NEWARK, NJ—A West Orange, NJ ., man who owned and operated multiple foreclosure rescue companies admitted today to his role in a mortgage fraud scheme that defrauded numerous mortgage lenders of over $10 million, United States Attorney Paul J Fishman announced. Ronald Harris Jr, 41, of Piscataway, NJ ., pleaded guilty before United States Magistrate Judge Patty Shwartz to an information charging him with one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering. Judge Shwartz recommended to United States District Judge Faith S Hochberg that his plea of guilty be accepted and entered. According to documents filed in this case and statements made during Harris’ guilty plea proceeding: Harris owned and operated Harris Capital and Skyline Capital Group, both of which held themselves out as foreclosure rescue companies and operated out of offices in Newark and later, Maplewood, NJ.

Harris admitted that he and other individuals, including Harris Capital employee Sterling Bruce, 37, of Newark, fraudulently promised to help homeowners avoid foreclosure, keep their homes, and repair their damaged credit by directing the homeowners to allow title to their homes to be put in the names of third party purchasers, or straw buyers, for approximately six month to one year. Harris told the homeowners that during that time period, he and others would help them obtain more favorable mortgages and improve their credit ratings. The homeowners were told that the titles to their homes would be returned to them. After the homeowners were signed up, Harris, Bruce, and others recruited individuals with good credit scores to act as straw buyers of the distressed properties.

The straw buyers were told that they were helping someone save his or her home and that they would make money when they sold the property back to the current owner after approximately one year. Once the distressed homeowners and straw buyers were in place, Harris, Bruce, Pia Perkinson, 39, of Parlin, NJ.—a mortgage loan officer at a number of different mortgage loan companies—and others caused loan applications to be sent in the straw buyers’ names to mortgage lenders. To increase the credit-worthiness of the straw buyers and to ensure that they would be approved for the loans, Harris, Bruce, Perkinson, and others submitted loan applications containing material false personal and financial information about the straw buyers, such as misstating their employment, income, and assets. For example, many of the straw buyers’ loan applications falsely stated that they worked for one of Harris’ companies making a substantial salary.

Harris would also regularly submit fraudulent supporting documents with the loan applications to support the false statements, such as fake employment records and fake investment account statements. Prior to the closings of these fraudulent transactions, Harris and Bruce regularly filed fraudulent liens for tens of thousands of dollars on the properties. At the closings of the transactions, the liens would be paid off with the proceeds of the fraudulently obtained loans and Harris and Bruce would enrich themselves. Harris admitted that he regularly laundered these loan proceeds through various bank accounts he controlled.

In total, Harris and his co-conspirators caused lenders to fund dozens of fraudulent loans that totaled more than $10 million. Of that amount, Harris received approximately $1,145,993. The wire fraud conspiracy count to which Harris pleaded guilty carries a maximum potential penalty of 30 years in prison and a fine of up to $1 million. The money laundering conspiracy count carries a maximum potential penalty of 20 years in prison and a fine of up to $250,000.

Sentencing is currently scheduled for September 13, 2011. Bruce previously pleaded guilty before Judge Shwartz to one count of wire fraud conspiracy relating to his role in the mortgage foreclosure rescue scheme. He is currently scheduled to be sentenced by Judge Hochberg on September 12, 2011. Perkinson also previously pleaded guilty before Judge Shwartz to one count of wire fraud conspiracy.

During her guilty plea, Perkinson admitted to submitting fraudulent loan applications to various lenders, as well as taking out at least two fraudulent loans herself. A sentencing date has not yet been determined. Sabir Muhammad, 47, of South Plainfield, NJ ., was charged along with Harris in the initial complaint, and the charges against him remain pending. United States Attorney Fishman credited postal inspectors of the United States Postal Inspection Service, under the direction of Inspector in Charge Thomas E Boyle; special agents of the FBI, under the direction of Special Agent in Charge Michael B Ward; and special agents of the IRS, under the direction of Special Agent in Charge Victor W Lessoff, with the investigation leading to today’s guilty plea.

The government is represented by Assistant United States Attorneys Matthew E Beck and Aaron Mendelsohn of the United States Attorney’s Office Economic Crimes Unit in Newark. The charges contained in the complaint against Muhammad are merely accusations, and the defendant is considered innocent unless and until proven guilty. This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.

The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. Defense counsel: Alan D Bowman Esq ., Newark

Reported by: FBI

BALTIMORE, MD—U.S. District Judge J. Frederick Motz sentenced James William Fox II, age 40, of Crofton, Maryland today to 27 months in prison, followed by three years of supervised release, for conspiracy to commit wire fraud in connection with a mortgage fraud scheme which he promised to help homeowners facing foreclosure keep their homes, but left them with no equity and no longer holding the title to their properties. At today’s sentencing hearing Judge Motz also ordered that Fox pay restitution in the full amount of the loss, which the government contends is between $1 million and $2.4 million.

The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; and Special Agent in Charge Ken Taylor, Jr. of the Housing and Urban Development Office of Inspector General—Office of Investigations.

According to Fox’s plea agreement, he met James Hooper Dan, age 45, of Annapolis, Maryland, when both were loan officers at a mortgage brokerage in Annapolis. Beginning in 2006, Fox began to identify prospective borrowers who owned and had equity in their homes, but who could not afford their mortgage payments and were at risk of losing their homes because they were either in foreclosure, bankruptcy or financial distress. Fox, and sometimes Fox and Dan, told potential victims that they could “rescue” them and save their houses. The promises involved transferring the home to Fox or Dan, who would obtain a new mortgage loan. Fox and Dan promised to make the payments on the new mortgage loan for six months or a year, during which time the individual would “repair” their credit, refinance the property and reacquire it. During this six month or one-year period, the individual was to continue living in the house.

In order to obtain the mortgage loans in their names, Fox and Dan made materially false and fraudulent loan applications including falsification of their intent to occupy the property, annual income, savings, other properties owned, and source of the borrower’s funds for closing. Fox was typically the loan officer for Dan’s loans and was aware of Dan’s material misrepresentations.

According to the plea agreement, from April 20, 2006 through July 5, 2007, Fox and Dan transferred eight properties from financially distressed homeowners to themselves or straw purchasers they recruited. The properties were located in Waldorf, Capitol Heights, Baltimore, Silver Spring, Pasadena and Hagerstown, Maryland, as well as Glen Rock, Pennsylvania and Chesterfield, Virginia. The settlement statements (sometimes called HUD-1s) used at the settlements were false. In each instance, Fox, Dan, or the straw purchaser was supposed to produce the buyer’s funds to close at settlement from their own resources. These funds actually came from the seller’s proceeds, or from money borrowed from others, so that Fox invested no funds of his own in any transaction. Although Fox and Dan were the buyers of the properties, they obtained proceeds from the equity in the properties by making material false representations to financial institutions making the loans. In addition, the sellers paid over to Fox and Dan, or one of their companies, monies that were identified on the HUD-1 as the sellers’ proceeds of the property sales. Fox and Dan shared some of these proceeds with the sellers either directly or by paying off sellers’ debts, but put the remainder in their own bank accounts. Although Fox and Dan made some mortgage payments on each of the properties, they eventually defaulted on the mortgage loans, and all eight properties went into default. The victims do not have title of their homes.

Dan previously pleaded guilty to the same charge and is scheduled to be sentenced on February 25, 2011 at 10:30 a.m.

The Maryland Mortgage Fraud Task Force was established to unify the agencies that regulate and investigate mortgage fraud and promote the early detection, identification, prevention and prosecution of mortgage fraud schemes. This case, as well as other cases brought by members of the Task Force, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and promote the integrity of the credit markets. Information about mortgage fraud prosecutions is available http://www.justice.gov/usao/md/Mortgage-Fraud/index.html.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

United States Attorney Rod J. Rosenstein thanked the Maryland Crime Victims’ Resource Center, Inc. for their assistance to victims in this case.

United States Attorney Rod J. Rosenstein thanked the FBI and HUD-OIG, Office of Investigations for their work in this investigation and commended Assistant U.S. Attorney Joyce K. McDonald, who prosecuted the case.

The lifting of the major banks’ “foreclosure moratoriums” — which had been instituted to stem the outcry over massive fraud in the processing of foreclosure documents — demonstrates the necessity for the working class to launch a struggle to win a genuine two-year moratorium on foreclosures and evictions predicated on the premise that housing is a fundamental human right.

With the federal government having essentially nationalized the mortgage industry, the president has the authority to implement such a moratorium through executive action.

Bank of America on Oct. 18 announced its intent to resume foreclosures in the 23 states which have judicial foreclosures. BOA had suspended foreclosures in those states on Oct. 1 due to revelations of fraud in the processing of foreclosure documents. BOA also announced it would resume foreclosures in a few weeks in the remaining 27 states. This move will likely encourage JP Morgan Chase and GMAC, who had similarly suspended foreclosures in the 23 judicial foreclosure states, to resume taking people’s homes. (New York Times, Oct. 18)

Barbara J. Desoer, president of Bank of America Home Loans, stated, “We did a thorough review of the process and we found the facts underlying the decision to foreclose have been accurate. We paused while we were doing that, and now we’re moving forward.”

While even bourgeois commentators treated this announcement with the cynicism and derision it deserved, Bank of America was emboldened to make this move with the backing of the federal government.

From the onset of the exposure of massive bank fraud, the Obama administration has opposed any calls for a national moratorium on foreclosures. When David Axlerod, President Barack Obama’s chief advisor, appeared on CBS’s “Face the Nation” Oct. 10, he came out against a national moratorium. He was followed by Housing and Urban Development Secretary Shaun Donovan, who published an article Oct. 17 in the Huffington Post that also rejected calls for a national moratorium, saying it would hurt the economy.

Billions for banks

Bank of America noted that the major holders of its mortgages, Fannie Mae and Freddie Mac, had been consulted during the review and had signed off on the decision to resume foreclosures. Of 14 million mortgages BOA services, one-half of them — worth $2.1 trillion — are owned by Fannie Mae and Freddie Mac, the giant mortgage holding companies controlled by the U.S. Treasury. (NYT, Oct. 18)

Fannie Mae and Freddie Mac were formerly government-sponsored enterprises, private corporations chartered by the federal government to give them enhanced standing to buy or back up mortgage loans.

