Freddie Mac Fraud - Forclosure Fraud

Part III Shielded from Justice: Who Polices the Houston Police

2011-05-16T20:52:00.004-05:00

We began this three part investigative series in an effort to expose how the citizens of Houston, the fourth largest city in America, had lost oversight of its police. Project 143 set out to explore a police department unresponsive to citizen complaints and unaccountable to the public it serves. What we did not expect was that shortly after release of part one of the series there would follow two major police incidents giving Houstonians first hand experience of how little control they had: the release of the Chad Holley police beating video tape and the April 13 DWI cover-up of Sergeant Ruben Trejo.

Both of these incidents demonstrated that acting under the color of law, the Houston Police Department fosters patterns and practices designed to remove the public’s ability to hold its officers accountable for their behavior. There is no true citizen review or oversight of the police department and any disciplinary action taken by the department is effectively neutered by Chapter 143 of the Texas Local Government Code through which 70% of the disciplinary actions taken against officers for misconduct is overturned or reduced.

Where public and police officials assured the citizens of Houston that what they saw on the Chad Holley video was an exception, the Trejo cover-up demonstrated that is was instead, the rule. Contrary to assurances by the city, is has become obvious that this type of behavior is ingrained in the culture of the Houston Police Department.

The Trejo Cover Up

On April 13, 2011, HPD reported that a school bus slammed into an off-duty Houston police sergeant’s vehicle on the city’s east side. “He was in his personal vehicle, off-duty, when the school bus driver ran a stop sign and hit our officer,” said HPD spokeswoman Jodi Silva. “Our officer was taken to Memorial Hermann with non life-threatening injuries.” The bus driver was cited but not transported for medical care.

Sgt. Ruben Trejo's Truck

The accident occurred at the intersection of 79th and Harrisburg but as members of the media arrived it was obvious that this was no small accident. It was also immediately evident that contrary to HPD’s report, it was the officer that slammed into the school bus.

An HPD spokesman on the scene stated that the sergeant was on his way to work when his pickup truck hit the back of a private school bus that ran a stop sign or failed to yield the right of way.

“The preliminary information that we have is that the driver of the school bus who was headed northbound on 78th either ran the stop sign or failed to yield the right of way leaving the stop sign causing a collision with a Toyota truck that was westbound on Harrisburg being driven by an off-duty HPD sergeant,” said Capt. Robert Manzo with the HPD.

But witnesses to the accident stated that the bus did not run the stop sign. A number of witnesses, including Teresa Argueta, the driver of the bus, stated that they saw open containers in the officer’s truck. “He smelled drunk. He got beer and wine open in the truck,” Argueta told members of the media.

The officers on the scene defended the sergeant, later identified as Ruben Trejo, against accusations of drunk driving. Argueta was instead cited for failure to yield. When Argueta and others attempted to take pictures of Trejo’s truck they witnessed officers covering the alcohol with towels and were threatened with arrest if they did not move away. By this point a number of officers had formed a line away from the vehicle and would not allow any one to approach.

Still insisting that there was no alcohol or other illegal substances involved in the accident, Capt. Robert Manzo made another statement to the press. “We have full confidence in the fact that there would not be any substances of concern found on the sergeant.”

What we now know is that Sgt. Trejo actually had a blood alcohol level nearly three times the legal limit. We know that he returned to work for nearly two weeks after the accident as if nothing had happened. Executive Assistant Chief Dirden, who is over the Internal Affairs division (“IAD”), admitted in an interview with Channel 13 that none of the officers on the accident scene, including Capt. Manzo, had reported any information from which IAD could open an investigation. If fact, it was not until Teresa Argueta, the driver of the bus, and Channel 13 started asking questions that any investigation was opened.

We know that Capt. Robert Manzo and a number of the officers on the accident scene were, in fact, aware at the time that there was alcohol in Sgt. Trejo’s truck based on pictures that were taken of the truck and accident scene.

Given the damage to the truck, the lack of visible skid marks on the road, and the distance the bus was thrown by the impact we can conclude that Sgt. Trejo took no evasive actions. From the statements in Officer Don Egdorf’s Affidavit, we can also conclude that Sgt. Trejo was likely traveling at an high rate of speed.

We also now know that Sgt. Trejo arrived at the hospital with a blood-alcohol content of .205 – nearly three times the legal limit. We know that Sgt. Trejo was only minutes from climbing behind the wheel of an HPD vehicle where he was to supervise an entire shift. We know that Sgt. Trejo was not placed under arrest at the time of the accident or at the hospital. And finally, we know that Capt. Robert Manzo, the supervisor and ranking officer on the accident scene failed in his duty to report any of this to his supervisors.

