Archive for the 'Crime' Category
June 2nd, 2009, 7:18 am by Mathew Padilla
Trade publication National Mortgage News reports:
The Federal Trade Commission is seeking public comments on how it should address foreclosure and loan modification scams and whether it needs to engage in further rule making with regard to unfair and deceptive mortgage lending and servicing practices. FTC has taken legal actions to stop several foreclosure rescue scams where consumers have paid fees up-front for bonus services. The consumer protection agency is considering drafting regulations that would ban advance fees for loan modification and foreclosure rescue services. The comment period ends July 15. In a separate “Mortgage Act and Practices Rulemaking,” the FTC is soliciting comments on whether it needs to issue regulations to stop deceptive practices dealing with mortgage advertising and marketing, loan underwriting and terms, appraisals and servicing. “The FTC is particularly interested in receiving comments about mortgage servicing,” the agency said. The advance notice of proposal rulemaking specially asks if FTC should prohibit or restrict servicers from charging fees that are not authorized under the mortgage contract or servicing agreement, such as late fees. Or charging “estimated” attorney fees or other fees for services not rendered. The comment period ends July 30.
In other news…
Posted in: Crime • Defaults & Foreclosures • Regulation • loan mods | 4 Comments »
May 15th, 2009, 6:33 pm by Mathew Padilla
Just saw this on National Mortgage News:
In a recent case that even raised the eyebrows of a spokesman for the Texas attorney general’s office, a woman in the Lone Star State was sentenced to 99 years in prison for mortgage fraud. Yes, you read that correctly: nearly a century in jail. Though other recent Texas mortgage fraud convictions have seen prison sentences of between 18 months and five years, Kandace Yancy Marriott of Gun Barrel City, Texas, got the maximum sentence possible after being found guilty of orchestrating a complex mortgage fraud scheme where she received monthly mortgage payments from her clients, failed to remit those payments to the mortgage lender and embezzled the homeowners’ funds, causing her clients to default on their home loans.
According to NMN, Marriott’s defense attorney, Ed Mason, did not return calls for comment.
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Posted in: Crime | 7 Comments »
May 5th, 2009, 3:00 am by Mathew Padilla
Michael Strauss, founder and former CEO of American Home Mortgage Investment Corp., has agreed to pay nearly $2.5 million to settle federal civil charges of accounting fraud and concealing the company’s deteriorating finances as the subprime mortgage crisis hit in 2007, the Associated Press reported last week.
The Securities and Exchange Commission alleges Strauss and two other executives misled American Home’s auditor about the adequacy of the company’s reserves against losses on mortgages.
Peter Bresnan, a lawyer for Strauss, didn’t return AP calls seeking comment.
National Mortgage News reported this week that Strauss now has a loan modification company called InstaModify. Its Web site lists offices in Irvine, on Von Karman, and in East Meadow, N.Y. Seems like everyone has a loan mod operation these days.
Here’s more from AP on American Home:
The executives were major players in the national mortgage meltdown, an SEC official said. American Home filed for bankruptcy protection in August 2007 and is currently in the process of liquidating. It fell from being one of the nation’s 10 biggest mortgage lenders to insolvency in about a week, as its lenders demanded more collateral for their loans.
Like scores of other mortgage companies, Melville, N.Y.-based American Home was left with no capital to operate as the market for securities tied to high-risk subprime home loans dried up after a spike in homeowner defaults. The collapse in the mortgage-backed bonds in 2007 helped set off the global economic crisis.
Strauss, 50, who lives in Southampton, N.Y., neither admitted or denied wrongdoing in his settlement with the SEC, though he did agree to refrain from future violations of securities laws. He agreed to pay about $2.2 million in restitution and interest, and a $250,000 civil fine. Strauss also will be barred for five years from serving as an officer or director of any public company.
In other news…
Posted in: Crime • Meltdown • loan mods • industry | 7 Comments »
April 16th, 2009, 3:00 am by Mathew Padilla
The Center for Public Integrity released this week a report on the role appraisers may have played in inflating the housing bubble. The report says lenders pressured appraisers to inflate home valuations.
