Real Estate Law

Engelmann appeal update

2013-08-12T13:41:00.001-05:00

The Court of Appeal has denied Marc Engelmann's appeal of his conviction for mortgage fraud. Engelmann's appeal was based on four alleged errors by the District Court. He argued the District court erred because it:
1. Refused to give his requested jury instruction regarding the definition of good faith.
2. Refused to grant him a new trial because the investigating FBI agents were having a conversation in the hallway during a break.
3. Increased his base offense level by 12 for the amount of the loss involved in his convictions.
4. Ordered him to repay almost $400,000 in restitution.

The Court of Appeals affirmed Engelmann's conviction and sentence. He is currently incarcerated in the Federal Correctional Institute in Terre Haute, Indiana with a release date of 14 October 2014.

And just last week I had an attorney ask me to arrange to have the seller pay the buyer under the table for a "repair" credit. Unbelievable.

Engelmann appeal update

2013-03-21T08:00:00.000-05:00

Marc Englemann's appeal of the denial of his motion for a new trial was granted, and the matter was sent back to the District Court for further consideration. Several months ago, the Court had a hearing on whether the sequestration order was violated when the FBI case agent was seen talking to his partner and maybe the lead prosecutor or maybe someone else in the hallway of the courthouse, and found it was not. Engelmann appealed this decision. The Court of Appeals decided that there should be an evidentiary hearing so the Judge could hear from the various witnesses. After this evidentiary hearing, the motion was again denied.

Three individuals claimed they witnessed the above-referenced conversation, though their recollections were rather varied. First up, was Richard McNamara, a self-employed contractor. Mr. McNamara called the judge's chambers, on 14 September 2011, the day after Engelmann's verdict was returned. When asked by the chambers staff person what his relationship was to the case, he replied that his wife and Engelmann's ex-wife were friends. He forgot to mention that he had known Engelmann for many years, and used Engelmann for several hundred legal matters, including real estate transactions and incorporations, and that Engelmann was the registered agent for several of Mr. McNamara's corporations and LLCs.

According to Mr. McNamara, during a recess on the afternoon 09 September 2011, which was the last day of testimony, he was walking down some steps, and heard an unidentified person saying something to the effect of, "we had Engelmann at his office." The court noted that the specific language was somewhat in doubt. He looked back to see the FBI case agent and his partner, and an individual he did not recognize. He pointed this out to his daughter, Kathryn Sommers. He recalled that the conversation was "serious," but could not hear them. Even though he apparently thought this discussion was significant and important enough to call a federal judge to discuss it, he waited until after the trial was over to bring it up to anyone, including, apparently, Engelmann or his attorney. The court also noted Mr. McNamara's personal interest in the case in a footnote where he described the FBI case agent recalling that Mr. McNamara gave him a "thumbs down" gesture as they were leaving the courthouse after the case agent's testimony. I think that most people, as a general rule, try to avoid rude gestures to FBI agents, especially at federal courthouses.

Ms. Sommers recalls this conversation taking place on the first day of the trial, 05 September 2011. She remembers her father drawing her attention to three men talking. She claims this group included the FBI case agent, his partner, and the lead prosecutor. She did not hear anything that was said by the group. Both Mr. McNamara and Ms. Sommers attended the most if not all of the trial, so the lead prosecutor would be easy to identify, even though Mr. McNamara did not recognize the third person in his group.

Finally, Jay Sommers, Ms. Sommers' husband, Mr. McNamara's son in law, at the time a Scott County assistant prosecutor, a character witness for Engelmann, and currently the attorney who took over Engelmann's practice, had a different recollection. He recalled standing in the lobby within five feet of Mr. McNamara and his wife. His wife called his attention to two people in suits talking about twenty-five to thirty feet away. She asked if they could do that. He later determined that the two individuals were the FBI case agent and his partner. Mr. Sommers was unable even to hear their voices.

