Scams to try to cash in on the $25 billion settlement with the nation's largest lenders have already begun, and the deal was finalized just last month.
The Arizona attorney general is warning consumers to watch out for companies contacting them about the settlement. People who are eligible for part of the settlement will be contacted directly by one of the five major lenders involved -- BofA, Citigroup, the former GMAC (now known as Ally Financial), JPMorgan Chase and Wells Fargo.
Arizona's portion of the settlement is $1.6 billion. About $1.3 billion of that amount will go toward principal reduction on mortgages and won't be cash paid directly to the state or consumers.
Only borrowers with loans owned by the five lenders involved are eligible for aid from the national settlement, and those lenders are responsible for contacting eligible homeowners in the coming month to offer assistance.
"Consumers should be aware that scammers are already using the media coverage of the settlement to exploit homeowners by promising quicker assistance in obtaining the refinancing, principal reduction or cash payments available to eligible consumers under the settlement," Arizona Attorney General Tom Horne said in the consumer alert issued earlier this week. He warns consumers to be wary of any unsolicited contact about the settlement.
Here are tips from the Attorney General's Office to help consumers eligible for the settlement avoid scams.
Beware of anyone calling and asking for your routing number, checking-account number or other financial information over the phone. Lenders will not do that.
You may receive legitimate mail from your servicer regarding the settlement if your mortgage loan is serviced by one of the lenders in the settlement. If you do receive a call or mail regarding the settlement, examine it closely to make sure it's the same entity handling your mortgage payments.
If you are unsure whether a caller is legitimate, ask for the person's name and title and say you are going to call your bank to confirm.
Here are numbers for the lenders involved in the settlement: Bank of America: 877-488-7814; JPMorgan Chase: 866-372-6901; Wells Fargo: 800-288-3212; CitiBank: 866-272-4749; GMAC/Ally: 800-766-4622.
Lenders also agreed to use part of the funds to reduce borrowers' interest payments and will issue $2,000 payments to people who lost homes in improperly managed foreclosures.
The national settlement does not extend to borrowers with loans backed by federal mortgage giants Fannie Mae and Freddie Mac, who make up more than half of all mortgage holders.
Federal officials estimate that 60,000 Arizona borrowers could see assistance with their principal or interest rates, and the national average for a principal reduction is $20,000 per mortgage.
Horne said homeowners whose mortgage balances are 175 percent or more of their current home values and who are current on their payments probably will be the first to receive principal reductions.
by Catherine Reagor, columnist - Apr. 27, 2012 03:07 PM The Republic | azcentral.com
Reagor: Lenders settlement spurs scams
Showing posts with label mortgage fraud. Show all posts
Showing posts with label mortgage fraud. Show all posts
Tuesday, May 1, 2012
Monday, February 13, 2012
Arizona gets $1.6 billion in mortgage fraud settlement
Marking a watershed day in the aftermath of the national housing crash, Arizona officials announced a pair of settlements with large banks over allegations of improper lending and foreclosure practices that will result in more than a billion dollars of aid for struggling homeowners.
Arizona's portion of a nationwide, $26 billion settlement with the country's five biggest lenders will be $1.6 billion, the third-largest share after hard-hit California and Florida.
Most of the money in that deal, announced Thursday after negotiations by attorneys general across the country, will be paid out by lenders in the form of principal reductions -- cutting the amount of money that certain borrowers are responsible for repaying on their home loans. Lenders will also dedicate part of the funds to reducing other borrowers' interest payments and will issue $2,000 payments to people who lost homes in improperly managed foreclosures.
A second, smaller settlement with Bank of America ends a state lawsuit over the bank's lending practices and will fund consumer protection and future investigation of mortgage lending.
The national settlement will not deliver assistance to every struggling homeowner. It applies only to mortgages held by the five large lenders and does not extend to borrowers with loans backed by federal mortgage giants Fannie Mae and Freddie Mac, who make up more than half of all mortgage-holders.
Still, federal officials estimate that 60,000 Arizona borrowers could see assistance with their principal or interest rates. And the settlement marks the first time lenders have agreed, on any large scale, to forgive money owed by underwater borrowers.
"These settlements will help Arizona homeowners and the state's economy that is so tied to housing," Arizona Attorney General Tom Horne said. "I think we are holding banks accountable."
