Real Estate Law

Marc Engelmann sentenced

2012-01-27T09:57:00.002-06:00

Marc R. Engelmann, a Davenport, Iowa real estate attorney, was sentenced on 26 January 2012 to three years in federal prison for his part in a mortgage fraud conspiracy. Engelmann represented a seller who sold nine properties to Robert Herdrich and Darryl Hannekin at fraudulently inflated prices, which caused the lender to lend more than the properties were worth. That amounts to four months for each property. The court has not yet determined restitution to the lender, but based on the kickbacks to the buyers and the "usual" post-foreclosure, half-off sale price of real estate, I would guess that to be approaching a half million dollars.

More about the scheme here.

Bank of America

2011-12-22T14:03:00.001-06:00

Bank of America has agreed to pay $335 million, yes a third of a billion dollars, to settle claims that its Countrywide unit engaged in systematic discrimination. It is alleged that Countrywide steered minority customers to subprime loan products based only on their minority status. This resulted in much higher costs and interest rates than Countrywide's non-minority customers enjoyed. How can something like this even happen in the 21st century?

Engelmann sentencing date set

2011-12-22T13:45:00.001-06:00

Sentencing for Marc Engelmann, the Davenport real estate attorney found guilty on nine counts of bank fraud, wire fraud, and conspiracy, has been set for January 20, 2012.

Two attorneys sentenced in Mississippi

2011-12-22T13:42:00.003-06:00

Charles H. Evans, Jr., of Jackson, Mississippi was sentenced on December 19, 2011 to serve 20 years
in federal prison. Brother and co-conspirator, Jon Christopher Evans, also of Jackson, was
sentenced to 14 years in prison.

The Evans brothers ran what was billed as the largest real estate Ponzi scheme in Mississippi history. They would purchase tracts of vacant land, and then subdivide and resubdivide, obtaining mortgages on real and fictitious pieces of real estate. Charles prepared title opinions and certificates of title on the fictitious land to perpetuate the fraud. They would get new mortgages to service the debt on the old mortgages, as well as put some in their pockets. Their fraud has involved eighty million dollars in loans, fifty lending institutions, and thirty shell corporations they created to hide their activities. All this in only six years.

Charles and Jon will be 77 and 67, respectively, when they reenter society.

Engelmann update II

2011-12-21T14:21:00.001-06:00

Marc Engelmann's motion for a new trial, discussed here, was denied. Sentencing is scheduled for January 2012.

Mary Pat Harper sentenced

2011-12-21T09:06:00.001-06:00

Mary Pat Harper, the real estate agent for Darryl Hanneken and Robert Herdrich, has been sentenced to two years in prison, $185,000 restitution, and three years of probation. Ms. Harper asked the judge to allow her to withdraw her guilty plea, which he declined to do. Even if the judge had allowed her to withdraw her guilty plea, I cannot see how it would have helped her much. In her written guilty plea, she admitted to all of the elements of the crime. She assisted Hanneken and Herdrich in a scheme to defraud lenders by fraudulently inflating the purchase price of investment properties, and then having the sellers of the properties kick back the extra money under the table to the Hanneken and Herdrich. This scheme involved approximately 40 properties in northwest Davenport, Iowa.

Marc Engelmann, the Davenport real estate attorney who was involved in nine of these transactions, and who was found guilty of nine counts of wire fraud, bank fraud, and conspiracy in September, is still awaiting sentencing. Strangely, even though he is a convicted felon as of September, he is still licensed to practice law in Illinois and Iowa.

DIY

2011-12-03T08:00:00.000-06:00

That's right--do it yourself. Apparently, with all of programs which are supposed to become available to help homeowners, the scamsters are ready to take your money. They offer to get you a better interest rate, negotiate with your current lender, etc., etc.

You do not need to pay a third party to get a new mortgage. Contact a reputable local lenders directly

Tenancy by the entirety

2011-11-24T08:00:00.000-06:00

There seems to be a misconception that holding title to real estate as tenants by the entirety is a magic bullet that makes judgments go away. Not the case. All it accomplishes is to protect you from creditors foreclosing judgments against your real estate, while you live there, and while you are still married.

