Scam Dupes Home Owners into False Loan Audits

Daily Real Estate News | Tuesday, September 27, 2011  

More home owners are being tricked into a forensic loan audit, a new scam that targets struggling home owners looking for a loan modification to save their home from foreclosure.

Several organizations, usually linking themselves to attorney and auditor organizations, have popped up in the last two years offering forensic loan audits. The Federal Trade Commission and Better Business Bureau say complaints about these “loan audit” companies have skyrocketed since the beginning of the year.

In the scam, the organizations claim to review a home owner’s mortgage documents to determine whether their lender had complied with state and federal lending laws. They then promise to get the home owner a quick loan modification and possibly a principal reduction on their mortgage too. Home owners pay an upfront fee—usually about $3,000.

However, home owners say that they aren’t getting a loan modification and usually nothing happens after the audit, even when errors in loan documents are revealed.

"They lure consumers to believe that by hiring them for a review of a loan modification package, they can expedite the process and get better results, or they make false promises that they can get a loan mod or principal reduction," Josh Fuhrman, FTC’s senior vice president of community affairs, told AOL Real Estate News. "Home owners are not typically getting any results. [Scammers] are just stringing [home owners] along, or they disappear."

Source: “Home Owners Beware: Forensic Loan Audit Scam,” AOL Real Estate (Sept. 26, 2011)

Twist & Shout!

By Annalyn Censky @CNNMoney September 21, 2011: 2:35 PM ET

NEW YORK (CNNMoney) -- The Federal Reserve announced 'Operation Twist' Wednesday, a widely expected stimulus move reviving a policy from the 1960's.

The policy involves selling $400 billion in short-term Treasuries in exchange for the same amount of longer-term bonds.

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While the move does not mean the Fed will pump additional money into the economy, it is designed to lower yields on long-term bonds, while keeping short-term rates little changed.

The intent is to thereby push down interest rates on everything from mortgages to business loans, giving consumers and companies an additional incentive to borrow and spend money.

"This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accomodative" the Fed said in its official statement.

It's controversial to say the least, especially following a high-profile letter from Republicans Monday, urging the central bank not to intervene in the economy more than it already has.

And even within the Fed, three regional bank presidents, Richard Fisher of Dallas, Narayana Kocherlakota of Minneapolis and Charles Plosser of Philadelphia, dissented against the decision.

Interest rates have already been at record lows since 2008, and that has yet to entice consumers to take out loans.

"This is not a situation where people are saying, 'gee, I really want to buy that house but interest rates are too high'," said Frank Sorrentino, CEO of North Jersey Community Bank. "Rates are already at historic lows and over the last six to nine months, we have not seen loan demand go up."

While the launch of Operation Twist was widely expected by both markets and economists, experts still question its effectiveness.

"I don't think it really solves the fundamental problems facing the economy, which are the bad shape of the housing market and that people still have very high debt levels," said Dean Croushore, chair of the economics department at the University of Richmond and former vice-president of the Philadelphia Fed.

Named after the popular 1960's dance, the Twist, the policy was first undertaken as a combined effort by the Federal Reserve and the Treasury Department under the Kennedy administration in 1961.

But economists today largely view the policy as a failure, arguing that it may have been too small to have a significant impact.

Totaling $8.8 billion, the original Operation Twist was roughly equal to 1.7% of the total U.S. economy in the early 1960's.

"It changed rates maybe 0.1% to 0.2% at the time, but that wasn't enough to get much happening in the economy," Croushore said. "That's the only time we've tried it before, and we lack a good amount of empirical data to figure out how much difference a bigger amount might make."

The second rendition, at $400 billion, is equivalent to roughly 2.7% of today's gross domestic product.

The launch of Operation Twist follows the Fed's sixth policymaking meeting of the year, which due to weakness in the economy, was rescheduled to last two days instead of the original one.

