Conned On The Front End, Conned On The Back End, Be Careful Out There Folks

[Mary Salzer]

CONNED INTO A DEEPER MORTGAGE MESS
By LOREN STEFFY
Copyright 2007 Houston Chronicle



This is an ugly story of exploitation and deceit.

It involves a Dallas-area couple who tried to fend off foreclosure on their home and wound up victims of a scheme that preys on the desperate.

Financial calamities tend to attract con men, and the mortgage mess is no different. It's given rise to what U.S. Bankruptcy Judge Stacey Jernigan in Dallas called a "new cottage industry of bottom feeders" in an order she issued late last year.

Bankruptcy attorneys in Houston and nationally told me they've seen variations of the scheme rising with the foreclosure rate.

Here's what happened, according to Jernigan's order:

Michael and Brenda White of Mesquite filed for Chapter 13 bankruptcy — a reorganization of personal debts — in June 2006.

Three years earlier, they'd bought a home with an adjustable-rate mortgage, which they were no longer able to pay. Under court protection, the couple worked out a plan for new payments and to repay what they owed.

Within six months, however, the Whites fell behind again and defaulted on the mortgage, which was being administered by HomEq Servicing in Sacramento, Calif. HomEq notified the couple in January 2007 of a foreclosure sale in early February.

"However, some intervening events occurred ... that are disturbing but not unfamiliar to this court," Jernigan wrote.

On the day of the Whites' foreclosure sale, HomEq received a notice that the couple had conveyed a 1 percent interest in their home to a woman in California named Chaka Casey, who had then filed for bankruptcy.

Casey's bankruptcy put a "stay" on all creditor claims, which included HomEq's foreclosure proceeding against the Whites' property.

Here's the catch: Casey, who filed her bankruptcy without an attorney, swore under oath that she didn't know the Whites and didn't buy an interest in their home. What's more, her list of assets in the bankruptcy case didn't mention it.

HomEq told Jernigan it sees the practice several times a month. Almost always, the bankruptcies are filed without an attorney, a practice known as pro se. The debtors, without an attorney to monitor their case, have no idea that their bankruptcy filing is being used in the foreclosure scheme. In the Whites' case, for example, no interest was actually conveyed to Casey.

To understand how all this happened, we have to back up a couple of months, to the time when the Whites defaulted on their mortgage. As the threat of foreclosure loomed, they were bombarded with offers, costing as much as $2,000, to fend off foreclosure.

Documents and dates
Desperate to keep their home, the Whites chose a company called North American Foreclosure, which assured them its service was legal.

It drew up papers indicating the Whites were conveying 1 percent of their home to Casey. Casey had already filed for bankruptcy, but North American apparently backdated the documents to make it appear as if the conveyance occurred before she filed, the judge's order said.

Then, North American notified HomEq to stall the foreclosure on the Whites' property.

The Whites agreed to pay North American $650 a month until the 1 percent interest it claimed to have transferred to Casey was repaid.

Part of that money, the Whites were told, would go to HomEq. HomEq said it never received a dime.

The Whites made two payments before their bankruptcy attorney, who had been unaware of the arrangement, intervened.

All numbers for North American have been disconnected, Jernigan's order said.

No one directly involved in the case, including HomeEq, has returned my calls in recent weeks.

Judge takes action
In her order, Jernigan warns bankruptcy attorneys to alert their clients to similar schemes. She also referred the case to federal and state authorities. A spokesman for the Texas Attorney General's Office confirmed an investigation into the case but declined to comment further.

Jernigan also demanded that North American's representatives appear at a hearing, but all correspondence to the company has been returned as undeliverable, court records show.

The attorney general's office has asked Jernigan to hold in contempt a Dallas-area man who met with the Whites on North American's behalf and who has failed to comply with the AG's subpoena. A final hearing to resolve the matter is scheduled for next month.

And the Whites? While sympathetic, Jernigan cleared the way for foreclosure. The couple lost their home as well as $1,300 to the North American scheme.

"The Whites have been naively duped in this matter and have not themselves knowingly or fraudulently participated in acts that might be described as a bankruptcy crime," Jernigan wrote.

They simply wanted to keep their home, feeling that they had exhausted all other options. In their hour of desperation, they found only false hope and became victims.

[Bucklest]

That is such a sad story..

My question is, WHY do judges sit idley by and allow these crooks to do their thing? Why didn't the judge allow these people to keep their home? What do people have left to believe in and to trust?

It's so sad what America has come to.

[Mary Salzer]

It is sad, but given the path we are headed down the only way to cure it is to get constructively MAD. Constructively means that "we aren't going to take it anymore" and start each and everyone of us in our own way to make change happen.

That means, voting and voting for the guy that appears to be REAL, not some puppet that they put up so that whomever "they" are can pull the strings. Voting and grass roots organization on a Local level, the basis on which this country was actually founded. Turn off the TV and get out and roll up our shirt sleeves and make change.

This is a situation around which a Change could occur if there are enough concerned and active people that are willing to go out, make some very pointed statements in mass and bring about Change. Frankly if we do not do it soon, it may be impossible to ever bring about Change to the system and we are stuck with what we got. And it ain't much.

[mreedlaw]

It sickens me too - I believe that through consumer education (combined with bringing back punishments such as hanging, tarring and feathering and the stockades...said tongue-in-cheek), may be able to combat this type of behavior.