FACTS
A victim in a foreclosure scam and sale/leaseback transaction cannot state a TILA claim because the victim is not a “consumer” and the transaction is not a “consumer credit transaction” within the meaning of TILA. See Scott v/ Dearcp REO. Inc.TILA ¶¶ 1.04[16]. 1.04[17],U.S.D.C. NJ.
MORAL
You cannot violate TILA when you have a business transaction, can you?
BORROWER SIGNING RECEIPT OF NOTICE OF RIGHT TO CANCEL IS NOT CONCLUSIVE AND CAN BE REBUTTED BY BORROWER'S TESTIMONY
FACTS
Karen Cappuccio appealed an unfavorable jury verdict on her complaint under the Truth In Lending Act against E*Trade for its failure to properly notify her of her right to cancel her home mortgage. Cappuccio challenged the District Court's directive that because her signature was on the notice of right to cancel, “something more than just [her] testimony is needed to rebut the presumption that she received” the notice.
The United States Court of Appeals-Third Circuit found no basis in TILA or the Federal Rules of Evidence for this portion of the instruction, and because the error was not harmless, it vacated the verdict and remand for a new trial on her rescission claim.
Prime Capital submitted a Universal Residential Loan Application on behalf of Cappuccio to lender Countrywide Bank NA for both a 30–year 5% fixed-interest loan and a 30–year 4.75% fixed-interest loan. Prime Capital also submitted a loan application on behalf of Cappuccio to lender First Magnus Financial for a 20–year 11.5% fixed-interest loan. Cappuccio later testified that she did not want two separate mortgages on her home and that Prime Capital did not tell her that it was submitting applications for two different loans.
Countrywide generated a new application which resulted in an offer of a 30–year adjustable, negative amortizing loan with a 9.95% interest rate ceiling and an initial one month teaser” rate of 4.75%. Countrywide did not inform Cappuccio that it was not processing the original loan applications, nor that it was offering her a more complex and expensive mortgage. First Magnus Financial provided Cappuccio with a 15–year 13.477% interest loan that included a $40,727 balloon payment due at the time of the last loan payment. First Magnus did not notify Cappuccio of the differences between the loan it offered her and the loan for which she had applied.
Cappuccio acknowledged at trial that she signed a notice of right to cancel for each loan on the night of the closing, but testified that she did not understand what they meant or signified at the time she signed them.
According to Cappuccio, by Nov. 8, when the loan proceeds were disbursed, she had not yet received copies of the notices or Truth in Lending statements. She testified that a UPS package from MAK Abstract arrived the next day, Nov. 9, containing a $14,000 check, loan documents, a single copy of the notice, and a Truth in Lending statement for the Countrywide loan.
On Aug. 15, 2007, Cappuccio, through her counsel, sought to rescind both loans. Countrywide and E*Trade Bank, the assignee of the First Magnus loan, both refused to honor her claimed rescission or make restitution. Cappuccio then filed suit.
A jury trial was held in September 2008. As to the fraud claims, the jury awarded Cappuccio a verdict in the amount of $40,000 against Countrywide for common law fraud and statutory fraud under the UTPCPL, as well as $50,000 (including $10,000 in punitive damages) for violations of the adverse action notice requirement of the EOA. Cappuccio did not bring those same fraud claims against E*Trade because it was only the assignee of the loan, not the original lender.
As to the TILA rescission claim, Cappuccio sought to prove that she did not receive the notices of her right cancel at the closing, and further, that to the extent she did receive the notices in the mail after the closing, they were not clear and conspicuous because they listed the wrong final rescission date and because they were received only after the loan funds had been disbursed, thus triggering a three-year extension of her right to rescind the mortgages.
The District Court erred when it instructed the jury that something more than just Cappuccio's testimony was needed to rebut the presumption that she received the notice, and the appellate court set forth the verdict sheet the jury considered along with the instructions given by the District Court.