This is not the first time we have run across Capt. Robert Manzo in the middle of a cover-up. In a report on the failure of IAD in preventing officer retribution, then Lt. Robert Manzo took an active role in covering up for an officer under his command who participated in the theft of two vehicles and other personal property totaling in excess of $176,000. None of the property or vehicles was ever recovered.

We grant the men and women of the Houston Police Department the greatest power that can be granted under our constitution: the power to decide and act to take the life of another citizen. This is arguably the most profound relationship of trust that a society creates, and it exists for good reason. Police officers must enforce the law against the most unethical of people. They test their resolve, convictions, intelligence and exhibit great courage – to the point of risking their lives – to do so. A violation of that trust inevitably results in an immediate chilling and disturbing effect on the public.

Each and every decision Capt. Manzo made on April 13th was a violation of the public trust. His efforts to cover up Trejo’s crimes began as soon as he arrived at the accident scene. He used his rank and position to direct the actions of the officers under his command to assist with this cover up insuring the omission of particular information in their reports and eventually falsifying his own report. Manzo had to be aware that Trejo has been named at fault in four accidents in 1990, 1992, 1999 and 2000. Yet his intention was to cover up this accident thereby insuring that Sgt. Trejo would be back out on the streets of Houston with an unsuspecting public.

Captain Robert Manzo

Capt. Manzo’s job on the accident scene was to protect the public. He chose instead to protect his officers facilitating a criminal cover up of Sgt. Trejo’s crimes. Without any consideration regarding its effect on her livelihood as a bus driver, Teresa Arguete was cited for failure to yield. Such a citation is an at fault citation shifting the insurance liability for the accident and Sgt. Trejo’s hospital bills and to Teresa Arguete’s policy.

Captain Robert Manzo should be charged with official misconduct for his role in attempting to cover up a car accident resulting from driving under the influence of alcohol. Additionally he should be charged with official misconduct, conspiracy to commit official misconduct, conspiracy to commit insurance fraud and insurance fraud if Teresa Arguete’s insurance policy pays a claim.

The Trejo charges may not stick

When Trejo arrived at the hospital he was not under arrest and thus HPD did not have access to his blood tests. Texas law only allows warrantless access to blood tests run by the hospital specific to blood alcohol levels if the driver of a vehicle under suspicion of DWI is transported to a hospital from an accident scene and there placed under arrest. Because Sgt. Trejo was not placed under arrest, all of his medical records are private and require his actual consent before they can be released.

The privacy of the tests run at the hospital on Sgt. Trejo’s blood alcohol level had an additional benefit for Capt. Manzo in that Trejo’s level of intoxication would never show up to contradict Manzo’s version of the accident. We do not need to read Manzo’s report to know what information he omitted. We know this by both by Sgt. Trejo returning to work without any charges being filed against him and from Chief Dirden’s admission on April 25, 2007, that none of the officers on the scene reported any information from which IAD could open an investigation.

Only after Teresa Arguete and a local television station continued to ask questions did HPD finally open an investigation. On April 25th, nearly two weeks after the accident, Sgt. Ruben Trejo was charged with DWI based on the investigation by HPD Officer Don Egdorf.

This is a copy of the Affidavit given by Officer Egdorf establishing probable cause to support the charge. The last paragraph of the Affidavit states that the officer requested a Grand Jury subpoena for Sgt. Trejo’s medical records from the hospital where Trejo was treated after the accident. Those records apparently included a toxicology report establishing Trejo’s blood alcohol level of .205. EmPac Texas spoke with a DWI attorney who saw a number of potential problems which could result in the charges against Trejo being dropped.

It is clear from the Affidavit that the sole purpose of the Grand Jury subpoena was to collect medical records for Officer Egdorf’s use in his investigation and not to bring documents before the Grand Jury as part of a grand jury investigation. It is unlikely that a grand jury was even seated and investigating this matter. As such the subpoena was improperly issued and represents an abuse of process by Officer Egdorf.

The assistant district attorney that signed the subpoena in this case similarly abused the grand jury subpoena power by issuing the subpoena at the sole request of the investigating officer. The prosecutor’s power to subpoena can not be used as a tool for police to obtain records that require the consent of the patient. The Texas Legislature has not chosen to vest police officers with subpoena power, and it would circumvent that legislative judgment to allow the police to make use of the grand jury process in order to do indirectly what they cannot do directly.