Speaking in August, Fed Chairman Ben Bernanke said the meeting had to be extended "to allow a fuller discussion" of what the Fed should do to respond to "disappointing" growth.

At the Fed's last official meeting in August, the policymaking committee decided to keep interest rates low until 2013 -- a move that was widely interpreted as a sign that the central bank is not expecting the economy to improve much for at least another two years.

On Wednesday, the Fed reiterated its gloomy outlook, saying "economic growth remains slow."

U.S. Department of the Treasury, U.S. Department of Housing and Urban Development and the Ad Council Launch New PSAs to Prompt Homeowners Who Are Facing Mortgage Trouble to Reach Out for Help

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WASHINGTON, DC, September 14, 2011 - The Ad Council, in partnership with the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development (HUD), have joined together to launch a new phase of their Foreclosure Prevention Assistance Public Service Advertising (PSA) Campaign. The campaign aims to increase awareness of the Making Home Affordable® Program’s free resources and assistance for homeowners who are struggling with their mortgage payments.

One in 11 homeowners nationwide has missed two or more mortgage payments. Many struggling homeowners delay conversations about their mortgage concerns and enter foreclosure without ever reaching out for assistance. The new PSAs notify homeowners facing mortgage trouble that options other than foreclosure are available, and the sooner they act, the more options they have for the best possible outcome.

 

The Foreclosure Prevention Assistance campaign encourages homeowners to call 888-995-HOPE begin_of_the_skype_highlighting 888-995-HOPE end_of_the_skype_highlighting (4673) to speak one-on-one with a HUD-approved housing expert to discuss the solutions that are available based on their individual circumstances. In addition, the program website, MakingHomeAffordable.gov, serves as an online resource for struggling homeowners to learn about options other than foreclosure.

 

Created pro bono by Schafer Condon Carter, a Chicago-based advertising agency, the new television, radio, print, out of home, and online PSAs have been created in English and Spanish. The PSAs aim to inspire homeowners who are unsure of where to turn to reach out for help as soon as possible.

 

“The Making Home Affordable Program has already assisted over a million homeowners," said HUD Secretary Shaun Donovan. "Housing counselors are ready to continue their work with homeowners to discuss specific solutions for their mortgage problems. Struggling homeowners do not need to work through their concerns alone. The key is encouraging homeowners to pick up the phone now to explore their options.”

 

Treasury Secretary Tim Geithner added: “While the housing market is still distressed, the Administration’s programs have helped establish better standards for the mortgage industry. As a result, struggling homeowners have more options today than ever before. We are continuing to do everything we can to help stabilize the market and to ease the burden on struggling homeowners. And that includes working to make sure families and individuals know about the resources available to them.”

 

“We are proud to continue our partnership with Treasury and HUD on this critical issue of home foreclosures that affects so many Americans,” said Peggy Conlon, president and CEO, the Ad Council. “We are confident that these new PSAs will resonate with homeowners struggling with their mortgages and encourage them to call 888-995-HOPE begin_of_the_skype_highlighting 888-995-HOPE end_of_the_skype_highlighting or visit the website to learn what they can do to prevent foreclosure.”

 

“All of us at Schafer Condon Carter have been honored to work with the Ad Council and its sponsors at Treasury and HUD on the Making Home Affordable campaign,” said David Selby, president of Schafer Condon Carter. “We know that the financial burdens currently facing many homeowners are paralyzing. We’ve captured this emotion with a creative treatment that shows people frozen in time while the world goes on around them. Speaking directly to these homeowners is key in getting them to get the help they need as soon as possible.”

 

The Ad Council will distribute the new PSAs to more than 33,000 media outlets nationwide. The new advertisements build on the successful nationwide campaign first launched between Treasury, HUD and the Ad Council in the summer of 2010. The PSAs will air in advertising space donated by the media.

