BOSTON—A indictment charging a Canton man with multiple counts of wire fraud in connection with a multi-year, multi-property mortgage fraud scheme was unsealed today in U.S. District Court.

PRINCE CHARLES EWEKA, 45, of Canton, was arrested this morning after being charged with eight counts of wire fraud in federal court on Wednesday. The indictment alleges that in 2006 and 2007, Eweka committed fraud in connection with condominium sales in two buildings in Dorchester. According to the charges, Eweka paid straw buyers to “purchase” individual units in buildings that Eweka controlled. Eweka allegedly promised straw buyers that they would not have to make down payments, pay funds at the closing, or be responsible for mortgage payments. The straw buyers’ financing for the purchases was obtained by submitting mortgage loan applications that falsely represented key information, such as the buyers’ income, assets, and/or intention to reside in the condominiums. The deals were closed with HUD-1 settlement statements that falsely represented that straw buyers had made substantial down payments in connection with the property transactions.

If convicted of the charges, Eweka faces a maximum sentence of 20 years’ imprisonment to be followed by three years of supervised release, and a $250,000 fine on each of the counts.

United States Attorney Carmen M. Ortiz; Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; and Robert Bethel, Postal Inspector in Charge of United States Postal Service, made the announcement today. It is being prosecuted by Assistant U.S. Attorney Ryan M. DiSantis of Ortiz’s Economic Crimes Unit.

The details contained in the indictment are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

Mortgage fraud is a key focus of the Department of Justice. The Department of Justice alongside its federal, state and local partners is committed to investigating and prosecuting significant financial crimes. The Department is committed to combating discrimination and fraud in the lending and financial markets, and recovering proceeds for victims of financial crimes.

BOSTON, MA—A realtor convicted of conspiracy and wire fraud by a federal jury in June was sentenced late yesterday for various roles in a mortgage fraud ring that conducted 21 fraudulent property transactions in the Greater Boston area involving 10 mortgage lenders and more than $10.6 million in loan proceeds.

ERNST APPOLON, 30, of Braintree, was sentenced yesterday by U.S. District Judge George A. O’Toole, Jr. to a term of 120 months’ imprisonment, to be followed by three years of supervised release.

A total of 11 defendants were indicted in May of 2008. Ernst Appolon was found guilty of one count of conspiracy to commit wire fraud and thirty-four counts of wire fraud by a federal jury following a seven-week trial in June 2010. Also convicted on conspiracy and wire fraud charges at the same trial were Eric L. Levine of Brookline; J. Daniel Lindley of Jamaica Plain; Daniel Appolon of Dorchester; and LaToya Haltiwanger of California. Levine and Lindley were also convicted of money laundering. Five other defendants pleaded guilty before trial and one defendant is pending trial.

The evidence at the jury trial showed that between May 2005 and June 2006, the defendants participated in a conspiracy to obtain $10.6 million in mortgage loan proceeds by fraud. The scheme involved the use of inflated purchase prices and documents containing numerous false representations, including false information about the purchase price, borrower income, employment, and intent to reside in the property. The difference between actual purchase prices negotiated with sellers and the inflated purchase prices submitted to lenders ranged as high as $255,000 on properties in South Boston, Dorchester, Jamaica Plain, Quincy, Hyde Park and Cohasset, aggregating to more than $1.9 million. From this $1.9 million, the defendants pocketed more than $1.7 million in illegal proceeds. The mortgages on all of the properties were defaulted upon and nearly all went into foreclosure.

Ernst Appolon served as the real estate agent to identify properties for use in the fraud scheme. He participated in inflating the purchase prices on mortgage loan applications and helped recruit individuals to act as straw buyers to obtain the fraudulent loans in their names. He was also involved in determining how $1.7 million in proceeds from the loans would be distributed among the conspirators, obtaining a very large share for himself.

Ernst Appolon is the third defendant sentenced to date. On October 18, 2010, Judge O’Toole sentenced Daniel Appolon to 42 month in prison and ordered co-defendant Samuel Jean-Louis to serve a prison term of 22 months. Seven additional defendants are currently pending sentencing.

United States Attorney Carmen M. Ortiz; Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Robert Bethel, Inspector in Charge of the United States Postal Inspection Service; William P. Offord, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation, Boston Field Division; Boston Mayor Thomas M. Menino; and Boston Police Commissioner Edward Davis made the announcement today. The case is being prosecuted by Assistant U.S. Attorneys Victor A. Wild and Ryan M. DiSantis of Ortiz’s Economic Crimes Unit and Mary B. Murrane, Chief of Ortiz’s Asset Forfeiture Unit.

