DELIBERATELY ALLOWING THE HOME TO GO INTO FORECLOSURE AND WHY SOME PEOPLE DO IT
FACTS
A study has appearently been done by economists at the University of Chicago and Northwestern indicating that 26% of current defaults are basically deliberate and worth doing. While the credit rating of the homeowner may become bad for the next seven years, the savings can amount to over $200,000 and worth the bad credit. For example, the homeowner attempts to do a loan modification. The balance of the loan at the time is $750,000. However, the value of the home is only $550,000. Thus the home is $200,000 over encumbered based upon current value. The homeowner attempts to negotiate with the lender and the lender refuses to lower the value of the principal amount via a loan modification if the homeowner allows the property to go into default and foreclosure, several things happen.
One is the homeowner has stopped paying on the mortgage, property taxes and upkeep. Thus for the next several months depending on the law of the state in which the homeowner resides, there is effectively no mortgage and no rent. The homeowner is putting money away.
Two. The homeowner may actively be searching for another home before the foreclosure process begins and purchase that home with his good credit and then allow the first home to go in foreclosure. This gives the homeowner a new home before vacating the old one.
Three. Before vacating the first home the homeowner finds a rental and moves in during the foreclosure process vacating the old home before the eviction notice. True the homeowner now has bad credit for seven years. But, the homeowner also has not paid over $200,000 on a mortgage that does not give any equity in return.
Against this the homeowner has to weight the loss of interest deductions, the fact that rent is not deductible on taxes and the inability to buy on credit.
MORAL
Now you can say this is immoral to deliberately breach a contract. And that maybe true. But on the other hand with the mortgage backed securities and the lenders that decided not to have people document their income, which in turn created the false inflation of real property if you will, who is at fault the more? I do not recommend this process to anyone. If you are contemplating a deliberate default on a mortgage see your lawyer first. There are still ways the lender can sue you even for deliberate breach. Especially if you have a second or third mortgage behind the first. Again, a deliberate breach should not be done without first consulting with your attorney about the negative side, including where the junior mortgages can still sue you after the foreclosure.
Do you hold a second mortgage that was foreclosed upon? You may have the ability to sue the borrower for the unpaid mortgage.
BANKRUPTCY IN IDAHO ALLOWS COUPLE TO KEEP UNIMPROVED LAND VALUED AT $100,000
FACTS
In May 2008 the Cercione family sold their home in Idaho and from the proceeds purchased an empty lot for $100,000. In July 2008, they filed Chapter 7 bankruptcy claiming the lot as a homestead because they intended to build a home on it and live there. The trustee in bankruptcy objected and wanted to take the lot to pay creditors. The bankruptcy court allowed the family to keep the homestead even though they had not filed a declaration of homestead at the time they filed the bankruptcy. The trustee appealed.
The 9th Circuit Bankruptcy Appellate Panel said affirmed. The law allows a homestead on unimproved land owned with the intention to build a home on it. There is an automatic homestead exemption is this case. (In re Cerchione, No. 09-1069, 9-8-09)
MORAL
Bankruptcy can save you a lot of money via unpaid debts and exemptions if you know what you are doing.
CALIFORNIA MAN ARRESTED FOR MORTGAGE FRAUD COMMITTED IN LAS VEGAS
FACTS
Justin M. Sabo was arrested on Oct. 9, 2009 in connection with a mortgage fraud case in Nevada. The warrant of arrest was from the Nevada Attorney General charging him with theft, mortgage fraud, identity theft and forgery. Two others, Thomas E. Gentile and Julio C. Martinez, both of Las Vegas were already arrested on the same charges.
The three allegedly schemed to fraudulently obtain a mortgage loan against a property owned by Gentile's former employer. They allegedly obtained and used the personal information to obtain a $65,000 mortgage loan. (hbind.com101509)
READ THE CALIFORNIA PRELIMINARY TITLE REPORT OR RISK LOSING AT TRIAL
FACTS
A purchaser of real property who receives and reads (or should have read) a preliminary title report revealing the existence of a deed restriction has actual notice of its existence and is on inquiry notice of its nature. (Alfarov.CommunityHousingImprovementSytstem&PlanningAss'n,Inc.(2009), 171CA4th 1356, 1389-1390, 89CR3d659,@688)
MORAL
You received the report. You are responsible for reading it. It does not make the owner seller liable because you failed to read the preliminary title report.
