We’ve always known that some homes appear to be haunted – heck I own a 120 year old home myself that some folks will swear has a spectral resident. There are entire industries that have sprung up around that phenomenon including exorcisms, TV shows and movies.

But there’s a new form of home that’s appeared on the market – the house of bad vibes. Apparently what we in the business casually refer to as a ‘distressed’ property may actually be distressed in more ways than financially. It may have all sorts of negative vibes, residues or ‘energy imprints’ associated with it as a result of arguments, emotions, money problems and loss.

And of course where there’s an opportunity, there are opportunists. While it’s not unusual for some religious or ethnic groups to have their homes blessed occasionally, this new group is at the beck and call of home buyers and sellers to help rid a house of the funk either before it is put up for sale or before it closes escrow.

Practitioners of the art utilize a wide variety of customs and items in their cleansing treatment. Ringing bells, according to some, breaks up the negative energy. Iron, especially iron swords, are effective at keeping evil spirits away if placed before windows and doors. Kosher salt, candles, fresh flowers, scented oils, spices and incense can also play a role in the ceremony and in maintaining the ongoing positive aura of the home.

Practitioners of native arts insist that the same power can be derived from smudging ceremonies involving sage, cedar and sweetgrass applied to the person and the home. If you prefer this method, make sure to use a clay or stone bowl rather than an abalone shell. As we all know, abalone shells should only be used in water ceremonies, not burining rituals,  at the risk of offending Grandmother Ocean.

Consultants, astral healers or in some cases, witches, advise on a number of procedures including a thorough top-to-bottom house cleaning and airing-out as a precursor to the spiritual cleansing or invocation. Herbal mixtures, or just a sea salt and water concoction, can be used to sprinkle the house or actually wash down the place if the vibes are really bad. This is accompanied by a blessing, incantation or charm session, lighted candles in every room and the application of more herbs and fresh flowers to keep the negative energy at bay.

But as always, there’s a caution. Advocates warn that by doing this you are entering into a relationship with an unseen power of the plants and spirits which must be treated with respect and honor. Worse yet, you may actually remove a beneficial spirit that will result in even greater harm to you after the ceremony. You are advised to know what effects the spirits are having on your environment before you take any action.

As always, as with any phase of our business, it’s best to hire a professional.

The real estate part of it consisted of representatives from Stonewood Financial buying homes at significant premiums over asking price. As this was at a time our housing market was appreciating 20% – 30% a year, the fact that someone would pay a 25% or 30% premium on a home purchase was not enough to warrant investigation by the authorities. Homes listed at $500,000 were routinely selling for $600,000 or more. Targeting specific neighborhoods, after the first two or three sales were obtained with fraudulent appraisals, it became a self-feeding scheme since subsequent appraisals were now based on actual sales, albeit fraudulent. Turns out many of the buyers were either made of straw, or people talked into buying multiple properties they couldn’t begin to afford. Naturally other buyers into those neighborhoods also became victims since selling prices became predicated on fraudulently inflated values. In addition to the 200+ documented cases, many more innocent victims lost their homes when prices tumbled by more than 2/3 in some cases.

How did they do it? Well, partially through affinity fraud – many of the buyers were either members of the same ethnicity as the perpetrators or were nurses at the same facility where one of the perpetrators worked. They were also promised that the properties could be rented, that any shortage between the rental income and the mortgage payment would be paid for them, and that the $100,000+ overage collected by Stonewood or a related entity, would be paid to an investment account with the promise of even greater dividends to come.

Naturally there was no investment account to produce income, after a month or two the promised rental offset payments dried up and houses started going into foreclosure by tens, then by hundreds. When we became aware that something smelled bad here, we documented about 60 homes and about $40 million dollars in potential scams. By the time authorities finally acted on it the result was over 200 homes with the perpetrators indicated for over $120 million dollars. Our local District Attorney did not see fit to take action until the SEC, FBI and US Attorneys Office had finally acted, then he stood up on the podium all puffed up taking the credit. I like to hope in some small way it was part of the reason he was soundly defeated in his recent re-election campaign by a relative unknown.

Anyway, in addition to our local real estate fraud task force, reporters Chris Bagley from the Californian and Leslie Berkman from the Press Enterprise payed significant roles in shining the spotlight on these nefarious activities and our own attorney John Giardinelli and an attorney for some of the plaintiffs Richard Ackerman were pivotal in keeping the focus on.

It took too damn long and cost too many people – not to mention the damage done to entire neighborhoods and our cities – but as they say – sometimes the wheels of justice grind slowly. Let’s hope in this case they also grind exceedingly fine.

