The Consolidated Resorts Tahiti VillageTranscripts, Robert Paisola Reports LIVE

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Cay Clubs Resorts FRAUD FRAUD FRAUD, Robert Paisola Reports

I introduced you to Jamie and Joe Castagna — an ambitious and hard-working couple who became ensnared by some silver-tongued con artists pushing real estate investing in Cay Clubs Resorts.

Jamie was a loan processor at the time, who eventually became a licensed mortgage broker. Her husband, Joe, is an electrician who had experience investing in real estate. They knew what they were doing, but as Jamie says, they were so impressed with the Cay Clubs Resorts promises and presentation and the professionalism of their sales reps, that they had few reservations about “drinking the Cay Clubs Cool-Aid.”

As Paul Harvey would say — here is the rest of the story.

We now had a $15,000 Reservation Agreement for a Membership in the Las Vegas Cay Club. We did not know what unit we were purchasing, what the sales price was, how big the unit was, or what the view was like, but according to Ricky Stokes we had secured our spot with another great investment.

On September 20, 2005 we wrote another $5,000 check payable to Clearwater Cay Club to reserve Unit #611. Prior to this time, we had received appraisals showing that our unit in Clearwater was worth OVER $150,000 more than what we had purchased it for. When Colin Brechbill gave us the chance to purchase another unit at the same price “per square foot” as our first unit, we jumped on it.

On October 21, 2005, we wrote another $10,000 check for the remainder of the deposit for unit #611 in Clearwater. After a few weeks, we began to realize that getting financing for unit #611 was going to be much more difficult. We asked Colin and Ricky if they would flip this $15,000 into another Las Vegas unit. They agreed, so we now had two Las Vegas Units reserved. Jamie was purchasing one unit, and her mother was going to purchase the other. The next step was to sit back and wait for the Las Vegas sales contracts to arrive.

We received the sales contracts about three months later, in December of 2005. One thing that always concerned me about Cay Clubs was the disorganization. We would receive contracts with many blanks, sales prices inflated to include the membership fees, no closing date, and so on. We never saw any addendums with the contracts to justify the inflated sales price, such as an addendum showing what the developer way paying. I always requested these sections to be completed, or I would fill them in myself, but it just seemed very unprofessional and bad business practice for a company to handle their legal documents so carelessly.

Once we had a fully executed sales contract, I started working to secure the financing for our unit in Las Vegas. I had contacted Colin Brechbill for his suggestions for who to use for a lender. He sent me an email with contact information for Jose Ramirez at Trans Atlantic. I called Jose Ramirez several times and never received return call, so I tried to obtain financing on my own through other lenders.

By May 23, 2006, I was still unable to locate a lender willing to finance the investment, so I emailed Colin again to see if he had any suggestions. He recommended Ross Pickard at Chase. I quickly made contact with Ross and sent him my loan application and the documents he requested. The appraisal had already been done by The Appraisal Team. My sales price was $296,022 (which included $7500.00 membership fee and $8,622 of seller’s concessions). The appraisal dated March 20, 2006 showed a value of $356,000 – almost $60,000 in instant equity, which represented an approximate 20-percent return, just as Ricky and Colin told us!

After working on this loan for six months, it was finally ready to close. We purchased our Las Vegas Cay Club Unit on July 13, 2006. The title company, Commonwealth Land Title Insurance Company was located in Las Vegas, so we did a mail away. I did not have a closer and had to go to my bank to get my loan documents notarized. We put 5 percent down and paid some closing costs on this property which totaled approx. $18,000 out of pocket.

We opted to have half of our leaseback checks in 2006 and receive the other half of the leaseback money in 2007, so approximately 60 days after closing, we received a check from CC704, LLC for the amount of $20,992.50 — half of our leaseback money.

At this time, we had no concerns about our Cay Club investments, as they both appraised for much higher than what we had paid for them, and we had enough money in the bank to make the payments over the next two years while the developer converted the properties into five-star resorts.

We kept in contact on a regular basis with Ricky Stokes and Colin Brechbill to stay on top of the status of what was going on with Clearwater and Las Vegas. Again, our strategy the entire time was to hold the property for a minimum of one year and one day or a maximum of 24 months. On May 16, 2006, I contacted Colin to let him know that I was interested in selling my unit. This was his response:

What was your original price and contracted price, and how much do you have left on your leaseback? The demolition on the strip mall begins end of next month, so this will create a tremendous buzz around the property, so you will be in an excellent position… of course the longer you can hold, the more capital return you will realize.