Here’s an anecdote involving an appraiser from eAppraiseIT, a unit of Santa Ana-based title insurance giant First American:
In 2004, years before plummeting real estate values turned Fort Myers, Florida, into a top five foreclosure capital, appraiser Mike Tipton faced a dilemma.
Tipton’s employer, eAppraiseIT, sent him to value a two-bedroom home in a new subdivision built by the developer D.R. Horton. Paperwork given by the appraisal management company to Tipton included a $245,000 estimated value.
But after inspecting the home and comparing it to five similar houses that had recently sold, Tipton set the value at $237,000, $8,000 less than the estimate. He knew the difference might disappoint DHI Mortgage, the prospective buyer’s lender, which is a subsidiary of developer D.R. Horton. And indeed it did.
The lender, in a process appraisers say was common in the boom days before the housing bubble burst, asked Tipton to redo the appraisal. It sent paperwork through eAppraiseIT asking him to reconsider the value. It gave him different homes to use for comparisons.
“If you read between the lines, they wanted a larger value,” Tipton said. “I told them no, I wasn’t changing my report.”
Tipton, who like many other appraisers is paid by the job, says he was never given another appraisal for a D.R. Horton home. “All I can say is D.R. Horton has remained an active developer in Lee County,” Tipton said. “I didn’t see any further appraisals for DHI Mortgage. So you tell me.”
Carrie Gaska, a spokeswoman for First American eAppraiseIT, declined to comment on why Tipton received no further orders from the company for DHI Mortgage properties.
In the example, the lender is a unit of a home builder, which is a special case since builders want to sell their properties at the highest value buyers will pay. But the report says other lenders also pressured appraisers.
Appraisal pressure is a byproduct of securitization. Lenders who hold loans on their books want an honest appraisal so that there is sufficient collateral backing their loan. (Collateral is one of the three Cs of lending; the other two are character and buyer capacity to pay.) But if the loans are sold to investors via mortgage securities, then lenders just want bigger values and the bigger commissions derived. Lenders thought they were freed from default risk.
Read the rest of this entry »
Posted in: Company Watch • Crime • First American • Loan underwriting • Appraisal fraud | 10 Comments »
April 14th, 2009, 12:00 pm by Mathew Padilla
Rocky Delgadillo, city attorney for Los Angeles, said today he has filed charges in two cases against predatory real estate companies and loan brokers, including one man in Huntington Beach. The alleged scams targeted first-time homebuyers and owners seeking to refinance.
“We will seek out and hold accountable to the fullest extent of the law those who contributed to our current financial mess by preying on low-income, first-time home buyers,” Delgadillo said in a release.
In one case, Ralph Rodriguez, 39, of Huntington Beach, Joseph Villaescusa, 46, of Whittier, and Isabel Gutierrez, 49, and Tony Gutierrez, 52, of Downey were each charged with nine criminal counts, including conspiracy to commit grand theft, grand theft, and forgery. The defendants each face a maximum penalty of nine years in jail and $18,000 in fines. Here’s more from the city attorney:
Beginning as early as April 2006, the defendants, acting as representatives of Norwalk-based Century 21 Allstars, Inc, deceived and induced five first-time home buyers to apply for and obtain mortgage loans under a fictitious government program that would supposedly pay the difference between what the victims said they could afford, and the actual monthly mortgage.
The defendants targeted low-income, Spanish-speaking victims by flooding Spanish language radio with ads voiced by Isabel Gutierrez that touted the non-existent government program.
Four separate sets of victims contacted the defendants in response to the radio ads and expressed their desire to Isabel Gutierrez to purchase a home through the non-existent government program. Isabel and Tony Gutierrez - both licensed real estate brokers for Century 21 Allstars - met with the victims and asked how much they could afford in monthly mortgage payments.
