Chicago Foreclosure Lawyer Blog

On July 9, Norton Helton, a former Chicago attorney and radio personality, was found guilty of engaging in a mortgage rescue scam. Although this was done while the housing market was still high, these kinds of scams also work when the market is down.

It is very important that people facing foreclosure understand these scams so that they can be avoided -- what seems like a great deal at the time is often a vehicle for leaving a homeowner high and dry. Some red flags to look for based upon the facts of the Helton case are:

1. Deals where you transfer your property to another person, group, or company. These deals usually include a promise that the homeowner can remain in the property and rebuild credit. In a perfect world, with repaired credit, the homeowner would be able to repurchase the property from the "investor." In the case of these scams, it doesn't work that way.

2. Promises of credit "scrubbing" or credit repair. Nobody can magically repair credit, it takes time and responsible spending habits (as well as the responsible use of credit) to rebuild a score. Money given to someone promising to repair your credit is money that is ultimately wasted.

3. Scenario #1, but with the promise of bankruptcy assistance as well. Removing a home from your assets and liabilities may seem like a good idea. It is also likely fraud, in particular, if the plan is to repurchase the home after discharge.

The risks are wasted money and losing your home. These scams often loot the property for any equity value, meaning that the investors extract as much money from the property as possible. Not only does this make it that much more difficult for the scammed homeowner to repurchase the property, but it often leaves homeowners facing foreclosure on a property they no longer own.

As with anything, if it sounds too good to be true, it may not be true. Before committing to anything, seek out a competent attorney in your area to discuss your options.

As reported on CNN.com, the SEC has charged Goldman Sachs with fraud relating to their involvement with subprime mortgage-backed securities. The charges center around allegedly undisclosed conflicts of interest between Goldman and a hedge fund named Paulson & Co. According to the SEC, Paulson & Co pooled mortgages that were then sold to investors as mortgage-backed securities. The investors, who were betting that the market would go up, were not told that Paulson & Co. had shorted the exact same investment pool.

For those who don't know a bunch about the markets, "shorting" something basically means that you borrow and sell the stock before you own it, with an obligation to eventually purchase it at a (hopefully) lower price. If all goes well, you end up with a nice profit. In the case of Paulson & Co., their nice profit was about $1 billion, according to the SEC.

So how did Paulson know that this specific CDO would drop? Allegedly, Paulson & Co. pooled the securitized mortgages, picking them based on the likelihood that they would fail.

I find this to be a highly interesting situation, and look forward to its development. As the SEC continues to examine transactions, it may very well uncover more of these situations. You never know what you'll find when you start turning over rocks.

Some law firms are making the move to social networking sites like Avvo, Martindale Hubbel Connected, Linkedin, Facebook, and Twitter. As Christine E. Mayle indicates, there are some ethical pitfalls involved in social networking. Even blogs (or "blawgs" as industry wags like to call them) can cause problems. More detail and though on these ethical issues can be found after the jump.

Continue reading "Ethical Pitfalls of Social Networking" »