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August 22, 2008

Hassan Nagi Indicted in $1.9 Million Michigan Mortgage Fraud Scheme

A federal grand jury in Michigan has indicted four men–including a mortgage broker and an appraiser–for allegedly running a $1.9 million real estate/mortgage fraud scheme. Hassan Nagi, 30, of Dearborn Heights, Michigan; Ali Haidous, 24, of Dearborn; Safi Bzeih, 35, of Dearborn; and Hussein Aoun, 23, of Dearborn Heights reportedly conspired to secure fraudulent mortgages from Countrywide Bank, Washington Mutual, Fifth Third Bank, IndyMac Federal Bank, Net Bank, and Sun Trust for more than 15 properties between April 2005 and April 2008.

The indictment alleges that Hassan Nagi worked as a mortgage broker and was responsible for submitting false and fraudulent applications to obtain the mortgages. Ali Haidous was a real estate appraiser who provided fraudulent appraisals for the properties. Bzeih and Aoun recruited sellers and straw buyers for the properties.

According to the indictment, after the Nagi and Haidous identified a willing seller of a property, Nagi secured financing for a straw buyer. False income and employment information was provided to the lender using fraudulent W-2 forms. In support of each loan, Nagi also submitted an inflated appraisal, created by Haidous.

After the inflated mortgage was funded at closing, the seller received sufficient funds to pay off any existing mortgage as well as a bonus for participating in the real estate fraud scheme. The remainder of the proceeds from the inflated mortgage were shared between Hassan Nagi, Ali Haidous and one of the straw buyers.

Nagi, Haidous, and Bzeih were expected to appear in federal court before Magistrate Judge Virginia Morgan yesterday afternoon, for their initial appearances and arraignment on the indictment. Hussein Aoun is a fugitive in Lebanon. The case is being prosecuted by Assistant U.S. Attorney Leonid Feller.

August 15, 2008

Countrywide and Loan Officer Fraud

When it comes to questionable business practices among real estate industry insiders, nothing quite beats the loan officer who purposefully chooses not to disclose critical information to the borrower. Simply stated, unethical loan officers don’t like to give borrowers the whole picture of what the final loan looks like before closing for fear that the borrower may do what they’re supposed to… namely, shop for the best deal.

Think about it for a second. If a borrower finds a loan that costs less, offers a better rate, or is a more stable product, they might decide to go with that loan instead of the one being offered by the loan officer who reveals little to no information about his or her loan offering. By not allowing the borrower to make a fully informed and educated decision, the unethical loan officer increases the chances that the loan–whatever its ultimate terms are–will close.

Some of the information commonly withheld or not given in a timely fashion–as you will see in the following homeowner’s story–includes a loan’s costs, fees, interest rate, and other crucial information about the loan product itself. As you read the story below, see if it doesn’t sound like an all too familiar one.

My husband and I live on a farm in the eastern part of Michigan. Soon after we purchased our place, we had well over 20% worth of “down equity,” and collectively, my husband and I had what we felt was a very good income. In 2000, after being told they could beat our current lending institution’s costs and rates, we switched our mortgage to Countrywide Home Loans, a division of Countrywide Financial.

Like many homeowners, we thought we could trust our loan officer (I’ll simply refer to him as “R.C.”); so much so that we recommended him to members of our family.

R.C. told us that a “No Doc” loan would be the easiest way to avoid looking for all the paperwork we would need to be approved for the new loan, and since my husband and Iwere busy with our lives, we determined that the No Doc route was the perfect option.

We told R.C. that we wanted a 30-year fixed loan, and we knew enough to ask for the costs associated with the mortgage upfront. Even though he was easy to talk to and seemed trustworthy, my husband and I had to pry every bit of information out of R.C. I asked several times for specific papers before closing, so I could review them, but was always told not to worry about costs because they were going to be attached to the back of the loan.

At the end of the day, despite asking repeatedly, we never received any of our costs in advance. It wasn’t until our closing—which R.C. did not attend–that I finally saw the true costs associated with the loan.

When we looked into refinancing—this time in 2005–we asked Countrywide. how much we could borrow, to which they replied, “How much to you want?” (apparently, a credit rating of 690 along with a solid income translated into the feeling that we could truly ask for any amount and get it). . At the time, we did not give them a figure but were really surprised when our appraisal came back showing that our home was worth a whopping $411,000. From our perspective, there was no way that amount was correct. At best, our home at that time was worth somewhere in the range of $315,000 to $325,000 (based on the sale prices of comparable homes in our immediate area). Again, we did not know any of this until the time of closing.