You can read the whole story and related elements here.

Press Enterprise – Fraud Trail Begins

]]> http://gadblog.srcar.org/2010/10/25/a-raspberry-to-michael-t-pines-others/feed/ 6 http://gadblog.srcar.org/2010/10/13/california-joins-multi-state-coalition-to-protect-homeowners-facing-foreclosure/ http://gadblog.srcar.org/2010/10/13/california-joins-multi-state-coalition-to-protect-homeowners-facing-foreclosure/#comments Wed, 13 Oct 2010 15:23:57 +0000 Gene Wunderlich http://gadblog.srcar.org/?p=1662 SAN FRANCISCO – Attorney General Edmund G. Brown Jr. announced today that California has joined a coalition of 49 attorneys general and dozens of state banking regulators in a multi-state effort to demand that lenders find solutions to serious and potentially widespread problems in the foreclosure process across the country.

“While California continues its own vigorous efforts to ensure that homeowners facing foreclosure are treated fairly and lawfully,” Brown said, “we are now working together with other attorneys general and regulators to seek solutions that reach across state lines to protect all borrowers at risk of losing their homes in this foreclosure crisis.”

On Friday, Brown called on all lenders in California to halt foreclosing on California homes until they can demonstrate that they are complying with state law. Earlier, Brown sent letters to Ally Financial and J.P. Morgan Chase directing them either to prove they are in compliance with state law or else halt foreclosures. His office also has been in discussions with other lenders, including Wells Fargo, One West and Bank of America. Brown’s office will continue its independent efforts to protect homeowners facing foreclosure.

Bank of America announced on Friday that it was temporarily halting foreclosures nationwide.

The multi-state group will review how lenders verify foreclosure documents nationally. The group was formed after several lenders and loan services admitted that officials, dubbed “robo-signers,” had vouched for the accuracy and completeness of foreclosure documents without reviewing them. Such sham verifications may constitute a deceptive and unfair practice or otherwise violate state laws.

Regulators in the states involved, including California, have already started examining whether mortgage servicers have submitted improper affidavits or other foreclosure documents.

Although each state has its own foreclosure laws, all attorneys general and financial regulators have a common goal of making certain that every lender and servicer conduct a good faith review of foreclosure documents, only foreclose on homeowners after confirming all requirements have been met, and obey all state laws.

California law prohibits lenders from recording notices of default on mortgages made between Jan. 1, 2003, and Dec. 31, 2007, unless – with certain exceptions — the lender contacts or tries diligently to contact the borrower to determine eligibility for loan modification. A notice of default must include a declaration of compliance with California law.

California homeowners who experience problems with foreclosures, or other consumer issues, can file a complaint online with the Attorney General’s office at: www.ag.ca.gov/consumers/general.php.

Brown Calls on Banks to Halt Foreclosures In California

SAN FRANCISCO – Following his office’s negotiations with the state’s top loan servicers and today’s announcement by Bank of America that it is temporarily halting foreclosures nationwide, Attorney General Edmund G. Brown Jr. today called on the state’s other lenders to halt foreclosing on California homes until the banks can demonstrate that they are complying with state law.

“All lenders should halt foreclosures until they clear up this mess and ensure that the process is fair and complies with California law,” Brown said. “Bank of America has taken an important step, and the other major lenders should follow its lead.”

California law prohibits lenders from recording notices of default on mortgages made between January 1, 2003 and December 31, 2007, unless, subject to limited exceptions, the lender contacts or tries diligently to contact the borrower to determine eligibility for a loan modification. A notice of default must include a declaration of compliance with California law.

In the past few weeks, Brown’s office has been in discussions with Bank of America, Ally Financial, JP Morgan Chase, Wells Fargo and OneWest to ascertain whether they are complying with California law. Brown’s office has called on those banks to show they are complying with state law before continuing with foreclosures.

JP Morgan Chase, the nation’s third largest loan servicer, Ally Financial and One West have admitted that employees approved and signed foreclosure documents without first fully reviewing the borrowers’ loan files. As a result, those borrowers lost their homes based on affidavits the bank never confirmed were accurate.

Ally Financial and JP Morgan have suspended foreclosures in 23 other states that, unlike California, require a court order for foreclosures.

