Sunday, March 04, 2007

Lawsuits against mortgage fraud

Today's Arizona Republic reports that "Big lenders and Wall Street investors are going after Arizona mortgage brokers, appraisers, real estate agents, title firms, and home buyers for fraud":
Dozens of civil lawsuits alleging the gamut of mortgage fraud, from cash-back deals to lying about income on loan documents, have been filed against Valley firms and individuals during the past few months.

Fraud experts and regulators say the lawsuits are only the beginning as the fallout from mortgage fraud starts to hit the Valley. Cash-back scams involve getting a mortgage for more than a home is worth and pocketing the extra money. The deals inflate home values and leave lenders with losses from loans worth far more than the house itself.
A few specific suits mentioned:

Phoenix's Biltmore Bank is suing Security Title, appraiser Kittelman & Associates, and Tucson resident and house flipper Frank Padilla (who already was indicted and pleaded guilty to fraud and money laundering) over a $1.3 million loan for $800,000 property.

A Lehman Brothers investment trust and Aurora Loan Services are suing the parent company of First National Bank of Arizona for 38 home loans which misrepresented home values and income, debt, and employment of borrowers. The plaintiffs bought the loans and want the bank to buy them back.

Transnational Financial Network is suing Lending House Financial and a Scottsdale investor "who purchased 22 homes within days of each other last spring" for failure to disclose debt level or the fact that the investor was purchasing multiple homes (which were all foreclosed upon).

Tucson mortgage lender First Magnus is suing its former Phoenix-based loan officer, Tyson Rondeau, for fraud and negligence, saying that bad loans are costing it $1 million. That lender itself has been investigated by the Arizona Department of Financial Institutions for misrepresentations and failure to disclose facts, and has agreed to pay a $200,000 fine.

The article quotes attorney Michael Manning, who is working for some of the above plaintiffs, saying that "This is the tip of the iceberg, but I think regulators got on top of it faster than in the mid-1980s." I'm not sure how fast they got on top of the S&L issues in the eighties, but they're at least three and a half years late to the party this time around--when these fraudulent deals were working, the regulators were uninterested. Now that they're failing and the house of cards is collapsing, suddenly they gain an interest. This is because all of these players--the plaintiffs and the defendants--knew what was going on. They were all profiting from it.

The regulators and lawsuits are just a way for the larger players to cover their asses after the fact and avoid paying the full price for what they must have known was bound to ultimately happen.


Ed Dickson said...

This has become a huge problem that we are all going to pay for.

A record amount of loans are going bad.

jim said...

First National Bank of Arizona is being investigated for taking "trust" funds from a companies account to repay corporate loans. They gave the company 2 days notice and no notice they were taking trust funds. Regulators are investigating!!

differentflags said...

40 Capital Square SW
Atlanta, GA 30334-1310

Dear Mr. Baker,

I am writing to you now, though I believe I should have written earlier. Once I bought a condo in the Buckhead neighborhood of Atlanta and I was a victim of what is called mortgage fraud. I arrived in Atlanta in late May of 2002. I liked the city very much and started to look at condos. I hooked up with a real estate broker named La Shawn Tucker(Buckhead Real Estate) and she hooked me up with a mortgage broker named Steffon. Ms. Tucker showed me a condo at 3660 Peachtree Road, J8, that I liked very much. It was a 2-bedrrom condo in a nice part of Buckhead. Ms. Tucker said that if I ever decided to rent it out, I could use something called the roomamate plan and rent it out for about $1,600 a month. Later I found out differently. The most I could get for the rental of the condo was around $800 or $900, but at that time, I believed and trusted her.

This man Steffon got me a loan with Novastar Mortgage company in Kansas City, Missouri. There were two mortgages instead of one—the first mortgage at an intesrest rate of 9.75% and the other at 13%. I had a very good credit score (around 754). The price of the condo was $170,000 and the seller’s real estate company was Harry Norman. The closing was scheduled for July 26, 2002. A few days earlier, while driving around Buckhead with Ms. Tucker, she told me that Steffon had paid someone to say that my yearly income was $120,000. My real income was nowhere near that amount. I was shocked, but I also thought that we had gone too far to turn back and that we had to close. I had no one in Atlanta that I could turn to or confide in. And I was spending too much money on hotels. I decided that I would fulfill my financial obligations once the condo was mine, just like I had done up to that time.

A month or two later, I called Harry Norman. It had dawned on me that the interest rates were too high for my very good credit score and that the best thing to do would be to sell. The Harry Norman real estate agent who had acted on behalf of the sellers told me that the best price I could get for the condo was $150,000—$155,000. I could not believe it and called other real estate agents. They all confirmed what she had said. Then I called La Shaunda Tucker and left a message but her office never returned my calls. I also called Steffon at 770-912-1504 and never heard from him. I got in touch with Novastar´s office in Atlanta, but they didn´t know who he was. I decided to try to refinance. The mortgage brokers I spoke with told me that yes, the rates were very high, but that I had to wait a year to refi.

In the meantime, I began to use my savings of about $40,000 to pay the monthly mortgages and maintenance bills while I looked for a job as a translator and/or Spanish teacher. I had a hard time finding a job, even though I had been a freelance translator in California and New York City. As you can imagine, this situation stressed me out. I looked for an agent to help me rent out the place. Several tried hard, with no success. They told me that Atlanta had overbuilt and that the market was saturated. Lawyers were not helpful, either.

Then, I went to New York and worked as a maid so that I wouldn´t max out my credit cards too soon. My life became an even bigger nightmare. I loved that condo in spite of everything and I knew that foreclosure meant a 7-year stain on my up to recently nearly spotless score. I wanted to save it. I tried everything, sought help from HUD in Atlanta, among other places, (like the Credit Bureau of GA),but it was no use. The condo foreclosed on November 1, 2005. I have proof of all I did to save it. It was put up for sale last year, but there were no takers, not even at $145,000.While in NY, I read an article in the Sunday real estate section of The New York Times (October 17, 2004) called Losing Your Dream Home. In it, a woman (Margaret Wragg) in one of the NY boroughs had an experience similar to mine. She also depleted her savings, and got two mortgages instead of one only to be left practically homeless. I was too overwhelmed then to think of writing you and asking you for help, Mr. Baker. All I could think of was that I could not lose my condo in GA.This year I filed a complaint against Novastar with the Department of Finances in GA. The name of the person handling my complaint was Jenny Neville. The answer she got from Novastar was that they thought I had promoted Steffon. In other words, they said I had asked him to pay somebody to lie about my income. That is not true. I liked the condo, but I would never do that. It wouldn´t have been worth it and it would totally be out of character. I am not that type of person and I never was.

I am asking you to do whatever you can to help me. If I was at fault, it was because I was new to Atlanta and I trusted the real estate and mortgage brokers. I was naive. I have already paid for this by having my credit score go from very good to bad and by having to become a maid when I have a disability due to childhood paralysis on the right side of my body.I would like to see these two people. La Shawn Tucker and Steffon, brought to justice. Maybe what happened to me has happened to other people they´ve dealt with. And, I would like to get the money that I have lost back. I still think about the condo and I miss it very much. I can´t get it back, I know, but for the sake of all I did to save it, I would like to have the law punish them. I´m willing to take a lie detector test if necessary. Thank you.

Eugenia Maria Renskoff