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A failed prosecution

November 17th, 2009, 1:00 am by Mathew Padilla

“There was a reasonable doubt on every charge,” said a juror in the case against two former Bear Stearns hedge fund managers. The quote comes from the New York Times.

Ralph Cioffi and Matthew Tannin were found not guilty of securities fraud in federal court in New York last week.

I am writing about the case now, only because I was too focused on other things to do it last week.

The collapse of the funds managed by Tannin and Cioffi marked the beginning of the credit crisis. In reality their case was great theater but not very significant. By the time the funds collapsed toxic debt had already spread to the books of countless banks here and abroad and was held by many investors. Subprime was the tip of the iceberg.

Still, a commentary by William Cohan for the Times is an interesting read. He writes:

In short, the prosecution blew it — on two counts. First, in devising the original indictment for conspiracy and securities fraud … it relied on damning snippets of lengthy e-mail messages that when viewed in their entirety proved to be highly ambiguous. Second, the prosecution made a reductionist opening argument claiming the men were nothing more than out-and-out liars, needlessly raising the bar in terms of what it had to prove to jurors.

So far I have not heard of any criminal charges against the real players in real estate finance’s recent boom and bust. It seems like the Securities and Exchange Commission’s civil charges against Angelo Mozilo, co-founder of Countrywide Financial, are the closest thing I have seen. (No opinion from me on his innocence or guilt, just noting the case.)

So what do you think?
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Will we see many more criminal prosecutions?
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Posted in: Crime • Polls | 8 Comments »

Loan aid firms skirt ban on advance fees

October 31st, 2009, 1:00 am by Mathew Padilla

Some companies that advertise help avoiding foreclosure are trying to avoid a ban on advance fees by charging consumers in steps, according to loan brokers and state regulators.

That’s illegal, said Tom Pool, a spokesman for the California Department of Real Estate (DRE).

The bill, dubbed SB 94, clearly prohibits loan modification companies from collecting any money until all services are performed, Pool said. He said the DRE will investigate any consumer complaints related to companies skirting the advance-fee ban.

“We knew folks were going to be looking for ways around the bill, and we are seeing these creative and clever approaches,” Pool said. “We are not buying it.”

Consumers, however, must pay close attention to the loan-modification contract, Pool said. (A loan mod is when a lender changes the terms of a loan to make it more affordable instead of foreclosing on the borrower.)

For example, it could say that all service is complete once an application for a loan mod has been submitted to a lender, regardless of the outcome, he said. A fee could be collected at that time in compliance with SB 94, he said.

“It begs the question, Who is going to sign up for that?” Pool said. “Who is going to spend $3,000 on a crap-shoot.”

There are alternatives to paying a third-party for loan help.

Homeowners can attempt to negotiate their own loan modification or can seek free help from a nonprofit organization approved by the U.S. Department of Housing and Urban Development.

More on loan mods…

Posted in: Crime • loan mods | 2 Comments »

Loan-aid lawyer surrenders license after sex with minor

October 27th, 2009, 12:42 pm by Mathew Padilla

James Parsa of Costa Mesa-based the Parsa Law Group gave up his right to practice law in California amid a probe into a prior conviction for having sex with a minor, the California State Bar said last week.

Parsa, whose firm promised to help homeowners avoid foreclosure, was suspended on Oct. 16 (corrected: 5:34 pm). It recently became aware that Parsa pleaded guilty in 2001 to a misdemeanor charge of sex with a child under 18.

The former attorney was not immediately reachable for comment. He resigned on Oct. 21, the Bar said.

The Bar said Parsa did provide evidence that he was working on homeowner cases. But he never reported his conviction to the Bar.

Attorneys and others can no longer accept advance fees from homeowners wanting help negotiating a loan modification. The practice was outlawed on Oct. 11 when Gov. Arnorld Schwarzenegger signed SB 94.

The Bar said two other Orange County lawyers have surrendered their right to practice law :

  • Ronald Rodis of Rodis Law Group and America’s Law Group in Newport Beach, resigned from the Bar on Oct. 13.
  • Jeffrey Nemerofsky, U.S. Advocacy Law Group and U.S. Financial Products, in Laguna Niguel, resigned Oct. 16.

