FTC Stops Foreclosure Prevention Marketers 

In the following press release the Federal Trade Commission (FTC) announced that at its request a federal court has halted a bogus mortgage foreclosure prevention operation [Freedom Foreclosure Prevention Services] that misrepresented both the “loss mitigation” services it offered and the earnings potential of the business opportunity it sold. The FTC seeks to end this deceptive scheme and make the defendants give up their ill-gotten gains.

According to the FTC’s complaint, the defendants sold “loss mitigation” services to homeowners at risk of foreclosure, falsely claiming they could prevent foreclosure in 97 percent of cases and misrepresenting that they would make a full refund if they failed. Before performing any loss mitigation services, the defendants required homeowners to pay the equivalent of one month’s mortgage payment. Their contracts instructed homeowners not to contact lenders or their contract and its money-back guarantee would be voided. In some cases the defendants’ consultants told homeowners to stop making their mortgage payments while the defendants were working on their cases.

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The FTC alleged that, contrary to the defendants’ claims, they completed loan modification in only about 6 percent of cases and routinely failed to return consumers’ repeated telephone calls. In numerous instances, the defendants had not contacted the consumers’ lenders or had made only non-substantive contacts with them, resulting in late fees, penalties, and other costs for the homeowners. After failing to secure loan modifications, the defendants also failed to honor their refund policies.

The FTC’s complaint also alleges that the defendants sold a “loss mitigation consultant” business opportunity for up to $1,500, falsely claiming that purchasers (“consultants”) could earn various amounts, including up to $6,000 per week, by referring homeowners to them and by recruiting new consultants. In fact, throughout the defendants’ entire operation, no consultant has earned that much money.

The defendants are charged with violating the FTC Act by misrepresenting that they would obtain a loan modification or stop foreclosure in all or virtually all instances; that they would give full refunds in all instances when they failed to obtain a loan modification or stop foreclosure; and that purchasers of their business opportunity could earn the levels of income claimed in their promotions.

The defendants are Freedom Foreclosure Prevention Services, LLC, Loss Mitigation Training Center of America, LLC, Jeffrey C. Segal, and Michael R. Workman. The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the District of Arizona. On June 1, 2009, the court entered a temporary restraining order against Freedom Foreclosure Prevention Services, Loss Mitigation Training Center of America, and Segal. The court entered a preliminary injunction against those defendants and defendant Michael Workman on June 18, 2009.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.


Kings County DA and Senator Schumer give update on mortgage fraud task force

In the following press release from earlier today, U.S. Senator Charles E. Schumer and Kings County District Attorney Charles J. Hynes announced that the Kings County Mortgage Fraud and Real Estate Crimes Unit has led to the indictment of 8 individuals and the opening of more than 80 cases. One such case involves Thomas Prusik-Parkin, the man accused of impersonating his deceased mother to collect Social Security benefits and rent subsidies. In March, Schumer announced that the Brooklyn DA’s office had been awarded $875,000 for the creation of a Mortgage Fraud and Real Estate Crimes Unit through the 2009 Omnibus Appropriations Act.

The new Unit addresses the recent flood of mortgage fraud cases across Brooklyn that is plaguing homeowners in the borough. In the past several years, local politicians, homeowner advocacy groups, attorneys, state agencies, and homeowners have complained of having nowhere to turn to report mortgage and deed fraud. Officials receiving the complaints have also voiced frustration over having no office to report to that specifically investigates mortgage scams. The creation of the District Attorney’s Mortgage Fraud and Real Estate Crimes Unit has resolved these issues by employing 10 staffers who focus exclusively on real estate crimes that plague the borough and prosecute scammers for their crimes.

“This Mortgage Fraud and Real Estate Crimes Unit at the Brooklyn DA’s Office has proved to be the perfect tool to prevent scam artists from preying on Brooklyn residents during the ongoing economic and housing crises,” Schumer said. “For years, these criminals have taken advantage of New Yorkers and escaped undetected and unscathed. I am proud to announce that the Mortgage Fraud and Real Estate Crimes Unit has begun to reverse this trend. District Attorney Hynes and his Unit deserve our congratulations for working so hard to make this unit so successful.”