MORAL
I would say she was very lucky to find such competent attorneys willing to take on the case. Still she has a retrial. But what is good to remember is the mere signing of receipt of the Notice of Right to Cancel is a rebuttable presumption and the mere testimony of the borrower is sufficient to remove the presumption and then it is up to the borrower to persuade the jury that she did not receive that for which she signed. You may also like to see the varying conclusions other courts have drawn on the same issue in Tacheny v. McrI Marshall &Isley Bank, In Re Perks (Perks v. Access Nat. Mortgage Corp.,) and In re Sousa, (Sousa v. Wells Fargo Bank), TILM ¶2.01[4][4])
CALIFORNIA AG SUES MULTIPLE LAW FIRMS AND OTHERS AS WELL AS FREEZING THEIR ASSETS OVER NATIONAL “MASS JOINDER” MORTGAGE FRAUD SCAM
FACTS
On Aug. 18, Attorney General Kamala D. Harris announced that the California Department of Justice, in conjunction with the State Bar of California, has sued multiple entities accused of fraudulently taking millions of dollars from thousands of homeowners who were led to believe they would receive relief on their mortgages.
Attorney General Harris sued PHILIP KRAMER, THE LAW OFFICES OF KRAMER & KASLOW, TWO OTHER LAW FIRMS, THREE OTHER LAWYERS, AND 14 OTHER DEFENDANTS who are accused of working together to defraud homeowners across the country through the deceptive marketing of "mass joinder" lawsuits. "Mass joinder" lawsuits are lawsuits with hundreds, or more, individually named plaintiffs.
KRAMER'S FIRM AND OTHER DEFENDANTS WERE PLACED INTO RECEIVERSHIP ON AUG. 15. The legal actions were designed to shut down a scheme operated by attorneys and their marketing partners, in which defendants used false and misleading representations to induce thousands of homeowners into joining the mass joinder lawsuits against their mortgage lenders. Defendants also had their assets seized and were enjoined from continuing their operations. Nineteen DOJ special agents participated as the firms were taken over Aug. 17, along with 42 agents and other personnel from HUD's Office of Inspector General, the California State Bar, and the Office of Receiver Thomas McNamara at 14 locations in Los Angeles and Orange Counties. Sixteen bank accounts were seized.
"The defendants in this case FRAUDULENTLY PROMISED TO WIN PROMPT MORTGAGE RELIEF for millions of vulnerable homeowners across the country," said Attorney General Harris. "Innocent people, already battered by the housing crisis, were targeted for fraud in their moment of distress."
It is believed that defendants sent out at least two million pieces of mail to victims in at least 17 states.Defendants' revenue from this scam is estimated to be in the millions of dollars.
As alleged in the lawsuit, defendants preyed on desperate homeowners facing foreclosure by selling them participation as plaintiffs in mass joinder lawsuits against mortgage lenders. Defendants deceptively led homeowners to believe that by joining these lawsuits, they would stop pending foreclosures, reduce their loan balances or interest rates, obtain money damages, and even receive title to their homes free and clear of their existing mortgage. Defendants charged homeowners retainer fees of up to $10,000 to join as plaintiffs to a mass joinder lawsuit against their lender or loan servicer.Consumers who paid to join the mass joinder lawsuits were frequently unable to receive answers to simple questions, such as whether they had been added to the lawsuit, or even to establish contact with defendants. Some consumers lost their homes shortly after paying the retainer fees demanded by defendants.
This mass joinder scam began with deceptive mass mailers, the lawsuit alleges. Some mailers, designed to appear as official settlement notices or government documents, informed homeowners that they were potential plaintiffs in a "national litigation settlement" against their lender. No settlements existed and in many cases no lawsuit had even been filed. Defendants also advertised through their web sites.
When consumers contacted the defendants, they were given legal advice by sales agents, not attorneys, who made additional deceptive statements and provided (often inaccurate) legal advice about the supposedly "likely" results of joining the lawsuits. Defendants unlawfully paid commissions to their sales representatives on a per client sign-up basis, a practice known as "running and capping."
Victims in the following states are known to have received these mailers, or signed on to join the case. This is a preliminary list that may be updated: Alaska, Arizona, California, Colorado, Connecticut, Florida, Hawaii, Maryland, Massachusetts, Michigan, Missouri, Nevada, New Jersey, New York, Ohio, Texas, Washington.