The Gutierrez’s assured the victims that the government would assist them in paying the difference between what they could afford, and what their monthly mortgage payments would be. Relying on the promise of free financial assistance, the victims agreed to purchase homes that ranged in price from $409,000- $470,000.
The victims were also told that in order to qualify for the program, they needed to purchase a house from a set of five that were shown to them by Tony Gutierrez.
The defendants chose dilapidated homes they couldn’t sell, in lower-income neighborhoods, and then presented them to the victims as the only homes eligible under the government assistance program. By representing both the buyers and the sellers, they were able keep the truth from either party, all while driving up the sales price - increasing their commissions and broker fees.
The defendants promised to sweeten the deal by offering the services of Tony Gutierrez - who is also a contractor - who would perform necessary repairs to the dilapidated houses by folding the cost of the repairs into the new home loans.
Once a victim agreed to purchase a home, the defendants falsified and forged loan applications by overstating the victim’s income, without the victim’s knowledge, in order to guarantee approval of the loan. These falsified closing documents were drafted in English, while the victims spoke and read only Spanish.
To date, all of the victims have been forced into foreclosure, and all but one lost their homes.
Villaescusa is the President of Maxres, Inc, which does business as Century 21 Allstars. Identical charges were filed against the real estate businesses Maxres, Century 21 Allstars, and Gutierrez & Associates.
A second case involved individuals in Northridge, Bakersfield, Van Nuys and Glendale who allegedly participated in a scheme to refinance homeowners for more than the owners realized by forging their signatures.
In other news…
Posted in: Crime | 80 Comments »
March 24th, 2009, 5:00 pm by Mathew Padilla
I’d like to hear from anyone who has hired a private company for help getting a loan modification. Email me at mapadilla(at)ocregister.com with your name and phone number.
The California Reinvestment Coalition, a nonprofit consumer advocate, recently criticized the state Department of Real Estate for issuing approvals to private companies so they can collect advance fees from consumers seeking help getting a modification.
The coalition argues the state is endorsing companies that will take advantage of homeowners by taking their money and not getting them a modification. Here’s more from the coalition:
The surest way to protect the public would be to restrict the ability to negotiate loan modifications to only HUD-certified, nonprofit mortgage counseling agencies and legal services agencies, according to Kevin Stein, associate director of the California Reinvestment Coalition.
Currently, the Department of Real Estate (DRE), which licenses mortgage brokers and real estate agents, provides certification for some private loan modification companies. More than 200 such companies in California have been authorized to negotiate with loan servicers to modify mortgages, and there are about 500 more applications pending.
“We are concerned that in approving fee agreements, the DRE may be seen as endorsing companies that may wind up taking advantage of people,” Stein said. In fact, many are former mortgage brokers and realtors who are using foreclosure databases to market to at-risk homeowners.
Vulnerable homeowners are being sold services that are available for free from nonprofit mortgage counseling agencies who have the expertise and the mission to serve the interests of California homeowners. Many of those swindled by for-profit companies eventually find their way to nonprofit counselors, but at that point, the damage is done. Lenders and loan servicers have not been contacted, and the client is out thousands of dollars in fees while falling further behind on mortgage payments. The average fee for these companies is $3,000, though some have been as high as $9,500.
The Treasury Department has issued a warning about loan modification scams in announcement of the housing rescue plan, but there is no provision to crack down on these companies.
The latest banking/lending stories …
Posted in: Crime • Fraud • loan mods • loan mods | 11 Comments »
August 28th, 2008, 9:48 am by Mathew Padilla
The Mortgage Asset Research Institute just released a report on mortgage fraud for the first three months of the year, and California ranked No. 2, behind the No. 1 state of…..Florida!
Coming in No. 3 was a three-way tie: Illinois, Maryland and Michigan.
The MARI maintains a database of reported incidents of fraud and misrepresentations, and the ranking is based on total number of properties involved in fraud (the totals were not given). Nationwide such reports were up 42 percent in the first quarter vs. a year ago. And here I thought fraud would decrease after the credit crunch began last summer.
