Thursday, July 29, 2010

Ongoing Probe Turns Up The Heat On Two Phoenix Cops Accused Of Ripping Off Homeowners Using Fraudulent Sale Leaseback Scam

In Phoenix, Arizona, KPHO-TV Channel 5 reports:
  • For the past seven years, Tim and Ellie Gray have been forced to live with their parents. They are the latest victims to come forward claiming they were scammed by two Phoenix police lieutenants, Lee Brent Shaw and Mark Tallman. "They took our house, you know? They took our home. They were just lying to us all the way through and it's a big vicious scam. This in particular, because they were able to hide behind their badges," said Tim Gray.

  • The Grays were facing foreclosure, so they signed a "quit claim" deed that they thought would keep them in their home. It's supposed to allow the Grays to repurchase their home over time. But after Better Choice Investments, run by Tallman and Shaw, took control of the Gray's property, the company didn't make the mortgage payments as promised. The Grays said Lt. Shaw even threatened them with eviction and jail time when they complained.

  • They said Shaw said, "Get the (expletive) out of my house. It's my house now, not yours." Without warning, the Grays were suddenly being evicted. They were given only 15 minutes to grab what they could. "I got out with a pair of shoes and a bag of clothes," said Ellie Gray.

  • The Grays showed CBS5 pictures of all of their belongings simply thrown about in the backyard and stacked haphazardly in the carport as Better Choice Investments gutted the home. In three days, they say Better Choice Investments destroyed or stole everything they owned. "Even our car. Our car was in the driveway. We lost everything," said Ellie Gray.

  • Lts. Tallman and Shaw are currently facing civil punishment from the attorney general, and sources close to the investigation told CBS5 News the two will soon face new internal allegations of public corruption fraud and racketeering.

  • "They need to be fired, first of all. They should not be police," said Ellie Gray. "It scares me because people are able to do it behind a badge. That makes me really scared. And I haven't talked about it to anybody until now," said Tim Gray.

  • Lieutenants Tallman and Shaw are not currently facing any criminal charges, but the internal allegations include committing fraud against at least nine other officers who lost thousands as investors. If the allegations stick, the lieutenants will most likely lose their jobs. That investigation will be concluded after the attorney general gets a turn at them. That process should take about a month.

Source: Two Phoenix Cops Accused Of Fraud, Racketeering (Lieutenants Lee Brent Shaw And Mark Tallman Face Multiple Investigations).

See also, The Arizona Republic: Phoenix lieutenants face probe over real-estate business (Two Phoenix police lieutenants are under investigation after residents complained that some of the 120 real-estate purchases conducted by their off-duty business were unethical or illegal).

Feds Settle Civil Suits With Operators Of Loan Modification Rackets In Three Separate Cases

The Federal Trade Commission recently announced:
  • Eight marketers are banned from selling mortgage modification or foreclosure relief services under settlements with the Federal Trade Commission. The FTC alleged that the marketers charged homeowners up-front fees and falsely claimed they could get their mortgage loans modified or prevent foreclosure on their homes. The settlements in three separate actions are part of the FTC’s ongoing efforts against scams that target financially distressed consumers.

The FTC settled with the following defendants:

  • Federal Loan Modification Law Center and Steven Oscherowitz;
  • Loss Mitigation Services, Dean Shafer, Marion Anthony “Tony” Perry, and Bernadette Perry, also known as Bernadette Carr and Bernadette Carr-Perry;
  • Hope Now Modifications LLC, Hope Now Financial Services Corporation, Salvatore Puglia and Nicholas Puglia.

For the details of these cases and links to the relevant court documents, see Deceptive Marketers Banned from Selling Mortgage Relief Services; One Defendant Ordered to Pay $11.5 Million.

Use Of Obama Name & Likeness, Federal Logo Popular With Scammers Running Loan Modification Ripoffs

The New York Daily News reports:
  • Scammers are using President Obama's mortgage relief program - and his photo - to squeeze bogus fees from homeowners trying to avoid foreclosure. Across the country, dubious loan modification firms are claiming affiliation with the Obama administration's $75 billion program to help struggling homeowners trim mortgage payments. Some are running websites with photos and video of Obama and the logos of federal government agencies.

***

  • The hucksters mail solicitations to foreclosed homes in official-looking letters that make reference to the Obama program. For a hefty upfront fee, they offer to negotiate an Obama loan modification, but do virtually nothing to get payments lowered.

For more, see Scams use Obama's picture, federal logos to lure customers into phony loan modification programs.

Vegas Trio Charged With Ripping Off Homeowners Facing Foreclosure While Running Alleged Loan Modification Racket

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:
  • Rena Starks was a homeowner advocate who said she wanted to stand up for Nevadans hit hard by our housing crisis. A TV commercial for her company, Homekeepers, said the business "modified all types of home loans." "Do you owe more on your mortgage than your home is currently worth," an announcer asked. "Are you on the verge or in foreclosure? Homekeepers can help." "If you're in trouble, call me," Starks said in the ad.

  • Now, Starks is in trouble with the law. A criminal complaint alleges Rena Starks, her husband Terry, her daughter Tracey, and employee Lourdes Damian stole money from their clients. "There's at least $25,000 to $40,000 involved in this case," said Chief Deputy Attorney General Conrad Hafen. "There may be more."

  • Hafen says the defendants would rip off homeowners who feared foreclosure by taking their money and not contacting the homeowners' lenders as promised. "This is clearly a case of individuals who are preying on the bad luck of other people," Hafen said.

For more, see Las Vegas Mortgage Broker Charged with Theft.

Wednesday, July 28, 2010

Lenders' Loan Modification Runarounds Physically, Emotionally Overwhelming For Many Homeowners

In Southern California, KPCC 89.3 FM (Southern California Public Radio) reports:
  • Lydia Mojica of Pasadena has been trying to save her home for the past year. “It’s been a nightmare. I can’t talk about it without starting to cry,” she says. She's negotiated with National City Mortgage for her loan. “It’s just been like a hamster in a wheel for the last seven months.”

***

  • I just felt like a toy. They were playing with me. The run around they kept giving us.” She says the lenders told her things like, “'We’ll have answers. Oh, we are going to delay this answer. Oh, we need one more document. Oh, now that’s April, we need your March documents.' It was being strung along to the very last minute.”

