IF YOU HAD A SECOND MORTGAGE IN CALIFORNIA AND YOUR PROPERTY WENT THROUGH FORECLOSURE YOU CAN STILL BE SUED
FACTS
Heritage Pacific Financial Inc. a Texas company is aggressively pursuing hundreds of Californians to collect second mortgage debt on homes they’ve already lost through foreclosure.
Many former homeowners even now believe their mortgage debt had been erased after their houses were foreclosed upon and taken by banks and lending companies. But Heritage Pacific Financial has pursued collections and filed lawsuits claiming those debts still linger.
Heritage Pacific was started by identical twin brothers Chris and Ben Ganter, who once starred in a reality TV show, “PayDirt,” about investing in the Dallas-Fort Worth real estate market. The company’s lawsuits often accuse defendants of misstating their incomes on loan applications. While many borrowers did overstate their incomes on applications, consumer attorneys say Heritage Pacific is targeting people who filled out their forms honestly or whose mortgage brokers pumped up their applications without their knowledge.
Critics of Heritage Pacific say the company’s central tactic is forcing settlements from people who can’t afford a drawn-out legal fight and who don’t know the details of California law. The company has sued people with second-mortgage debts of less than $150,000, despite a state law prohibiting lawsuits alleging fraud on mortgages below that amount.
Heritage Pacific’s collection methods now face legal challenges, including a class-action lawsuit in Santa Clara County Superior Court that contends that the company is carrying out an “insidious and illegal debt collection scheme.”
The company doesn’t make mortgage loans, but instead attempts to collect payments on loans originated by others. Heritage Pacific launched its effort in late 2008 when it began buying at a steep discount second mortgage loans that borrowers had stopped paying. Many of the loans were secured by houses that already had been sold in foreclosure by first mortgage lenders.
By demanding payments from more than 1,000 individuals in California, the lawsuit contends, Heritage Pacific has violated “the rights of those who have already suffered the emotional and financial distress that results from the loss of their foreclosed home.”
In an answer to the lawsuit, Heritage Pacific says it’s not suing “innocent home-owners who, through no fault of their own, lost their homes.” Instead, the company says it targets defendants who “made material misrepresentations to secure large loans upon which they soon stopped paying.” Fraud claims “are the only ones we’re interested in pursuing,” Chris Ganter, the company’s chief executive and main owner, said in an interview. Some former homeowners now threatened with legal action by Heritage Pacific dispute these claims. They told California Watch that the income they claimed on their mortgage applications was valid, and they stopped paying because they lost their jobs, their income plummeted, and the banks foreclosed on their houses. Others said they signed applications that had been prepared by brokers.
Fraud accusations against former homeowners became Heritage Pacific’s tactic for restoring value to its second-mortgage notes. California law gives a lender that can prove that a borrower fraudulently obtained a loan for more than $150,000 the right to sue. A creditor also may allege fraud to prevent a debt from being erased in bankruptcy.
Heritage Pacific’s first California lawsuits came in U.S. District Court in Los Angeles, where in a three month period beginning in December 2009, it filed suits seeking $46 million in actual and punitive damages from 158 defendants who took out 143 loans.
California Watch reviewed online records in 10 of the California’s 17 largest counties and found 365 lawsuits in which Heritage Pacific was a party. Heritage Pacific also has filed 226 cases in federal bankruptcy courts in California.
This story was originally produced by California Watch, the state’s largest investigative reporting team. It is a part of the independent, nonprofit Center for Investigative Reporting. (californiawatch.org52312)
MORAL
There are protections that many people have to protect themselves against these types of lawsuits.
GSE SHORT SALE DECISIONS WITHIN 60 DAYS
FACTS
Starting June 15, the Federal Housing Finance Agency, which regulates both Fannie Mae and Freddie Mac, will require both agencies to give short sale buyers final decisions within 60 days. The new rules also mandate that Fannie Mae and Freddie Mac respond to initial requests for short sales within 30 days of receiving a buyer’s submission.
MORAL
Increase your short sale activity with properties that have mortgages with Fannie Mae and Freddie Mac.
THE BIG PROBLEM WITH HELOCS IN CALIFORNIA
FACTS
The owner of real property takes out a second or even a first mortgage lien equity line of credit. The owner gives the lender a deed of trust on the property to protect the loan. The line of credit is (let us say hypothetically) $75,000. The owner borrows $50,000 and then later pays it back. The balance is now zero. Owner now sells the property to a third party. Owner now after the sale a year later (regardless of how many times the property is sold0 finds the HELOC is still active and borrows $75,000 against it even though owner now no longer owns the property. Will the lender lend?