Mr. McNamara was present during the closing arguments of Engelmann's trial, in which the prosecution stressed the importance of the FBI agents' testimony. It would seem that if he felt this hallway conversation was inappropriate, he would have brought it up to Engelmann or his attorney at that point. It was also discussed during the evidentiary hearing that Englemann's attorney had a copy of the report prepared by the FBI agents at the time of their interview with Engelmann before he was arrested, and that both agents testified consistently with that report. Based on this evidence, the Court did not find any prejudice to Engelmann which would require a new trial. According to the Court:

"More fundamentally, absent speculation and argument by interested parties, the only reasonable construction of the events during the afternoon recess on that Friday is a meeting of the prosecutors and their trial team with an upcoming rebuttal witness in which the prosecutor advised that witness of the areas that would be covered. This does not violate the Sequestration Order."

The motion for a new trial and the motion for release pending appeal were both denied.

Buyer Select for HUD Purchases

2013-03-18T14:24:00.003-05:00

As of March 01, 2013, buyers of properties in Northern Illinois sold by the U.S. Department of Housing and Urban Development (HUD) can select their own closing agent under a program called Buyer Select.

While I am always in favor of buyers being able to choose closing and title agents, closing a HUD transaction has several peculiar twists and turns. Missing a deadline or a filing can result in the closing being delayed or the transaction being cancelled. We have successfully closed over 3,000 HUD transactions since 2007, so we know exactly what needs to be done and when. We have seen the title fees charged by Gardi and Haught, Ltd. and Lakeshore Title Agency, the current HUD closings agents for northern and central Illinois. They charge at least three to four times what local providers charge for the exact same product.

If you are a potential buyer of a HUD home, or a real estate agent representing a potential HUD home buyer, please feel free to call our office at 309.736.3117, and we will assist you in properly preparing the purchase agreement to ensure the closing is as smooth, rapid, and reasonably priced as possible. We can provide title and closing services for the entire state of Illinois.

Website update

2013-03-15T12:42:00.001-05:00

It is alive!

www.thomasmoens.com

Mediation

2013-03-15T10:46:00.001-05:00

Alternative dispute resolution is nothing new, but it still seems to be underutilized. Any type of dispute that can be litigated can be mediated: Personal injury, divorce, custody, contract disputes, business dissolutions, neighborhood disputes, even collections.

Mediation is very successful in resolving disputes. While it depends on many factors, including the matter being mediated, the willingness of the parties to negotiate, the parties' attorneys, and of course the mediator, over 90% of disputes submitted to mediation are resolved.

Mediation gives you an opportunity to be heard. Mediation lets parties discuss their disputes in detail. Litigation is highly structured and allows only facts allowed under the strict rules of evidence to be presented. The fact that you may be hurt or angry is irrelevant in litigation, but can be addressed in mediation.

Mediation is much less expensive than litigation. Expert witness, endless motions, and protracted discovery are all unnecessary in mediation.

Mediation puts the parties in control. Litigation forces you to give up control to a judge or jury who only knows what the rules of evidence allow them to hear. Your opinions, feelings, suggestions are not part of the discussion in litigation, but are all important components in mediation.

There are no losers in mediation. In litigation, one side will win, and one side will lose, and even the winner does not always get what he or she wants, and will usually have paid a large sum of money and spent a large block of time. Mediation allows the parties to creatively craft their own solutions.

Mediation is faster. Most mediations are completed in one day. In litigation, your case may linger on the court docket for months, then take weeks or months after your trial to be decided, then take months or years in appeals. Mediation lets you resolve your dispute immediately.

There are a number of ways mediation can be started. Sometimes one party will contact a mediator and let the mediator initiate contact with the other party. Sometimes both parties will select a mediator. Sometimes the attorneys for the parties make the arrangements.

For more information on allowing me to mediate your dispute, please contact our office at 309.736.3117, or visit our website.

Here ya go.

2012-05-10T09:59:00.000-05:00

"Here ya go." What does that even mean?

Just spent $400 at Home Depot. After scanning the little bar codes, the cashier hands me my receipt and says, "Here ya go." Not, "Thank you." Not even the ubiquitous and now meaningless, "Have a nice day."

Here. Ya. Go.

She actually seemed to be waiting for me to thank HER for handing me my receipt--which is actually the proof that she should be thanking me for adding $400 to Home Depot's coffers. This, as astute readers will surmise, results in her company being able to pay her. I have seen many, many polite Midwesterners, after hearing, "Here ya go," thank the cashier for giving them a receipt. And the cashier proudly replying, "You're welcome!" Heck, they have even tricked me into thanking them for handing me a receipt. You would think they would be at least Midwestern polite enough to thank me for thanking them.

