loan modification scams

A Copy of the letter the NY AG’s office sent to 180 mod companies

loan modification scams

New Jersey Man Charged in Foreclosure Rescue Scam

Gennaro Rauso, who owned and operated a real estate management company that purported to help financially distressed homeowners with their foreclosure problems, was charged today by information with several mortgage fraud related offenses. The information alleges that as part of his scheme, Rauso took advantage of desperate homeowners with the promise of staying in, or saving, their homes, when in fact, he was using them to defraud the mortgage holders. The charges were announced by United States Attorney Zane David Memeger, Internal Revenue Service Acting Special Agent-in-Charge Troy N. Stemen, with the Criminal Investigation Division, Federal Bureau of Investigation Special Agent-in-Charge Janice K. Fedarcyk, and Inspector General of the Department of Housing and Urban Development Kenneth M. Donohue. Invaluable assistance was also provided by the Office of the United States Trustee.

According to the information, between January 2005 and December 2008, Rauso owned and operated a real estate management company, D&B Property Investors, to carry out a scheme to defraud mortgage companies out of hundreds of thousands of dollars in mortgage payments. Rauso sought out homeowners who were facing immediate foreclosure on their homes and offered to help them avoid foreclosure. In a flyer mailed to these homeowners, Rauso claimed that he could help homeowners fight the mortgage companies on their behalf, while at the same time helping them to rebuild their credit so they could keep their home. Rauso also boasted that even if their home were lost to foreclosure, he could still keep them in their home for an additional 12-18 months after the sheriff’s sale.

Once a homeowner agreed to participate, Rauso had the homeowner transfer the title of the home over to him for a nominal sum. Rauso then had the homeowner sign a lease, making the homeowner a tenant who paid rent to Rauso. He then delayed and obstructed the foreclosure process by, among other things, filing federal bankruptcy petitions. During this time when foreclosure was delayed, Rauso collected monthly rent payments from the homeowners, but made no payments to the mortgage companies. Ultimately, Rauso used more than 200 homeowners and their properties in his scheme to defraud mortgage companies, resulting in Rauso pocketing at least $400,000 in diverted or lost mortgage payments. With respect to at least four of the homes involved, the mortgages were federally insured by the Federal Housing Administration (“FHA”), resulting in substantial claims paid by the FHA once the mortgages defaulted.

“The troubles in our economy and housing market have, unfortunately, created new opportunities for scam artists,” said Memeger. “According to the information, this defendant took advantage of struggling homeowners, and preyed on their desperation to use them in his corrupt scheme to defraud mortgage companies. We urge the public to seek assistance from the U.S. Department of Housing and Urban Development before signing over their lifelong investment to a third party.”

In addition to the mortgage fraud scheme alleged in the information, Rauso is also charged with willfully failing to file a tax return on behalf of D&B Property Investors, defrauding the government of taxes owed on more than $1.6 million in income.

INFORMATION REGARDING THE DEFENDANT

NAME: Gennaro Rauso
ADDRESS: Trenton, New Jersey
AGE OR YEAR OF BIRTH: 46

If convicted, the defendant faces a maximum possible sentence of 247 years in prison, a $6.95 million fine, five years of supervised release and a $2,000 special assessment.

Janice K. Fedarcyk, Special Agent in Charge of the Philadelphia Division of the FBI stated: “The type of criminal activity alleged in this indictment today is particularly despicable in that it targeted those victims who were the most vulnerable financially and the most desperate for some type of assistance to avoid foreclosure on their properties. It also represents an affront to the millions of hard-working Americans who struggle every day to meet their mortgage obligations and keep their families in their homes.”

Kenneth M. Donohue, Inspector General of the Department of Housing and Urban Development stated: “In the past several years, we have seen enormous and damaging developments in the mortgage and housing markets with an urgent reliance on the government to bolster unstable marketplaces and devastated communities. The HUD OIG, in partnership with other federal agencies, is deeply committed to ensuring that scarce resources are not diverted to those who seek to enrich themselves at the expense of those who so desperately need assistance today.”

Troy N. Stemen, Acting Special Agent-in-Charge of IRS Criminal Investigation, stated: “The charges announced today describe a scheme involving fraud at many levels. According to the charging documents, not only did Rauso earn substantial income by deceiving homeowners, defrauding mortgage companies and manipulating the bankruptcy process, he also failed to pay taxes on this income. The financial expertise of IRS-CID agents allows us to analyze complex financial transactions, such as those employed in this scheme.”

