FACTS
The Consumer Financial Protection Bureau had so far limited its complaint process to just credit cards. But CFPB began taking complaints related to home mortgages as of Dec. 1.
MORAL
One more enforcement agency to chase mortgage loan originators. This means you have: 1-State licensing agency; 2-FDIC seeking damages on loans from portfolios of failed banks; 3-FBI seeking indictments on fraud loans; 4-HUD special agents and auditors seeking damages, indemnity and indictments on FHA and FHA reverse mortgage loans; 5-VA seeking indictments on fraud VA loans; 6-State attorneys general seeking civil and criminal charges on state laws regarding mortgage fraud; 7-Local county district attorneys indicting for mortgage fraud. We have seen them all. In some cases we have seen both the federal and state prosecutors chasing the same person on the same matters but one under federal law and one under state law at the same time.
ALABAMA REAL ESTATE INVESTOR PLEADS GUILTY TO RIGGING BIDS AT PUBLIC FORECLOSURE SALES
FACTS
On Dec. 2, charges were filed in U.S. District Court for the Southern District of Alabama against Bobby Threlkeld Jr., a Mobile, Ala., real estate investor who has agreed to plead guilty for his role in a conspiracy to rig bids and commit mail fraud at public real estate foreclosure auctions in southern Alabama.
Threlkeld was charged with one count of bid rigging to obtain selected real estate at foreclosure auctions and one count of conspiracy to commit mail fraud. The Department of Justice alleges that Threlkeld participated in a conspiracy to rig bids by agreeing to refrain from bidding against other investors at public real estate foreclosure auctions in Mobile County and its surrounding areas.
The department said that the primary purpose of the conspiracy was to suppress and restrain competition and to make and receive payoffs in order to obtain selected real estate offered at public foreclosure auctions at noncompetitive prices.
According to the court documents, between May 2001 and December 2006, Threlkeld conspired with others not to bid against one another at public real estate foreclosure auctions in southern Alabama. After the conspirators' designated bidder bought a property at the public auctions, which typically take place at the county courthouse, the conspirators would generally hold a secret, second auction at which each participant would bid the amount above the public auction price he was willing to pay. The highest bidder at the secret, second auction won the property. Threlkeld was also charged with conspiring to commit mail fraud by using the U.S. mail in carrying out the conspiracy to defraud financial institutions by paying potential competitors not to bid competitively in the public auctions for foreclosed properties.
Threlkeld was charged with violating the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the statutory maximum. Threlkeld was also charged with conspiracy to commit mail fraud which carries a maximum penalty of 20 years in prison and a fine in the amount equal to the greatest of $250,000, twice the gross gain the conspirators derived from the crime, or twice the gross loss caused to the victims of the crime by the conspirators. (usdoj12211)
MORAL
Remember the one I just published about the bid rigging in Sacramento? Now Alabama. Note that the federal prosecutors are treating it so seriously that they went back 10 years to prosecute this. Anyone reading this do any bid rigging at foreclosure sales from 2001 to the present? I suggest you see your attorneys now. There are legal ways to protect you. Your attorney should know them.
FIVE PEOPLE CHARGED WITH A FORECLOSURE SCHEME IN SACRAMENTO FEDERAL COURT
FACTS
On Dec. 2, Jesse Wheeler along with four other defendants was publicly charged with a foreclosure scheme in an indictment unsealed in federal court in Sacramento.
The other defendants include Jewel Hinkles, a/k/a Cyndy Sanchez; Bernadette Guidry; Cynthia Corn; and Brent Medearis.
Hinkles and Guidry were charged with eight counts of mail fraud. All the defendants except Guidry are charged with 16 counts of bankruptcy fraud.
According to court documents, Hinkles founded and ran Horizon Property Holdings LLC, Beverly Hills, which offered a "Save My Home" service, that promised to rescue homeowners from foreclosure. The company offered its services directly and through affiliated companies, including JW Financial Solutions, operated by defendant Jesse Wheeler in Roseville.
New Horizons told people in distress they could save their homes in return for an up-front fee and monthly payment. The company would either find a buyer for the existing mortgage or negotiate a mortgage reduction. The indictment says Horizon Property Holdings failed to arrange for the purchase of clients' mortgages or to negotiate reductions in the mortgage debt owed by clients.