The example that comes up frequently is this. Married couple own their residence as tenants by the entirety. A judgment is entered against the husband only, and a memorandum of judgment is recorded. If they, for example, owned the property as tenants in common, that judgment creditor would be able to foreclose the judgment lien. But since they own the property as tenants by the entirety, this cannot happen. When the couple decides to sell the house, they will need to take care of the lien. Many people are under the mistaken impression that tenancy by the entirety makes the lien disappear. The lien is still there, it just cannot be enforced against the real estate. So when they sell the house, it will no longer be their residence, and the tenancy by the entirety protection will cease to exist. And boom, as soon as the deed to the buyers is recorded, the lien is now enforceable, and it is ahead of any mortgage lien the buyers might have.

More information on tenancy by the entirety is here.

Senator Jacobs CAN write!

2011-11-22T15:53:00.000-06:00

I have sent our esteemed Senator Mike Jacobs two letters over the past couple of years regarding matters that I consider important to the People of the State of Illinois. Senator Jacobs apparently disagrees, since he has not even given me the courtesy of a political "thanks but you bore me." You know, the typical, "Thank you for expressing your concerns, and I will give your suggestions all of the consideration warranted under the circumstances." Or, "Your letter brings up some important matters of which I was not fully cognizant. I will immediately create a commission and make recommendations accordingly." Anything would have been nice, including actually doing something.

My first contact was when I was unable to get anyone interested in the rampant mortgage fraud occurring in our area. I was under the mistaken impression that maybe our legislators could light a fire under the appropriate enforcement agencies.

No response from Senator Jacobs.

Next, I was frustrated with the one-sided and possibly unlawful contracts being required by banks selling foreclosed properties. In many of these contracts, the bank requires the buyer to use the closing agent and sometimes title agency selected by the bank. These closing agents and title agencies are sometimes charging as much as five times what a local provider would charge (i.e., local providers which are small businesses in Senator Jacobs' district). No disclosure of these exorbitant fees is provided to the buyer prior to when they show up at closing. I had this crazy idea that Illinois could follow several other states in allowing buyers to select their own settlement service providers. After all, there is no good reason that the seller should tell the buyers who they have to hire and pay.

No response from Senator Jacobs.

Did I take this personally? Not at all. Maybe he is too busy getting these things taken care of for us. Maybe his typewriter is in the shop. Was I bitter that I made an effort to make a difference and make things better for the people of the State of Illinois and was summarily ignored. Of course not! Perhaps Illinois Senators do not send letters as a cost-saving measure.

But then I hear that he CAN write AND send letters! Well, sort of write, anyway. An acquaintance sent me correspondence from Senator Jacobs. Apparently, someone was annoyed that Senator Jacobs cast the only vote in favor of using taxpayer money to pay for a portrait of Rod Blagojevich. (Actually, in the interest of accuracy and specificity, he voted no to a bill which would prohibit the use of taxpayer money to pay for the portrait, so it is a double negative kind of thing.) And she sent a letter to Senator Jacobs telling him so.

Rather than take the high road and ignore her, which, I assure you, he is fully capable of doing, he sent a letter to her demonstrating his intellectual prowess. He responded that "in the words of Harry Truman, if you want a friend in government, get a dog."

Well, first of all, what President Truman is actually credited with saying is, "If you want a friend in Washington, get a dog" [emphasis added], so he did not even quote correctly. See the difference? The big difference is, President Truman's statement actually makes sense. He was simply saying that Washington is full of folks with ulterior motives desiring political gain. If you want a real friend in a town like this, a dog is your best bet. Senator Jacobs' quip seems to imply that the government is full of dogs. I guess. Maybe

Now for Senator Jacobs quote: How would getting a dog help me have a friend in government? Ok, Senator, I went and got a dog at the shelter and he is my friend, now what? How does this help me get a friend in government? Should I get my dog elected to office? Can I get my dog to replace Senator Jacobs? What if my dog was a relative of Senator Jacobs, would that help? Perhaps Senator Jacobs should stick with ignoring letters sent to him. Less embarrassing perhaps.

It is great for Senator Jacobs that the job was handed to him by his father, but I am not so sure it is great for residents of western Illinois. This is why nepotism is generally frowned upon in most circumstances. It is also why tigers often eat their young.

Marc Engelmann update

2011-11-18T09:31:00.002-06:00

Marc Engelmann, a Davenport, Iowa real estate attorney was found guilty of nine counts of wire fraud, bank fraud, and conspiracy on September 13, 2011. Engelmann filed a motion for a new trial based on his assertions that 1) the jury was confused regarding whether he acted in good faith, and 2) the investigating FBI agents were discussing the case during the trial.