At our closing, we learned that we had another secondary equity loan on the property for $60,000. I was not happy and called our loan officer, R.C., again at the closing.

I asked to have the entire amount rolled into one loan and he made excuses about why they had to structure it this way to get the loan through. How could that be with a high credit rating, I wondered In addition, R.C. assured us that we could always consolidate the loans together after closing if we would like.

Another errant item I noticed at the closing was that Countrywide was trying to charge my husband and I for homeowner’s insurance, which I already had and had sent proof of to the company. If I had not caught it, we were sure to be paying for it.

By the time 16 months had gone by, the interest on the home equity loan jumped from 8.25% to 11%, often jumping as much as .25% in a month’s time for several months in a row As you can imagine, we just could not afford the payments on any longer. I tried to refinance again, but of course, our credit score had lowered as a result of struggling to make payments. Like many other people, we were told it wasn’t possible to refinance because our house wasn’t worth as much now. In other words, our house was now upside down in its value.

Countrywide posts everywhere–on all their paperwork and strategically throughout their website–that they can help if you are struggling with payments and that they have “counselors” you can talk to. They even sent us letters to that effect. My husband and I called many times to try to work things out with them and they just demanded money and made harassing threats. Countrywide representatives often called us six or more times a day demanding payment, and even went so far as to harass us at work. They even told my secretary of my situation and harassed her!

During our time of trying to make the payments, I was often driven to tears and hysterics by Countrywide’s harassing phone calls, threats and no help whatsoever from their customer service department. It was just awful! They didn’t give us any alternatives; just threats if we did not make the payments. We were told we would face criminal charges, be tossed out on the street, lose everything we have, and be marked as debtors forever on our credit reports and more. They humiliated us at every chance they could and treated us like dirt. I cannot begin tell you the stress it created at an already stressful time.

~ Jean and Steven Sample

When you stop to consider the lack of information given to some borrowers and the tactics used by some loan officers to “get the loan done,” it is not all that difficult to see why there are so many problems with loans in the market today. The refinancing party ultimately comes to an end, leaving the borrower to pick up the shattered pieces.

Posted By: Ralph Roberts @ 10:29 pm | | Comments (52) | Trackback |
Filed under: Countrywide, Loan Officer Fraud

August 1, 2008

Fired Countrywide Employee Arrested for Data Theft

Adding to its recent rash of disappointments, Countrywide Financial is back in the news… this time for a security breach that put the confidential information of approximately 19,000 customers at risk.

CountryWide Logo.png Despite the fact that it publicly states that “…the confidentiality and security of our customers’, both current and potential, personal information is a priority for Countrywide and its family of companies,” one of the company’s own senior financial analysts–36-year-old Rene L. Rebollo Jr.–was arrested this morning on charges of illegally accessing company computers containing personal identification information of Countrywide Home Loan customers, and the illegal sale of the data. A second man charged in the case–25-year-old Wahid Siddiqi–was also arrested today by FBI agents on suspicion of purchaing the stolen data.

Rene Rebollo is charged with exceeding authorized access to the computer of a financial institution, a charge that carries a statutory maximum penalty of five years in federal prison. Siddiqi is charged with fraud and related activity in connection with access devices, a crime that carries a statutory maximum penalty of 15 years in prison.

According to a criminal complaint filed last night, the FBI, as well as investigators with Countrywide Financial, discovered a security breach at the company and initiated a joint investigation. The complaint alleges that Rene Rebollo was employed as a senior financial analyst for Countrywide Home Loan’s subprime mortgage division, Full Spectrum Lending in Pasadena, Calif. In his position, Rebollo had access to Countrywide computer databases, many of which contained sensitive information of Countrywide clients. Countrywide terminated Rebollo’s employment just days ago.

According to the complaint, Rebollo was interviewed by FBI agents last month and acknowledged that he was responsible for giving out account information belonging to Countrywide customers to third parties over the course of two years.

Rebollo said he obtained the information from Countrywide computers at his workspace and saved the reports to personally owned flash drives, according to the complaint. After he saved the Countrywide Home Loan data on the flash drives, Rebollo left the Countrywide Home Loan premises with the intent to sell the data.

Rebollo opened a personal bank account specifically for the purpose of depositing and holding the illegal proceeds of the Countrywide data sales, and he estimated that he profited approximately $50,000 to $70,000 from the sale of the Countrywide-owned data, according to the complaint.

Rebollo was requested by other individuals to obtain specific types of data from Countrywide, and he was able to provide the information because of his access to many of Countrywide’s databases that contained information about clients from around the United States, according to the complaint.