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HUD Press Release
HUD Mortgagee Letter 2010-23, FHA Refinance of Borrowers in Negative Equity Positions

Well, I know we’ve all had smoke blown up our nether regions repeatedly by the big banks about releasing REO’s,  loan mod’s and short sales, (to name but a few) but maybe – just maybe, we are making some progress. Our leaders are meeting, or have met, with B of A, Chase, Wells Fargo and two more, who slip my mind right now. Maybe as a result of these meetings – or maybe just because they felt like it, both B of A and Chase have recently released guidelines that Realtors® will find  helpful to comply with each banks HAFA programs.

Will they work and will the process be as easy-cheesy, lemon squeezy as they claim? Only your Realtor® will know for sure – but it’s a start.

Click here for the 10 page B of A ‘Home Affordable Foreclosure Alternative (HAFA)  Short Sale Program & Guide for Agents

Or click here for a one page synopsis of Chase Bank Home Affordable Foreclosure Alternatives (HAFA) Program.

This morning we were treated to an hour long conference call with FHA Commissioner Dave Stevens, courtesy of NAR. Long-time readers know I’m a fan of Stevens, even got a nice comment from him on a blog I wrote last fall following his address at NAR. I think it’s a good thing to have somebody in his position who actually knows real estate, knows what it takes to sell a house, get a mortgage, work a short sale, etc. As introduced this morning, they said it’s ‘refreshing to have someone who knows our industry.’ I concur.

Stevens started his talk saying these are ‘unprecedented times’ in the housing industry. ‘The good news is that the housing industry has never received this much attention. The bad news is that the housing industry has never received this much attention.’ The housing industry brought the U.S. economy to it’s knees and nearly took the world economy with it.  We had a severe hiccup when people lost sight of housing as shelter and started viewing it as an investment strategy.

He then ran through some of the stats that most of us are aware of. Exotic mortgages nearly wiped out the FHA base. With their 3% down, 30 year fixed mortgages they were too boring, couldn’t complete with ’0′ down, no interest, no doc loans – they were irrelevant and shrank to less than 3% of the market. Today they are back up to 30+% and growing. They originate 50% of loans to Blacks, 45% of loans to Hispanics and 80% of loans to 1st time homebuyers.

He also talked about some of the changes FHA has made to protect their base things like increasing the down payment amount in for some buyers and decreasing the amount of seller contributions. He noted those things are vital to protect FHA and he quoted numerous studies showing the rise in failure rates between buyers getting 3% seller contributions and those getting 6%. He also talked about the SAFE Act, which he believes will go a long ways toward eliminating the type of ‘rogue’ lender that contributed so much to questionable lending. He sees this as a good step toward rebuilding consumer confidence in the market.

He also stated that, in hindsight, it’s clear that everybody should not have become homeowners as was the mantra for the first half of the decade, and through their policies they intend to make sure everybody doesn’t become a homeowner going forward – only those who should be, who can demonstrate the fiscal ability to meet the responsibility they are undertaking. He realizes that some of the policies sound harsh and that some innocent people will be hurt, but in the interest in returning credibility, confidence and integrity to the market, these are steps that need to be taken. And with 95% of the financial market under the control of the Federal Government, they are in a position to set those rules.

And for the most part I find myself in agreement with what Stevens said – up to a point. He started losing me when he said that the belief in Washington is that THEY  need to act to restore confidence in the market because WE failed. WE collectively built this market – all of us, according to Stevens, but it is the Obama administration that now sees the mandate to ride to the rescue. He credits this administration with stabilizing the market at a time it was in free-fall. He believes the HAMP & HARP and other programs have been resounding successes and that without them the crisis would have gotten much worse.

That’s all partially true but it strikes me that in some respects Dave has been drinking the Kool-Aid. And that’s OK – I mean he works for the administration and his job depends on toeing the company line on this kind of stuff – just don’t expect everybody else to believe it without question. And we were all too polite to question it on the call this morning.

I just sent out my monthly newsletter in which I pretty much said the same thing Stevens did about it being a unique market and that the government has their finger in darn near every aspect of the market. Where we diverge is that while Stevens thinks more government intervention and manipulation is a good thing, I think it has artificially propped the market up and has kept us from a true stabilization, reaching a real bottom and starting a sustainable recovery. We simply don’t know what the government is going to do next – and that creates instability – especially when the  majority of people don’t have much confidence in that government.

As Ben Bernanke recently commented to the Dallas Regional Chamber, “We have yet top see evidence of a sustained recovery for the housing market. Mortgage delinquencies for both prime and sub-prime loans continue to  rise as do foreclosures.”