The complaint, temporary restraining order, examples of marketing documents and photos of the enforcement action are available with the electronic version of this release at
MORAL
Some of you out there reading this may recall asking me about these lawsuits. One of you actually asked about paying $5,000 to join the lawsuit. You may recall what I say and what I thought about the lawsuits. I believe that if 1,000 people pay an attorney $5,000 each to sue lenders to stop foreclosures the attorney would have received $5 million and could take any lawsuit to the U. S. Supreme Court, win, lose or draw since he would have already been well paid regardless of the outcome. I did not recommend it then and you may see why now from the above. Remember, the government has to prove its case by a preponderance of the evidence since this is not a criminal action. However, it takes a lot of initial proof at the outset to prove to the court why the government should be allowed to seize assets at the beginning of a lawsuit basically leaving the defendants destitute unless the court agrees to release funds for defense.
FORMER PRESIDENT OF HURST FINANCIAL CORP. INDICTED FOR MORTGAGE FRAUD
FACTS
On Aug. 18, JAMES HURST MILLER JR., of Paso Robles, Calif. was charged with federal fraud and money laundering offenses for allegedly bilking victims who invested into Central Coast real estate projects—money that was siphoned off for other purposes. He was the former president of the Atascadero-based Hurst Financial Corp., and was charged in a four-count criminal information filed in United States District Court. The four-count information charges Miller with mail fraud, wire fraud, money laundering, and making a false statement to a bank.
The information alleges that Miller solicited investments in the Beacon Road and Vista Del Hombre real estate development projects in Paso Robles, as well as the Salinas River real estate development project in Templeton, and that the solicitations were fraudulent because the funds were not used to develop those projects. The information alleges that after obtaining investors' funds, Miller used most of the money for other purposes.
The information specifically alleges that Miller failed to disclose that he was using new money solicited for the Beacon Road project to make interest payments to older investors, as well as to investors in other real estate development projects. Miller also allegedly failed to disclose that he used proceeds from investors in the Salinas River project to pay off loans relating to a different real estate development project, and that money invested in the Vista Del Hombre project was used to develop other real estate projects. Finally, the information alleges that Miller aided and abetted false statements made to Heritage Oaks Bank relating to collateral for a loan application.
The mail fraud and wire fraud charges each carry a statutory maximum penalty of 20 years in federal prison. The money laundering count carries a statutory maximum penalty of 10 years in federal prison. The charge of making a false statement to a bank carries a statutory maximum penalty of 30 years in federal prison. Therefore, if he were to be convicted of all four counts in the information, Miller would face a maximum sentence of 80 years in federal prison. (usattycdca81811)
MORAL
EIGHTY YEARS IN A FEDERAL PRISON IS A LONG TIME if he is found guilty and if the judge sentences him to the maximum. I trust he has good legal counsel.
FORMER TITLE AGENT PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On Aug. 18, CYNTHIA DARLENE STRICKLAND PLEADED GUILTY TO BANK FRAUD. Strickland was a LICENSED TITLE AGENT AND THE OWNER OF PREMIER TITLE GROUP, INC., A TITLE AGENCY IN JACKSONVILLE. She faces a maximum penalty of 30 years in federal prison.
The ORCHESTRATOR OF THE MORTGAGE FRAUD SCHEME WAS JUAN CARLOS GONZALEZ, WHO PREVIOUSLY PLEADED GUILTY and was SENTENCED TO SEVEN YEARS IN PRISON. Gonzalez entered into contracts to buy residential real estate properties and retained a licensed real estate appraiser, BARRY WESTERGOM, to appraise the properties. WESTERGOM, WHO PREVIOUSLY PLEADED GUILTY AND WAS SENTENCED TO FOUR YEARS IN PRISON, fraudulently appraised the properties at values that were significantly inflated above the agreed purchase price.
Gonzalez recruited third-party buyers to enter into a second contract that listed the fraudulently inflated appraised value as the purchase price. Gonzalez applied for mortgage loans in the name of the third-party buyers and in support of the applications he submitted the second contract, the fraudulent appraisal, and false financial information about the buyers. Based upon this information, banks and other mortgage lenders approved the loans.