BOSTON, MA—A former Bank of America branch manager was charged today in federal court with wire fraud and bank fraud for his role in connection with a multi-year, multiproperty mortgage fraud scheme in Dorchester and Roxbury.
ARTHUR SAMUELS, 36, of Mattapan, was charged in an Indictment with six counts of wire fraud and one count of bank fraud. The Indictment alleges that from September 2006 to July 2008, SAMUELS and others committed fraud in connection with the purported sale of condominium units in Dorchester. According to the charges, developer Michael David Scott arranged to purchase multi-family dwellings and then sold individual units in the buildings to straw buyers recruited by Scott, SAMUELS, and others. The straw buyers’ financing for the purchases was obtained by submitting mortgage loan applications that falsely represented key information, such as the buyers’ assets, down payment and intention to reside in the condominiums. SAMUELS also caused false verifications of deposit to be created in support of loan applications submitted to lenders in the names of straw buyers, and acted as a straw buyer himself on three property transactions. In most instances the lenders were led to believe that the straw buyers had made substantial down payments and paid substantial sums at closings.
If convicted, SAMUELS faces up to 20 years’ imprisonment to be followed by three years of supervised release and a $250,000 fine for each count of wire fraud, and up to 30 years imprisonment to be followed by five years of supervised release and a fine of $1 million for bank fraud.
United States Attorney Carmen M. Ortiz, Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, and William P. Offord, Special Agent in Charge of Internal Revenue Service Criminal Investigation – Boston Field Division made the announcement today. The case is being prosecuted by Assistant U.S. Attorneys Victor A. Wild and Ryan M. DiSantis of Ortiz’s Economic Crimes Unit.
The details contained in the Indictment are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
Mortgage fraud is a key focus of the Department of Justice. The Department of Justice alongside its federal, state and local partners is committed to investigating and prosecuting significant financial crimes. The Department is committed to combating discrimination and fraud in the lending and financial markets, and recovering proceeds for victims of financial crimes.

Pretty bizarre given all that has happened in the global economy over the past few years, but sadly it’s true.

Media set out to find examples of scammers doing jail time here in Massachusetts for mortgage fraud given the explosion in foreclosures, especially in poor neighborhoods across the state.

Instead, they came back pretty much empty handed and for a reason that floored us all. Mortgage fraud is not a criminal offense here in the Bay State, accordingly to Attorney General Martha Coakley.

Given that mortgage fraud is considered a civil but not a criminal offense in Massachusetts, Coakley has had her hands tied behind her back when it comes to going after some of the scammers. While mortgage fraud is a crime under federal law, there are many cases in this very local kind of abuse that should not or can’t be pursued by the feds.

Take a look at this issue – which has pretty much gone largely unreported until now – in a weekly column for Banker & Tradesman.

There’s no doubt we saw an orgy of mortgage fraud, both during the bubble years and even after the market began to collapse.

Small time speculators wreaked a trail of foreclosures in poor neighborhoods from Boston to Springfield. The schemes were brazen and simple: Flip three barely rehabbed condos in a Dorchester triple-decker to straw buyers for $350,000 or so each, get no doc loans from some brainless subprime mortgage factory, and walk away with a million bucks.

Nine months later, all three units would be foreclosed on and sold at auction back to their lenders, ready to be bought by another group of fraudsters.

It really does not seem much different than walking into a bank with a gun and demanding money.

BOSTON, MA—A Massachusetts attorney, Michael R. Anderson, 41, of Framingham, was charged today in federal court with wire fraud, bank fraud, and money laundering in connection with a multi-year, multi-property mortgage fraud scheme in Dorchester and Roxbury. United States Attorney Carmen M. Ortiz; Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; and William P. Offord, Special Agent in Charge of Internal Revenue Service, Criminal Investigation – Boston Field Division, announced today that the defendant was charged in an Information with 16 counts of wire fraud, nine counts of bank fraud, and two counts of money laundering.

The Information alleges that from September 2006 to April 2008, Anderson committed fraud in connection with the purported sale of some 27 condominium units in Boston. A developer, Michael David Scott, who was charged separately in an indictment on August 26,2010, and his associates bought multi-family dwellings promising to convert them into condominiums, and then resold the individual units to various straw buyers. Scott, Anderson and others arranged for the straw buyers to obtain mortgage financing by falsifying key information,such as the buyers’ intent to reside in properties, assets, down payment, and/or funds paid at closing. The defendant and others arranged to prepare loan closing documents which the defendant used to facilitate the closings.

The Information further alleges that Anderson caused mortgage loan proceeds to be disbursed to Scott. In most instances, the straw buyers obtained residential mortgage loans for properties that they never intended to live in. While the lenders (mortgage companies and one bank) were led to believe they were lending to residential purchasers who had made substantial down payments, the developer and others recruited buyers by representing the purchases to them as a no-money-down “investment” opportunity. The “investors” were assured that they would not have to make any down payments, pay any closing costs, or pay expenses relating to the maintenance of the units, but would share in profits when the units were sold.

If Anderson is convicted on these charges, each count of bank fraud carries a sentence of up to 30 years in prison to be followed by up to five years of supervised release and a fine of up to $1 million; each wire fraud count carries imprisonment up to 20 years to be followed by up to three years of supervised release and up to a $250,000 fine; the money laundering counts each carry a maximum punishment of 10 years in prison to be followed by up to three years of supervised release and a fine of $250,000.

The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service. It is being prosecuted by Assistant U.S. Attorneys Victor A. Wild and Ryan M. DiSantis of Ortiz’s Economic Crimes Unit.

