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JAN 10, 2013

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Arrested Broker's Cooperation Brings Down SoCal Fraud Ring

JAN 10, 2013 3:00pm ET
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CALIFORNIA EMPLOYEES OF DISCOVERY HOMES HAVE BEEN INDICTED FOR MORTGAGE FRAUD

FACTS

Employees of a Seeno development company have been implicated in a mortgage fraud ring, expanding an investigation into real estate dealings by the Contra Costa construction family's various corporations.

An FBI complaint, unsealed the week of Dec. 13, 2012 alleges a loan agent with Discovery Homes, a Seeno company, confessed to her part in submitting fake loan documents in 2008 in order to qualify for a loan on a Fairfield house. Also that year, a Pittsburg couple that had trouble getting traditional bank loans was directed by a Seeno employee to apply for a loan through a Southern California mortgage broker that the FBI claims had set up a mortgage fraud ring.

The referral was made by a top Seeno sales executive, Carey Hendrickson, who was indicted on three counts of wire fraud.

The 15-page complaint based on an FBI investigation is the latest travail for Seeno family companies, which have been accused of making criminal threats, breaking environmental laws and racketeering by former business associates in Nevada. This month, a Las Vegas health department accused a Seeno company in Nevada of illegally installing septic systems on a golf course.

These developments come on the heels of a 2010 raid on the Concord company's headquarters. Earlier court documents illustrate a pattern in the developer's activities during the housing bust that fit what mortgage industry experts call a "builder bailout," which entails inflating the value of homes to help allow developers to maintain a more robust line of credit during down times.

A Seeno spokesman noted that the new criminal complaint does not mention any family members and asserted the company may have been duped along with the homebuyer.

Along with the FBI complaint, arrest warrants were filed for George Zevada, Miguel Arenas Sr., Tony Phan and Troy Chattariyangkul on Dec. 4 on suspicion of one count of wire fraud. Those four are associated with the alleged fraud ring, not with the Seeno companies.

The Southern California fraud ring came crashing down shortly after the Aug. 21 arrest of mortgage broker Chang Park on suspicion of one count of wire fraud. He cooperated with FBI investigators as part of a deal with the U.S. attorney's office and tipped them off to his former boss Zevada.

Zevada co-owned Silverline Mortgage of Pasadena, a mortgage brokerage that obtained fraudulent tax and income-employment documentation from Arenas, an accountant with Miro Accounting, according to the complaint. Arenas would provide fraudulent W-2 and 1040 forms and pay stubs.

Zevada also allegedly paid kickbacks to underwriters Phan and Chattariyangkul, who worked with mortgage lender Homecomings Financial, to process and approve loan applications for unqualified buyers, the complaint alleges. For each loan, the underwriters would get a $700 kickback.

In early 2008, Park received a phone call from Diana Bruce, a Discovery Homes loan officer, who wanted help with her own personal mortgage loan application. Park told Bruce she did not meet requirements for loan approval, and that "he would need to produce false documents in order to get her loan approved," according to the FBI.

Arenas, the CPA, fabricated tax statements showing Bruce had an annual income of $430,000; her loan was then funded by Homecomings Financial, the FBI complaint alleges. Bruce's actual salary was $180,374.

Bruce purchased a house in the 700 block of Greentree Circle in Fairfield, a Seeno-built home, for $505,000. When the FBI interviewed Bruce in August 2012, she admitted her paperwork was fraudulent and that she knew Park was submitting fake documents to the lender, according to the complaint. Bruce has not been charged.

On April 4, 2008, Don and Linda Anderson signed a sales contract with Discovery Homes to buy a house on Canyon Oaks Drive in Pittsburg for $525,000.  The Andersons needed a $417,000 mortgage and $108,000 down payment.

The Andersons told the FBI they did not have sufficient funds for the down payment, but took advantage of an offer from Discovery Homes. Seeno sales agent Joe Sterlino told the couple Discovery Homes would loan them money by securing a deed of trust on their existing home, also in Pittsburg, according to the FBI. Still, the Andersons did not qualify for the mortgage, as together the couple earned less than $65,000 a year, and Linda Anderson had bad credit. The couple tried to get a loan through Chase Bank and Countrywide and were rejected. They explained their problems to Sterlino, who has not been charged, and he told them to try Park in Southern California, the complaint alleged.