MORAL
The HELOC is still attached to the property and whoever owns it must check that the old owner (seller) does pay it and cancels the deed of trust or the new owner may well be stuck with it to the point of foreclosure. If you have a HELOC and pay it off and are going to sell the property you must tell the lender to reconvey the HELOC deed of trust. They do not do it simply because the balance is zero. The deed of trust will follow all sales. If title does not pick it up because of the zero balance it still exists. So check if the seller ever took a HELOC out on the property and make sure it was reconveyed back because the lender in the majority of cases does not do it voluntarily and the lender is not legally required to do it unless you request it.
TWO MORE NORTHERN CALIFORNIA REAL ESTATE INVESTORS AGREE TO PLEAD GUILTY TO BID RIGGING AT FORECLOSURE SALES. FACTS
Two Northern California real estate investors, Douglas Ditmer of San Ramon and Keith Slipper of Oakland, have agreed to plead guilty for their roles in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California. The felony charges were filed June 7, in the U.S. District Court for the Northern District of California in Oakland.
To date, as a result of the department’s ongoing antitrust investigation into bid rigging and fraud at public real estate foreclosure auctions in Northern California, 24 individuals, including Ditmer and Slipper, have agreed to plead or have pleaded guilty.
According to court documents, Ditmer and Slipper participated in conspiracies to rig bids and commit mail fraud by agreeing to stop bidding or to refrain from bidding for properties at public foreclosure auctions in Contra Costa and Alameda counties, negotiating payoffs with other conspirators not to compete, purchasing selected properties at public auctions at suppressed prices, and participating in second, private auctions open only to members of the conspiracy, where the property was awarded to the conspirator who submitted the highest bid.
The department said Ditmer conspired with others to rig bids and commit mail fraud at public real estate foreclosure auctions in Contra Costa County beginning as early as July 2008 and continuing until about January 2011, and in Alameda County beginning as early as June 2007 and continuing until about January 2011. Slipper conspired with others to rig bids and commit mail fraud at public foreclosure auctions in Contra Costa County beginning as early as June 2008 and continuing until about December 2010, and in Alameda County beginning as early as March 2009 and continuing until about May 2009.
The department said that the primary purpose of the conspiracies was to suppress and restrain competition in order to obtain selected real estate offered at Contra Costa and Alameda county public foreclosure auctions at non-competitive prices. According to court documents, these conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner.
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than $1 million. Each count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.
The charges today are the latest cases filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa, and Alameda counties.
The ongoing investigation into fraud and bid rigging at certain real estate foreclosure auctions in Northern California is being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco office. (usattyndcasfdiv6712)
MORAL
Notice the words “ongoing investigation.” Basically, the ones caught, “cut a deal” for a lesser sentence by trying to get the U. S. Attorney to make a recommendation to the judge. How does the deal get cut? By agreeing to “cop out” on others they know are doing the same thing. How do you think the count got to 24?
CALIFORNIA MAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On June 7, Alonzo Jackson Brown III of Fairfield, Calif., pleaded guilty in Sacramento after defrauding investors of $2 million in two different schemes, federal prosecutors said.
In one scheme, Brown posed as an investment advisor and induced a Canadian citizen to give him $1 million. Brown promised the victim returns of $1 million per week for eight consecutive weeks, according to court documents.
Brown then used the money for personal expenses and investments in his own name, prosecutors said. He repaid some of the money before cutting off communication with the victim and pocketing the remaining $635,000.
In the second scheme, Brown, a licensed real estate agent, defrauded financial institutions to the tune of $1.5 million by buying homes and then "selling" them to unwitting straw buyers at greatly inflated prices.
Brown supplied all the money for the down payments on the properties he was selling and also paid for the first several mortgage payments before defaulting on the loans. The lenders were induced to give the loans because Brown had prepared loan applications and submitted false documentation that greatly inflated the purported buyers' income.
Brown faces 20 years in prison at his Sept. 27 sentencing. (usattyedsac5912)
MORAL
I have but one question: Who is stupid enough to believe they can loan someone $1 million and get a return of $1 million per week for eight weeks? Answer: Someone so greedy, that common sense flew right out the window.
TWO CALIFORNIA BUSINESS OWNERS INDICTED FOR CREDIT REPAIR AND DEBT RELIEF FRAUD
FACTS.
On May 31, a federal grand jury returned a 46-count indictment charging Sharanjit Kaur and Baljit Singh, both of Fresno, with conspiracy, mail fraud, wire fraud and international money laundering United States Attorney Benjamin B. Wagner announced following the defendants’ arrests in Fresno.