  • The ceaseless financial stress began to physically and emotionally overwhelm her and her family. She wasn’t able to sleep or eat for days. Her mother suffered as well. “My mother’s blood pressure is completely out of control. She has had to be medicated recently.”

  • Stories like this are nothing new to lawyer Pat Pinto of Orange Country Legal Aid. Her job is to help families negotiate with banks for mortgages they can afford. “They sit in my office and they cry, they vomit.” She says homeowners start to break down. “They’re so upset because they love their home. They want to stay in their neighborhood. They want their children to stay in their schools.”

  • In fact, she says she moved her trash can from behind her desk to in front, “because people sit in my chair and they are so upset they vomit all over the floor.” She describes the process families go through dealing with the banks to get better terms on their mortgage. “This is an emotional upsetting experience for them. And I tell you because this loan modification process is taking so long, over a year, that we watch homeowners become mentally unstable. And as the process goes on, they sink deeper into depression.”

For more, see Bank runarounds take toll on homeowners' mental health.

NJ An Unfriendly Place For Sale Leaseback Peddlers As Judge Slams Another Operator With $225K In Triple Damages, $50K+ In Homeowners' Legal Fees

In Bergen County, New Jersey, another foreclosure rescue operator who entered into a sale leaseback arrangement with a financially strapped local couple was found to be on the wrong end of a court ruling in a civil suit.(1)

In finding that the foreclosure rescue operator violated the state Consumer Fraud Act ("CFA"), Judge Ellen Koblitz found that the amount of actual damages suffered by the homeowners was $75,347, which she calculated by taking the $120,000 value of the home equity that the homeowner signed over to the operator, and reducing it by $44,653 worth of improvements to the home (after accounting for collected rents) made by the operator subsequent to the title transfer.

By voiding the conveyance, title in the property remained with the homeowner-couple as if no conveyance took place. In making the award of triple damages, Judge Koblitz made the following statement:

  • This Court is bound by the CFA and thus plaintiffs are entitled to treble damages. In granting the equitable relief of returning the property to the plaintiffs, the Court has—in essence—provided the plaintiffs with one third of the treble damages to which they are entitled. The return of the property compensates them for their ascertainable loss and
    makes them whole. The plaintiffs are thus entitled to the remaining two thirds of the treble damage award required by the CFA, in the amount of $150,694, as well as $50,590 in reasonable counsel fees and $1,912 in costs for a total of $203,196.(2)

For the full details of the case, as well as how the court calculated the amount of the homeowners' attorneys fees, the obligation for payment of which was imposed on the operator, see D'Agostino v. Maldonado, Docket No. C-84-09 (N.J. Super. Chancery Div., Bergen County, June 30, 2010) (when link expires, try here).

(1) For past posts on other New Jersey civil court cases involving similarly situated sale leaseback peddlers, see:

Federal criminal prosecutors in New Jersey have also been getting into the act. See:

(2) Interestingly, Judge Koblitz comes off in her ruling as being somewhat sympathetic towards (and possibly even a bit impressed with) the foreclosure rescue operator (a full-time kitchen remodeling salesman for Sears who had a history of working serious overtime hours for his employer, and who did occasional real estate deals on the side), and who completed only the ninth grade ("Although uneducated, his street sophistication and moxie allowed him to profit, while putting some money into the hands of the distressed homeowners that they may not have had the ability to obtain for themselves").

She also made clear that she wasn't all that impressed with the testimony of the homeowner-couple (for example, the husband, a college graduate who worked on Wall Street for ten years, earning as much as $250,000 a year before getting canned from his job, was described by Judge Koblitz as "an extremely non-responsive witness. He seemed totally unable to respond to a direct question, whether it was posed by his counsel, adversary counsel, or the Court. He cried several times during his testimony and generally bewailed his plight and that of his children.").

Notwithstanding, in reaching her decision, she explained (bold text is my emphasis, not in the original text):

  • The CFA mandates, with no discretion permitted, an award of treble damages, as well as reasonable counsel fees, once the claimant has established a CFA violation and an ascertainable loss. Cox v. Sears Roebuck, 138 N.J. 2, 24 (1994).

  • In this case, the requisite result imposed by the finding of a violation under the CFA may be harsh, but it is mandated by law.

  • Thus although it appears to this Court that Maldonado’s actions were motivated by what he viewed as legitimate profit, rather than an intent to defraud, his actions nonetheless constituted a violation of the CFA, and thus the Court is bound by the statute. See Skeer v. EMK Motors, Inc., 187 N.J. Super. 465, 470 (App. Div. 1982) (“The act is broadly designed to protect the public, even when a merchant acts in good faith.”).

  • While Maldonado may have kept up his end of the oral agreement, his written agreements were severely one-sided and unconscionable in that they did not conform to statutory requirements and were contradictory. Additionally, he held out an unlikely prospect of repurchasing the property and thereby obtained an unreasonable profit from the transaction. To hold that Maldonado did not violate the CFA because he was not formally educated, and was seemingly unaware of the legal implications of his behavior, would vitiate the intention of the CFA.

In addition, in finding that the state Consumer Fraud Act applied to the foreclosure rescue operator (even though he was not engaged in the real estate business full time, only doing deals occasionally), Judge Koblitz made this observation (footnotes appearing in original text omitted; bold text is my emphasis, not in the original text):

  • While the plain language of the CFA makes the act applicable to all persons involved in the “sale or advertisement of any merchandise or real estate,” courts have held the CFA applicable to professional and part-time merchants as they can be said to be involved in commercial practices. The CFA is not applicable to the casual seller.

  • Prior to his involvement with the D’Agostinos, Maldonado had been a party to other real estate transactions involving distressed properties. Each one involved a different situation and no proof was presented that he engaged in other fraudulent transactions, or that the other parties did not believe they were well-served by the transaction.

  • Maldonado’s past experience in this area of business, however, is sufficient to bring him under the purview of the CFA. The applicability of the CFA to Maldonado’s business dealings is further supported by the fact that he advertised for his services. It was this advertisement, displayed on the side of his car, which brought Maldonado to the attention of the plaintiffs.

