U. S. COURTS FREEZES ASSETS OF FIVE CALIFORNIA MORTGAGE COMPANIES FOR TOUTING THAT "MASS TORT LITIGATION" COULD STOP THEIR FORECLOSURES
FACTS
A federal court has frozen assets at five California companies that are being investigated for trying to scam U.S. homeowners facing foreclosure. The Federal Trade Commission says it has opened an investigation into companies, which charged its customers up to $10,000 for legal advice and forensic audits.
Sameer Lakhany and his five Santa Ana, Calif.-based companies tried to convince homeowners to join a lawsuit against their lenders that could stop their foreclosures, reduce their delinquent payments and yield financial pay-outs, according to a complaint filed in U.S. District Court in central California on March 5.
At the request of the FTC, the United States District Court froze the assets of Credit Shop; Fidelity Legal; Titanium Realty; Precision Law Center Inc. and Precision Law Center LLC. The operation allegedly took in more than $1 million by allegedly
Lakhany also did business using three websites,
In one scam, the FTC claims the defendants masqueraded as a specialty law firm, Precision Law Center, and sent out direct mail resembling a class action settlement notice, holding out the false promise to consumers that if they sued their lenders along with other homeowners in so-called “mass joinder” lawsuits, they could obtain favorable mortgage concessions from their lenders or stop the foreclosure process. In fact, the defendants allegedly operated a sham law firm and only engaged attorneys briefly to file the lawsuits, after which either the defendants neglected the suits, or the suits were dismissed. According to the FTC, they charged $6,000 to $10,000 in advance, but failed to get the results they promised.
The FTC alleges that to convince consumers that they should hire Precision Law Center, telemarketers followed up by mailing material to them promising that the mass joinder suit would result in: “Forgiveness of all delinquent payments, fees and penalties,” “Halt and reverse (sic) foreclosure proceedings,” “Credit restoration,” “Possible compensatory damages in the amount of $22,500.00,” and “Possible punitive damages in the amount of $52,500.”
The material also allegedly claimed that 80% to 85% of these suits are successful, and that consumers might also: receive their homes free and clear; have their principal balance reduced to 70% of the current value and their interest rate reduced by half; be refunded any accrued interest, penalties, and charges; improve their standing with credit reporting agencies; and receive monetary damages.
In the other scam, the defendants allegedly promised but failed to deliver relief from mortgages and foreclosures, and typically charged the consumer between $795 and $1,595 for a so-called "forensic loan audit." According to the FTC, the defendants told consumers these audits would find lender violations 90% of the time or more, and that the resulting legal leverage would force their lender to give them a loan modification that would substantially improve their mortgage terms. The defendants falsely portrayed themselves as non-profit, free, accredited, or HUD-certified housing counselors with special qualifications to help obtain mortgage loan modifications and avoid foreclosure. They promised consumers that the forensic loan audit would be the only charge not covered by their “free” service, and that if the “audit” did not turn up any violations, consumers could get a 70% refund and still obtain a loan modification. They also told consumers their loan modification requests would be seriously delayed without the audit, according to the complaint.
In its complaint, the FTC charged the defendants with violating the Federal Trade Commission Act and the Mortgage Assistance Relief Services Rule. (ftc 3-22-12)
CALIFORNIA FRAUDSTERS PLEAD GUILTY TO LOAN MODIFICATION FRAUD
FACTS
Rene Alvarez and Mariano Ortega, both of San Jose, pleaded guilty to defrauding about 400 homeowners out of nearly $2 million in a wide-ranging loan modification scam, according to the Santa Clara County District Attorney's Office. Both were co-owners of M&R Contemporary Solutions in Campbell and pleaded guilty and no contest, respectively to theft and foreclosure fraud charges.
Alvarez and Ortega ran the scam in 2008 and 2009 and mostly preyed on Hispanic homeowners, according to the District Attorney's Office. The men are scheduled to be sentenced May 21 and are facing a maximum of three years in the county jail.
Prosecutors say M&R lured homeowners who were in one of three stages of the foreclosure process by pitching a "principal reduction" program. Homeowners paid between $3,000 to $10,000 each to M&R depending on how far along they were in the process. Owners who were in the final stages of foreclosure—still in their homes but no longer titleholders—paid $10,000.
The collection of upfront fees from homeowners in foreclosure is a felony under California law regulating the conduct of foreclosure consultants, Fitzsimmons said. Homeowners were told M&R would save their homes by facilitating the purchase of their existing lender's loan by a third party at a discounted price. The homeowners were to be offered a new reduced-principal loan that would have significantly lower monthly payments. But no M&R client ever received a new loan.
A third defendant in the case, Cyndey Sanchez, is still awaiting trial in the case. Sanchez, who owned and operated West Coast Mortgage and Horizon Property Holdings of Beverly Hills, was supposed to provide the investors to purchase the loans.