The Office of the United States Trustee also praised the work of investigators working to target abuses of the bankruptcy system: “I am grateful to U.S. Attorney Zane Memeger and our law enforcement partners for their pursuit of those who seek to use the bankruptcy system to prey upon financially distressed consumers,” said Roberta DeAngelis, United States Trustee for Pennsylvania, Delaware, and New Jersey. “As a member of the President’s inter-agency Financial Fraud Enforcement Task Force, the U.S. Trustee Program works to combat fraud and abuse throughout the bankruptcy system, including bankruptcy-related mortgage fraud.”

The case is being prosecuted by Assistant United States Attorney Leo R. Tsao.

loan modification scams

Cal Bar goes after O.C. loan mod lawyer

An Orange County lawyer who signed retainer agreements with homeowners facing foreclosure but then “did little or nothing to help them” was placed on involuntary inactive enrollment, the State Bar of California announced.

The Bar cited complaints from clients in 8 states against lawyer Brian Colombana, 29, of Lake Forest.

“The Chief Trial Counsel’s office continues to send the message that attorneys guilty of misconduct – especially toward homeowners who are at their most vulnerable when facing the loss of their homes – will be prosecuted and disciplined,” Interim Chief Trial Counsel Russell Weiner said.

From the Bar:

“State Bar Court Judge Richard Honn said in his June 17 ruling that the conduct of Brian Colombana …  “poses a substantial threat of harm to his clients or the public.” Honn cited 13 declarations against Colombana by clients from California, South Carolina, Minnesota, Nevada, New Mexico, Maryland, Utah and New York who paid upfront fees to one of the loan modification companies with which Colombana was affiliated, including Loan Negotiators of America, Housing Law Center and Mortgage Law Center.

“In most cases, clients never even met the attorney but dealt with non-attorney representatives of the loan modification companies. Through the companies, Colombana ‘convinced numerous cash-strapped homeowners to pay him thousands of dollars in hopes of saving their homes from foreclosure,’ Honn wrote. ‘. . . Many of these homeowners were worse off after retaining respondent’s services.’

“The judge noted that many of the homeowners were current with their mortgages but then were advised by Colombana’s affiliates to stop paying. “Soon these clients were behind on their mortgage payments and facing foreclosure, and [Colombana] wasn’t there to help,” Honn wrote.

“In ordering involuntary inactive enrollment, Honn said Colombana continues to harm clients by failing to refund unearned fees or communicate with them and demonstrates a pattern of behavior likely to continue to cause substantial harm.”

The action against Columbana stems from efforts by the State Bar’s Task Force on Loan Modification to stop lawyers who ”exploit the vulnerabilities of frightened homeowners who face foreclosure by promising services that are never delivered,” the Bar says.

Since the task force was created last April, seven involuntary enrollments have been ordered and 13 resignations obtained from lawyers who engaged in misconduct related to loan modifications. The Bar says there are 5 loan modification trials pending and 2,000 active investigations.

Read more here: http://www.ocregister.com/articles/lawyer-254168-bar-enrollment.html

loan modification scams

Is this what Jerry Brown wants to do to legitimate loan modification firms?

WARNING: THIS VIDEO IS NOT SUITABLE FOR THE OFFICE AND CONTAINS VIOLENT IMAGES

loan modification scams

Jerry Brown and Cal Bar Continue Kristallnacht-style Raids and Smear Campaigns Against Modification Lawyers

The Cal Bar put out the below press release a couple of days ago and I believe there is more to this story than what the Cal Bar is saying.  Just like their cases against Green Credit Solutions and Paul Lucas, what the Cal Bar is not saying is how many total clients did these attorneys have and how many people were actually helped.

The Cal Bar is about to lose their case against Green Credit Solutions because when they confiscated all the files out of their office, they  neglected to refer these homeowners to other attorneys or giving give them legal assistance to them. Thus, leaving hundreds of homeowners without legal representation and putting them at greater risk of losing their homes.  Matter of fact, because of the Cal Bar’’s actions, some actually did.  At the hearing this week, it was revealed that the Cal Bar only had 19 legitimate complaints against Green Credit Solutions.  They claimed last year they had 900.  This out of 3500 clients GCS had signed up.

