Tampa Federal Jury Convicts Trio In Short Sale "Flopping" Racket That Targeted Financially Distressed Houses & Duped Unwitting Homeowners Into Participating

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

• U.S. Attorney Robert E. O'Neill announces that a federal jury [] found John Lebron (33, Tampa), Patricia Lebron (36, Tampa), and Paul Gogolewski (31, Tampa) guilty of conspiracy to commit wire fraud and wire fraud. John Lebron was also found guilty of making false statements to financial institutions. All three individuals face a maximum penalty of 30 years imprisonment. Their sentencings are scheduled for January 18, 2013.
  
  According to the testimony and evidence presented at trial, the individuals conspired together to "flop" houses. "Flopping" is a form of short sale fraud involving conducting a short sale on a property and then "flipping" the property in a non-arms' length transaction.
  
  John Lebron was a Florida-licensed realtor and worked as a loan officer. Patricia Lebron is a Florida-licensed realtor. Paul Gogolewski was the President of Synergy Solutions.
  
  Together, they targeted unsophisticated, low income homeowners, who were in financial distress and convinced them to sell their houses to a straw purchaser, in a non-arms' length transaction.(1)
  
  For a brief period of time, the conspirators would pay the mortgage payments but then stopped. They then arranged a short sale of the property from the straw purchaser to one of the conspirators. In that short sale, the lender to the straw purchaser suffered an immediate loss of approximately 80% of the original loan.
  
  Then, six days later but using deeds recorded simultaneously, the properties were re-sold to another straw purchaser for approximately 350% more than the short sale amount.
  
  In these deals, the conspirators pocketed the money that should have gone to the original distressed home owner,(2) received the mortgage broker commission for arranging the first straw purchaser's loan, and got the difference between the short sale amount and the new loan. The straw purchasers were all paid $5,000 for their role. In all, this case involved at $1.5 million dollars in loans.

For the U.S. Attorney press release, see Federal Jury Convicts Three Of Mortgage Fraud "Flopping".

(1) I suspect that, in this non-arm's length transaction, the homeowners may have been duped into participating in the ripoff with promises that they could save their homes from foreclosure by engaging in a purported sale leaseback arrangement.

(2) Ibid.

C. Fla. Real Estate 'Land Trust' Operator Cops Guilty Plea In 'Reverse Staging' Short Sale Flipping Scam; Intentionally Trashed Homes To Drive Down Appraisals Prior To Purchase, Then Flipped For Profit

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

• Guerard Wallace Howard (63, Melbourne) pleaded guilty [] to one count of wire fraud, he faces a maximum penalty of 20 years in federal prison. His sentencing hearing is scheduled for January 16, 2013, before Senior U.S. District Judge G. Kendall Sharp.
  
  According to the plea agreement, between November 2007 and August 2011, Howard operated an illegal real estate short sale flipping business, Provincial Real Estate Administrative Services, Inc. (“Provincial”).(1)
  
  Using Provincial, Howard made properties appear to be in poor condition during appraisals, through a scheme known as reverse staging.
  
  Reverse staging is a process wherein someone manipulates the short sale price by intentionally downgrading a property's appearance and falsely representing the condition of a property in advance of bank appraisals. Reverse staging is done in an effort to acquire the property at below market price.
  
  In this case, it included Howard removing receptacle plates and pulling wires from the walls to falsely represent to an appraiser that the house required rewiring; falsely representing that the house needed electrical service upgrades, and repair work.
  
  In some instances it also involved spraying the house with a foul-smelling prank product, and falsely representing to an appraiser that the odor was due to mold or other potential biohazard issues that required expensive remediation costs.
  
  The reverse staging effectively caused the lender to agree to the below market offer made by Howard through Provincial. The property was then immediately resold at a profit.

For the U.S. Attorney press release, see Melbourne Man Pleads Guilty To Short Sale Mortgage Fraud.

For the factual basis and plea agreement, see U.S. v. Howard.

(1) According to the factual basis filed in this prosecution:

• Howard and Provincial, doing business as a real estate management company, approached and/or were approached by distressed sellers and negotiated a land trust agreement with the Provincial as trustee.
  
  Howard then had the seller execute a warranty deed to the trustee, Provincial. The deed effectively transfened title of the property to Provincial. However, rather than record the deed immediately, Howard waited to record it until just before closing the short sale transaction.
  
  When negotiating the short sale with the lender, Howard did not inform the lender of the land trust agreement nor provided the warranty deed to trustee, but acted under the auspices of representing the  seller. This tactic concealed from the short sale lender the fact that Howard, through Provincial, was contracting to purchase property for which he already held the title.

***

• Howard scheduled both closings for the same day, or as close together as possible, and paid cash-obtained through investor funds-for the short sale purchase. Howard then resold to the end buyer who financed through one of two end buyer lenders who calculated the seasoning period in Howard's favor.

Michigan Supreme Court Justice Faces FBI Probe For Reportedly 'Dancing' The 'Short Sale Shuffle' While Trying To Unload Underwater Home; Speeds Off In 'Getaway' Car To Dodge Local TV News Reporter's Questions

In Grosse Pointe Park, Michigan, WXYZ-TV Channel 7 reports:

• State Supreme Court Justice Diane Hathaway is under investigation by the FBI, according to law enforcement sources.
  
  The probe comes as a result of a 7 Action News investigation into a dizzying property shuffle Hathaway made prior to her bank granting a short sale.
  
  Hathaway's lawyer Steve Fishman said [] by phone that he was unaware of any federal investigation.
  
  Justice Hathaway had previously refused multiple requests for comment about the property transfers, and ultimately sped away in her car when approached by 7 Action News Investigator Ross Jones last May. She may have a harder time dodging the feds' questions.
  
  A short sale allows a homeowner to sell his or her property at a loss rather than go into a foreclosure. It can save the owner hundreds of thousands of dollars in mortgage payments, but he or she needs to prove a hardship to their bank, like a loss in income.
  
  But prior to Hathaway’s short sale, she shuffled two homes out of her name: a Florida home valued at almost three-quarters of a million dollars went to her stepdaughter, and one in Grosse Pointe Park went to her stepson.
  
  After the bank agreed to the short sale on Hathaway’s Lake St. Clair home, that Florida house went back into Hathaway’s name.
  
  The home where the Justice currently lives was recently put into her name, but its first owner was Hathaway’s stepdaughter. According to records, she bought it for $195,000 cash around the same time Hathaway’s bank was mulling over the short sale that they ultimately approved. Hathaway won’t say whose cash was used to buy that home.
  
  "It raises questions," said Howard Young, a Bingham Farms attorney who reviewed the timing of the property transfers without knowing they were Hathaway's.
  
  "It just sounds like, listen I’m going to park these assets in your name for a while, there’ll be deeds recorded, you’ll own them for all intents and purposes but our deal is, because you’re my child…when the trouble passes, you’re going to transfer the property back to me," he said.
  
  It’s not clear when the FBI's investigation began, but 7 Action News has learned that grand jury subpoenas have already been issued. Even though the feds are investigating, it does not mean that charges are imminent.
  