The details contained in the Information are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

BOSTON—Following a seven-week trial, a federal jury found five defendants guilty of mortgage fraud stemming from a scheme that involved 21 properties in the Greater Boston area, 10 mortgage lenders, and more than $10.6 million in loan proceeds.

United States Attorney Carmen M. Ortiz; Warren T. Bamford, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Robert Bethel, Postal Inspector in Charge of the United States Postal Inspection Service, Boston Division; Susan Dukes, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation, Boston Field Division; Boston Mayor Thomas M. Menino; and Boston Police Commissioner Edward Davis, announced that ERIC L. LEVINE, 57, of Brookline; J. DANIEL LINDLEY, 62, of Jamaica Plain; ERNST APPOLON, 31, of Braintree; DANIEL APPOLON, 23, of Dorchester; and LATOYA HALTIWANGER, 28, of Los Angeles, were convicted of wire fraud and conspiring to commit wire fraud. LEVINE and LINDLEY were also convicted of money laundering.

“This type of greed and self-interest has directly contributed to the deterioration to many neighborhoods across the country,” said U.S. Attorney Ortiz. “The U.S. Attorney’s Office and our law enforcement partners, are committed to ensuring that those in the real estate profession who exploit consumers for their own profit are exposed and brought to justice.”

Evidence at trial established that between May 2005 and June 2006, the defendants and others participated in a conspiracy to obtain $10.6 million in mortgage loan proceeds by fraud. Specifically, the scheme involved the use of inflated purchase prices and documents containing false statements about purchase price, borrower income, employment, or intent to reside in the property. The difference between purchase prices negotiated with sellers and inflated purchase prices submitted to lenders ranged from as little as $15,000 to as much as $255,000 on individual properties in South Boston, Dorchester, Jamaica Plain, Quincy, Hyde Park, and Cohasset, aggregating to more than $1.9 million. From this $1.9 million, the defendants and other co-conspirators pocketed more than $1.7 million in illegal proceeds. The mortgages on all of the properties were defaulted upon and nearly all went into foreclosure.

LEVINE, a suspended attorney, and LINDLEY, a practicing attorney, participated in the loan closing process and handled the money. ERNST APPOLON, a real estate broker, identified properties for the conspirators, negotiated purchase prices with sellers, and recruited people to lend their names and credit information (“straw” borrowers) to obtain mortgage loans for property purchases. HALTIWANGER, a mortgage broker, was the loan originator for three of the properties in the conspiracy and was the “straw” borrower for a separate property purchase. DANIEL APPOLON recruited two “straw” borrowers whose name and credit information were used to purchase three properties.

The defendants face up to 20 years’ imprisonment to be followed by three years of supervised release and a $1 million fine on each count of wire fraud. For the conspiracy, they face up to five years’ imprisonment to be followed by three years of supervised release and a $250,000 fine. On the money laundering counts, LEVINE and LINDLEY face up to 10 years’ imprisonment to be followed by three years of supervised release and a $250,000 fine.

Co-defendants ANDRE JUNIOR LAMERIQUE, WIDNER LAMARRE, JERMAINE BLAKE, SAMUEL JEAN-LOUIS and JEAN NORISCAT pled guilty to conspiracy to commit wire fraud and several counts of wire fraud. They each face a maximum of 20 years’ imprisonment to be followed by three years of supervised release and a $1 million fine on each count of wire fraud. For the conspiracy, they face up to five years’ imprisonment to be followed by three years of supervised release. NORISCAT also pled guilty to several counts of aggravated identity theft and faces a mandatory two years’ imprisonment for each of the identity theft counts in addition to any other sentence imposed.

The defendants have been scheduled for sentencing as follows: LAMARRE and BLAKE, September 14, 2010; JEAN-LOUIS, September 16, 2010; LAMERIQUE and NORISCAT, September 21, 2010; LEVINE and ERNST APPOLON, September 22, 2010; LINDLEY, September 23, 2010; and DANIEL APPOLON and HALTIWANGER, September 29, 2010.

Co-defendant RALPH APPOLON is scheduled for trial in February 2011.

The case was investigated by the Federal Bureau of Investigation, United States Postal Inspection Service, and Internal Revenue Service, with assistance from the Boston Police Department. It is being prosecuted by Assistant U.S. Attorneys Victor A. Wild and Ryan M. DiSantis of Ortiz’s Economic Crimes Unit and Mary Murrane of Ortiz’s Asset Forfeiture Unit.

Mortgage fraud is a key focus of the Department of Justice who in November 2009 created the Financial Fraud Enforcement Task Force. The task force works 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.

SPRINGFIELD, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that three former mortgage brokers were among five co-defendants sentenced in federal court for their roles in a $1.2 million mortgage fraud scheme.