As always, Colin encouraged me to stay in the property longer, because the developers were beginning to build the amenities, and this would make the property appreciate even more.

On July 5, 2006 I submitted my first request for our $35,000 “refundable” reservation deposit. Ricky and Colin talked to us and convinced us that we would be giving up a great opportunity if we pulled out of this deal now. So a few more months went by, and we still did not feel comfortable with the project. Nothing was signed, no unit number reserved, and the price point seemed very high. So in October 2006, after requesting our money back again, I received an email from Colin stating: “I can help refund this but I need to put a replacement buyer in your position.”

On November 1, 2006, I was requested to fill out a cancellation form, which I did and sent back right away. A week later, Colin stated that there had to be another buyer that would come in with $35,000 before they could release my money. He tried to put us at ease by telling us that this was such a great deal that if another buyer didn’t show up Colin would personally take our place. A month later, we were still waiting to see if we would even be refunded our “refundable” deposit. Only after I threatened to get my attorney involved did I begin to see some action. Finally in January 2007, we received our $35,000 refundable deposit. Looking back, it was a big blessing that we requested this money when we did, as there are many owners who will never receive their refunds.

When we visited the property in September 2006, we did see some progress (the strip mall was being demolished), but progress was nowhere near what we had been led to believe. Again, I expressed my concerns and urgency to Colin to sell our Clearwater unit. This was his email response:

I may be able to move all your Clearwater Units and any family members you have in. The REIT we have been talking about is here and ready to take the units. I can place a certain amount into the plan for them to take down, this would be about $100 sq. ft. increase from what you paid. Let me know ASAP if and who you want in. I will need unit numbers and price they were in at.

Over the next six months, we waited patiently for the REIT to come in, buy our units, and for us to realize a profit of $100 per square foot (which in our case translated to: 1,140 sq. ft x $100 per sq. ft = $114,000). With that kind of profit hanging in the balance, I was willing to hang in there and keep paying over $4,000 per month even after my leaseback money had run out.

On November 16, 2006, I contacted Barbara Mills, a sales associate for Waterfront Resort Realty, to see what they could do to sell our unit. She kept brining up the fact that our leaseback was not up until May 2007 and that we should wait until then to sell the condo. She emailed me a breakdown of what the going price was ($425.00 per sq. ft., which was less than what Colin told us), an 8.5 percent broker fee, closing costs, etc. We then started to get concerned that the value was not what we thought it was.

In December 2006, we went over to the “office” — a doublewide trailer that Ricky Stokes and Colin Brechbill worked out – of and sat down with them face to face to express our concerns.



I had prepared a Microsoft Excel spreadsheet to show them that we were almost out of money; if we kept the property until the leaseback expired, we would have to pay an additional $24,409 out of pocket. I also brought the email that Barbara Mills had sent to me showing the going price per square foot to see what they had to say about it.

Colin and Ricky danced around every question and again made us drink more of their Cay Club Cool-Aid. Colin was still trying to sell us on another project out in Crested Butte, Colorado, and Ricky (the wise CPA that he is) kept throwing things back in our face, like did you write off all of the furniture package. He said that all you had to do was deed your property into a corporation, and it is a one time write-off, called a 1079. Luckily, we did NOT take his advice and sought the advice of our current CPA instead.

January 3, 2007, we received an email from Colin confirming that the REIT has been consummated and they would spend $250,000,000 over the next four years to purchase condos from Cay Club investors.

On January 16, 2007, Colin emailed me the following:

The REIT has been consummated at has made the initial offer of $1 Billion over the next 4 years, with the initial $250 Million to begin closing in March. The unit selection has not been released at this time as we are all eagerly awaiting this information. Once I receive, I will be sure to update you ASAP, so we can begin your exit of the Clearwater Cay Club.

The news started to get a little better, as we started to think that we did not need to make a big profit. Our main concern was to get out of this property. What we were being told and what we were seeing were not adding up.