  A call to Hathaway for comment was not returned.

Source: State Supreme Court Justice Diane Hathaway under FBI investigation (Probe sparked by 7 Action News).

For the earlier WXYZ-TV Channel 7 story, see Did a Michigan Supreme Court Justice play a shell game to get out from her underwater home?

California Appeals Court Belts Borrowers With Personal Liability On Non-Recourse Mortgage For Committing 'Bad Faith' Waste

From a client alert from the California law firm Farella Braun & Martel LLP:

• Borrowers and their constituents generally benefit from certain limitations on personal liability for indebtedness secured by California real property. California’s one action and anti-deficiency rules require a lender faced with a borrower default to proceed against the real estate first and prohibit a deficiency judgment following a nonjudicial foreclosure or in the case of a purchase money loan.
  
  In addition, various corporate forms generally provide principals and employees with comfort that they will not be personally liable for an entity’s debts. A recent California appellate court decision, however, delivered a sobering reminder that, despite these protections, even the well-intentioned may face unexpected (and involuntary) liability.
  
  In Fait v. New Faze Development, Inc., 207 Cal. App. 4th 284 (2012), the appellate court considered whether a borrower corporation, its sole owner and certain of its key employees could be held liable to a foreclosing purchase money lender for a deficiency relating to nonpayment of a loan where the borrower demolished a building prior to securing construction financing for the redevelopment.
  
  The trial court had granted summary judgment in favor of the defendants with respect to all claims. The appellate court reversed, holding that there were triable issues of fact as to whether the borrower, as well as its representatives, could be held liable to its purchase money lender for “bad faith” waste.
  
  The court relied, in part, on the California Supreme Court’s decision in Cornelison v. Kornbluth¸ 15 Cal.3d 590 (1975), holding that the anti-deficiency rules (i.e., California statutory rules barring a deficiency judgment following a nonjudicial foreclosure or in the case of a purchase money loan) would not bar recovery against the borrower where the borrower has committed “bad faith” waste as opposed to waste resulting from “the depressed condition of the general real estate market.”
  
  In ruling that the borrowers (and its owners and representatives) could be liable, the Fait court adopted a more expansive interpretation of “bad faith” waste, stating that “‘bad faith’ waste . . . is any waste that is not the result of economic pressures of a market depression” and noting that it did not require a showing of reckless, intentional or malicious conduct.
  
  The court found that the developer’s decision to demolish the building before it had the financial means to complete development or repay the promissory note was not comparable to a mere decline in property value due to market forces.

***

• The Fait case serves as an important reminder to real estate professionals that the risk of personal liability to lenders for property damage should not be taken lightly.

For more, see Hidden Liability Traps in Real Estate Loans.

Bay State High Court: Uncontroverted 'Affidavit Of Sale' OK In Moving Forward With Carrying Out Post-Foreclosure Boot; 100-Year Old Process Still Viable In Mass.

In Boston, Massachusetts, The Boston Globe reports:

• The Massachusetts Supreme Judicial Court [] affirmed a lower court decision in favor of mortgage giant Fannie Mae that removes a legal challenge for borrowers fighting foreclosure.
  
  The state’s top court ruled that a so-called “affidavit of sale [under Power of Sale in Mortgage]” is enough for a lender to prove it has the right to seize a home. The affidavit is used by a lender during the auction process to prove it has complied with foreclosure laws.
  
  Christopher Pitt, president of the Real Estate Bar Association for Massachusetts, said the process has been in place since 1912. A decision against the affidavits could have put the validity of tens of thousands of foreclosures into question, he said.

***

• The case was first heard in housing court where a judge ruled in favor of Fannie Mae, which was trying to evict tenant Oliver Hendricks of Roslindale who challenged the seizure claiming the affidavit was “outdated.” The top court said Hendricks’s challenge “offered nothing to show the existence of a genuine issue of material fact.”

For the story, see State’s highest court rules for lender in foreclosure affidavit case.

For the ruling, see Fed. Nat'l Mortgage Ass'n v. Hendricks, SJC-11234 (Mass. October 26, 2012).

Maryland High Court: Centuries-Old 'Self-Help' Remedy OK When Booting Holdover Homeowners Post-Foreclosure Sale, But Handle Occupants' Personal Property With Care

An opinion summary from a recent Maryland Court of Appeals decision reported at Justia US Law:

• At issue in this case was whether Respondents, a property management company, law firm, and mortgage servicer, committed an impermissible forcible entry when they enforced, through lock-out, the foreclosure purchaser's lawful possessory interest in a dwelling by the means of the common law remedy of self-help,(1) as opposed to receiving first the issuance of a statutory writ of possession from the circuit court.
  
  The circuit court granted Respondents' motions to dismiss, and the intermediate appellate court affirmed.
  
  The Court of Appeals affirmed in part and reversed in part, holding (1) the common law right of peaceable self-help permits a foreclosure purchaser to surreptitiously enter a residential property and change the locks while the resident is out; and (2) the court of special appeals erred in dismissing Plaintiff's conversion claim and in holding that Plaintiff had abandoned all personal property in the residence, as there was no adequate basis from which to conclude that Plaintiff abandoned his personalty or that Respondents acted reasonably in disposing of his belongings.

Source: Opinion Summary: Nickens v. Mt. Vernon Realty.

For the ruling, see Nickens v. Mt. Vernon Realty Group, LLC, No. 7, Sept. Term (October 19, 2012).

Thanks to Deontos for the heads-up on the ruling.

(1) Buried in footnote 2 of the ruling, the Maryland high court comments on the common law remedy of self-help when carrying out a post-foreclosure boot which, apparently (at least in Maryland), is still a viable method to obtain actual possession from any occupants in foreclosed-upon property (provided, of course, those occupants do not otherwise have a legal right to reside there):

• Originating in fourteenth-century England, peaceable self-help is a common law remedy that provides title owners with the right to repossess their real property from a possessor who has no legal right to reside on that property. See, e.g., Laney v. State, 379 Md. 522, 543, 842 A.2d 773, 785 (2004) ("The right of peaceable self-help, therefore, is a viable mechanism for a title owner of property to obtain actual possession of real property from a holdover mortgagor."); see also 1 Julian J. Alexander, British Statutes in Force in Maryland 247 (Ward Baldwin Coe ed., 2d ed. 1912) (explaining the common law background of the causes of action that gave rise to the self-help remedy).

Freddie's Mortgage Refinance Resistance Kept Homeowners Locked Into High-Rate Handcuffs; Some Regarded Relief As Nothing More Than Backdoor Economic Stimulus

ProPublica reports:

• Freddie Mac, the taxpayer-owned mortgage giant, made it harder for millions of Americans to refinance their high-interest-rate mortgages for fear it would cut into company profits, present and former Freddie Mac officials disclosed in recent interviews.
  
  In closed door meetings, two Republican-leaning board members and at least one executive resisted a mass refi policy for an additional reason, according to the interviews: They regarded it as a backdoor economic stimulus.
  
  Freddie's policy was financially brutal: During the worst years of the Great Recession, when homeowners most needed the savings they could have gotten from refinancing to lower interest rates, Freddie helped keep millions of borrowers locked in high-interest-rate mortgages.