Sterlino told the FBI that he learned about Park through Hendrickson, the Discovery Homes district sales manager scheduled for a federal trial March 11, the complaint alleged.

The Andersons got their loan through Park within a week, again from Homecomings Financial. Phan was the underwriter for their loan, using fraudulent documents purporting Don Anderson earned $12,921 a month at his job, collecting $3,500 a month in rent and possessing $165,000 in bank accounts, according to the FBI. The Andersons, who never saw the fraudulent documents, still live in the Canyon Oaks house, according to public records. However, it was assessed at $301,500 last year.

In 2009, Homecomings Financial went under.  (concostatmes122012)

MORAL

That is what I would call “enterprise.” However, it is criminal enterprise and people are innocent until proven guilty. Did you get or do any loans through any of the named people here?

MORTGAGE FORGIVENESS DEBT RELIEF ACT AND DEBT CANCELLATION EXTENDED THROUGH DEC. 31

FACTS

The American Taxpayer Relief Act of 2012 includes extending the Mortgage Forgiveness Debt Relief Act through Dec. 31. The law affects homeowners who are granted principal forgiveness on their loan, due to a short sale, a deed-in-lieu of foreclosure, or have lost their home to foreclosure.

The Mortgage Forgiveness Debt Relief Act allows homeowners who get their mortgage debt forgiven through either a short sale or loan modification to have taxes forgiven up to $2 million or $1 million if married and filing separately.

The amount of forgiven debt is the difference between the amount a homeowner owes on the mortgage and the amount the mortgage company receives after closing.

Remember the Act applies only to forgiven or cancelled debt used to buy, build or substantially improve the principal residence or to refinance debt incurred for those purposes. 

Refinanced debt qualifies as well to the extent that the principal balance of the old mortgage immediately before the refinancing would have qualified.

MORAL

One win for the people that are hurting. If you are considering short sale or foreclosure please call me so you can understand the difference between the two and the effect it can have on you in the future. Do not just walk away.

AS OF JAN. 1, USE THE RIGHT DISCLOSURE FORM WHEN INTERVIEWING POTENTIALLY NEW EMPLOYEES IF YOU INTEND TO RUN AN INVESTIGATIVE CONSUMER REPORT

FACTS

The Consumer Financial Protection Bureau is now responsible for all rules and enforcement for the Fair Credit Reporting Act and has updated the FCRA form that employers must use if they are going to conducting background investigations of prospective and current employees. If an employer uses the report to take an adverse employment action, such as terminating or failing to hire an employee, without complying with the FCRA, the employer is subject to liability under the FCRA.

The updated form is “A Summary of Your Rights Under the Fair Credit Reporting Act” to indicate that it has primary responsibility for the FCRA. On the new form–which employers must use–the Bureau encourages employees to visit its website for further information about their rights.

An employer is required to provide the Summary of Rights to job applicants and current employees before it obtains an investigative consumer report (a report that contains information gathered through personal interviews with people who know the applicant or employee) from a consumer reporting agency. Employers are also required to provide the Summary of Rights with any pre-adverse action notice sent to an employee when the employer plans to rely on the information contained in the background report to make an employment-related decision.

Employers are on notice that the CFPB will use its enforcement powers to ensure employer compliance.  Go to the CFPB website for a copy of  the form.

MORAL

All the new forms, disclosures and manuals can be used as a violation to the extent you do not have them

SENTENCING FOR MORTGAGE FRAUD DELAYED; PERP STILL APPARENTLY SELLING HOMES

FACTS

The sentencing hearing of Teresa Rose, a Ramona real estate agent, has been delayed until May 20. She pleaded guilty to one count of conspiracy to commit wire fraud and to launder money.

Federal investigators say Rose was involved in a scheme to inflate real estate process, obtain mortgages fraudulent and skim more than  $1.5 million in kickbacks in 2006 and 2007. The scheme caused lenders to lose about $5 million, records say.

Rose entered a guilty plea during the summer of 2012 and told the a local newspaper in San Diego she was sorry for her role in the real estate scam.

Rose, who was an agent at Coldwell Banker Residential Brokerage during the incidents, could face up to a five-year prison sentence and up to a $250,000 fine.