In January 2007, we were suppose to receive a $20,992.50 check for the remainder of the Las Vegas leaseback from Cay Clubs, but only received $10,496.25. This came as a shock, because nobody had ever given us a heads up that we wouldn’t be receiving the full amount. It was like a big roller coaster with Cay Clubs, you never knew what to expect; you could only hope and pray for the best as we had close to $1 million on the line in our Cay Club properties.

March 2007 came and went with no sign of the REIT buying us out of our unit as Colin had promised us. We were now starting to realize that we had been drinking too much Cay Club Cool-Aid and that the blinders needed to come off. We had trusted everything that Colin and Ricky had told us. They were our point of contact, and they were in direct communication with Dave Clark, Barry Graham, and all of the other principals of the company. So, how were we to believe anything else?

By April 2007, Cay Clubs was in talks with Key Hospitality for them to acquire all of the equity of privately-held Cay Clubs. This seemed like a great thing for both us and Cay Clubs. The completion of the merger was not expected until the third quarter of 2007. We were forced to wait it out, as the property had not sold yet.

In June 2007, we decided to list our Clearwater property with an agent at Prudential Tropical Realty, as we had little to no faith in Colin Brechbill or Ricky Stokes at this time. She was very familiar with Cay Clubs, and had been around the complex since the time when the condos were apartments. We listed the property as low as we could to just break even. We never received one offer.

September 24, 2007, I received my last email from Colin:

I am in meetings still. It does not look well for Cay Clubs, we are doing all we can to get information but between us looks like they may be closing the doors soon. The lending industry is so tight they can not move any loans to close and this is stifling all payouts and construction.

I know Joe stopped by last week, but we have been doing everything we can to survive the market and save Cay Clubs. I wish there was more I could provide but this is literally all that I know. In my opinion (and only my opinion) I am letting my units go into foreclosure as I can not keep up the payments without any income coming in on these. We have not collected a payment from Cay Clubs since almost Nov. of last year floating this entire organization, they have literally bankrupted me. The SAC is still a 60% shot (this is the Public offering) but this is not until mid October which is just to far for us to continue hanging on.

We now knew that we were in BIG trouble. We contacted an attorney who was representing other Clearwater Cay Club owners and are currently involved in a lawsuit. We are now aware that there was a massive amount of fraud perpetrated in both the Clearwater and Las Vegas properties by Dave Clark and partners. During this time, we continued to pay on our “dead horse,” due strictly to the fact that we always had perfect credit.

In February 2008, after doing the research and seeing the fraud for ourselves in black and white, we made the difficult, life-changing decision to quit paying on our units. We now feel like we are on the right track and fighting back for what has been done to us. I hope that many other owners will come forward as we have to expose those who were behind this fraudulent scheme and bring them to justice.

I would like to thank both Jamie and Joe for having the courage to share their story and warn other prospective investors about Cay Clubs Resorts and similar operations across the country that are doing their utmost to scam honest people out of the hard-earned cash. Hopefully, we can team up with other investors to provide the honest investors with some financial relief and make Part 3 of this story a little less painful.

JPMorgan Chase Involved in Illegal and Fraudulent Loan Advice to Lenders- Robert Paisola Reports

If you’ve been following the reports on the Cay Clubs con, you’ve probably met Carisa and Craig Urban — two investors who got burned by Cay Clubs and one of its property managers, Phil Graham.

On Thursday, March 27, The Oregonian ran an article entitled “Chase mortgage memo pushes ‘Cheats & Tricks’,” in which reporter Jeff Manning exposes an incriminating memo that was being circulated amongst loan officers at JPMorgan Chase. The memo, called “ZiPPY Cheats & Tricks,” encourages loan officers to fudge facts and figures on loan applications, if necessary, to gain approval for loan applications that otherwise would be rejected by the bank’s automated underwriting system, ZiPPY.


http://www.flippingfrenzy.com/wp-content/uploads/2008/04/zippycheatstricks2.jpg

(click above to see memo)

The main problem with this practice–in addition to being illegal–is that it deceived loan applicants into believing that they could easily afford payments on the loans for which they were applying. After all, most borrowers assume, “the bank certainly wouldn’t approve a loan if I couldn’t make the payments.” This is exactly what happened to Cay Clubs investors Carisa and Craig Urban, as they relate in their own words:

We are approaching the one year anniversary of our investment in a Las Vegas Cay Club condo, but there’s not much to celebrate. We have sunk into the real estate and mortgage fraud abyss like so many others. It has been a long and grueling process to find someone who will listen to our story, believe what we have said, and assist us in seeking justice.