CALIFORNIA HOME EQUITY SALES CONTRACT ACT-IT CANNOT BE WAIVED-VIOLATE IT AND GET SUED
FACTS
1. When a foreclosure purchaser fails to give the homeowner notice of the right to rescind in violation of the Act, a general release of "known and unknown claims" signed by the homeowner is ineffective as relinquishment of the homeowner's right to cancel the home equity sales contract. (hoffmanvLloud(9thcir2009)572F3d999,1001)
2. The Act also applies to the purchase of the property in foreclosure where the debtor as seller has filed a Chapter 13 bankruptcy. (spencerv.marshall(2008)168ca4th783,798-799)
3. Violation of the Home Equity Sales Contract Act involving fraud or deceit can be prosecuted criminally as a misdemeanor or felony and gives the prosecutor four years to file the criminal action. (Peoplev.Shetty(2009)174CA4th1488,1492)
MORAL
There are legal ways to buy homes in foreclosure and there are illegal ways to do it. Did you buy a home in foreclosure without using the legal method required by law? If so you are at risk for a criminal complaint. (cc1695.8)
HERE ARE SOME LAWS TO REMEMBER IN ORDER TO AVOID DISCIPLINE BY THE CALIFORNIA DEPARTMENT OF REAL ESTATE
FACTS
1, Failure to put your license number on your business cards or any other advertisement and on the real property purchase agreement can cause you to be audited and thereafter disciplined. (B&PC §10140.6)
2. Failure to have the mortgage loan disclosure statement in the loan file showing the borrower received it within three business days and signed it before close of escrow. (B&PC §10240, 10241)
3. Seller and/or the sellers' broker failing to disclose lawsuits by or against the seller that threaten or affect property being offered for sale. Extends to previous as well as pending lawsuits. (Calemine v. Samuelson (2009) 171 C.A.4th 153, 162-166)
4. The Recovery Fund now allows a seller, buyer or borrower to recover up to $50,000 for one transaction and up to $250,000 against any single license. This means it is now worth suing a broker or salesperson that is broke since the recovery fund allows up to $50,000 per defalcation. (B&PC §10474) It also means you lose your license until the recovery fund is repaid by you including the interest.
A REMINDER ABOUT THE NEW CALIFORNIA FORECLOSURE LAWS
FACTS
This applies to mortgage loans on owner occupied single-family one-to-four units where the mortgage was entered into between Jan. 1, 2003 and Dec. 31, 2007.
Lenders, mortgagees, trustees, beneficiaries or their agents (with limited exceptions) may not record a notice of default until 30 days after contacting the borrower or satisfying statutorily mandated "due diligence" requirements for contacting the borrower. (cc2923.5(a)(g)(i)).
Under given conditions the lenders, mortgagees, trustees, and their agents may not give notice of sale until at least 180 days after the notice of default is recorded. (cc2923.2(a))
Lenders, etc must file with notice of sale declaration concerning the prescribed "contact" and "mortgage loan servicer" declarations. (cc2923.54)
MORAL
If you or your client are in foreclosure, you want to be certain the foreclosure company is complying with these laws. It takes them longer to "kick you out of the house."
NEVADA MORTGAGE LENDING DIVISION PROPOSES SETTLEMENT WITH FIRST INTERSTATE MORTGAGE
FACTS
All allegations set forth in the proposed summary of the settlement offer are alleged upon information and belief of the Nevada Mortgage Lending Division. However, I have abbreviated the proposed settlement for lack of space. First Interstate was incorporated in the State of Nevada on or about April 7, 2003 and as of October 2009 its corporate status with the Nevada Secretary of State is dissolved, effective on or about 8/7/2008.
On July 16, 2003, First Interstate was registered with the Financial Institutions Division and was subsequently licensed as a mortgage broker. First Interstate operated within Nevada as a licensed mortgage broker until it failed to renew its license on June 30, 2007, and closed on July 3, 2007. The Division currently classifies First Interstate's license as closed. All factual allegations herein occurred while First Interstate held an active mortgage broker license.