“Factors have created a perfect storm for mortgage fraud and real estate crime,” said District Attorney Hynes. “The pool of potential victims is huge in this densely-populated borough, and the desperation of homeowners facing default and foreclosure has made them easy targets for real estate scammers. The new Mortgage Fraud and Real Estate Crimes Unit in my office has made a full time job of fighting this crime. I’d like to thank Sen. Schumer for making additional resources available for this effort.”

The Mortgage Fraud and Real Estate Crimes Unit assisted in unraveling the scam of a Brooklyn man accused of impersonating his mother to collect thousands of dollars in social security benefits and rent subsidies. Thomas Prusik-Parkin, the man charged with fraud and larceny, first contacted the Brooklyn District Attorney’s office to report that the owner of his mother’s apartment had engaged in fraud. When the Mortgage Fraud and Real Estate Crimes Unit requested a meeting with Prusik-Parkin’s mother to investigate the claim, the prosecutors quickly realized that Prusik-Parkin was in fact impersonating his mother. As a result of this skillful perceptiveness, Prusik-Parkin is now in jail and faces up to 25 years in jail if convicted.

The new Unit has also led to the indictment of a man who posed as an attorney and pretended to have the authority to sell a property. The scammed person paid him $37,500 as a security deposit to hold the property. Unfortunately, he was not an attorney and had no authority to sell the property. Another case involves a woman who forged a deed, transferred a property to herself and filed the deed. She also forged a Power of Attorney and a signature card and used the documents to steal over $25,000.

In March, Schumer secured funding for the establishment of a Mortgage Fraud and Real Estate Crimes Unit at the Brooklyn DA’s office through the 2009 Omnibus Appropriations Act. Over the past several years, the Kings County District Attorney’s Office had been flooded with referrals of mortgage and deed fraud cases from local politicians, homeowner advocacy groups, attorneys, state agencies, and individual homeowners.While several investigations and prosecutions were undertaken, much of the increasing work load was referred elsewhere, making the system extremely unorganized and confusing. The Brooklyn DA’s office did not handle many of the cases due to lack of investigative and prosecutorial resources. Victims of mortgage fraud were generally referred to civil court to battle the scams because many groups believe this will allow victims to resolve their individual situations.Unfortunately, not enough headway had been made to combat the huge mortgage scam crisis that was taking over Brooklyn and New York City.

Missing from the DA’s office was a dedicated prosecutorial unit. Increased prosecution of housing frauds is a necessary weapon in the arsenal of government programs to end the crisis currently manifesting itself in the foreclosure wave. Prosecutions can result in jail sentences for the offenders and restitution for the victims, which are currently very rare. The majority of housing fraud cases involve some degree of criminal conduct, such as theft of a home through a forged deed, a foreclosure rescue scam where a victim unwittingly signs over ownership of the house, falsification of borrower assets by a mortgage broker, or falsification of an appraisal report in order to close a loan that the borrower cannot actually afford.But uncovering the evidence of criminality requires investigative resources that are currently not readily available to victims. The Mortgage Fraud and Real Estate Crimes Unit in the Kings County DA’s Office’s Rackets Division was needed to address the problem.

After the establishment of the Brooklyn Mortgage Fraud and Real Estate Crimes Unit, Schumer recognized that the housing scam epidemic reached far beyond the borders of Brooklyn and was joined by all five New York City District Attorney’s in April to unveil his Fighting Real Estate Fraud Act of 2009 that would create elite mortgage fraud units in District Attorney’s offices across the country.

The Fighting Real Estate Fraud Act of 2009 establishes a competitive grant program in the Department of Justice for local District Attorney’s offices to fight real estate fraud. Under this bill, real estate fraud includes crimes involving misrepresentations and forgeries to general applications, tax returns, and financial statements, appraisals and valuations, verifications of deposit and employment, escrow and closing documents, and credit reports. The Attorney General is authorized to make grants on a competitive basis through the Bureau of Justice Assistance to DA’s offices to develop units solely dedicated to the investigation and prosecution real estate fraud. The bill authorizes $100 million in grants for FY2010 and each year through FY2013. These grants will be used for hiring specialized staff to offices in need of specialized resources to combat scams.