We purchased our first investment property during the era of the “mortgage meltdown,” when mortgage fraud was on the rise. Recently, we came across a disturbing memo that has been linked to a former Chase Account Representative, Tammy Lish. According to JPMorgan Chase, this is not an official company memo, they do not condone the practices recommended in the memo, and they fired the Account Representative as soon as they discovered who was responsible for it. We don’t doubt any of these claims. From our experience with Chase, however, we do believe that the recommendation in this memo were common practice.

The memo provides detailed information on how to work around the company’s automated underwriting system – a system designed to function as a gatekeeper, rejecting loan applications when borrower do not meet the minimum requirements. Here are the recommendations that the memo contains:

Always select “ALTERNATE DOCS” in the documentation drop down.
Borrower(s) MUST have a mid credit score of 700.
First time homebuyers require a 720 credit score.
NO! BK’s OR Foreclosures, EVER!! Regardless of time!
Salaried borrowers must have 2 years time on job with current employer.
Self employed must be in existence for 2 years. (verified with biz license)
NO non-occupant co borrowers.
Max LTV/CLTV is 100%

The memo also provides step-by step instructions on how to gain favorable SISA (Stated Income, Stated Assets) findings; in other words, how to make an applicant’s income and assets look good on paper:

In the income section of your 1003, make sure you input all income in base income. DO NOT break it down by overtime, commissions or bonus.
NO GIFT FUNDS! If your borrower is getting a gift, add it to a bank account along with the rest of the assets. Be sure to remove any mention of gift funds on the rest of your 1003.
If you do not get Stated/Stated, try resubmitting with slightly higher income. Inch it up $500 to see if you can get the findings you want. Do the same for assets.
We find it interesting that there were so many similarities between what the memo stated and what our loan officer from Chase Bank, Ross Pickard, actually did to us and numerous other investors who purchased Cay Club properties. Ross Pickard simply followed the #3 recommendation and plugged in inflated numbers for our income and assets to get the loan approved. That’s mortgage fraud, plain and simple.

He also labeled our purchase as a second home instead of an investment property. When we questioned him about it he said, “We can label it as a second home because with the Cay Clubs lease back agreement you would have possession of the property 2 weeks out of the year.”

In talking with other professionals, we have since come to question many aspects of this transaction. At the time, however, we believed we were working with a legitimate developer and a legitimate loan originator and lender. After all, JPMorgan Chase is no mom-and-pop operation. We approached the transaction believing we could trust these professionals. Cay Club Resorts also offered to waive our first year of HOA fees if we used their preferred vendor, Ross Pickard. I guess this shows our naivety and inexperience as first time investors.

As a result of this fraud, many of us are left struggling to pay mortgages we cannot afford–mortgages that no lender would have approved if it had been given accurate facts and figures. Moreover, we now owe mortgages on properties that are worth less than we owe on them. We can’t even refinance or sell our way out of trouble.

We know that an employee in the loss mitigation department from Chase Bank has been assigned to deal with Las Vegas Cay Club loans, but many owners do not qualify for deed in lieu of foreclosure or a short sale, which would enable us to get out from under these properties without losing any more money.

So where does that leave us? Stuck in the mortgage fraud abyss! The ZiPPY Cheats & Tricks memo is blatant proof that shady transactions were going on behind the scenes.

There is a task force currently looking into Ross Pickard’s bad practices, and it is only a matter of time before the truth comes out. Chase played a major role in the acts committed. Now it is time for Chase Bank to right its wrongs and the deceptive practices of its loan officers.

~ Carisa & Craig Urban

Fortunately, when fraud can be proven to have been committed on a loan application, the borrowers can file a RESPA (Real Estate Settlement Procedures Act) complaint and actually force the lender to renegotiate the terms of the loan. Carisa and Craig Urban have an open and shut case, proving that fraud was committed in approving and processing their mortgage loan.

Our fraud busting team is currently working with the Urbans’. We have carefully audited their loan application and highlighted the specific incidents of fraud that were committed and are in the process of filing a RESPA complaint on behalf of the Carisa and Craig. We fully expect justice to be served and the Urbans’ to receive some long awaited relief.