U.S. Sues 17 Banks Over Mortgage Losses

Daily Real Estate News | Tuesday, September 06, 2011  

The Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, is suing 17 of the nation’s largest lenders over about $200 billion in investment losses that severely battered Fannie and Freddie nearly three years ago.

FHFA is accusing lenders in the lawsuit of misrepresenting the worth of the mortgage securities they arranged and sold.

Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co., Deutsche Bank AG, General Electric Co., and others were named in the lawsuit, which was filed Friday in federal and state court in three jurisdictions.

FHFA alleges in the lawsuit that the losses that Fannie Mae and Freddie Mac incurred were from mortgage investments that had riskier characteristics than "the descriptions contained in the marketing and sales materials" provided to the government-sponsored enterprises. They also allege that the banks failed to identify proof that borrowers’ incomes were overstated or fake, and the securities rapidly lost value when borrowers were unable to make their payments.

The lawsuit represents one of the biggest against banks since the housing crisis, as banks continue to face legal trouble in recent months. Some critics say the mounting lawsuits against banks threatens to tighten credit and undermine the housing recovery.

"The government is coming at the banks from every direction — the FHFA lawsuits being the most recent example — at the same time the government is putting enormous pressure on the banks to extend credit to help alleviate the housing crisis," Andrew Sandler, co-chairman of BuckleySandler LLP, a law firm representing banks in litigation and regulatory enforcement actions, told The Wall Street Journal. "It constitutes a completely incoherent government approach to the housing crisis."

Meanwhile, in a separate case, the Financial Times reported Tuesday that several big banks are in talks over a possible settlement with state prosecutors over accusations of improper mortgage practices. The settlement reportedly would limit the banks’ legal liabilities in return for a multibillion dollar payment, the Financial Times reported. The allegations against banks such as Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and others stem from the robo-signing scandal that surfaced last fall, in which banks were accused of seizing homes from delinquent borrowers without proper reviews of mortgage documents.

Source: “U.S. Sues 17 Banks Over Soured Mortgage Deals,” The Wall Street Journal (Sept. 3, 2011) and “U.S. Banks Offered Deal Over Lawsuits,” Financial Times (Sept. 5, 2011)

Attorney General Kamala D. Harris Sues Law Firms Engaged in National "Mass Joinder" Mortgage Fraud

State of California
Department of Justice
Office of the Attorney General

News Release


SAN FRANCISCO --- Attorney General Kamala D. Harris announced that the California Department of Justice, in conjunction with the State Bar of California, has sued multiple entities accused of fraudulently taking millions of dollars from thousands of homeowners who were led to believe they would receive relief on their mortgages.

Attorney General Harris sued Philip Kramer, the Law Offices of Kramer & Kaslow, two other law firms, three other lawyers, and 14 other defendants who are accused of working together to defraud homeowners across the country through the deceptive marketing of "mass joinder" lawsuits. "Mass joinder" lawsuits are lawsuits with hundreds, or more, individually named plaintiffs. This is the first consumer action by the Attorney General's Mortgage Fraud Strike Force.

Kramer's firm and other defendants were placed into receivership on Monday, Aug. 15. The legal actions were designed to shut down a scheme operated by attorneys and their marketing partners, in which defendants used false and misleading representations to induce thousands of homeowners into joining the mass joinder lawsuits against their mortgage lenders. Defendants also had their assets seized and were enjoined from continuing their operations. Nineteen DOJ special agents participated as the firms were taken over Wednesday, Aug. 17, along with 42 agents and other personnel from HUD's Office of Inspector General, the California State Bar, and the Office of Receiver Thomas McNamara at 14 locations in Los Angeles and Orange Counties. Sixteen bank accounts were seized.

"The defendants in this case fraudulently promised to win prompt mortgage relief for millions of vulnerable homeowners across the country," said Attorney General Harris. "Innocent people, already battered by the housing crisis, were targeted for fraud in their moment of distress."