The jury sent a question to the judge asking for more information on "good faith." The Judge responded that the instructions provided a clear definition of good faith, and the jury should refer to those instructions. Part of Engelmann's defense was that he acted in good faith that the lender was aware of the fraud scheme. He claimed that the closing agent was aware of the fraud, and therefore, he claims, the lender was aware. All of the employees of the closing agent testified that they were unaware of the kickback scheme. His own (former) real estate assistant testified that Engelmann told her not to discuss the kickback with the closing agent. He also prepared two closing statements--one which was marked "Numbers for HUD" and one which was marked "courtesy copy." The "Numbers for HUD" version was faxed to the closing agent, but it did not appear the "courtesy copy" was provided to the closing agent. The "Numbers for HUD" version did not show the kickback, while the "courtesy copy" did. As an experienced real estate attorney, he was certainly aware that the scheme was illegal, and if he believed the lender knew of the scheme and assented to it, he certainly should have had ample documentation in his file from the lender. No such documentation was presented at trial.

There was a clear and concise jury instruction defining good faith, which was taken from a set of model jury instructions. Engelmann wanted a more verbose version, though everything which was included in the verbose version was included throughout the rest of the jury instructions.

A long-time client of Engelmann's was apparently a spectator at the trial. This individual called the Judge after the trial. During a break, this individual claims he witnessed the two investigating FBI agents discussing the case. Normally, witnesses are not allowed to discuss the case prior to testifying. Obviously, it would not be appropriate for the closing agent employees and Engelmann's former assistant to get together to get their stories straight before testifying. These gentlemen, however, were the investigators. They talked to all of the witnesses. And they obviously talked with each other. Can you imagine Sgt. Friday not talking with Officer Gannon about the facts, ma'am? Pete Malloy and Jim Reed ignoring each other in Adam 12? Ponch and Jon with their fingers in their ears saying "la la la la I can't hear you?" In fact, one of the agents was present through the entire trial, and he also testified. The only reason the other agent was called to testify is that Engelmann denied telling the agents that he told them he knew the scheme was illegal when they first came to talk to him. To argue that two investigating agents cannot discuss a case on which they are working together is a bit of a stretch.

The motion was denied. His sentencing has been delayed until January 2012.

Engelmann guilty on all counts

2011-09-13T14:41:00.002-05:00

A federal jury found Marc Robert Engelmann, a Davenport, Iowa real estate attorney, guilty on all nine counts of bank fraud, wire fraud, and conspiracy.

Engelmann represented a seller who sold nine Davenport properties to Darryl Hanneken and Robert Herdrich. Hanneken and Herdrich recently were sentenced to 40 months in federal prison, five years of supervised release following their imprisonment, and restitution of almost $900,000 for their part in this fraud.

In the scheme, Herdrich and Hanneken would offer to pay a seller more than the asking price of the property, with a side agreement requiring the seller to refund the difference to them after closing. The side agreement, or kickback, was not disclosed to the lender. In one of the nine transactions in which Englemann was involved, the actual sale price was $95,000, but the parties represented to the lender that the purchase price was $125,000. The $30,000 difference was paid by the seller to Herdrich and Hanneken after the closing. Engelmann assisted with the fraud by preparing false settlement statements to the closing agent, reflecting only the inflated price. The wire fraud counts resulted from Engelmann transmitting the false statements via facsimile from his Davenport, Iowa office to the closing agent's office in Illinois.

How many other local attorneys were involved in these transactions?

Thinking of co-signing a loan?

2011-06-29T12:32:00.002-05:00

Many people have a misconception that as a co-signer, you are not responsible for the debt, or you are less responsible than the primary borrower. Unfortunately, co-signers are just as responsible for the debt as the primary borrower.

Basically, what the lender is saying by requiring a co-signer is this: "We would not loan money to the primary borrower without the co-signer agreeing to pay." In other words, the primary borrower is not sufficiently credit-worthy in the opinion of the lender.

What can a co-signer do if the primary borrower does not pay the debt. The short answer is, get out the checkbook. If the co-signer had the foresight to have a written agreement with the primary borrower that the primary borrower was responsible for the debt, that still does not affect the rights of the lender to make every effort to collect the debt from the co-signer. In that very unlikely event there was such an agreement, collecting is going to be tricky.