***

• Freddie's resistance to refis highlights a central conflict of interest that plagues both Freddie and Fannie. That conflict is even more pronounced now that they are owned by taxpayers. The companies, which own or back about 60 percent of U.S. home mortgages, have a mandate to help expand homeownership and also to generate profits. These goals can work at cross purposes.

For more, see Why Freddie Mac Resisted Refis.

Bankster Attaches 'Liability Release' As Condition To Homeowner Mortgage Resolution Refund Checks

Blogger David Dayen writes in Firedoglake:

• The failings of the 49-state foreclosure fraud settlement have by now become so obvious that even traditional media cannot ignore it. When half of the $2.5 billion earmarked as a hard-dollar penalty to states for aid and relief for struggling homeowners just gets sucked up into filling state budget holes, you can hardly make any excuses.
  
  And the other 90% of the settlement isn’t exactly destined to flow into the hands of homeowners, either; as we know, banks will probably honor up to 1/4 of their “penalty” by doing things they already do as a routine part of their business.
  
  There’s another potential element to this that we’re already starting to see. In relation to a resolution outside the settlement, Wells Fargo has been sending along refund checks to homeowners who overpaid for loans that the bank steered them into. Just one thing, though: the refund checks, if cashed, serve as a legal claim of liability release.

For more, see The Banks Devise a New Deal for Homeowners: Token Relief for Liability Waivers.

Bulk Tax Lien Purchaser Faces Threat Of Being Foreclosed Out From Under By City Over More Recent Delinquent Property Taxes

In Albany, New York, Courthouse News Service reports:

• A Florida company asked a federal judge to bar the city of Schenectady from foreclosing on tax-delinquent properties, claiming it paid the city $43 million for the right to do so.
  
  American Tax Funding, of Jupiter, Fla., says city foreclosures would thwart its own foreclosures in Schenectady and threaten its livelihood.
  
  American Tax Funding is a collections company that buys tax liens in bulk from municipalities that lack resources to recover back taxes from homeowners. American Tax pays cash up-front, then recoups its money from the property owners through repayment plans or foreclosure.
  
  The company paid more than $43 [million] to Schenectady for its tax liens between 2004 and 2009, American Tax claims in its federal complaint.
  
  But in September the city said it would conduct its own foreclosures on tax liens from 2010 and 2011.
  
  American Tax Funding claims that "would render numerous liens that the city sold to ATF worthless," because they could involve some of the same properties.
  
  "The city's threatened foreclosure action would preclude ATF's foreclosures, would preclude ATF from collecting on the payment plans that it has in place with numerous property owners, and would also preclude ATF from purchasing subsequent tax liens pursuant to its right of first refusal under the contracts," according to the complaint.
  
  "Not only would ATF be left unable to recoup its investment in the tax liens if the city were permitted to proceed, these actions on the part of the city will result in the demise of ATF, as AFT would not be able to repay its bank loans obtained to finance the purchase."
  
  ATF's website describes the company as "the nation's leading bulk sale purchaser and servicer of delinquent property tax liens."

For more, see Tax Farmer Sues NY City Over Tax Liens.

Chicago Federal Judge Gives Class Action-Seeking Suit The Go-Ahead; Complaint Alleges State Law Claims That Bankster Botched Homeowner's 'HAMP' Loan Modification Requests

In Chicago, Illinois, the Chicago Tribune reports:

• A Yorkville homeowner's lawsuit alleging that her lender botched her efforts to modify her mortgage will be allowed to proceed and seek class-action status, a federal court judge ruled this week.
  
  The [] ruling by U.S. District Court Judge Sharon Johnson Coleman, denying OneWest Bank's motion to dismiss the case filed by Stacey Fletcher, shows that the door has been opened to homeowners and former homeowners who believe their lenders mishandled applications for participation in the government's loan modification programs, according to Steven Woodrow, one of Fletcher's attorneys.
  
  "It really helps the people who are really being strung along," Woodrow said. "That person may be able to sue the bank for breach of contract."
  
  In 2009, three years after purchasing a home, Fletcher encountered financial difficulties and sought to have her mortgage payments modified by IndyMac Mortgage Services, her lender whose assets have since been acquired by OneWest. According to the suit, a bank representative suggested that Fletcher skip a few mortgage payments in order to qualify for the federal government's Home Affordable Modification Program.
  
  In February 2010 she was approved for a three-month trial payment plan and told, according to the suit, that if she was approved after making those three payments, her modification would be made permanent. Fletcher made the payments, but the bank had trouble crediting her account for the payments and reported her delinquency to credit bureaus. Conflicting letters arrived, including one that came even before the first trial payment was due. That one stated Fletcher was not eligible for a permanent modification because she hadn't made her trial payments.
  
  Two months after the trial period ended, Fletcher hadn't received any decision regarding a permanent loan modification. She filed the lawsuit seeking class action status, alleging, among other things, breach of contract and violations of the Illinois Consumer Fraud and Deceptive Businesses Practices Act.
  
  Fletcher remains in the home, and a foreclosure action has not yet been filed against her because of the pending litigation, Woodrow said. Fletcher declined an interview request.
  
  David Isaacs, a spokesman for OneWest, said the bank doesn't comment on pending litigation.
  
  In her opinion, Coleman cited a federal appellate court ruling in March that favored another Chicago-area homeowner who filed a similar case.(1)
  
  In that case, the 7th Circuit U.S. Court of Appeals overturned a lower court ruling and revived a suit filed by Lori Wigod, a Chicago resident who sued Wells Fargo in 2010. She claimed that the lender broke a promise made in 2009 to give her a permanent loan modification after giving her a four-month trial payment plan.
  
  Lenders have argued that the Home Affordable Modification Program precludes consumers from filing lawsuits alleging federal law violations. But the appellate court ruled that Wigod's state law claims of breach of contract and fraud were not barred by federal laws.
  
  Fletcher's case was put on hold until the appellate court's ruling.
  
  "There's new cases being filed all the time," said Woodrow, who also represents Wigod. "The first wave got knocked off by motions to dismiss. Since the Wigod decision, that's really opened the door for more claims to be filed, rooted in state law, more breach of contract claims."
  
  Woodrow acknowledged that such cases are complex. If it becomes a class-action complaint, the litigation will have to determine the potential class of claimants. It also will have to resolve now much a time delay constitutes breach of contract and how damages would be calculated.

Source: Judge advances suit over botched mortgage modifications (Ruling allows plaintiff to seek class-action status and could help homeowners who believe their lenders mishandled applications for government loan modification programs).

For the ruling, see Fletcher v. OneWest Bank, FSB, No. 10-cv-4682 (D. Ill. October 22, 2012), which denies the bankster's motion to dismiss the homeowner's lawsuit alleging breach of contract, promissory estoppel, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act.

(1) See Wigod v. Wells Fargo Bank, NA, 673 F. 3d 547 (7th Cir. 2012). Unless ultimately reversed by the U.S. Supreme Court, the Wigod ruling supports the proposition that bankster violations of HAMP and its enabling statute, while not actionable by homeowners under Federal law, may be actionable under an applicable state consumer fraud or an unfair/deceptive trade practices statute, or through state common law claims.