It’s cyclical. The market would never have peaked as high or as boisterously as it did without government intervention. When Barney Frank and Bill Clinton decided everybody who could fog a mirror should buy a house, the die was cast. When the financial markets, including the GSE’s responded with vigor and with increasingly exotic products and Barney Frank and George W encouraged it, we were toast and didn’t know it. So when Stevens said WE built this market, he should have expanded his collective WE to include all the federal cronies who are now charged with straightening out the mess they helped create in the first place. Dave didn’t mention that.

Oh well,. As always, we at the street level are left to deal with what plops in steaming piles from the bowels of Congress. Thus has it always been. Obama didn’t create the mess and he sure as heck ain’t cleaning it up, though when the cycle ultimately turns you can bet he’ll be leading the parade to take credit for it. The rest of us will just keep working and trying to eke out a living and stashing as much as we can before higher taxes and interest rates take it. That’s the fun part. As Dave Stevens closed today he quoted that thing that makes each of us get up in the morning and do what we do – “We still own the American Dream business.” Well, at least the part the administration doesn’t lay claim to.

As you are aware, California just passed SB401 which brings the state of California into compliance with the Federal Mortgage Debt Relief Act of 2007. Essentially what that means is that, like the federal program, California homeowners who have benefited from a short-sale or foreclosure (benefited? That’s questionable), qualify for relief.

Most of you already know what it means but for any first-time readers, this means if you took out a loan from a lender to buy a house and that house is now worth half what it was when you bought – you are upside down in your house. You owe more than you can sell it for.

But say you lost your job or have to relocate or the adjustable interest rate grew faster than your income and you can no longer afford your home you either have to get them to modify your loan (good luck) sell it as a short-sale (good luck), or let the bank take it back either through a foreclosure or a deed-in-lieu. Regardless, the bank is going to take a hit because they can’t recoup the amount of money they originally lent you.

Prior to the Tax Forgiveness Act, the difference between what you owe and what they end up with could be considered income because you no longer had the obligation to repay the lender. The IRS could, and did, tax that as income in the year it occurred. So if you bought a home for $400,000 and sold or lost it for $200,000, the bank would report that $200,000 differential as income and it got tacked onto whatever else you made that year and you got taxed on it – even though you never saw a penny of the cash.

Under the Mortgage Debt Relief Act, and now California SB401, you will no longer be liable for moneys used to purchase your principle residence as the result of foreclosure, short-sale or loan modification.

However, there are caveats that some folks are finding out at tax time at their own detriment. For example:

1. If you took out a 2nd mortgage or refinanced your home and took cash out to buy toys, take a vacation or otherwise squandered the cash – you may still be on the hook.
2. If you used a HELOC (home equity line of credit) to buy toys, take a vacation, pay for education or otherwise squandered the cash – you may still be on the hook.
3. You used the money to buy a vacation home and lost that to foreclosure – you may still be on the hook.
4. If the property is over $2 million dollars and you lose it. The Act covers only the first $2 mil. After that, you are on the hook..

As a Realtor® you are part of one of the largest special interest groups in this country – the Realtor® Party, and you have a noble cause – preservation of the American Dream of home ownership. You may not like the idea of being a ‘special interest’ and you may disavow any inclination to participate in the political process that supports it, but that doesn’t change the facts.

Pericles summarized the concept in 500 BC when he said “Just because you don’t take an interest in politics doesn’t mean politics won’t take an interest in you.” I’ve updated that somewhat with the Wunderlich codicil “If you’re not at the table, you’ll probably be on the menu.”

If you think the business of real estate is just about buying and selling houses, you only know half the story. The National Association of Realtors® is the largest grassroots political action group in this country representing more than 1.1 million Realtors® in our nation’s Capitol. Last year we invested more money in candidate elections and special campaigns than almost any other group. That’s the other business of real estate – the part that allows you to stay in your business.

A few members have voiced concerns over the recent decision by the California Association of Realtors® to increase our dues by $49 to cover this vital piece of our business. But in reading through those comments (comment summary on $49 investment), I realized some of you are simply not aware of what these critical funds are used for and the direct benefit you derive. For less than the price of 1 latte a month, you are insuring your political survival and generating a real and measurable impact to your bottom line.

So let’s break down what YOU get for that $49 investment.

• Just last week we defeated a proposal from CA Senate President Darrell Steinberg that sought to impose a 3% accelerated withholding tax on independent  contractors – that’s you. If you sold a $100,000 condo, the withholding from your commission check would be $90. On a median price home in Temecula last year that would have taken an additional $260.89 out of your check – every check all year long. If it wasn’t for our successful lobbying efforts you’d be  paying that already because Darrell tried the same thing 3 times last year. Is that worth $49 to you?

