NOV 15, 2012

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Compliance Matters

California Attorney Faces Debarment for Lawsuit Scheme




Sharon L. Lapin, the attorney of record in 130 predatory lending lawsuits filed from August 2009 to November 2010 was found guilty of most of the 26 allegations of professional misconduct. The Greenbrae attorney was allegedly involved in what court officials called a bogus predatory lending lawsuit scheme and foreclosure rescue scam faces disbarment after a decision by a State Bar Court hearing judge the week of Nov. 5. Lapin claimed innocence and said she would appeal also stating, "I never engaged in a scheme to defraud clients."

She was excoriated in a judgment after being found "culpable of multiple counts of professional misconduct, including moral turpitude, aiding the unauthorized practice of law, sharing fees with a nonlawyer, participating in a nonlegal lawyer referral service, failure to perform legal services with competence, failure to maintain only legal or just actions and failure to avoid representing adverse interests," the State Bar said in a report by spokeswoman Laura Ernde.

Lapin worked as a contract attorney for an organization that operated under names including US Loan Auditors LLC, US Loan Auditors Inc., My US Legal Services and US Legal Services. She received $177,000 from August 2009 through November 2010 without having to provide legal services, officials said.

When asked if there was any value that clients received, respondent testified that they were able to stay in their homes that much longer. She insisted, despite overwhelming evidence to the contrary, that she was entitled to the monies as reimbursement for costs. Yet she could not explain how costs could exceed $34,000 per month. She kept no time records of her alleged hourly services to justify her $350 hourly fee.

The court found that homeowners would pay 1% of their mortgage value to a foreclosure "rescue" organization for a "forensic loan audit" that was then used to persuade them they had a good case against lenders even though the audits merely provided routine boilerplate information. Organization staffers who were not lawyers then handled many legal filings.

Judge Armendariz ordered Lapin's license pulled as of Nov. 10 pending disbarment, which becomes effective when approved by the state Supreme Court. (sjmercnew111012)


I have explained for years that in my opinion, forensic audits are worthless and a waste of money.  Since February 2009, the State Bar's Office of Chief Trial Counsel has received thousands of complaints against attorneys regarding loan modification fraud. More than 100 attorneys have been disciplined, including 22 who have been disbarred.



On Nov. 5, U.S. District Chief Judge Roslyn O. Silver sentenced Thomas Gregory Alexander in Arizona Federal Court to 10 years in federal prison, to be followed by five years of supervised release. Alexander was also ordered to pay $5,463,769 in restitution.

Alexander worked as a loan originator for American Mortgage Funding between 2005 and 2007. Though AMF, Alexander assisted borrowers to qualify for loans from Mesa Bank (now known as Sunrise Bank of Arizona). Borrowers used the loan funds to acquire parcels of land in Maricopa County and to fund the construction of custom homes on those parcels.

Alexander used a scheme to defraud Mesa Bank by creating fraudulent documents for unqualified borrowers. In many cases, Alexander directed the borrower to sign a blank Uniform Residential Loan Application, which he and co-conspirators would complete by 1) overstating the borrower’s monthly income; 2) overstating the amount of money in the borrower’s bank accounts; 3) falsely representing that the borrower would make a down payment at closing; and 4) misrepresenting the intent of the borrower to use the property as a primary residence. Alexander and his co-conspirators would also alter Verification of Deposit documents to falsely overstate the amount of money in the borrowers’ bank accounts and alter the borrower’s credit report to falsely represent a higher credit score. Alexander and his co-conspirators also submitted false documents to show that the borrowers had made the required 5% to 10% down payments when, in fact, none of the borrowers ever actually paid a down payment.

Alexander also directed many of the borrowers to acquire loans to purchase lots from Sea Rock LLC, a company that he owned. The borrowers were unaware that they were purchasing lots owned by their loan originator. Alexander ultimately received a significant amount of profit from the lot sales because he directed a co-conspirator to create false appraisals to inflate the prices of the lots.

In total, Alexander’s mortgage fraud scheme induced Mesa Bank to issue over $40 million in loans and caused tens of millions of dollars in losses to the bank. The substantial loss eventually led to Mesa Bank’s merger into Sunrise Bank of Arizona.  (usattyaz11512)


A quote from Lexis Nexis that was put in its 2012 Mortgage Fraud Report—“And the schemes are only expected to worsen, says Tim Coyle, senior director for real estate and mortgage fraud at LexisNexis. ‘As the market has evolved, the obvious crush of fraud and misrepresentation in the foreclosure, short sale and REO [real-estate-owned] worlds has forced the issue of collusion to the forefront.’”

POINT TO BE MADE: How many of you remember what I have been saying about reviewing files for fraud. Especially when there is a foreclosure on a loan where you were the MLO? What about the Compare Ratio in HUD/FHA when the loan goes through a Direct Endorsement lender? If loans are questionable, it is a lot easier to discuss it with us before a problem occurs.



On Nov. 9, in federal court, James Hoffman and Teresa Hoffman, a Stillwater couple, were sentenced in connection with a $5 million mortgage fraud scheme. U, S. District Judge David S. Doty gave James Hoffman 78 months in prison and ordered him to pay $344,409.26 in restitution. Judge Doty sentenced Teresa Hoffman to 12 months and one day in prison.

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