Actual consent in a DWI case to obtain a blood sample is not constitutionally required where the accused is under arrest. But Sgt. Trejo had not been arrested. Thus access to Trejo’s medical records would seem to require Trejo’s actual consent.

A grand jury subpoena is one of the State’s most powerful tools. The prosecutor and the investigator stepped outside the scope of their authority in abusing the power of the grand jury subpoena which may result in a ruling of an illegal seizure as it relates to the medical records. Without those records it is highly unlikely that the charges would stand.

A culture of patterns and practices

In the Chad Holley incident, if the video tape never emerged, the officers involved – including those that stood by and did not step in to stop the beating, would have never been called to answer for their part in such a heinous violation of individual rights. The patterns and practices ingrained in the culture of HPD would have shielded them from justice.

It is those same patterns and practices that allowed Sgt. Trejo to return to work as if nothing had happened until a citizen and a member of the media started asking questions. Nearly twenty officers and a Captain acted to cover up the crimes of a single officer at the expense of protecting the public.

It has become clear that an ingrained culture of oppression is pervasive in the Houston police department. That culture directly results from the shelter that Chapter 143 of the Texas Local Government code provides to officers. Officers know that under Chapter 143, nearly 70% of disciplinary actions are reversed or reduced making it unlikely that they would ever have to answer for misconduct. Chapter 143 allows Houston’s police officers to violate citizen’s civil rights with impunity comfortable that they will not be held accountable for their actions.

When faced with being forced to reinstate two of the officers he fired for their participation in the Chad Holley incident under the authority of Chapter 143, Chief of Police Charles McClelland underscored the basic denial of civil rights in a statement to the Houston Chronicle. “How can I protect the public?”

Houston, like dozens of other Texas cities, operates under Chapter 143 of the Texas Local Government Code. After progressives implemented civil service reforms under Chapter 143 in the 1940s and 1950s, Houston voted to adopt Chapter 143 as a mechanism to protect public servants against machine politics. While Chapter 143 applies to about 75 Texas cities, Subchapter G of the Act, under which Houston operates, applies only to the City of Houston.

Over the past 30 years, police unions succeeded, one step at a time, in convincing the state legislature to change Chapter 143, reshaping it into a legal device which acts to shield officers from responsibility for their actions. Chapter 143 enables these pattern and practices by removing potential consequences from an officer that acts to violate a citizen’s civil liberties.

Given the strength of the police unions around the state, it is unlikely that Chapter 143 will ever see legislative correction. It will take a suit in federal court against the city by a citizen like Chad Holley or Teresa Arguete whose rights have been trampled. Under either the Equal Protection Clause or the due process clauses, where a law infringes upon a fundamental right, the Court subjects the law to close scrutiny. The Court presumes that a law that restricts a fundamental right is unconstitutional, and the state may only prove that the law is constitutional by showing that the law is “narrowly tailored” to further a compelling governmental interest. This standard is very difficult for the government to overcome.

Given the Trejo Cover up and the Chad Holley experience, it is doubtful that Chapter 143 would survive the Court’s scrutiny.

Part II: Shielded from Justice: Who Polices the Houston Police?

2011-02-12T14:07:00.000-06:00

Part II: Shielded from Justice: Who Polices the Houston Police?

Shortly after Project 143 began this series, the city of Houston experienced first hand the predictable results of a police force unaccountable to the citizens with the public release of the Chad Holly tape. The bottom line is that the Houston Police Department lacks effective public accountability and transparency (open and public sharing of information and documentation) and has repeatedly failed to appropriately respond to officers who have committed such violations.

The Report Regarding the Failure of IAD in Preventing Officer Retribution offers frighting insight into police retaliation against citizens of Houston for filing complaints with HPD’s Internal Affairs. It is also further evidence that this behavior is part of a pattern or practice instituted in the chain of command of the Houston Police Department.

Read the rest of the article at empactexas.org.

Shielded from Justice: Who Polices the Houston Police?

2011-02-02T17:07:00.001-06:00

Shielded from Justice: Who Polices the Houston Police?

This is a wonderful article from a watchdog group at EmPacTexas.org and worth the read.