• Have you sold a home to a first-time homebuyer in the past year? Over 1.2 million first-time prospects have become owners since the inception of the tax credit last year – 450,000 of those would not have jumped into the market without that incentive. Who do you think lobbied to get that measure passed last February and then worked extra hard to get it extended and expanded in November against long odds? Selling side commission on a median price home in Murrieta last year was about $8,133. Is that worth $49 to you?

• Last year Canyon Lake proposed an ordinance requiring every Realtor® to pay a $90 business license fee every year. If you worked in, advertised in, sold a home in, or even mentioned Canyon Lake in your website – you would get a bill for $90. We worked hard to modify that ordinance – not just for Canyon Lake but so that other Southwest California cities didn’t get the idea they could just reach into your pocket without a fight. Is that worth $49 to you?

• Last election cycle we supported candidates in 9 local city council races. 8 of our candidates won including 3 Realtors®. Do you think it might be helpful to have people serving on our local councils and water boards who understand property rights issues, eminent domain, sign ordinances, zoning and so forth? How about in Sacramento? Or Washington DC? If we had more legislators in place who understood real estate or banking or appraisal issues do you think we’d be having some of the problems we’re having today? Is that worth $49 to you?

• Would the loss of the mortgage interest tax deduction have any impact on home ownership? How about capital gains tax benefits for home owners? The  mortgage interest tax deduction and capital gains benefits are on the table every couple years in Washington DC as a source of potentially significant tax revenue. They will be again this year. Without your NAR lobby, these significant advantages to homeownership would have disappeared along with a chunk of your business during the past decade. It that worth $49 to you?

• Would your business be impacted if a buyer could walk into any bank and buy a home from the same salaried employee who gave them a loan? NAR fought an 8 year battle to eliminate a loophole banks were trying to exploit to do just that. We won that fight in 2009. Is that worth $49 to you?
  

Those are just a few of the things your $49 does. Here’s a few things it doesn’t do:

• Realtor Action Funds do not support a political party platform or agenda – they support the Realtor® Party. We support candidates who understand our issues at the local, state and national level regardless of party affiliation. Historically our expenditures are split almost down the middle at the federal level.

• Realtor Action Funds do not support issues or legislation that is not real estate related. At the state level our analysts comb through every one of the 3,300 bills submitted in an average session. About 1,500 of these may be flagged as having some potential impact on either Realtors® or property rights. Our state directors discuss each of those bills to determine whether the Association will support it, oppose it, maintain a neutral position or if it really isn’t real estate related at all. We also sponsor our own bills to address specific real estate issues of concern to our members. You can read about the eight bills CAR  authored for 2010 here.

• Realtor Action Funds do not support travel by Directors, they don’t pay for lobbyists salaries and they don’t pay for ‘pet projects’. If it doesn’t directly support a candidate or real estate related issue or campaign, it doesn’t come out of these funds. They are too precious to squander and the real need is growing exponentially.

I hope this gives you a better feel for why this latest move was made by our state association. It was not a capricious decision and was discussed in detail for more than a year. In order to continue to be effective at the level our members have come to demand, we
must have the support of all members. 10% or 20% can’t continue to pay for benefits demanded and enjoyed by 100% of the membership. That’s neither fair nor equitable.

We welcome your input and questions and I encourage you to visit http://gadblog.srcar.org/ to take part in the discussion.

The eight bills we’ll be sponsoring this year include:

SB206 (Dutton) – REO Homebuyer Tax Credit. As introduced, SB206 would have created a program similar to the federal first time homebuyer program providing a tax credit up to $8,000 for the purchase of a principle residence. Due to the state’s fiscal crisis it was later determined modofied to limit the tax credit to purchases of REO properties. At our recent BOD meeting, the language was further modified to include supporting a recent proposal by the Governor for the purchase of new or existing homes IF a reliable source of funding is found. This means if the Governor sponsors a bill to address substantially the same issue, we will abandon SB206 and sign on to support the Governor’s efforts assuming anybody can find money to fund such a program.

Local Property Maintenance Ordinance – (No author yet). This legislation will pre-empt over-reaching local vacant property ordinances that may adversely affect the market and unfairly expose Realtors® and homeowners to liability. While many cities, including those in Southwest County, have adopted workable ordinances to address abandoned property maintenance and blight issues, other cities have determined these ordinances are excellent sources of revenue for their cash-flow and have levied substantial fines. In some cases, the level of the fine is in excess of the value of the property. This bill would supersede local ordinances.