Southern Florida Housing Crisis - Proof- Posted by Robert Paisola

Matt Sanchez reports live from Coral Gables Florida with video that shows that most every home on an upscale suburban street is either for sale or in Foreclosure, Video Courtesy of LiveLeak.com

Bank of America to ax Countrywide name, Posted by Robert Paisola

Thursday, April 24, 2008 - 11:47 AM HAST

Bank of America to ax Countrywide namePacific Business News (Honolulu)
Bank of America Corp. plans to drop the Countrywide Financial moniker after it closes on its purchase of the troubled mortgage lender later this year.

California's largest bank generally drops the name of an acquired institution. (Keeping the U.S. Trust brand last year was an exception.)

BofA may be eager to distance itself from the Countrywide brand, given the scrutiny its lending -- and collection -- practices are now receiving in the wake of the nation's housing bubble.

BofA (NYSE: BAC) CEO Ken Lewis told shareholders at that bank's annual meeting in Charlotte, N.C., of the plans to discontinue using the Countrywide (NYSE: CFC) name.

Earlier this week, the bank disclosed in testimony to the Federal Reserve that it plans to boost Countrywide's lending standards, eliminating altogether subprime loans and option adjustable-rate mortgages that include a feature in which the loan balance actually rises over time if borrowers routinely make the minimum payment permitted.

Lewis also reiterated his commitment to the Countrywide acquisition, which is expected to close in the third quarter.

BofA announced in January that it would buy Countrywide in an all-stock transaction worth about $4 billion. Later that month, Countrywide said 33.64 percent of its subprime mortgages were delinquent at the end of 2007. That was up from 29.08 percent in September and 21.22 percent in December 2006.

In August, BofA invested $2 billion in Countrywide, the country's largest mortgage lender. BofA's investment came in the form of a nonvoting convertible preferred security yielding 7.25 percent annually. The security can be converted into 16 percent of Countrywide's common stock.



San Francisco Business Times

Utah Homes Sales Dropping , Robert Paisola Reports

Utah Homes Sales Dropping
Last Edited: Thursday, 24 Apr 2008, 8:07 AM MDT

SALT LAKE CITY -- Plummeting home sales along the Wasatch Front are finally starting to take their toll on selling prices.

The Salt Lake Board of Realtors says sales of existing single-family homes in Salt Lake County fell by 42.2 percent in the first quarter, compared with the same period last year. Median selling prices were virtually unchanged over that period, rising less than 1 percent, to $242,000. Just a year earlier, the increase was more than 20 percent from the previous year.

In Davis County, which had a 26.6 percent decline in home sales, median prices remained largely unchanged at $220,000.

Average prices fell in Tooele County by 6.3 percent, to $180,000, coinciding with a steep 45.5 percent drop in sales from last year.

Another Story

Foreclosure future grim for Utahns
By Jasen Lee
Deseret News
Published: April 17, 2008
Utah's housing bubble is forecast to burst in a big way, with one in 25 Utah homeowners projected to be in foreclosure in the next two years, according to a report released Wednesday by The Pew Charitable Trusts.
The report attributed the rise in foreclosures to subprime loans made in 2005 and 2006. In those years, 24 percent of home loans in Utah were subprime.

The outlook is grim in several other states, as well, including Nevada, where one in 11 homeowners are projected to be in foreclosure in the next two years, and Arizona, where one in 18 homeowners may face the same circumstance. Rounding out the five states with the highest projected foreclosure rates were California at one in 20, and Utah, which tied with Colorado at one in 25, or a 4 percent rate of foreclosure.

"Is the American dream slipping away?" asked Shelley Hearne, managing director of Pew's Health and Human Services program, in a letter introducing the report, titled "Defaulting on the Dream: States Respond to America's Foreclosure Crisis."

Because of foreclosures in their communities, 40 million homeowners could see their property values and their municipalities' tax bases drop by as much as $356 billion, largely over the next two years, said Hearne, a professor of health policy and management at Johns Hopkins University.

"The stakes are incredibly high. Homeownership is the primary vehicle through which American families build financial security," she said. "It also is an essential building block of state and local economies."