The Human Side of the Forclosure Crises - The Houston Texas Story

2010-10-15T04:21:00.006-05:00

Next week I will be focusing on the current foreclosure fraud in an effort to demonstrate the underlying mortgage fraud that the major banks are only just beginning to understand is behind the foreclosure abuses in the market. Before moving to a clinical approach however, I think it is imperative that we understand the type of people that knowingly seize family homes without any proper authority.

The following link is representative of exactly what happens when a real estate agent, motivated by profit, improperly seizes a home. Whether or not their actions are proper, once the agent labels the home owners with the “foreclosure tag,” their rights in the eyes of the authorities evaporate. The home owners become the people that “lost their house,” “were foreclosed on,” “didn’t pay their note,” or any number of other identifiers through which their ability to defend their property is literally removed.

The Houston, Texas, case demonstrates how far police and other authorities are willing to go without questioning real estate agents or their actions. Their use of the word "foreclosure" seems to be the only authority needed. When the home owner showed documents demonstrating the real estate agent as wrong, he was promptly arrested under suspicion of creating forged or fraudulent documents. The unfortunate reality is that once labeled with the “foreclosure” tag there is little that the home owner can offer in their defense on which authorities will act. The Supreme Court delt with this exact issue, point for point, in the landmark case SOLDAL v. COOK COUNTY, 506 U.S. 56 (1992).

In Soldal, Terrace Properties forcibly evicted the Soldal family and their mobile home from a Terrace Properties' mobile home park. Cook County, Illinois, Sheriff's Department deputies were present at the eviction. Although they knew that there was no eviction order and that Terrace Properties' actions were illegal, the deputies refused to take Mr. Soldal's complaint for criminal trespass or otherwise interfere with the eviction. Petitioners brought an action in the Federal District Court under 42 U.S.C. 1983, claiming that Terrace Properties had conspired with the deputy sheriffs to unreasonably seize and remove their home in violation of their Fourth and Fourteenth Amendment rights. After making its way through the appellate courts, the Supreme Court issued the following decision.

“The complaint here alleges that respondents, acting under color of state law, dispossessed the Soldals of their trailer home by physically tearing it from its foundation and towing it to another lot. Taking these allegations as true, this was no "garden variety" landlord-tenant or commercial dispute. The facts alleged suffice to constitute a "seizure" within the meaning of the Fourth Amendment, for they plainly implicate the interests protected by that provision. The judgment of the Court of Appeals is, accordingly, reversed, and the case is remanded for further proceedings consistent with this opinion.”

The case itself is fascinating reading. The Court uses the illegal eviction to define the Fourth Amendment in a context that affects each and every one of us every time we lock our doors at night. Soldal is directly on point with The Houston case and demonstrates how any show of defense of property displayed by the home owner results in his arrest. The home owner in the Houston case eventually demonstrates the fraud in civil court, but not before being arrested for trespass, loosing his home, having his cars, business inventory and personal property seized by the police and real estate agent – none of which was ever recovered.

What the Houston article also demonstrates is the length to which the officers involved will go in order to avoid their part and responsibility. Fortunately, each and every action taken by the authorities in this matter simply serves to toll the statutes under which the victims in this matter will eventually file in civil court.

As disturbing as this case is, it is far from isolated. Next week’s article will touch on many of the players as we explore mortgage fraud as the bases for the current foreclosure crisis.

Synthetic Identity Theft

2010-10-14T00:34:00.000-05:00

Identity theft is a crime through which the perpetrator acts illegally to obtain the available credit of another.

An individual’s available credit represents more real value than its hard currency counterpart. The amount of total available credit an individual has can be traded for services, educational choices, social access, and access to privileges and perks not available to those with less available credit.

Available credit can be exchanged for its hard currency counterpart at any time but the cost of doing so is staggering. Currency depreciates at 7.5% per year immediately impacting the exchange. Consumer products acquired through the exchange realize additional depreciation in value and efforts to free up your available credit comes at the expense of interest and fees. The cost of making the exchange is a personal and weighty decision.

Traditional identity theft is a fraud through which the perpetrator obtains the social security number, date of birth and any other information needed to access and quickly deplete the victim’s available credit and quickly move on to another victim.

However, there is a new type of identity theft only now beginning to be noticed by law enforcement – Synthetic Identity Theft. Synthetic identity theft happens when a thief steals bits and pieces of information from different people and creates a wholly new and unique identity. This usually happens when your social security number is used with a different name, date of birth and driver’s license. Because of all of the mismatched information, detecting synthetic identity theft can be nearly impossible.