Greg Navone was the owner, president, secretary, treasurer, and a director of First Interstate from its incorporation until its dissolution.
Respondent consents that it was grossly negligent or incompetent by:
(a) conducting mortgage lending activities at an unlicensed branch, in violation of NRS 645B.020(2);
(b) failing to maintain complete and suitable records of all mortgage transactions, in violation of NRS 645B.080(1), 2(a); and
(c) failing to exercise reasonable supervision of the activities of its mortgage agents, in violation of NRS 645B.460(1); by failing to implement and maintain safeguards to protect the sensitive customer information contained in 40 boxes of records that had been placed in a trash dumpster, in violation of the Gramm-Leach Bliley Act, 15 USC §6801, et seq.
2. Respondent consents that the above-mentioned conduct constitutes a deceitful, fraudulent or dishonest business practice, in violation of NRS 645B.670(20)(o).
In light of the parties' desire to resolve this matter, respondent agrees to surrender its mortgage broker license to the Division with the understanding respondent will not apply for any licensure within the State of Nevada subject to this Division's jurisdiction for a period of five years from the date of execution of this Agreement. (mldwebsite101809)
MORAL
Leaving 40 boxes of financial data in a trash dumpster can create havoc for borrowers. How do you dispose of your sensitive material? Do you have a privacy manual required by FTC? Do you have the "Red Flags Identity Theft Manual" required by FTC as of Nov. 1, 2009? If not we have one available. However, if you do not have the manuals and do as First Interstate did you may suffer more than a loss of license. You may become personally liable for civil penalties and a consent decree you will not like as issued by the FTC.
NEW YORK FEDERAL PROSECUTORS CHARGE 41 DEFENDANTS WITH MORTGAGE FRAUD
FACTS
On Oct. 15, 2009 charges against 41 defendants, in eight separate cases, for allegedly engaging in various mortgage fraud scams that collectively defrauded lenders out of more than $64 million in home mortgage loans on more than 100 properties across New York State. Among those charged are six lawyers, seven loan officers, three mortgage brokers, an accountant, and a residential property appraiser.
So far, 31 defendants were arrested or surrendered to authorities in New York, Pennsylvania, Ohio, and North Carolina. Four of the defendants were previously charged and will appear in Manhattan federal court at a later date, and five defendants remain at large.
The mortgage fraud scams alleged in the cases included property flips, equity stripping, and appraisal and loan fraud. In one case, defendants operated a foreclosure rescue scheme, targeting individuals who were on the verge of losing their homes by tricking them into giving up the equity in the properties with false promises that their homes would be saved.
The Cases:
United States v. Lavette Bills, et al.
Ten defendants are charged in an 11-count Superseding Indictment with perpetrating a mortgage fraud scheme involving loans totaling over $5.6 million for at least 11 different residences, including through a foreclosure rescue scheme.
According to the Superseding Indictment, the defendants identified distressed properties that could be purchased at a low price usually targeting homeowners who had fallen behind on mortgage payments and whose homes were facing foreclosure. In most instances, the defendants induced the homeowners to sell their homes to companies controlled by the defendants, including NNI, LLC, which was controlled by LAVETTE M. BILLS, and Recani Inc., which was controlled by WAYNE GREEN. These companies usually purchased the properties via "short sales," in which the lenders agreed to sell the properties for less than the balance owed on the loans and to discharge the remainder of the loans. The defendants then resold or "flipped" the properties to third party straw buyers at a higher price, usually on the same day. In other instances, the defendants tricked the homeowners into deeding or selling their homes to other persons, by falsely promising the homeowners that title would be returned to them at a later date or telling the homeowners that they were merely refinancing their homes.
