees, Leaving Unit Owner Unable To Unload Apartment

In Baltimore, Maryland, WBAL-TV Channel 11 reports:
  • The tightening of the mortgage industry is keeping one Glen Burnie man from selling his home. Dave Shaffer said he has a buyer for the home, but that buyer is having trouble getting a home loan because of a lending rule that's just recently been enforced.

  • Shaffer is disabled and unable to work. He said he can't afford to live in his condo community anymore, so he found a buyer to purchase it. Shaffer's home in the Elvation Towne Condominium neighborhood has been on the market for a year and a half. He said he was excited to find a buyer, had packed up his home and was ready to close on the deal last week.

  • "A day and a half before we were to go to closure, I was called and told the banks could not underwrite the loan," he said. Shaffer was told that more than 15 percent of the homeowners in his neighborhood are behind on their homeowners association fees, so his buyer couldn't get a loan. He said they tried many banks and mortgage companies. [...] He said he can't afford to stay in his home, can't refinance because he doesn't have a job and, if he can't sell his home soon, it'll go into foreclosure.

For more, see HOA Fee Law Keeps Man From Selling Home.

Minnesota Woman Faces Charge Of Ripping Off Dementia-Disabled Aunt Of Life Savings, Leaving Her Facing Eviction From Nursing Home & Foreclosure

In Dakota County, Minnesota, the Minneapolis Star Tribune reports:
  • An Eagan woman faces a felony charge of exploiting a vulnerable adult for allegedly stealing more than $35,000 from her disabled aunt. She is accused of gambling away the woman's life savings. Misty M. Williams, 30, was the conservator of the estate of Doris Jean Johnson, 72, who has dementia and lives in an assisted care center in Eagan. [...] Papers filed in probate court show an even higher loss. An examination of Johnson's accounts estimated the losses at more than $50,000 and possibly as high as $125,000, records show.

  • Johnson's bills and rent had gone unpaid, she faced eviction, and her home, which her estate still owned, went into foreclosure because of a mechanic's lien by a homeowner's association, records show.

Source: Eagan woman accused of stealing aunt's life savings, gambling it away.