Gonzalez recruited Strickland to be the closing agent for the transactions. Strickland's plea agreement describes a transaction that was funded by first and second mortgage loans that Gonzalez fraudulently obtained from Lehman Brothers Bank. As part of her responsibilities as closing agent, Strickland prepared a standard settlement statement that identified various expenses, payments, and disbursements related to the transaction. The banks and other mortgage lenders relied upon the fraudulent documents during the loan approval process.
On the settlement statement, Strickland represented that the purchase price of the property was $725,000, the inflated appraised value, when in fact the purchase price was $570,000, the price Gonzalez had negotiated with the sellers. Although Strickland knew that two contracts existed, one for the lower price negotiated with the sellers and one for the higher price based on the inflated appraisal, she did not inform the bank of these facts.
Strickland also falsely represented on the settlement statement that the third-party buyer would make a $70,694.24 down payment when in fact no down payment was made. During the closing, Strickland informed the bank that all closing conditions had been met and, as a result, the bank disbursed a first mortgage loan of $581,239.51 and a second mortgage loan of $104,170.47. After the bank disbursed the funds, Strickland issued a check to Gonzalez for $155,000, which was the difference between the actual purchase price, $570,000, and the inflated appraised value, $725,000. Gonzalez deposited the funds at a financial institution and obtained a cashier's check in the name of the third-party buyer for the down payment. Gonzalez then provided this check to Strickland, who deposited it into her title agency's escrow account as the down payment for the transaction.
As part of her plea agreement, Strickland agreed to forfeit $178,625, which is the total amount of the fees she received from the fraudulent transactions. Strickland also agreed to pay restitution claims made by victims of the offense in the amount of $531,356.62. (usattymdfl81911)
MORAL
Do you notice how the prison sentences are getting longer? Four years in prison. Seven years in prison. If anyone thinks they are being investigated for mortgage fraud they should see their attorneys now. Later when indicted, it may be too late for reasons any competent attorney can discuss with the person being seen.
FORMER RENO MORTGAGE BROKER INDICTED ON DOZENS OF FRAUD CHARGES INVOLVING ABOUT $35 MILLION
FACTS
On Aug. 10, MARCILIN ANNE BENVIN currently of Juneau, Ala., who operated a mortgage brokerage firm in Reno, Nev. has been indicted by a federal grand jury on dozens of fraud charges involving about $35 million from investors.
Benvin is charged with two counts of wire fraud, 39 counts of mail fraud, five counts of aggravated identity theft, one count of money laundering, one count of embezzlement and theft from an employee benefit plan, and two counts of making false statements and concealment of facts in employee benefit plan records, the U.S. Attorney's Office for Nevada announced.
Benvin was president and operator of Cetus Mortgage Ltd. The state of Nevada seized control of the company in 2008 when it ended up in bankruptcy court with a $60 million outstanding loan portfolio and several loans in default.
The indictment alleges from 1996 to 2008 Benvin worked as a mortgage broker in Reno. It said at Cetus, she got money from investors and misled them about the conditions of loans and the borrowers and the purpose of the loans. It also alleges she provided false documents and information to investors, and forged signatures of investors, borrowers, and Cetus employees. It said she benefited from the fraud through loan origination fees and commission and by using investor money for herself.
If convicted, Benvin faces up to 20 years in prison for each wire fraud, mail fraud, and money laundering count, up to five years on the embezzlement and false statements counts, and a two-year consecutive sentence for the identity theft counts, the U.S. Attorney's Office said. Benvin also faces fines of $250,000 to $500,000. (rgj.com81811)
MORAL
To say this lady has problems is putting it mildly. Remember though, she is innocent until proven guilty in a court of law
NEW MEXICO REAL ESTATE DEVELOPER PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On Aug. 19, in U.S. District Court, Albuquerque REAL ESTATE DEVELOPER VINCENT J. GARCIA pleaded guilty to committing bank fraud in the amount of $365,677 under a plea agreement with the United States Attorney's Office. Garcia admitted that the gross loss amount to the victims of his fraudulent activity was $842,237.44. Garcia entered a guilty plea to count three of a 19-count superseding indictment charging him and CO-DEFENDANTS DEREK BARNHILL, FORMERLY OF RIO RANCHO, AND DAVID GARCIA, OF ALBUQUERQUE, with bank fraud and money laundering charges in connection with three real estate development projects.