First, the co-signer needs to locate the primary borrower. You would be surprised how many times the best of friends, family members, significant others, etc., become separated when the evil spectre of looming debt appears. Then the co-signer needs to try to collect. Obviously, if the primary borrower is not paying the debt, he or she is probably not likely to respond to a polite request from the co-signer to do so. The co-signer can sue the primary borrower, but the co-signer will need to demonstrate to the court that the primary borrower actually owes the co-signer money.

Even if the co-signer can find the primary borrower, and sues the primary borrower, and actually gets a judgment against the primary borrower, there is still the tricky matter of collecting. Getting a judgment does not put money in your pocket. It gives you the legal right to collect. If the primary borrower does not have the money to pay the debt, finding the money to satisfy your judgment can be difficult as well.

And if the primary borrower files bankruptcy, it is game over for the lender and the co-signer getting any money at all from the primary borrower. If the primary borrower files bankruptcy, and the debt is discharged, the co-signer is completely responsible for paying the debt.

The moral of the story: If you agree to be a co-signer for anyone, be sure you are willing and able to pay the debt. That, after all, is what you are agreeing to do.

Mary Lee Reinking guilty plea

2010-07-02T09:49:00.004-05:00

Mary Lee Reinking has plead guilty to wire fraud for her actions as loan officer for Robert Herdrich and Darryl Hanneken. Ms. Reinking worked for Crow Valley Mortgage in Bettendorf, Iowa. You remember Messrs. Herdrich and Hanneken.

According to the Plea Agreement, Mr. Herdrich worked at the hair salon at Younkers making about $1,500 per month. Ms. Reinking prepared a mortgage application which showed Mr. Herdrich owned his own salon and made $20,000 per month, which of course was signed by Mr. Herdrich. Ms. Reinking took someone else's financial documents who owned his own salon and made $20,000 per month and pasted Mr. Herdrich's name over the salon owner's name. She then sent these documents to the lender claiming this was Mr. Herdrich's monthly income so he could qualify for the loan. She also sent Verification of Deposit forms with the forged signatures bank officials to the lender. Ms. Reinking was also aware of the kickback scheme involved in these transactions, but did not make any effort to notify the lender of the fraud. In fact, she agrees that that she had reason to believe that the lender would not be advised of the kickback agreement.

The Plea Agreement says that Mr. Hanneken told Ms. Reinking that the loan would involve "creative financing" and that Crow Valley would need to do what was necessary in order to "make the numbers work" so Herdrich and Hanneken qualified for the loan. The correct answer would have been, "No thank you gentlemen, that is illegal and actions such as those you suggest will result in devastation to our national economy." Apparently Ms. Reinking's answer was, "Okey dokey."

She has not yet been sentenced.

Ok, this was just funny

2010-07-02T09:41:00.003-05:00

I heard a commercial for an asbestos/mesothelioma law firm. The overly sincere client was trying to tell me how great this firm is. She said, "They were more than just attorneys. They were human beings." So, apparently, most attorneys with whom she is acquainted are not human beings. I wish I could say I disagreed, but still, to actually say it out loud....

Odd part three

2010-06-10T09:49:00.003-05:00

In the continuing saga of Ronald Wheeler...

I decided to found out how much was lost by the lender (or more accurately, the American Taxpayer) on this foreclosure. The lender sold the property for $455,000. Remember, the first mortage was for $796,000, and the second mortgage to the seller was for $193,716.20, and the third mortgage a couple of months later was for $484,000.

The good/strange/interesting/ironic news is that the individual who sold the house to Mr. Wheeler is the one who bought it from the bank for $455,000. He then got a mortgage for $475,000, which does not appear to contain an owner-occupied requirement.

Odd part two

2010-06-10T08:12:00.002-05:00

Update to the Well, this is odd story. Ronald Wheeler, Clarke County Attorney, sent a letter to the Osceola Sentinel-Tribune explaining his side of the story. Boiled down, he says he was duped, that he trusted Mr. Glessman, the individual for whom he acted as a strawman, and that he was inexperienced in real estate investing.

Mr. Wheeler and his wife (also an attorney) purchased property in Ankeny for $995,000 in June 2006. They mortgaged the property to Mid American Home Services for $796,000. Mid American immediately assigned the mortgage to Wells Fargo. Mr. Wheeler and wife also gave a mortage to the seller for $193,716.20. For those of you following along at home, this means they only put roughly five grand into a million dollar transaction.