Defendants allegedly deceived the straw buyers and the lenders who were providing the mortgages to finance the purchases. In some instances, the straw buyers thought that they were helping the homeowner "save" his or her home from foreclosure, or they were told that they were purchasing an investment property. The straw buyers were also often told that they would not need to make mortgage payments on the properties, either because the payments would be made on their behalf, or because the payments would be covered by the rental income from the properties. The defendants convinced lenders to give the straw buyers mortgages to purchase properties the straw buyers could not otherwise afford by falsifying certain - personal and financial information about the straw buyers
As a result of their fraud, the defendants profited from their "flips" of the properties; the homeowners lost title to their homes; the straw buyers became liable for hundreds of thousands of dollars in loans they were unable to repay; and the lenders suffered losses from those loans, which eventually went into default.
BILLS was the Chief Executive Officer of MTC Real Estate Inc., in the Bronx, and KIRK LACEY, OMAR HENRY, and PETER CHEVERE, all worked for MTC during various periods. The defendants, through MTC, identified the distressed homeowners, recruited straw buyers, and prepared fraudulent documents for submission to the lenders. GREEN and SHERESE W. GLENN processed home mortgage loan applications through various mortgage brokerage firms on behalf of MTC and others. REVLON HINDS was the purported president of Recani Inc., and signed closing documents on its behalf. JOSEPH EVANS and JERRY CALONGE recruited straw buyers to obtain home mortgage loans in transactions processed by GREEN and GLENN. MARK BARNETT was a loan officer at Golden First Mortgage Corp., who processed fraudulent loan applications for MTC.
United States v. Peggy Persaud, et al.
Eight defendants are charged in a 10-count Indictment in connection with an alleged mortgage fraud scheme involving over $23 million of fraudulently obtained loans from lenders through a mortgage brokerage called GuyAmerican Funding Corp. in Queens. Three of the defendants, PEGGY PERSAUD, ORETTE KILLIKELLY, and GEORGE ESSO, were loan officers at GuyAmerican. PEGGY PERSAUD, as a manager of a branch office of GuyAmerican, received hundreds of thousands of dollars in commissions based on fraudulent loans submitted to lenders.
According to the Indictment, three of the defendants charged in the scheme, ELTON LORD, RAFICK BAKSH, and MAHAMOOD HUSSAIN, worked with GuyAmerican loan officers to recruit distressed sellers and straw buyers, flipping properties multiple times between different straw buyers, and stripping the equity from those properties as they were resold with inflated market values.
The loans submitted to the lenders allegedly contained numerous false statements about the straw buyers who often had little or no assets and modest or no incomes. The loan applications purportedly falsely represented that the straw buyers intended to reside in the properties. Two lawyers, CHEDDI GOBERDHAN and RAVI PERSAUD, who acted as the closing attorneys for most of the transactions and facilitated the fraud by allegedly disbursing illicit payments to co-conspirators, were also charged.
United States v. Beverly Johnson, et al.
Six defendants are charged in a one-count Complaint with conspiracy to commit bank and wire fraud in connection with their participation in a scheme to provide false information and documents to lenders for the purchasing and refinancing of properties. In total, the defendants allegedly obtained $5 million in loans on seven properties through fraud. Four of the defendants, a mother and her three daughters, BEVERLY ANDREA JOHNSON, a/k/a "Beverly Johnson," a/k/a "Beverly Samuels," a/k/a "Andrea Johnson," CARONE JOHNSON, a/k/a "Carone Johnson-Holt," a/k/a "Carone Morris," CARIANNE JOHNSON, and CARRELL JOHNSON, operated a title company called Poui Land Services LLC. Poui Land acted as the title agent charged as part of this case, generating significant fees for the defendants, including, in one instance, approximately $68,000. In some cases, the Complaint alleges that the defendants failed to record the mortgages on the properties, or to properly transfer the titles, which permitted the defendants to obtain additional mortgage loans on the properties. Furthermore, in some instances, the defendants refinanced properties in their own names, submitting applications to banks for loans that contained numerous misrepresentations in an effort to strip the equity out of the properties through fraud. OLIVER ANDERSON operated a financial services company called OGA Group, and purportedly provided fake employment verifications for some of the JOHNSONS' transactions. BRADLEY SKIERKOWSKI was a loan agent at Eastern American Mortgage who prepared fraudulent home mortgage loan applications on behalf of the JOHNSONS for some of the properties.