Who benefits
Only borrowers with loans owned by BofA, Citigroup, the former GMAC (now known as Ally Financial), JPMorgan Chase and Wells Fargo are eligible for aid from the national settlement. The five lenders are responsible for contacting eligible homeowners in the coming month to offer assistance.
The deal requires the banks to reduce loans for about 1 million households that are at risk of foreclosure. The lenders will also send $2,000 each to about 750,000 Americans who were improperly foreclosed upon from 2008 through 2011. The banks will have three years to fulfill terms of the deal.
Borrowers who had loans originally issued by the five participating lenders but then had their mortgages sold to another bank aren't eligible.
About $1.3 billion of Arizona's $1.6 billion will go toward principal reductions. Federal officials estimate the national average for principal reductions will be $20,000 per loan. In Arizona, where home prices have fallen 60 percent, many homeowners are likely to be underwater by far more than $20,000.
Horne said homeowners whose mortgage balances are 175 percent or more of their current home values and who are current on their payments will probably be the first to receive principal reductions.
Nationally, at least $17 billion of the settlement is to go directly to reducing principal. Details on how much lenders will reduce the amount borrowers owe aren't available yet.
About $86 million of Arizona's share of the deal will go toward offers to modify borrowers' loans by lowering interest rates. An additional $110.4 million has been set aside to compensate Arizona borrowers who lost their homes to foreclosure from 2008 to 2011 and believe they suffered unfair treatment by lender servicers. Each borrower is eligible for $2,000.
Horne said that any former homeowner who thinks he or she qualifies for the $2,000 should contact the lender and that little documentation will be required to receive this compensation.
Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said 55,000 former Arizona homeowners will qualify for the $2,000 payments. During the housing crash, more than 175,000 borrowers have had Arizona homes taken back by lenders, though that figure includes loans held by Fannie and Freddie.
Arizona will receive $102.5 million to be used for mortgage-fraud investigations and consumer counseling.
Arizona State University's real-estate analyst Mike Orr said reducing mortgage principal for underwater homeowners will "significantly bolster the housing market" if it entices more people to stay in their homes and keep making payments.
Almost 50 percent of the state's homeowners are underwater, meaning homeowners owe more than their homes are now worth because values have plunged by more than half since the market's peak in 2006.
Patricia Garcia Duarte, president of the Phoenix-based housing non-profit Neighborhood Housing Services, said the settlement looks like a lot of money to help both former and current homeowners. However, she said the damage done to Arizona families and communities has been extreme.
"The funds will definitely help," Garcia Duarte said. "But how the funds are spent in Arizona will determine the success in our housing recovery."
BofA lawsuit
Arizona is also receiving $10 million through the settlement of a lawsuit with BofA over allegations of mortgage fraud and deceiving borrowers trying to obtain loan modifications.
The money will go toward funding criminal loan investigation and consumer education. Horne said it's not clear yet whether the BofA borrowers who served as plaintiffs will be compensated from the $10 million or the state's $1.6 billion from the national settlement.
The suit, filed in December 2010 by the state's attorney general, had to be reconciled for Arizona to participate in the national settlement.
"If we had continued to litigate the BofA lawsuit, we might have recovered more money," Horne said. "But the lawsuit could have taken another five to six years. By settling now and joining the national settlement, more homeowners will receive help sooner."
Enforcement
The deal establishes a regulatory group of local and federal government agencies. It calls for North Carolina's banking regulator Joseph Smith to monitor lenders for compliance.
Horne said lenders will be subject to hefty fines if they don't follow through with the actions to help homeowners laid out in the settlement.
Federal officials said states could receive more funding if more mortgage firms sign onto the agreement. One estimate is for the national settlement to grow to $40 billion if the next nine large lenders join in. The only state not part of the national settlement is Oklahoma. Arizona, California, Florida, New York and Nevada were the last states to join. Arizona's negotiations with BofA over the mortgage-fraud lawsuit went on until almost 11 p.m. Wednesday night.
President Barack Obama said in a speech Thursday that the $26 billion settlement will allow the nation's biggest banks, "banks rescued by taxpayer dollars," to right wrongs committed in making loans and foreclosing on homeowners during the past several years.
"These banks will put billions of dollars towards relief for families across the nation. They'll provide refinancing for borrowers that are stuck in high interest-rate mortgages," Obama said. "They'll reduce loans for families who owe more on their homes than they're worth. And they will deliver some measure of justice for families that have already been victims of abusive practices."
