MAY 16, 2013

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Compliance Matters

Four Convicted in Loan Mod Scam

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FOUR CONVICTED IN CALIFORNIA FOR DEFRAUDING HUNDREDS OF VICTIMS IN LOAN MODIFICATION SCAM

FACTS

On May 8, four men were convicted in Orange County Superior Court of defrauding hundreds of victims in a real estate scam that included fraudulently collecting upfront fees for loan modification services and sending fake letters with the CitiFinancial or CitiMortgage logos offering home loan modification assistance. Victim losses in this case are estimated to be in excess of $130,000. All four defendants are scheduled to be sentenced on July 29.

Jacob John Cunningham and John D. Silva pleaded guilty to one felony count each of conspiracy to collect illegal upfront fees and conspiracy to commit theft by false pretenses. Cunningham and Silva are each expected to be sentenced to six months in jail and five years formal probation, during which they will be prohibited from engaging in loan modification or loan consulting practices. They are also ordered to jointly pay $60,000 toward restitution by their sentencing date and will be ordered to pay additional restitution in an amount to be determined at a later hearing.

Justin Dennis Koelle pleaded guilty to one felony count each of conspiracy to collect illegal upfront fees and conspiracy to commit theft by false pretenses. He is expected to be sentenced to nine months in jail, five years of formal probation, during which he will be prohibited from engaging in loan modification or loan consulting practices, and ordered to pay restitution in an amount to be determined at a later hearing.

Dominic Adam Nolan pleaded guilty to one felony count of conspiracy to collect illegal upfront fees. He is expected to be sentenced to six months in jail, five years of formal probation, during which he will be prohibited from engaging in loan modification or loan consulting practices, and ordered to pay restitution in an amount to be determined at a later hearing.

Previously, Andrew Michael Phalen had pleaded guilty on June 4, 2012 to one felony count each of conspiracy to collect illegal upfront fees and conspiracy to commit fraud. He was sentenced to one year in jail, five years formal probation, during which he is prohibited from engaging in loan modification or loan consulting practices, and ordered to pay restitution in an amount to be determined at a later hearing.

Between January 2009 and March 2012, Cunningham, Koelle, Phalen, Nolan and Silva created numerous fraudulent loan modification businesses. They sent a promotional letter to people throughout the United States with an offer to restructure their home loans, in which the defendants referred to the homeowner’s specific lender and principal balance, and charged the homeowner upfront fees for loan modification services. The letter was fraudulently designed to appear as if it came from the victims’ lenders.

When victims called the number on the letter, the defendants falsely told the victims that they could get a complete refund of the fee their company charged if their loan was not modified and that the company had over a 95% success rate. After the victims gave Cunningham, Koelle, Phalen, Nolan or Silva their money, the defendants kept that money without securing loan modifications for the distressed victims. They did not return or refund the victims the fees they paid for a loan modification.

In order to avoid having their theft discovered, Cunningham, Koelle, Phalen, Nolan and Silva regularly changed the names, phone numbers, and addresses of the companies they operated.

In late December 2011, after over a hundred victims from California and other states submitted complaints to various law enforcement agencies and the Better Business Bureau regarding the defendants’ loan modification activities, Cunningham, Nolan and Silva started a new fraudulent scheme, in which they would send out forged conditional approval letters to victims with a CitiFinancial or CitiMortgage Logo in the letterhead. They stated in the forged letters that they could offer the homeowner a low interest rate of 2.8% or less to refinance their home loan. Cunningham, Nolan, and Silva also attached escrow instructions with the letter, directing the homeowner to deposit between $3,500 and $4,600 directly into the defendants’ bank accounts.

Cunningham, Nolan and Silva had no affiliation to CitiFinancial or CitiMortgage or any authorization to offer a loan on behalf of CitiFinancial or CitiMortgage. They made no efforts to qualify the victims for loans with CitiFinancial or CitiMortgage. (ocdaprrel5913)

MORAL

Notice how this goes back four years to January 2909. Do you know any one that paid them or their companies for loan modifications that has not contacted the District Attorney? Notice this includes not only loan modifications but also loan modification services?  Advising on loan modifications and collecting an advance fee for the advice can be considered illegal.

STRAW BUYER IN SAN DIEGO PLEADS GUILTY TO CONSPIRACY TO COMMIT MORTGAGE FRAUD

FACTS

On May 8, Timothy E. Shannahan pled guilty to conspiring to commit mortgage fraud by acting as a straw buyer in a $5 million scheme.

In pleading guilty Shannahan became the fourth person to admit conspiring with Kathryn Sylvester, the former CEO of Sylvester Financial Inc. According to court records, Sylvester was responsible for recruiting straw buyers—whom she directed to submit false mortgage loan applications in order to purchase properties throughout Southern California between 2005 and 2008.

Shannahan admitted conspiring with Sylvester between January 2007 and May 9, 2008, to fraudulently induce lenders to fund mortgage loans.  Shannahan falsely claimed on a mortgage loan application that he earned $50,000 per month as the vice president and director of marketing for Real Realty Solutions in order to obtain mortgages for a residence located on Nautilus Street in La Jolla. In total, Shannahan admitted that the loans obtained in his name resulted in losses of $400,000 to $1 million. For her part, Sylvester, according to her indictment, is alleged to have played a role in approximately 80 fraudulent loans on 28 foreclosed properties resulting in losses in excess of $5 million. Her case is pending.

Shannahan is scheduled to appear before District Judge Lorenz on July 29 for sentencing. (usattysdca5813)

MORAL

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