AUG 23, 2012
Compliance Matters

Arizona AG Sues Two for Loan Modification Fraud

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NOT TO BE OUTDONE BY CALIFORNIA, ARIZONA AG SUES TWO LOAN MODIFICATION COMPANIES

FACTS

On Aug. 15, Arizona Attorney General Tom Horne announced two lawsuits have been filed against Arizona companies selling mortgage modification services to distressed homeowners
The lawsuits are against Phoenix-based Making All Homes Affordable LLC and its owner Albert Figueroa; and Tucson-based La Paz Source LLC, its owners, Maria Beltran and her husband, Francisco Ramos and their new operation La Placita Multi Services LLC owned and operated by Beltran and an individual named Arturo Gomez Leon.
The lawsuit against MAHA alleges that MAHA and Defendant Figueroa violated the Consumer Fraud Act by misrepresenting the nature and value of the MAHA program, which MAHA advertises exclusively in Spanish language media and sells in face-to-face meetings in MAHA’ office and at several “retail outlets” in Phoenix and Tucson, including at the office of La Placita. The lawsuit alleges that MAHA salespersons tell potential clients that MAHA can help them obtain specific, favorable mortgage modifications, including lower interest rates and principal reductions. After homeowners pay MAHA nearly $1,900, homeowners discover that the MAHA program is nothing more than a do-it-yourself program, allowing them access to various standardized forms and information on MAHA’s website; forms and information that are available for free on government websites. The lawsuit also alleges that MAHA uses dozens of fake consumer testimonials on its website and that MAHA charges its clients a fake sales tax of 9.3%. 
The lawsuit against La Paz Source and La Placita alleges that La Paz Source  was an Arizona LLC who advertised as providing foreclosure consultant services. Consumers have reported that La Paz Source promised to stop the foreclosure process, obtain loan modifications for its consumers and communicate with lenders/servicers on behalf of its clients. As La Paz Source, the defendants allegedly claimed they were authorized to conduct such business in Arizona when they were not duly licensed to conduct their business here. Oftentimes, La Paz Source charged very large upfront fees, which were prohibited by state and federal law, and then failed to provide the mortgage loan modification services required to earn those fees. In some cases, the clients lost their homes in the process. 
In November 2011, Beltran and Ramos dissolved La Paz Source LLC. The same day that the defendants dissolved La Paz, Beltran and Arturo Gomez Leon started La Placita which also held itself out as being a provider of mortgage loan modification services to Arizona consumers. 
The defendants deceptively and willfully target the Spanish-speaking community in Arizona to obtain a benefit through the exploitation of the consumers’ Spanish/English language barrier. The defendants provide contracts written only in English. Many times, the defendants verbally explain terms of the agreement to consumers, in Spanish, that are in direct contradiction to the written provisions of the contract provided in English. 

The La Paz and La Placita defendants now claim to have changed their business model to that of a retail outlet for MAHA. The complaint further alleges: the defendants continue falsely to guarantee consumers that the defendants’ services will result in foreclosure prevention and a favorable loan modification; the defendants hold themselves out to the community as experts in mortgage loan modifications and use deceptive means to lure distressed homeowners into parting with hundreds or thousands of dollars, then the dfendants take their money without providing the efficacy, nature, or kind of services for which the consumer bargained; and that the defendants charge consumers a fee they call a “sales tax,” but those monies are not remitted to the Arizona Department of Revenue. Furthermore, the defendants represent that they are compliant with state and federal laws when they routinely violate the FTC M.A.R.S rule banning upfront fees for mortgage assistance relief services. (azag81512)

MORAL

I wonder if the attorney general is seeking an “asset freeze.” If so it is going to be difficult for the individual defendants to pay for their attorneys. You can follow along by going to the Maricopa County and Pima County court web sites and check on the case numbers. Usually the calendar is printed there and the type of documents filed. So sometimes you can see who is saying what to whom and how they are defending.

CALIFORNIA AG GETS $4 MILLION JUDGMENT AGAINST THOSE DOING LOAN MODS

FACTS

On July 24, California Attorney General Kamala D. Harris announced defendants who ran a national loan modification scam were ordered to pay more than $4 million in penalties and restitution, including $2 million to consumers who were falsely promised modifications of their mortgage loans.

More than 1,000 customers paid more than $2 million for loan modification services to Statewide Financial Group Inc., which did business as US Homeowners Assistance and Webeatallrates.com, and was based in Orange County.

The Orange County Superior Court ordered that every US Homeowners Assistance loan modification customer should receive a full refund upon request. The defendants were also permanently enjoined from engaging in the conduct that led to the lawsuit and were ordered to pay $2 million in civil penalties

The prosecution of this action took nearly three years, culminating in a multi-week bench trial in March. The business’ owners, Zulmai Nazarzai and Hakimullah Sarpas and Fasela Sheren (who went by the name Sharon Fasela), were all found liable for violating California’s Unfair Competition Law and False Advertising Law.

In a separate proceeding in late 2010, Attorney General Harris successfully prosecuted Nazarzai for contempt of court for his refusal to turn over $360,000 unlawfully taken by defendants as ordered by the court. He has been incarcerated in the Orange County jail since December 2010 because of his continued refusal to comply with the court’s order.  (caag72412)

MORAL

Three years to prosecute in a bench trial (judge only, no jury). And still no money received. But I presume the civil lawyers were well paid.  For them to take on a case and keep it going three years when pursued by the attorney general of California I would say was pretty good legal work all things considered.