The Bar also placed Christopher Diener of Irvine-based Home Relief Services LLC on inactive status on Oct. 9, “due to the State Bar Court judge’s finding that he poses a substantial threat of harm to his clients and the public.”

Read more about attorneys HERE.

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Posted in: Crime • loan mods | 36 Comments »

Loan-aid attorney faces discipline over sex with minor

October 8th, 2009, 4:31 pm by Mathew Padilla

The California State Bar plans to suspend James Parsa of Costa Mesa-based the Parsa Law Group from practicing law, citing “moral turpitude” related to a prior conviction of having sex with a minor.

The suspension is scheduled to begin on Oct. 16, but Parsa’s attorney is seeking to stop it, according to the Bar.

An attorney for James Parsa was not immediately available for comment. Calls to Parsa’s office were not answered.

Parsa Law represents homeowners asking their lenders to make their loan payments more affordable.

The firm’s Web site says it stopped accepting new clients. A few customers contacted the Register saying they cannot reach anyone at the firm to get a refund.

Customers were denied access to Parsa’s office at 3200 Park Center Drive. Anyone visiting is given a letter saying the firm only responds to emails.

Kristin Ritsema, a supervising trial counsel for the Bar, declined to say why it began looking at James Parsa, citing privacy rights.

A few months ago investigators discovered Parsa pleaded guilty in 2001 to a misdemeanor of unlawful sexual intercourse.

“We were never notified that he was convicted,” Ritsema said.

She said Bar prosecutors believe even though Orange County Superior Court failed to notify the Bar, Parsa should have done it himself.

Ritsema declined to say if any consumers have complained about Parsa’s loan modification business.

The Bar last month identified 16 attorneys, including 11 in Orange County, who are being investigated for alleged misconduct related to loan mods. Parsa was not on the list.

Wade Gilliam said he paid Parsa Law $2,400 to help him get the mortgage modified backing his Westminster home.

The firm did submit paperwork to Wells Fargo, but the bank declined to offer a change to Gilliam’s loan terms.

He can afford the payments now, but is worried that when the interest-only period ends and the loan’s rate becomes adjustable, he won’t be able to make payments. The home is worth less than the debt on it, he said.

Parsa’s contract says it will refund $975 if it fails to get a mod, Gilliam said.

But now Gilliam can’t reach anyone to get his money back, he said.

More headlines from this blog…

Posted in: Crime • loan mods | 43 Comments »

Feds target Irvine loan-aid firm

September 17th, 2009, 2:45 pm by Mathew Padilla

(Update: Response from Infinity’s attorney.)

The Federal Trade Commission said today it took action against two companies, including one in Irvine, for allegedly making false promises about helping people avoid foreclosure.

The FTC late last month charged Irvine-based Infinity Group Services and its president, Kahram Zamani, with falsely claiming they would obtain a loan modification in all, or nearly all, cases and give refunds if they failed to get help.

Instead the company often failed to obtain a loan modification and often either ignored refund requests or only  returned money after consumers complained to the FTC or another agency.

A court filing by Peter Rundle, a lawyer for Infinity and Zamani, said the FTC paints a picture of his client that is “deeply flawed.” The filing says Infinity was approved by the Department of Housing and Urban Development and that the company “was stymied at every step” by lenders refusing to cooperate in the federal Hope for Homeowners program.

This is not the first time the commission has targeted an Orange County-based company for loan modification promises.

In April, the FTC filed a complaint against Irvine-based Federal Loan Modification Law Center for similar reasons.

And Attorney General Jerry Brown last month ordered 133 loan-mod shops in Orange County to register with his office and post a $100,000 bond, or prove they don’t have to comply.

The FTC’s complaint against  Infinity Group Services alleges the company  also advertised a flat fee of $995 for a mortgage refinance, but later sought additional fees ranging from $2,000 to $15,000.

Rundle’s filing for Infinity states the company was hurt by collapse of the market to sell loans to investors.