See National Consumer Law Center: CONSUMER PROTECTION IN THE STATES: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes for an overview of state consumer fraud, unfair/deceptive trade practices statutes throughout the states.

The binding effect of the Wigod ruling by the 7th Circuit Court of Appeals is limited to all lower Federal courts in the states of Illinois, Indiana, and Wisconsin, but may be considered for its persuasive effect by other courts. To find out which Federal appeals court has jurisdiction over appeals from the lower Federal courts in your state, check the U.S. Circuit Court of Appeals Map.

Elderly HOA Residents Stuck With Crappy Cable Contract; Face Lien, Foreclosure Threats Over Bills For Services They Don't Use

In Ocala, Florida, WFTV-TV Channel 9 reports:

• Some Ocala residents are taking on a cable company they say is forcing them to pay for services they don't use. The homeowners of the Palm Cay community said Cablevision has threatened them with liens and foreclosure.
  
  Some homeowners said they are still charged by Cablevision, even though they use a satellite TV company. The cable company said it doesn't matter.
  
  One homeowner's cable bill, which he said he hasn't paid in years, went up to $1,200 – and ended up in court Wednesday. Leonard and Annette Gaze, residents of Palm Cay, said they have to stand up for themselves and many of their neighbors. "They are afraid. They don't want to make waves. And they're too old to fight. So they just sit back and pay," Leonard Gaze said.
  
  Some residents don't want it. One said she didn't like the excuse she got when her cable went out. "The moon was in the wrong place and we lost our signal," Hill said. She said the company told her they have a contract in the community and she has to pay forever.
  
  When the community, for ages 55-plus, was built back in the 1980s, cable was considered one of the amenities -- homeowners had to pay for it.
  
  But the service has changed hands over the years. The Gaze's said the old rules no longer apply and they haven't paid their bill in years, so they took the case to court with dozens of their neighbors in tow.
  
  A letter from Cablevision's lawyers to the Gazes insists the homeowners are "contractually obligated" to pay their cable bill, whether they use the service or not.
  
  The Gazes said too many seniors in their community have been frightened into paying. "They're afraid their kids will inherit a problem when they die," Annette Gaze said. The court case resumes next Monday with one last witness -- the owner of the cable company.

For the story, see Cable company forcing payments, Ocala residents say.

Widow Finds Herself Facing Foreclosure After Being Duped By Racket Purporting To Provide Government-Connected Mortgage Help

In Omaha, Nebraska, WOWT-TV Channel 6 reports:

• An Omaha widow thought she had found a financial lifeline in the form of a mortgage refinancing company backed by the government. At least that's what it seemed. The woman's trust turned to tears when foreclosure papers came her way.
  
  When her husband Bud died, Cecelia Minshall lost her ability to live in the home they shared for 30 years. “Couldn't make the payments without him. His Social Security kept us going.”
  
  Cecelia turned to a refinancing program that promised to reduce her mortgage payments. “It's all set up to look like it’s government, but it's not.”
  
  She didn't realize she had been misled until after paying monthly fees totaling $5,000 to Financial Services Center. “I gave this company my mortgage money and they never sent it in to the mortgage company, so now I'm in danger of losing my home.” [...] The phone number for the Financial Services Center in California connects to a voice mail. Fact Finders called and it is full.

For the story, see Widow Scammed Out Of $5,000 Nearly Lost Home.

Foreclosure Rescue Operator Found Guilty In Homeowner Ripoff Involving Abuse Of Bankruptcy System, Bogus Home Buyback Promises

From the Office of the U.S. Attorney (New York City):

• Preet Bharara, the United States Attorney for the Southern District of New York, announced that ANDREW BARTOK, a former owner of the foreclosure remediation business Revelations Consulting (“Revelations”), which was located in New Jersey and Connecticut, was found guilty [] in White Plains federal court of charges related to a scheme to defraud distressed homeowners, commit witness tampering and obstruct federal court proceedings.
  
  BARTOK was convicted after a 15-day jury trial presided over by U.S. District Judge Cathy Seibel. He was remanded into the custody of the U.S. Marshals following his conviction.
  
  Manhattan U.S. Attorney Preet Bharara said: “Andrew Bartok dangled false promises of relief to desperate homeowners who were trying to keep their homes, but instead, he victimized them by stealing their money and forcing many of them into involuntary bankruptcy. While Andrew Bartok vacationed in tropical locales and spent his hours in casinos gambling away his clients’ hard-earned money, his clients were losing their most treasured possessions – their homes. He will now face justice for the fraud that he committed against vulnerable and needy homeowners up and down the East Coast.”
  
  According to the Superseding Indictment filed in White Plains federal court, other court documents, and the proof at trial:
  
  From 2000 through February 2011, BARTOK owned Revelations, a company which also operated under the name “Foreclosure Club of America.” BARTOK and his co-conspirators at Revelations and Foreclosure Club of America solicited individuals in New York, New Jersey, Connecticut, Pennsylvania, Georgia and Florida who were facing foreclosure proceedings on their homes. BARTOK promised those homeowners that – in exchange for fees paid to Revelations – they would be able to stay in their homes and later repurchase their homes at foreclosure auctions for a fraction of the dollar amount of their mortgage obligations.
  
  In reality, BARTOK and his co-conspirators defrauded hundreds of homeowners of millions of dollars. None of BARTOK’s clients ever bought their homes back using the methods he advocated. Instead, BARTOK and his co-conspirators filed fraudulent bankruptcy petitions and other false documents with U.S. Bankruptcy Courts, primarily in Poughkeepsie, New York, and Newark, New Jersey. BARTOK and his employees forged the names of Revelations’ clients on fraudulent filings under penalty of perjury, subjecting these clients to potential arrest and imprisonment.
  
  BARTOK and his co-conspirators also routinely instructed clients not to attend court proceedings, and not to mention Revelations if contacted by court personnel. As a result of following this advice, at least two of Revelations’ clients were arrested by U.S. Marshals and brought before a U.S. Bankruptcy Judge in Poughkeepsie to explain false documents that BARTOK filed in their names. These clients of Revelations were released after they explained BARTOK’s role in these filings.
  
  The fraudulent documents were filed by BARTOK and his co-conspirators in U.S. Bankruptcy Courts for the improper purpose of using the bankruptcy laws to forestall the foreclosure of the clients’ homes as long as possible while Revelations continued to collect its monthly fees.(1) Ultimately, the bankruptcy cases were dismissed and Revelations’ clients – who already had paid significant sums of money to Revelations – were evicted from their homes.
  
  Throughout the fraud, BARTOK collected millions of dollars in fees from his victims.

For the U.S. Attorney press release, see Owner Of Foreclosure Remediation Business Found Guilty In White Plains Federal Court For Fraudulent Scheme That Preyed On Distressed Homeowners.

(1) See Final Report Of The Bankruptcy Foreclosure Scam Task Force for a discussion of the various foreclosure rescue rackets involving the abuse of the bankruptcy court system.