Charles M. Davis, 35, of Rogersville, Mo., was sentenced by U.S. District Judge Gary A. Fenner on Monday, May 17, 2010, to four years and three months in federal prison without parole. The court also ordered Davis to pay $1,271,590 in restitution. Scott Allen Kassebaum, 42, of Ozark, Mo., was sentenced to two years in federal prison without parole and ordered to pay $209,100 in restitution; his wife, Cheryl Joan Kassebaum, 43, was sentenced to 15 months in federal prison without parole and ordered to pay $497,200 in restitution. Steven Ray Spencer, 49, of Carl Junction, Mo., was sentenced to two years and six months in federal prison without parole and ordered to pay $436,556 in restitution. Shanda Lynn Moore, 45, of Springfield, Mo., was sentenced to three years of probation, including six months of home confinement and a $3,000 fine and restitution of $262,755.

Davis, a former mortgage broker who was the owner of Master Marketing Consultants, pleaded guilty to his participation in two separate conspiracies to obtain mortgage loans for the purchase of homes based on false loan applications. Davis knew that the loan applications he prepared and submitted were false because the loan applications included overstatements of income and understatements or omissions of liabilities, falsely represented that the purchaser/borrower intended to reside in the home to be purchased, and, in some cases, stated a false place of employment for the purchaser/borrower.

A significant portion of the loan proceeds was returned to the purchasers of the homes (who also were the borrowers) without the lender’s knowledge. Davis facilitated these kickbacks to the purchasers by routing the proceeds through Master Marketing Consultants and, in some cases, through Metro Consulting Group, which was owned by the Kassebaums.

The mortgage fraud schemes involved a total of 20 houses with home mortgage loans ranging from approximately $200,000 to $500,000. The amount of loan proceeds returned to the borrowers ranged from less than $30,000 to more than $100,000. Some of the home purchasers subsequently defaulted on the loans, and the homes have been foreclosed or are in the process of being foreclosed.

In addition to the two conspiracy charges, Davis pleaded guilty to two counts of wire fraud and two counts of money laundering.

Scott and Cheryl Kassebaum, former mortgage brokers and co-owners of Metro Consulting Group, pleaded guilty to their roles in one of the mortgage fraud conspiracies with Davis that involved seven houses with home mortgage loans ranging from approximately $200,000 to more than $400,000. The Kassebaums prepared and submitted fraudulent loan applications to lenders and facilitated the return of a significant portion of the loan proceeds to themselves and other purchasers without the lender’s knowledge and outside the closing of the home purchase.

Cheryl Kassebaum also pleaded guilty to one count of wire fraud and one count of money laundering. Scott Kassebaum also pleaded guilty to one count of wire fraud and one count of money laundering.

Spencer pleaded guilty to his role in both of the mortgage fraud conspiracies. In each conspiracy, he was a purchaser and solicited other purchasers for the schemes. Spencer also pleaded guilty to one count of wire fraud and one count of money laundering.

Moore pleaded guilty to her role in one of the mortgage fraud conspiracies with Davis and Spencer. Moore admitted that she provided false employment verification for Spencer and another individual.

This case was prosecuted by Assistant U.S. Attorney Douglas C. Bunch. It was investigated by the Federal Bureau of Investigation and IRS-Criminal Investigation.

A 41-year-old Quincy man was sentenced to 42 months in federal prison on a mortgage-fraud conviction.

In U.S. District Court on Tuesday, Judge Douglas P. Woodlock also gave Michael Hicks three years of supervised release following his imprisonment. An order of restitution was deferred for up to 90 days because one unit of the foreclosed properties is scheduled to be sold at auction.

Hicks pleaded guilty in November to one count of wire fraud and one count of money laundering.

The office of U.S. Attorney Carmen Ortiz said Hicks recruited straw buyers and provided false financial information to secure mortgages for five dwellings on Quincy Street and Sexton Court in Dorchester.

Hicks was paid a total of $180,500 by Michael Lee, who converted the Quincy Street dwelling into three condominiums. The Sexton Court dwelling is owned by Lee’s in-laws.

The payment to Hicks was turned over to the government and the court ordered its forfeiture.

Lee has also been indicted on five charges of wire fraud in connection with the scheme. His case is pending.

The case was investigated by the Secret Service and the criminal investigations branch of the Internal Revenue Service. It was prosecuted by Assistant U.S. Attorney Sandra Bower of Ortiz’s economic crimes unit.

The state Department of Public Health found last year that Hicks was the victim of botched liposuction surgery in 2008. The report placed the blame on both the doctor and Beth Israel Deaconess Medical Center, where it was performed. Hicks sued the hospital, six doctors and two nurses and reached a confidential settlement.

A Brookline man has been sentenced to five years probation, with four months of home detention, for participating in a mortgage fraud scheme, federal prosecutors said.

Jason Jester, 40, of Fordham Drive was convicted of wire fraud conspiracy for running Precision Mortgage, a mortgage broker business that helped borrowers obtain real estate loans by lying about the borrowers’ finances, prosecutors said.

Jester conspired to submit false documents to lenders, including appraisals that overstated the value of property, and federal tax forms and pay stubs that overstated the borrower’s income, prosecutors said.<-->

Leon Gelfgatt, an attorney from Marblehead, Massachusetts entered an innocent plea Friday, December 18, 2009 to larceny charges. Gelfgatt is alleged to have masterminded an elaborate mortgage fraud scheme.