Wahid Siddiqi was recorded by a confidential witness working for the FBI when he placed an order for personal profiles at a negotiated price, according to the complaint. Siddiqi subsequently met the confidential witness and delivered the data, in exchange for cash. Copies of the discs were provided to Countrywide investigators for verification and authentication. Countrywide investigators are currently analyzing evidence to determine if any of their customers’ identities may have been compromised so that they can be formally notified and assisted in the immediate future.

Posted By: Ralph Roberts @ 11:45 pm | | Comments (13) | Trackback |
Filed under: Identity Theft, Countrywide

June 16, 2008

Did Members of Congress Commit Real Estate Fraud?

As a United States Senator, I would never ask or expect to be treated differently than anyone else refinancing their home. This suggestion is outrageous and contrary to my entire career in public service.

When my wife and I refinanced our loans in 2003, we did not seek or expect any favorable treatment. Just like millions of other Americans, we shopped around and received competitive rates.

~ U.S. Senator Christopher Dodd

What you just read is a statement issued last Friday by U.S. Senator Christopher Dodd (D-CT), who according to Portfolio.com’s Daniel Golden, is one of two members of Congress that we now know received loans from Countrywide Financial through a “little-known program that waived points, lender fees, and company borrowing rules for prominent people.”

From strong>Portfolio.com’s Daniel Golden:

Countrywide VIPs: In the Senate and Beyond

Senators Christopher Dodd, Democrat from Connecticut and chairman of the Banking Committee, and Kent Conrad, Democrat from North Dakota, chairman of the Budget Committee and a member of the Finance Committee, refinanced properties through Countrywide’s “V.I.P.” program in 2003 and 2004, according to company documents and emails and a former employee familiar with the loans.

Other participants in the V.I.P. program included former Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former U.N. ambassador and assistant Secretary of State Richard Holbrooke. Jackson was deputy H.U.D. secretary in the Bush administration when he received the loans in 2003. Shalala, who received two loans in 2002, had by then left the Clinton administration for her current position as president of the University of Miami. She is scheduled to receive a Presidential Medal of Freedom on June 19.

Holbrooke, whose stint as U.N. ambassador ended in 2001, was also working in the private sector when he and his family received V.I.P. loans. He was an adviser to Hillary Clinton’s presidential campaign.

James Johnson, who had been advising presidential candidate Barack Obama on the selection of a running mate, resigned from the Obama campaign Wednesday after the Wall Street Journal reported that he received Countrywide loans at below-market rates.

Most of the officials belonged to a group of V.I.P. loan recipients known in company documents and emails as “F.O.A.’s”—Friends of Angelo, a reference to Countrywide chief executive Angelo Mozilo. While the V.I.P. program also serviced friends and contacts of other Countrywide executives, the F.O.A.’s made up the biggest subset.

According to company documents and emails, the V.I.P.’s received better deals than those available to ordinary borrowers. Home-loan customers can reduce their interest rates by paying “points”—one point equals 1 percent of the loan’s value. For V.I.P.’s, Countrywide often waived at least half a point and eliminated fees amounting to hundreds of dollars for underwriting, processing and document preparation. If interest rates fell while a V.I.P. loan was pending, Countrywide provided a free “float-down” to the lower rate, eschewing its usual charge of half a point. Some V.I.P.’s who bought or refinanced investment properties were often given the lower interest rate associated with primary residences.

Unless they asked, V.I.P. borrowers weren’t told exactly how many points were waived on their loans, the former employee says. However, they were typically assured that they were receiving the “Friends of Angelo” discount, and that Mozilo had personally priced their loans.

The V.I.P. loans to public officials in a position to advance Countrywide’s interests raise legal and ethical questions. Countrywide’s ethics code bars directors, officers and employees from “improperly influencing the decisions of government employees or contractors by offering or promising to give money, gifts, loans, rewards, favors, or anything else of value.” Federal employees are prohibited from receiving gifts offered because of their official position, including loans on terms not generally available to the public. Senate rules prohibit members from knowingly receiving gifts worth $100 or more in a calendar year from private entities that, like Countrywide, employ a registered lobbyist.

Why is it that the people who seem to need extra help the least often receive it the most? Here’s more from today’s issue of The Wall Street Journal:

The Countrywide Financial sweetheart loan scandal continues to grow, spreading to Senators and other Beltway potentates. We are about to find out if Congress’s passion for investigating business ethics extends to conflicts of interest and cash that involve fellow Members.