However, in July 2008 Fannie Mae and Freddie Mac were taken over by the federal government due to massive losses they incurred as a result of the record rise in foreclosures caused by the fraudulent and predatory lending practices of the banks. The federal government placed Fannie Mae and Freddie Mac in trusteeship under the Federal Housing Finance Administration, guaranteeing up to $200 billion in federal tax dollars to back up their loans. That figure was raised to $400 billion, and is now uncapped.

According to a June 3, 2009, statement by FHFA Director James Lockhart, Fannie Mae and Freddie Mac own or guarantee 56 percent of single-family mortgages worth $5.4 trillion in the U.S. When combined with the Federal Housing Administration, the federal government backs or issues a whopping 75 percent of the country’s mortgages. (Associated Press, Sept. 9, 2008)

What this means is that when a borrower goes into foreclosure, the bank which made the loan gets paid off at the loan’s full value by Fannie Mae or Freddie Mac. In addition, the government pays the bank to process the foreclosure. Then the government takes over the home, evicts the homeowner and any tenants, places the home on the market, and sells it at a fraction of the loan’s value.

The difference in what the government paid the bank for the loan, and what the home sells for after foreclosure and eviction, is paid for by taxpayers. That arrangement amounts to a silent bailout of the banks.

For example, a home several doors from where this writer lives in Detroit sold for $137,000 in 2001. The home was then foreclosed and the loan was taken over by Fannie Mae. The home is now being listed by Fannie Mae for $31,000. The $99,000 difference between the $130,000 still owed on the home for which the bank received full value, and the $31,000 for which Fannie Mae is selling the home, is paid for out of taxpayer funds.

This bailout to the banks, which occurs with virtually every foreclosure, has already amounted to $145 billion.

While the FHFA estimated that the total cost of this bailout will be $221 to $363 billion, in 2009 the Congressional Budget Office estimated that Fannie Mae and Freddie Mac would require $389 billion in federal subsidies through 2019. (Bloomberg News, Oct. 21)

Barclays Capital Inc. analysts put the price tag as high as $500 billion, and Sean Egan, president of Egan-Jones Ratings Co., estimated that the total taxpayer bailout to the banks through Fannie Mae and Freddie Mac will total $1 trillion. (BN, June 13)

These figures do not include the additional hundreds of millions of dollars in federal subsidies on FHA-backed loans.

Still-soaring foreclosures, no relief for homeowners

The Obama administration has announced modest loan modification programs to help homeowners, such as the Home Affordable Modification Program, in exchange for this continued massive bailout.

HAMP and other programs are supposed to be mandatory for the banks. But the banks do not comply to help homeowners in any significant way. The government relies on the banks themselves to carry out these modifications, and the federal government and most courts have refused to enforce any sanctions for refusal to perform them.

With the banks knowing they will be getting paid full value on the loans after foreclosure, the banks have little incentive to modify loans and have sabotaged HAMP and led to the program’s virtual collapse. As of August less than one-sixth of the 3 million homeowners who were supposed to be helped have received loan modifications, and the number of borrowers being offered trial modifications has drastically declined. (NYT, Aug. 20)

It was recently exposed that Fannie Mae and Freddie Mac are using the same law firms that prepared the fraudulent documents for the major banks in their processing of foreclosures and evictions. Fannie Mae and Freddie Mac are sanctioning loan servicers if they do not toss people out of their homes within a short period of time. (NYT, Aug. 22)

Obama: Issue moratorium now!

Today the foreclosure crisis continues to intensify. An estimated 2.8 million foreclosures are projected across the U.S. during 2010, with foreclosures totaling 9 million for the years 2009 to 2012. The total lost home-equity wealth due to foreclosures is expected to be $1.9 trillion for the years 2009 to 2012. (Center for Responsible Lending, Aug. 20)

Foreclosures and evictions are a direct product of persistent high unemployment. Of the 1 million homeowners who received foreclosure counseling through the National Foreclosure Mitigation Counseling Program, 58 percent listed unemployment as the main reason for default. (HousingWire, June 1)

With the federal government controlling or backing the vast majority of mortgage loans, President Obama has the clear authority to implement a two-year moratorium on foreclosures and foreclosure-related evictions through an executive order.

A moratorium would let homeowners and tenants remain in their homes, stabilize communities and allow time to develop a long-term solution to this crisis. Then home loans could be restored to their proper value and housing for all guaranteed.

We must fight each foreclosure and eviction and begin implementing such a moratorium through direct action. During the Depression of the 1930s, move-ins reversed many evictions and led to foreclosure moratoriums being enacted in 25 states, which were upheld as constitutional by the U.S. Supreme Court.

What is needed is for the working class to launch a mass struggle to win this demand. It’s time to fight to reverse the government policies which place the well-being of the financial institutions ahead of the welfare of the people.

Jerry Goldberg is an anti-foreclosure attorney and a leader in the Detroit-based Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shutoffs. Articles copyright 1995-2010 Workers World. Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.

In the still-developing “mortgagegate” scandal, the Obama White House is pledging its loyalties to the letter of the law, vowing Tuesday to hold “accountable” any bank that engaged in foreclosure fraud.

“As institutions are determining their next steps in addressing these issues, we remain committed to holding accountable any bank that has violated the law,” White House Press Secretary Robert Gibbs told reporters.

“Mortgagegate,” as it’s been dubbed in the media, centers around the use of unqualified workers given jobs as “mortgage experts,” who were then tasked with signing off on thousands of documents required by courts in foreclosure proceedings.

Many times, paperwork was not properly examined. In some cases, according to sworn statements, bribes of jewelry, cars and even houses were offered if an employee would forge documents or notary seals.

And all of it, according to the allegations, happened in an effort to speed up the foreclosure process.

It was enough for attorneys general in all 50 states to initiate investigations. Only 23 states currently require a court approval before a bank may foreclose on a home.

Now, the Obama administration has directed its Financial Fraud Enforcement Task Force to find out whether banks that used so called “robo-signers” actively mislead government housing agencies, or if they committed mail or wire fraud by submitting false paperwork.

“The administration’s Federal Housing Administration and Financial Fraud Enforcement Task Force have undertaken their own regulatory and enforcement investigation into the foreclosure process,” Gibbs explained Tuesday.

It is possible the investigation will result in criminal charges, The Washington Post noted.

In the wake of the “robo-signing” revelations, several major lenders froze foreclosures temporarily to review paperwork, Bank of America being the largest. The institution said Monday it would be resuming foreclosures this week.

The Obama administration has resisted calls for a national moratorium on foreclosures, with spokesman Robert Gibbs warning of the “unintended consequences” of such an action.

While many House Democrats, including Speaker Nancy Pelosi (D-CA), have called for a congressional investigation into foreclosure fraud, Congress is widely expected to attempt legislation retroactively forgiving the mortgage industry for its abuses.

Up to 1.2 million homes are expected to be foreclosed upon this year, according to data provided by RealtyTrac Inc.

By Stephen C. Webster

Concealed from IRS Millions of Dollars of Profits Made from “Flipping” Hundreds of Properties Bought at Foreclosure Auctions

GREENBELT, MD—Chief U.S. District Judge Deborah K. Chasanow sentenced Minh-Vu Hoang, age 58, of Bethesda, Maryland, today to five years in prison followed by three years of supervised release for conspiracy to defraud the Internal Revenue Service and the U.S. Bankruptcy Trustee in connection with a scheme to conceal millions in profits earned from the purchase and sale of hundreds of foreclosure properties. Judge Chasanow also sentenced her husband Thanh Hoang, age 65, also of Bethesda, to a year and a day in prison followed by two years of supervised release for conspiracy to impede the IRS in connection with his role in the scheme.
The sentences were announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service – Criminal Investigation; Montgomery County State’s Attorney John McCarthy; and Special Agent in Charge Richard McFeely of the Federal Bureau of Investigation.
“This was a transparent scheme to defraud the United States,” stated Rebecca Sparkman, Internal Revenue Service-Criminal Investigation Special Agent in Charge, Washington, D.C. Field Office. “The IRS-Criminal Investigation is proud to be part of the law enforcement team that is having an impact on this criminal activity.”
According to their plea agreements, the Hoangs and other family members purchased property at foreclosure auctions beginning in 1999, and resold some of the properties at a profit. The Hoangs and others deposited and withdrew money from an escrow account for the purchase and sale of properties, and transferred money from the escrow account to business entities they controlled in order to conceal their financial interests in the properties. From 2000 to 2005, the Hoangs and others purchased and sold hundreds of foreclosure properties using the names of their agents or business entities to conceal their involvement in the purchase and sale of the properties, and thereby avoid taxes.
On May 10, 2005, Minh-Vu Hoang filed for bankruptcy in Maryland. She filed several false schedules and a false statement of financial affairs with the bankruptcy court in support of her bankruptcy petition in which she: reported a financial interest in only six properties, knowing that she had an interest in other properties; substantially under-reported the income she earned in 2003 and 2004; and failed to report her interest in various bank accounts.
The court determined today that the tax loss from the fraud was between $2.5 and $7 million. Because the bankruptcy proceedings are ongoing, the court made no separate determination of the bankruptcy loss.
United States Attorney Rod J. Rosenstein thanked the IRS – Criminal Investigation; Special Investigator Daniel N. Wortman of the Montgomery County State’s Attorney’s Office; the Federal Bureau of Investigation and the Greenbelt Office of the United States Trustee Program, the Department of Justice agency that supervises bankruptcy cases and trustees, for their work in this investigation and prosecution. Mr. Rosenstein commended Assistant United States Attorneys David I. Salem and Emily N. Glatfelter, who prosecuted the case.

The recent revelations of massive fraud in the processing of foreclosures by major banks demonstrate the urgent necessity for activists to press the demand for an immediate declaration of a two-year moratorium to halt all foreclosures and evictions in the U.S.