Boston Feds Pinch Mortgage Broker In Fraudulent Sale Leaseback Foreclosure Rescue Scam; Suspect Stripped Home Equity, Leaving Owner With More Debt

In Boston, Massachusetts, The Herald News reports:
  • A North Dartmouth mortgage broker was charged Monday with defrauding mortgage lenders in connection with a mortgage rescue scheme in Wareham and Tiverton. Ryan Lazar, 31, of Tiverton, has been charged in a written allegation, called an “information,” with three counts of wire fraud, according to a press release issued by United States Attorney Carmen Ortiz, Robert Bethel, Inspector in Charge of the United States Postal Service and Jon Rymer, Inspector General of the Federal Deposit Insurance Corporation.

  • The information alleges that in 2005, Lazar schemed with others to defraud mortgage lenders in connection with the purchases and/or refinancing of properties located in Wareham and Tiverton. For each property, Lazar allegedly submitted false mortgage loan applications, which fraudulently concealed his prior indebtedness and falsely represented that he intended to reside in the property.

  • It is alleged that the Wareham transaction involved a mortgage “rescue” scheme, whereby homeowners who were on the brink of foreclosure purported to sell their home to Lazar. According to the information, in the course of the transaction, Lazar pocketed loan proceeds and ultimately caused the homeowners to incur significantly higher mortgage debt.

Source: Police: 'Rescue' scheme defrauded lenders.

Victimized Homeowner "A Piece Of Garbage!", Judge "A Bleeding Heart Liberal!", Court Ruling "A Disgrace!", Says Attorney For Equity Stripping Clients

A recent story in the New Jersey Law Journal reported on how a foreclosure rescue operator group was slammed in a civil lawsuit for screwing a financially strapped Marva Coleman out of the equity in her home while she lay seriously ill in a hospital bed after being initially admitted into the hospital through the emergency room.

The following excerpt, buried at the end of the story, describes the apparent hard feelings of the attorney representing the losing sale leaseback peddlers after Bergen County, New Jersey Chancery Division Judge Ellen Koblitz gave his clients a well-deserved hammering:
  • The lawyer for Kohout, Gentles and Salvation, Verona, N.J., solo practitioner Peter Caplan, calls Coleman "a piece of garbage" and said she "participated in this transaction, she profited from this transaction, she was fully aware of this transaction, and it's a disgrace that the judge found my clients did anything wrong." Caplan says Coleman was coherent when she signed the documents in the hospital.

  • Caplan says of Koblitz, "the judge is a bleeding heart liberal who used to be a public advocate. The judge's mind was made up long before the trial began." He says no decision has been made whether to appeal.

Source: Mortgage Rescue Firm Hit With Punitive Damages, Attorney Fees.

For Judge Koblitz' court ruling, see One West Bank, FSB v. Capo, Docket No. F-5952-09 (N.J. Super. Chancery Div., Bergen County, July 19, 2010) (when link expires, try here).

Tuesday, July 27, 2010

Report: Servicers' Claims That Investors Owning Delinquent Mortgages Won't Allow Loan Modifications A Bunch Of BS

ProPublica reports:
  • Arthur and Alberta Bailey are about to lose their home near New Orleans, and their mortgage company says one thing stands in the way of relief: The investors who own their mortgage won’t allow any modifications.

  • It’s a story heard again and again across the country as desperate homeowners try to participate in a federal program created to foster loan modifications and prevent foreclosures. Loan servicers say their hands are tied by Wall Street. Federal officials, bank officers, housing counselors and investors themselves say that excuse is cited far more often than is justified. In fact, they say, few mortgage deals include such restrictions.

  • Consider the case of the Baileys. Litton, a subsidiary of Goldman Sachs, services their loan, and Litton’s contract with investors has no clear language banning modifications. In fact, documents show that over 115 other mortgages from the same investment pool have already been modified.

For more, see When Denying Loan Mods, Loan Servicers Often Wrongly Blame Investors.

In a related ProPublica story, see Resources for Investigating Investor Restrictions on Mortgage Modifications.

Accused Foreclosure Rescue Operator Under Indictment & Free On Bond Continues To Target Financially Strapped Homeowners

In Brooklyn, New York, the New York Daily News reports:
  • Brooklyn homeowner Angela Neysmith scraped up $1,500 when real estate broker Lavette Bills promised to trim her loan payments via President Obama's foreclosure prevention plan. "She said she could put me into the Obama program," Neysmith said, recalling Bills told her, "I could get a fixed rate and everything would be good for me."
    Everything was not so good. Neysmith, 50, did not get the promised loan modification to bail her out of the foreclosure she was facing on her Midwood St. home, but Bills managed to jack up her fee to $3,000. Neysmith says she was forced to send papers to the bank to process her modification application because Bills failed to do so.

***

  • Authorities say Bills' victims were distressed homeowners who called a radio show Bills hosted on WBLS and WLIB in 2007 in which she held herself out as a "foreclosure specialist." In a brief interview last Thursday, Bills denied scamming Neysmith, but declined to answer questions.

  • A few hours later, Bills showed up at Neysmith's house with a check for $1,500. Neysmith says Bills promised she'd get the rest of her money next month. "She says she wants no publicity," Neysmith said.(1)

For the story, see Homeowner victimized by broker promising to trim loan using Obama's foreclosure prevention plan.

(1) Bills' desire to keep this matter quiet is understandable inasmuch as a simple phone call to the U.S. Attorney's Office could be enough to set in motion the process of revoking her $250K bond and lead to her waiting for her criminal trial sitting in jail.

Parties In Michigan Predatory Lending Lawsuits Wrestle Over Forum Selection; Homeowners Ask Federal Judge To Kick Cases Back To State Court

In Troy, Michigan, the Daily Tribune reports:
  • Officials at an organization representing homeowners battling their mortgage lenders say hundreds more people in the tri-county area will join additional lawsuits. Officials at Michigan Loan Compliance Advisory Group Inc. in Troy said they plan to file lawsuits including up to another 1,000 plaintiffs against financial institutions for deceptive lending, excessive fees and other wrongdoing in granting subprime mortgages. That’s on top of the 88 plaintiffs representing 78 mortgages in Oakland and Macomb counties who through Michigan Loan Compliance sued more than two dozen banks for awarding inflated mortgages to borrowers.