Take Senator Kent Conrad, the North Dakota Democrat whose office issued a Friday statement saying that “I never met Angelo Mozilo.” What he did not say then but admitted under later questioning by a Journal reporter is that, although he may not have had a face-to-face meeting with the Countrywide CEO, Mr. Conrad had called Mr. Mozilo and asked for a loan. The result was a discounted loan on his million-dollar beach house and a separate commercial loan of a type that residential lender Countrywide did not even offer to other customers, regardless of the rate.

So after calling the CEO of a company with various matters before the Senate, asking for a loan and then receiving at least two sweetheart deals, Mr. Conrad now says: “I did not think for one moment – and no one ever suggested to me – that I was getting preferential treatment.” Lawyers will immediately wonder if this isn’t a version of the “ostrich defense,” which judges describe during jury instruction as willful blindness or deliberate ignorance. For what other reason, besides preferential treatment, would one call the CEO of the mortgage company? Does Mr. Conrad call August Busch IV when he wants to buy a six-pack?

Almost as breathtaking is Senator Conrad’s attempt to use a charitable contribution for the estimated amount of any mortgage savings – $10,500 – to make the issue go away. So while the Senator says he did nothing wrong, now that his nonmistake has been discovered he’ll nonetheless give away the nonspecial treatment cash. There is ample evidence here to warrant an investigation, including subpoenas for relevant documents.

The same goes for Senator Christopher Dodd (D., Conn.), who chairs the very Banking Committee responsible for drafting the laws that govern Countrywide’s market.

You can rest assured that Flipping Frenzy will cover this story in further detail in the weeks and months to come. For now, feel free to leave a comment or two of you own. Do you think politicians deserve breaks like the ones Senators Christopher Dodd and Kent Conrad received?

Posted By: Ralph Roberts @ 2:42 pm | | Comments (3) | Trackback |
Filed under: Countrywide

May 23, 2008

Countrywide’s Mozilo Did NOT Call a Borrower’s Plea “Disgusting”

The Internet is buzzing today over a comment made by Countrywide Financial Corp. founder, chairman and chief executive officer, Angelo Mozilo. Compiled from various news reports:

Countrywide Financial Corp. Chief Executive Officer Angelo Mozilo inadvertently responded to an e-mail from a struggling mortgage borrower seeking help from the company, calling it “disgusting.”

Dan Bailey wrote a May 19 e-mail to Mozilo and other executives at Countrywide, asking the Calabasas, California-based lender to lower his payment to help him keep his home. Bailey said he misunderstood the terms of his adjustable-rate loan and is unable to keep up with payments.

“This is unbelievable,” Mozilo wrote the same day in an e-mail response that Countrywide called inadvertent.” Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the internet. Disgusting.”

In one of the most irrational moves yet by the popular media, somehow everyone–including editors at some of the nation’s most respected papers and web-based news gathering and reporting organization–agrees that Mozilo’s use of the word “disgusting” refers to Dan Bailey’s request that Countrywide step up and help him keep his home.

Are you kidding me?

Now listen folks… all it takes is a junior high school education to see that Mozilo’s comment was directed at the tactic Bailey used to generate his letter; not the request for help itself.

A little research reveals that Bailey issued a stock letter found on LoanSafe.org–an Internet site that “encourages borrowers to pester companies and executives until they agree to rework mortgages,” according the Arizona Daily Star. For anyone to take Mozilo to task for his comment–which was so clearly in response to the use of a stock letter–is absurd. Of course he wasn’t slamming Bailey personal situation, nor was he indicating that Countrywide wouldn’t help Bailey. He was simply venting steam over the fact that he has received hundreds of letters containing the exact same language, and of course, the response he wrote was not aimed at Bailey in the first place (he hit “reply” rather than “forward” — who among us hasn’t done that!).

Now before you go assuming or leaving comments on this post suggesting that I’m defending Countrywide or Mozilo against allegations of collusion in real estate and mortgage fraud, don’t even bother. All you have to do to know where I stand on these issues is review the content of this site. I am not defending Countrywide for the mortgage meltdown they helped create. Rather, what I’m suggesting is this…

If you want to attack Mozilo and Countrywide, fine, because there’s lots to go after them on–like, for example, allowing millions of homeowners to receive loans that the company knew homeowners’ could not afford to pay, and then packaging these loans up and selling them to Fannie, Freddy, Wall Street, and international investors, all the while knowing full well that non-performing loans were included and would never stand a snowball’s chance in hell of being repaid. But please, don’t diminish Countrywide’s role in all of this by going after its CEO just because he commented on form letter tactics. The issues at stake here–namely, that millions of homeowners are at risk right now–are much larger than Mozilo’s use of the word “disgusting.”