Although the report didn’t break out Orange County, it said in California 52 percent of properties with “misrepresentations” are in the Los Angeles area.
Here’s more:
“Income and employment misrepresentation on the mortgage application rank high in Florida, California, Illinois and Maryland. Florida and Maryland report higher income than employment misrepresentation, and California and Illinois report slightly higher employment than income misrepresentation.”
And…
“The first quarter data reveals that loan application misrepresentation continues to plague the industry. According to the FBI’s 2007 Mortgage Fraud Report, ‘the downward trend in the housing market provides an ideal climate for mortgage fraud perpetrators to employ a myriad of schemes suitable to a down market. Simply stated, mortgage fraud will not disappear — in fact, it is expected to significantly grow, evolve and penetrate new areas within the industry”
Read the full report HERE.
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Posted in: Crime • Fraud | 7 Comments »
August 22nd, 2008, 8:32 am by Andrew Galvin
A second bill aimed at strengthening regulation of mortgage brokers passed the state Senate Thursday and is headed to the governor.
This bill, SB 1240, “would enact a comprehensive series of mortgage broker reforms aimed at fixing many of the problems that helped create California’s current mortgage crisis,” said its sponsor, state Sen. Michael Machado (D-Linden), in a news release.
Here’s a clip from Machado’s release:
Existing law fails to provide the Department of Real Estate (DRE) with any information about the activities of its licensed mortgage brokers. Currently, DRE has approximately 360 staff to oversee over half a million licensees, and is unable to proactively prevent mortgage fraud.
SB 1240 will allow DRE to keep track of mortgage broker licensees, and to conduct audits and enforcement activities against those mortgage brokers whose activities pose the greatest risk to the public.
“Many of the problems we have seen involving mortgage brokers in California are not because there has been a failure in law. Rather its a failure of enforcement,” said Machado. “California’s Real Estate Law is one of the toughest in the nation. SB 1240 will transform our regulator from one that relies on consumer complaints to identify fraud, to one that is a proactive protector of borrower’s rights.”
On Wednesday, the Senate sent SB 1737 to the governor. That bill would, among other things, allow the DRE to ban unscrupulous individuals from working in real estate or related industries for up to three years.
Under current laws, the DRE can order brokers to stop doing bad things but has no power to enforce its orders.
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Posted in: Crime • Defaults & Foreclosures • Fraud • Regulation | 3 Comments »
August 21st, 2008, 8:43 am by Andrew Galvin
A bill aimed at making it more difficult for people like Jimmy Osborn to victimize vulnerable mortgage borrowers passed the state Senate yesterday and is headed to Gov. Schwarzenegger.
SB 1737 (which passed the Assembly on Monday) would give the Department of Real Estate the power to ban unscrupulous individuals from working in real estate or related industries for up to three years.
Osborn, whose crimes were detailed in a two-part series (part 1, part 2) in the Register this week, was ordered by the DRE in 2004 to desist and refrain from arranging mortgage loans without a real estate license. Nevertheless, Osborn was able to get hired by several Orange County mortgage companies before being jailed last year. Currently, the DRE doesn’t have authority to enforce its own orders.
According to the bill’s sponsor, state Sen. Michael Machado, D-Linden, the bill would also “prohibit a real estate broker from sabotaging a short sale in order to get the property listing when the property is up for foreclosure sale, and requires a real estate broker who brokers a mortgage, and helps facilitate a property sale as part of the same transaction, to notify everyone involved in that transaction about all of the roles the broker is performing.”
“What we’re trying to do is increase the level of accountability and the risk to the person doing business that way,” Machado told the Register earlier. “It’s not going to be foolproof, but it does close some loopholes.”
Posted in: Crime • Defaults & Foreclosures • Fraud • Legal problems • Regulation | 12 Comments »
August 18th, 2008, 8:19 am by Andrew Galvin
 Refinancing a home can be a complex, confusing process in the best circumstances. It’s harder if your mortgage representative is lying to you. His lies could cost you thousands of dollars in bogus fees or even your home.