Here’s more from the FTC’s release on Infinity:

According to the FTC’s complaint, the defendants’ radio ads and Web site urged consumers to call a toll-free number. Once consumers called, the defendants’ sales personnel promised that, in return for the up-front fee, the company would help them modify their mortgage loans through the Department of Housing and Urban Development’s Hope for Homeowners program. The defendants claimed a high success rate and offered a full refund if they failed. The FTC alleges that the company often failed to obtain loan modifications and either failed to answer or return consumers’ telephone calls or update them about their status. When consumers were able to contact the defendants, they were falsely told that negotiations were proceeding smoothly or that lenders had caused a delay. In many instances, consumers received refunds only after repeatedly complaining to the FTC, the California Attorney General’s Office, or the Better Business Bureau.

The FTC’s complaint further alleged that the defendants also offered mortgage loan refinancing for a “flat fee” of $995 but then sought additional fees ranging from $2,000 to $15,000. In other instances, consumers were led to believe that they had closed on their loans but were later told by the defendants that the loan would not be funded. According to the complaint, the defendants’ Web site stated that there were no hidden costs, but a fine-print footnote stated, “Rates, Fees and Terms are subject to change.”

The defendants are Infinity Group Services, also doing business as IGS, Hope to Homeowners, ASK IGS, and ASK IGS, Inc., and the company’s president, Kahram Zamani. The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Central District of California, Southern Division, on August 26, 2009.

I think the FTC announced the complaint today because government officials are meeting to chat about fraud and the need for more action. Treasury Secretary Tim Geithner hosted Attorney General Eric Holder, Housing and Urban Development Secretary Shaun Donovan, FTC Chairman Jon Leibowitz, Financial Crimes Enforcement Network Director Jim Freis and attorneys general from 12 states.

In any case, the FTC also announced action against Nations Housing Modification Center in San Marcos and gave updates to older cases.

Finally, the commission is considering a ban on advanced fees for loan mods.

More from this blog…

Posted in: Crime • loan mods | 17 Comments »

O.C. loan officer arrested in $30 million fraud

September 11th, 2009, 11:59 am by Mathew Padilla

Attorney General Jerry Brown said today his office arrested a Huntington Beach loan officer and two other men for allegedly placing consumers into $30 million worth of fraudulent loans and pocketing $1 million in illicit profits.

Alan Ruiz

Alan Ruiz

Alan Ruiz, 28, was arrested at his Huntington Beach home late Thursday and is being held in the Orange County Sheriff’s jail.

However, Brown’s release focuses more on Michael McConville, 39, of Simi Valley, who worked as a sales manager for Los Angeles-based mortgage company ALG, Inc.  Garrett Holdridge, 23, of Palmdale, California and Texas was also arrested.

All three worked at ALG and are being held on $2 million bail.

According to Brown’s release:

“McConville and his co-conspirators lured dozens of borrowers into refinancing home loans by falsely promising low interest rates and brokers’ fees, and other attractive terms. They then negotiated different terms with lenders, forged the victims’ signatures on the final loan documents and collected hefty brokers fees - ranging from $20,000 to $57,000 - that were never disclosed. Only when the borrowers received true copies of the loan documents after the refinance did they discover that their names had been forged. In total, defendants stole over $950,000 from more than 70 borrowers, leaving victims holding $30 million in loans with terms they did not agree to.”

Michael McConville

Michael McConville

“After victims signed their closing papers, McConville and his associates doctored the loan documents, forged borrowers’ signatures and slipped in hefty fees that were never disclosed,” Brown said. “This was not some clerical error but a criminal conspiracy to steal nearly a million dollars from borrowers.”

Earlier this week, Brown filed 44 criminal charges against the men, including:

  • 28 counts of grand theft, by violating Penal Code section 487, subdivision (a);
  • 14 counts of forgery, by violating Penal Code section 470, subdivision (d);
  • One count of elder abuse, by violating Penal Code section 368, subdivision (d);
  • One count of conspiracy to commit grand theft, by violating Penal Code section 182, subdivision (a)(1);
  • Three special allegations of aggravated white-collar crime in excess of $500,000, by violating Penal Code section 186.11, subdivision (a)(2); and
  • Taking in excess of $3,200,000, by violating Penal Code section 12022.6, subdivision (a)(4) and (b).
Garrett Holdridge

Garrett Holdridge

Here’s more from Brown:

From April 2007 to October 2008, McConville and his associates provided homeowners closing documents bearing terms promised, but which the lender never approved. After homeowners signed those documents, key pages were removed and replaced with pages bearing the terms that the lender had actually agreed to. The homeowners’ signatures were forged on the replacement pages, and ALG forwarded the forged documents to the escrow company.