12 News reporter Melissa Blasius contributed to this article.
by Catherine Reagor - Feb. 9, 2012 09:28 AM The Republic | azcentral.com
Arizona gets $1.6 billion in mortgage fraud settlement
Arizona's portion of a nationwide, $26 billion settlement with the country's five biggest lenders will be $1.6 billion, the third-largest share after hard-hit California and Florida.
Most of the money in that deal, announced Thursday after negotiations by attorneys general across the country, will be paid out by lenders in the form of principal reductions -- cutting the amount of money that certain borrowers are responsible for repaying on their home loans. Lenders will also dedicate part of the funds to reducing other borrowers' interest payments and will issue $2,000 payments to people who lost homes in improperly managed foreclosures.
A second, smaller settlement with Bank of America ends a state lawsuit over the bank's lending practices and will fund consumer protection and future investigation of mortgage lending.
The national settlement will not deliver assistance to every struggling homeowner. It applies only to mortgages held by the five large lenders and does not extend to borrowers with loans backed by federal mortgage giants Fannie Mae and Freddie Mac, who make up more than half of all mortgage-holders.
Still, federal officials estimate that 60,000 Arizona borrowers could see assistance with their principal or interest rates. And the settlement marks the first time lenders have agreed, on any large scale, to forgive money owed by underwater borrowers.
"These settlements will help Arizona homeowners and the state's economy that is so tied to housing," Arizona Attorney General Tom Horne said. "I think we are holding banks accountable."
Who benefits
Only borrowers with loans owned by BofA, Citigroup, the former GMAC (now known as Ally Financial), JPMorgan Chase and Wells Fargo are eligible for aid from the national settlement. The five lenders are responsible for contacting eligible homeowners in the coming month to offer assistance.
The deal requires the banks to reduce loans for about 1 million households that are at risk of foreclosure. The lenders will also send $2,000 each to about 750,000 Americans who were improperly foreclosed upon from 2008 through 2011. The banks will have three years to fulfill terms of the deal.
Borrowers who had loans originally issued by the five participating lenders but then had their mortgages sold to another bank aren't eligible.
About $1.3 billion of Arizona's $1.6 billion will go toward principal reductions. Federal officials estimate the national average for principal reductions will be $20,000 per loan. In Arizona, where home prices have fallen 60 percent, many homeowners are likely to be underwater by far more than $20,000.
Horne said homeowners whose mortgage balances are 175 percent or more of their current home values and who are current on their payments will probably be the first to receive principal reductions.
Nationally, at least $17 billion of the settlement is to go directly to reducing principal. Details on how much lenders will reduce the amount borrowers owe aren't available yet.
About $86 million of Arizona's share of the deal will go toward offers to modify borrowers' loans by lowering interest rates. An additional $110.4 million has been set aside to compensate Arizona borrowers who lost their homes to foreclosure from 2008 to 2011 and believe they suffered unfair treatment by lender servicers. Each borrower is eligible for $2,000.
Horne said that any former homeowner who thinks he or she qualifies for the $2,000 should contact the lender and that little documentation will be required to receive this compensation.
Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said 55,000 former Arizona homeowners will qualify for the $2,000 payments. During the housing crash, more than 175,000 borrowers have had Arizona homes taken back by lenders, though that figure includes loans held by Fannie and Freddie.
Arizona will receive $102.5 million to be used for mortgage-fraud investigations and consumer counseling.
Arizona State University's real-estate analyst Mike Orr said reducing mortgage principal for underwater homeowners will "significantly bolster the housing market" if it entices more people to stay in their homes and keep making payments.
Almost 50 percent of the state's homeowners are underwater, meaning homeowners owe more than their homes are now worth because values have plunged by more than half since the market's peak in 2006.
Patricia Garcia Duarte, president of the Phoenix-based housing non-profit Neighborhood Housing Services, said the settlement looks like a lot of money to help both former and current homeowners. However, she said the damage done to Arizona families and communities has been extreme.
"The funds will definitely help," Garcia Duarte said. "But how the funds are spent in Arizona will determine the success in our housing recovery."
BofA lawsuit
Arizona is also receiving $10 million through the settlement of a lawsuit with BofA over allegations of mortgage fraud and deceiving borrowers trying to obtain loan modifications.