People who relied on Jimmy Osborn learned this the hard way.
Osborn, a salesman who worked for several Orange County mortgage companies, stole $550,000 from his clients and caused 10 families to lose their homes to foreclosure.
Osborn’s story reveals the lack of protection for mortgage borrowers under state law.
To read part 1 of the story, click here.
For part 2, click here.
Posted in: Crime • Defaults & Foreclosures • Fraud • Legal problems | 13 Comments »
July 17th, 2008, 12:51 pm by John Gittelsohn
 UPDATED: With response from Bank of America.
Jerry Brown, California’s attorney general, has added new accusations to a law suit against Countrywide Financial, alleging the lender’s deceptive business practices included ignoring its internal underwriting guidelines and rewarding employees for selling risky home loans.
“These shocking new details provide further evidence of Countrywide’s dangerous lending practices, which included ignoring borrowers’ low credit scores and rewarding employees for selling risky loans,” Attorney General Brown said. “In one case the company approved an adjustable rate mortgage to an 85-year-old disabled veteran with such a low credit score and high debt that he defaulted in less than six months.” (Brown pictured in file photo from AP’s Jeff Chiu)
The new allegations are part of an amended complaint to a lawsuit Brown filed June 20 against the lender, which was taken over this month by Bank of America.
Bank of America spokesman Dan Frahm said his company does not dispute the numbers in Brown’s latest allegations, but he said the problems reported represent a minority of Countrywide’s portfolio– about 158,000 of 950,000 loans owned and originated by the company. Countrywide services a total 9 million loans.
“The percent of delinquencies and foreclosures in that part of the portfolio is much higher than other loans,” Frahm said of the Countrywide loans under attack.
Frahm added that BofA is cooperating with Brown’s investigation and expects to correct any potential systemic problems now that it owns Countrywide.
To see the Attorney General’s announcement, CLICK HERE.
To see the Attorney General’s amended complaint, CLICK HERE.
Related stories …
Posted in: Company Watch • Countrywide • Crime • Legal problems | 13 Comments »
June 20th, 2008, 10:50 am by John Gittelsohn
 Daniel McMullen, special agent in charge of the FBI’s Los Angeles area criminal division, announced a multi-agency program to target rampant mortgage fraud called SCAM — for Southern California Mortgage task force. About 40 FBI agents are devoting full-time to the fight against mortgage fraud in Orange, Los Angeles, Riverside, San Bernardino, San Luis Obispo, Santa Barbara and Ventura counties. McMullen spoke with the Register’s John Gittelsohn. Some excerpts.
Q. Why focus on mortgage fraud now?
A. This is the result of intelligence work that we’ve gathered from the industry and individuals. We’re seeing where fraud is occurring and this type of fraud is so significant we need to concentrate on it.
Q. But hasn’t a lot of the problem been taken care of by lenders tightening credit? It’s pretty hard to get a “liar loan” these days.
A. There are different types in the up markets and the down markets. We see more of the down market cases these days. These are schemes where folks are supposedly helping those who are losing their homes. This is short-sale fraud and credit rescue schemes.
Q. The FBI just arrested former Bear Stearns hedge fund managers in a fraud case. Are you going after any corporations here?
A. We’re looking at all types of fraud: Corporate, criminal enterprises, individuals. The essence of the crime is people aren’t stating the correct facts — to those buying homes, providing mortgages or investing. Fraud runs the gamut from the largest to the smallest. We believe 80 percent of fraud is for profit. And about 20 percent of the fraud is for housing — solely by the borrower using fraudulent documents. The for-profit fraud could be industry insiders who skim equity, inflate the value of property or make fraudulent loans.
Q. How does this region stack up when it comes to fraud?
A. We have the largest number of suspicious activity reports, or SARs, of any area in the country. We’re No. 1 because we certainly have a large population. There are also a significant number of lenders here.