Posted By: Ralph Roberts @ 4:15 pm | | Comments (6) | Trackback |
Filed under: Countrywide

April 21, 2008

Judge Dismisses Mortgage Fraud-related Class Action Lawsuit

A federal judge in Philadelphia, Pennsylvania, has thrown out a lawsuit against lenders who supplied funds to a mortgage broker who previously pled guilty to charges of mortgage fraud, finding that lenders are not obliged to monitor mortgage broker actions. The decision is a major setback for 842 victims of Wesley A. Snyder’s company, Personal Financial Management, who could have used the strategy to recover some of their losses, had it succeeded. The victims are said to have approximately $30 million in the scam.

The claim rejected by U.S. District Judge James Giles started in the fall of 2007, when a Fleetwood, Pennsylvania, couple–Douglas and Andrea Jones–filed a lawsuit, hoping to have it certified as a class action suit. According to paperwork filed with the court, defendants in the complaint included:

  • ABN AMRO Mortgage Group, Inc.
  • Chase Home Mortgage Corporation
  • Citimortgage, Inc.
  • Citicorp Home Mortgage Services, Inc.
  • Countrywide Home Loans, Inc.
  • Fifth Third Mortgage Company
  • Florida Capital Bank Mortgages
  • GMAC Mortgage Corporation
  • GMAC Mortgage Asset Management, Inc.
  • GMAC Mortgage Group, Inc.
  • HSBC Mortgage Corporation (USA)
  • Indymac Financial Services Corporation
  • Moorequity, Inc.
  • National City Mortgage, Inc.
  • nBank, N.A.
  • Provident Funding Group, Inc.
  • Saxon Home Mortgage
  • Saxon Mortgage, Inc.
  • Sovereign Bank
  • SunTrust Mortgage, Inc.
  • U.S. Bank, N.A.
  • Wachovia Mortgage Corporation
  • Washington Mutual Home Loans, Inc.
  • Wells Fargo
  • Home Mortgage, Inc.
  • John Doe Mortgage Companies

In their suit, Douglas and Andrea Jones alleged that several Pennsylvania companies, owned or controlled by Wesley Snyder, offered them Equity Slide Down Mortgages as part of what they say was a mortgage servicing Ponzi scheme. The Joneses said Snyder failed to monitor and supervise his companies, which did not credit them properly for payments and pre-payments of interest and principal on their mortgages. They further alleged that, following the bankruptcy of Snyder’s companies, the defendants in the case–the companies listed above–failed to notify them properly that they had taken over as servicing agents on the mortgage loans and demanded payments from them in amounts substantially higher than owed on the loans serviced by Snyder’s companies. The Joneses also claimed that each defendant was guilty of having committed numerous RESPA violations.

Specifically,the Joneses alleged that they applied for and closed on two separate Equity Slide Down mortgages through Snyder’s companies–one for each of their two properties–in 2002 and 2005, respectively. They alleged that at all times after closing they remitted their monthly mortgage payments to Snyder’s company and that they were current on all payments owed and had pre-paid a large portion of the principal balance by way of a large principal reduction payment made soon after closing.

They further alleged that in September 2007, after the bankruptcy filing of the Snyder’s company, they learned for the first time that SunTrust and Countrywide claimed to hold their respective mortgages and notes. According to the Joneses, SunTrust and Countrywide demanded payment for amounts that were duplicative and excessive and that failed to credit properly the payments and pre-payments they had made to the Snyder. The Joneses say that the Snyder’s companies were the “servicing agents” of each Defendant, as defined by the Real Estate Settlement Procedures Act (RESPA), and that Snyder’s companies were otherwise the Defendants’ agents under Pennsylvania agency law.

More specifically, the Joneses alleged that:

  1. Each defendant employed one or more of the Snyder’s companies to originate, close, and service all the mortgage loans at issue.
  2. Each Defendant knew the Joneses were making all mortgage payments to the Snyder Entities.
  3. Each Defendant knew it was sending all mortgage statements and federal tax forms to Snyder rather than to the Joneses.

In dismissing the suit, U.S. District Judge Giles said the Joneses’ recollections were trumped by documents they signed stating payments would be made to mortgage bank ABN Amro Mortgage Group, meaning, Snyder was not ABN’s agent and ABN had no duty to oversee him.