On Sept. 22 it was reported that GMAC announced it was suspending the evictions of homeowners in the 23 states governed by judicial foreclosures. This was followed by similar announcements by JPMorgan Chase and Bank of America.

The states affected by this suspension of foreclosure activity are Connecticut, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.

The basis for these announcements was the uncovering of massive fraud by the banks in the processing of foreclosures. In states covered by judicial foreclosure — where the banks have to take borrowers to court to seize their homes — the lenders were filing motions for summary judgment to speed the process, accompanied by affidavits stating that the signers had personal knowledge that the loans were in fact owned by the bank and were in default.
Foreclosures & lost wealth

Mortgage delinquencies and foreclosures:

State foreclosure projections: 2010: 2.8 million

State foreclosure projections (2009-2012): 9 million

Total state foreclosure starts (Q1-2008 through Q1-2010): 4.9 million

Total state foreclosure sales (Q1-2008 through Q3-2009): 1.3 million

Total state foreclosure inventory (end Q1-2010): 2.1 million

Total state past due mortgages (end Q1-2010): 6.2 million

Annual change in foreclosure starts in the state (ending Q1-2010): -10 %

Change in state foreclosure starts (Q3-2006 to Q1-2010): 162 %
Lost wealth:

U.S. lost home equity wealth due to nearby foreclosures, 2009-2012: $1.9 trillion

Number of homes experiencing foreclosure-related decline: 91.5 million

Average loss per home affected: $20,288

Source: Center for Responsible Lending, August 2010

During legal depositions in several cases, it was revealed that the signers of the affidavits had, in fact, no personal knowledge of the facts being sworn to. They were working for foreclosure mills.

A Sept. 22 New York Times article noted that Jeffery Stephens, working on behalf of GMAC (now Ally Bank), was signing 10,000 affidavits a month over the past last five years despite not having reviewed the files to determine whether banks were entitled to enforce their liens.

The New York Times on Oct. 4 went even further, pointing out that many signatures on the affidavits appeared to be forged and the notarizations improper.

The foreclosure suspensions by GMAC, JPMorgan Chase and Bank of America were to give them time to clean up their acts. But the revelations of this massive fraud by some of the country’s largest financial institutions are symptomatic of the overall foreclosure crisis devastating the working class.

What can stop the crisis?

Virtually every government program announced to help homeowners with modifications is collapsing. The programs are based on the premise that the same banks that will not even take the time to properly carry out foreclosure activity, which is their primary concern, will treat borrowers who seek loan modifications in a fair manner.

The programs are all based on the borrower calling the lender to request the mandated modification. However, borrowers are stymied by the fact that the lenders either have no one to answer the call, or when they do, the banks routinely deny the modifications in violation of their agreements with the federal government to carry them out.

For example, on Aug. 20 the New York Times reported the collapse of President Barack Obama’s Making Home Affordable modification program. It said that of the 3 million households that were intended to benefit from the program, only one-sixth had actually had their loans modified. In July, some 96,000 individuals were denied permanent modifications, while only 17,000 were placed into new trial modifications, signaling the program’s demise.

In July, the state of Michigan announced it had received $184 million from the federal government for the Helping Hardest Hit Homeowners program, a program geared to keeping unemployed workers in their homes. While the funding for this program has increased to $500 million, the program has been a dismal failure thus far, with only 230 homeowners being helped out of the 30,000 that were expected to qualify.

According to an August report by the Center for Responsible Lending, the home equity wealth lost in the U.S. due to nearby foreclosures for 2009-2012 is projected to be $1.9 trillion. Nine million homes are expected to be lost to foreclosure during the same period.

The immediate necessity is for the federal government to declare a national two-year moratorium on all foreclosures and evictions. With the majority of home loans now either owned or backed up by the federal government through Fannie Mae, Freddie Mac or the Federal Housing Authority, President Obama has the authority to declare such a moratorium by executive order.

The time is ripe for housing activists to press this demand in light of the current revelations. Sign the online petition in support of a two-year moratorium at: www.bailoutpeople.org/moratoriumpetition.shtml.

By Jerry Goldberg

Goldberg is an anti-foreclosure attorney and an organizer in the Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shutoffs.

Articles copyright 1995-2010 Workers World. Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.

The unfolding foreclosure fraud crisis isn’t easy to understand, but here it is boiled down. Banks need proper documentation to repossess a home from a family. They need documents about everything from the family’s financial situation to its history of missed payments to its assets. And they need to verify that the information in those documents is correct. But they didn’t. They hired individuals to sign thousands of mortgage papers — legal affidavits, swearing to a judge that they had personal knowledge of the information within — without checking a thing.

Only 23 states require a judge to sign off on a foreclosure, but some banks are now stopping foreclosures in all 50 states. Moreover, they are halting the sale of foreclosed properties to new homeowners.

So who stands to gain? And who stands to lose? Let’s go through the possible impacts on major players and markets, one by one.

The winners:

* Homeowners undergoing foreclosure. Borrowers undergoing foreclosure might benefit from the various state moratoriums: The process is stalled for now, meaning some might have a few more months in their homes, and they know they will not be evicted without due process. States and federal agencies might also work with banks to provide principal write-downs and right-to-rent to ameliorate the foreclosure crisis in the meantime.

The losers:

* Recent purchasers of foreclosed homes. A nightmare scenario: Banks probably foreclosed on and evicted families without proper mortgage documentation. It is unclear whether or how courts might overturn those foreclosures. (One expert I spoke with said it would be more likely that the bank would have to offer some sort of restitution to the evicted family, but nobody really knows.) What if you recently bought one of those houses? There’s a whole lot of uncertainty for you, right now.
* The housing market. The fraud crisis looks certain to prolong the foreclosure crisis — dragging out how long families undergoing foreclosure will remain in limbo, and preventing banks from clearing properties off of their books. It seems possible that the foreclosure fraud crisis will weaken an already-weak housing market.
* The banks and investors. This could be a complete catastrophe. For a detailed but clear explanation of the various liabilities, see Mike Konczal’s description of who owns what and who stands to lose — and an explanation of why this might create a new too-big-to-fail scenario. Rep. Brad Miller (D-N.C.) also provided a clear explanation to The Washington Post yesterday:

There is massive potential liability for the securitizers, which are mostly the biggest banks. The contract was that if mortgages didn’t meet certain requirements, then the securitizer would buy them back. The mortgage servicers and trustees have exclusive control over the paperwork. Both the investors, the people who own the mortgage-backed securities, and the homeowners, really depend on them. There’s been lots of litigation where investors try to get securitizers to buy back the bad mortgages because they were flawed, but that litigation has been stymied by procedural objections. If the private investors can break through that defense and require the mortgages that don’t meet the requirements to be bought back, the liabilities for the biggest banks will be enormous.

A little of each:

* Communities with concentrations of homes in foreclosure. Good news and bad news. On the one hand, families should be able to stay in their homes until the banks and Washington work out the foreclosure fraud crisis. That will benefit communities with lots of families undergoing foreclosure. On the other hand, neighborhoods with high concentrations of bank-owned properties for sale will see a lot of homes remain vacant, pulled off of the market.
* The courts. State attorney generals — Beau Biden in Delaware, Richard Cordray in Ohio, Tom Miller in Iowa and many others — are going hard after the banks. This looks to be just the first wave of what might be thousands of cases for judges to handle. Many housing advocates argue that judges should have had a more prominent role in foreclosure decisions before, anyway — and this might give new life to cramdown legislation in Washington. But the scandal certainly has the potential to swamp courts and cost billions in legal fees. In that sense, lawyers might be the clearest winner from the whole thing thus far.

By Annie Lowrey

Soon, I’ll be up with a piece looking more closely at the foreclosure fraud scandal engulfing the country. But for those not following carefully, here’s a recap.

Last month, Ally Financial, formerly known as GMAC, suspended evictions in 23 states after revealing that employees had submitted faulty affidavits when foreclosing on some unknown number of homes. In those 23 states, the bank needs a judge’s approval to foreclose, and submits affidavits to get it. (Affidavits are sworn statements, so false ones constitute perjury or fraud.) This month, Bank of America and J.P. Morgan Chase also suspended evictions in these states after revelations about robo-signers — employees rubber-stamping thousands of foreclosure documents, without checking the information — and false evictions came to light.

Now, state governments are enacting moratoriums and politicians are castigating banks for failing to follow through on their legal work, forcing families out of their homes without following due process. This week, Rep. Nancy Pelosi (D-Calif.) and other Democrats wrote Attorney General Eric Holder, requesting that the Justice Department investigate the systemic problems.

The scandal has made clear that paperwork in the housing bust has proven just as shoddy as during the housing boom. The banks are just acting illegally. Check out this video of a woman who thought a burglar was breaking into her house. It was the bank, coming to change the locks. Even though she still lived there.

Salt Lake City FBI and Utah Division of Real Estate Name Top Five Mortgage Scams in 2010
Special Agents and State Investigators Warn Utahns to Beware

• Is someone letting you live in a home for free?
• Did a builder offer you deep discounts to move into a newly constructed house?
• Has a company offered to refinance your mortgage for a fee?

If the answer to any of these questions is “yes,” then you may be a victim of a scam. FBI special agents and the state investigators with the Utah Division of Real Estate have compiled a list of top five mortgage related scams in 2010.

1. Reverse Mortgage Scam: Reverse mortgages can be a legitimate way for senior citizens to take equity from their homes without a monthly payment. However, con artists convince senior citizens they can live in a home for free, obtain a home loan under the occupant’s name, and disappear with the equity, leaving the victim to repay the mortgage.

2. Short Sale Fraud: A “short sale” transaction involves a lender agreeing to sell a property for less than the mortgage amount. Fraud occurs when a distressed homeowner finds a prospective buyer and they secretly set a low sale price. Unbeknownst to the lender, the buyer is willing to pay more for the property and the homeowner pockets the difference.