Using your social security number (“SSN”) criminals can open new bank accounts, obtain credit cards, mortgages, obtain employment and live in the plain light of day. These accounts and actions never show up on your credit report because credit reporting systems require matching information such as an SSN and name or address. All the different pieces of information confuse and pollute the existing credit reporting and law enforcement systems. In effect a new person has been created with a substantial available credit that the criminal then launders through any number of schemes seemingly with no victim.

However, it can get serious if your social security number gets into databases designed to flag criminals. Unfortunately, the fact that you were a victim of synthetic identity theft usually shows up when a typical background check is done. Your SSN can show that you are accused of the crime. Unlike traditional identity theft, here the different name attached to the number will not automatically prove your innocence and you will be accused of using an alias. You can easily be turned down for jobs, mortgages, club memberships and suddenly find yourself identified as a criminal even if you’re able to prove it wasn’t you.

Synthetic fraud is quickly becoming the more common type of identity fraud, surpassing traditional identity fraud. In 2005, ID Analytics reported that synthetic identity fraud accounted for 74 percent of the total dollars lost by U.S. businesses to ID fraud and 88 percent of all identity fraud "events" -- for example, new account openings and address changes. Unethical mortgage originators have developed this into an art form allowing them to create invisible straw buyers at arms length shielding them from prosecution.

Synthetic identity theft is a very sophisticated crime where perpetrators can spend years cultivating and building the available credit of the new identity. As the bailout of Freddie Mac and Fannie Mae continue, investigators have begun to uncover a massive amount of mortgage fraud. These new identities are being used to buy and sell properties in flipping schemes, double-selling schemes and assignment fraud. The mismatched information typically makes the criminals nearly invisible to law enforcement and, without the clear-cut victim to complain of the crime, synthetic identity fraud represents a major threat to our current economic markets.

Here is a very small example of Synthetic ID's we found from the Department of Motor Vehicles in Texas with little effort. Duplicate names were left in the list intentionally as these represent the same "person" with the same date of birth at the same address with different and current driver's license numbers - impossible in Texas without presenting 2 different SSN's. The majority of the others, regardless of the age, show that their current license is their first and original license. However, the most obvious indicator is that they all apparently reside at the same address.

Synthetic identity theft rewards the criminal at the expense of the tax payer and the economy. We see banks like Sterling Bank out of Overland Park, Kansas buying huge numbers of mortgage loans from mortgage banks in Texas, Florida and other states that turn out to be taken out under a synthetic identities. The properties were overvalued many times over their actual market value – if they existed at all. Many of the loans were simply fraudulent loan packets, the valid loan and security having been prior sold to other banks and a huge number of the loans Sterling Bank purchased immediately rolling into foreclosure. When banks like these inevitably close under the unrecoverable mortgage portfolios, the tax payer bears the cost.

Freddie Mac and Fannie Mac have yet to begin to disclose the impact of loans purchased from mortgage originators using this scheme. However, reading their last annual report makes it clear that they are expecting the worse.

We need banking and financial market regulations able to detect and stop synthetic identity fraud. Institutional self-regulation has absolutely failed and the cost of that failure is ours. Our economy and financial markets depend on the smooth and regular flow of finance. Not only does synthetic identity fraud unravel everything, but it is perhaps of greatest consequence to those who concern themselves with the certain, predictable and fluid flow of commerce – our banks and economic markets.

Mortgage Modification Fraud / Assignment Fraud

2010-10-05T04:19:00.000-05:00

Unlike the loan modification problems facing home owners recently, this fraud scheme is targeted at home owners who entered into a loan modification agreement between 2002 and 2007. If you modified your loan between these years you might want to dig out your paperwork because you may be in for a big surprise.

This scheme to defraud begins when the loan is closed and initially involved the escrow account set up with the servicer of the loan for the payment of insurance, property taxes and mortgage protection insurance. Part of the closing costs buyers are required to bring to closing was the portion of the property taxes owed from the date of the purchase of the property through the end of the year. The seller was required to pay for the property taxes from the first of the year to the day they sold the property.

The closing agent should have collected the taxes from both the buyer and the seller and deposited them into the escrow account per the escrow instructions thus insuring that the funds were available in that account to pay property taxes at the end of the year. As you are aware, there is an additional amount added to loan payments every month which is deposited in an escrow account each month insuring that, year after year, the property taxes, property insurance and mortgage protection insurance are paid and kept current.