Posted By: Ralph Roberts @ 2:01 pm | | Comments (5) | Trackback |
Filed under: Mortgage Fraud, Real Estate Fraud, Pennsylvania, Ponzi Scheme, Trial, Countrywide

April 16, 2008

The FBI’s Mortgage Fraud Probe Now Targets 19 Firms

We learned some interesting things today about the FBI’s probe into real estate and mortgage fraud at some of Wall Street’s top financial institutions. According to FBI Director Robert S. Mueller, III’s testimony before the U.S. Senate Committee on Appropriations, Subcommittee on Commerce, Justice, Science, and Related Agencies, the Bureau’s investigation of real estate fraud in the mortgage industry now encompasses 19 companies, up from 17 just one month ago. In Mueller’s own words:

  • “We’ve had a tremendous surge in cases related to the subprime mortgage debacle. We currently have almost 1,300 cases that have grown exponentially over the last several years and we expect them to grow even further.”
  • “We have also 19 cases involving institutions themselves where mortgage fraud may have contributed to misstatements and the like.”.

Mueller, who was testifying on Capital Hill in defense of the FBI’s budget request for 2009, also said that when the Bureau’s budget request was originally drafted, the subprime mortgage mess had not yet “grown to the point where we could see the extent of the surge,” and that he was not certain at this point when we can expect to see the extent of the surge.

Additional information, from Reuters:

Bureau officials declined to name any additional companies targeted in the probe. “We’ve always said it was a fluid number,” FBI spokesman Stephen Kodak said. “It could change at any time.” He said the bureau has publicly acknowledged only one company as involved — Doral Financial Corp (DRL.N: Quote, Profile, Research). A former Doral treasurer was indicted for investment fraud last month. He denied the allegations and the company declined to comment.

The largest U.S. mortgage lender, Countrywide (CFC.N: Quote, Profile, Research), also is under FBI investigation, authorities have said, although the FBI has declined to comment and Countrywide said it was unaware of any investigation. When the FBI disclosed its industry investigation, major investment banks Goldman Sachs (GS.N: Quote, Profile, Research), Morgan Stanley (MS.N: Quote, Profile, Research) and Bear Stearns Cos (BSC.N: Quote, Profile, Research) each said the government had asked them for information, but there was no confirmation of any FBI role. Beazer Homes (BZH.N: Quote, Profile, Research) said last year it had received a federal grand jury subpoena related to its mortgage business.

Posted By: Ralph Roberts @ 10:07 pm | | Comments (5) | Trackback |
Filed under: Uncategorized, Mortgage Fraud, FBI, Subprime Mortgages, Mortgage Meltdown, Countrywide

March 30, 2008

Some Law Firms Improperly Profit from Foreclosure

Today’s New York Times features a lengthy article (more than 3,000 words) asserting that as the number of foreclosures grows, a small group of law firms and default servicing companies, who represent mortgage lenders, have been raking in mounting profits. These firms, according to the Times, assess legal fees and a host of other charges, calculate what borrowers’ owe and draw up the documents required to remove them from their homes. The only problem is, in a growing number of cases, the firms involved have not been following the the law.

In many cases, paralegals and “nonlawyer employees” do all the work, which only increases the chance of mistakes being made, and that’s just the tip of the iceberg, according to The New York Times’ investigation.

Of particular interest to FlippingFrenzy.com readers (courtesy of The New York Times)…