The Cal Bar, the California AG’s office and the FTC publicly tarred and feathered Paul Lucas for scamming people by raiding and ransacking his offices, confiscating files and blocking his access to his firm’s bank accounts like something out of a 1930’s gangster movie.  They even attempted to have his law license revoked.  Only problem was, he wasn’t scamming people.  The FTC and the Cal Bar lost their case because Paul Lucas could prove he successfully modified 90% of the loans he handled and he was later re-instated as a member of the California Bar.  According to Cal Bar everything is now right in the universe.  Wrong!  Thanks to the internet, Paul Lucas will be permanently labeled, “Scam Artist”

So think about all that while reading this or any press releases put out by them or Jerry Brown’s office.

San Francisco, June 02, 2010 — Continuing its effort to protect the public from lawyers who take advantage of distressed homeowners, the State Bar prosecutor’s office has secured orders of involuntary inactive enrollment for Southern California attorneys Eric Douglas Johnsonand Mark Alan Shoemaker.

Besides the two involuntary inactive enrollments, the State Bar’s Office of Chief Trial Counsel has obtained the resignations of 13 attorneys involved in loan modification misconduct since creation of the Loan Modification Task Force in April 2009.  Five loan modification trials are pending. Another 2,000 active investigations related to loan modification are being conducted.

In separate May actions, State Bar Court Judge Richard Honn ruled that the conduct of  Johnson (State Bar #224065), 55, of Los Angeles, and Shoemaker (State Bar #134828), 49, of Long Beach, pose a “substantial threat of harm” to their clients or the public, and both were ordered involuntarily enrolled as inactive members of the State Bar under Business and Professions Code 6007.

Johnson associated with several non-attorney legal organizations, lending his name and status as an attorney to a firm offering bankruptcy filing and assistance, a business handling forensic audits and loan modifications and two other loan modification companies. Honn cited cases in which homeowners were promised that their homes would not be foreclosed but the homeowners lost them anyway after having made significant payments to the non-attorney companies.

Johnson “lacked control and failed to supervise” any of the organizations with which he was associated, Honn wrote in his May 18 order. “This lack of control and failure to supervise consequently led to, among other things, the unauthorized practice of law, misrepresentations and client harm.”

Shoemaker, whose case was investigated and prosecuted with the invaluable help of the California Department of Real Estate, has owned and operated a loan modification business called Advocate for Fair Lending since 2008. Shoemaker “used Advocate and his status as an attorney to convince cash-strapped homeowners to pay him thousands of dollars in hopes of saving their homes from foreclosure,” Honn wrote in his May 28 order. Shoemaker, however, “often did little to nothing to help these clients. In fact, many of these homeowners were worse off after retaining [Shoemaker’s] services.”

The order referred to 18 examples in which Advocate clients, who signed power of attorney when they contracted with Advocate, were not helped and asked for refunds. A few did get refunds; many others did not. Some clients reported that their lenders said they had never been contacted by Advocate on their behalf. Shoemaker argued that he was merely the president of Advocate and did not represent any Advocate clients in a legal capacity.

“Advocate’s clients were also [Shoemaker’s] clients,” Honn wrote. “An attorney cannot use a power of attorney form to absolve themselves of the ethical mandates they have sworn to uphold.”

loan modification scams

Ohio foreclosure firm scams 600 Indiana homeowners

From Indystar.com

The Indiana attorney general’s office claims a Cincinnati-based loan modification firm signed fraudulent agreements to help nearly 600 Hoosier homeowners avoid foreclosure.

Foreclosure Assistance USA told the homeowners they would help prevent foreclosure in claims made on websites and radio and in direct-mail advertisements and phone solicitations, the attorney general’s office said in a statement. Spokeswoman Molly Butters said a lawsuit against FA USA was filed today in an Allen County court.

“The suit also claims FA USA violated Indiana law by failing to have a $25,000 surety bond while acceptingmoney up front from customers for services that had not yet been performed,” the statement said. “The company is also accused of deceptive acts including misrepresenting to consumers that the consultants were experts in the area of foreclosure prevention or possessed in-depth knowledge of the industry.”

The Ohio attorney general filed a similar lawsuit against FA USA in 2009 in a Hamilton County, Ohio, court. The Ohio lawsuit followed an investigation started in March 2008. In the lawsuit, Ohio asked the court to prohibit FA USA and another foreclosure provider from committing further violations of the law and to require the companies to reimburse consumers and pay civil penalties.

On July 1, a new Indiana law will require foreclosure consultants have a $25,000 surety bond on file with the attorney general’s office, regardless of whether the company demands money up-front for services or not.