The money will go toward funding criminal loan investigation and consumer education. Horne said it's not clear yet whether the BofA borrowers who served as plaintiffs will be compensated from the $10 million or the state's $1.6 billion from the national settlement.
The suit, filed in December 2010 by the state's attorney general, had to be reconciled for Arizona to participate in the national settlement.
"If we had continued to litigate the BofA lawsuit, we might have recovered more money," Horne said. "But the lawsuit could have taken another five to six years. By settling now and joining the national settlement, more homeowners will receive help sooner."
Enforcement
The deal establishes a regulatory group of local and federal government agencies. It calls for North Carolina's banking regulator Joseph Smith to monitor lenders for compliance.
Horne said lenders will be subject to hefty fines if they don't follow through with the actions to help homeowners laid out in the settlement.
Federal officials said states could receive more funding if more mortgage firms sign onto the agreement. One estimate is for the national settlement to grow to $40 billion if the next nine large lenders join in. The only state not part of the national settlement is Oklahoma. Arizona, California, Florida, New York and Nevada were the last states to join. Arizona's negotiations with BofA over the mortgage-fraud lawsuit went on until almost 11 p.m. Wednesday night.
President Barack Obama said in a speech Thursday that the $26 billion settlement will allow the nation's biggest banks, "banks rescued by taxpayer dollars," to right wrongs committed in making loans and foreclosing on homeowners during the past several years.
"These banks will put billions of dollars towards relief for families across the nation. They'll provide refinancing for borrowers that are stuck in high interest-rate mortgages," Obama said. "They'll reduce loans for families who owe more on their homes than they're worth. And they will deliver some measure of justice for families that have already been victims of abusive practices."
12 News reporter Melissa Blasius contributed to this article.
by Catherine Reagor - Feb. 9, 2012 09:28 AM The Republic | azcentral.com
Arizona gets $1.6 billion in mortgage fraud settlement
Sunday, December 18, 2011
SEC charges ex-Fannie, Freddie CEOs with fraud - BusinessWeek
The Securities and Exchange Commission on Friday brought civil fraud charges against six former top executives at Fannie Mae and Freddie Mac, saying they misled investors about risky subprime loans the that mortgage giants held when the housing bubble burst.
Those charged include the agencies' two former CEOs, Fannie's Daniel Mudd and Freddie's Richard Syron. They are the highest-profile individuals to be charged in connection with the 2008 financial crisis.
The federal government has faced criticism for not bringing charges against top executives who may have contributed to the worst financial meltdown since the Great Depression.
Mudd, 53, and Syron, 68, led the mortgage giants in 2007, when home prices began to collapse. The four other top executives also worked for the companies during that time.
The lawsuit was filed in federal court in New York City.
"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, SEC's enforcement director. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk."
Fannie and Freddie both entered into agreements with the government on Friday, accepting responsibility for its conduct without admitting or denying the charges. The government-controlled companies also agreed to cooperate with the SEC on the cases against the former executives.
The Justice Department has opened up probes into Fannie and Freddie but has not charged anyone with a crime.
In a statement released through his attorney, Mudd said the lawsuit "should never have been brought" and said the government reviewed and approved all of the company's financial disclosures.
"Every piece of material data about loans held by Fannie Mae was known to the United States government to the investing public," Mudd said. "The SEC is wrong, and I look forward to a court where fairness and reason -- not politics -- is the standard for justice."
Syron's lawyer couldn't be immediately reached for comment.
According to the lawsuit, Fannie told investors in 2007 that it had roughly $4.8 billion worth of subprime loans on its books, or just 0.2 percent of its portfolio. The SEC says that Fannie actually had about $43 billion worth of products targeted to borrowers with weak credit, or 11 percent of its holdings.
Mudd told a congressional panel in March 2007 that Fannie's subprime business represented less than "2 percent of our book." He also said the company held subprime mortgages "very carefully." A month later, he told a separate congressional panel that subprime loans represented less than 2.5 percent of Fannie's books.
Freddie told investors in 2006 that it held between $2 billion and $6 billion of subprime mortgages on its books. The SEC says its holdings were actually closer to $141 billion, or 10 percent of its portfolio in 2006, and $244 billion, or 14 percent, by 2008.
In a May 2007 speech in New York, Syron said Freddie had "basically no subprime exposure," according to the suit.
Fannie and Freddie buy home loans from banks and other lenders, package them into bonds with a guarantee against default and then sell them to investors around the world. The two own or guarantee about half of U.S. mortgages, or nearly 31 million loans.