But wait, there's more! In August 2006, Mr. Wheeler et uxor gave another mortgage to Citibank for $484,000. So, now they owe nearly $1.5 million dollars on something they paid less than $1 million for two months ago. So that is a half million bucks lining someone's pockets inside of two months. And that is without the messiness of having to sell the place at a profit. Not bad work if you can get it.

Now on the one hand, Mr. Wheeler presents this as if it was a real estate investment. But from all indications of the documents available at the court house, this was a loan for owner-occupied property. In fact, the following is copied from the actual mortgage signed by these two attorneys. See if you find it confusing.

"Borrower shall occupy, establish, and use the Property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy. . . ."

He is an attorney. The documents presented at closing, while voluminous, are not terribly complicated. In an owner-occupied property transaction, there are generally at least two documents which state very clearly that you intend to occupy the property as your residence. If it was FHA, there will be several more.

Mr. Wheeler also claims that Mr. Glessman appeared to be a "legitimate and very successful real estate investor." If he was legitimate and very successful, why was he unable to get his own legitimate finanacing?

He also seems surprised that when Mr. Glessman failed to make the payments, he was the one ultimately responsible. At least that is how I take the use of the word "I" in quotes, in the following sentence. "I then learned, to my horror, that the value of the property was far less than what he had told me, and far less than the amount for which "I" had financed it." Yes, "you" financed it. That is what it means when you sign promissory notes for $1.5 million. Pretty sure I remember that being discussed in first year law school contracts courses. And what did you think? You bought the property for less than $1 million, and two months later it is worth half again as much?

Why did the lender care whether or not Mr. Wheeler intended live in this property? Investors generally pay a higher interest rate and are required to have a larger down payment than people who are going to live in a property. The logic is that if things get tight, you are more likely to bail on property you own only as an investment than your home. And if it was an FHA loan, there is a certain amount of government subsidization, since the government guarantees the loan. There are also several documents which tell you that defrauding a lender is not a good idea, and the penalties can be steep. That may have been mentioned in first year criminal law class.

But, apparently Mr. Glessman told him it was cool....

Well, this is odd.

2010-05-21T14:08:00.002-05:00

The Clarke County, Iowa County Attorney was indicted for mortgage fraud on May 19, 2010. Ronald Wheeler is alleged to have acted as a "strawperson" in transactions involving Russell Blessman, who was also indicted. Clarke County is south of Des Moines, about halfway between Des Moines and the Missouri border.

The indictment alleges that Mr. Wheeler falsely claimed that he intended to reside in a house in Ankeny and obtained a $796,000 mortgage for the property, when in fact Mr. Blessman was going to reside there. He later obtained a $484,000 second mortgage for the same property, again claiming he lived in the property. Lenders give more favorable terms when the loan is for your residence as opposed to rental or investment property. And as discussed here, lying to lenders is illegal. The indictment further claims that Mr. Blessman paid Mr. Wheeler $29,000 for getting the mortgage for him. Apparently Mr. Blessman owned a company which bought and repaired properties.

Ok, now is where it gets odd. The indictment states that Mr. Wheeler claimed on his mortgage application that he made $360,000 per year and had $500,000 in his checking account in 2006. In 2008 he filed bankruptcy claiming $79,000 income and $1.2 million in debt from the above discussed property. Hmm...

And odder. Mr. Blessman is apparently already in federal prison. He was arrested in Utah for fleeing Iowa child abuse charges involving an eight year old girl. Uhhh....

And then odder still. According to the Des Moines Register, "Blessman was arrested in a Heber City motel after authorities found pornography and weapons in a room that had been visited frequently by children." Why in the world is there a Heber City motel room which was visited frequently by children, and nobody said anything until this guy was arrested? I don't even know what to say to that, except if you happen to see a motel room which is visited frequently by children, CALL THE POLICE. Seriously.

That was pretty odd, but then, the oddness continues. Again, according to the Des Moines Register, "A Utah official said in October 2007 that the 6-foot, 350-pound Blessman had been living in that state since June and had stayed, for a time, in a cave." So, he went from a million dollar plus house to a cave. In Utah. A cave. In Utah.

Mr. Wheeler advised that he will be writing a letter to his local paper to explain his side of this odd story. Looking forward to that.