***

  • The pending cases in Oakland, Macomb and a third in Wayne County were filed in state circuit court, but have since been moved to U.S. District Court in Detroit. However, Loan Compliance attorney Ziyad Kased has asked federal Judge Arthur Tarnow to return the Oakland case to Judge Colleen O’Brien in the Oakland court in Pontiac and said he believes federal Judge Nancy Edmunds on her own may return the Macomb case back to circuit Judge John Foster in Mount Clemens. Kased said the Oakland case should remain in state court because all of the defendants and plaintiffs do not have different state residences, which is a requirement to get the case moved.

***

  • Kased urged the federal judges to act soon. “Plaintiffs pray this court remand this case as quickly as possible because certain plaintiffs are facing imminent foreclosures and plaintiffs must file requests for temporary injunctions to prevent irreparable harm,” Kased said.

For more, see Mortgage fraud accusers promise hundreds more cases (Oakland, Macomb cases currently in federal court but may return to local state courts).

Use Of Private Process Servers In Chicago Foreclosure Actions Leading To Increased Incidents Of "Sewer Service"?

Buried in a recent story on the blog Chicago Now is an account of a local homeowner facing foreclosure who may be the victim of "sewer service" when a private process server purportedly served the foreclosure papers upon her when the lawsuit was commenced:
  • [Zabrina] Worthy, who lives on the South Side, came home in the winter of 2008 to find her bungalow boarded up. "I knew I was headed toward foreclosure," she said. After falling behind on her monthly payments, which ballooned from $1,500 to $2,100, she applied for a home loan modification. Her plan B was to sell the home. "I had hired a realtor and we were going back and forth on a modification and the house was boarded up."

  • According to court records, the firm hired to deliver the summons made four attempts. Three were delivered to homes that were thought to be Worthy's relatives. A special process server reported that he delivered another summons to her house, which he noted was vacant with no furniture, according to a court affidavit.

  • Worthy's court file is indeed chock full of evidence that her home was not vacant as the special process server noted. Under a judge's order, she was eventually allowed to go back into the house to retrieve her belongings, many of which were ruined by squatters who broke into the house in the meantime, according to Worthy and court documents.

  • Worthy's attorney Kelli Dudley, who also works with the Fair Housing Legal Support Center at the John Marshall Law School, said she thinks that the mortgage company's "hired guns" submitted "bogus" documents to the court confirming that they delivered the summons.

Source: Foreclosed without notice: How a court order could be violating homeowners' due process.

For a report on the "sewer service" problem in the City of New York, see Justice Disserved: A Preliminary Analysis of the Exceptionally Low Appearance Rate by Defendants in Lawsuits Filed in the Civil Court of the City of New York.

Go here for other posts on "sewer service."

Monday, July 26, 2010

Woman Recovers Home Title Lost In Equity Stripping Scam; Judge Belts Sale Leaseback Peddlers w/ $75K In Punitves, Refers Case To Criminal Prosecutors

In Bergen County, New Jersey, the New Jersey Law Journal reports:

  • A Bergen County, N.J., judge [...] ordered the president of a mortgage firm and one of its salespeople to pay $75,000 in punitive damages, and more in attorney fees, for leading a homeowner into unknowingly selling her house and losing $162,000 -- for their own benefit. The defendants "continuously concealed the character of their enterprise and the true nature of the transaction" and "preyed" on the homeowner's "weakened health condition and financial vulnerability," Chancery Division Judge Ellen Koblitz said in the case, One West Bank, FSB v. Capo, F-5952-09.(1) (when link expires, try here).

***

  • When [the unwitting bank that financed the sale leaseback] foreclosed on [straw buyer Maria] Capo, [victimized homeowner Marva] Coleman was included as a defendant by her status as tenant. Coleman brought a third-party complaint against the [foreclosure rescue operators]. Coleman also named Capo but dismissed claims against her [...] when Capo agreed to deed the property back to her.

  • Koblitz said Coleman demonstrated the five elements of common-law fraud: material misrepresentation of facts, knowledge or belief by the defendant of its falsity, intention that the other party rely on it, reasonable reliance thereon by the other party and resulting damages. Koblitz ruled that the deed conveying Coleman's house to Capo and the mortgage Capo took out on the house were void ab initio. Koblitz also ordered IndyMac's successor, One West Bank, to issue an equitable mortgage in Coleman's name on the house.(2)

***

  • She referred the case to the Bergen County Prosecutor's Office and the state attorney general's office to determine whether the third-party defendants committed criminal acts.

Attorney Anthony Viso, Lodi, N.J., reportedly successfully represented the screwed-over homeowner.

For the story, see Mortgage Rescue Firm Hit With Punitive Damages, Attorney Fees.

See also Cliffview Pilot.com: How a mortgage scheme nearly claimed an innocent victim.

For Judge Koblitz' court ruling, see One West Bank, FSB v. Capo, Docket No. F-5952-09 (N.J. Super. Chancery Div., Bergen County, July 19, 2010) (when link expires, try here).

(1) According to the story, Charles Kohout, president of Salvation Home Buyers LLC of Bergenfield, N.J., and Linton Gentles, a salesman, offered to help arrange refinancing when Marva Coleman of Teaneck, N.J., a home health aide, fell behind on her mortgage payments.

The story states that a seriously ill Coleman had been taken by ambulance to a local hospital, where she remained for a week on oxygen and medications, and that Gentles visited her with numerous documents prepared by Salvation and she signed them from her hospital bed. Coleman was not given copies and later did not recall signing the documents, but the contract she signed conveyed her house for $422,000 to Maria Capo, who obtained a mortgage from IndyMac Bank, according to the story.

(2) Although she found both the deed and the mortgage to be absolutely void, Judge Koblitz reportedly then awarded the lender an equitable lien / equitable mortgage against the home to the extent that the proceeds of the loan that financed the scam were applied towards Coleman's benefit, the story states. The amount of the equitable mortgage awarded to the lender was $268,156, and breaks down as follows:

  • Payment of Coleman's existing first mortgage at the time of the ripoff - $231,950,
  • Payment of judgments in her name - $7,500,
  • Back taxes owed by Coleman - $2,800,
  • Cash received by Coleman - $10,000, and
  • One West's payment of real estate taxes and homeowner's insurance - $15,116 and $760.

To the extent the proceeds of the new loan did not benefit Coleman, but were instead diverted into the pockets of the foreclosure rescue operators, the lender was left holding the bag. According to Judge Koblitz, One West "was not involved in the fraud and should not be penalized beyond losing that portion of their security in their $337,600 loan beyond Coleman's original debt."