Coldwell Banker terminated Rose after the indictment was handed down, a company official said. However, she's still practicing real estate under a different brokerage, based on real estate listings and her licensing record. Until sentencing is final, Rose can still list homes, show them to clients and sell them, says the California Department of Real Estate, which regulates real estate license holders.

State law allows the DRE to suspend, revoke or deny a license if the license holder enters a guilty plea to or is convicted of a felony. However, the agency cannot by law act until the conviction is final and the time for an appeal has passed.  (sdut122012)

MORAL

As I said, the federal prosecutors are on a roll and the roll will continue, in this lawyers’ opinion through 2014 for all loans that were funded from 2004 to the year 2014.  Good luck to those that had creative stated income loans. I suggest you seek legal counsel now.

THREE INDICTED IN BALTIMORE FOR MORTGAGE FRAUD

FACTS

On Dec. 20, 2012 a federal grand jury indictment was unsealed indicting Kimberly Eileen McMillian, a/k/a Kimberly Simmons and Kimberly Simmons McMillian; Olutoyin Oladosu, a/k/a Tony Oladosu; and Glenroy Emanuel Day Sr. on charges of conspiracy to commit and committing wire fraud affecting a financial institution, in connection with a million-dollar mortgage fraud scheme.

According to the nine-count indictment, from Sept. 1 to Dec. 31, 2007, McMillian and Oladosu, assisted by Day, carried out a scheme to fraudulently obtain inflated home mortgages and then diverted a substantial portion of the proceeds resulting from the sale of four homes to themselves. Specifically, McMillian, who identified herself as a real estate agent, consultant and investor and as a mortgage loan broker, arranged to purchase three homes in the Reservoir Hill neighborhood of Baltimore in the names of others, after she told the owner of the company that owned the homes that she had clients from New York City who were eager to buy residential properties in Baltimore.

McMillian then contacted a loan officer and advised him that she was working as a mortgage loan broker and wanted to submit several loan application packages to his bank for financing, because her own company would not be able to get the loans approved in time to meet the currently scheduled closing dates for the four Baltimore properties. The loan officer agreed to review the packages, each of which consisted of a loan application identifying the purchaser of the house and detailing their employment history, earnings, assets, and debts, along with supporting documentation such as pay stubs or vouchers and bank account statements.

According to the indictment, virtually all of the information submitted by McMillian in connection with the loan applications was false. The names and other personal information of the purported borrowers consisted of either stolen or fictitious identities, or were of persons who never intended to live in the houses or make the mortgage payments.

The telephone numbers of the purported employers actually belonged to co-conspirators or others who had agreed to falsely verify the borrowers’ employment. McMillian also arranged for Day to prepare misleading and fraudulent real estate appraisal reports on the three Reservoir Hill properties and a fourth property owned by McMillian herself, which McMillian then submitted to the bank in support of the loan applications.

Based on the information provided in the loan applications, the false employment verifications, and fraudulent appraisals, the bank agreed to extend financing on each of the four properties, totaling $1.094 million.

At each of the four settlements, McMillian directed the settlement agent to transfer a substantial portion of the loan proceeds to her or to businesses associated with Oladosu, either pursuant to an assignment contract or to pay for purported renovations to the property. In fact, no repairs or renovations were carried out on any of the properties. The mortgage on each property soon went into default with mortgage payments either not made at all, or only one or two payments being made

The defendants each face a maximum sentence of 30 years in prison for the conspiracy and for each of eight counts of wire fraud affecting a financial institution. McMillian and Day had their initial appearance on Dec. 20, 2012. Oladosu is a fugitive. (usattymd122012)

MORAL

Here the federal prosecutors went back five years. They are on a roll and in this attorneys opinion will not stop or slow down for at least another two years.  So for all those that had creative mortgages over the last 10 years I suggest you see your attorney now to evaluate your risks.  We are available should you so desire to speak with us.

MASSACHUSETTS LAWYER GETS SIX YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD

FACTS

On Dec. 20, 2012, Marc D. Foley, a former attorney who operated a real estate practice in Needham, was sentenced for his role in a fraudulent mortgage scheme. U.S. District Judge Richard G. Stearns gave Foley 72 months in prison, to be followed by 36 months of supervised release. In September 2012, Foley was convicted by a jury of 33 counts of wire fraud and five counts of money laundering.