Schumer added, “The recent foreclosure and refinancing crisis, following a sharp increase in home values created a perfect storm for these housing scammers to swoop in and fleece homeowners. Thankfully, we now have the Mortgage Fraud and Real Estate Crimes Unit so these criminals will be stopped.”


AZ Dept of Financial Institutions revokes broker license in fraud allegations

In a Final Decision and Order dated May 14, 2009, Superintendent Felecia Rotellini ordered the Arizona mortgage broker license of Lending House Financial Corp. revoked. The revocation Decision and Order also ends the legal authority of Lending House’s president Doran Jampolsky to act as a mortgage broker in Arizona. In the order the Superintendent found numerous statutory violations committed by either the president or the company’s employees.

Among other bad acts, the company facilitated processing of a fraudulent mortgage loan against the home of an Arizona resident using the homeowner’s personal identifying information, accepted more than $7,000 as its mortgage broker’s compensation for the fraudulent loan, and enabled the perpetrator of the fraud to take more than $82,000 in equity from the homeowner in the fraudulent loan transaction. In addition to the revocation, the company and its president have been ordered to pay a $15,000 civil money penalty as well as $12,420.00 in examination costs plus a late payment penalty calculated from 11/2/08 until paid at $50.00 per day.

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Harris county man sentenced in scheme that involved seven over valued homes

In the following press release Patricia R. Lykos, the Harris County (TX) District Attorney, announced that “Prosecutors have obtained a 20-year prison sentence against a defendant convicted in a mortgage fraud scheme that recruited bogus homebuyers, District Attorney Patricia Lykos reported Thursday. Hubbard Blackshear, 55, was found guilty of the first-degree felony of making false statements to obtain credit of more than $200,000.

Evidence showed Blackshear lined up “straw buyers” to act as the purchasers for seven Harris County homes that had been over-appraised in 2005. The purchases were made possible through loan application information that falsely indicated the buyers were financially qualified to afford the houses. Evidence showed that Blackshear knew the buyers were not qualified, and that he profited financially from the sale of each of the houses. The properties later went into foreclosure.

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Blackshear pleaded guilty and was sentenced Friday in the 232nd District Court.

District Attorney Lykos commended the investigative work by the District Attorney’s Financial Crimes Division and Prosecutors Tara George and Craig Still.”


Disbarred attorney found guilty in Prince George's County, MD

In the following press release Prince George’s County State’s Attorney Glenn F. Ivey today [June 5, 2009] announced that a Prince George’s County grand jury found David Alexander, 37, of North Bethesda, MD guilty of Theft over $500 and Unauthorized Practice of Law in representing Renata Brevard, 45, of Prince Georges County, MD, who hired him to help her recover her home from a mortgage scam.

He faces up to 20 years in prison total - 15 years for theft over $500 and up to five years for unauthorized practice of law and or a fine of $5000.

Assistant State’s Attorney, April N. Richardson in the SAO Mortgage Fraud Unit was the prosecutor. Doubly victimized, Ms. Brevard fell prey to foreclosure fraud washe was first mistreated by foreclosure scammers who took her home and then by the attorney that she hired to fight back against the scammers.

On November 11, 2007, Ms. Brevard hired Defendant, David Alexander, an attorney to help get back her home and to sue the scammers. Alexander charged her $13,000 to file suit against the scammers, get back her home and stop the subsequent foreclosure on her home. Although he assured her that he was performing his duties. However, Ms. Brevard learned that Alexander failed to keep his promises when she came home in April 2009, and all of her family’s belongings had been evicted and thrown on the street. On the day of the eviction, she contacted Alexander who assured her that he was handling her legal matters and that the eviction was an error. She had made her last payment to Alexander in January 2009. After the eviction day, he never called her back. She later learned that he had been disbarred from the practice of law in August 2008. As a result of his disbarment, he was not allowed to practice law in the State of Maryland. Not only did he fail to notify the victim of his disbarment, but he continued to hold himself out as her lawyer and continued to take her money. In April 2009, the victim learned that the defendant never filed suit against the scammers and did nothing to stop the foreclosure sale on her home. She lost 905 of her and her families belongings including her two-year old granddaughter’s leg braces.

