JUL 19, 2012

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Compliance Matters

Nine Indicted for Mortgage Fraud in CA

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NINE PEOPLE INDICTED FOR MORTGAGE FRAUD OUT OF BAKERSFIELD AND LOS ANGELES.

FACTS

On July 17, a 26-count indictment was unsealed charging Eliseo Jara Jr., Sergio Jara, Antonio Perez Marcial, Lucia Yolanda Chavez, Arlene Jeanette Jara, Candace Shantel Gonzales, Joseph Shawn Chavez Jr., Melissa Rochelle Jara and Ricardo Fabian Salinas in a mortgage fraud conspiracy. The indictment was returned on July 12 by a federal grand jury in Fresno and the defendants were arrested at their residences on July 17.

The indictment alleges that Eliseo Jara and Sergio Jara owned and operated Jara Brothers Investments Inc., also known as Jara Brothers Development, a property development company. Lucia Chavez, their sister, owned Pershing Partners LLC, a property development business. Eliseo Jara and Sergio Jara also owned and operated Paragon Realty and Paragon Home Mortgage before selling Paragon Home Mortgage in 2007 to Lucia Chavez. Antonio Marcial recruited nominee buyers to purchase properties developed by JBI, Pershing Partners, and another defendant’s business. Arlene Mojardin, Candace Gonzales, Joseph Chavez, Melissa Jara and Ricardo Salinas worked at various real estate and mortgage businesses.

According to the indictment, from approximately January 2007 to 2010, the defendants carried out a scheme to defraud banks and other mortgage lenders by selling properties owned by JBI, Pershing Partners, and the defendants to nominee buyers, using loans obtained from lenders based on fraudulent loan applications and false supporting documentation. The false statements and omissions in the loan applications frequently concerned the borrowers’ income, assets, employment status, and intent to use the home as a primary residence. The defendants also often funded large down payments for the buyers of the properties without disclosing that the down payments were coming from the property developers. Defendants at times paid nominee buyers a fee of $10,000 or more per home purchase. After the property sales closed and the defendants received the loan proceeds, many of the loans ultimately went into default and the lenders either foreclosed on the properties or sold the properties through short sales at a loss. In some cases, Eliseo Jara used his companies JLE Holdings LLC and Owkins LLC to repurchase the properties from the lenders out of foreclosure or through short-sale agreements. The scheme involved more than $5 million in losses to lenders.

Eliseo Jara, Sergio Jara, Lucia Chavez, and Arlene Mojardin are siblings. Sergio Jara is married to Melissa Jara, and Lucia Chavez is married to defendant Joseph Chavez. Candace Gonzales and Melissa Jara are sisters.

The indictment also seeks forfeiture of the following assets: approximately $110,419 in cash seized from a defendant’s bank account, a 2007 Lexus GS350, and four properties owned by certain defendants.

The maximum statutory penalty for the conspiracy, bank fraud, mail fraud, and wire fraud counts is 30 years in prison and a $1 million fine. The maximum penalty for money laundering is 10 years in prison and a fine of $500,000. (usattycaed71712)

MORAL

This is what is called a “family operation." Note the loans occurred starting in 2007. So the federal people are still looking at the stated income loans.

FOUR CHARGED, ARRESTED, INDICTED FOR MORTGAGE FRAUD IN SOUTHERN CALIFORNIA

FACTS

United States Attorney Laura E. Duffy and Federal Housing Finance Agency Inspector General Steve A. Linick announced that fugitive loan broker Mary Armstrong was arrested in Las Vegas. The indictment, which was returned on May 10, and unsealed on July 12, charges Armstrong, real estate agent Teresa Rose and Armstrong's assistant William Fountain with devising and executing a mortgage loan origination fraud and kickback scheme.

As detailed in the indictment, the defendants carried out their scheme by recruiting “investors” through advertisements in the Los Angeles Times and online and encouraging them to purchase homes in Ramona, Calif., and elsewhere. The advertisements offered investors who had good credit the chance to buy property with no money down, and the defendants falsely claimed they would make the mortgage payments on the investors’ behalf using rental income they generated by renting and managing the properties. In reality, these so-called investors were nothing more than straw buyers who were promised $10,000 for each property purchased as part of the scheme. The defendants were able to secure mortgages for the properties by falsifying loan applications for the straw buyers. Among other things, the loan applications falsely claimed exorbitant income from fake employers and used sham companies to verify the borrowers’ fabricated employment and rental histories. The defendants went so far as to include fake W-2s and pay stubs to support the income claims. The defendants used these loan applications to obtain mortgages with 100 percent financing and thus avoided having to make any down payment on the properties.

The bulk of the profits the defendants made from the scheme resulted from their convincing sellers to inflate the purchase price of the properties by approximately $100,000, which was allegedly to be used for construction to improve the properties. In fact, no construction work was ever performed and the funds were instead diverted (or “kicked back”) to bank accounts controlled by the defendants. The defendants pocketed this money, made few if any mortgage payments, and allowed nearly all of the properties to swiftly fall into foreclosure.

The indictment alleges that Armstrong, Rose and Fountain purchased at least 16 properties in Ramona and in El Cajon, Calif., and Washington State as part of this scheme. In total, the defendants secured over $11 million in mortgage loans, skimmed over $1.5 million in sham construction kickbacks, and earned hundreds of thousands of dollars in additional proceeds through commissions and fees listed as part of the closing costs for each transaction. As a result of the foreclosures and defaults caused by the defendants’ failure to make the mortgage payments they promised, the defrauded mortgage lenders suffered losses of approximately $5 million. Fannie Mae purchased five of these fraudulently obtained mortgages on the secondary market and suffered losses as a result of the defaults.

Comments (3)
I read this and shook my head. The justice system shaking its finger at these "professionals" for doing something "bad". Now, I am not saying what they did was right, but come on, 30 years in prison??? Well what about all the execs at the big banks? When they knew they were selling "crappy" loans to investors.What did most of them get? A slap on the wrist at most. These guys only had over 100k in the bank; 100k is what bank execs got pain in a week. We as a nation have our priorities mixed up. Everyone should be judged equally. You defraud a lender, go to jail, yo defraud a nation go to jail. I will never understand why we let this happen. just my 2 cents
Posted by Really? | Monday, July 23 2012 at 3:41PM ET
Well Said Really! That's because the Big Bank and Big Government are pretty much one in the same.
Posted by kman | Monday, July 23 2012 at 5:11PM ET
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