Would-Be Homeowner Victimized In Rent-To-Own Racket: "If Somebody Says, 'We Finance Homes; Ugly Credit, No Credit,' Don't Buy It! Do Your Research. I Didn't, & I Got Stung!"

In Philadelphia, Pennsylvania, WPVI-TV Channel 6 reports:

• In a special consumer report, Action News helps some families who have fallen victim to a real estate scam and are now on the verge of losing their homes. Action News Consumer Reporter Nydia Han has been investigating the man they say is responsible for their troubles.
  
  It is a heartbreaking situation. They say they invested almost all of their money to own what they thought would be their dream home, but after putting in tens of thousands of dollars, they say they are at risk of losing everything.
  
  "We like it here," said one homeowner. "It's a nice little neighborhood. There are children around they can play with." The father of three, who has asked us to be identified as James, tells Action News he spent $30,000 making his house in Montgomery County a home.
  
  Deneane Grigger says she did the same thing on her home in Delaware County. "Fixing the light fixtures and all kinds of stuff with my money, my hard-earned money that I saved up," she said.
  
  Both say they responded to ads targeting people with Bad Credit, No Credit, or Ugly Credit, and then entered into Rent-to-Own agreements for their homes with Jimmy Zaspel of JimmyZHomes.
  
  "We buy and sell houses and we specialize in selling houses on rent-to-own programs and help people with less than stellar credit realize the dream of home ownership," said Jimmy Zaspel.
  
  James says he gave Jimmy Z a total of more than $50,000, first for rent and then to pay his mortgage. Deneane says she paid out $13,000. Both say their money was wasted.
  
  "I am a single mother with three kids, and I don't have money like that to be wasting," said Deneane. "I am out of everything that I had been saving, thinking that I was finally getting a house that I can fix up and call my own. I've been flim-flammed." The home Deneane lives in was foreclosed on this week.
  
  James is petrified he could lose his home, too, because he says Jimmy Z failed to pay the underlying mortgage. "We just sunk down roots and there's the very real possibility that they could move to foreclose on this property, and I don't have a say in it," said James.
  
  Deneane has filed a lawsuit accusing Jimmy Zaspel and his company, Tulip Enterprises, of negligent misrepresentation, fraud, breach of contract, and violation of the unfair trade practices and consumer protection law.
  
  "I'm just looking for my money back so I can just move on and find another house for me and my family and just be done with it," said Deneane.
  
  Deneane says her house was already in foreclosure when she entered into the Rent-to-own deal with JimmyZ. When asked about it, Zaspel said, "That's what she says. She's mistaken."
  
  Action News asked Zaspel how the home could be in foreclosure when he put it under a rent-to-own agreement? His response, "Well, that's because you're not a real estate investor, are you?"
  
  But consumer advocates say it doesn't take a real estate investor to spot this kind of trouble. Ed Magedson of RipOff Report warns that all renters and home buyers must beware. "This is a tremendous problem around the country," said Magedson. "This is going on everywhere."
  
  "If somebody says, 'We finance homes; ugly credit, no credit,' don't buy it. Do your research. I didn't, and I got stung," said James.(1)
  
  Zaspel says he stopped paying the underlying mortgage on the home James lives in only after James stopped paying him. Both Zaspel and James tell me they plan on filing lawsuits against each other.(2)

Source: Nydia Han tracks down man behind real estate scam.

(1) If the allegations made against Zaspel are true, he may make for a pretty good suspect for, at a minimum, criminal charges of theft by deception/theft by false pretenses and organized fraud, charges that could be brought by local and state law enforcement authorities. The Feds could also be interested in his antics for possible violations of federal conspiracy charges, as well as federal wire and mail fraud charges if he employed telephonic communications or mail delivery in pulling off this racket.

In a similar-sounding case, the Detroit, Michigan Feds recently criminally charged a real estate operator for allegedly using dubious 'land contract' deals to peddle illusory home ownership dreams using houses in foreclosure to unwitting, would-be homebuyers. See Detroit Feds Pinch Notorious Area R/E Operator Suspected Of Screwing Over Naive Homebuyers With Land Contracts On Homes In Some Stage Of Foreclosure. (Reportedly, the victims found the property on Craigslist ads, which in part, lead to the wire fraud charges against the real estate operator. See Real estate investor charged with wire fraud in connection to homes sold through Craig's List).

In addition, the Philadelphia, Pennsylvania Feds (prosecutors that may have jurisdiction in the case reported in the WPVI-TV Channel 6 story, above) have not been reluctant to bring prosecutions involving home ownership-related  ripoffs. See, for example:

• Philly 'Dream-Killing Slumlord' Cops Plea To Loan Fraud In Connection With Rent To Own Racket That Left Wanna-Be Homeowners Screwed Over,
• Use Of Novel Dual Criminal/Civil Prosecution Targeting Sale Leaseback-Peddling Racket Yields Guilty Pleas, Keeps Victims From Getting Boot From Homes.

(2) As a reminder to those who mistakenly believe that these apparent ripoff deals are nothing more than civil cases (as opposed to criminal matters), it is clear that all the sophisticated paperwork in the world (ie. business/purchase contracts, leases, closing statements, etc.) isn't enough to permit scammers to insulate themselves from criminal prosecution when they target their victims with legitimate-looking business propositions when screwing them over. Criminal prosecutors have the authority to "pierce through" such attempts to disguise a blatant criminal real estate ripoff as a common, legitimate business deal.

Clear precedent exists for such a "pierce through" approach to overcome any objections that will certainly arise when the scammers make the argument that the arrangement was just a civil transaction that, if challenged, should be done with a civil lawsuit, not a criminal prosecution. See, for example:

• People v. Frankfort, (1952) 114 Cal.App.2d 680, 700; 251 P.2d 401:
  
  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.)
  a
• People v. Jones, (1943) 61 Cal.App.2d 608, 620 [143 P.2d 726]:.
  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.
  
  [***]a
  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].)

The Looting Of The Mortgage Settlement Fund

Blogger Adam Levin writes in The Huffington Post:

• States are looting the Mortgage Settlement Fund, and the odds are good that you or someone you know is getting robbed -- for the second time.
  
  According to recent reports, politicians, not bankers, are the culprits this time around -- siphoning billions from that historic settlement and pumping it into their broken state budgets. Instead of "manning up" and changing their diet, they're taking a cue from ancient Rome: After a quick trip to the vomitorium, it's back to the banquet table. (Care for a mint?)
  
  Their willingness to play fast and loose with the settlement -- crawling through certain wiggle words in its language to circumvent the clear intent of its negotiators --- tells me they still haven't learned where "fast and loose" leads.

For more, see Back From the Vomitorium: The Looting of the Mortgage Settlement Agreement.

Disbarred NJ Attorney In More Hot Water; Pinched For Allegedly Hijacking Title To House Using Forged Deed, Then Pocketing Close To $1M Through Multi-Mortgage Refinancing

From the Monmouth County Prosecutor's Office:

• Alexander Iler, 38, of Middletown, was arrested [] on a charge of second-degree theft for fraudulently converting the ownership of a Middletown property to his own name, Acting Prosecutor Christopher J. Gramiccioni announced. Iler, formerly a licensed attorney, was disbarred from the practice of law in July 2012. He previously maintained a law practice in Red Bank, N.J.
  