Investigators have seized $257,000 from M&R's bank accounts, which may be applied toward restitution. (sjmercnews326120)
MORAL
Two million dollars equals three years in prison plus time off for good behavior. Not a bad exchange.
MARYLAND FEDERAL JUDGE SENTENCES HOLLYWOOD, FLORIDA MAN TO 150 YEARS IN PRISON FOR MORTGAGE FRAUD WHERE HE PROMISED TO PAY OFF HOMEOWNER MORTGAGES
FACTS
On March 30, it was announced that Andrew Hamilton Williams, Jr., 61, was sentenced to 150 years in prison followed by three years of supervised release for his participation in a massive mortgage fraud scheme which promised to pay off homeowners' mortgages on their “dream homes,” but left them to fend for themselves. He was convicted by a federal grand jury on Nov. 10, 2011 on charges of conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering.
U. S. Attorney Rod J. Rosenstein announced: “Coordinated law enforcement is helping to hold the perpetrators accountable.”
According to evidence presented at the two-week trial, Williams and his conspirators targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” In exchange for a minimum of $50,000 initial investment and an “administrative fee” of up to $5,000, the conspirators promised to make the homeowners' future monthly mortgage payments and pay off the homeowners' mortgage within five to seven years. Dream Homes Program representatives explained to investors that the homeowners' initial investments would be used to fund investments in automated teller machines, flat screen televisions that would show paid business advertisements, and electronic kiosks that sold goods and services.
To give investors the impression that the Dream Homes Program was very successful, Metro Dream Homes spent hundreds of thousands of dollars making presentations at luxury hotels such as the Washington Plaza Hotel in Washington, the Marriott Marquis Hotel in New York, and the Regent Beverly Wilshire Hotel in Beverly Hills, Calif. Metro Dream Homes had offices in Maryland, the District of Columbia, Virginia, North Carolina, New York, Delaware, Florida, Georgia and California.
According to trial testimony, Williams and his co-conspirators failed to advise investors that the ATMs, flat screen televisions, and kiosks never generated any meaningful revenue. The defendants used the funds from later investors to pay the mortgages of earlier investors. Evidence showed that MDH had not filed any federal income tax returns throughout its existence. The defendants also failed to advise investors that their investments were being used for the personal enrichment of select MDH employees, including Williams, to pay salaries of up to $200,000 a year as well as their mortgages; employ a staff of chauffeurs and maintain a fleet of luxury cars; and travel to and attend the 2007 National Basketball Association All-Star Game and the 2007 National Football League Super Bowl, staying in luxury accommodations in both instances. Nor were investors told that investor funds were used to pay off investors in a prior failed ATM investment venture called Bankcard Group; make multiple donations of up to $50,000 each to charitable organizations to give MDH the appearance of being financially successful; and transfer millions of dollars in investor funds to third-party businesses for purposes not disclosed to investors.
Trial testimony showed that Williams and his co-conspirators arranged for early Dream Homes Program investors, whose monthly mortgage payments had been paid by MDH using the funds of later Dream Homes Program investors, to attend recruitment meetings to assure potential investors that the Dream Homes Program was not a fraud. MDH used a third-party company to pay investors to advertise the Dream Homes Program to friends and family. MDH encouraged homeowners to refinance existing mortgages on their homes in order to withdraw equity and generate the funds necessary to enroll their homes in the Dream Homes Program.
On Aug. 15, 2007, the Maryland Securities Commissioner issued a cease-and-desist order to MDH and other related companies directing them to immediately cease the offering and sale of unregistered securities in connection with their promotion of the Dream Homes Program. However, Williams thereafter called meetings in which investors were told that MDH was earning up to $10 million in one month and that the company's legal difficulties were the result of either misunderstandings or racial animus against company leaders. In October 2007, the Circuit Court for Prince George's County, Md. granted the commissioner's motion to freeze MDH assets and appointed a receiver.
As a result of the scheme, more than 1,000 investors in the Dream Homes Program invested approximately $78 million. When Williams and his co-conspirators stopped making the mortgage payments, the homeowners were left to attempt to make the mortgage payments MDH had promised to make in full.
Michael Anthony Hickson, the chief financial officer of MDH; Isaac Jerome Smith, the president of MDH; and Alvita Karen Gunn, vice president of operations, were convicted by a federal jury of fraud conspiracy, wire fraud, and conspiracy to commit money laundering in connection with their participation in the mortgage fraud scheme. Hickson was also convicted of making a false statement in a federal court proceeding. Judge Titus sentenced Hickson to 120 months in prison, Smith to 70 months in prison, and Gunn to 60 months in prison.