According to a statement from the Massachusetts’ State Attorney General, Martha Coakley, Leon Gelfgatt used false documents to give the appearance that mortgages on several properties scheduled for impending sale had been transferred to a fake company created by Gelfgatt.

Gelfgatt, according to the Attorney General’s office, recorded false documents at different registry of deeds offices indicating his fake company was the new holder of the mortgages for the properties slated for sale.

“His goal,” Coakley said, “was to divert mortgage payoff money to be sent to the fake company rather than the rightful mortgage holders by obtaining the money from real estate closing attorneys when the properties were sold.”

State Police arrested Gelfgatt Thursday in Boston as he attempted to retrieve more than $1.3 million in funds connected with his scheme. He was arraigned Friday in Cambridge District Court in Medford for attempted larceny.

State troopers assigned to Coakley’s office and AG’s Financial Investigation Unit member James McFadden investigated Gelfgatt.

“This arrest is the result of an intensive and ongoing investigation utilizing state-of-the-art tools and techniques into fraudulent assignments recorded at several Registries of Deeds within Massachusetts,” the AG’s statement said.

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?

Massachusetts Attorney General, Martha Coakley, has filed a regulation with her state’s Secretary of State’s Office that permanently bans for-profit foreclosure rescue transactions in the state of Massachusetts. The Massachusetts Consumer Protection Act authorizes the Attorney General to promote regulations to identify unfair or deceptive conduct that violates the act. The new regulation, which goes into effect immediately, prohibits predatory, for-profit foreclosure rescue transactions.

Foreclosure rescue transactions between family members or arranged by a non-profit community or housing organization are not banned under the new regulation.

The new regulation also makes it an unfair or deceptive act to market foreclosure-related services without a precise description of exactly how the company will assist homeowners in avoiding or delaying foreclosure. (The regulations define a “Foreclosure Rescue Transaction” as a transaction designed to avoid foreclosure and where the homeowner transferring the property maintains an option to reacquire the home by maintaining a legal interest in the home.)

On June 1 of this year, Massachusetts’ Attorney announced emergency regulations that placed a temporary ban on these types of unfair and deceptive foreclosure rescue schemes as part of her multi-faceted plan to address the foreclosure rescue crisis in Massachusetts. The regulations went into effect immediately and were valid for 90-days. After a public hearing held last Thursday in Boston, the regulations were promoted as final.

As everyone who reads Flipping Frenzy should know by now, foreclosure rescue schemes are typically initiated when businesses or professionals claim to assist homeowners who are facing foreclosure by convincing them to convey their property to straw purchasers. The straw purchasers then obtain mortgage loans, permitting the individuals facing foreclosure to continue living in their property for a limited time, and promising the individuals that they will be able to later reacquire their homes. Far too often, the promises of maintaining home ownership are illusory and homeowners lose their home to the so-called “rescuer.”

In addition to permanently banning foreclosure rescue transactions, Attorney General Coakley announced earlier this month regulations to address unfair and deceptive tactics used in the mortgage industry. Hearings will be held across the state on the proposed regulations throughout the month of September. The Attorney General’s Office anticipates that promotion of new mortgage regulations will occur by the end of September 2007.

As a part of a comprehensive plan to prevent predatory lending and protect families facing foreclosures, the Governor of Massachusetts has filed legislation to criminalize mortgage fraud. Governor Deval Patrick’s bill follows several regulatory changes already put in place to address the rising tide of foreclosures in Massachusetts. In April, the state established a hotline for consumers and began assisting homeowners in crisis.

The proposed legislation, “An Act Implementing the Division of Banks Mortgage Summit Recommendations,” implements recommendations from the the state’s Mortgage Summit Working Group (convened in response to rising foreclosure rates). The Working Group included nearly 50 participants from government agencies, non-profit organizations, and the mortgage lending industries who convened to develop a comprehensive foreclosure prevention strategy.

The bill as proposed includes the following provisions:

• Criminalizing mortgage fraud. In response to rising instances of mortgage fraud, the bill defines mortgage fraud in statute and create criminal penalties for violations.
• Prohibiting abusive foreclosure rescue schemes. With many people facing the threat of foreclosures, unscrupulous individuals and groups have preyed upon consumers’ fears of losing their homes by promising to allow homeowners to stay in their home in exchange for signing over the property. Many people who fall victim to this scheme think that they are making mortgage payments when in fact they are paying rent. This bill would prohibit such agreements unless the purchaser is a direct relative.
• Requiring a Notice of Intent to Foreclose and Right to Cure. The bill sets out a right to cure for a consumer that is in default and requires the holder of a mortgage to inform the consumer of this right in addition to the intent to foreclose if the consumer does not cure the default.
• Prohibiting a lender from making an adjustable rate subprime loan unless the borrower opts-out. In reviewing default rates and foreclosure information, subprime fixed rate loans have performed well and allowed consumers with impaired credit to reestablish their credit history. Subprime adjustable rate mortgages (ARMs), on the other hand, have very high default rates and higher foreclosure rates. The Massachusetts bill would prohibit any lender from making a subprime ARM unless the consumer affirmatively opts-out of the fixed rate product and presents a certificate indicating that they have received homebuyer counseling.
• Establishing a central repository of foreclosure information at the Massachusetts Division of Banks. The bill would require lenders and servicers to send a copy of the Notice of Intent to Foreclose and Right to Cure to the Division of Banks as well as the details of any final foreclosure. In addition, the bill requires the Division of banks to establish a database of foreclosure information to track geographic and industry trends relative to foreclosures.