  The investigation undertaken by the Monmouth County Prosecutor’s Office revealed that
  Iler fraudulently assumed ownership of a Middletown property by recording a deed, at the Monmouth County Clerk’s Office, which contained a forged signature of the purported “seller.”
  
  Though no sale of the property had actually taken place, the fraudulent deed purported to reflect a transfer of the property from the seller to Iler for a sale price of $575,000 in December 2011. Iler subsequently encumbered the real estate with multiple mortgages, totaling approximately $1,000,000.
  
  Iler was arrested on October 24 and was remanded to the Monmouth County Correctional Institution in lieu of a $250,000 bail, with no 10% option, set by Superior Court Judge Richard W. English., J.S.C. Conditions of bail also required Iler to surrender his passport and submit to a hearing on the source of any funds posted for bail.

For the press release, see Former Red Bank Attorney Arrested for Fraudulently Converting Middletown Property.

Attorney Scores 'Get Out Of Jail Free' Card After Admitting To $70K+ Theft While Acting As Fiduciary; Allowed To Walk In Exchange For Probation, 'Payback' Promise

In Braxton County, West Virginia, The West Virginia Record reports:

• A Braxton County attorney will remain a free man after admitting to embezzling nearly $75,000 from a trust account he was appointed to oversee.
  
  Thomas J. Drake on Sept. 13 was indicted via information on a single charge of embezzlement. According to the indictment, Drake converted $70,798.57 belonging to the ATS Settlement Trust between July 2009 and August 2011.
  
  No details are provided about the trust, and when Drake was made its trustee. The only other information available is that Drake’s embezzlement of the funds took place in Elkview.
  
  In exchange for agreeing to plead guilty, Assistant Kanawha County Prosecutor Rob Schulenburg offered to recommend Drake get probation for a term to be determined by Judge James C. Stucky. Also, as a condition of his probation, Drake was to make court-ordered restitution.(1)
  
  As of presstime, Stucky’s sentencing order was not available. According to his attorney William C. Forbes, Stucky placed Drake on two years probation.

For the story, see Braxton attorney gets probation for embezzlement.

(1) The victim may be able to look to the West Virginia State Bar's Lawyers Fund for Client Protection,  which was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a West Virginia-licensed attorney, for a source of recovery of the pilfered cash if the defendant stiffs it on its restitution promise.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian recovery funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

Another Attorney Pinched For Allegedly Stealing Settlement Funds From Clients' Trust Account

In Dallas, Texas, The Southeast Texas Record reports:

• A Dallas attorney was indicted recently for allegedly stealing money from his clients.
  
  Thomas Corea faces four first degree felonies after he was indicted Aug. 27 by a Dallas County grand jury. He is accused of stealing settlement funds from clients’ trust accounts, using false information to secure loans and stealing identities to apply for various loans and credit cards.
  
  The indictments are the result of a seven month investigation by the Dallas County District Attorney’s Office.
  
  Corea is charged with theft over $200,000, misappropriation of funds over $200,000 by a fiduciary, securing the execution of a document by deception worth more than $200,000 and fraudulent use and possession of identification information. He allegedly stole the identity of another Dallas attorney and used it to apply for a variety of American Express credit cards.(1)

***

• Corea had been hosting a live call-in program, “Ask the Lawyer with Tom Corea,” at noon on Tuesdays and Thursdays on station KTVT.

For the story, see TV lawyer indicted for stealing clients’ money.

(1) If the defendant is convicted, any victims may be able to look to The Client Security Fund of the State Bar of Texas, which was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Texas-licensed attorney, for a source of recovery of the pilfered cash.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian recovery funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

Newly-Enacted Ordinance That Forced Local Businessman To Permanently Close Down, Lose Premises To Foreclosure Found Unconstitutional; City Now On Major 'Damages' Hook For Passing & Enforcing Crappy Law

In Jeannette, Pennsylvania, the Pittsburgh Tribune Review reports:

• Cash-strapped Jeannette could be forced to pay a city businessman more than $500,000 in damages from real estate and business losses sustained because of an unconstitutional ordinance enforced in 2005.
  
  Businessman Frank Trigona testified Monday during a nonjury trial before Westmoreland County Judge Richard E. McCormick Jr. that his restaurant was forced to close permanently and a building he leased to a day care center underwent foreclosure as a result of the Jeannette law that prevented occupancy of either structure.
  
  The restaurant, which had been in operation on Clay Avenue for more than a century, was closed in May 2005 when city officials used a newly enacted ordinance to refuse to issue Trigona health permits because he owed taxes on the building. That same ordinance was used to prevent Trigona from occupying and making storm damage repairs to a building on Fourth Street that was being leased by a day care center.
  
  In 2009, Westmoreland County Judge Daniel J. Ackerman ruled the Jeannette ordinance was unconstitutional. The state Supreme Court later upheld that finding.(1)
  
  McCormick is now being asked to decide just how much money Trigona is due because of the faulty law.
  
  “The city of Jeannette enforced an improper ordinance. Under the Constitution and the laws of the commonwealth, Mr. Trigona is entitled to damages,” said his attorney, William Lightcap.
  
  Lightcap said Trigona sustained about $500,000 in damages.

***

• Trigona testified that he did not have the financial means to reopen the restaurant after the ordinance was overturned. “I was just not able to reopen,” Trigona said.
  
  Trigona said he sustained lost rent payments from Seton Hill Child Services, which rented the Fourth Street building since 1999 for the day care center. Trigona told the judge he was in the process of negotiating a new five-year deal when Jeannette enforced its illegal ordinance.

For the story, see Unconstitutional law might cost Jeannette $500,000.

(1) For the court ruling, see Trigona v. Lender, 926 A. 2d 1226 (Pa. Cmwlth. 2007); appeal denied Trigona v. Lender, 944 A. 2d 760 (Pa. 2008).

NYC Feds Clip Bronx Landlord For $75K In Fair Housing Suit Settlement; Building Super Admits Stiffing Black Prospective Renters While, On Same Day, Welcoming Apartment-Seeking Whites With Open Arms

From the Office of the U.S. Attorney (New York City):

• Preet Bharara, the United States Attorney for the Southern District of New York, [] announced a settlement of the United States’ lawsuit against LOVENTHAL SILVER RIVERDALE, LLC, GOODMAN MANAGEMENT, and JESUS VELASCO for discriminating against African-American apartment seekers in violation of the Fair Housing Act.
  
  The settlement, in the form of a consent decree, resolves a lawsuit filed by the United States on September 26, 2011. It enjoins LOVENTHAL SILVER RIVERDALE, GOODMAN MANAGEMENT, and VELASCO from discriminating based on race or color in the terms or conditions of renting a dwelling, and establishes a $35,000 victim fund that will be available to compensate the victims of their discriminatory practices.
  