Q. I saw you put out a list of tips for regular people. What’s your advice?
A. I’d say start at the top. No. 1: Understand who you’re dealing with. Get a reference. No. 2: If it sounds too good to be true, it probably is.
To see the FBI’s announcement, CLICK HERE.
Related stories …
Posted in: Crime | 5 Comments »
June 19th, 2008, 4:58 pm by John Gittelsohn
A federal grand jury in Orange County charged three people with conspiracy to commit mortgage fraud, leading lenders to fund more than $50 million in loans, “with half of those currently in default or foreclosure,” said FBI spokeswoman Laura Eimiller.
The seven-count indictments are part of a Southern California initiative, nicknamed SCAM, to prosecute mortgage fraud, announced today by authorities in nine different federal agencies.
The local campaign is part of a nationwide effort unveiled today called Operation Malicious Mortgage, which resulted in 144 mortgage fraud cases charged against 406 defendants since March 1. The most prominent case was the charges unveiled today against two Bear Stearns hedge fund managers.
The Orange County indictments charged Gilma Ruiz and her brother, Francisco Ruiz, both of Las Vegas, and their cousin, Mario Hernandez of Los Angeles, with preparing false bank statements that helped mortgage brokers obtain loans from Orange County companies including Resmae Mortgage, People’s Choice Home Loan and Encore Credit Corp.
The three defendants could not be reached for comment. They are scheduled to make their first court appearance on June 23 to enter pleas in the indictmnent.
To read the 9-page indictment, CLICK HERE.
To see the FBI’s announcement, CLICK HERE.
Related stories …
Posted in: Crime • Fraud | 7 Comments »
May 22nd, 2008, 3:50 pm by Jeff Collins
A spokesman for the state Attorney General’s Office said today that 20 delinquent Orange County homeowners were among at least 345 victims of an alleged scam in which they transferred their homes to a “federal land grant” to shield them from foreclosure. Many victims also deeded their properties to businesses that, according to authorities, were running the foreclosure rescue scam.
Arrested were William Hutchings, 62, accused of heading the operation; Xiaoke Li, 43, both of Scripps Ranch in San Diego, according to an Attorney General press release. Others arrested included Edgar Martinez, 30, and Diego Gil, 38. An arrest warrant for Shawna Landis, 29, of Sorrento Valley, has been issued.
Charges include conspiracy, grand theft, and deceitful practices as foreclosure consultants. The defendants couldn’t be reached for comment because they’re still in jail, according to a spokesman for the San Diego District Attorney’s Office. Landis is still being sought.
The attorney general filed civil action seeking a restraining order and penalties. According to the release:
Federal Land Grant Company — a San Diego-based business run by Bill Hutchings, his wife Xiaoke Li and former wife Shawna Landis — tricked desperate homeowners into believing that they could protect their homes from foreclosure by deeding their property to “federal land grants.” Land grant transfers, used hundreds of years ago when the United States was still acquiring land from other countries, are no longer recognized by any court or county assessor. …
Federal Land Grant required homeowners to pay up to $10,000 to put their property in a so-called land grant which the company claimed would prevent foreclosure. Federal Land Grant also tricked homeowners into signing over the deed to their home and paying the company rent.
The San Diego District Attorney’s office estimates that the alleged fraud scheme targeted 400 homeowners in San Diego County, with more victims throughout the state.
Most of the victims were Hispanic immigrants who speak little English, according to the state press release. The Attorney General’s Office reported that more than 280 properties in San Diego and Riverside counties were transferred to Federal Land Grant or one of its affiliated companies. An additional 65 properties were transferred in Los Angeles, Orange and San Bernardino counties. At least 60 homeowners lost their homes in foreclosures.
More victims are being sought, officials said. Foreclosure rescue scams have become increasingly common since the housing slump began as strapped homeowners become increasingly desperate. Orange County recorded nearly 900 foreclosures in April, the highest number on record.
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Posted in: Crime • Defaults & Foreclosures • federal land grant • foreclosure scam | 1 Comment »
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