CALIFORNIA REAL ESTATE INVESTOR AGREES TO PLEAD GUILTY TO BID RIGGING AT FORECLOSURE SALES

FACTS

On Aug. 15, Danli Liu, a real estate investor, agreed to plead guilty for her role in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California. Felony charges were filed in the U.S. District Court for the Northern District of California in Oakland against Liu.

To date, 25 individuals have agreed to or already have pled guilty to charges in this matter. Liu conspired with others not to bid against one another but instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in Alameda County, Calif. Liu was also charged with a conspiracy to use the mail to carry out a scheme to fraudulently acquire title to selected properties sold at public auctions, to make and receive payoffs, and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy. The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions. The private auctions often took place at or near the courthouse steps where the public auctions were held.

The department said Liu conspired with others to rig bids and commit mail fraud at public real estate foreclosure auctions in Alameda County beginning as early as April 2009 and continuing until about March 2010.

The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Alameda County public foreclosure auctions at non-competitive prices. These conspirators paid and received money that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties, and, in some cases, the defaulting homeowner.

A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud. (usattysfndca81312)

MORAL

Do not rig the bids in a public foreclosure sale or your may find yourself going to a public prison.

INDIANA BROKER GETS 10 YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD—FATHER ONLY GETS EIGHT YEARS

FACTS

Convicted of operating a mortgage fraud scheme that took advantage of unsophisticated investors, Jeremie Sheneman was sentenced to 10 years in prison despite his continued pleas of innocence.  Sheneman, who was convicted along with his father Michael in May 2011 of four counts of wire fraud, also was ordered to pay $269,967 in restitution. The younger Sheneman wrote a letter to U.S. District Judge Jon DeGuilio, arguing that evidence was withheld during his trial. Sheneman's argument, however, appeared to come too late. Both father and son have long maintained their innocence in the scheme, which federal prosecutors say ran from 2003 to 2005.

Operating under the company names Tri-State Mortgage and Superior Mortgage Lending, the Shenemans were accused of brokering deals, falsifying buyers' income and assets, forging signatures and concealing from lenders the fact that buyers have simultaneously applied for other mortgage loans, according to federal prosecutors. Investigators say they believe the Shenemans sold 60 properties, causing buyers—recent immigrants and people with limited incomes—to incur about $3.5 million in mortgage debt.

The Shenemans had maintained their innocence throughout their trial, and Michael Sheneman had argued at his sentencing that they were all victims of an economy gone bad. The older Sheneman was sentenced last October 2011 to eight years in prison. His son had delayed the process by motioning to receive a new trial by arguing that he had received ineffective council—a motion which was not granted. The case was delayed a second time after Sheneman's court-appointed trial attorney withdrew from the case because of the earlier motion alleging ineffective council.

Jeremie Sheneman was ordered to pay the same amount of restitution as his father. (mortdly8612)

MORAL

I bet he got the extra two years for not accepting responsibility for his acts. However, that really would be a shame if in fact he was innocent and it was a miscarriage of justice. If he appeals only time will tell.

IN MINNEAPOLIS TWO LOAN OFFICERS PLEAD GUILTY TO RECRUITING STRAW BUYERS TO PURCHASE REAL PROPERTY AT INFLATED PRICES

FACTS

On Aug. 13, in federal court, two mortgage loan officers pleaded guilty to recruiting straw buyers to purchase properties at inflated prices and then distributing the excess loan funds among themselves, the straw buyers, and others involved in the scheme. Chad Arthur Anderson and Troy Allen Huston pleaded guilty to one count of conspiracy to commit mortgage fraud through the use of interstate wires. The two were indicted on April 3, and entered their pleas before United States District Court Judge Joan N. Ericksen.

The defendants admitted that from 2006 through 2007, they recruited others, mainly relatives and friends, to act as straw buyers for the purchase of homes in the Twin Cities. At the time, the men worked as loan officers at Prestige Mortgage, a mortgage brokerage company in White Bear Lake, where they brokered numerous fraudulent mortgage loans by submitting false loan applications to prospective lenders. Anderson admitted to recruiting five straw buyers to purchase 17 homes during the course of the scheme, while Huston admitted to recruiting an unspecified number of buyers to purchase additional homes. The scheme involved a total of 32 homes in Minnesota. All of the mortgage loans involved have gone into default, causing losses to the mortgage lenders that exceed $2.5 million.

Anderson and Huston were also involved in Lofton Property Management, a property management company in Chisago City. They used Lofton’s name on construction invoices and other statements to obtain loan proceeds for property management services never provided. In addition, they used Lofton’s name on property settlement statements, thereby receiving fraudulent mortgage loan proceeds, which they disbursed among themselves, the straw buyers, and others involved in the scam.

At the same time, Huston was involved in Yes Financial a property management company in Chisago City. Through that company, he received additional, illicitly acquired loan proceeds. Moreover, he arranged for a colluding appraiser, who offered appraisals to support the inflated prices of the properties. He also prepared false loan applications on behalf of the straw buyers, often overstating their income, misrepresenting their employment, and failing to disclose their other mortgage obligations or the true source of their down payments.

For their crimes, the defendants face a potential maximum penalty of five years in prison. Judge Ericksen will determine their sentences at a future hearing, yet to be scheduled.   (usattymn81312)

MORAL

Note that the problems took place in 2006-2007 and six years later they are indicted and plead guilty! A word to the wise—see your attorney now if you have straw buyers. She or he can do more for you now then when the federal agents arrive at your door if you were overly creative.

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.

AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.

 

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