  Defendants LOVENTHAL SILVER RIVERDALE and VELASCO must also pay a $40,000 civil penalty.

***

• According to the Complaint and the Consent Decree filed in Manhattan federal court:
  
  LOVENTHAL SILVER RIVERDALE owns an apartment complex at 3800 Independence Avenue in Riverdale, New York, which consists of approximately 72 rental apartment units. GOODMAN MANAGEMENT is the management company for the complex. Under the settlement, VELASCO, the superintendent of the complex, admits that, on repeated occasions, he informed prospective African-American tenants that there were no available apartments, while, on the same day, he informed prospective Caucasian tenants that there were available apartments in the building.

For the U.S. Attorney press release, see Manhattan U.S. Attorney Settles Housing Discrimination Lawsuit With Owner, Manager, And Superintendent Of Riverdale Apartment Complex (Superintendent Admits that He Did Not Show Available Apartments to African-Americans).

For the lawsuit, see U.S. v. Loventhal Silver Riverdale LLC, et al. (go here for the settlement agreement).

Civil Rights Feds Tag HOA, Management Co. w/ Fair Housing Suit Over Alleged Overly-Restrictive Occupancy Limit For Homes That Reflects Bias Against Renters With Kids

From the U.S. Department of Justice (Washington, D.C.):

• The Justice Department [] filed a lawsuit against the homeowners association and former manager of a 249-townhome community in Gibsonton, Fla., for violating the Fair Housing Act by discriminating against families with children.
  
  The lawsuit, filed in the U.S. District Court for the Middle District of Florida, charges that Townhomes of Kings Lake HOA Inc. engaged in a pattern or practice of violating the Fair Housing Act by adopting, maintaining, ratifying, and, along with Vanguard Management Group Inc., enforcing occupancy standards unduly limiting the number of individuals who can reside in the townhomes.
  
  The suit also charges that the defendants violated the Fair Housing Act by threatening to evict a couple and their six minor children from the four-bedroom townhome they were renting and by taking other actions to interfere with their tenancy.

***

• The lawsuit arose when the family filed a complaint with the Department of Housing and Urban Development (HUD). After the family had moved into the home, the management company and the homeowners association indicated there was a problem with the number of children living there. The defendants’ occupancy policy allowed only six individuals to occupy the home, which was far more stringent than what Hillsborough County permitted.
  
  The homeowners association also adopted similarly restrictive limitations on the number of individuals who could live in two- and three-bedroom townhomes in Kings Lake. After HUD investigated the complaint, it issued a charge of discrimination and the matter was referred to the Justice Department.

For the Justice Department press release, see Justice Department Files Fair Housing Lawsuit Against Florida Homeowners Association and Management Company for Discrimination Against Families with Children.

For the lawsuit, see U.S. v. Townhomes of Kings Lake HOA, Inc. et ano.

Another Clueless Private Equity Real Estate Investor Leaves 10-Building, 475 Unit Mess In Upper Manhattan; Low Income Renters, Local Pols Now Concerned With Possible Flip To New Speculator

In New York City, Crain's New York Business reports:

• City officials flagged 10 apartment buildings in the Washington Heights section of Manhattan as "at-risk properties" in danger of deterioration and falling into further distress.
  
  The buildings, which house 475 units located at 566 and 570 W. 190th streets, are among several apartment complexes across the city in which owners paid hefty sums at the top of the market in hopes of raising rents but failed to do so and defaulted on their mortgages and left the properties in disrepair. The buildings will fall under the city's Proactive Preservation Initiative, a year-old program designed to monitor properties that carry liens and a high number of housing code violations.
  
  Now, the buildings' tenant associations, city officials and local politicians are expressing concern that another over-leveraged investor may take over the Washington Heights properties.

***

• Vantage Properties bought the buildings in 2007. It defaulted on a $44 million mortgage issued by Anglo Irish Bank in August 2010.
  
  A year later, Lone Star Funds, a Texas-based private equity investment group, bought the loan through an auction of Anglo Irish's non-performing and sub-performing loans and began foreclosing on the properties in March, according to the city. Lone Star is now marketing the property for $50.75 million, or more than the current mortgage on the buildings.

For more, see City: 10 Washington Heights apt. buildings 'at risk' (Officials, politicians and housing advocates are lining up against a private-equity group trying to flip deteriorating properties it bought in foreclosure last year).

See also, Pols Join Forces To Protect Rents at Foreclosed Manhattan Apartments.

Ex-LA Public Housing Official Gets 51 Months In $500K+ Ripoff; Coordinated w/ Brothers To Set Up Sham Companies To Pocket Cash Meant For ADA-Compliant Construction For Low Income Disabled Renters

From the Office of the U.S. Attorney (Los Angeles, California):

• A former public official who orchestrated a conspiracy involving his two brothers that stole more than $500,000 from the Housing Authority of the City of Los Angeles (HACLA) was sentenced [] to 51 months in federal prison.
  
  Victor Taracena, 41, who formerly resided in Burbank, was sentenced by United States District Judge Percy Anderson. In addition to the prison term, Judge Anderson ordered Victor Taracena to pay $526,727 in restitution to HACLA.
  
  Victor Taracena managed HACLA’s construction program for public housing units occupied by disabled residents, and the money that he and his brothers stole was intended to build accommodations that complied with the American with Disabilities Act.
  
  In June, Victor Taracena’s two brothers – Diego L. Taracena, 37, and Bennett A. Taracena, 32, both of Burbank – each were each sentenced to 21 months imprisonment.
  
  All three Taracena brothers pleaded guilty earlier this year to conspiracy charges. As part of the scheme, Diego and Bennett Taracena established four sham companies to get contracts from HACLA. After establishing bank accounts for those sham companies, Diego and Bennett Taracena accepted $526,727 from HACLA over the course of 3½ years. Despite receiving the payments, the companies did not perform any actual work.

For the U.S. Attorney press release, see Third Brother Sentenced to Over Four Years in Prison in Plot that Stole Over $500,000 Designated for Low-Income, Disabled Residents.

NYC Feds Tag BofA For $1B For Allegedly Generating Thousands Of Fraudulent & Otherwise Defective Home Loans Peddled To Fannie, Freddie

In New York City, The Associated Press reports:

• The latest federal lawsuit over alleged mortgage fraud paints an unflattering picture of a doomed lender: Executives at Countrywide Financial urged workers to churn out loans, accepted fudged applications and tried to hide ballooning defaults.
  
  The suit, filed Wednesday by the top federal prosecutor in Manhattan, also underscored how Bank of America’s purchase of Countrywide in July 2008, just before the financial crisis, backfired severely.
  
  The prosecutor, Preet Bharara, said he was seeking more than $1 billion, but the suit could ultimately recover much more in damages. “This lawsuit should send another clear message that reckless lending practices will not be tolerated,” Bharara said in a statement. He described Countrywide’s practices as “spectacularly brazen in scope.”
  
  He also charged that Bank of America has resisted buying back soured mortgages from Fannie Mae and Freddie Mac, which bought loans from Countrywide.