Homeowners only discovered they had been defrauded when they received the final loan documents with the true terms and saw their signatures forged on disclosures of closing costs, Truth-in-Lending disclosures, loan applications and other documents. ALG often collected between $20,000 and $30,000 in undisclosed broker fees. In one transaction, they collected over $57,000 in such fees.

As a result of this scheme, homeowners suffered devastating financial losses. Some were forced to sell their homes, come out of retirement, or tap into retirement savings. Others paid significant prepayment penalties — in one case, over $21,000. Borrowers often never received the significant amounts of cash-out they were promised.

VICTIMS
Michael McConville promised one couple a 5.5 percent fixed interest rate, cash-out of $58,000 and $4,500 in closing costs. Only after they signed the documents, they realized their copy did not include the pages detailing the key terms of the loan. The couple soon received loan documents from Indymac Bank and discovered their signatures had been forged and they had received a 7 percent interest rate, no cash-out, and over $50,000 in closing costs, including a $42,000 origination fee paid to ALG.

ALG contacted a 65-year-old retired woman in July 2007 and promised her a 30-year fixed rate loan at 5.25 percent. A month later, a notary had arrived at the victim’s house with loan documents reflecting the 5.25 percent fixed interest rate. After closing, the victim discovered she had received an adjustable rate mortgage with an initial rate of 8.65percent, a $22,000 origination fee, and $2,230 in miscellaneous fees. The victim’s signature had been forged on most of the documents.

Brown recently sued Michael McConville and his brother Sean for their part in the “Property Tax Reassessment” scam which targeted Californians looking to lower their property taxes. Tens of thousands of mailers were sent out that featured official-looking logos and demanded hundreds of dollars in payments for property tax reassessment and reassessment appeal services. The statements warned homeowners that if payments were not received by the “due date” they faced late fees or would have their file marked “non-responsive” or “ineligible for future tax reassessments.” A copy of the press release can be found at: http://ag.ca.gov/newsalerts/release.php?id=1734

Brown has made it a top priority to combat mortgage fraud. In July, as part of a nationwide sweep, Brown filed suits against 21 individuals and 14 companies who ripped off thousands of homeowners seeking mortgage relief. In total, Brown has sought court orders to shut down 32 companies and has brought criminal charges and obtained lengthy prison sentences for deceptive mortgage consultants.

More from this blog…

Posted in: Crime • Legal problems | 73 Comments »

AG cracks down on 133 O.C. loan modifiers

August 12th, 2009, 11:31 am by Mathew Padilla

(Clarification: Exemptions added.)

Attorney General Jerry Brown today ordered California companies that promise to help people avoid foreclosure to immediately post $100,000 bonds and register with his office or face criminal prosecution. He’s targeting 133 loan rescuers in Orange County and 386 statewide.

He also ordered 27  of these companies to “justify suspicious loan modification claims made in ’slick advertising,’ online and through the mail.”

Meanwhile, the State Bar of California today said it has obtained resignations from two lawyers and filed charges against a third for their loan modification activities. The Bar’s loan-mod squad is investigating more than 400 active complaints from consumers about lawyers’ roles in loan modification scams.

Here’s more from Brown’s office:

“Hoping to lower their mortgage payments, thousands of homeowners were instead duped by slick advertising and money-back guarantees,” Brown said. “The time for accountability is at hand, and this rogue industry must clean itself up or face legal action,” Brown added.

Brown also unveiled a new website that provides homeowners tips to avoid loan modification fraud, allows them to determine if a company is registered with his office and makes it easier to file complaints.

Brown today joined with the California Department of Real Estate and the State Bar of California in a new partnership to combat loan modification and foreclosure fraud.