Mary Pat Harper Guilty Plea

2010-05-04T13:41:00.002-05:00

Mary Pat Harper, an Iowa real estate agent, pleaded guilty to four counts of wire fraud. Ms. Harper acted as real estate agent for Robert Herdrich and Darryl Hanneken, who sometimes do business as Sand Castle Properties, LLC.

These folks would find a property they wanted to buy, and offer more than the seller was asking, usually much more. They would prepare what is often known as a "dual contract." The main part of the contract would show the inflated price. They would attach an addendum which showed the "real" price and the obligation for the seller to kick back the difference. What generally happens is, this addendum mysteriously disappears before it gets to the end lender. Here is an example of how it works:
Seller wants $70K for the house.
RH DH offer $140K.
MH prepares a purchase agreement which shows a $140K purchase price, and a separate piece of paper which clarifies that the purchase price is actually $70K, and the seller will give the extra $70K to RH and DH at closing. No matter how you slice it, the value of the house is $70K.
The lender only sees a purchase agreement of $140K.
Add in a "flexible" appraiser to value the property at $140K, and the lender has no idea they have loaned $140K for something worth $70K.
In some cases it appears that RH and DH did not make any payments at all.
The lender forecloses and gets even less than the $70K the place was worth in the first place, due to deterioration of the property.
Guess who gets to make up the difference?

Now you know why getting a loan has become so much more difficult. Thank folks like Darryl and Robert and Mary Pat, people who assisted them, and others like them across the country.

According to an article in the Quad City Times, Ms. Harper's attorney said that "the amount of money she received was somewhat minimal." What that has to do with anything, I cannot fathom. Say she was part of a group that robbed a bank, and while $200,000 was taken, she only got $20 of it. Does that make her less culpable? I would also think that "minimal" must be a relative term. According to RH and DH's indictment, there were 27 properties involved. Assuming $125K average purchase price, and assuming she got only half the commission (i.e., she was not a dual agent), we are still talking well over $100K. Maybe $100K+ is minimal to Ms. Harper's attorney, but it seems like a tidy pile of cash to me. And he is missing the point of what their actions did to neighborhoods in our community, and how much their actions are going to cost taxpayers when we bail out these toxic assets.

Ms. Harper is scheduled to be sentenced on August 27, and the two gentlemen will get their sentence on June 4. They face up to twenty years in prison. On second thought, maybe the amount of money received was minimal.

Rental scam

2010-04-30T12:46:00.002-05:00

The craigslist rental scam has apparently hit the Quad Cities. A house is listed as available for rent on craigslist. The owner is out of town/out of the country. The owner wants you to send the money, and then he or she will send you keys. Apparently, some people have even received keys. Unfortunately, the keys did not fit the house. Because the owner is out of town/country, the potentials scammees, er, tenants cannot inspect the property.

Most people who live out of the country are going to have someone locally who will manage the property, so the fact that you need to send money to South Africa to get keys is a huge red flag. If there is no one in town to manage the property, who has been cutting the grass, who shoveled the sidewalks, who raked the leaves, who stopped by to make sure the pipes did not freeze this winter? Also, who in their right mind is going to rent a house they have not seen? Obviously, anyone who was serious about renting their house to someone would have arrangements in place to let potential tenants in the house to inspect it. Why would a reputable landlord want to rent to someone who was so desperate they would rent a house without seeing it? Another red flag: if the price is too good to be true, it probably is not true.

If you are still adamant that you want to rent this place, some suggestions. One way you might be able to flush out a scammer: Rather than send money to South Africa and hope you get keys back, you could suggest using a local escrow agent, such as an attorney. Tell the owner that you would deposit the money with the attorney and the owner should send the keys to the attorney. When the attorney has both the money from you and the keys from the owner, and you have had an opportunity to inspect the property, the keys would be delivered to you and the money forwarded to the owner. My guess is that if you suggest this, it will be the last you will hear from the "owner." If the individual is reputable, he or she should have no problem with an arrangement like this, since you are both protected.

Depending on where the property was located, there might be very detailed satellite and ground level photographs available at maps.google.com which can help you. Take a look at what is available, and try asking dumb questions of the "owner" to see if they verify what is on the maps and photos. For example, if the house does not have a pool, ask the if there is a pool, expressing how important it is that you have a pool. If there is a street level view (click on the little gold man at the top of the scale tool), you will even be able to tell what color the house is, how many trees, etc. Ask the owner and see if he or she knows some of these details. Any owner will know the color of their own house. Ask how many houses in the neighborhood, how close to the interstate, closest grocery store--things an owner would know and a scammer would not.