"The number of lawyers who have tried to take advantage of distressed homeowners in these tough economic times is nothing short of shocking," said State Bar President William Hebert. "By taking over the practices of four attorneys accused of fraudulent marketing practices, the State Bar can put a stop to their deplorable conduct as part of our ongoing effort to protect the public."

It is believed that at least two million pieces of mail were sent out by defendants to victims in at least 17 states. Defendants' revenue from this scam is estimated to be in the millions of dollars.

As alleged in the lawsuit, defendants preyed on desperate homeowners facing foreclosure by selling them participation as plaintiffs in mass joinder lawsuits against mortgage lenders. Defendants deceptively led homeowners to believe that by joining these lawsuits, they would stop pending foreclosures, reduce their loan balances or interest rates, obtain money damages, and even receive title to their homes free and clear of their existing mortgage. Defendants charged homeowners retainer fees of up to $10,000 to join as plaintiffs to a mass joinder lawsuit against their lender or loan servicer.

Consumers who paid to join the mass joinder lawsuits were frequently unable to receive answers to simple questions, such as whether they had been added to the lawsuit, or even to establish contact with defendants. Some consumers lost their homes shortly after paying the retainer fees demanded by defendants.

This mass joinder scam began with deceptive mass mailers, the lawsuit alleges. Some mailers, designed to appear as official settlement notices or government documents, informed homeowners that they were potential plaintiffs in a "national litigation settlement" against their lender. No settlements existed and in many cases no lawsuit had even been filed. Defendants also advertised through their web sites.

When consumers contacted the defendants, they were given legal advice by sales agents, not attorneys, who made additional deceptive statements and provided (often inaccurate) legal advice about the supposedly "likely" results of joining the lawsuits. Defendants unlawfully paid commissions to their sales representatives on a per client sign-up basis, a practice known as "running and capping."

Defendants' alleged misconduct violates the following laws:
-False advertising, in violation of section 17500 of the Business and Professions Code
-Unfair, fraudulent and unlawful business practices, in violation of section 17200 of the Business and Professions Code
-Unlawful running and capping, in violation of section 6152, subdivision (a) of the Business and Professions Code (i.e., a lawyer unlawfully paying a non-lawyer to solicit or procure business)
-Improper fee splitting (defendants unlawfully splitting legal fees with non-attorneys)
-Failing to register with the Department of Justice as a telephonic seller.

Homeowners who have paid to be added to one of the lawsuits should contact the State Bar if they feel they may be victims of this scam. They can also contact a HUD-certified housing counselor for general mortgage related assistance.

The Department of Justice has seized the practices of the following non-attorney defendants:
Attorneys Processing Center, LLC; Data Management, LLC; Gary DiGirolamo; Bill Stephenson; Mitigation Professionals, LLC; Glen Reneau; Pate Marier & Associates, Inc.; James Pate; Ryan Marier; Home Retention Division; Michael Tapia; Lewis Marketing Corp.; Clarence Butt; and Thomas Phanco.

The State Bar has seized the practices and attorney accounts of the attorney defendants:
The Law Offices of Kramer & Kaslow; Philip Kramer, Esq; Mitchell J. Stein & Associates; Mitchell Stein, Esq.; Christopher Van Son, Esq.; Mesa Law Group Corp.; and Paul Petersen, Esq.

Attorney General Harris is challenging the defendants' alleged misconduct in marketing their mass joinder lawsuits; her office takes no position as to the legal merits of any claims asserted in the mass joinder lawsuits filed by defendants.

Victims in the following states are known to have received these mailers, or signed on to join the case. This is a preliminary list that may be updated:

Alaska, Arizona, California, Colorado, Connecticut, Florida, Hawaii, Maryland, Massachusetts, Michigan, Missouri, Nevada, New Jersey, New York, Ohio, Texas, Washington

The complaint, temporary restraining order, examples of marketing documents and photos of the enforcement action are available with the electronic version of this release at http://oag.ca.gov/news.