Jim Wood, director of the University of Utah's Bureau of Business and Economic Research, said that Utah's previous highest rate of foreclosures was about 2 percent in 2002, coinciding with the last recession. He noted that foreclosures are closely tied to unemployment rates and rapid home price appreciation, which Utah was able to avoid for the most part during the national housing boom, due to the state's strong, stable economy.

The Pew report's prediction of a 4 percent foreclosure rate "would be close to an all-time high," he said "It's quite pessimistic — double what we've been before."

He attributed the state's recent housing bubble to overly optimistic beliefs by those in the housing industry, combined with eager homebuyers and sellers, which prompted a home-building run-up during the past few years.

Hearne said that the Pew study is the first comprehensive look at what all 50 states and the District of Columbia are doing to try to address the subprime mortgage fallout. The study was a joint effort between the Pew Center on the States and Pew's Health and Human Services Program.

"Stronger standards from federal policymakers could have helped avert this crisis," Hearne said. "Future legislation must consider ways to strengthen standards to prevent more troubling loans from being made."

Fourteen states, including Utah, have created statewide foreclosure task forces to bring government, lenders, consumer advocates and experts together to address the crisis.

The Pew researchers analyzed two principal data sets: the Mortgage Bankers Association 4th Quarter National Delinquency Survey, and the Center for Responsible Lending's foreclosure projections and subprime spillover data.

The Mortgage Bankers Association quarterly data are based on survey sampling techniques and offer a point in time picture of loans in various stages of delinquency or in the foreclosure process, the report said. The MBA foreclosure estimates refer to all loans in the foreclosure process, as well as loans that are seriously delinquent, or more than 90 days past due.

The Center for Responsible Lending's estimates evaluate the total number of subprime loans disbursed during 2005 and 2006 and give the number of loans the analysts expect will be foreclosed upon. This estimate includes foreclosures that will occur in 2008, as well as subsequent years.

Wood said resets of variable-rate subprime loans have contributed to the increase in foreclosures, both nationally and in Utah.

"We will probably go well above the national average," he said, "but 4 percent seems high."

Money Laundering or Assistance with A Mortgage, Robert Paisola Reports

Below is an update on the Down Payment Assistance Front. Recently HUD stated that they were going to do away with the DPA. A DPA is where a seller contributes 3% of the purchase price plus an administration fee to the DPA and the DPA will gift the buyer the down payment.

This program works for FHA loans and that is why HUD is in the middle of it.

A buyer's down payment can be a gift, however the gift cannot be directly from the seller. So this clever little money laundering technique has benefited many of homeowners get a 100% loan but instead of it being a sub-prime adjustable type thing or an interest only for two years and kaboom. The buyer would have a nice 30 year fixed rate with low monthly mortgage insurance.

So here is the deal in action. Billy Buyer makes an offer on Sally Seller's home. The offer has an addendum that says that Sally will contribute 2.5% of the purchase price to pay for the buyer's closing cost. Then Billy Buyer will ask Sally Seller to contribute 3% of the purchase price + a $500 processing fee. So depending on the price of the home, the seller will contribute approximately 6% of the sales price on behalf of the buyer.

Usually the difference is split, meaning the sales price is increased by 3%. The seller agrees to the full 6% concession. SO the buyer gets 100% loan and finances the closing cost.

October 31, 2007

UPDATE

Gaithersburg, MD - United States Federal District Court Judge Paul L. Friedman today ruled in the case of AmeriDream v. Jackson that the Department of Housing and Urban Development cannot implement its regulation on downpayment assistance, which had been scheduled to go into effect today. AmeriDream, Incorporated, a 501(c)(3) charitable entity dedicated to helping low and moderate income families purchase their own homes through the provision of downpayment assistance and other services, had brought suit against HUD Secretary Alphonso Jackson challenging the regulation, which would have reversed prior HUD policies regarding downpayment assistance.

Judge Friedman agreed with AmeriDream's position that there was a "substantial likelihood" that the regulation violated applicable law. Judge Friedman further stated that the regulation lacked a "reasoned analysis" and was based on "flimsy" support. Judge Friedman also questioned whether HUD acted appropriately in issuing the regulation in view of a published report that Secretary Jackson was committed to that course of action regardless of whatever public comments HUD would later receive. In view of those shortcomings and other considerations, Judge Friedman issued an injunction, effective immediately, preventing the regulation from taking effect.