3. Builder Bailouts: Simply put, builder bailouts are a “kick-back” scheme. They may be more common in a troubled real estate market where builders may have a surplus of unsold properties. The builder offers excessive “incentives” to the purchaser. These incentives are disclosed as a down payment which leads the lender to believe there is equity in a home. Under these circumstances the builder and the buyer are committing fraud.

4. Loan Modifications: The FBI Salt Lake City Field Office issued a consumer alert about loan modifications in the fall of 2009. Special agents and state investigators are concerned homeowners may fall for this same scam in 2010. Companies charge up to $2000, promising to make a homeowner’s mortgage payment more affordable. But some homeowners report that they didn’t get what they paid for. For more information on loan modification scams please find the 2009 news release at: http://saltlakecity.fbi.gov/pressrel/pressrel09/slc110409.htm.

5. Affinity Fraud: Affinity fraud is an ongoing concern for the Salt Lake City FBI Field Office and the Utah Division of Real Estate. Fraudsters who promote affinity scams frequently are, or pretend to be, members of a particular religious, ethnic, or professional group. They often enlist respected community or religious leaders from within the group to spread the word about the scheme. They convince those people that a fraudulent investment is legitimate and worthwhile. Many times those leaders become unwitting victims of the fraudster’s ruse.

Short Sale Fraud   Short Sale Fraud    Short Sale Fraud    Short Sale Fraud   Short Sale Fraud

ATLANTA – Metro Atlanta’s foreclosure notices jumped a whopping 27% this month over January.

More than 10,000 of those notices came in the 13-county metro area, according to Alpharetta’s Equity Depot.

That bad news is sure to spur on some state lawmakers who’re trying to reform Georgia’s mortgage laws and crack down on fraud.

JoAnne Hall of Decatur is one of the lucky homeowners.

Four years ago, she refinanced the mortgage on her Decatur home of 35 years for some needed improvements.

About a year later, her monthly payment on what she thought was a fixed, 30-year loan began to explode.

“It was going up, up, up so fast ’til I couldn’t keep up,” the 66-year-old disabled retired nurse’s aide told 11 Alive News on Monday.

She was able to restructure what turned out to be an adjustable loan and hang onto her home thanks to the help of Atlanta Legal Aid.

But she was one of the few fortunate ones in a sea of foreclosures.

“Left unchecked, we’ll see all of these problems arise again 5 to 10 years down the road,” says State Representative Mike Jacobs (R-Atlanta).

Jacobs chaired a House Judiciary Sub-committee hearing Monday that began studying some bills that would revamp Georgia’s mortgage laws.

HB 972 would lengthen the state’s foreclosure period to 90 days instead of the current 30 days, which is one of the shortest in the nation.

SB 57, which passed the State Senate last year and is now in the House, would make several changes, including doing away with prepayment penalties and requiring a lender to make sure the borrower can afford loan payments before signing.

Some banking groups say the wording of the laws goes too far, while some consumer advocates think the bills are too pro-banking.

Either way, they are beginning to get traction as new figures continue to show the foreclosure crisis is still around.

Meanwhile, Governor Sonny Perdue is trying to do something about another embarrassing statistic…that Georgia ranks fourth in the nation in mortgage fraud.

One of his floor leaders, Sen. Bill Cowsert (R-Athens), has introduced a bill to create a GBI Mortgage Fraud Task Force to prosecute lawbreakers statewide.

“Our interest is in where fraud took place either by the borrower or the lender or the broker in that area,” the Governor tells 11 Alive News.

Lawmakers are also looking into whether Georgia’s mortgage reform bills might conflict with similar changes being made by the U.S. Congress and President Obama.

Many still want the state to have its own tougher mortgage laws no matter what Washington does.

Orlando Man Sentenced to 22 Years for Arranging Fraudulent Mortgages

ORLANDO, FL—United States Attorney A. Brian Albritton announces that U.S. District Judge Anne C. Conway today sentenced Garry S. Martin (age 36, of Orlando) for conspiring to commit money laundering in connection with various mortgage fraud schemes and violating the terms of his supervised release. As part of his sentence, the court also ordered that Martin pay more than $1 million in restitution to his victims. Martin pleaded guilty to the charges on July 16, 2009.

According to the plea agreement, Martin was convicted in the United States District Court for the Eastern District of New York in 2006 for engaging in mortgage fraud. Martin had made several applications to secure mortgages from Citimortgage, Inc., a subsidiary of CitiBank. Those applications contained several false statements, including inflated values for the borrower’s income and assets.

The terms of Martin’s supervised release for his 2006 conviction prohibited him from offering various real estate services. After Martin had been placed on supervised release in the Middle District of Florida, however, he maintained his real estate sales agent license and obtained his real estate brokers license. He also formed various companies, including Antigua Housing and Management, Inc. (“Antigua H&M”), Antigua Real Estate, Antigua Abstract LLC (“Antigua Abstract”), GSM Financial LLC, and Savvy Professional Title Company (“Savvy”), each with its principal office listed as 5449 South Semoran Boulevard, Suite 200, Orlando, Florida. Through those companies, and up until August 2008, Martin conducted various schemes, including foreclosure fraud, reverse mortgage fraud, and completely sham transactions, to defraud financial institutions out of more than $5 million.

Through Antigua H&M, Martin obtained money from people facing foreclosure by promising that Antigua would bring their past due mortgages current through refinancing and forward their payments to their lenders. He then used the foreclosure payments himself and did not pay the banks.

Through Savvy and Antigua Abstract, Martin marketed reverse mortgages to seniors, sent fraudulent financing packages to support the mortgage applications, arranged the mortgage closings himself, and then diverted mortgage proceeds to his personal use.

Martin also created wholly fictitious agreements between fake buyers and fake sellers to receive mortgage proceeds.

This case was investigated by the Federal Bureau of Investigation (FBI), Internal Revenue Service (IRS), and Orange County Sheriff’s Office. It was prosecuted by Assistant United States Attorney Vincent A. Citro.

This case was brought as part of the Middle District of Florida’s Mortgage Fraud Surge, a joint effort by the U.S. Attorney’s Office for the Middle District of Florida, the Federal Bureau of Investigation, Tampa and Jacksonville Divisions, and numerous other federal, state, and local law enforcement agencies. The Surge, which ended October 31, focused intensive investigative and prosecutorial resources on the mortgage fraud crisis that plagues middle Florida and has contributed to the current economic situation nationwide. The Surge accelerated mortgage fraud cases to bring perpetrators to justice quickly and provide maximum deterrence, and it was the first step in an ongoing effort to prosecute mortgage fraud of all types throughout the Middle District. For more information on the Middle District of Florida’s Mortgage Fraud Surge, please contact Steve Cole, Public Affairs Officer for the United States Attorney’s Office

 Garry S. Martin   Garry S. Martin  Garry S. Martin  Garry S. Martin   Garry S. Martin  Garry S. Martin

Federal Authorities Announce Significant Regional Federal Mortgage Fraud Investigations and Prosecutions Coinciding with Nationwide “Operation Malicious Mortgage” Takedown

SACRAMENTO, Calif.—United States Attorney McGregor W. Scott, FBI Special Agent-in-Charge Drew Parenti; and Internal Revenue Service–Criminal Investigation Special Agent-in-Charge Scott O’Briant announced today a number of significant events that have occurred here in the Eastern District of California as part of the United States Department of Justice’s nationwide takedown, “Operation Malicious Mortgage.”

These cases have arisen out of the efforts of the Eastern District of California Mortgage Fraud Task Force, which was created as a result of a significant increase in reported mortgage fraud. Members of the task force include representatives from the United States Attorney’s Office, the Federal Bureau of Investigation, the Internal Revenue Service- Criminal Investigations, the Department of Housing and Urban Development, the United States Bankruptcy Trustee’s Office, and the California Department of Real Estate. The task force allows for a more targeted, coordinated approach in prioritizing the massive volume of referrals being made to federal and state agencies.

Mortgage fraud cases in the Eastern District of California include:

United States v. Joy Johnson et al.

Nine defendants were charged by complaint Tuesday with mail fraud, money laundering, and related offenses in connection with a “cash back to buyer” mortgage fraud scheme that occurred between May 2006 and September 2006. The defendants charged are JOY JOHNSON, 33; ELIZABETH CARRION, 38; husband and wife LENIN and CARMEN GALEANO, 32 and 30; ANGELITO EVANGELISTA, 40; husband and wife CLARISA and CRIS ANG, 43 and 46; CRIS’ mother LYDIA ANG, 71; and CORY WHALEN, 31. All defendants are from Solano County. The defendants purchased 12 houses in Solano County. In all but one of the transactions, the real estate agent was JOHNSON. The real estate transactions were designed to allow the sellers to credit defendants “money for repairs” at the close of escrow. The purchase prices were substantially inflated from the list prices, and the increases were then credited at the close of escrow to fictitious businesses controlled by the defendants. The defendants by and large did not use the funds they received for repairs on the properties. Instead, the funds were used to pay the mortgage payments on the properties and for living expenses. In addition, the loan applications contained false information about employment, income, assets, real estate owned, and/or occupancy status. Eleven of the homes have either been foreclosed upon or have had notice of defaults recorded against them. The
amount of loss attributed to these defaults has not been determined, but it is anticipated the
lenders will sustain losses in excess of one million dollars. This case was investigated by the FBI
and IRS-Criminal Investigation. The case is being prosecuted by Assistant United States
Attorney Courtney Linn.

United States v. Villegas

MELISSA VILLEGAS, 29, of Natomas, was arrested Monday in Sacramento, charged with lying to federal agents. According to the complaint, she had been involved in transactions that were the subject of a mortgage fraud investigation, including paying money to a suspected straw buyer. During the course of the investigation, VILLEGAS falsely stated that she had not paid any money to this other person whom investigators believed to be a straw buyer in a mortgage fraud scheme. This case is being investigated by the FBI and IRS-Criminal Investigation. The case is being prosecuted by Assistant United States Attorney Russell Carlberg.