Since April, when Governor Patrick first instructed the Division of Banks to seek case-by-case foreclosure delays for homeowners who filed complaints, more than 400 people have reached out to the Division. Just under half of those individuals were already in foreclosure and needed immediate relief. The Division was able to secure 30- to 60-day stays in the foreclosure process in most of those cases. Due to these stays, many individuals and families were able to refinance or are in the process of refinancing their loans, were able to modify their loan terms, have received credit counseling, or were able to sell their homes. In addition, homeowners who contacted the Division and were in financial distress but not yet in foreclosure were partnered with counseling agencies that offer comprehensive services that can help them change direction and hopefully prevent foreclosure from occurring.

In addition, Massachusetts’ Division of Banks is also continuing work on the other Working Group recommendations. These include implementing regulatory changes that increase licensing and education requirements for mortgage lenders and brokers to eliminate disreputable firms and practices, and building on the partnerships between government, non-profit organizations, and the mortgage industry to improve the support for homeowners and monitoring of the industry.

Earlier this week, the Massachusetts Attorney General’s Office obtained a preliminary injunction against fifteen individuals and companies that are said to be involved in mortgage fraud and a foreclosure rescue scheme. As a result, the defendants in the case have been instructed to cease acting as mortgage brokers, real estate brokers, and closing attorneys, and have been ordered not to transfer any assets while the case is pending.

The individuals listed below were named in two separate lawsuits that the Attorney General’s Office filed as part of a continued effort to uncover predatory conduct in mortgage brokering and lending in Massachusetts:

• Leo Desire, Sr., a salesperson who works on behalf of Primary Mortgage Resource, Inc.
• Primary Mortgage Resource, Inc., Mortgage Broker and where Desire Sr. worked.
• Valerie Hanserd, a closing attorney.
• Home Pride Management, a company that took fees for un-rendered services.
• Leo Desire Jr., President and Treasurer of Home Pride Management.
• Dr. Joel Charles (d/b/a Sourie Corp.)
• Louis R. Joseph, Pierre N. Joseph and his wife Daphne Mompoint, Robens Joseph, Paul A. Joseph, Jean Joseph, Advie Charles, Neville Francis and Marie Betey Mereus, all property buyers.

The first of the two suits filed alleges that the defendants participated in a foreclosure rescue scheme targeted at desperate homeowners facing foreclosure. Each of the defendants allegedly conspired through their respective roles to deceive homeowners into selling their homes under the false promise avoiding foreclosure and maintaining their homes.

The defendants not only obtained the title to the homeowner’ residences but also stripped most of the homes’ equity though inflated mortgages, false fees for fictitious services, and false certifications by closing attorneys. In some cases, the defendants resold the homes amongst themselves, thereby extracting any remaining equity.

Homeowners victimized by the foreclosure rescue scheme include:

• A Roxbury, Mass. pastor who lives with his wife and two children
• A Natick, Mass. patent attorney
• A Brighton, Mass. nurse who lives with her teenage son
• A Mattapan, Mass. woman who lives with her two teenage children
• A Methuen, Mass. woman who lives with her four children
• A disabled Dorchester, Mass. nurse who lives with her husband

According to the complaint, the defendants misled homeowners about the nature of the transactions, defrauded them out of their equity, absconded with the homeowners’ money, and forged homeowners’ signatures on checks payable to homeowners. Because of the defendants’ foreclosure rescue scheme, homeowners were ultimately left destitute, facing foreclosure and eviction.

In a companion case, the Attorney General’s Office says that Leo Desire Sr., Primary Mortgage Resource, Inc., and Valerie F. Hanserd, together altered a deed from the Federal Home Loan Mortgage Corporation (a.k.a. “Freddie Mac”). Freddie Mac intended to transfer a residential two-family house to Leo Desire for $305,000, and prepared a deed to such effect. The defendants, however, altered the deed by changing the purchase price of the property from $305,000 to $475,000, and by changing the name of the grantee from Leo Desire to a “straw buyer,” Gloria Avila.

The defendants made these changes over the existing signature of Freddie Mac, and without Freddie Mac’s knowledge or approval. The defendants also provided an inflated appraised value of the real property, thereby obtaining a mortgage loan from a third party, Argent Mortgage Company, in a sum which was greater than the property value supports. They also fabricated a HUD Settlement Statement to reflect the fictitious purchase price and fictitious disbursements, and shared in the proceeds of the larger mortgage loan.

Anyone who believes they may have been victimized by any of the above named individuals or companies should contact the Massachusetts Attorney General’s Consumer Protection Hotline at (617) 727-8400.