There are a couple things you can do check ownership, however this will only be useful if the scammer was not smart enough to find out the actual owner's name. You can check the following websites:
http://www.iowatreasurers.org/
http://www.iowataxandtags.org/
http://iowalandrecords.org/

Some of the scammers are using houses which are for sale, which would be another red flag. Most (but not all) people selling their houses are not interested in renting them. You may be able to look up the property on www.realtor.com to see if it is listed. There should be information to contact the listing agent who would know if the owner was trying to rent the property.

Be careful, even when following these suggestions. Scammers are very good at explaining things away.

Poltergeist Drywall?

2010-04-05T10:46:00.002-05:00

Air conditioners failing-several times a year. Outlets that no longer work. Television sets failing. Plumbing leaks in the walls. Stereos failing. All of your electrical wiring and your silverware turns black. Odd "fire and brimstone" smells in your home. A poltergoost!? Could be, Neil. Or it could be your drywall has hydrogen sulfide (a/k/a hydrosulfuric acid) in it. Perhaps hundreds of thousands of homes in numerous states may need to have all of the drywall, electrical components and wiring, gas service piping, fire suppression sprinkler systems, smoke alarms and carbon monoxide alarms replaced. Not to mention all of your electronics and silver.

There are also people losing their homes to genius lenders because of this. Logically, when you have to gut your walls, electrical, gas service, and plumbing, you might need to crash somewhere else for a few weeks, no? Amazing, in a recession, many people cannot afford to pay the mortgage, pay for repairs, AND pay for another place to live while the work is done. Some lenders are already proceeding with foreclosure against these properties, even though the owners have tried to make arrangements with those lenders for some forebearance while repairs are made. Talk about toxic assets.

The only good news I could find in this story, and it ain't much, is that there are currently no reports of this drywall being sold in Illinois or Iowa.

Another local indictment

2010-03-09T10:40:00.006-06:00

According to the Grand Jury Indictment filed January 20, 2010, Susan Lynn Maroon defrauded Guaranty Bank. Ms. Maroon was a mortgage broker who was the owner of Maroon Mortgage in Eldridge, Iowa. Guaranty Bank required that Ms. Maroon's borrowers had $500 in the bank to qualify for the loan. Apparently these particular borrowers did not have enough money in the bank to qualify. The indictment says that over a period of five days, she gave the borrowers a total of $1,250 to put in their account, and then, after Guaranty verified that the borrowers had the money in their bank, Ms. Maroon had the borrowers withdraw the money and return it to her. Of course, logic would tell us that since these folks did not even have $500 of their own money in their bank account prior to closing, they might default on the loan. They did. The indictment claims that Guaranty lost more than $88,000 after the borrowers defaulted.

What can be the justification here? That she was trying to help these folks out by allowing them to purchase a home? They lost their home and their credit is trashed. Sure, the borrowers have responsibility here, but they would not have been able to get in this position without the complicity of Ms. Maroon as alleged in the indictment. If you really want to help someone in such a situation, tell them to come back when they were in a position to legitimately qualify for the loan, maybe even give them suggestions on how they could get there.

According to PACER, the trial is set for April 5, 2010.

Update: The trial has been continued to May 3, 2010.

Update 2: The trial has been continued to August 2, 2010.

A Scam Directed at Veterans

2010-03-08T15:13:00.003-06:00

A client recently received a letter from Department of Veterans Assistance. Sounds suspiciously like Department of Veterans Affairs, no? It is not a government agency, which you can plainly see by reading the 5 point type buried at the bottom of the page. But they have a fancy military looking shield for a logo, their document is entitled IRRRL-1030 Benefit Allotment Form 792-B Eligibility Notification Reinvestment Initiative, and shows a very government looking "Case #." And when they answer the telephone, the automated attendant says, "Welcome to the Mortgage Division." Even though they are "not a part of any government agency, they are sure trying to, um, imply?, otherwise.