The indictment alleges that between July 2010 and June 2011, Kaur and Singh owned and operated several companies based in Fresno, California, for the sole purpose of defrauding hundreds of customers throughout the United States. Kaur and Singh touted to potential customers that their businesses could provide debt consolidation services. They also falsely promised that they could renegotiate debts with creditors and mortgage lenders, obtain low-interest loans for customers, assist in avoiding lawsuits, lower car payments, replace high-interest credit cards with low-interest ones, and correct errors in credit reports. Kaur and Singh used a call center in India whose employees would call customers using aliases such as “Neil McKenzie” or “Anthony Jones.”
The indictment alleges that after luring customers into using these purported services, Kaur, Singh and their agents instructed customers to send in monthly payments of $500 or more. Even though they collected regular payments from customers, the defendants did not contact creditors on behalf of customers. Nor were customers informed that the defendants were not in fact providing the promised debt renegotiation services. To mislead customers as to the status of their debts, the defendants sent fake letters from creditors indicating that the customers’ loan modifications had been approved. When customers would contact the defendants’ companies about late-payment or default notices they had received from their creditors, the defendants and their agents would either hang up on customers or request that customers continue to make service payments to the defendants. Customers sent over $400,000 in payments to the defendants. According to the indictment, Kaur and Singh used the funds received from customers for their own benefit. Kaur and Singh also wired a portion of the funds to an individual in Kolkata, India. (usattyedca67120
MORAL
They are innocent until proven guilty. But where are they going to get the money to pay their attorneys to prove they are innocent?
CALIFORNIA MAN GETS YEAR IN JAIL FOR MORTGAGE FRAUD; FOUR CO-CONSPIRATORS AWAIT TRIAL
FACTS
Andrew Michael Phalen has pleaded guilty for defrauding hundreds of victims by offering unlawful home loan modification assistance according to Orange County prosecutors. He admitted in May to committing conspiracy to charge illegal upfront fees and conspiracy to commit grand theft. Phalen will serve one year in jail and he will also have on five years’ probation when he gets out. He is prohibited from engaging in similar activities during the length of his probation.
Four co-defendants will be tried later this year. They stand accused of creating numerous fraudulent businesses which were used to contact struggling homeowners. The business were CSFA Home Solutions, Mortgage Solutions Specialists Inc., CS & Associates, National Mortgage Relief Center, NMRC, NMRC Inc., N.M.R.C. Inc., Allied Home Servicing and Allied Loan Servicing. (OCREG6812l7).
MORAL
All things considered, I would say he had one sweetheart deal and a very good lawyer.
NEW YORK BANK AND 19 INDIVIDUALS CHARGED WITH MORTGAGE LOAN FRAUD IN HUNDREDS OF MILLIONS OF DOLLARS
FACTS
On May 31, Manhattan District Attorney Cyrus Vance Jr. charged Abacus Federal Savings Bank and 19 individuals with mortgage fraud. The defendants are accused of selling millions of dollars in fraudulent loans to Fannie Mae.
Vance said at a press conference that senior employees at the bank trained others to falsify loan documents so unqualified borrowers could qualify for loans and the bank could earn fees, commissions and other funds by selling the loans to Fannie Mae.
Abacus primarily serves the Chinese-American community pleaded not guilty before Judge Renee A. White in state court in Manhattan. The bank is “disappointed” to learn of the indictment as it discovered and investigated the issue more than two years ago, fired some employees and reported the results to
Vance’s office is “overreaching” in accusing Abacus “when many other banks that contributed to the national economic crisis remain untouched,” it said. The district attorney called the bank’s help “too little, too late” at the press conference.
Loans covered by the indictment were made to 4,500 borrowers and were among the $1 billion in loans that the bank sold to Fannie Mae.
The charges cover activities from May 2005 to February 2010 and follow a two-and-one-half-year investigation, according to prosecutors. Eight Abacus employees have admitted their guilt, Vance said. Vance said the majority of the loans involved in the case are still “performing” and borrowers haven’t defaulted. The 184-count indictment includes charges of mortgage fraud, securities fraud, grand larceny, conspiracy and falsifying business records.
Yiu Wah Wong, the bank’s former chief credit officer and underwriting supervisor, was among the defendants arraigned on May 31. Wai Hung “Raymond” Tam, the loan origination supervisor, was also charged and is free on $100,000 bail.
According to the indictment, incomes, assets and job titles were inflated; software was manipulated; and false “gift letters” were created to obscure the source of borrowers’ down payments.
Managers, according to the complaint, encouraged loan officers to make sure the falsified applications would be believable in the eyes of the bank’s regulator, the Office of the Comptroller of the Currency, as well as Fannie Mae. Fannie Mae’s own protocols to ensure loans met certain standards were thwarted, prosecutors said.
MORAL
Now that is what I called fraud on a grand scale. Remember though, they are all innocent until proven guilty in a court of law. But 182 counts! It must have taken weeks to draw up that indictment.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