In December 2006 and January 2007, Foley participated in a scheme to defraud six mortgage lenders in connection with $4.9 million in real estate loans for the purchases of 24 condominium units in Dorchester. When Foley and an associate acting under his direction closed the loans, documents sent to the mortgage lenders falsely represented that funds ranging from $9,300 to $39,000 had been collected at the closings from the borrowers, when in fact the borrowers made no down payments and paid no funds at the closings. Furthermore, Foley entered into an undisclosed agreement with the seller to subtract from the seller’s proceeds all the funds that were reported to the lenders as coming from the borrowers. Foley also used various other means to conceal from the lenders that the borrowers had not provided funds for the purchases.  (usattyma122012)

MORAL

Even attorneys are not immune from federal prosecution. Note this one gets six years at a federal hotel for something he did six years ago. As I have said, the federal government has 10 years from when the loan closes to indict people for mortgage fraud.

DALLAS MAN GETS NEARLY 16 YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD

FACTS

On Dec. 21, 2012  Gregory Lashon Thomas was sentenced to 189 months in federal prison and order to pay over $2 million in restitution following his conviction at trial on various offenses related to a multi-million-dollar mortgage fraud scheme he ran in the Dallas area. In addition, the court ordered forfeiture in the amount of $218,148 and ordered that Thomas surrender to the custody of the Bureau of Prisons on Feb. 5.

Thomas was convicted on all four counts of the indictment—one count of conspiracy to commit mail fraud and three counts of mail fraud. The two co-defendants, charged in the case, Aja D. Crawford, a/k/a Aja Abercrombie and Ernest Ohenekitiwa McMillan, each pleaded guilty last year to one count of conspiracy to commit mail fraud, as charged in a superseding indictment. Each faces a maximum statutory sentence of five years in prison and a $250,000 fine. Restitution could also be ordered.

Thomas ran two real estate “investment” businesses called Investor Source and Myriad Investments. Thomas located sellers who wanted to unload excess properties and were willing to kick back substantially all of their proceeds to the defendant. Thomas then recruited straw buyers, including co-defendant McMillan, and worked with loan officers, including co-defendant Crawford, to prepare and submit fraudulent loan applications on the buyers’ behalf.

The loan applications contained numerous material false statements, such as overstating the buyer’s income level or assets. For instance, the evidence showed that one of the straw buyers, who had just been released from federal prison and was living in a halfway house and earning minimum wage, falsely represented on his loan application that he made nearly $100,000 per year and had an account with more than $34,000. That loan application also identified a Washington Mutual bank account that actually belonged to the defendant. Not only was the bank account controlled by the defendant, he and the loan officer altered a bank statement to make it appear as if the account was owned by the straw buyer.

Thomas received a substantial kickback from the seller after each of the transactions closed and then disbursed a portion of those kickbacks to the co-defendants and others involved in the fraud. Thomas also assisted the buyers in closing on the properties by obtaining cashier’s checks, in the buyer’s name, for the down payment on the properties.

Evidence at sentencing showed that the scheme involved approximately $5 million in fraudulently obtained loans and approximately $2 million in losses to various mortgage lenders. (usattydallastx122112)

MORAL

On and on it goes and where it will stop, nobody knows.

 

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.

AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.

Comments (2)
While the summary of the relief act (now extended) is accurate, most readers will not grasp the distinction that it has limited application to cash out refinances, which have been the bulk of loans in trouble. The protection does not apply to the extent of the cash out. However, there are other exceptions in the Internal Revenue Code that are more widely helpful, and state law can provide protection in many cases. Borrowers facing Cancellation of Debt Income (CODI) need to see a tax attoney, as CPAs cannot advise on (and are often unaware of)provisions of state law that may protect the borrowers.
Posted by Wm Matz | Friday, January 11 2013 at 2:21PM ET
So now everyone in the industry will suffer from the actions of these thugs who thought they could get away with it?

CA Needs to stop allowing Realtors to shlep loans too. It's non arms-length.

Posted by blech | Friday, January 11 2013 at 4:17PM ET
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