At sentencing, Vincent Garcia faces a maximum penalty of 20 years of imprisonment, a $1,000,000 fine, and restitution as ordered by the court. Sentencing hearing has yet to be scheduled. Vincent Garcia knowingly executed a plan to obtain funding from the Columbian Bank & Trust Co. by having Barnhill submit a bank construction loan drawdown request containing a material misrepresentation. Vincent Garcia admitted that he used $360,000 in construction loan proceeds to invest in a casino in Washington state. To obtain these funds, Vincent Garcia had Barnhill submit a construction loan drawdown request in the amount of $365,677 to the Bank on Feb. 12, 2007. The drawdown request falsely stated that the funds were needed for “materials and price lock” for construction services to be provided by a specific company.
Vincent Garcia admitted instructing Barnhill to draw down the construction loan knowing that the funds would not be directly utilized in the construction of the Anasazi Building. In requesting that Barnhill submit the drawdown request, Vincent Garcia knew that the request would falsely represent that the money would be used for a direct construction expense.
In his plea agreement, Vincent Garcia states that his company engaged HIS SON, CO-DEFENDANT DAVID GARCIA, to act as the general contractor for the Anasazi Building and the other real estate development projects, and that David Garcia was compensated in the form of labor and materials for construction work on his personal residence. Vincent Garcia admitted that he submitted invoices for work performed on his son's residence to the Bank and to the First Financial Credit Union, and manipulated the invoices to appear to be direct expenses for his real estate development projects. Vincent Garcia asserted that David Garcia was not aware that the invoices for work performed and labor provided at his residence were being submitted to the banks as direct project expenses.
On Dec. 16, 2010, BARNHILL ENTERED A GUILTY PLEA TO BANK FRAUD OFFENSE, and MONEY LAUNDERING. In his plea agreement, Barnhill provided a more expansive description of the bank fraud to which Vincent Garcia entered his guilty plea. Barnhill said that, on Feb. 12, 2007, Vincent Garcia told Barnhill that he needed $360,000 for a “good faith payment” towards the purchase of a casino. Vincent Garcia asked Barnhill to use an old bid for sheet rock for the Anasazi Building to get the money. Barnhill altered the sheet rock bid to support a fictitious drawdown request for $365,677 and submitted the request based solely on the false invoice to the Bank. After the Bank disbursed the money, Barnhill transferred the funds to an Anasazi account at New Mexico Bank and Trust. The next day, Vincent Garcia and Barnhill went to New Mexico Bank and Trust and withdrew $360,000 of the proceeds and the money at Compass Bank in an account in the name of Albuquerque Downtown Partners. Thereafter, Vincent Garcia flew to Washington State with a Compass Bank check for $360,000 to make a payment on the casino. In entering his guilty plea, Barnhill did not implicate David Garcia in the criminal conduct charged in the superseding indictment.
Like Vincent Garcia, BARNHILL FACES UP TO 20 YEARS OF IMPRISONMENT, a maximum $1,000,000 fine, and restitution as ordered by the court. He remains on conditions of release pending his sentencing hearing, which has yet to be scheduled.
The United States anticipates seeking dismissal of the charges against David Garcia. (usattynm81911)
MORAL
It sees like indicting the son was overkill. Was this done merely to make the father confess? If so, it would be “dirty pool.”
NEW YORK REAL ESTATE BROKER INDICTED IN $50 MILLION MORTGAGE FRAUD SCAM THAT DATES BACK AS FAR AS 1995
FACTS
On Aug. 19, a federal grand jury in Brooklyn returned an indictment CHARGING EDUL AHMAD with participating in a mortgage fraud scheme in which he and others fraudulently obtained more than $50 million in loans. The indictment alleges the defendant conspired to defraud financial institutions, including Bank of New York, JP Morgan Chase, Citibank N.A., Countrywide Financial, Flushing Savings Bank, Fremont Investment and Loan, HSBC Bank USA N.A., IndyMac Bank, One West Bank, U.S. Bank, and Wells Fargo & Co., and wholesale mortgage lenders, including New Century Mortgage Corp. and Ocwen Financial Corp. Ahmad is charged with one count of conspiracy to commit bank and wire fraud and 10 counts of bank fraud.
