JAN 30, 2014

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Compliance Matters

74-Year-Old Man Jailed for Fraud

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74-YEAR-OLD REAL ESTATE BROKER GETS 10 YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD

FACTS

On Jan. 27, in a Fresno federal courtroom James Lee Lankford, a former real estate broker, was sentenced to 10 years in prison for orchestrating an 11-year mortgage fraud scam that looted elderly homeowners and lending institutions of close to $10 million dollars.

Lankfordís co-defendant Jon Vance McDade was sentenced to one year of home detention to be followed by a five-year term of supervised release, in connection with the same mortgage fraud scam. (McDade and Lankford have married and McDade is now known as Jon Vance Lankford.) The two were ordered to forfeit their interests in various properties and to pay $1,443,826 in restitution to the victims of the fraud scheme.

Lankford, who operated Century 21-Apollo Realty as a real estate agent and broker, fraudulently induced elderly property owners to sell their homes to him and to provide the financing for the purchase. In return, Lankford agreed to make interest-only payments and to pay the principal at a future date. He induced the elderly sellers into believing that their financing was secured by the property itself by filing deeds with the county recorderís office.

Unbeknownst to the elderly sellers, Lankford also obtained mortgages from lending institutions to finance the purchase of the same properties. In order to obtain the mortgages, Lankford would not inform the lending institutions that he had obtained seller-backed financing. Lankford and McDade also made other material misrepresentations on the loan applications and in some instances, submitted falsified documents regarding monthly income to ensure approval for the loans.

In many instances, Lankford then refinanced the properties with another lending institution after filing fraudulent deeds purportedly showing that the elderly property owners had been paid in full. After eliminating the sellerís lien on the property, Lankford would then obtain refinancing and draw out any equity that had accumulated in the property. Lankford, having refinanced the property, and in some instances having obtained additional financing by reselling the property to McDade, would then allow the property to go into foreclosure, or would sell it as a short sale.

Ironically, in his plea for a lighter sentence, he asked the court to consider his age of 74 and he was elderly. (usattyedca12714)

MORAL

You will notice that this went on for 11 years. That is pretty good without getting discovered. Now he has 10 more to think about it.

FEDERAL AGENTS ARREST CALIFORNIA REAL ESTATE AGENT FOR SHORT SALE FRAUD THAT OCCURRED FOUR YEARS AGO

FACTS

On Jan. 22, federal agents arrested Minerva Sanchez, a Bay Area real estate agent accused of helping a Gustine man commit fraud in the short-sale of his Patterson home four years ago, costing banks more than $350,000. She was arrested at her Fremont home, according to the U.S. attorney's office in Sacramento. She was later arraigned in San Jose federal court, where she pleaded not guilty to conspiring to commit bank fraud.

In March 2010, Sanchez represented Agustin Simon in the sale of his Patterson home. Sanchez recommended that he undertake a short sale of his home using her son as a straw buyer, federal prosecutors said.† Simon submitted fraudulent short-sale applications to Tri Counties Bank and Freddie Mac that caused them to approve the funds for the short sale of his home, according to court documents.

The prosecutors said Sanchez and Simon falsely claimed that the transaction was "arm's length," and that they made false statements about Simon's assets and ownership of other real estate. Sanchez wrote a "hardship letter" for Simon to include with the short-sale application that misrepresented his inability to make his monthly mortgage payments.

Sanchez and Simon made other false statements to conceal their agreement that Simon would provide Sanchez's son with the money for the short sale, prosecutors said, and that ultimately Simon would regain ownership of his home.

With Sanchez's knowledge, Simon gave Sanchez's son $355,000 to buy the home, according to the allegations. The prosecutors said Sanchez also received 75% of the commission paid to her son's real estate agent.† As a result of the alleged scheme, Tri Counties Bank suffered a loss of $247,000 and Freddie Mac lost $107,348.

If convicted, Sanchez faces a maximum sentence of 30 years in federal prison and a $1 million fine.

On June 10, 2013 Simon pleaded guilty to conspiring to commit bank fraud in connection with the alleged short-sale scheme. He is scheduled to be sentenced Oct. 6. †(modbe122214)

MORAL

Now the CFPB is chasing more real estate agents and mortgage brokers.

A LENDER/SERVICER CANNOT FORECLOSE IN SOUTH CAROLINA IF THE HOMEOWNER FAILS TO PURCHASE AND MAINTAIN FLOOD INSURANCE

FACTS

The state of South Carolina amended its provisions regarding mortgage foreclosure by providing that no cause of foreclosure action may be commenced if the alleged default was based solely on a failure to purchase or maintain flood insurance covering the mortgaged property; no cause of action exists for foreclosing a mortgage when the alleged default was based solely on a failure to purchase or maintain flood insurance covering the mortgage property; and the remaining provisions in a mortgage remain in full force and effect despite a failure. The provisions are effective immediately.† (alrgs12014)

MORAL

So save the money and do not buy the flood insurance. But Lord help you if you have a flood and there have been quite a few recently.

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE

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