***

• Bharara said the lawsuit was the first civil fraud suit brought by the Justice Department concerning loans later sold to Fannie and Freddie. When Fannie and Freddie collapsed, investors were wiped out.
  
  Taxpayers have spent $170 billion to keep Fannie and Freddie afloat, and it could cost $260 billion more to support the companies through 2014 after subtracting dividend payments to taxpayers, according to the government.
  
  The lawsuit says that Fannie and Freddie suffered $1 billion in losses because they had to pay for Countrywide’s defaulted loans. The lawsuit also complains that Bank of America is refusing to buy back mortgages “even where the loans admittedly contained material defects or even fraudulent misrepresentations.”

***

• For at least two years, Bank of America and other banks have been sifting through so-called repurchase demands from Fannie, Freddie and other investors who bought its mortgages. The repurchase demands contend that the bank should buy back mortgages that have since gone bad.

***

• In the past year and a half, Bharara’s office has settled lawsuits against CitiMortgage, Flagstar Bank and Deutsche Bank over mortgages. Its lawsuits against Wells Fargo and Allied Home Mortgage are pending.
  

For the story, see US suit cites ‘brazen’ mortgage fraud at Countrywide, even after Bank of America purchase.

For the U.S. Attorney press release, see Manhattan U.S. Attorney Sues Bank Of America For Over $1 Billion For Multi-Year Mortgage Fraud Against Government Sponsored Entities Fannie Mae And Freddie Mac.

For the lawsuit, see U.S. v. Countrywide Home Loans, Inc., et al.

Arizona AG Squeezes $75K In Penalties, Restitution From Woman Suspected Of Running Loan Modification Racket; Refused Giving Refunds On Failed Assistance, Saying Homeowner Payments Were Donations To Her Church

From the Office of the Arizona Attorney General:

• Arizona Attorney General Tom Horne has obtained a Consent Judgment against Rosa Galope in a consumer fraud lawsuit in which the State alleged that Ms. Galope engaged in a scheme designed to defraud homeowners looking for assistance in obtaining mortgage loan modifications and forestalling foreclosure on their homes.
  
  The State alleged that Ms. Galope charged distressed homeowners thousands of dollars in advance fees for her services and, when she was unable to obtain results for her clients, refused to refund their money while claiming that their payments were donations to her church, Nation to Nation Ministries.
  
  The State also alleged that Ms. Galope instructed her clients to not communicate with their lenders and to send their mortgage payments to her so that she could forward them to the consumer’s mortgage lender, while keeping the money for her own use.

***

• The terms of the judgment require Ms. Galope to pay full restitution to consumers who filed a complaint with the Attorney General’s Office, an amount of nearly $65,000. Ms. Galope was also ordered to pay $10,000.00 in civil penalties and is prohibited from engaging in any loan modification activities in Arizona or on behalf of Arizona consumers.
  
  In entering into the Consent Judgment Ms. Galope did not admit that she violated the law nor did the court make findings that she did so.

For the Arizona AG press release, see Consent Judgment for West Valley Woman Who Claimed "Church Donations" as Part of Alleged Mortgage Modification Scheme.

Caretaker Pinched In Alleged $400K Ripoff Of Now-Deceased Dementia Patient; Loot Included Proceeds From Reverse Mortgage Loan On Victim's Home

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:

• A 55-year-old Lauderhill woman was charged with grand theft and elderly exploitation, on Wednesday, and accused of stealing an estimated $400,000 from the Deerfield Beach woman she was paid to care for, according to the Broward Sheriff's Office.
  
  Lorna Mulgrave was a home health care aide for Jean Barbara between March 2007 and March 2010 when Barbara died at the age of 93, investigators said.
  
  Barbara's grandson, Russell Markowitz, had hired Mulgrave temporarily to care for Barbara after a fall in 2006 that required 12 stitches to Barbara's knee. But, the doctor diagnosed Barbara with dementia and said she needed 24-hour care and could no longer drive, medical records showed.
  
  Markowitz arranged to pay Mulgrave $500 per week to care for Barbara. The arrangement worked for about eight months until Markowitz and his family traveled from New Jersey to Deerfield Beach for a visit. He found several cancellation notices for the electric bill and insurance coverage, according to the arrest report.

***

• Bank of America records revealed Mulgrave opened a joint account with Barbara in July 2007 without telling Markowitz. He later told detectives hundreds of thousands of dollars were funneled through the account without his knowledge.
  
  In addition to the $500 payments she received, Mulgrave paid herself an extra $157,000 over the three years she cared for Barbara. Records showed Mulgrave also gave money to her daughter Sherika Jackson and her son-in-law Shane Jackson.

***

• Markowitz said thousands worth of gold and diamond jewelry, including his grandmother's engagement and wedding rings, were missing. Her credit cards were maxed out at $30,000 as well, he said.
  
  Mulgrave also is accused of cashing out Barbara's $170,000 worth of Certificates of Deposit, despite early withdrawal penalties. She also managed to get a reverse mortgage for the house that Barbara owned outright for 30 years. Mulgrave burned through an estimated $148,000 within six months, investigators said.
  
  Barbara died thousands of dollars in debt, Markowitz said.

For the story, see Caretaker accused of stealing from elderly client (Lorna Mulgrave, 55, watched over Jean Barbara, 93).

California Regulator Hammers Underwriter Peddling Force-Placed Insurance With 30.5% Rate Reduction; Homeowner Savings Estimated At $42.7M

The California Department of Insurance recently announced:

• Insurance Commissioner Dave Jones [] announced a 30.5 percent rate reduction, for "lender-placed" (also called force-placed) homeowner insurance coverage offered by American Security Insurance Company (an Assurant Inc.-owned company). The reduction will result in an estimated $42.7 million savings to homeowners, with an average savings to policyholders of $577 annually.
  
  Force-placed insurance has been subjected to controversy because, under certain circumstances, homeowners are forced to purchase the policies. These policies are primarily intended to protect the lender's interest in the property and typically come with exorbitant costs that are often much higher than standard homeowners insurance policies.
  
  In March, Commissioner Jones contacted the state's largest "lender-placed coverage" insurers to express his concerns about apparent excessive rates. He directed insurers to submit new rate filings with the California Department of Insurance (CDI) to determine if rates could be reduced.
  
  Force-placed insurance has been the subject of national scrutiny and there have been investigatory hearings regarding this insurance in the states of New York and Florida, as well as at the annual meeting of the National Association of Insurance Commissioners (NAIC).
  
  At the Commissioner's direction, CDI carefully examined the insurers' annual financial statement data, and found many cases of low loss ratios. The low loss ratios (the percentage of every premium dollar an insurer spends on actual claims) were a flag to Department officials that rates charged by insurers may be excessive. Insurers were directed to provide a response to CDI by April 1, 2012.
  
  Today's rate reduction is a result of the efforts taken by the Commissioner earlier this year. American Security is the first insurer to lower rates based on the Commissioner's action.

For the California Department of Insurance press release, see Insurance Commissioner Dave Jones Announces $42.7 Million Rate Reduction For Policyholders Of "Force-Placed" Mortgage Insurer (Warns Consumers Not to Let Homeowners Insurance Lapse).