Reportedly, Koblitz then set punitive damages against Gentles at $20,067, the amount he profited in the scheme carried out by Kohout. Finding Kohout the mastermind of the deal, the judge set his punitives at $55,500 -- three times the profit he realized, the story states. "His casual, flippant, self-important attitude and disrespect for Coleman and others in economic distress was readily apparent. Kohout's arrogance is exemplified by the letter of gratitude he required Coleman to write after he defrauded her," Koblitz wrote.

Utah Court Declares Rental Agreement, Eviction Invalid; Future Trial To Determine Property Title In Lawsuit Between Homeowner, Sale Leaseback Peddler

In Taylorsville, Utah, KTVX-TV Channel 4 reports:
  • A Taylorsville man faced with the prospect of losing his home turned to a foreclosure rescue company for help. But instead of help, he claims the company practically tricked him out of his home.

  • Mark Jeffs was months late on his mortgage, and his bank was looking to collect. Jeffs says one day a man with a plan came knocking on his door, promising Jeffs he'd save his home. Jeffs claims that the man's company, Foreclosure Connection, helped catch him up with his mortgage and said they'd assume his mortgage from the bank. In return, Jeffs signed over the deed to his home but asserts that he didn't understand what he was doing at the time. "I thought my home was saved," Jeffs told ABC4 but continues, "a few months later I got an eviction notice." Turns out, Jeffs had in effect become a renter in his own home. And when the Taylorsville man couldn't afford to make payments to the foreclosure rescue company on his own home he was evicted. "They said it was a lease option," Jeffs told ABC4 and we asked, "did you understand what you were signing at the time? No."

  • However, Jason Williams, owner of Foreclosure Connection says that simply isn't true. [...] The Foreclosure Connection owner says Jeffs knew exactly what he was doing, and in fact Jeffs fell behind in his payments to William's company that was why he was being evicted.

***

  • Williams could not elaborate further on his situation with Jeffs due to current litigation and an impending trial. But Williams did say that the Jeffs were frustrated because they fell behind, "when things don't go their way it's no longer a buy and sell, it's a loan because I lent them money."(1)

  • Currently, the two head to court in December to find out who really owns the Taylorsville home. A judge has ruled that Jeffs lease and eviction are invalid but Williams still holds the deed to Jeffs' home.

For the story, see Homeowner claims "lender" tricked him out of home.

(1) Apparently, Williams, like many other sale leaseback peddlers, are clueless that one of the risks of entering into these types of transactions is the possible recharacterization of the deal from a sale leaseback arrangement into a secured loan through the judicial invocation of the centuries-old equitable mortgage doctrine. See, generally:

BofA Demands Death Certificate As Condition For Loan Modification; Financially Strapped Homeowner Refuses To Comply, Exclaims "I Am Not Deceased!"

The Wall Street Journal reports:
  • Sarah Larson had been trying for months to get a break on her mortgage payments when a letter from her bank arrived in March. Sitting at the dining-room table of her Minneapolis house, the 33-year-old acupuncturist ripped open the envelope and pulled out a list of important documents demanded by Bank of America Corp. Bank statements. A utility bill. Her death certificate.

  • Ms. Larson, who was struggling to make her $1,055-a-month mortgage after client appointments dropped off by half, is in good health. So she replied to the nation's largest bank in assets with a letter. "I am not sending a death certificate because I am not deceased," she wrote. "I am currently still living."

  • Turns out the bank had erroneously asked for proof of her demise—the sort of paperwork snafu that has roiled applicants since the Obama administration's foreclosure-prevention plan was announced in February 2009. [...] Across the nation, applicants are flush with tales of the absurd. Lenders and mortgage-payment processors—sometimes in error—ask borrowers to demonstrate the impossible. Or they ask them to verify events of many decades past.

For more, Grave Errors as Undead Rework Loans.

Sunday, July 25, 2010

Chicago Suit Challenging Use Of Private Process Servers In F'closure Actions Could Void Thousands Of Cases In Cook County; "Sewer Service" A Concern

In Chicago, Illinois, Chicago News Cooperative reports in The New York Times:
  • In the summer of 2007, with the housing bubble bursting and the number of foreclosure cases soaring, [Dorothy Kirie Kinnaird, the presiding judge in the Chancery Division of Cook County Circuit Court,] issued an order making it easier for mortgage-foreclosure lawyers to hire special process servers to do what otherwise would be carried out by Cook County sheriff’s deputies, according to records reviewed by the Chicago News Cooperative and the Better Government Association.

***

  • A lawsuit filed last week in federal court in Chicago is challenging the practice, saying it is a violation of state and federal law for the judge to allow freer use of special process servers. The lawyer for David L. Washington, the foreclosed property owner who is the plaintiff in the suit, said he hoped to convert the case into a class-action suit that would void tens of thousands of foreclosure cases handled by special process servers in recent years.

***

  • Edward T. Joyce, the lawyer for Mr. Washington, the plaintiff in the case, said Judge Kinnaird’s order was well-intentioned. But Mr. Joyce said her action was most favorable to banks and foreclosure lawyers because it allowed them to serve papers on debtors more quickly and cheaply. He also said the private process servers often engaged in sewer service” — stuffing court papers between sewer grates in front of debtors’ homes.

For more, see Use of Private Process Servers Is Up; Concern Is, Too.

For the lawsuit, see Washington v. Wells Fargo Bank NA.

Subprime Loan Investors Gain In Effort To Force Major Banks To Buy Back Crappy Mortgages

Reuters reports:
  • U.S. mortgage bond investors have quietly banded together to gain the long-sought power needed to challenge loan servicers over losses the investors claim resulted from violations in securities contracts. A group holding a third of the $1.5 trillion mortgage bond market has topped the key 25 percent threshold for voting rights on 2,300 "private-label" mortgage bonds, said Talcott Franklin, a Dallas-based lawyer who is shepherding the effort.

  • Reaching that threshold gives holders the means to identify misrepresentations in loans, and possibly force repurchases by banks, Franklin said. Banks are already grappling with repurchase demands from Fannie Mae and Freddie Mac, the U.S.-backed mortgage finance giants.

For more, see Mortgage bond holders get legal edge; buybacks seen.