.
United States v. Marlene Bossous, et al.
Five defendants are charged in a four-count Indictment in connection with an alleged mortgage fraud scheme involving over $13.5 million in fraudulently obtained loans through Southwest and Pro Capital, two mortgage brokerages. Between 2005 and 2008, the defendants allegedly conspired to obtain loan proceeds from numerous lending institutions on the basis of fraudulent applications, which included false information regarding the applicants' qualifications for the loans. In particular, MARLENE BOSSOUS and DAYANARA VELASQUEZ worked at those brokerages as loan agents and allegedly prepared the fraudulent loan documents. Another defendant, FAITH ESIMAI, operated a real estate agency called "Redeemed Realty" and recruited straw purchasers, in addition to preparing false and fraudulent loan applications. The defendants also conspired to create fake W-2s, pay stubs, and Certified Public Accountant certifications, among other documents, and to submit those documents to lending institutions to trick the lenders into issuing loans to individuals who otherwise would not have qualified for them. One of the defendants, NORMAN BARABASH, was a certified public accountant who created fraudulent employment and tax documents for a fee for submission with loan applications. HAROLD JOHN, a/k/a "Reverend John," also created false documents.
United States v. Danny Siony, et al.
Four defendants were charged in a twelve-count Indictment involving over $6.8 million in allegedly fraudulent home mortgage loans obtained through a mortgage brokerage firm called Joshua Funding Corp. The defendants recruited and obtained home mortgage loans on behalf of at least six straw buyers to fund the purchase of more than 11 distressed properties in the New York City area.
According to the Indictment, DANNY SIONY, a/k/a "Rahim Siuny Kalimi," and SHIRIN KALIMI, a/k/a "Shirin Siouny," operated Joshua Funding Corp. through which they processed fraudulent loan applications for straw buyers recruited by SIONY, EMMANUEL ROY, and TARIFF DILL. In order to carry out the mortgage fraud scheme, SIONY identified and placed bids on properties that were for sale at auction, usually as the result of a foreclosure proceeding. SIONY, ROY, or DILL then recruited straw buyers for the properties, for whom the defendants obtained home mortgage loans through the use of false and fraudulent documents. KALIMI prepared and submitted the false and fraudulent documents to the lenders, including loan applications which misstated the straw buyers' employment, income, and assets, and falsified title reports and phony contracts of sale. In each instance alleged in the Indictment, the defendants represented to the lenders that a company controlled by SIONY, Australian Open, was selling the properties to the straw buyers at an inflated price when, in fact, the company did not hold title to the properties at that time and, in most instances, never held title to the properties at all. Once the defendants had obtained home mortgage loans for the straw buyers based on the inflated price, SIONY allegedly used the loan proceeds to pay off the auction price, caused the properties to be transferred to the straw buyers, and distributed the remaining funds amongst his co-conspirators.
The Indictment also charges ROY, an attorney licensed to practice law in the State of New York, who was paid to represent some of the straw buyers at closings. ROY also allegedly obtained a power of attorney for at least one of the straw buyers he recruited to the scheme and signed documents on the straw buyer's behalf.
United States v. Dean Reskakis, et al.
Three defendants are charged in a three-count Indictment with participating in a mortgage fraud scheme involving more than $6 million worth of fraudulent loans. The defendants sought and obtained home mortgage loans using straw buyers for homes at values that were well in excess of the prices at which the sellers agreed to sell the properties and well in excess of the prices at which the properties were actually sold. The defendants, including DEAN RESKAKIS, ADEOLU ADENIJI, a/k/a "Larry Ade," and SHARON FRIDAY, a/k/a "Sharon Friday Cudjoe," created fake documents, including phony contracts of sale, to trick the lenders into believing that the significantly inflated sales prices were accurate. The defendants recruited straw buyers to purchase the properties at the inflated prices by, among other things, falsely telling them that they were joining an investment club that would purchase and try to either operate or resell the properties at a profit. The defendants also submitted applications for home mortgage loans on behalf of the straw buyers with numerous false statements, including lies regarding the straw purchasers' income, assets, and employment. DEAN RESKAKIS, an attorney admitted to practice in the State of New York, served as the closing attorney or acted as such in connection with the fraudulent transactions. According to the Indictment, RESKAKIS allegedly distributed proceeds to the co-conspirators, and caused forged and fraudulent documents to be submitted to the lenders to make it appear as if transactions involving the target properties occurred as represented to the lenders in the home mortgage loan applications. SHARON FRIDAY, a/k/a "Sharon Friday Cudjoe," acted as an attorney for straw buyers of several of the target properties, even though she allegedly was not licensed by the State of New York to practice law. FRIDAY also purportedly recruited and met with straw purchasers.