Carole Nelson of Washington, the chief financial officer of POS Dream Homes, previously pleaded guilty to money laundering, and Charlotte Melissa Josephine Hardmon, of Bowie, Md., pleaded guilty to conspiracy to commit wire fraud in connection with their participation in this scheme. Their sentencing dates are pending. (usattymd33012)
MORAL
So some people thing mortgage fraud is the all-American crime? Well here are some all-Americans that received 150 years in prison, 10 years in prison, five years-10 months in prison and five years in prison. Note the 150 years for a 61-year-old man. Somehow that sounds like “Life without parole?”
OHIO ADDS NEW REGULATIONS REGARDING A CONSUMER'S ABILITY TO REPAY A MORTGAGE LOAN
FACTS
The Ohio Office of Attorney General issued additional regulations regarding a consumer's ability to repay. The added provision is that a consumer shall be considered to have an ability to repay if the lender is offering a fully-amortizing fixed-rate refinance loan that has the same or lesser interest rate as the consumer's current loan, the same or lesser principal amount as the consumer's current loan, and does not extend the payoff date of the consumer's current loan. If the consumer currently has an adjustable rate mortgage, the interest rate of the consumer's current loan is the interest rate the consumer is paying as of the date of the refinance. (oh bills: reg 109:4-3-19&273/30/2012)
MORAL
While state and federal laws may be markedly similar as to “ability to repay," I recommend you read both very carefully and possibly obey the stricter of the two.
PENNSYLVANIA BROKER AND THREE OTHERS PLEAD GUILTY TO FORECLOSURE RESCUE SCAM
FACTS
On March 20, Anthony J. DeMarco pleaded guilty to conspiracy and fraud charges in connection with a mortgage fraud scheme involving more than $30 million in loans. From 2006 through July 2009, DeMarco owned and operated DeMarco REI Inc., a foreclosure rescue company. A 15-count indictment charged DeMarco with conspiracy, mail fraud, wire fraud, bank fraud, and money laundering. Three others were charged in the conspiracy with him. Michael Richard Roberts, Sean Ryan McBride and Eric Bascover previously pleaded guilty. DeMarco will be sentenced on June 27. He faces approximately 210 to 262 months in prison under sentencing guidelines.
DeMarco REI Inc. was headquartered in Center City and employed Roberts and Bascove. DeMarco's business claimed to be able to assist homeowners facing imminent foreclosure. Between June and December 2008, the defendants would scour public records filings to find homeowners in financial distress and pitch a “sale-leaseback” arrangement to them. The pitch was that DeMarco REI would buy the homeowner's house, the homeowner would remain in the house and pay rent to DeMarco REI, and when the homeowner got back on his or her feet financially, the homeowner could buy back the house. The defendants solicited straw buyers for properties, used fraudulent documents to obtain mortgage loans from lenders, stole the sellers' equity in the homes at closing, and eventually failed to make the monthly mortgage payments. DeMarco used the sellers' equity to run his company and to pay lavish personal expenses. The houses went into foreclosure with the straw buyers listed on the mortgage, the original homeowners facing eviction from their own homes, and the mortgage lenders stuck with loans in default. Only one couple ever acquired the means to repurchase their home, but only after they wired approximately $245,000 to DeMarco at his direction and for that purpose. DeMarco instead used their money to purchase a Ferrari for himself and jewelry for his girlfriend and to pay miscellaneous expenses.
McBride was a title agent and chief financial officer at Settlement Engine in Pittsburgh. Settlement Engine closed approximately 30 loans for DeMarco REI from June 2008 to early December 2008. McBride pleaded guilty to conspiracy, wire fraud, and bank fraud and faces a sentence of approximately 63 to 78 months in prison when sentenced on June 27. Roberts pleaded guilty to conspiracy, wire fraud, and bank fraud and faces approximately 78 to 87 months in prison when sentenced on May 7. Bascove pleaded guilty to conspiracy and bank fraud and faces approximately 78 to 97 months in prison when sentenced on June 27.
At the time of indictment, the U.S. Attorney's Office Civil Division filed a verified complaint and temporary restraining order to help the original homeowners save their homes. The complaint and temporary restraining order sought novel relief that would bring all the individuals and entities that have a stake in the homes before the court in an orderly process by which the damage caused by the defendants' alleged fraud could be mitigated. In 2011, U.S. District Court Judge Michael Baylson approved conversion of the temporary restraining order into an injunction that stopped foreclosures and evictions that were related to the alleged fraud and that set forth the details of the mediation process. Currently, the majority of the banks and the original homeowners are still in the process of attempting to reach resolutions. (usattyedpa32012)
MORAL
The prosecutor went back to 2006 which is six years ago but the federal prosecutors are still very active and for those that did foreclosure rescue I would recommend seeing their respective attorneys before the FBI decides to see them. There are still many active cases and especially in Southern California.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