Lenders, Mortgage-Backed Bond Packagers May Eat As Much As $30B In Crappy Loans Owned by Fannie, Freddie, Says Regulator

Bloomberg News reports:
  • Fannie Mae and Freddie Mac’s regulator may identify as much as $30 billion of debt included in mortgage bonds that the companies can force sellers to repurchase, according to Joshua Rosner, an analyst who in 2007 predicted the collapse in the market for the securities.

  • The Federal Housing Finance Agency this month said it issued 64 subpoenas seeking loan files and other documents related to so-called non-agency mortgage securities bought by the two government-supported companies. The U.S. is trying to determine whether misrepresentations might require issuers to repurchase debt, producing funds from firms that may include Wall Street’s largest banks to help repay taxpayer money.

For more, see Fannie Subpoenas to Show $30B Bad Mortgages, Rosner Says.

Recently-Passed Wall Street Reform Law Tacks On Two Add'l Years To Protecting Tenants At Foreclosure Act

From the Office of the National Low Income Housing Coalition:
  • The National Low Income Housing Coalition applauds the expected enactment of the Dodd-Frank Wall Street Reform and Consumer Protections Act (H.R. 4173), which has passed the House and Senate and is likely to be signed by President Obama [...]. While the bill’s financial reform and consumer-protection provisions have been well documented, the act also includes housing provisions important to low income households and communities.

  • The bill will extend the Protecting Tenants at Foreclosure Act (PTFA) through the end of 2014.(1) One of NLIHC’s highest policy priorities, the PTFA provides renters whose landlords have lost their properties to foreclosure the right to stay in the home for 90 days after the foreclosure or through the term of their lease. Under PTFA, housing choice voucher holders are offered similar protections. The Dodd-Frank bill also clarifies that any lease or tenancy created prior to the change of title as a result of foreclosure is protected by PTFA.

For more, see Dodd-Frank Reform Bill Includes Extension of Protecting Tenants at Foreclosure Act, Additional Housing Provisions.

(1) The law was originally written to terminate on December 31, 2012.

Minnesota Feds Charge Attorney In Alleged Mortgage Fraud Flipping Scam; Suspect Accused Of Using 86-Year Old Mom As Unwitting Straw Buyer

In Minneapolis, Minnesota, the Vadnais Heights Press reports:
  • A White Bear Town Board official who was accused of using his elderly mother to “flip” a real estate deal and pay off a foreclosed office property was indicted in federal court July 14. The U.S. Attorney’s Office said Richard Sand, 58, was charged in U.S. District Court with three counts of mortgage fraud through interstate wire and 11 counts of money laundering. Donald W. Krause, 49, of Plymouth, and Brenda Epperly, 58, of Oak Grove, were also charged with mortgage fraud and Krause was charged with one count of money laundering.

  • Sand, an attorney, has served on the White Bear Town Board for 33 years and was reelected to a three-year term March 9. He pled “not guilty” at a hearing July 15.

***

  • According to the complaint, Sand, Krause and Epperly allegedly obtained approximately $1.5 million in fraudulent bank loans by submitting fraudulent applications and closing documents. The group allegedly used Sand’s 86-year-old mother, Antoinette Sand of White Bear Township, to obtain loans by inflating her income and net worth. The indictment alleges that from February through April, 2008 the defendants devised a scheme to obtain loans fraudulently, using two residential properties to get funds. On Feb. 21, a purchase agreement was executed for a $1.6 million home in Orono to RSN Companies, in which Krause was a general partner. The next day Krause sold the residence to Antoinette Sand for $2.6 million — a $1 million profit.

For more, see White Bear Town Board chair indicted in mortgage scam (Dick Sand, two others headed for federal court).

From the Office of the U.S. Attorney:

See also: Minn. Feds Suspect Attorney Of Leaving 88-Year Old Mom Holding The Bag As Straw Buyer In Scam To Generate Cash To Redeem His Law Office From F'closure.

Saturday, July 24, 2010

Chicago Lawmakers To Offer 5% Kickbacks For Reporting Vacant, Deteriorating Foreclosures In Effort To Persuade Lenders Into Maintaining REOs???

In Chicago, Illinois, CBS2chicago reports:
  • Ratting out your neighbors could have its rewards – at least when it comes to those living near crumbling, foreclosed homes. As CBS 2's Kristyn Hartman reports, tell the city about one and you could get paid – if an ordinance one alderman is set to propose, passes. "Our neighborhoods are becoming ghost towns," said Action Now President Michelle Young.

***

  • The problem is making someone maintain a place during the sometimes lengthy foreclosure process. Their plan would put it on the banks. Young said, "They wanted it back. They should maintain it."

  • Chicago's 3rd Ward Alderman Pat Dowell likes the idea so much, she's pitching it as part of a three-point plan. "It increases fines for neglect by almost five times," said Dowell. And if you report problem properties, you might get a finder's fee – 5 percent of the fine. So, rat on a neighbor and cash in. Dowell said, "What neighbor? It's ratting on the bank, and that's how it should be until they can show they can be more responsible." Dowell will propose the ordinance next week.
For more, see Ratting Out Your Neighbors May Earn You Cash (Propsed Ordinance Would Reward Snitching On Foreclosed Homes).

Couple Blames Lender's Failure To Repair Leaky Roof In Adjacent Bank-Owned F'closure For Caving-In Ceilings, Black Mold Invasion; Fear Loss Of Home

In Cape Canaveral, Florida, WESH-TV Channel 2 reports:
  • The roof is caving in on a Central Florida couple. Roger and Sharon Harrell share a roof with the condo next door to them, which has been posted as unsafe by the city. The Cape Canaveral couple said there's a big problem: the condo next door is in foreclosure and owned by the bank. The Harrells said they fear they'll lose everything over the bank's inaction. "This could be catastrophic," Sharon Harrell said.

  • She said she and her husband have spent thousands fixing the leaks that originate on the other side of the wall, under the same roof. City inspectors took photos of the ceiling falling in, black mold on the walls and attic trusses covered in black. "We could lose everything," Sharon Harrell said.

  • Banking giant JP Morgan Chase bought the damaged condo last year for $100. The city is fining Chase $250 a day for failing to make repairs. Those fines now add up to $60,250, and Harrell said Chase is ignoring all her pleas. She said she has also filed a lawsuit. A Chase spokesperson did not answer WESH 2's repeated questions.