Less than two weeks after a State Senator indicated that he would introduce legislation aimed at curbing real estate and mortgage fraud in Massachusetts, the state’s Division of Banks last Friday announced the implementation of a plan designed to address abuses by rogue mortgage lenders and brokers. Several recent investigations have produced evidence that some Massachusetts mortgage lenders and brokers have purposely steered customers–often those with low incomes or with limited English language ability–into loans they cannot afford by using misleading tactics and, in some cases, committing fraud.

The Division of Banks’ plan combines enforcement and regulatory initiatives along with community and industry partnerships and outreach. On the enforcement side of the equation, the Division’s examiners have launched multiple surprise examinations of mortgage lenders and brokers, focusing on stated income loans and looking for any evidence that borrowers’ incomes are being inflated. Connected to this effort, the Division of Banks issued an industry letter to all licensed mortgage lenders and brokers and financial institutions threatening immediate and severe action should any evidence of inflating borrower income be found. (Click here for a copy of the letter.)

On the regulatory side of things, last Friday the Division of Banks issued emergency amendments to regulations that govern the supervision of mortgage lenders and brokers. These changes significantly expand the number of existing prohibited acts and practices that constitute grounds for the issuance of cease and desist orders and license suspension or revocation.

Effective immediately, in the state of Massachusetts, it is against the law for a mortgage broker or mortgage lender to:

• have a consumer sign a blank or incomplete mortgage loan application or mortgage loan documents.
• sign a mortgage loan application or mortgage loan documents on behalf of a consumer.
• falsify income or asset information on a mortgage loan application or mortgage loan documents.
• make false promises to influence, persuade or induce a consumer to sign a mortgage loan application or mortgage loan documents.
• pressure or coerce a consumer to sign a mortgage loan application or mortgage loan documents by misrepresenting or omitting crucial information about the terms of the mortgage.
• discourage a consumer in a mortgage loan transaction from seeking or obtaining independent legal counsel or legal advice.
• engage in a pattern or practice of failing to make any disclosure to a consumer required by and at the time specified by any applicable state or federal law, regulation or directive.
• fail to disclose the type and number of its license in an advertisement.
• advertise mortgage services without naming the licensee and disclosing the license number of the mortgage broker or mortgage lender under whose license the individual is acting.
• require a consumer to use the real estate services of a particular entity, agent or broker

The Division is also continuing to dedicate significant resources to the development of a nationwide mortgage database of mortgage professionals. The implementation of the database is essential to fill cracks in the existing regulatory framework and reduce fraud. Specifically, the nationwide database would eliminate real estate fraudsters’ ability of to move from state to state by providing a comprehensive listing of enforcement actions taken by all state regulatory agencies.

Massachusetts Attorney General Tom Reilly has obtained emergency orders to stop unfair and deceptive practices by individuals and businesses he claims are involved with mortgage fraud and foreclosure rescue schemes. As part of Massachusetts’ continued effort to tackle predatory conduct in mortgage brokering and lending, temporary restraining orders were issued against five individuals and four businesses engaged in what Rily calls unfair and deceptive practices.

In each of the three lawsuits filed this past Wednesday, judges issued emergency orders to stop the illegal practices, and ordered the defendants not to evict any homeowners or sell any of their homes.

In a complaint filed in Suffolk Superior Court, Reilly alleges that Brockton, MA, attorney Alec G. Sohmer, and his wife Jennifer, participated in a bogus foreclosure rescue scheme targeted at desperate homeowners. The complaint also names Timeless Funding Inc., a Nevada company the Sohmers allegedly used in their fraudulent activities.

According to Reilly’s complaint, Sohmer has preyed on homeowners facing foreclosure since 2004 by promising them they could avoid foreclosure with refinancing through Timeless Funding. Instead, Sohmer deceived the homeowners into conveying their property to himself or to his wife. The complaint alleges that Sohmer concealed his fraud by deceiving the homeowners into signing documents purporting to allow them to stay in their homes by making monthly payments to Sohmer, and then to “repurchase” their homes from Sohmer by obtaining new financing. The complaint alleges that Sohmer knew that, because of the homeowners’ financial distress and the onerous “repurchase” terms, the homeowners would never be able to afford the monthly payments, or obtain the required financing to get their homes back.

After homeowners were unable to make their monthly payments, Sohmer sought to evict them from their homes, and to sell their homes to new buyers. Reilly alleges that, as a result of Sohmer’s scheme, at least three homeowners have already lost, or face losing, their homes and their life savings. The Sohmers also allegedly took for themselves the equity that the homeowners had built up in their homes, as well as additional fees, commissions and other payments directly from the homeowners.

The complaint identifies homeowners in Centerville, Wareham, and Brockton, MA, who have been victimized by Sohmer’s practices. According to AG Reilly’s complaint, Sohmer misled consumers about the nature of the transactions, misrepresented and omitted crucial terms, pressured homeowners into signing documents without reading them, and then refused to give them copies of the signed documents. Sohmer also capitalized on his position as an attorney, and in one case victimized a homeowner who he was representing in bankruptcy.

In another case involving a bogus foreclosure rescue scheme, Reilly filed a complaint Wednesday in Middlesex Superior Court against Walter Ribeck of Newburyport, MA.