For more information, please contact Sharon Dukes in the State’s Attorneys’ Office.



Cabot woman accused of providing false VOD's (1 of 4)

In the following press release Mary Beth Buchanan, United States Attorney for the Western District of Pennsylvania announced that a nine-count indictment returned by a federal grand jury charges Crystal Spreng, age 38, of 329 Stoney Hollow Road, Cabot, Pennsylvania, with Aiding and Abetting Wire Fraud.

According to the indictment, an individual known to the grand jury devised a mortgage fraud scheme that involved the submission of fraudulent loan applications that contained misrepresentations related to the borrowers’ financial condition.

The mortgage fraud scheme also involved the submission to lenders of fraudulent Verifications of Deposit (VOD) from Citizens Bank that purportedly verified that the borrowers had funds in accounts at Citizens Bank. The Verifications of Deposit were fraudulent in that some of the borrowers did not even have accounts at Citizens Bank, and if they did have accounts, their account balances were overstated.

The indictment alleges that Spreng, who was an employee of Citizens Bank, aided and abetted the mortgage fraud scheme by verifying the accuracy of the Verifications of Deposit when called by the lending institutions, when she then knew that the Verifications of Deposit were fraudulent.

These cases are being prosecuted by Assistant United States Attorney Brendan C. Conway. The Mortgage Fraud Task Force conducted the investigation leading to the indictments and Bill of Information in these cases.


Sewickley, PA man indicted on mortgage fraud charge (2 of 4)

In the following press release Mary Beth Buchanan, United States Attorney for the Western District of Pennsylvania announced the filing of a one-count indictment that charges Daniel Hoey, age 43, of 357 Chestnut Street, Sewickley, Pennsylvania, with Wire Fraud and Conspiracy.

According to the indictment, Hoey was involved in a mortgage fraud scheme designed to finance the purchase and renovation of the residence located at 357 Chestnut Street, Sewickley, Pennsylvania. The scheme involved the submission of fraudulent loan applications that overstated the borrower’s income
and assets, a fraudulent appraisal that overstated the value of the residence, documents that overstated the true sales price of the residence, and a fraudulent settlement statement that contained false representations related to the down payment and the distribution of the money at the closing.

These cases are being prosecuted by Assistant United States Attorney Brendan C. Conway. The Mortgage Fraud Task Force conducted the investigation leading to the indictments and Bill of Information in these cases.


Pittsburg man indicted in mortgage fraud allegations (3 of 4)

In the following press release Mary Beth Buchanan, United States Attorney for the Western District of Pennsylvania announced that the filing of a one-count Information charging Robert Arakelian, age 47, of 356 S. Negley Avenue, Pittsburgh, Pennsylvania, with Wire Fraud Conspiracy.

According to the Information, Arakelian worked as a licensed mortgage broker for Pittsburgh Home Loans that assisted borrowers in obtaining loans collateralized by real estate. The Information alleges that Arakelian participated in a conspiracy to defraud lenders by submitting to the lenders appraisals knowing that the appraisals vastly overstated the true fair market values of real estate that served as collateral for the loans. The Information also alleges that Arakelian submitted loan applications that he knew were false because they overstated the assets of the borrowers to make it falsely appear as though they had sufficient funds to pay the down payments, and false Verifications of Deposit that falsely verified that the borrowers had sufficient funds to make the down payments in bank accounts.

U.S. District Judge Nora Barry Fischer will schedule a date for Arakelian’s entry of aguilty plea.

These cases are being prosecuted by Assistant United States Attorney Brendan C. Conway. The Mortgage Fraud Task Force conducted the investigation leading to the indictments and Bill of Information in these cases.