It appears that originators like Memorial Park Mortgage in Houston, Texas were under-funding some loans by the exact amount that the seller owed for their portion of the property taxes. This was fraudulently concealed buyers at the time by a cleaver accounting entry that transferred a credit from the seller’s side of the ledger to the buyer’s side of the ledger. Originators like Memorial Park Mortgage then instruct the closing agent to only fund the escrow account with the buyer’s portion of the property taxes. The effect of this is that the seller fulfilled their obligations in paying their portion of the property taxes. The buyer received a credit from the seller thereby transferring the tax obligation to the buyer which should have caused a closing surplus in the buyer’s favor. However, because Memorial Park Mortgage under-funded the amount they sent to the closing agent by the exact amount of the seller’s tax obligation, it appeared as if all the closing transactions balanced.

In effect, Memorial Park Mortgage stole an amount equal to the property taxes owed by the seller at closing. Further, buyers have been repaying a loan greater than the amount that you actually received.

Immediately after the loan closed the originator would sell the loan to Freddie Mac.

Sometime after January of the following year, buyers are contacted by the loan servicer and told that although the property taxes were paid from the escrow account, this payment caused a shortage in escrow. The shortage was the amount of taxes that Memorial Park Mortgage cleverly transferred as a credit from the seller to you at closing and then instructed the closing agent not to deposit to the escrow account. Many home owners who were victims of this fraud contacted their closing agent and were told that they had received a credit from the seller at closing and therefore the taxes had been their obligation. What they were not told is that, had Memorial Park Mortgage funded the full amount of the loan, the credit from the seller would have resulted in a surplus that should have been deposited in their escrow accounts.

The loan servicer would not have required an escrow account to be set up and then allowed it to be under funded. Because of this they assumed that the shortage must necessarily have been caused by some other condition such as in increase in the property value. Accordingly, your servicer required buyers to not only cover the shortfall in the escrow account but this shortfall amount was doubled to insure that the shortfall did not reoccur the following year. This amount must be paid out over 12 months thus the loan payment increased by nearly thirty (30%) percent.

Mortgage originators like Memorial Park Mortgage are in a unique position to know exactly how much buyers can afford to pay each month as well as what would likely occur if the monthly note each month increased by the shortfall they created in your escrow account at closing. After several months of paying the increased payment, many home owners fell behind on the note and began receiving foreclosure notices from Barrett Burke Wilson Castle Daffin & Frappier, LLP (“Barrett Burke”) claiming default.

At the same time home owners were contacted by Loan Servicing, a company in Dallas, Texas working with their client, Freddie Mac, in order to help you stay in your home, the result of which was an agreement to enter into a modification of the original promissory note signed at closing. Once approved for the modification, paperwork would be forwarded to Barrett Burke for buyer’s signature and buyers are required to pay the “closing costs including title insurance.”

If you originally worked with Loan Servicing from Dallas, Texas to modify your loan, a quick check of your loan modification agreement may show that the owner of the loan is listed as someone other than Freddie Mac. If it does, Barrett Burke may have worked in conspiracy with your mortgage originator and induced you to sign a Loan Modification Agreement with some other investor by fraudulently concealing the true owner of your note. This is actually a new loan.

As you can see from this copy of a Loan Modification Agreement, Principal Residential Mortgage is noted as the lender. This corresponds with the Assignment of Deed of Trust in the county records filed by Memorial Park Mortgage a short time after the Loan Modification Agreement was signed. This action by Memorial Park Mortgage is an essential part of the fraud as it, along with the Loan Modification Agreement, serves to illegally attempt to change the ownership of your loan to someone other than Freddie Mac.

Note on this copy as well as this copy of Modification Agreements that the Loan Servicing information from Dallas printed on the copy has been covered over by information from First American Title Company on the copy filed with the county. Note that AmeriStar Title also played a part in the scheme. AmeriStar Title is owned by Barrett Burke and we can explain to your attorney how they and First American Title participated.

Many of the victims we have spoken to were unable to keep up their payments after their monthly payments increased and they were eventually foreclosed on by Principal Residential Mortgage fraudulently acting as the owner of their note.

In these examples Principal Residential never owned these notes and was only servicing it for Freddie Mac. Memorial Park Mortgage sold the original note to Freddie Mac, the ownership of which was transferred to Freddie Mac under an irrevocable power of attorney executed prior to closing that forever transferred the rights to sell the loan from Memorial Park Mortgage.

The original shortfall in the escrow was caused by Memorial Park Mortgage’s theft from the funds they owed to you due at closing. In addition to being caused to pay back the money that Memorial Park Mortgage stole, these home owners have been paying notes based on a loan amount that they never received because of Memorial Park Mortgage under-funding the loan at closing.