During the financial crisis, the two firms verged on collapse. The Bush administration seized control of them in September 2008.
So far, the companies have cost taxpayers almost $150 billion -- the largest bailout of the financial crisis. They could cost up to $259 billion, according to its government regulator, the Federal Housing Finance Administration.
Mudd was fired from Fannie after the government took over. He's now the chief executive of the New York hedge fund Fortress Investment Group.
Syron resigned from Freddie in 2008. He's now an adjunct professor at Boston College.
The other executives charged were Fannie's Enrico Dallavecchia, 50, a former chief risk officer, and Thomas Lund, 53, a former executive vice president; and Freddie's Patricia Cook, 58, a former executive vice president and chief business officer, and Donald Bisenius, 53, a former senior vice president.
Lund's lawyer, Michael Levy, said in a statement that Lund "did not mislead anyone." Lawyers for the other defendants declined to comment Friday morning.
Fannie and Freddie had traditionally purchased a small number of subprime mortgage loans, which involved borrowers with credit problems who could not qualify for cheaper prime loans. But starting in the late 1990s many firms started purchasing subprime loans, and Fannie and Freddie followed suit.
Legal experts say the cases, while unusual, might not yield much in penalties against the former executives.
In July, Citigroup paid just $75 million to settle similar civil charges with the SEC. The company's chief financial officer and head of investor relations were accused of failing to disclose more than $50 billion worth of potential losses from subprime mortgages. The two executives charged paid $100,000 and $80,000 in civil penalties.
A federal judge in the case said she was "baffled" by the low settlement.
Fines against executives charged in SEC civil cases can reach up to $150,000 per violation. SEC Chairman Mary Schapiro has asked Congress to raise the limit to $1 million.
Mudd made nearly $4 million in salary and bonuses in 2007, and Syron made more than $18 million, according to company statements.
The SEC has charged more than 80 people, including 40 CEOs and senior executives, with violations stemming from the 2008 financial crisis.
by Derek Kravitz Associated Press Dec 16, 2011
SEC charges ex-Fannie, Freddie CEOs with fraud - BusinessWeek
Those charged include the agencies' two former CEOs, Fannie's Daniel Mudd and Freddie's Richard Syron. They are the highest-profile individuals to be charged in connection with the 2008 financial crisis.
The federal government has faced criticism for not bringing charges against top executives who may have contributed to the worst financial meltdown since the Great Depression.
Mudd, 53, and Syron, 68, led the mortgage giants in 2007, when home prices began to collapse. The four other top executives also worked for the companies during that time.
The lawsuit was filed in federal court in New York City.
"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, SEC's enforcement director. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk."
Fannie and Freddie both entered into agreements with the government on Friday, accepting responsibility for its conduct without admitting or denying the charges. The government-controlled companies also agreed to cooperate with the SEC on the cases against the former executives.
The Justice Department has opened up probes into Fannie and Freddie but has not charged anyone with a crime.
In a statement released through his attorney, Mudd said the lawsuit "should never have been brought" and said the government reviewed and approved all of the company's financial disclosures.
"Every piece of material data about loans held by Fannie Mae was known to the United States government to the investing public," Mudd said. "The SEC is wrong, and I look forward to a court where fairness and reason -- not politics -- is the standard for justice."
Syron's lawyer couldn't be immediately reached for comment.
According to the lawsuit, Fannie told investors in 2007 that it had roughly $4.8 billion worth of subprime loans on its books, or just 0.2 percent of its portfolio. The SEC says that Fannie actually had about $43 billion worth of products targeted to borrowers with weak credit, or 11 percent of its holdings.
Mudd told a congressional panel in March 2007 that Fannie's subprime business represented less than "2 percent of our book." He also said the company held subprime mortgages "very carefully." A month later, he told a separate congressional panel that subprime loans represented less than 2.5 percent of Fannie's books.
Freddie told investors in 2006 that it held between $2 billion and $6 billion of subprime mortgages on its books. The SEC says its holdings were actually closer to $141 billion, or 10 percent of its portfolio in 2006, and $244 billion, or 14 percent, by 2008.
In a May 2007 speech in New York, Syron said Freddie had "basically no subprime exposure," according to the suit.
Fannie and Freddie buy home loans from banks and other lenders, package them into bonds with a guarantee against default and then sell them to investors around the world. The two own or guarantee about half of U.S. mortgages, or nearly 31 million loans.