United States v. Ahmad et al.; United States v. Bridge; United States v. Blanford;
and United States v. Ngo

Seven defendants are facing charges or have been sentenced arising out of a “straw buyer” mortgage fraud scheme. IFTIKHAR AHMAD, 36; MANPREET SINGH, 24; and JOSE SERRANO, 44, each from Stockton, California, were indicted on October 25, 2007, for mail fraud. AHMAD and SERRANO were also charged with money laundering. Between 2003 and 2005, the defendants engaged in a scheme to defraud in connection with residential real property purchases primarily in the Stockton area. AHMAD, through I & R Investment Properties, fraudulently sold 10 houses to straw buyers, obtaining in excess of $1.5 million. AHMAD pleaded guilty on April 28, 2008 to mail fraud and money laundering. SERRANO pleaded guilty on April 17, 2008, to mail fraud. SINGH pleaded guilty on March 31, 2008, to mail fraud. All three are scheduled to be sentenced on August 25, 2008. Also arising out of the AHMAD investigation, four other defendants have been charged in separate cases, discussed below.

WILLIAM T. BRIDGE, 41, of San Francisco, California entered a guilty plea Monday to one count of filing a false tax return and three counts of paying illegal kickbacks to a loan coordinator at Long Beach Mortgage between 2003 and 2006. BRIDGE, a loan broker, admitted that in each of those tax years, he derived more than $10,000 from criminal activity involving fraudulent loans funded by Long Beach Mortgage on houses purchased in Sacramento and Stockton. The total tax loss to the United States for those tax years exceeded $1,000,000. BRIDGE also pleaded guilty to paying illegal kickbacks to a loan coordinator at Long Beach Mortgage in violation of the Real Estate Settlement Procedures Act of 1974 (RESPA). BRIDGE paid a loan coordinator working for Long Beach Mortgage more than $120,000 between July 2003 and March 2007, in exchange for the loan coordinator using his position at Long Beach Mortgage to process fraudulent loan applications submitted by BRIDGE. He is scheduled to be sentenced on September 2, 2008.

PAUL BRIDGE, William’s brother, who is also a loan broker, was charged Tuesday with paying kickbacks in violation of RESPA.

JOEL BLANFORD, 40, of San Ramon, Calif., was indicted on June 12, 2008, on six counts of mail fraud and one count of conspiring to engage in money laundering. From April 2003 through October 2005, BLANFORD, while working as a sales representative for Long Beach Mortgage, participated in a scheme to defraud that company. BLANFORD allegedly paid a Long Beach Mortgage loan coordinator in cash and checks to falsify documents, provide false verification of borrowers’ employment or professional licensing status, and to turn a blind eye to fraudulent representations contained in loan applications and other documents submitted to Long Beach Mortgage. In each of the years 2003, 2004, and 2005, the indictment alleges that BLANFORD received, before taxes and payroll deductions, more than $1,000,000 in commissions and other compensation from Long Beach Mortgage. The indictment further charges that between April 2003 and October 2005, he conspired with others to engage in money laundering in order to conduct financial transactions to promote the carrying on of the fraud scheme and to conceal and disguise the nature and source of the payments to the loan coordinator.

JOHN NGO, 27, of Dublin, California, was charged with lying under oath before a federal grand jury. He pleaded guilty on December 17, 2007, and is scheduled to be sentenced on July 14, 2008. NGO admitted that between September 2001 and May 2006, he worked as a Senior Loan Coordinator at Long Beach Mortgage, a subprime lender of residential real property that is now a subsidiary of Washington Mutual. NGO was responsible for validating and verifying loan application information, including employment information, submitted by loan applicants. In September 2007, NGO testified under oath before a federal grand jury investigating a mortgage fraud scheme in the San Joaquin County area. He was asked whether a mortgage broker had given NGO any money. NGO falsely testified that the broker had not given him any money. In fact, records later obtained from Bank of America showed that between July 2003 and March 2007, NGO received in excess of $100,000 in checks and bank transfers from the mortgage broker. NGO admitted in his plea agreement that most of the payments were to ensure that fraudulent loan applications were processed and funded. NGO also admitted he received payments from Long Beach Mortgage sales representatives to push applications through the funding process. He knew many of these applications were fraudulent, and he and others took steps to “fix” applications by creating false documents or adding false information to the applications or the loan file.

These cases were investigated by the FBI and IRS-Criminal Investigation, and are being prosecuted by Assistant United States Attorneys Benjamin Wagner and Courtney Linn.

United States v. Charles Head

CHARLES HEAD, 33, of Los Angeles, California, was the leader of a nationwide “foreclosure rescue” scam, netting approximately $6.7 million in fraudulently obtained funds taken from 47 homeowners, nearly all of whom were located in California. On February 28, 2008, a federal grand jury indicted Head and 15 other defendants with violations of mail fraud, conspiracy to commit money laundering and related offenses. The defendants are alleged to have used straw buyers to replace victim homeowners on the titles of properties without the homeowners’ knowledge. These straw buyers were often friends and family members of the defendants. Once the straw buyer had title to the home, the defendants immediately applied for a mortgage to extract the maximum available equity from the home. The defendants then shared the proceeds of the ill-gotten equity and the “rent” that the victim homeowners paid them. Ultimately, the victim homeowners were left without their home, equity, and with damaged credit ratings.

On March 13, 2008, the grand jury returned a second indictment in the HEAD case against seven defendants, including four not charged in the first indictment. “Head Two” involved an “equity stripping” scheme, netting approximately $5.9 million in stolen equity from 68 homeowners in states across the nation. This time CHARLES HEAD allegedly altered the scheme by recruiting strangers via the Internet to act as straw buyers. Under this new scheme, he would receive approximately 97% of the stolen equity. His “sales agents” and employees, and the other defendants, would receive the remaining 3% of equity.

The following defendants were charged in the “Head One” indictment: CHARLES HEAD; JEREMY MICHAEL HEAD, 30, of Huntington Beach, California; ELHAM ASSADI, aka Elham Assadi Jouzani, aka Ely Assadi, 30, of Irvine, California; LEONARD BERNOT, 51, of Laguna Hills, California; AKEMI BOTTARI, 28, of Los Angeles; JOSHUA COFFMAN, 29, of North Hollywood; JOHN CORCORAN, aka Jack Corcoran, 52, of Anaheim; SARAH MATTSON, 27, of Phoenix, Arizona; DOMONIC McCARNS, 33, of Brea, California; ANH NGUYEN, 36, of Los Angeles; OMAR SANDOVAL, 32, of Rancho Cucamonga, California; XOCHITL SANDOVAL, 29, of Rancho Cucamonga; EDUARDO VANEGAS, 28, of Phoenix; ANDREW VU, 39, of Santa Ana; JUSTIN WILEY, 28, of Irvine; and KOU YANG, 32, of Corona, California. The following defendants were charged in the “Head Two” indictment: CHARLES HEAD, JOHN CORCORAN, KOU YANG, each also charged in “Head One,” as well as KEITH BROTEMARKLE, 42, of Johnstown, Pennsylvania; BENJAMIN BUDOFF, 41,
of Colorado Springs, Colorado; DOMONIC McCARNS, 33, of Brea; and LISA VANG, 24, of
Westminster.

This case was investigated by the FBI and IRS-Criminal Investigation, and is being prosecuted by Assistant United States Attorneys Laura Ferris, Rob Tice-Raskin, and Ellen Endrizzi.

United States v. Santa et al.

MARIA SANTA, 33; VIRGIL SANTA, 35; and CANDIT SAVA, JR., 26, all of Sacramento, were charged by complaint on March 17, 2008. The complaint alleged that beginning in November 2006, MARIA SANTA and SAVA prepared and submitted loan applications containing false statements as to employment and monthly income, and other false information, of a straw purchaser in order to purchase houses in the name of the straw purchaser. The complaint further alleged that MARIA SANTA and SAVA committed identity theft by using a victim’s identity to purchase property. The case was investigated by the Internal Revenue Service-Criminal Investigation and the California Department of Real Estate, and is being prosecuted by Assistant United States Attorney Matthew Stegman.

SENNETT H. SWIFT, 25, of Sacramento, was sentenced on April 29, 2008, to 15 months in prison on charges of bank fraud and money laundering. He pleaded guilty on January 15, 2008. SWIFT, who was not a licensed loan broker, defrauded two homeowners and the corresponding lenders by fraudulently refinancing two homes, the goal of which was to receive substantial loan broker commissions. To accomplish this fraud, the defendant solicited the two homeowners and falsely told them that they would receive loans with favorable terms, such as a low adjustable rate that would not increase above a certain rate cap. He also falsely led homeowners to believe that their prepayment penalties on their existing mortgages would be rebated by the defendant. Actually, SWIFT knew that the rate caps were much higher than promised, and never intended to rebate the prepayment penalties. Additionally, in one of the cases, SWIFT submitted a forged loan application and forged documents to the lender. Further, the loan application contained false information such as inflated wages. The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service–Criminal Investigation and was prosecuted by Assistant United States Attorney Matthew Stegman.

The above charges, except those to which defendants have already pleaded guilty, are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt. The maximum statutory penalties for mail fraud is 20 years in prison and a fine. The maximum statutory penalty for money laundering is 10 or 20 years in prison and a fine. The maximum statutory penalty for bank fraud is 30 years in prison and a fine. The maximum statutory penalty for identity theft is 15 years in prison and a fine. The maximum statutory penalty for lying to a federal agent is five years in prison and a fine. The maximum statutory penalty for perjury before a grand jury is five years in prison and a fine. The maximum statutory penalty for filing a false tax return is three years in prison and a fine. The maximum statutory penalty for a RESPA violation is one year in prison and a fine. The actual sentence, however, will be determined at the discretion of the court after consideration of the Federal Sentencing Guidelines, which take into account a number of variables and any applicable statutory sentencing factors.

Rita Gosselin, 58, was arrested and charged with one count of continuing criminal enterprise (racketeering) at her Grosse Ile house early Thursday morning by investigators from the Michigan Attorney General’s Office and the Southgate Police Department.

Gosselin is accused of orchestrating a real estate investment Ponzi scheme in the Detroit metropolitan area between April 2007 and September 2008.  The allegations include defrauding up to 20 people of $500,000.