Anti Deficiency Protection (Corbett) – This bill would extend the existing borrower protections against personal liability for a purchase money loan to either refi the property or for improvements that increase the value of the property. Current policy states that any refinance, even with no cash out just to reduce interest rates, automatically shifts the loan from non-recourse to recourse. This bill addresses that.

CID Unit Owner Right To Rent – In 2008 we sponsored AB2259 (Mullin) which would have allowed current property owners within an HOA to continue to use their rental rights until such time as they sold the property even if the HOA decided to restrict rentals. Approved almost unanimously in both houses, it was vetoed by the Governor. This bill would require a 2/3 approval in a CID for any amendment that would prohibit owners from renting or leasing their units.

Portable Appraisals (Correia) – Current law permits, but does not require, lenders to utilize an appraisal ordered by a different lender. This bill states that if an appraisal is ordered and prepared by one lender, a second lender would be required to accept the appraisal to support the mortgage.

Appraisal Management Company (AMC) Regulatory Oversight (Hall) – Driven by the HVCC, Appraisal Management Companies have grown
enormously in both scope and power over the past two years. In 2009 CAR supported SB237 (Calderon) which subjects AMC’s to review by the Office of Real Estate Appraisers (OREA). This bill clarifies and expands OREA’s oversight of these behemoths. Since we can’t seem to stop HVCC at the federal level, we are trying to at least establish some control and oversight at the state level. By the way, HVCC technically sunsets this year but nobody is betting that the process or the AMC’s will simply pack it in and go home.

DRE ‘Poison Pill’ Reserve Protections – During the 1990′s the Governor and Legislature raided Department of Real Estate funds to help balance the budget. CAR sponsored legislation stating that if the funds were taken it would trigger a rollback of license fees to 1982 levels. The bill passed. Years later the state again  raided the DRE money but stated that it was borrowed by the general fund so the rollback was not triggered. We again addressed the matter legislatively and closed that avenue of pilferage. In 2009 DRE coffers were again raided in a manner than again did not trigger a rollback as the funds were not stolen, not borrowed, but loaned not to the general fund but directly to another department, the DOJ. Back to the drawing board yet again.

Advance Fee Definition Clarification (Hayashi) - Last year we supported SB 94 (Calderon) to prohibit ‘cash up front’ loan modification contracts. However, the language that emerged in the final bill requires some clarification of the definition of advance fees for services such that it cannot be construed to include a listing agreement – which is technically a fee agreement for future services to be rendered.

The legislative deadline for identifying authors and obtaining bill numbers is February 15 so we will keep you apprised of developments and successes in our 2010 advocacy efforts as they occur. Stay tuned for RED ALERTS as we elicit your support to persuade legislators of the importance of these measures.

There are also hundreds of ‘bills of interest’ in the process of being introduced by others. At future meetings CAR will evaluate those bills and members will be asked to take a position.

For a complete (as of January 2010) summary of both CAR sponsored bills as well as a list of these others bills of interest, please go to:
http://www.car.org/governmentaffairs/

Prosecutors claim that two of the individuals hired two loan modification agents in hopes of saving their home but believe the men just took their money and did nothing. WOW! That’s hard to believe, eh? Prosecutors claim the ‘victims’ were lured to an office where they were held for hours, beaten and robbed before one of them escaped and notified authorities. “The two allegedly sought loan modification assistance from the victims but believed that nothing was being done and wanted their money back,” a statement from the district attorney’s office said.

What makes this case noteworthy (at least to me) is that in customary news media fashion, the names of the the accused have been well publicized but the name of the alleged swindlers is being withheld for their protection. This is one reason fraud continues to flourish – the names of the true victims is often published while the perpetrators (in this case identified as ‘victims’) is withheld.

Of course I am not in a position to know whether the ‘victims’ in this case were truly victims or if they were scam artists who got a much deserved ass-whooping. I suspect if more fraud perpetrators were treated to a good old fashioned ass-whoopin’, we would start to see a lot less prevalence of the problem.

I’m hoping the LA Prosecutor manages to devote as much time to finding out if these people were really innocent legitimate business people or if they were among the multitude of scam artists cluttering up our industry. I’m hoping the next headline I see is: ‘Torture Victims Released From Hospital – Taken Directly to Jail For Mortgage Fraud Scheme.’

Ironically, this happened the same day Los Angeles housing advocates launched a campaign warning consumers of  mortgage rescue scams.

The world is all topsy toivy.

Here’s the link to see non-compliant companies in your area. Taking names and kicking ass – love ya Jerry.