Brown has sent letters directing 386 mortgage foreclosure consultants to register with his office within 10 days and post $100,000 bond, or demonstrate why they are not required to. If the consultants are required to register and have failed to do so, they are subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation. Eighty-five of these consultants are based in Los Angeles County, 133 in Orange County, 47 in the Inland Empire, 68 in San Diego County and seven in the Bay Area.

Additionally, Brown sent letters today demanding that 27 loan consultants substantiate suspect claims made on the internet and in direct mail advertising. For instance:

…

Brown directed Mortgage Modification Solutions of Irvine to substantiate its claims including: “Our services are due to the FEDERAL MANDATE which makes it mandatory for mortgagees, upon the default of a single family mortgage, to engage in loss mitigation actions” and “Why $3995.00 is nothing compared to what you can accomplish in return? #1- It’s 10 times more expensive to hire a CPA or a Financial Advisor to exclusively analyze & Research your financial affairs to create a plan acceptable to the Banking standards.”

Brown has published the list of companies needing to register.

Last month Brown said he has filed suit against 21 people and 14 companies, alleging that they scammed homeowners seeking to avoid foreclosure. At least four of those being sued are in Orange County.

Clarification: The original post said Brown also demanded law firms post a bond.  That was not correct. Brown’s list of loan mod shops he wants to register and post a bond includes some portraying themselves as law firms. Basically, Brown wants all the companies to post a bond or prove they are exempt under Civil Code 2945.1(b). Exemptions includes law firms and certain other licensed person under certain conditions. I think Brown is targeting call centers that ‘rent a lawyer’ as a front.

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Posted in: Crime • Defaults & Foreclosures • Legal problems • loan mods • | 45 Comments »

Trabuco Canyon appraiser convicted in $40 million fraud case

August 10th, 2009, 5:06 pm by Mathew Padilla

A federal jury today convicted Lila Rizk, 42, of Trabuco Canyon and Kyle Grasso, 38, formerly of Santa Monica of conspiracy, bank fraud and loan fraud charges for their roles in a mortgage fraud scheme that led to more than $40 million in losses at federally insured banks, the Department of Justice said.

Grasso, a real estate agent, also was convicted of three counts of money laundering.

The duo were part of a scheme that obtained inflated mortgage loans on luxury houses, with Grasso earning commissions and other payments and Rizk, an appraiser, earning fees.

Donald Marks, an attorney for Rizk with Marks & Brooklier in Century City, said, “We are very disappointed in the jury verdict. We think our case was very defensible. We think we raised reasonable doubt, and we think she is not guilty. We will continue fighting on her behalf.”

Marks said he would appeal the verdict. A lawyer for Grasso was not immediately reachable by phone.

Eight others involved previously pleaded guilty:

  • The DOJ dubbed “scheme leader” Charles Elliott Fitzgerald, 48, formerly of Newbury Park and Beverly Hills;
  • Mark Alan Abrams, 47, of Los Angeles, who along with Fitzgerald orchestrated the scheme, according to the DOJ;
  • Nicole LaViolette, 38, of Palm Springs;
  • Jamieson Matykowski, 35, of Laguna Niguel;
  • Timothy Holland, 37, of Santa Ana;
  • Richard Maize, 54, of Beverly Hills;
  • Thomas R. Schiff, 47, of Brentwood; and
  • L. Scott Robinson, 46, of Dana Point.

Fitzgerald was previously sentenced to 14 years in federal prison, and the remaining defendants are awaiting sentencing.

Here’s more from the DOJ:

The wide-ranging and sophisticated scheme defrauded mortgage lenders by obtaining inflated mortgage loans on expensive homes in some of California’s most exclusive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills, Malibu, Carmel, Mill Valley, Pebble Beach and La Jolla. Members of the conspiracy sent false documentation, including bogus purchase contracts and appraisals, to the victim banks to deceive them into unwittingly funding mortgage loans that were hundreds of thousands of dollars higher than the homes actually cost. Lehman Brothers Bank alone was deceived into funding more than 80 such inflated loans from 2000 into 2003, resulting in tens of millions of dollars in losses.

