Prosecutions Lag as Foreclosure Swindles Surge in New York

The front page of April 14th's New York Times reports that housing fraud cases in New York City have largely gone unprosecuted, despite wiping out tens of millions of
dollars for thousands of predominantly minority homeowners. Attorneys and clients from South Brooklyn Legal Services, Brooklyn Legal Services Corporation A, and Staten Island Legal Services (all programs of Legal Services NYC) are featured.

As the foreclosure crisis has deepened, officials have promised a tougher line. Last week, Treasury Secretary Timothy F. Geithner announced plans for federal and state agencies to fight mortgage and foreclosure fraud. And last month, District Attorney Charles J. Hynes of Brooklyn and Senator Charles E. Schumer
announced the creation of a real estate fraud unit in Brooklyn, to
address what Mr. Hynes described as “the recent flood of mortgage fraud
cases plaguing New Yorkers.”

But the lawyers who have pleaded
with district attorneys, chased witnesses and pointed out the same
suspected law breakers for years say that prosecutors failed to stop
fraud when it was most rampant.

“We gift-wrapped these cases,” said Jessica Attie, co-director of the foreclosure prevention project at South Brooklyn Legal Services. “These are crimes committed in plain sight.”

When Doris Dickinson walked into Joe Sanders’s office at Brooklyn Legal Services Corporation A, he noted the sort of detail he thought an assistant district attorney would love.

The men who sold one of Ms. Dickinson’s houses filled out a deed in 2002 claiming that she was dead.

“Exhibit
A: This is Ms. Dickinson and she’s alive,” Mr. Sanders said. “I figured
that was a good place for a prosecutor to start.”

 […]

[Daniel M.] Donovan, on Staten Island, is the only New York City district
attorney who says his county has no mortgage fraud problem, although
his county ranks near the top in foreclosures per capita statewide. “We
don’t see many complaints,” said Mr. White, his spokesman.

But
lawyers with Staten Island Legal Services and State Senator Diane J.
Savino, who represents parts of Brooklyn and Staten Island, say they
get many reports of fraud and have walked some cases over to Mr.
Donovan’s office. “We’ve gotten very little response,” Ms. Savino said.

Linda and Wesley Bryce can attest to Staten Island’s fraud problems.
They own a small, $169,000 home on the borough’s working-class north
shore. Mr. Bryce, 71, worked in a pigments factory; Ms. Bryce, 55,
worked as a chemical technician. Then she injured her spine, and their
granddaughter, who is in their care, needed surgery, and in 2006 they
fell behind on their mortgage payments.

The bank filed notice
and a day later two “rescue” specialists from a mortgage broker in
Queens knocked on the Bryces’ door. Temporarily share the mortgage with
us, the men said, and we’ll give you $10,000 of the refinance proceeds
and put your home on solid footing.

The Bryces, who are quick
to say they lack financial sophistication, agreed. According to a
lawsuit in State Supreme Court, the so-called rescuers transferred the
deed to a straw buyer. A year later, they told the Bryces that they
would have to pay $324,000 to get their house back, or start paying
rent of $3,000 per month. When the Bryces protested, the rescue firm
filed a petition to evict them.

“It was all done in a couple
of hours,” Ms. Bryce recalled, resting her chin on her cane, in an
interview in their lawyer’s office.

The Bryces called Mr.
Donovan, and a detective tried to help them. Mr. Donovan’s top deputy
said his office investigated but dropped the case after discovering
that federal prosecutors had obtained an indictment of one of the
mortgage brokers in an unrelated case.

An associate of the
broker, however, continues to claim ownership of the Bryces’ home; a
state judge has intervened but the Bryces still face eviction.

“There is this mentality that the victims are complicit if they sign papers they don’t understand,” said Margaret Becker of Staten Island Legal Services. “But who would ever knowingly sell their home for $10,000? Of course it’s fraud.”

 Read the article in its entirety on the New York Times website.