News Release

August 12, 2009

For Immediate Release

Contact: (916) 324-5500

Brown Orders Mortgage Foreclosure Consultants to Post $100,000 Bond or Face Prosecution

Los Angeles – Threatening possible criminal and civil prosecution, Attorney General Edmund G. Brown Jr. today ordered 386 mortgage foreclosure consultants to post $100,000 bonds and register with his office.

He also ordered more than two dozen companies to justify suspicious loan modification claims made in “slick advertising,” online and through the mail.

“Hoping to lower their mortgage payments, thousands of homeowners were instead duped by slick advertising and money-back guarantees,” Brown said. “The time for accountability is at hand, and this rogue industry must clean itself up or face legal action,” Brown added.

Brown also unveiled a new website ( http://ag.ca.gov/loanmod) that provides homeowners tips to avoid loan modification fraud, allows them to determine if a company is registered with his office and makes it easier to file complaints.

Brown today joined with the California Department of Real Estate and the State Bar of California in a new partnership to combat loan modification and foreclosure fraud.

Brown has sent letters directing 386 mortgage foreclosure consultants to register with his office within 10 days and post $100,000 bond, or demonstrate why they are not required to. If the consultants are required to register and have failed to do so, they are subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation. Eighty-five of these consultants are based in Los Angeles County, 133 in Orange County, 47 in the Inland Empire, 68 in San Diego County and seven in the Bay Area.

Additionally, Brown sent letters today demanding that 27 loan consultants substantiate suspect claims made on the internet and in direct mail advertising. For instance:

· Brown directed Irsfeld, Irsfeld & Younger, LLP of Glendale, Calif. to substantiate its claims including: “Our team has 10 years of success in negotiating 90% of all mortgage loan modification requests to a successful outcome….For the modification requests we accept, our modification failure rate is less than 1%.”

· Brown directed 21st Century Real Estate Investment Corporation of Rancho Cucamonga to substantiate its written solicitations including: “[y]our proposed loan modification is a 30 year fixed/3.5% interest rate with a monthly payment of $495. Your monthly savings is $705. Total savings over a 30-year period is $253,800. . . . Your first payment will be negotiated to begin March 2009 – payable to your current lender for $495.”

· Brown directed Mortgage Modification Solutions of Irvine to substantiate its claims including: “Our services are due to the FEDERAL MANDATE which makes it mandatory for mortgagees, upon the default of a single family mortgage, to engage in loss mitigation actions” and “Why $3995.00 is nothing compared to what you can accomplish in return? #1- It’s 10 times more expensive to hire a CPA or a Financial Advisor to exclusively analyze & Research your financial affairs to create a plan acceptable to the Banking standards.”

· Brown directed Alliance Law Center of San Diego to substantiate its letters to consumers stating: “Final Notice: 3/11/09, our review of certain information indicates you may be a victim of federal disclosure violations and/or predatory lending violations, therefore your loan may be invalid, and you may qualify for a loan modification saving you thousands of dollars.”

The State Bar of California today announced that it has obtained resignations from two lawyers and filed charges against a third for their loan modification activities. The State Bar’s special team on loan modification complaints continues to investigate more than four hundred active complaints from consumers about lawyers’ roles in loan modification scams.

Brown has made it a top priority to combat loan modification fraud. As part of a nationwide sweep last month, Brown filed suits against 21 individuals and 14 companies who ripped off thousands of homeowners seeking mortgage relief. In total, Brown has sought court orders to shut down 32 companies and has brought criminal charges and obtained lengthy prison sentences for deceptive loan modification consultants.

Copies of the letters and a list of consultants who have not registered are attached.

You may view the full account of this posting, including attachments, in the News & Alerts section of our website at: http://ag.ca.gov/newsalerts/release.php?id=1780

DO NOT MISS YOUR CHANCE TO CAST YOUR VOTE:  

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As a result of this case we have developed a very good working relationship with our District Attorney’s  Office and have initiated a statewide effort with CAR to add real estate fraud to our statewide agenda. We have also given numerous Fraud Prevention presentations to City Councils, County groups and civic organization as part of the program you’ve seen as my tagline in the Mortgage Fraud Group.

Realtors. We’re part of the solution – not part of the problem.

While the amount awarded doesn’t represent the total damages these individuals wreaked on our community, it’s a good start.

HOUSING: Judge puts $59M price tag on fraud allegations

By CHRIS BAGLEY – cbagley@nctimes.com

RIVERSIDE —- A federal judge ruled that two Murrieta-area men defrauded dozens of investors and ordered them on Monday to repay a total of $58.6 million.