  • Chase received and returned $25 billion in taxpayer bailout money. The Harrells said they thinks the bank can afford to fix the roof on its condo. "How many other people are they doing this to?" Sharon Harrell said.

Source: Couple Cites Bank Inaction For Leaky Roof (Cape Canaveral Couple Files Lawsuit Against JP Morgan Chase).

As Million$ In Unpaid Real Estate Taxes Pile Up, City Reluctant To Foreclose, Seize Deteriorating Multi-Unit Residential Buildings

In New York City, The New York Times reports:
  • Hundreds of buildings, from the South Bronx to central Brooklyn, whose renovation and rescue from ruinous debt were critical to the rebirth of blighted neighborhoods, are again in severe financial trouble. That poses a dilemma for the city, which began unloading the properties in the mid-1990s as part of an arduous effort to divest itself of thousands of decrepit buildings seized because of tax delinquencies.

  • Filled with unemployed tenants unable to make rent or mortgage payments and squeezed by soaring city fees, about 442 buildings are in serious default on property taxes and far behind on municipal bills. As the number of imperiled buildings grows, the city, struggling with its own cash shortage, faces unappealing choices. Seizing the buildings is not an option. The city’s previous role as a master landlord was widely deemed a disaster, with many buildings locked in chronic states of disrepair.

  • Instead, housing officials must either force deadbeat owners to pay their debts, or else foreclose on the buildings and find new owners in a harsh real estate climate. A total of $140 million is owed on the buildings, and nearly half of them have arrears of at least $3,000 of debt per unit, according to the city’s housing department. Many of the buildings are now slipping into the kind of shoddy conditions from which they had been saved.

For more, see Rescued From Blight, Falling Back Into Decay.

Municipal Scandal Involving Shoddy Repairs Made Through City Home Improvement Program May Cost Family Its Residence

In Sandusky, Ohio, the Sandusky Register reports:

  • The city’s housing scandal might soon deliver one of its biggest blows. It may cost a family its home. Later this month, the foreclosure process will begin on 902 First St., where Derrick and LeAnn Close live with their two children and Derrick’s ill mother. The family blames the city for the possible foreclosure.

  • Between 2004 and 2006, malfeasance in the city’s housing department caused 41 homes in the Community Housing Improvement Program, better known as CHIP, to receive subpar repairs, or none at all. The program’s mission was to provide loan-interest [sic] loans and repairs to low-income families to improve their homes and neighborhoods. The Closes were one of the families that received subpar repairs.

  • Workers installed a faulty porch, bad electrical wiring, inefficient windows and ill-fitted doors, and did other shoddy work. The home still has exposed lead paint in its kitchen, and flakes of lead paint blanket the basement floor. In return for the work, the Closes now owe the city $33,000 as part of a lien on their home.

  • Last year, when the Closes fell on hard times, they asked the city to subordinate the lien, so they could refinance their home. Subordination means allowing a borrower to pay off other creditors first. [...] But the city rejected their subordination claim, and now they face foreclosure. The couple believes city officials turned their backs on them. “I don’t know what we’re going to do,” LeAnn says. “They didn’t fix our house. They made it worse. The least they could do is subordinate so we can refinance.”

For more, see CHIPped out of a home: Housing scandal could cost Sandusky family everything.

Duo Accused Of NYC Summer Rental, Loft Living Ripoff Victimizing College Students, Others; Foreign Tourist Trio Left Stranded In U.S. Until Sept.

In Williamsburg, Brooklyn, the New York Post reports:
  • What seemed like a dream deal of spending the summer living in one of New York's hottest neighborhoods has become a nightmare for more than a dozen out-of-towners. Many of the victims - college students and young professionals - told the Post they were each duped out of thousands of dollars by two Brooklyn men posing as lease holders of a massive loft within a new luxury apartment complex at 175 Powers St. in Williamsburg.

  • The alleged scammers, Desmond Eaddy and Ronnie Barron, used Craigslist and other ads to reel in the unsuspecting victims, including eight from Ireland, and collected at least $14,000.

  • Left with empty pockets, many say they've spent the past month working odd jobs and scrambling just to raise enough cash for food and shelter. "This has been pretty traumatizing," said Neil Sturdy, 19, who traveled to the city with two other friends from Ireland. "We came to New York and were taken advantage of. Now we sometimes don't even have enough money to feed ourselves." The trio says they were taken for a total of $3,375 and that their pre-paid, nonrefundable return flight home isn't until September.

For more, see Williamsburg scam turns loft-y dream to nightmare.

Friday, July 23, 2010

Rent-To-Own Deal Leaves Tenant As An Unwitting Squatter Out $5K After Doing Business With Home Hijacker Claiming Adverse Possession To Vacant Houses

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Carole-Ann Higgs thought she was on a rent-to-own track when she signed up for a 12-month lease with the Wellington-based company Saving Palm Beach Homes Inc. In seven years, she was told, she and her husband would have a chance to buy the little home in Seminole Manor off Lantana Road as long as they took care of the property and agreed to pay $750 a month for the house "as is." It was an attractive offer to the growing family. But it may have made them unwitting squatters.

  • Four months after moving in and after they spent $5,000 on relocation and repair costs, they learned Saving Palm Beach Homes Inc. wasn't what they thought. The for-profit company incorporated in February by Wellington resident Mark Guerette didn't own the home, it didn't even manage the home, which has been in foreclosure since April 2008. A final judgment of $259,306 in favor of Chase Home Finance was awarded last month.

  • Instead, Guerette has been using a centuries-old law to take possession of foreclosed properties in Palm Beach and Broward counties - a dubious opportunity exacerbated by the real estate crash that flooded communities with vacant homes and often unclear rights of ownership.(1)

For more, see Odd old Fla. law makes makes earnest renters into squatters at risk of losing their homes.

(1) Reportedly, Guerette claimed adverse possession on dozens of homes in Broward County, but has since withdrawn the claims. In April, the Broward County State Attorney's Office charged the 46-year-old with one count of organized scheme to defraud over $20,000 for allegedly renting out six properties that he didn't own, the story states.

Foreclosed Couple Refuses To Vacate Historic $5M Bayfront Estate; Continues Pocketing Cash For Renting Premises Out For Weddings, Receptions

In San Diego, California, KGTV-TV Channel 10 reports:
  • Residents in a Point Loma neighborhood are angry over the way a historic home that has been foreclosed is being used. The Bowman-Cotton House, a $5 million estate which dates back to the 1920s, overlooks San Diego Bay and is located at the foot of Nichols Street.