During the financial crisis, the two firms verged on collapse. The Bush administration seized control of them in September 2008.
So far, the companies have cost taxpayers almost $150 billion -- the largest bailout of the financial crisis. They could cost up to $259 billion, according to its government regulator, the Federal Housing Finance Administration.
Mudd was fired from Fannie after the government took over. He's now the chief executive of the New York hedge fund Fortress Investment Group.
Syron resigned from Freddie in 2008. He's now an adjunct professor at Boston College.
The other executives charged were Fannie's Enrico Dallavecchia, 50, a former chief risk officer, and Thomas Lund, 53, a former executive vice president; and Freddie's Patricia Cook, 58, a former executive vice president and chief business officer, and Donald Bisenius, 53, a former senior vice president.
Lund's lawyer, Michael Levy, said in a statement that Lund "did not mislead anyone." Lawyers for the other defendants declined to comment Friday morning.
Fannie and Freddie had traditionally purchased a small number of subprime mortgage loans, which involved borrowers with credit problems who could not qualify for cheaper prime loans. But starting in the late 1990s many firms started purchasing subprime loans, and Fannie and Freddie followed suit.
Legal experts say the cases, while unusual, might not yield much in penalties against the former executives.
In July, Citigroup paid just $75 million to settle similar civil charges with the SEC. The company's chief financial officer and head of investor relations were accused of failing to disclose more than $50 billion worth of potential losses from subprime mortgages. The two executives charged paid $100,000 and $80,000 in civil penalties.
A federal judge in the case said she was "baffled" by the low settlement.
Fines against executives charged in SEC civil cases can reach up to $150,000 per violation. SEC Chairman Mary Schapiro has asked Congress to raise the limit to $1 million.
Mudd made nearly $4 million in salary and bonuses in 2007, and Syron made more than $18 million, according to company statements.
The SEC has charged more than 80 people, including 40 CEOs and senior executives, with violations stemming from the 2008 financial crisis.
by Derek Kravitz Associated Press Dec 16, 2011
SEC charges ex-Fannie, Freddie CEOs with fraud - BusinessWeek
Tuesday, November 22, 2011
Phoenix home-fraud lawsuit leads to indictment
A case that likely would have died in civil courts came back to life with a multicount indictment unsealed in federal court last month that accuses a Valley man of fraud and money laundering for his work with historic homes near downtown Phoenix.
The allegations against Jere Parkhurst will be familiar to anyone who lived in the Valley during and after the housing boom: Parkhurst, a Litchfield Park resident, is accused of taking money from investors, promising a 20 percent return within six months as he bought, renovated and sold historic homes for a profit.
The investors included a schoolteacher, engineer and other middle-class residents looking to pad their retirement accounts with proceeds from the booming Valley housing market. Investors allege in civil lawsuits that as the bottom began to fall out of the market, Parkhurst saw what was coming and funneled the money earmarked for renovations into his own accounts.
Parkhurst's activities resulted in a series of suits being filed against him in civil court from 2007 through 2009, all of which were either settled or dismissed with victims claiming they never received any of the court-ordered payments.
That's where it could have ended - until investor Katie Muha got angry.
Frustrated that an attorney said it would cost $75,000 in legal fees to try to recoup $46,000 from Parkhurst, Muha hired a private investigator who dug into Parkhurst's past and presented the information first to the Arizona Attorney General's Office, which passed on the case, and then to federal officials.
Those efforts paid off last month when a 27-count indictment against Parkhurst was unsealed in federal court.
Parkhurst's attorney said his client intends to fight the allegations.
The U.S. Attorney's Office declined comment.
But for investors like Muha, a Gilbert teacher, and her husband, the indictment was vindication after years of trying to hold Parkhurst accountable for his actions.
Muha and her husband were drawn to the investment opportunity in early 2007 by friends who were "making money left and right" renovating and flipping historic homes near downtown Phoenix. They worked with Parkhurst to buy a home on Lewis Street, which was renovated and sold months later for a profit, Muha said. Another opportunity arose in the spring and they invested again, but by then the market started to turn and Muha said they decided to sell the house at the first opportunity. But Parkhurst could not repay the $100,000 they invested, she said.