Lehman Brothers Bank and RBC Mortgage Company sued Fitzgerald, Abrams and others in federal court in Los Angeles in 2003 and obtained a receivership, temporary restraining orders and preliminary injunctions against them. Judge Pregerson appointed David J. Pasternak as receiver to recover assets acquired with proceeds of the fraud. The receiver, as well as attorneys and forensic accountants employed by him, have cooperated extensively with the government’s ongoing criminal investigation.
The evidence presented at trial included proof that Grasso profited by collecting hundreds of thousands of dollars in commissions and concealed payments. The prosecution further presented evidence that Rizk profited by collecting hundreds of thousands of dollars in fees for providing inflated appraisals in the scheme.

Judge Pregerson is scheduled to sentence Grasso and Rizk on January 29, 2010.

A third defendant who went to trial, Joseph Babajian, 56, another Westside real estate agent, was acquitted on 13 criminal counts, and the jury was unable to reach a verdict on eight additional counts. United States District Judge Dean D. Pregerson declared a mistrial as to the eight counts.
This case is the result of an investigation by the Federal Bureau of Investigation and IRS-Criminal Investigation.

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Posted in: Crime | 8 Comments »

D.A. raids Ladera homes in loan-aid scam probe

July 23rd, 2009, 3:34 pm by Mathew Padilla

(Update: D.A. declines to comment.)

Investigators with the Orange County district attorney early Thursday morning searched three Ladera Ranch homes believed tied to a foreclosure rescue scam.

Roshelle searchAgents served search warrants on two homes on Roshelle Lane and one on Merrill Hill. The homes are connected to Terence Green Sr. and Stefano Marrero of Home Relief Services and Christopher Diener of the Diener Law Firm. (Photo by Ken Steinhardt. Home on Roshelle.)

The three men were not immediately available for comment.

Attorney General Jerry Brown last week said he has filed suit against the men, alleging that they charged homeowners $4,000 in upfront fees and then failed to get them cheaper payments on their home loans.

Brown also charged that the companies sometimes promised to arrange a short sale — when a lender agrees to accept less than the debt owed on a property — but instead attempted to use customers’ personal information for the companies’ own benefit.

The District Attorney’s Office declined to comment. After getting an anonymous tip, a Register photographer took photos of agents entering the homes.

Alan Gordon, assistant chief trial counsel of the California State Bar, confirmed that the Orange County district attorney and some other agencies served search warrants today. He said the bar has been “working closely with several agencies” investigating potential loan mod scams.

Earlier in the week, District Attorney Tony Rackauckas told a group of community leaders that his office is expanding investigations into real estate fraud.

Elizabeth Henderson, an assistant district attorney who spoke at the same event in Garden Grove, said 30% of the cases handled by the office’s major fraud unit are tied to real estate, up from an average 10% in past years. Here’s more of what I wrote about her talk and subsequent interview:

The district attorney has two prosecutors, two investigators and a paralegal focused just on real estate fraud, she said.

The real estate squad is paid for, at least partially, with money from a $3 fee on the filing of certain real estate documents that was approved by the Board of Supervisors earlier this year.

Henderson was more blunt in her speech and in a later interview.

“We want to send people to jail,” she said.

The issue is not just that someone might lose $2,000 or more, but that his or her house proceeds to foreclosure while the homeowner waits for help that never comes, Henderson said.

Defrauding just one person could translate to a maximum penalty of three years in prison for grand theft, she said. Subsequent victims could add eight months to a sentence per person. Loan modification scammers could be committing other crimes, such as fraud, practicing without a license, and breaking rules tied to call centers.

More from this blog…

Posted in: Crime • Meltdown • loan mods • | 45 Comments »

District Attorney steps up real-estate fraud investigations

July 22nd, 2009, 3:57 pm by Mathew Padilla

The Orange County District Attorney has expanded efforts to combat foreclosure rescue scams and other real estate fraud cases, as the worst housing downturn in decades results in thousands of potential victims.

Elizabeth Henderson, assistant DA, said 30% of the cases handled by the office’s major fraud unit are tied to real estate, up from an average 10% in past years. The DA has two prosecutors, two investigators and a paralegal focused just on real estate fraud, she said.