If your loan modification agreement exhibits these same elements, you should contact an attorney.

The Obvious Side of the Double-Selling Fraud

2010-09-25T18:40:00.000-05:00

Once you are able to identify the elements that indicate Double-Selling fraud, you can quickly recognize those loans in the property records that stick out like a sore thumb. Here are a few examples of what you should be looking for.

This is a loan to Claudia Spofford, table-funded by FREDDIE MAC through their agent, Memorial Park Mortgage of Houston, Texas who subsequently delivered the loan to FREDDIE MAC. Through a “Double Selling” scheme, Memorial Park Mortgage sold and assigned a second set of forged documents to ABN Amro Mortgage Group. Then, eighteen months later, Memorial Park Mortgage then sold it a third time to Principal Residential Mortgage.

This is a loan to Steve Nucci, table funded by FREDDIE MAC through their agent, Memorial Park Mortgage who subsequently delivered the loan to FREDDIE MAC. Through the same “Double Selling” scheme, Memorial Park Mortgage sold and assigned a second set of forged documents to ABN Amro Mortgage Group. Apparent from the record, Memorial Park Mortgage then sold and assigned a third set of forged documents to Principal Residential Mortgage, evidenced by the Release of Lien filed by Principal Residential Mortgage a year later. Oddly, Memorial Park Mortgage then did the impossible and sold and assigned for a fourth time to Principal Residential Mortgage a loan that had been paid off and released to Principal Residential Mortgage three months earlier.

Finally, this is a loan to James Endler, table-funded by FREDDIE MAC though their agent, Memorial Park Mortgage who subsequently delivered the loan to FREDDIE MAC. Through the same “Double Selling” scheme, Memorial Park Mortgage sold and assigned a second set of forged documents to ABN Amro Mortgage Group. Apparent from the record, Memorial Park Mortgage then sold and assigned a third set of forged documents to Washington Mutual evidenced by the Release of Lien filed by Washington Mutual two years later. Special attention should be paid to the return address on the Washington Mutual Release. This address is registered to a number of different companies such as Vertex Computer Solutions, The Houston Police Foundation and several telephone repair companies - and oddly, FREDDIE MAC, all under the control of Charlene Floyd. Washington Mutual has no record of this address.

It should be noted that in 2004 Wells Fargo sued Memorial Park Mortgage alleging a similar fraud involving 54 loans Memorial Park Mortgage sold to Wells Fargo. The suit was dismissed by Wells Fargo following an undisclosed settlement.

Freddie Mac Mortgage Fraud - Double-Selling and Assignment Fraud

2010-09-21T05:22:00.000-05:00

In determining whether a particular loan is part of a “double-funding” or “double-selling” scheme, examiners and forensic accountants look for as evidence that a mortgage originator is engaging in this scheme and participating in a pattern of deception, forgery and fraud. Once demonstrated, these indicators inevitably point to fraudulent affidavits and assignments of mortgages filed in the public records.

As you examine your loan documents you should be looking for the following:

1. Loan originators, servicers and their lawyers forge documents with "squiggle marks" that are not the marks, initials or signatures of the actual officer that is notarized to be the signatory.

2. Signature, initials or "squiggle marks" differ for the same signatory from document to document.

3. Squiggle marks and full signatures that are diametrically opposed to the known signature of the signatory.

4. Pre-stamped assignments and notary signatures on assignments, affidavits and proof of claims.

5. Back-dating of dates on assignments and signatures of officers dating years after either a company is no longer in business or the officers are no longer with the company.

Examples of this can be seen here. Notice that the notary swears under oath that they witnesses the signature on these documents in 2001. However in the State of Texas, notaries are commissioned for 4-years. The notary stamps on these documents expires in 2006 making it impossible for this notary to have witnessed anything in 2001. Again, these are all loans originated by Memorial Park Mortgage, sold to Freddie Mac and then, as demonstrated here, other banks on forged and fraudulent assignments.

6. The forgery of forbearance agreements and modification agreements.

7. Missing assignments or multiple assignments of the same instrument filed in the public records are a direct result of multi-pledging and the use of the same collateral, the mortgage loan, to pool into securities or pledge for other financing and should be viewed as an overt act of fraud when encountered.

As an example, Freddie Mac was finally compelled by a court to admit to purchasing this particular loan even though no assignment to Freddie Mac was ever filed in the public records.