The letter advises that the Department of Housing Assistance (not the Department of Housing and Urban Development, not even close!) "in accordance with the 2009 Economic Stimulus Act must inform Federally Insured homeowners that FHA or VA insured mortgages must reflect the rate modifications passed by this office" Um, what? It goes on in excruciating faux-government-speak to tell you you MUST call or horrible things will happen, and you are foolish if you do not call because you might get to skip TWO MONTHS of payments. That can happen with any refinance. You just pay the interest at closing. Notice, they do NOT say you get to skip two months of interest. The letter is signed by the Director of Veterans Assistance, Cynthia Moore. What a lofty title, Cynthia.

Maybe they have a nice interest rate and reasonable fees for our veterans. But the underhanded way they try to get them to call leads me to believe that may not be the case. In case you were not counting, we have three different names for this outfit. I almost forgot to mention that even though their address is a PO Box in Washington, DC (are there few government agencies in that town?), the letter was apparently mailed from California.

Part of Iowa FED statute unconstitutional

2009-11-20T11:23:00.002-06:00

A part of the Iowa Forcible Entry and Detainer (FED) statute has been declared unconstitutional by the Iowa Supreme Court. The FED statute is that part of the Iowa Code which sets forth the procedures for eviction. The code section at issue states that residential tenants can be informed of their eviction hearing by certified or restricted certified mail, whether or not the tenant signs a receipt for the notice.

Somehow Iowa legislators decided that just putting something in the mailbox was sufficient to give someone notice that there was going to be a hearing which would determine whether or not someone would be thrown out of their home. The Iowa Supreme Court determined that this is not notice at all. A tenant might not even get notice that the certified mail is waiting for them until after the hearing date. I have never understood why, in Illinois, the sheriff needs to put the documents in someone's hand, but in Iowa landlords were allowed just drop a note in the mail.

Here is the opinion.

Blue Seal Staffing Scam

2009-10-23T09:20:00.002-05:00

Wow, it looks real. We see a lot of certified checks here, and this thing looks REAL. It even does that "VOID" thing in the background when you copy it. Kudos scammers. Except next time, it should say DOLLARS and CENTS, not DOLLAR and CENT. But other than that, top notch, really.

It came in this morning's mail accompanied by a letter from my new bestest friends at Blue Seal Staffing in North Carolina. But strangely the letter came from Canada. Good day, eh? I have been selected to be a mystery shopper! So, here is what I am supposed to do:

1. Deposit the $3,480.

2. Keep $300 for my first week's pay!

3. "Evaluate" Money Gram or Western Union by sending $2,900 to one of Blue Seal Staffing's training agents. Why we couldn't evaluate them for $29 is indeed a good question, and one that will be answered in a moment.

4. Pay the transfer fees of $180.

5. Go buy $100 worth of merchandise at one of several retailers, ostensibly evaluating their service. And I get to keep the merchandise!

That sounds just great, eh? They even did their math correctly. If I do good, I might even get a raise!

Here is what is really going to happen if I went along with this scam. I would deposit the check in my account. Since it is a cashier's check, the funds will probably be available in three days or less. I "keep" my $300.00. I send their "training agent" $2,900. I pay Western Union $180 (does it really cost that much to send money via Western Union? Yowza.) I spend the other $100 on trinkets at Sears. Since I want that big raise they promised me, I will send Blue Seal Staffing the forms with all of my personal information. By the time that cashier's check wends through the byzantine maze of banks, I will have spent $3,180. Then my bank will tell me that the check was a forgery, and I get to cover that money I sent.

Well, I thought I would try something different and contact the local authorities to see if they would like to have fun with these folks.

Remember, if it sounds too good to be true........

Are you kidding me?

2009-09-30T09:39:00.003-05:00

An attorney in Somerville, ~~Massechu~~, ~~Masatchus~~, ~~Massechuset~~, Massachusetts came up with a new one. He kept getting new mortgages without paying off his old ones. It appears he had four mortgages on one property, three on another, two on another. These were not second or home equity mortgages. He was directed by the lenders to pay off the previous mortgages. He just didn't. Apparently he kept the money for his own purposes. It took some time for the lenders to catch on, since it was making his payments on time. It took a Fannie Mae database search to uncover the frauds. He failed to disclose some of these additional loans on his loan applications. They even got the Postal Inspector in on this one. He plead guilty to eight counts of Larceny and seven counts of Willfully Making a False Statement Regarding Financial Condition or Assets.

Doesn't it seem to be pretty simple math that making QUADRUPLE house payments eventually is going to catch up to you?