“Out-of-state companies often don’t believe the Indiana attorney general’s office has jurisdiction over their practices,” Attorney General Greg Zoeller said in the statement. “That’s simply not true. The vast majority of foreclosure consultant scams originate outside Indiana and this enforcement action reflects that we are not bound by state borders.”

loan modification scams

Free programs ease homeowners’ burden

Greta Guest, Detroit Free Press

Thousands of distressed Michigan borrowers are frustrated over the long waits to get a loan modification.

But homeowners don’t have to go it alone. There are dozens of free programs to choose from. And yet too few people who are having trouble making mortgage payments are reaching out for the free help available, housing counselors say.

Jamele Hage, executive director of the Wayne County Foreclosure Prevention Program, said her counselors do what it takes to resolve a borrower’s case. The average loan modification takes six months to two years to resolve.

“We know … what the law says,” she said. “If it gets escalated, I will escalate it all the way to the U.S. Treasury for people.”

The program is among several that are either taxpayer-funded or nonprofit, such as GreenPath Debt Solutions, creditcounselors based in Farmington Hills. A full list can be found at Web sites for the U.S. Department of Housing and Urban Development, or for the Michigan State Housing Development Authority.

Counselors work with lenders

John Hoffa, 57, got a permanent loan modification on his Brownstown Township home with the help of a foreclosure prevention program.

So much free help is available to people, but many don’t reach out to get it.

Hoffa, whose great-uncle is the late union leader Jimmy Hoffa, said he’s unemployed but works on a contract basis with a former EDS colleague who started a computer salvage company.

Read more here: http://www.freep.com/article/20100524/BUSINESS04/5240340/1318/Loan-help-is-free-few-seek-it-out

loan modification scams

Foreclosure scam’s mastermind gets 46 years in prison

Dana Littlefield, San Diego Union-Tribune

A man prosecutors described as the ring leader of a real estate fraud scheme that defrauded hundreds of San Diego County residents out of more than $2 million was sentenced Friday to 46 years in prison.

A jury found William Jeffrey Hutchings, 63, guilty in March of 160 felony counts including conspiracy, grand theft, rent skimming and violations of the mortgage foreclosure consultant law.

Prosecutors argued that Hutchings and other defendants convinced 400-500 victims, most of them Hispanic homeowners from San Diego and other counties, that he could keep them from losing their homes to foreclosure. The criminal enterprise lasted 21 months.

Hutchings, who represented himself in trial, contended his motives were pure and that he truly believed his foreclosure-rescue program would help, not harm the participants.

San Diego Superior Court Judge Charles Gill said during a Friday hearing that Hutchings victimized people whose financial situations made them particularly vulnerable.

The judge noted that Hutchings was warned in late 2006 by one of the victims that the program wasn’t working, but he continued to take money and transfers of title from the victims until May 2008.

“You allowed your ego as well as the financial rewards to dictate your actions until you were forcibly stopped by your arrest,” Gill said.

Deputy District Attorneys Stephen Robinson and William La Fond contended during the two-month trial that Hutchings and others led the victims to believe they could save their homes through his so-called land-grant program. They could either pay a one-time fee of $10,000 to put their property in a land grant or they could transfer their property to the defendants and rent it back through monthly payments.

Prosecutors said the transactions were illegal and the documents Hutchings filed did not prevent foreclosure. Almost all of the victims have been evicted from their homes by the time they testified in trial.

Several victims spoke to the judge in court Friday. They noted the financial and emotional pain they suffered as a result of Hutchings’ actions.

Marina Ramos told the judge she believed initially that the foreclosure-rescue program was a godsend. At the time, she was the sole provider in her household because her husband had fallen ill.

“I’m Christian,” she explained in court. “I thought that the program was actually real, so I trusted in them.”

Later, Ramos was sued by her bank.

loan modification scams

CA Man Used Unwitting Attorney’s Name On Website To Run Foreclosure Rescue Racket

In Marin County, California, the Contra Costa Times reports:

• A Sacramento man was arrested [] on suspicion of using a Mill Valley lawyer’s name to scam homeowners facing foreclosure, authorities said. Nicolas Moscouplos was taken into custody after a search warrant was served at his Sacramento office, said Supervising Inspector Carl Chapman of the Marin County District Attorney’s Office.