The real estate squad is paid for, at least partially, with money from a $3 fee on the filing of certain real estate documents that was approved by the Board of Supervisors earlier this year.

Henderson and District Attorney Tony Rackauckas spoke at a foreclosure prevention workshop put on by the Orange County Home Ownership Preservation Collaborative today in Garden Grove. Organizers included NeighborWorks America, the U.S. Department of Housing and Urban Development, the Federal Reserve, and the Federal Deposit Insurance Corp. The event was meant to educate community and religious leaders on helping people avoid being scammed.

Tony Rackauckas file photoRackauckas (file photo shown) said scams are so prevalent that once a possible fraudster called an attorney in his office and offered to rescue the attorney’s house and suggested his company had the backing of Rep. Maxine Waters. It did not have her backing.

In a separate interview, Rackauckas said his office is not overlooking small players who take $2,000 or $3,000 from desperate homeowners but never lift a finger to help them avoid foreclosure.

“We will use our resources as best we can,” he said.

Henderson was more blunt in her speech and in a later interview.

“We want to send people to jail,” she said.

The issue is not just that someone might lose $2,000 or more, but that his or her house proceeds to foreclosure while waiting for help that never comes, Henderson said.

Defrauding just one person could translate to a maximum penalty of three years in prison for grand theft, she said. Subsequent victims could add eight months to a sentence per person. Loan mod scammers could be committing other crimes, such as fraud, practicing without a license, and breaking rules tied to call centers.

She said Orange County was once the epicenter of subprime. “The only thing worse is being the epicenter of an earthquake.”

Henderson said former subprime salespeople are now selling loan modifications — or promises to help a homeowner avoid foreclosure by getting a bank to lower his monthly payments. Such companies sometimes have no intention of helping anyone, she said.

Companies in Orange County often target homeowners in other states, making it harder for those people or authorities there to catch the companies later. She said East Coast companies are calling Orange County homeowners for the same reason.

Henderson showed photos of offices from loan mod shops that have been raided. One cubicle had a big sign that said “Ask for Money.” Another office had a sign that said “Don’t even think about going to another department.” Henderson explained the latter sign as companies telling employees that sales staff should not mix with people negotiating loans. That’s because there might not be anyone handling negotiations.

To avoid having to get a real estate license to do loan mods, some companies are “renting” lawyers, she said. Attorneys can negotiate loan mods without a real estate license or a pre-approval from the Department of Real Estate. But the lawyer may just be a front who never touches a loan file, she said.

Henderson suggests people try to negotiate their own loan modification, or work with a nonprofit group that offers help for free.

If they decide to pay an attorney, they should first meet the lawyer in person and ensure their money is set aside in a trust account, she said.

More from this blog …

Posted in: Crime • loan mods • | 15 Comments »

Attorney general sues dozens alleging foreclosure-aid scams

July 15th, 2009, 11:42 am by Mathew Padilla

(correction: four in Orange County, changed from eight in second sentence.)

Attorney General Jerry Brown revealed today that he has filed suit against 21 people and 14 companies, alleging that they scammed homeowners seeking to avoid foreclosure. At least four of those being sued are in Orange County.

jerry-brown-file-photo-fro.jpgHis actions are part of a nationwide crackdown, dubbed “Operation Loan Lies,” conducted with the Federal Trade Commission, the U.S. Attorney’s Office and 22 other federal and state agencies. In all, the agencies filed 189 suits and orders to stop doing business. (On Sunday, I did a story on possible loan mod scams, including a couple of companies in Orange County, but they were not named in Brown’s release.)

Brown seeks millions of dollars in civil penalties, a return of victims’ funds, and to stop the companies from offering foreclosure relief.

“The loan modification industry is teeming with confidence men and charlatans, who rip off desperate homeowners facing foreclosure,” Brown said in a release. “Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn’t provide an ounce of relief.”

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Since the housing collapse, hundreds of loan modification and foreclosure-prevention companies have popped up, charging thousands of dollars in upfront fees and claiming that they can reduce mortgage payments. But Brown says they rarely get banks and loan servicers to lower monthly payments of borrowers. His office said less than 1 percent of homeowners nationwide have received principal reductions of any kind.