“The wrongful conduct continued over the course of at least three years and defendants evolved their conduct to evade detection as well as to continue to separate investors from their money,” Phillips wrote. “Defendants have not recognized the wrongful nature of their conduct and have not given any indication that they will not engage in su

One story I still hear way too often in spite of all our efforts to get the word out was a story of fraud. One gentleman lamented that he had sent $2,500 to a Florida company that promised to get his loan modified. Not only has nothing been done in three months, but now they don’t even answer the phone there and their website states they no longer do business in California. Nice!

What should he do?

My advice – kiss the $2,500 good-bye and don’t send anymore money to scam artists. I did put him in touch with the District Attorney and the Attorney General because how is one individual going to sue a company clear across the country – especially a company that was probably founded on fraudulent grounds and specializes in flim-flam? That he possesses no significant resources and has only a halting command of English doesn’t make it any easier for him to proceed and undoubtedly made him a prime target for the unscrupulous. I’ve also put him in touch with a legitimate counseling service and the HUD website and hope it’s not too late for him to recover.

On the flip side, last night I got a call from a good friend of mine on an altogether happier matter – his loan modification had been approved! Honest. I don’t know about you but this is the first success story I’ve heard from the Making Home Affordable program and it was a welcome relief from all the failures experienced by so many. There may be rays of sunshine out there somewhere, folks.

My friend – let’s call him John – said he was fed up with the 20 calls and letters he was getting every day offering to refi or modify his loan for a fee – or to make his mortgage go away completely. From being my friend for years he knows all about fraud and only recently came to realize how pervasive it is in the housing industry. He found the onslaught of offers frustrating and very insulting in their blatant attempts to rip him off.

And it’s not that John was in imminent danger of losing his home but being self-employed they have seen a substantial decline in their own business the past couple years and are finding that the money runs out before the month does anymore. So they contacted their lender, Chase, on-line and he said the process couldn’t have been easier or simpler. They filed the appropriate paperwork on March 8 and this month their monthly mortgage payment will be reduced by over $200 – or about 18%. Granted we’re not talking huge numbers here (especially for California) but how many people do you know who would be able to stay in their home with even that amount of relief?

Now over the years John and Betty have been prudent homeowners. They bought their house during the last big drop for about $90,000. After 16 years and two kids, the house needed some updating and repairs so they refi’d in 2007 but only took out the amount they needed for the update. Their current mortgage is about $125,000 though at the time they could have sucked more than $300,000 equity out of the house. They also have the good fortune to have a Fannie/Freddie backed loan, which is not all that common in California – especially after the over-heated run-up the past few years. And they still have positive equity in their home and they are not delinquent in their payments even though they’ve been paying a $38 late fee for so long it seems like part of the mortgage.

The modification was accomplished through an interest rate adjustment only – the principle and term remain the same. Based on individual circumstances he said there are programs where the principle might be reduced or the term extended to 40 years in combination with an interest rate reduction but those options didn’t apply in their case. Their assigned caseworker was personable and almost always answered her phone immediately.She encouraged them to be diligent in their follow-up every week or two, was happy to answer questions and the promise of an answer within 120 days was actually less than 90.

As John pointed out – this is a legitimate program for legitimate people. I know I’m happy as heck for my friends as they do a lot for our community with minimal compensation. It’s great to see deserving people get something for a change.

I’ve sprinkled a variety of company logos throughout this post. If you click on any of them, it’ll take you to the company website where the details of their modification program is available. The Making Home Affordable site even has an easy on-line form to see if you might qualify. It couldn’t get much simpler. The Help for Homeowners site is currently local to Riverside County, but expanding. This group puts on seminars throughout the region geared to put homeowners in touch with FREE or low-cost LEGITIMATE resources to help refi, modify, short-sale or even lose your home (everybody cannot be helped). This is done with every effort to provide relief, comfort and with as little impact as possible with an eye to future homeownership for those who can’t be helped right now.

There are resources available. Remember – if the deal sounds too good to be true, it probably is. If they ask for money up front – it’s probably a scam. Also be aware of ‘affinity’ fraud. Your own ethnic group will prey on you before others. Your church group, your workplace (nurses, teachers) are all more likely to be victimized by an inside job – somebody you may know and trust.

If you’re in trouble, start with YOUR OWN bank first. Be patient, be persistent and be professional. If they can help you they PROBABLY will. Banks don’t always seem to operate rationally or in their own best interest (or yours) but as John & Betty can tell you – sometimes it works just right and sometimes you win the lotto. Good Luck.