RealtyStore Real Estate Blog

The rate of foreclosures spiraled out of control when the real estate market collapsed, opening the door of opportunity for foreclosure scams and defrauders claiming they could help distressed homeowners save their homes and their credit scores.

Thankfully, some of these defrauders have been seized by the police and brought to justice. Maurice MdDowall was one such individual, committing foreclosure fraud in New York; he was sentenced last weekend.

The North Country Gazette brings you the story:

“NEW YORK—A New York man has been sentenced to 10 years in prison for his participation in a wide-ranging home foreclosure rescue scheme, which defrauded homeowners who were facing foreclosure and banks and other lenders who made mortgage and home equity loans.

“According to the indictment to which Maurice MdDowall, 50, pleaded guilty in June, from November 2003 through April 2005, he engaged in a fraud scheme targeting homeowners whose homes, primarily in Brooklyn and Bronx, were in foreclosure or facing foreclosure, by offering them a plan to “save” their homes.

“The plan included the refinancing of the homeowners’ debt with new, larger mortgages. Because the distressed homeowners typically had poor credit and were not eligible to refinance their debt at favorable terms, the defendants induced them to “sell” their homes to third parties, or “straw buyers,” who would apply for loans to be used to “save” the home. The defendants promised that once the straw buyer obtained the mortgage, the proceeds would be used to payoff the homeowners’ old debt and make one year’s worth of payments on the new loans.

“The homeowners were told that, during that year, they could continue to live in their homes and work on improving their finances and credit.

“Finally, the defendants explained to the homeowners that, at the end of the year, the title to their homes would be returned to them by the straw buyers, with their credit repaired and their homes saved. There were also cases in which the defendants did not explain to homeowners that the plan to “save” their home required them to deed their house to a third party and did not obtain permission to deed the homes to others. In such cases, the defendants effectively stole the property of the homeowners by forging the homeowners’ signatures on various documents that transferred the homes to straw buyers without the homeowners’ knowledge.

“In furtherance of the scheme, McDowall submitted loan applications to various banks and lending institutions on thestraw buyer’s behalf. In submitting these applications, the defendants regularly used documents containing false or misleading information, including information concerning the straw buyer’s income, assets, and existing debt, to improve the straw buyer’s credit-worthiness. In addition to false statements concerning the straw buyers’ financial profile, the defendants misrepresented to lenders that the straw buyers intended toreside in the property that would secure each mortgage or loan, when, in fact, the properties were already occupied by the distressed homeowners.

“McDowall, who directed the daily operations of the scheme, obtained more than 80 home mortgages and/or equity loans valued at over $20 million. In some instances, the defendants failed to make even one payment on the loans, causing the loans to default immediately; in nearly every other case, they eventually failed to make the payments and defaulted on the loans, thereby “cashing out” on the properties. As a result, the distressed homeowners lost the titles to their homes and faced eviction, the straw buyers owed the lenders hundreds of thousands of dollars that they were unable to repay, and the lenders suffered losses from the defaulted loans.

“The defendants’ profit consisted of the difference between the value of the new and old loans; they also earned at least $1.4 million in fees.

“McDowall was sentenced to 120 months in prison and three years of supervised release, with 100 hours of community service to be performed in the first year after release.

“In addition, McDowall was ordered to forfeit $2.5million and indicated that restitution would be determined at alater date.

“Of the five other defendants charged in United States

“v. Maurice McDowall, et al.: Aleksander Lipkin, Marina Dubin, and Kerri Clarke have pleaded guilty and await sentencing; and Andrea Moore and Michael Irving await trial, which is scheduled for Oct. 20. 10-5-08″

Source: Leader Of Foreclosure Rescue Scheme Sentenced. Copyright © 2008, North Country Gazette.

A new foreclosure Bill is expected to pass this week, granting home owners more rights and making it harder for banks to reclaim their assets when owners default on their mortgages. This is great news for homeowners in distress, but not necessarily for savvy buyers and investors looking for golden opportunities in a troubled housing market.

But the bigger issue is whether legislation is really the right move.

Given that most Americans have more debt than they can ever expect to repay, why wouldn’t the Government step in there too? Most importantly, how might this legislation affect our economy?

Keep these important questions in mind as you learn more about the foreclosure Bill discussed in the following New York Times article, including the points that have been highlighted below.

By MANNY FERNANDEZ
Published: June 22, 2008

“The bill that Gov. David A. Paterson and leaders of the State Legislature announced last week to address the subprime lending and foreclosure crisis was, for Albany, that rarest of things — an effective compromise.

“The legislation will change how subprime loans are made and regulated, and will alter the way many foreclosures are handled by the courts, establishing protections for homeowners that had not been in place.

“For housing advocates and some Assembly Democrats, the bill could have been stronger. Their push for a statewide one-year moratorium on foreclosures ultimately failed. For the state’s banking and mortgage broker industries, it could have been weaker. They argued that New York has seen fewer foreclosure filings than other states largely because of regulations already in place.

“But the end product — a bill expected to pass on Monday, the last day of the legislative session — appears to have struck a balance that satisfies nearly all sides, though housing advocates question the extent to which it will help thousands of homeowners most in need: Those going through foreclosures right now.”

Read the Full Article:
In Confronting the Foreclosure Crisis, a Bill Strikes a Balance
Copyright 2008 New York Times

CNNMoney.com writer, Les Christie, criticizes the U.S. government’s plan to help homeowners from foreclosure.

“Several months ago the Bush administration came up with a great plan to fix the foreclosure problems plaguing the U.S.: The FHA Secure Loan. This loan was to be made available to homeowners who were having, or had, their variable interest rates adjusted and needed to refinance in order to keep making payments. So just how many people has the FHA Secure program helped avoid foreclosure since its inception? Try 3,000, according to an CNN Money.

“Though only 3,000 people have been saved from foreclosure, the FHA Secure program has become widely popular, with over 200,000 loans issued to date according to CNNMoney. While the program was meant to help people avoid foreclosure it has turned out to be a great program for people looking to refinance. The average homeowner refinancing with an FHA Secure loan is saving approximately $400 a month, according to the article.

“Many of the people using the FHA Secure program could continue to make their payments without a problem, and additionally many of them even had other options for refinancing out of their existing mortgages. For a program that was meant to help prevent foreclosure, I’m just not sure how effective it is. It is certainly helping people save money, but when the time comes that the government has to start coming good on these guarantees, taxpayers are going to have to foot the bill. Lending out at high LTVs to high risk homeowners is not appealing to banks for a reason, so if we think we are going to avoid having to pay up when all is said and done, we are sadly mistaken.”

The full article can be read at CNN Money

According to Mark Huffman, with ConsumerAffair.com, the White House has threatened to veto a bill which would help those who are being affected by the foreclosure crisis.

Mr Huffman states:

“The White House is threatening to veto a measure that would spend $300 billion to help distressed homeowners avoid foreclosure. The House passed the measure last week while a similar bill is making its way through the Senate.

The American Housing Rescue and Foreclosure Prevention Act (H.R. 3221), authored by Rep. Barney Frank (D-MA), is aimed at expanding federal programs available to distressed homeowners. The White House says the plan rewards speculators and lenders who make shaky loans.”

Read the full article at:

http://www.consumeraffairs.com/news04/2008/05/foreclosures_bush.html