Gosselin was arraigned Thursday, December 3, 2009 in 33rd District Court in Woodhaven, Michigan on charges related to an alleged real estate Ponzi scheme.

If convicted, she faces a 20-year sentence for the racketeering felony, and 10 years each for three counts of false pretenses over $20,000.

Gosselin allegedly enticed investors with claims that she could purchase foreclosed and distressed properties in bulk, renovate them and sell them for a profit. Gosselin allegedly promised investors regular monthly payments.  As security for these investments, Gosselin allegedly provided investors with promissory notes.

A preliminary examination of the evidence against Gosselin is set for 9 a.m. Dec. 15 in 33rd District Court.

Judge Michael McNally set bond at $300,000.

The Continuing Criminal Enterprise statute defines a criminal enterprise as any group of six or more people, where one of the six occupies a position of organizer, a supervisory position, or any other position of management with respect to the other five, and which generates substantial income or resources, and is engaged in a continuing series of violations of Title 21 of the United States Code.

Foreclosure filings were reported on 2.3 million U.S. properties in 2008, an increase of 81% from 2007 and up 225% from 2006, according to the RealtyTrac U.S. Foreclosure Market Report released today.

The steep annual increase came despite a quarterly decrease in the fourth quarter after nine consecutive quarterly increases. And the fourth quarter decrease came despite a surge in foreclosure activity in December. The conflicting trends come largely as a result of artificial pressures on the foreclosure market.

Foreclosure prevention programs implemented to-date have not had any real success in slowing down the foreclosure tsunami. And the recent California law (SB 1137, which went into effect Sept. 15, 2008, and required lenders to contact distressed homeowners about their intent to foreclosure 30 days before filing a Notice of Default), much like its predecessors in Massachusetts and Maryland, appears to have done little more than delay the inevitable foreclosure proceedings for thousands of homeowners.

That law had a noticeable impact on Notice of Default(NOD) filings in California, with those filings decreasing from around 44,000 in August to around the 20,000 level in September, October and November. But then NOD filings spiked back up to more than 40,000 in December. A similar trend occurred in Massachusetts over the past few months, after foreclosure-extending legislation was enacted there in May of 2008.

Nevada, Florida, Arizona post top state foreclosure rates in 2008

More than 7 percent of Nevada housing units (one in 14) received at least one foreclosure notice in 2008, giving it the nation’s highest state foreclosure rate for the year. A total of 77,693 Nevada properties received a foreclosure filing during the year, an increase of nearly 126 percent from 2007 and an increase of nearly 530 percent from 2006.

Florida registered the nation’s second highest state foreclosure rate in 2008, with 4.52 percent of its housing units (one in 22) receiving at least one foreclosure filing during the year, and Arizona registered the nation’s third highest state foreclosure rate, with 4.49 percent of its housing units (one in 22) receiving at least one foreclosure filing during the year.

Other states with Top 10 foreclosure rates for 2008 were California, Colorado, Michigan, Ohio, Georgia, Illinois and New Jersey.

A total of 523,624 California properties received a foreclosure filing in 2008, the nation’s highest state total. Foreclosure activity in the state increased nearly 110 percent from 2007 and nearly 498 percent from 2006.

With 385,309 properties receiving a foreclosure filing in 2008, Florida documented the second highest state total. Florida foreclosure activity increased 133 percent from 2007 and nearly 412 percent from 2006.

Arizona’s 2008 total of 116,911 properties receiving a foreclosure filing was third highest among the states. Foreclosure activity in Arizona increased 203 percent from 2007 and 655 percent from 2006.

Other states with Top 10 totals for 2008 were Ohio, Michigan, Illinois, Texas, Georgia, Nevada and New Jersey.

Sunbelt cities plus Detroit land on top 10 metro foreclosure rates list

With 9.46 percent of its housing units (one in 11) receiving a foreclosure filing during the year, Stockton, Calif., registered the highest foreclosure rate among the nation’s 100 largest metropolitan areas in 2008. Other California cities in the top 10 were Riverside-San Bernardino at No. 3 (8.02 percent, or one in 12 housing units); Bakersfield and No. 4 (6.17 percent, or one in 16 housing units); and Sacramento at No. 9 (5.20 percent, or one in 19 housing units).

Las Vegas documented the second highest metro foreclosure rate in 2008, with 8.89 percent of its housing units (one in 11) receiving a foreclosure filing during the year.

More than 6 percent of Phoenix housing units (one in 17) received a foreclosure filing during the year, giving the city the fifth highest metro foreclosure rate in 2008.

The foreclosure rate in Fort Lauderdale, Fla., ranked No. 6, with 5.95 percent of the metro area’s housing units (one in 17) receiving a foreclosure filing in 2008. Other Florida cities in the top 10 were Orlando at No. 7 (5.48 percent, or one in 18 housing units) and Miami at No. 8 (5.21 percent, or one in 19 housing units).

With 4.52 percent of its housing units (one in 22) receiving a foreclosure filing during the year, Detroit registered the tenth highest metro foreclosure rate in 2008.

While elected officials in Washington, D.C. were busy bailing out Wall Street, Main Street homeowners were left wondered whether anyone was considering their plight. With the economy crashing down in sectors all around us and unemployment on the rise, now more than ever, millions of homeowners face the daunting prospect of losing their homes to foreclosure.

As you’ll see in the following video from Carol Biaggi of Bloomberg Television/Bloomberg On Demand, missed mortgage payments may not necessarily mean you’ll automatically be forced from your home:

Lenders have a lot of tools at their disposal to help distressed homeowners stay in their home, including loan repayment plans, forbearance programs, and loan modifications. In the weeks and months to come, I’ll provide additional information, tips, analysis, and warnings related to all three options and more. In the meantime, if you have a question or recommendation about loan modification, please free to post it here on FlippingFrenzy.com.

“The nation’s economy is dependent on the real estate market to bottom out and turn the corner before any true healing from the mortgage crisis can begin in earnest. The federal government is attempting to legislate the economy back to health.

However, with the labor market continuing to shed jobs, more citizens filing for bankruptcy protection, and the foreclosure floodgates wide open, legislation alone is not enough. Investors and ordinary citizens need to feel confident of their own financial stability. Until that confidence returns to the marketplace, foreclosures will continue to delay any real economic recovery.”

Predatory lenders employ many of the same illegal tactics found in other write-ups here on Flipping Frenzy. Loan officers, for example, may obtain inflated appraisals to get the homeowner a higher loan or will falsify income information to qualify the borrower for a mortgage.

Rather than doing those things to help the borrower, predatory lenders are simply out for themselves. Their actions rarely have any tangible benefits for borrowers and often saddle homeowners with loans they cannot afford. Loan officers—as you’re about to read—sometimes simply use borrowers to engage in a type of fraud I like to refer to as fraud for commissions.

Recently, one Flipping Frenzy reader came forward to share her experience with predatory lending and fraud for commission.

My name is Kim Sikorski, and in 2000 I was living in a one-bedroom apartment in New Baltimore, Michigan, when a local builder began construction on the Aspen Glen Condominiums right outside my front door. I remember thinking to myself how nice they looked and wished that someday I could own a home like that. Fast forward three years and I did.

To be honest, I wasn’t sure I could buy anything. I made ok money for a single person but I wasn’t sure it’d be enough to actually buy a home. To get the process started, I went to talk to a man named Dave P at Lira Financial in Clinton Township., MI (Dave P Inc. dba Lira Financial; 16600 18 Mile Rd.; Clinton Township., Michigan 48038). He was a friend of my boss, Ralph Bianchi, so I thought that I would be able to trust him.

I told Mr. P where I was looking to live and gave him the information he needed to check my credit report and get things started. A few weeks later I received a call from Stephen Tyree, the Lira Financial loan officer assigned to my application. Mr. Tyree called to tell me that my credit was good and I qualified to purchase one of the Aspen Glen condos with a mortgage at 6 ¼% (which for me translated into a monthly of $912.00). Before long, I went ahead and signed the purchase agreement and then started picking out carpet, countertops, tile color, etc. From my perspective, I was in the process of living the American dream of home ownership; I was buying my own home and I couldn’t be happier.

On August 27, 2003, I closed on my condo at the Mt. Clemens MI, office of Greco Title Co. To my surprise, neither Stephen Tyree or Dave P were present. It was there–at the closing–that I first found out that I was placed into an adjustable rate mortgage (ARM) that was only fixed for two years.

At the time, I only had a few days left to move out of my apartment, so I went ahead and signed all the documents and looked forward to moving into my new home. For me, the closing was a exciting day in my life. My mom and sister were even there by my side, taking pictures along the way.

The next day I talked to Dave P at Lira Financial and asked about the adjustable rate mortgage without escrow. Mr. P told me not to worry because in two years we would refinance and be able to set up escrow for my property taxes (which, by the way, were not included the first time). Eventually, I started having trouble keeping up with the taxes, and once again talked to Dave P about the situation. As he did before, Mr. P told me not to worry, that the taxing authority couldn’t do anything about it until I was four tax bills behind, and that by then we will have refinanced and paid off the back taxes, and set up escrow before that happens.

Based on Dave P’s recommendation, I went ahead as planned. About a week or so before I was supposed to close, my mortgage company at the time, Homecomings Financial, paid the back taxes (to protect their interest) and put me into forced placed escrow, which added to my principle and interest payment. My monthly payment went from $912 to $1,280 overnight.

When I called Dave P at Lira Financial, to tell him what happened, he told me this wasn’t a problem because we would just add it to the new mortgage. Just before closing I went to Mr. Dave P’s office where I learned for the first time that he had placed me into a interest-only mortgage. I was told that my new mortgage was at 8%, 30-year fixed interest. I immediately told the staff in Mr. P’s Lira Financial office to stop all paperwork and please have Dave P call me himself as I was not aware of the interest-only loan (just like I was not aware that I was placed in an adjustable rate mortgage the first time around).