According to AG Reilly’s complaint, Ribeck targeted financially distressed homeowners facing foreclosure on their homes. Ribeck, promoting himself as a “loan specialist” with Powderhouse Mortgage Company, promised to arrange replacement financing to allow homeowners to keep their homes and any home equity they may have accumulated. Then, when foreclosure was imminent, Ribeck instead arranged for the homeowners to deed their homes to him, while purportedly maintaining a right to lease the residence and buy it back at a future date. This repurchase terms, however, were at inflated prices that far exceeded the homeowners’ original mortgage obligations. The ultimate result of these transactions, AG Reilly alleges, is that Ribeck evicted the homeowner so he could sell the home on the open market, for far more than he paid to acquire it.

In 1991, Ribeck, then a real estate broker, was convicted of bank fraud and making false statements to a federally insured bank and was incarcerated for two years. Reilly has obtained an emergency court order to prevent Ribeck from evicting homeowners or selling their property, and is also seeking restitution for homeowners harmed by Ribeck’s conduct, civil penalties, and reimbursement of the costs of investigating and litigating this case.

Since he took office, Reilly has made it a priority to protect Massachusetts homeowners and homebuyers from predatory practices by mortgage brokers and lenders, and more recently, from bogus foreclosure rescue scams. From 2003 through mid-2006, the state of Massachusetts has brought lawsuits or obtained settlements against fraudsters that together will return over $25 million to over 20,000 Massachusetts homeowners.

A Massachusetts State Senator says he will reintroduce a bill next year that would require all loan officers–not just the owners of mortgage companies–to register with the state and take and pass state-enforced exams and background checks. State Senator Brian Joyce says the State of Massachusetts should license all individual brokers. Under the current state rules, while mortgage companies are required to register with the state, only the owners of the brokerages are required to undergo criminal background checks.

From the Boston Globe:

The state’s Division of Banks, which had opposed Joyce’s bill, yesterday said it would be open to changes to the law, provided that companies that hire loan officers maintain responsibility for their actions, according to an agency spokesman.

“Should we be looking at the system?,” said Joseph A. Leonard Jr., general counsel for the Division. “The division continues to consider the merits of licensing individual loan originators just as some other states do.”

Leonard described the problem of licensing for individual brokers as a “nationwide issue.”
“The current framework in Massachusetts is that the company gets licensed and anybody who works for them as an employee is exempted,” he said, adding that under the current system, “we expect a licensee to put anybody who works under their license and reputation through extensive scrutiny.”

Victim advocates say that the current system allows for loan officers who show little understanding of the state laws against predatory lending. Also, brokers sometimes present in English sensitive information, such as the Truth in Lending Statement, which tells buyers exactly how much they will pay per month for mortgages, without providing translation to clients who do not understand financial terms in English — a violation of state regulations.

A recent Boston Globe report revealed a wide variety of abuses by mortgage brokers servicing Lawrence, MA, including overstating incomes so borrowers could qualify for loans, arranging loans that cost hundreds of dollars more per month than borrowers could afford, and, in one case, identity theft, reported the Globe.

If you need further proof that you must do your due diligence before entering into a real estate transaction, look no further than to the three-year prison sentence a Springfield, Massachusetts, pastor (yes, I said ‘pastor’ as in ‘religious minister’) received late last week for his role in a real estate fraud scam. From WCVB-TV, Boston’s Channel 5 News:

A Springfield pastor who admitted defrauding his own parishioners in a $600,000 real estate scam was sentenced to three years in prison. The Rev. Paul Starnes was also sentenced Friday to five years probation and ordered to repay $137,000 to two banks defrauded in the scheme.

In January, Starnes pleaded guilty to two counts of wire fraud and one count of conspiracy to launder money. Federal prosecutors said Starnes and two others from Trinity Mortgage Brokerage Co. were involved in a land-flip scheme that involved buying depressed properties and paying off appraisers to inflate their values. They then recruited poor, first-time buyers and drafted phony financial documents to obtain mortgages.

Assistant U.S. Attorney William M. Welch told U.S. District Judge Michael Ponsor that the minister targeted four of his own parishioners at the Morning Star Church. “I can’t figure out what’s worse: Defrauding a total stranger. Or a family member. Or one of your parishioners,” Welch said.

Starnes’ attorney, Peter Ettenberg, argued his client should be given credit for helping prosecutors win convictions against two of his employees. He told Ponsor that Starnes’ resorted to unethical practices while arranging loans when his company struggled in the late 1990s.

This is not the first time–nor do I suspect it’ll be the last–that religion has found its way into a real estate fraud scam. So-called ‘mortgage elimination’ companies will sometimes use biblical references to lure susceptible homeowners into their web of deceit and trickery (if you’re not familiar with these scams, mortgage elimination schemes work because they resonate with the most vulnerable of homeowners–namely, those who are facing bankruptcy or foreclosure and believe God can and will bail them out).

If you suspect that you’re being taken advantage of inside the confines of a real estate-related transaction, seek help immediately. Click here for further details on who to turn to for help.