8. The discovery of pre-dated, backdated and fraudulent assignments of mortgages or endorsements either completely filled in or left blank to be filled in before or after the fact to support the future allegations of a foreclosing party. These fraudulent assignments are typically discovered by examiners in the servicers files or MERS files when MERS acts on the servicers behalf. These documents are created for the sole purpose of assisting in concealing known frauds and abuses by originators, prior servicers and are designed specifically to conceal the true chain of ownership of a borrower's loan.

Here is an example from a loan from Memorial Park Mortgage of Houston, Texas that was first sold to Freddie Mac and then to several other banks by the originator. Notice that the bank to whom the assignment is made is left blank as are the instrument number and several other blanks. More importantly, notice that the assignment has already been signed and notarized. This document was produced in discovery by CitiMortgage even though an assignment to them already existed in the public records.

9. No escrow instructions or settlement statements should trigger the examiner to immediately attempt to locate the assignment of the mortgage. Multiple or missing assignments coupled with an inability to produce escrow and settlement statements demonstrate a deliberate concealment of the ownership of the borrower's mortgage debt obligation and the actual lender to whom the borrower is indebted.

10. Lack of possession of the original note demonstrating the proper chain of title and legal right to foreclose should be noted as evidence of fraud. Coupled with a missing assignment or multiple assignments is further evidence of the existence of fraud.

A common practice by some banks party to or victims of this kind of fraud is the fraudulent concealment from the court and the borrower that the financial institution does not have possession of the note. Of special note is the use of known false, fraudulent, and forged affidavits and assignments by those institutions unable to demonstrate their possession of the original note.

The effects and implications are more far reaching than a borrower simply having their debt extinguished. Debt extinguishment or dismissal of foreclosure actions could be obtained if it can be shown the entity filing the foreclosure:

1. Does not own the note;

2. Made false representations to the court in pleadings;

3. Did not have the proper authority to foreclose;

4. Does/did not have possession of the note;

5. All indispensable parties (the actual owners) are not before the court or represented in the pending foreclosure action.

This kind of fraud is not difficult to detect once you know the indicators.

Mortgage Fraud - "Double-Funding" or "Double Warehousing" and Assignment Fraud

2010-09-10T23:33:00.000-05:00

The Federal Home Loan Mortgage Corporation, otherwise known as Freddie Mac, has been at the center of the sub-prime lending fiasco since the government takeover of the company in September of 2008. The funds being committed by Congress to bail out Freddie Mac and its much larger sister company, Fannie Mae, are staggering. The initial $741 billion approved by Congress grew by almost $100 billion immediately. Divide that money up among every American citizen old enough to vote and we would receive $2.9 million each.

Sub-prime lending is only a part of the overall problem at Freddie Mac. What is now beginning to surface are the losses attributed to the massive amount of fraud that mortgage originators created and passed on to Freddie Mac. This blog focuses on two specific types of origination fraud know as “Double-Funding” or “Double Warehousing” fraud and Assignment Fraud.

“Double-Funding” involves a mortgage originator sending simultaneous funding requests for the same loan to two different warehouse lenders. Both warehouse lenders, unaware of each other, would send funding for the loan to the title companies specified by the mortgage originator. The mortgage originator then disburses the money from one lender to the borrower, while directing the title company to wire the money received from the other lender to mortgage originator’s bank account. The mortgage originators then provide fabricated mortgage documents to the warehouse lenders that falsely represented that the lender’s funds had, in fact, been used to finance borrower loans.

Assignment Fraud involves modifications to the original loan where the name of the bank who actually owns the note is changed on execution of the Loan Modification Agreement. The problem with these “modifications” (actually new loans with new “lenders”) is that the old loans remain unaffected. The existing cloud on title to the property, the mortgage deed (or deed of trust), the note, the obligation, the purported assignments etc. is being compounded by attempts to allow impostors to foreclose on the mortgage, collect on the note, modify the loan, or approve a short sale. The time bomb is title where securitized loans were recorded, foreclosed, modified or sold. The parties (other than the borrower and possibly the Trustee on the Deed of Trust) had actual knowledge that the “lender” was not the Lender, the terms of the obligation were already changed at the time of closing, the appraisal was false, the underwriting was negligent or fraudulent, the Good Faith Estimate was by definition rendered neither in good faith nor even close to an accurate estimate, and the list goes on and on.

This blog will attempt to give you to tools and examples to research whether you or your client has been made a victim of these types of fraud.