  1. Law firms, paid by the number of motions filed in foreclosure cases, have sometimes issued a flurry of claims without regard for the requirements of bankruptcy law, several judges say.
  2. Court documents say that some of the largest firms in the industry have repeatedly submitted erroneous affidavits when moving to seize homes and levied improper fees that make it harder for homeowners to get back on track with payments. Consumer lawyers call these operations “foreclosure mills.”
  3. John and Robin Atchley of Waleska, Ga., have experienced dubious foreclosure practices at first hand. Twice during a four-month period in 2006, the Atchleys were almost forced from their home when Countrywide Home Loans, part of Countrywide Financial, and the law firm representing it said they were delinquent on their mortgage. Countrywide’s lawyers withdrew their motions to seize the Atchleys’ home only after the couple proved them wrong in court.
  4. Joel B. Rosenthal, a United States bankruptcy judge in the Western District of Massachusetts, wrote in a case last year involving Wells Fargo Bank that rising foreclosures were resulting in greater numbers of lenders that “in their rush to foreclose, haphazardly fail to comply with even the most basic legal requirements of the bankruptcy system.
  5. Last month, almost 225,000 properties in the U.S. were in some stage of foreclosure, up nearly 60 percent from the period a year earlier.
  6. Fidelity National Default Solutions, a unit of Fidelity National Information Services of Jacksonville, Fla., is one of the biggest foreclosure service companies. It assists 19 of the top 25 residential mortgage servicers and 14 of the top 25 subprime loan servicers. Citing “accelerating demand” for foreclosure services last year, Fidelity generated operating income of $443 million in its lender processing unit, a 13.3% increase over 2006. By contrast, the increase from 2005 to 2006 was just 1 percent.
  7. A recent analysis of 1,700-plus foreclosures across the country by Katherine M. Porter, associate professor of law at the University of Iowa, showed that questionable fees were added to borrowers’ bills in almost half the loans.
  8. A generation ago, home foreclosures were a local business, lawyers say. If a borrower got into trouble, the lender who made the loan was often a nearby bank that held on to the mortgage. That bank would hire a local lawyer to try to work with the borrower; foreclosure proceedings were a last resort. Now foreclosures are farmed out to third-party processors who hire local counsel to litigate. Lenders negotiate flat-fee arrangements to try to keep legal bills down.
  9. The September 2006 issue of The Summit, an in-house promotional publication of Fidelity National Foreclosure Solutions, another unit of Fidelity, trumpeted the efficiency of its 18-member “document execution team.” Set up “like a production line,” the publication said, the team executes 1,000 documents a day, on average.
  10. The Texas law firm of Barrett Burke has come under intense scrutiny by bankruptcy judges. Overseeing a case last year involving James Patrick Allen, a homeowner in Victoria, TX, a judge examined the firm’s conduct in eight other foreclosure cases and found problems in all of them. In five of the matters, documents show, the firm used inaccurate information about defaults or failed to attach proper documentation when it moved to seize borrowers’ homes. The judge imposed $75,000 in sanctions against Barrett Burke for a pattern of errors in the Allen case.
Posted By: Ralph Roberts @ 4:11 pm | | Comments (0) | Trackback |
Filed under: Attorneys, Foreclosure, Mortgage Meltdown, Countrywide

February 12, 2008

Rally Is on to Stem Foreclosure Epidemic

Just yesterday, Countrywide Financial Corp. announced that it was partnering with the community advocate group, ACORN (Association of Community Organizations for Reform Now) to expand relief for its borrowers who are facing foreclosure. Today, the Bush administration followed up with its own foreclosure relief expansion plan — “Project Lifeline” — giving distressed homeowners an additional 30 days to work out more affordable payment options with their lenders.

The new program is designed to help all homeowners who are having trouble making their monthly mortgage payments, instead of restricting assistance to those with high-interest, subprime loans. Project Lifeline was developed through the collaborative efforts of six of the largest lending institutions in the United States, which collectively service nearly half the mortgages in the U.S. The banks that have agreed to participate in the program so far are:

  • Citigroup
  • Countrywide
  • Bank of America
  • JPMorgan Chase
  • Washington Mutual
  • Wells Fargo

According to this new program, lenders will contact homeowners who are more than 90 days delinquent in their mortgage payments and offer them the option of delaying the foreclosure for 30 days while they explore options for making the mortgage more affordable.

Who does not qualify?

  • Homeowners already in foreclosure.
  • Those who have a foreclosure date within the next 30 days.
  • Investors who took out the mortgage loan to purchase an investment property or vacation home.

Both of these expanded relief programs are steps in the right direction, both for homeowners and for neighborhoods and communities. Hopefully, more mortgage lenders will follow suit to cover 100% of those who are in jeopardy of losing their homes and their equity as a result of foreclosure. It is only right that the lenders who contributed to creating the current crises do their part to fix it.

Posted By: Ralph Roberts @ 5:10 pm | | Comments (4) | Trackback |
Filed under: Foreclosure, Mortgage Meltdown, Countrywide

February 1, 2008

Friday’s Real Estate & Mortgage Fraud Round-Up

Some mortgage fraud cases will not be criminally prosecuted!: Amid all the anguish arising from the swelling volume of home foreclosures in and around Stockton, California, there has been much talk about real estate fraud. But most of the complaints cannot be criminally prosecuted, representatives of the San Joaquin County Office of the District Attorney said yesterday.

Foreclosure vultures prey on Portland, Oregon, homeowners: As national foreclosure rates hit their highest levels ever, people calling themselves “foreclosure consultants,” are filling Craigslist, billboards and mailers with offers to “save your home.” Detective Liz Cruthers, who investigates white-collar crimes for the Portland, Oregon, Police Bureau, says she’s spending much of her time learning the intricacies of “mortgage rescue fraud” and chasing down the bad guys.

Utah seeks stiffer penalties for real estate fraud: A Utah legislative committee is recommending the passage of a bill aimed at increasing criminal and civil penalties against people involved in mortgage fraud. The Senate Business and Labor Standing Committee on Tuesday unanimously approved SB134 for further consideration by the state Legislature.