"What Jere had been doing was using money for the first deal for the second deal," Muha said. "When the wheels came off the bus he couldn't pay for it. I really think that he knew that things were going south and he grabbed as much money as he could grab before it went down."
The Muhas' claim mirrors many of the other civil lawsuits filed against Parkhurst, with investors alleging losses estimated to range from several thousand dollars to more than $1 million.
Many of the investors who filed claims against Parkhurst and scored rulings and settlements in their favor say they have never been paid, much like Muha, who holds out some hope that the federal court case will succeed where the civil actions fell short.
"I hope he goes to jail," she said. "I know I'm never going to get my money back. That was a tough lesson to learn. I should have made sure that money never went directly to him, but to an escrow officer."
A lot of green investors learned similar lessons when the bottom fell out of the Valley's housing market, but experts say that guidance still holds true, particularly with the abundance of short-sale and foreclosed properties on the market that continue to lure investors.
"Even though you think that it's a relic of what happened four or five years ago, it's still going on," said Eric Forster, a mortgage-fraud expert from Los Angeles. "The best thing to do, which no one does, is use a real-estate attorney before they give the money to anyone. Most people just don't have a sense of what they're getting into."
by JJ Hensley The Arizona Republic Nov. 13, 2011 08:47 PM
Phoenix home-fraud lawsuit leads to indictment
The allegations against Jere Parkhurst will be familiar to anyone who lived in the Valley during and after the housing boom: Parkhurst, a Litchfield Park resident, is accused of taking money from investors, promising a 20 percent return within six months as he bought, renovated and sold historic homes for a profit.
The investors included a schoolteacher, engineer and other middle-class residents looking to pad their retirement accounts with proceeds from the booming Valley housing market. Investors allege in civil lawsuits that as the bottom began to fall out of the market, Parkhurst saw what was coming and funneled the money earmarked for renovations into his own accounts.
Parkhurst's activities resulted in a series of suits being filed against him in civil court from 2007 through 2009, all of which were either settled or dismissed with victims claiming they never received any of the court-ordered payments.
That's where it could have ended - until investor Katie Muha got angry.
Frustrated that an attorney said it would cost $75,000 in legal fees to try to recoup $46,000 from Parkhurst, Muha hired a private investigator who dug into Parkhurst's past and presented the information first to the Arizona Attorney General's Office, which passed on the case, and then to federal officials.
Those efforts paid off last month when a 27-count indictment against Parkhurst was unsealed in federal court.
Parkhurst's attorney said his client intends to fight the allegations.
The U.S. Attorney's Office declined comment.
But for investors like Muha, a Gilbert teacher, and her husband, the indictment was vindication after years of trying to hold Parkhurst accountable for his actions.
Muha and her husband were drawn to the investment opportunity in early 2007 by friends who were "making money left and right" renovating and flipping historic homes near downtown Phoenix. They worked with Parkhurst to buy a home on Lewis Street, which was renovated and sold months later for a profit, Muha said. Another opportunity arose in the spring and they invested again, but by then the market started to turn and Muha said they decided to sell the house at the first opportunity. But Parkhurst could not repay the $100,000 they invested, she said.
"What Jere had been doing was using money for the first deal for the second deal," Muha said. "When the wheels came off the bus he couldn't pay for it. I really think that he knew that things were going south and he grabbed as much money as he could grab before it went down."
The Muhas' claim mirrors many of the other civil lawsuits filed against Parkhurst, with investors alleging losses estimated to range from several thousand dollars to more than $1 million.
Many of the investors who filed claims against Parkhurst and scored rulings and settlements in their favor say they have never been paid, much like Muha, who holds out some hope that the federal court case will succeed where the civil actions fell short.
"I hope he goes to jail," she said. "I know I'm never going to get my money back. That was a tough lesson to learn. I should have made sure that money never went directly to him, but to an escrow officer."
A lot of green investors learned similar lessons when the bottom fell out of the Valley's housing market, but experts say that guidance still holds true, particularly with the abundance of short-sale and foreclosed properties on the market that continue to lure investors.
"Even though you think that it's a relic of what happened four or five years ago, it's still going on," said Eric Forster, a mortgage-fraud expert from Los Angeles. "The best thing to do, which no one does, is use a real-estate attorney before they give the money to anyone. Most people just don't have a sense of what they're getting into."
by JJ Hensley The Arizona Republic Nov. 13, 2011 08:47 PM
Phoenix home-fraud lawsuit leads to indictment
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