• The case began May 13 after the Mill Valley lawyer, Mohamed Salem, contacted the sheriff’s department to report that someone had opened an Internet site using his name. The website, www.canwinforeclosure.com, appeared to offer Salem’s legal services in helping residents fend off foreclosure actions. Salem reported that he became aware of the site after receiving complaints from lawyers regarding paid services that were not being provided.(1)

For the story, see Mill Valley lawyer’s name used in alleged foreclosure scheme.(2)

(1) Reportedly, Salem said in an interview that he is mainly a civil engineer but studied law for his work in the construction field. Salem, 70, has been a member of the state bar since 1990. “I couldn’t believe it at first,” he reportedly said. “I was really stunned, if you want to know the truth. … Why me?” The Mill Valley, Calif., attorney’s practice in environmental and construction law usually focuses on building places for people, not kicking them out of their homes, according to this report.

(2) See also, The Recorder: Calif. Lawyer’s Name Stolen for Scam:

• When confronted by detectives earlier this month in his Sacramento office, Moscouplos first claimed to be Salem, according to an affidavit. Later Moscouplos said he was actually a private mortgage “auditor” who referred cases to Salem. But when asked, Moscouplos could not provide authorities with any contact information for the Marin County attorney.
• Why Moscouplos chose Salem’s name and Bar number is unclear — Salem said he’s never met the man — but authorities suspect he accessed it on the State Bar’s website, Salem said. “What are there, like a quarter of a million attorneys registered with the State Bar?” Salem said Thursday. “I don’t know why he chose my name. I’m baffled by that.”
• Salem told authorities that he received calls from three different attorneys, all of whom had questions about pending foreclosure cases that he knew nothing about. One of those attorneys told Salem he had tried calling the Sacramento number listed on the pleadings but no one ever answered. So the attorney looked for alternative contact information for Salem on the State Bar website.

loan modification scams

MORTGAGE BROKER SENTENCED TO PRISON

Julian James Ruiz III pleads guilty to multiple counts of theft, mortgage fraud and tax evasion and is sentenced to 61 months in prison

Oregon Attorney General John Kroger today announced the conviction and sentencing of a Salem mortgage broker on mortgage fraud, theft, identity theft and tax evasion charges. This is the first criminal case completed by the Attorney General’s new Mortgage Fraud Task Force. The Mortgage Fraud Task Force was created by Attorney General Kroger in late 2009 to combat fraud in the mortgage and foreclosure relief industries.

“If you cheat vulnerable Oregonians facing foreclosure, we will hold you accountable,” said Attorney General Kroger.

Julian James Ruiz III (DOB: 4/28/1971) was sentenced to 61 months in prison after pleading guilty to 2 counts of Aggravated Theft in the First Degree; 1 count of Aggravated Identity Theft in the First Degree; 1 count of Identity Theft in the First Degree; 1 count of Mortgage Fraud; 1 count of Forgery in the First Degree; 1 count of Tax Evasion; and 1 count of violating House Bill 3630, which prohibits collecting advance fees for loan modifications.

Ruiz was stripped of his mortgage license and permanently barred from working in the industry. The judge also ordered Ruiz, manager and owner of American Home Modifications, a Salem-based loan modification company, to pay $469,500 in restitution to more than 100 victims.

The Ruiz investigation involved the Oregon Department of Justice’s Financial Fraud and Criminal Justice sections, the state Division of Finance and Corporate Securities, the Salem Police Department and the Marion County District Attorney’s Office.

Fighting mortgage fraud is a top priority for Attorney General Kroger. When Kroger took office, the Oregon Department of Justice had no attorneys dedicated to mortgage fraud. Since its creation, the new Mortgage Fraud Task force has opened more than two dozen mortgage fraud and foreclosure scam investigations.

Assistant Attorneys General Simon Whang and Janelle Wipper prosecuted the case for the Department of Justice.

Loan modification customers of Julian Ruiz or his UMAX mortgage business should not rely on Ruiz to complete their loan modifications and may wish to consult with a HUD-approved counselor to avoid pending foreclosure or defaults. Consumers can call 800-SAFE-NET or 800-723-3638 to find a counselor, including Spanish-speaking counselors, at:http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?webListAction=search&searchstate=OR.

Further foreclosure prevention information can be found at the Division of Finance and Corporate Securities website: http://www.dfcs.oregon.gov/ml/foreclosure.html

Additional information is available at the Department Justice website:http://www.doj.state.or.us/finfraud/mortgage_fraud.shtml.

Going after crooked mortgage companies is part of a larger effort by the Department of Justice, the state Department of Consumer and Business Services, the Oregon Legislature and consumer groups to fight the foreclosure crisis.

Attorney General John Kroger leads the Oregon Department of Justice. The Department’s mission is to fight crime and fraud, protect the environment, improve child welfare, promote a positive business climate, and defend the rights of all Oregonians.

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