United States v. Keren Misaghi, et al.
Three defendants are charged in a one-count complaint with conspiracy to commit wire fraud, in connection with their obtaining a home mortgage loan in the approximate amount of $650,000 for the purchase of a property in Brooklyn, New York. In furtherance of the scheme, KEREN SADE MISAGHI, a/k/a "Karen Sade Misaghi," a/k/a "Karen Sade," purportedly completed a loan application on behalf of the purchaser that contained numerous false statements, including about the purchaser's income, assets, and employment. DAVID MISAGHI allegedly obtained a cashier's check from a bank account he controlled, which was then altered and used as a so-called "show check" at the closing for the transaction, falsely reflecting a large down payment by the purchaser. QUENTIN TUCKER was an appraiser who allegedly created an inflated appraisal for the property by, among other things, attaching photographs of a different location to the appraisal. After the fraudulent transaction closed, and to hide the scheme, KEREN SADE MISAGHI arranged for one month's mortgage payment to be made on the property.
United States v. Dustin Dente, et al.
DUSTIN DENTE and BRANDON LISI, both of whom are practicing lawyers, were charged in a one-count complaint with participating in a scheme to defraud various lenders by obtaining mortgages through false and fraudulent information and statements. According to the Complaint, the defendants used straw purchasers to obtain the loans, and, in at least one instance, misappropriated the proceeds of those loans. The defendants are alleged to have fraudulently obtained home mortgage loans with a total face value of over $3.5 million, many of which are now in default and/or foreclosure. (usattynysd101509)
MORAL
Did you notice the mother and her three daughters? If convicted the family that commits fraud together can stay in prison together. Imagine, if true a mother raising her daughters this way and ruining their lives.
NEW YORK FEDERAL PROSECUTORS CHARGE SIX MORE WITH MORTGAGE FRAUD
FACTS
Six individuals located in the New York City area were charged on Oct. 14, 2009 with defrauding Flaherty Funding, Rochester, N.Y. Specifically, MANRE EBHOMIELEN has been charged with mail fraud, bank fraud, and conspiracy; TYSHE BANKSTON, MERRICK HENRY and VAL TAYLOR have been charged with mail fraud and conspiracy; and JOCELYN JOSEPH and BERNARD LAWSON have been charged with mail fraud.
In April 2008, Flaherty Funding contacted Vista Mortgage, a licensed mortgage company located in Queens, in an effort to expand its business into the New York City area. Flaherty Funding and Vista Mortgage eventually agreed that Vista Mortgage would close its operation and some of its staff would become employees of Flaherty Funding. One such person was Ebhomielen. Subsequently, Ebhomielen and the other defendants participated in a scheme to obtain large mortgage loans from Flaherty Funding by submitting false information and documents to Flaherty Funding. The scheme involved five properties that were purchased in the New York City area. The purchasers were promised $10,000 if they purchased the homes and applied for a mortgage loan from Flaherty Funding. During the mortgage loan approval process, the defendants submitted false information and documentation which included false employment information, false monthly income amounts, false bank records, false Form W-2s, and false down payment information. As a result of this false information and documentation, Flaherty Funding provided three mortgage loans in the amounts of $533,850, $533,850 and $646,300, totaling $1,714,000. The remaining two mortgage loans, which were not provided by Flaherty Funding due to the discovery of the fraud, would have totaled $913,500. (usattywdny101509
MORAL
If you are going to merge another company into yours, make sure you investigate the people you hire. Doesn't this sound familiar? Haven't I said this to you before?
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