Brown’s office filed the following lawsuits against these companies in Orange County and Los Angeles:

  • U.S. Homeowners Assistance, based in Irvine;
  • U.S. Foreclosure Relief Corp. and its legal affiliate Adrian Pomery, in Orange;
  • Home Relief Services, LLC, with offices in Irvine, Newport Beach and Anaheim, and its legal affiliate, the Diener Law Firm;
  • RMR Group Loss Mitigation, LLC and its legal affiliates Shippey & Associates and Arthur Aldridge. RMR Group has offices in Newport Beach, Orange, Huntington Beach, Corona, and Fresno;
  • United First, Inc, and its lawyer affiliate Mitchell Roth, based in Los Angeles.

Read the rest of this entry »

Posted in: Crime • Defaults & Foreclosures | 25 Comments »

Look who’s doing loan mods

July 13th, 2009, 2:23 pm by Mathew Padilla

In case you missed the story I wrote in Sunday’s Register, here’s a clip about one loan modification dispute:

Helena Cameron needed help paying her mortgage after she quit her job to care for her sick mother and her husband was laid off. She paid $1,500 to Irvine-based Debt Barter to help her negotiate a deal with her lender.

But the company fumbled her case and hasn’t returned her money, she said.

While she was making payments to Debt Barter, the California Department of Real Estate ordered the company to stop taking money from consumers like Cameron. Sean R. Roberts, founder of Debt Barter, declined to comment for this story, beyond saying Cameron is scheduled to receive a refund in August.

And some background on Roberts:

Long before Roberts founded Debt Barter he ran Instafi.com, a now defunct Irvine company that refinanced home loans over the telephone or Internet.

Sean Roberts image taken from TV commercialDuring housing’s heady days, Instafi processed more than $500 million in loans per quarter and employed 380 people. Roberts, who pitched the company in TV commercials, drove a Ferrari and a Mercedes-Benz and took friends on chartered jets to golf vacations in Cabo San Lucas.

After mortgage rates bottomed, the refinance shop imploded in December 2003, leaving employees with bounced checks and owing creditors $38 million. Creditors have yet to be paid because of pending litigation, said Richard Golubow, an attorney for Credit Management Association, which is handling Instafi’s liquidation.

Roberts tried lending again under the name PremServ, but the California Department of Corporations shut its lending subsidiary down in 2004. It didn’t have a license, the department said.

The great housing collapse brought Roberts back in business. He set up Debt Barter in an office in Irvine’s business district alongside John Wayne Airport and began soliciting customers in 2008, according to state records.

Cameron said after she started missing payments on her house, someone from Debt Barter called her and promised to help, for a fee. She thinks they may have found her after her lender filed a notice of default, which is publicly available at the county recorder’s office.

She paid Debt Barter $750 in January, the month the Department of Real Estate issued a desist-and-refrain order against Roberts for doing loan modifications without a license, and another $750 in February.

But she never got any paperwork from her lender, originally Countywide Financial, and later Bank of America. Meanwhile, employees of Debt Barter either ignored her or asked for more money, she said.

“I had to call every day and they never returned my calls,” Cameron said. “I called Countrywide. They didn’t know who the hell Debt Barter was.”

I think you get the idea.

It’s certainly possible that most companies doing loan mods are helping people, not scamming them; I only get calls from consumers who feel wronged. However, the California Department of Real Estate has published a list of more than 100 companies and individuals it has ordered to stop doing loan mods.

I suggest anyone having trouble paying a mortgage and who really wants to keep his house speak directly with the lender/loan servicer. If that does not work, then try a nonprofit agency listed on www.hud.gov.

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Posted in: Crime • Defaults & Foreclosures • loan mods | 15 Comments »

FTC may prohibit advance fees for loan-modification help

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.

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Posted in: Crime • Defaults & Foreclosures • Regulation • loan mods | 4 Comments »

99 years for mortgage fraud

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.

In other news…

Posted in: Crime | 7 Comments »

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