FBI targets mortgage fraud in Hawaii: The FBI has opened multiple mortgage fraud investigations in Hawai’i as a result of the fallout from the nation’s subprime mortgage crisis, the bureau’s director said yesterday. FBI Director Robert S. Mueller III, speaking to reporters on a stopover following a trip to Asia, confirmed the subprime mortgage mess has reached Hawai’i.

Countrywide accused of mortgage fraud: Already burned in the subprime mortgage meltdown, lending giant Countrywide Financial Corp. is now under investigation in Florida for possible unfair and deceptive trade practices, state officials said Thursday. Officials say they have received more than 150 formal complaints about Countrywide since setting up a mortgage fraud hotline last year.

Arrest made in Erie, Pennsylvania, real estate fraud case: A key figure in an ongoing federal investigation into suspected mortgage fraud in the city of Erie, Pennsylvania, will plead guilty to fraud and money-laundering charges. The U.S. Attorney’s Office in Erie on Thursday filed criminal charges against Frank Kartesz II. Kartesz, 39, is accused of one count each of mail fraud and criminal conspiracy to commit mail fraud, wire fraud and bank fraud. The government alleges he was part of a scheme in which he and others bought run-down houses and sold them at artificially inflated prices. Most of the buyers were low-income people who knew little about the home-buying process.

Illinois mortgage broker in jail for selling credit histories: Homeowners already worried about with a slumping real estate market and tighter restrictions on home loans should look to the case of an Illinois mortgage broker as another cautionary tale.

Georgia real estate appraiser sentenced to prison for mortgage fraud: After submitting fraudulent appraisals on incomplete houses as part of a mortgage fraud scheme, a Georgia real estate appraiser has been sentenced to prison.

January 28, 2008

Drinking the Cay Clubs Cool-Aid: Part I

The people selling real estate investment opportunities in Cay Clubs Resorts were slick. They didn’t just ensnare unseasoned investors in their web of lies, but they also managed to catch some fairly sophisticated real estate investors who were already experienced.

Recently, I heard from Jamie and Joe Castagna. Jamie was a loan processor at the time, who, as this story unravels, became a licensed mortgage broker. Her husband, Joe, is an electrician who had experience investing in real estate. They knew what they were doing, but as Jamie says, they were so impressed with the Cay Clubs Resorts promises and presentation and the professionalism of their sales reps, that they had few reservations about “drinking the Cay Clubs Cool-Aid.”

Here, Jamie relates Part 1 of the story about how Cay Clubs and Partners turned her and Joe’s lives upside down.

Jamie and Joe met in October of 2002 at Fort Myers Beach. We became good friends and eventually dated. Joe’s main career was an electrician, but in 2001 he started to invest in real estate. Jamie was involved in the real estate industry since high school and at that time was a loan processor. We both had a passion and love for real estate.

We eventually got married in December of 2003 and had our first child May 15, 2004. During this time we started to invest together in different real estate properties and it was a big success. With Joe having gone to real estate training and his previous experience working for a very large real estate education company and Jamie’s background in the financing, we made the perfect team!

As a newly married couple and new parents we had a serious drive to do the best for our family. In January of 2004, Joe secured a job at Findwhat.com and was in the facilities operations department. We continued to search for good real estate deals and worked hard to support our family. In approximately October or November 2004, one of Joe’s co-workers, Colin Brechbill approached him at work one day and said:

“How does a guy like you afford an Escalade on a Findwhat salary?”

Joe proceeded to tell Colin that we invested in real estate. After that point, Colin latched onto Joe like a leach. Joe had brought home different brochures from EarthMark Companies and talked to Jamie about these investments that Colin was offering. Joe said to Jamie, “I know that these investments are a little out of our price range, but please look them over.” Jamie reviewed the brochures and really did not know what to think, due to the limited information provided. The information that was in the package was for property at Mariner’s Club Bahia Beach and Mariner’s Club Key Largo. It included floor plans, aerial views of the waterfront property, an Appreciation Analysis–(showing an average of overall appreciation of 73.22% to 158.54%)–and the history of the company. It seemed like they were established developers with a great amount of success. Jamie figured that it was at least worth taking a look at.

A few weeks later (October 2004), we decided to take a trip up to the Tampa, Florida area to check out the two new developments that Colin Brechbill had told us about. The first place that we visited was at the Mariner’s Club Bahia Beach in Ruskin, Florida. This was a pre-construction opportunity which required 1