Long story short, I never heard from Dave P until he called about six months later to tell me that I owed him $350.00 for the appraisal done on my condo. I told him I was not paying him for the appraisal because I did not close with him, and we have not spoken since.

So my interest rate went up and I paid the difference for a year, but with my rate to go up a point or so a year with a ceiling of 12 ½ %, I knew I could not keep it up, so I went to see Stephen Tyree (my original loan officer at Lira Financial) who was now with Keystone Mortgage in Shelby Township, Michigan (45679 Village Blvd, Shelby Township, Michigan 48315). While it’s true that I originally knew Stephen from my association with Dave P, Stephen had refinanced my girlfriend’s mortgage and she was very happy with the results. I told Stephen the situation I was in—which he was well aware of—and asked for his help. He said he would see what he could do and get back with me. In the meantime, he had me fill out a credit application and give him permission to check my credit report. He also had me sign lots of blank forms saying we had to see what we could do and fill those in later.

When Stephen Tyree called me back he told me it was going to be tough to help me but that he felt he could get it done. He asked me if I had any savings, which I did not, and told me that having a savings account with at least three to six months worth of mortgage payments would show reserves and help me get approved. Stephen Tyree asked me to ask someone with money in their own bank account to add my name to their account to make it look like I had some savings, so I did. I asked my father to do this for me, and despite feeling it was not a very good idea–but wanting to help and not see me lose my home–he did. Stephen also told me that getting my condo to apprise for what we needed was going to be difficult but he thought he knew an appraiser that could get it done. Obviously, looking back, these should have been red flags. I know I should have never signed those papers.

On October 16, 2006, I closed on the refinance with an 80-20 mortgage. The 1st for $112,320 with an interest rate of 7.5% and a payment of $1,047.99 and the 2nd for $28,660 with an interest rate of 9.75% and a payment of $252.44. The total of both is $1,300.43, which I could not afford but I did what I thought I should to save my home.

In about March or April of 2007 I started calling Indy Mac to make them aware of my situation and that I was falling further and further behind on my payments. I talked to several people but no one really had any suggestions for me. They did thank me for calling and making them aware but offered no help other than trying to refinance again with a lower interest rate.

Ultimately, I was told Indy Mac could not lower my interest rate due to the fact that they technically did not own my mortgage any longer. With a payment of $1300.43 plus association dues of $160.00 a month come October 2007, I could no longer afford to pay my mortgage. I had put my condo up for sale by owner in May of 2007 (I thought I would rather sell it then lose it). But nothing. I was advised from Indy Mac that I could sell it in a short sale but the property must be listed with a real estate agent for at least 90 days. I listed the property in October 2007 and did not have even one person look at it. My condominium complex is not completed (the builder has about four more buildings to construct), and prices for new units identical to my own have dropped to $99,000. Why would anyone look at mine for $145,000.00 when they can build a new one for $99,000?

In January 2008 I came home from work to find a letter on my door from Trott & Trott, the law firm representing IndyMac, stating that my property had gone into foreclosure, was going to a Sheriff’s sale at the end of February, and that I had six months from 2/29/08 to redeem my property or be out.

And so there you have it—that’s were I am as of today. Most of my conversations with both Dave P at Lira Financial and with Stephen Tyree formally at Lira and now with Keystone Mortgage, were based on trust. Like many new homeowners, I did not know anything about mortgages and put all my trust in the people who did. I thought they were working with my best interest at heart.

Expecting the worst, hoping for the best!

~ Kim Sikorski, Michigan

In reviewing Kim’s account of what happened, a number of items jump off the page as being sure signs of predatory lending and fraud for commissions. For example, after contacting Kim and reviewing her situation a little closer, I was able to determine the following:

• Kim’s loan officer had her “sign lots of blank forms” and told her that he had to first “see what we could do and fill those in later.” In real estate fraud forensics, we call this ‘backing into the documents.’ With signed forms (that contain blank fields) in hand, a loan officer is able to manipulate the borrower’s loan documents to fit his commission-related needs.
• Kim’s loan officer artificially inflated her income in order to help her qualify for her loan. This of course is against the law.
• As noted by Kim above, her loan officer worked with an appraiser to secure an inflated appraisal on Kim’s property, thus allowing her to qualify for a higher loan that translated into a higher commission for the loan officer. Here again, the loan officer and appraiser broke the law.
• As Kim already pointed, she was encouraged to borrow her father’s assets, which everyone should know by now is a highly improper way of determining one’s actual worth and ability to repay a loan. Any real estate industry professional that advises someone to borrow or rent assets is more likely than not up to no good.
• Her loan officer promised to refinance Kim into a fixed loan within two years. Legally, no one can make that type of promise to a homeowner.
• As you read in Kim’s account, when she arrived for the very first closing of her life, she learned that she had been placed into an adjustable rate mortgage that was only fixed for two years. When mortgage brokers and loan officers present the borrower with a product, specifying the terms, and then change the terms just prior to closing, that is called “bait and switch” and it makes the loan highly suspect and questionable.

While many federal and state laws are aimed at preventing predatory lending, it’s not always easy to spot it when it occurs. If after reading Kim’s story, you’re left wondering if you are a victim of predatory lending, review the following list of common predatory lending practices:

1. Refinancing a mortgage repeatedly within a short period of time and charging higher than normal loan origination fees each time.
2. Selling a high-cost, high-interest loan to a borrower who would qualify for the lower-cost, lower-interest loan that the same lender offers.
3. Being asked or instructed to sign an application or documents containing blanks that the loan officer says he will fill in later.
4. Convincing loan applicants to borrow more than they can reasonably afford to pay back.
5. Pressuring loan applicants into accepting high-risk loans such as interest-only mortgages and loans with unusually high prepayment penalties.
6. Providing “products” that are nonexistent or offer no benefits.
7. Selling high-interest loans to borrowers based on ethnicity or nationality rather than their credit history or financial situation.

Loan officers (and to be fair, Realtors also) are often paid on commission. The more loans the sell, the more they make. In many cases, loan officers can earn even higher commissions by selling high-cost loans and additional products and services. In other words, the motivation to make money sometimes eclipses a loan officer’s responsibility to follow the rules.

The rules that real estate industry professionals—including loan officers—are supposed to follow stipulate the parameters for approving and underwriting a home loan. Although the stipulations may seem overly restrictive to some, the rules are in place for a reason—to make sure that the homeowner/borrower can afford their monthly payments and continue to live the American Dream of Homeownership.

Speaking to reporters by phone during this morning’s White House Press Briefing, White House spokeswoman Dana Perino said President Bush is now prepared to sign the American Housing Rescue & Foreclosure Prevention Act, H.R. 3221, which is expected to receive full Congressional approval by this time tomorrow. According the legislation, H.R. 3221 will help families facing foreclosure keep their homes, help other families avoid foreclosures in the future, and help the recovery of communities harmed by empty homes caught in the foreclosure process.

To shore up the housing market and ensure the availability of affordable home loans, H.R. 3221 would put a new, independent regulator in charge of housing Government Sponsored Enterprises (i.e., GSEs — Fannie Mae, Freddie Mac, and the Federal Home Loan banks), which is said to be vital to both the financial markets and homeowners. The new regulator is expected to be far better prepared than the current system is to quickly and effectively respond to issues affecting the safe and sound operation of Fannie Mae, Freddie Mac, and Federal Home Loan banks.

The centerpiece of the bill provides assistance to a large number of homeowners now in danger of losing their homes. Lower-cost government-insured mortgages–which Congressional leaders say come at no cost to the American taxpayer–will be offered if President Bush signs the Bill into law, but according to the Congressional Budget Office estimates, the plan could cost taxpayers around $25 billion.

Specifically, the American Housing Rescue & Foreclosure Prevention Act, H.R. 3221, includes the following provisions:

FHA Housing Stabilization and Homeownership Retention Act

1. Provides mortgage refinancing assistance to keep at least 400,000 families from losing their homes, to protect neighboring home values, and to help stabilize the housing market at no cost to American taxpayers.
2. Expands the FHA program so many borrowers in danger of losing their home can refinance into lower-cost government-insured mortgages they can afford to repay.
3. Protects taxpayers by requiring lenders and homeowners to take responsibility. This is not a bailout, legislators say; in order to participate, lenders and mortgage investors must take significant losses by reducing the loan principal.
4. In exchange for an FHA guarantee on the mortgage, borrowers must share any profit from the resale of a refinanced home with the government.
5. Contains critical protections for taxpayers’ dollars, including higher refinancing fees that establish a new FHA reserve to cover possible losses from defaults on these government-backed mortgages.
6. Only primary residences are eligible: NO speculators, investment properties, second or third homes will be refinanced.
7. Provides $180 million for financial counseling and legal assistance to help families stay in their homes.

Strengthening Regulations of the GSEs

1. Puts an independent regulator in place with what are said to be significant responsibilities and powers so that Fannie Mae and Freddie Mac can safely and soundly work to provide families with affordable housing.
2. The new regulator will have enhanced authority to raise capital standards, set strict prudential standards, including internal controls, audits, and to enforce these new standards and promptly take corrective action.
3. The new regulator will oversee, and can directly restrict, executive compensation at Fannie Mae and Freddie Mac.
4. Raises the GSE loan limits for single family homes to create more affordable mortgage loans for moderately priced homes by allowing GSE loans up to 115% of the local area median home price, and to make GSE loans effective in high cost areas by raising the permanent loan limit from $417,000 to $625,500.
5. Creates a new permanent affordable housing trust fund–financed by the GSEs and not by taxpayers–to fund the construction, maintenance and preservation of affordable rental housing for low and very low-income individuals and families nationwide in both rural and urban areas.

Backstopping Fannie Mae and Freddie Mac To Shore Up the Housing Market

1. Gives the Secretary of the Treasury the authority to increase the already existing line of credit to Freddie and Fannie for the next 18 months, as well as giving the Treasury Department standby authority to buy stock in those companies to provide confidence in the GSEs and stabilize housing finance markets.
2. Includes taxpayer protections directing the Treasury Department to take the following into account, when using these authorities: A) Taxpayers should be first in line for being paid back, before other shareholders; and, B) There should be restrictions on dividends for shareholders and on compensation for the executives of the GSE’s until taxpayers are fully reimbursed.
3. Strengthens oversight by requiring the Federal Reserve and Treasury to consult with the new regulator on issues concerning the safety and soundness of the GSEs and use of the standby authority.