As detailed in the indictment, FROM 1995 TO 2009 (notice the prosecutors are using loans that funded 16 years ago), Ahmad was a licensed real estate broker in the state of New York and also acted as a loan officer. As part of the alleged scheme, the defendant submitted false loan applications and supporting documents to make borrowers of mortgage loans appear to be more creditworthy than they actually were. The defendant did that in order to profit from real estate commissions and loan fees generated by the transactions. Additionally, at the closings, Ahmad prepared and submitted documents that falsely misrepresented whether the borrowers actually made any payments to the sellers and understated the amounts of Ahmad's real estate commissions and loan fees. In doing so, Ahmad prevented the financial institutions from discovering that his fees exceeded those permitted by the institutions. Many of the homes involved were ultimately lost in foreclosures because the borrowers could not afford to make their mortgage payments.
If convicted, the defendant faces a maximum term of imprisonment of 30 years. The indictment also seeks forfeiture of the proceeds of the defendant's bank and wire fraud activity, including a criminal forfeiture money judgment and money traceable to the offenses of conviction. (usattyedny81911)
MORAL
If the government takes the position that all funds Ahmad has are “ill-gotten gains” and cannot be used to pay defense counsel, where is the money coming from to defend him? He may need a Federal Public Defender.
14 MORE DEFENDANTS CHARGED WITH MORTGAGE FRAUD IN NEW YORK INVOLVING $58 MILLION
FACTS
On Aug. 19, an indictment has been filed in Manhattan Federal Court charging 14 defendants for participating in a mortgage fraud scheme that involved over 100 home mortgage loans valued at more than $58 million. The residential properties were located in New York City and Long Island, and Westchester and Duchess counties.
The defendants charged in the indictment were GERARD CANINO, IAN KATZ, OMAR GUZMAN, JAMES VIGNOLA, HENRY RICHARDS, ROBERT THORNTON, NEAL SULTZER, MICHAEL RAPHAN, MICHAEL SCHLUSSEL, JACQUELYN TODARO, KEVIN HYMOWITZ, MICHAEL CHARLES, RALPH DELGIORNO AND PANDORA BACON.
According to the indictment, the loans were made from 2004 to 2009 through the mortgage brokers FIRST CLASS EQUITIES, which had offices on Long Island in Oceanside and Old Westbury. Canino served as the president and owner of FCE, while his co-conspirators included five FCE loan officers, five real estate attorneys and a real estate title closer.
As part of the scheme, the co-conspirators arranged home sales between straw buyers who had no intention of living in the property and homeowners in financial distress who were willing to sell their home. The FCE loan officers allegedly obtained mortgage loans for the fraudulent deals by submitting false applications including W-2s and pay stubs to banks and lenders and using inaccurate representations about the straw buyers' net worth, employment, income, and plans to live in the properties.
After approving the loans, the lenders sent the mortgage proceeds to their attorneys, who submitted false statement to the lenders about how they were distributing the loans. The attorneys allegedly made illegal payments from the loans to members of the conspiracy that totaled tens of thousands of dollars for every transaction.
The indictment said the real estate title closer omitted certain documents that he was required to provide and improperly notarized documents to further the fraud scheme.
In addition, two of the lawyers supposedly had false documents sent to lenders in order to obtain second mortgages on properties purchased by straw buyers. These proceeds then were divided among certain members of the conspiracy. Other members also allegedly funneled the money through shell corporations they owned to “flip” properties to other straw purchasers at higher prices to obtain new mortgages on the property, basically restarting the fraudulent scheme.
All the defendants were charged with conspiracy to commit bank and wire fraud and face a maximum penalty sentencing of 30 years in prison and a fine of $1 million. (nmn81511)
MORAL
Between this one and the one immediately preceding this one we are talking about two alleged fraud schemes ONLY and the total is $108 million! I would say if true, New York is pretty busy and the banks have taken some very heavy hits in these two indictments alone.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