This does not just occur at Home Depot, it seems to be very pervasive lately. What happened to thanking your customers? Do employees not understand the process? Money comes in from customers to company in exchange for merchandise. Company doles a small portion of that money out to employees as pay for taking customers' money. Is that too big of a stretch to comprehend that customers pay their wages?

Apparently. Here ya go.

New car buying

2012-04-03T13:57:00.001-05:00

Bought a new car lately? Why, why, why is it still so horrible? In 2012, every dealer must know that most consumers do their homework on the interwebs regarding prices, options, and trade-ins. And they still pull the, "I need to check with my manager routine." I made it very clear what price I would pay, and that I was not going to play the back and forth negotiation game, so they better make sure they give me their last and best offer right out of the gate.

Of course, they came back way higher than I was going to pay, though to their credit they did try to obfuscate it by monkeying with the trade-in value. I asked if this was the last and best offer and was told it was. So I left, and planned to go to a different dealer.

I had a message waiting for me before I even made it back to the office. By golly, they were willing to knock $500 off their last and best offer. Nope, still too much.

Sooo, then "The Manager" calls. "What can we do to put you in this car today?" Charge me what everyone else is paying for this model. "Weeeelllllll......"

Sure, I know they are just trying to stick it to us consumers, just like in the good old days. But it sure left a sour taste in my mouth with regard to this dealer, and this brand. Seriously, does all this dinking around really work on people? Are they just bored and have nothing better to do than to try to squeeze a few extra bucks from people while destroying any goodwill those customers may have had? Are they simply evil?

When I go to Target I am not forced to play games like this. So, notice to all car dealers: Figure out what your overhead is, and how many cars you sell, and price them accordingly. I would have purchased a new car years ago if I was not procrastinating, knowing what horrors awaited me at the dealership. Make it pleasant, charge a fair price, and you will sell more cars. Simple.

And another thing: Do NOT give them your email address. I have been inundated with "Congratulations on your new Honda, please buy this or complete this survey or get a great deal on male enhancement drugs for your driving pleasure." Ok, maybe I made that last one up, but in any event, I set my spam filter to block anything with the word "Honda" in it, so who knows?

Maybe by the time I am ready for my next car, I can just get it on Amazon.

Engelmann in prison

2012-03-07T16:00:00.000-06:00

Marc R. Engelmann, a Davenport, Iowa real estate attorney, is now incarcerated. According to the Federal Bureau of Prisons website, he is at the Terra Haute FCI, prisoner number 12846-030. His incarceration apparently began yesterday afternoon.

Engelmann has hired a new attorney and appealed his conviction, still claiming that he acted in "good faith" in his role in this mortgage fraud scheme. This, even though the government put up a veritable parade of witnesses testifying that he was fully aware his actions were illegal, and that he made documented efforts to hide the fraud from the lender and closing agent. If nothing else, he was the self-professed real estate law expert of the Quad Cities, so how could he not know these transactions were fraudulent? Either he knew his actions were illegal, or he is far, far from an expert.

There were actually about a dozen attorneys who represented individuals who sold property to Darryl Hanneken and Robert Herdrich. Herdrich and Hanneken, who along with their real estate agent, Mary Pat Harper (aka Mary Pat Lord), were the center of this large fraud scheme, which involved dual contracts and under the table kickbacks from the sellers back to the buyers in the tens of thousands of dollars per transaction. I would imagine there are about a dozen attorneys in the Quad Cities who are breathing sighs of relief as the statutes of limitations expire on these transactions.

Engelmann restitution set

2012-02-08T10:24:00.001-06:00

Restitution for Marc Robert Engelmann, a Davenport, Iowa, real estate attorney found guilty of nine counts of bank fraud, wire fraud, and conspiracy, was set at $392,937.73. The amount, when paid, will be distributed among three different lenders who suffered losses due to the fraud.

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.

www.thomasmoens.com

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.

www.thomasmoens.com

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.

www.thomasmoens.com

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.

www.thomasmoens.com

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 and sending false settlement statements to the closing agent, reflecting only the inflated price, and not showing the kickbacks. 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.

www.thomasmoens.com

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.

www.thomasmoens.com

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....