Stabilizing Neighborhoods Hurt by the Foreclosure Crisis

1. Provides $4 billion in emergency assistance (CDBG Funds) to communities hardest hit by the foreclosure and subprime crisis to purchase foreclosed homes, at a discount, and rehabilitate or redevelop the homes to stabilize neighborhoods and stem the significant losses in home values of neighboring homes.
2. Foreclosed and rehabilitated homes would be sold or rented to moderate-income individuals and families–those whose incomes do not exceed 120% of the area median income. At least 25% of the funds would be targeted to house low-income and very low-income persons and families–those whose incomes do not exceed 50% of area median income.
3. Any profit from the sale, rental, rehabilitation or redevelopment of these properties must be reinvested in affordable housing and neighborhood stabilization.
4. Provides $180 million for pre-foreclosure counseling, to be distributed in grants by the Neighborhood Reinvestment Cooperation (NeighborWorks), with 15% targeted for low-income and minority homeowners and neighborhoods, and $30 million in grants for legal counseling to assist homeowners in foreclosure.

Preventing Future Abuses and Crises

1. Establishes a nationwide loan originator licensing and registration system that will set minimum standards for loan originator licensing substantially improving the oversight of mortgage brokers and bank loan officers.
2. Establishes improved mortgage disclosure requirements that will help ensure that mortgage borrowers understand their mortgage loan terms.

FHA Modernization

1. Expands affordable mortgage loan opportunities for families (many of whom would otherwise turn to subprime lenders) and for seniors through expanded access to reverse mortgages through Federal Housing Administration reform.
2. Raises FHA loan limits to create affordable mortgage loans for moderately priced homes by allowing FHA loans up to 115% of the local area median home price, and to make GSE loans more available in high cost areas by raising the permanent loan limit from $362,790 to $625,500.
3. Expands opportunities for seniors to tap into equity in their home through FHA reverse mortgage loans, by increasing the loan limit for the program, reducing and capping lender fees for such loans, and strengthening consumer protections limiting the sale of other financial products in conjunction with FHA reverse mortgage loans.
4. Prevents HUD from raising single family loan fees on lower and middle-income borrowers, and from raising loan fees on FHA rental housing loans.

Preserving the American Dream for Our Nation’s Veterans

1. Increases VA Home Loan limit, as was done in the stimulus package, for high-cost housing areas so that veterans have more homeownership opportunities.
2. Helps returning soldiers avoid foreclosure and stay in their home by lengthening the time a lender must wait before starting foreclosure, from three months to nine months after a soldier returns from service and providing returning soldiers with one-year relief from increases in mortgage interest rates.
3. Requires the Department of Defense to establish a counseling program for veterans and active service members facing financial difficulties and provides a moving benefit to servicemen and women who are forced to move out because their rental housing was foreclosed on.
4. Increases benefits paid to veterans with disabilities, such as blindness, to adapt their housing and allows the Veterans Administration to provide for improvements to homes of veterans with service-connected disabilities.

Tax Provisions to Expand Refinancing Opportunities and Spur Home Buying (H.R. 5720)

1. Provides $15 billion in tax benefits, including tax credits to first-time homebuyers, a real property tax deduction for non-itemizers, an additional $11 billion in mortgage revenue bonds for states, and improves access to low-income housing.
2. Gives first-time homebuyers a refundable tax credit that works like an interest-free loan of up to $7,500 (to be paid back over 15 years) to spur home buying and stabilize the market. The credit will begin to phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).
3. Provides taxpayers that claim the standard deduction with up to an additional $500 ($1,000 for a joint return) standard deduction for property taxes in 2008.
4. Temporary increase in mortgage revenue bond authority to allow for the issuance of an additional $11 billion of tax-exempt bonds to refinance subprime loans, provide loans to first-time homebuyers and to finance the construction of low-income rental housing.
5. Temporary increase in low-income housing tax credit and simplification of the credit to help put builders to work to create new options for families seeking affordable housing alternatives.

The Wall Street Journal reports this morning that President Bush’s support of the measure is a “dramatic split” for both Bush and congressional Republicans, many of whom the Journal says are “angrily opposed to the housing legislation, which they call a handout for irresponsible homeowners and unscrupulous lenders.” President Bush had voiced earlier objections to a provision that would give grants for local governments to purchase and refurbish foreclosed properties–a provision the White House feels amounts to nothing more than a bailout. But White House spokeswoman Perino said today that President Bush doesn’t feel this is the right time for a “…prolonged veto fight, but we are confident the President would prevail in one.”

In a highly unpublicized development, Wells Fargo Bank (NYSE: WFC) and one of Fidelity National Financial, Inc‘s (NYSE: FNF) companies–the Ticor Title Agency of Arizona–agreed last week to pay over $4 million and $200k respectively for their roles in preparing and submitting false claims to the Federal Housing Administration (FHA).

According to the Office of the United States Attorney District of Arizona, Well Fargo Bank submitted more than 70 false claims to FHA under the pre-foreclosure sales program, and Ticor Title prepared inaccurate escrow documents which allowed lenders to submit false claims to the FHA. The U.S. Attorney for Arizona estimates loses of more than $2.1 million dollars as a result )$2,156,078.00 to be exact), and for their part, Wells Fargo Bank and Ticor Title deny any wrongdoing yet still agreed to pay $4,046,786 and $265,370 respectively.

Under certain circumstances, the FHA’s pre-foreclosure sales program allows homeowners with federally-insured loans to avoid foreclosures by listing their homes for sale. If a sales price is not enough to pay-off a loan, then the lender submits an insurance claim to the FHA, which will pay the lender the balance owing on the loan.

What’s most interesting about this case is that neither company–not Wells Fargo & Company (NYSE:WFC) or Ticor Title Agency’s parent company, Fidelity National Financial, Inc. (NYSE:FNF)–have any information about the settlement on either of their corporate websites. Moreover, none of the national news media outlets picked up on the story, and even the New York Stock Exchange’s (NYSE) own stock quote pages for each company makes no reference whatsoever to the development, which first broke 10 days ago, on the 20th of June.

More Americans are facing foreclosure than at any other time in recent memory. According to the May 2008 U.S. Foreclosure Market Report™ from RealtyTrac, foreclosure filings (i.e., default notices, auction sale notices, and bank repossessions), were reported on 261,255 properties during the month of May, which translates into a 7% increase over April and a 48% increase from May 2007. The report also shows one (1) in every 483 U.S. households received a foreclosure filing during the month of May, the highest monthly foreclosure rate since RealtyTrac began issuing its report in 2005.

Nevada, California, and Arizona post top state foreclosure rates

With one in every 118 households receiving a foreclosure filing in May, Nevada posted the highest state foreclosure rate for the 17th consecutive month. Foreclosure filings were reported on a total of 9,009 Nevada properties, an increase of nearly 24% from the previous month and a 72% increase from May 2007.

California’s foreclosure activity in May increased 11% from the previous month and 81% from May 2007, helping the state continue to register the nation’s second highest state foreclosure rate. One (1) in every 183 California households received a foreclosure filing during the month of May, a rate that was 2.6 times the national average.

Arizona’s May foreclosure rate — 1 in every 201 households received a foreclosure filing during the month — ranked third highest in the U.S. for the second month in a row. Arizona’s foreclosure activity increased nearly 12% from the previous month and almost 119% from May 2007.

One in every 228 Florida households received a foreclosure filing in May, giving it the fourth highest foreclosure rate in the country. Michigan foreclosure activity in May increased nearly 25% from the previous month, helping the state’s foreclosure rate to jump to fifth highest in the country after ranking No. 9 the previous month. One in every 353 Michigan households received a foreclosure filing in May.

Other states with foreclosure rates ranking among the top 10 for the month of May were Georgia, Colorado, Massachusetts, Ohio and New Jersey.

Detailed state-by-state data is available here.

For the second month in a row, California and Florida cities accounted for nine out of the top 10 metropolitan foreclosure rates among the 230 metropolitan areas tracked in the report. Seven cities in California were in the top 10, led by Stockton in the top spot. One in every 75 Stockton area households received a foreclosure filing in May– more than six times the national average. Other California cities in the top 10 were Merced at No. 3, Modesto at No. 4, Riverside-San Bernardino at No. 5, Vallejo-Fairfield at No. 7, Bakersfield at No. 8, and Sacramento at No. 9.

The Cape Coral-Fort Myers metro area in Florida registered the second highest metro foreclosure rate in May, with one in every 79 households receiving a foreclosure filing during the month. The other Florida metro area in the top 10 was Port Lucie-Fort Pierce at No. 10.

Las Vegas was the only city outside of California and Florida with a foreclosure rate ranking among the top 10. One in every 96 Las Vegas households received a foreclosure filing in May, more than five times the national average and No. 6 among the metro areas.

Metro areas with foreclosure rates among the top 20 included Phoenix at No. 12, Detroit at No. 14, San Diego at No. 17 and Miami at No. 19.

Next up: Speculation about when the slide will end / have we seen the worst of the worst. Weighing in on the topic is Joe G. Henry of Long & Foster-affiliated W.C & A.N Miller Realtors in Virginia (comment found on ForeclosurePulse):

Defendable recovery will be 2011 due to the highest volume of ARM resets occurring in June 2008 and the typical foreclosure process lasts 12 months from Notice of Default, Notice of Trustee Sale, Foreclosure Auction, then seasoning to a Bank Owned (REO) — plus a 15-18 month housing inventory. Moreover, for every one bank-owned listing in Fairfax County, we have three short sales, which 80 percent of these will actually be foreclosed. There are three crisis response talking points concerning this scenario: (1) added liquidity; (2) mark down distressed assets; and (3) act now.

What’s your take? Do you agree with Joe G. Henry or do you have a theory of your own?