  • For many, the home is a dream wedding location thanks to its stunning views and spacious layout. However, the house has been foreclosed upon and the new owner can't move in. Weddings and receptions are being planned for the house, but they may never happen there.

  • Todd and Stacy Sabin lost the house to foreclosure and legally have no right to rent it out for special events. The city of San Diego issued a cease-and-desist order, and the issue has now made its way to court.

  • Attorney Grant Teeple represents the home's new owners and told 10News, "The city's told them, 'You can't have events and weddings.' They're selling that to people who have no clue, who go on the website, put down $5,000, $10,000, $15,000 deposit. [And] they're going to show up and find they can't have the event there. My predication is they won't be able to refund the money and won't be at the property."

For more, see Neighbors Upset With Events Held At $5M Point Loma Home (Home Was Foreclosed Several Months Ago; Ex-Owners Accused Of Renting Out Home For Weddings).

For story update, see City's Order On Pt. Loma Home Forces Couples To Alter Plans (Several Couples Told 10News They Are Looking For New Wedding Venue Due To Decision):

  • Couples who booked their weddings at a luxurious Point Loma home may have to find a new venue quickly following a city decision regarding the multi-million dollar property. Prospective brides and grooms and their families were shocked and worried that their weddings may not happen as planned after the city of San Diego shut down the almost weekly rentals at the historic Bowman-Cotton House due to complaints from neighbors.

Racket Engages In "Paper Terrorism" Says Local Prosecutor About "Sovereign Citizen" Group Attempting To Steal Empty Houses Across North Georgia

In North Georgia, WSB-TV Channel 2 reports:
  • DeKalb County prosecutors say they’ve cracked open an elaborate attempt to steal empty houses across North Georgia. Channel 2 Action News teamed up with police and the FBI to share information uncovered during a monthlong investigation. So far, four people are in jail and police have arrest warrants for four others.

  • The suspects call themselves sovereign citizens. They are anti-government extremist and refuse to answer to state or local authority. The members often refuse to pay taxes or register their vehicles. Some told Channel 2 Investigative reporter, Jodie Fleischer, their homes are considered sovereign land. "Frankly, it's rather absurd the philosophies and techniques they're espousing, but people will buy into that and try it," said FBI Agent Steve Emmett.

  • Fleischer confronted Gregory and Linda Ross, who were living at a 5-bedroom home on South Goddard Road in DeKalb County. A deed posted in the window of the house claimed Jermaine Gibson owned the property. Records show the $1 million home is actually owned by a bank. Authorities say Gibson filed fraudulent paperwork to take the house around the same time the bank was forcing out the previous owners who were in foreclosure.

  • According to the deed, Gibson signed over the property to himself for free. Gibson has also filed paperwork declaring himself a sovereign citizen and immune to the laws of Georgia. [...] Prosecutors say the scheme can force real owners of the homes to prove it in court. Buyers are sometimes delayed from closing on houses. "They're able to tie up the legal system by filing bogus paperwork and engaging in paper terrorism against anybody who dare comes after them," said DeKalb County Assistant District Attorney John Melvin.

For more, see Sovereign Citizens Accused of Stealing Georgia Houses.

Go here for more from the FBI on The Sovereign Citizen Movement.

Alleged Rent Scammer Charged With Theft By Deception After Pocketing $1,000 From Unwitting Tenant For Foreclosed Home

In Atlanta, Georgia, WXIA-TV Channel 11 reports:
  • It's time to turn the table on landlords. They do background checks on you. We'd recommend you do background checks on them. Why? You could find yourself kicked to the curb after signing a lease. Shanitra Jones learned that the hard way. "When the foreclosure people came, I just started putting my stuff back in boxes because I knew that one day soon, I'd have to move," she told 11Alive's Center for Investigative Action.

  • Just days after signing her lease and paying $1000.00 to rent an Atlanta house, she got a knock on the door from Bank of America representatives, telling her the house had been foreclosed upon. The man who rented her the house, Eliot Harrison had signed the lease with her 3 days after Bank of America said it had full legal title to the property to sell the house at auction. So we knocked on his door to get Harrison's side of the story. "I don't want to talk about it," Harrison said, as he closed the door on us.

For the story, see Dangers of Renting a Foreclosed House.

(1) Reportedly, Bank of America has offered the victimized tenant relief under the 'cash for keys' program. She has been offered $2000.00 and 2 months to find a new place to live. Harrison's case is now in the hands of the DeKalb County District Attorney and, despite repeated requests, he still hasn't offered us his side of the story, according to the story. Harrison had surrendered his Georgia real estate license following an investigation in 2007 on an unrelated matter. Click here to see the order from the Georgia Real Estate Commission.

Tampa Man Accused Of Commandeering Vacant Home For Sale & Renting It Out; Also Suspected Of Leasing Condos He Didn't Own To Unwitting Tenants

In Tampa, Florida, ABC Action News reports:
  • An ABC Action News investigation has uncovered a bizarre alleged real estate scam where a local man is accused of breaking into vacant homes and renting them out to unsuspecting victims.

***

  • Robert Smith got a call from one of his former neighbors about the home [...] he was trying to sell. "Congratulating me on selling my house. It had been on the market for a while," said Smith. It was good news all around. Not exactly. "So when she called I was like I haven't sold my house yet,” according to Smith.

  • Smith, a soldier at MacDill Air Force Base, went to the neighborhood and found a house full of people inside the home he hadn't sold yet. Once at the front door, a man came out, "...and he gives me this spiel about my partner and I have a business in Tampa and we rent houses and buy foreclosed homes then rent them out," said Smith. "What did you say when you told him you were the owner of the house?” We asked. “He didn't say anything," Smith responded.

  • His full name is Jackie Robinson Moore. Moore is now jailed after being charged by Hillsborough Sheriff's Deputies with Grand Theft, Dealing in Stolen Property, and Fraud. [...] We learned this may not be an isolated case. The management company, which runs a New Tampa condominium complex, said a man calling himself "J Moore" also leased 4-5 units he didn't own to unsuspecting renters.

For more, see INVESTIGATION: Man accused of renting other people's homes.