To prevent foreclosure, Horizon allegedly filed fraudulent deeds transferring the interest in the property to a fictitious entity called Pacifica Group 49/II. In many cases, the defendants also filed fraudulent bankruptcy filings, naming the homeowner and Pacifica as the debtor. That tactic triggers the automatic provision of bankruptcy law that halts foreclosure action.
The indictment alleges the defendants used this scheme and collected at least $5 million in fees from more than 1,000 clients. (sacbusjl12211)
MORAL
Repeating myself, the federal prosecutors are up in arms as well as the state. Prosecutions in California have dramatically increased during 2011 as you see from reading the eAlert. Anyone that believes they may have been involved directly or indirectly in questionable loans from 2004 to the present should consult with their attorneys, if for no other reason, to develop a comfort level on where they may stand.
THREE TOP OFFICERS OF LEGACY HOME LOANS AND REAL ESTATE ARRESTED FOR LOAN MODIFICATION FRAUD
FACTS
On Dec. 1, three top officers of a Stockton, Calif. real estate company who allegedly took thousands of dollars in up-front loan modification fees and made false promises to lower the mortgage payments of struggling Central Valley homeowners were arrested.
Magdalena Salas, Angelin Mireles and Julissa Garcia were arrested on 13 felony and two misdemeanor counts, including conspiracy, grand theft and false advertising. They are being held at the San Joaquin County Jail on $100,000 bail.
"This operation was nothing more than a scam," said Christy Romero, Deputy Special Inspector General for SIGTARP. "Salas, Mireles, and Garcia lined their pockets with up-front fees while making false promises to homeowners of lowering their mortgage payments through the ‘Obama Plan'. Today's criminal charges should be a warning to anyone involved in this type of scam—SIGTARP is catching those who perpetrate these crimes and is working with its law enforcement partners to prosecute them and hold them accountable."
Salas, the owner of Legacy Home Loans and Real Estate; Mireles, her twin sister; and Garcia took up-front fees of up to $5,000 from dozens of Central Valley homeowners for loan modification services that were never performed.
From November 2009 to August 2011, Salas and her employees circulated flyers throughout Stockton that read, in both English and Spanish: "We will save your home! Guaranteed!" and "Guaranteed new lower mortgage payments!" Along with the flyers, Legacy Home Loans ran television and radio advertisements in English and Spanish and broadcast its services on a billboard.
Clients were promised a full refund if they did not receive a loan modification. Many clients ended up losing their homes. (caag12111prsrel)
MORAL
I trust they can afford legal counsel. If not, the public defender will have to do.
CONNECTICUT MAN DRAWS 10 YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On Nov. 28, Syed A. Babar was sentenced to 120 months of imprisonment followed by three years of supervised release, for orchestrating a multi-million-dollar mortgage fraud scheme.
“The U.S. Attorney's Office, FBI, HUD-OIG and the other participants in the Connecticut Mortgage FraudTask Force are committed to investigating and prosecuting those who are responsible criminally for creating blight in our communities and contributing to our nation's banking crisis.”
Between February 2007 and April 2010, Babar and others engaged in a scheme to obtain millions of dollars in residential real estate loans, including loans insured by the Federal Housing Administration, through the use of sham sales contracts, false loan applications and fraudulent property appraisals. Babar was the de facto leader and organizer of the conspiracy.
Babar and others recruited and paid straw purchasers to nominally purchase homes. He and his co-conspirators then directed the straw purchasers to enter into sales contracts with the sellers of homes for prices higher than the actual prices that the sellers would receive. Members of the conspiracy submitted false documentation in connection with loan applications, including fraudulent appraisals of the properties being purchased in order to justify the inflated sales prices and the loan amounts being sought to fund the purchases. Babar and his co-conspirators also created a fictitious construction company in order to divert fraud proceeds to it and, in some cases, to falsely justify the artificially inflated sales price of houses based on renovations to the property that never occurred. Babar and his co-conspirators then split the fraud proceeds.
Contrary to the representations made on the loan applications, the straw purchasers never occupied the houses. They defaulted on the loans they obtained and let the houses go into foreclosure.
Babar and his co-conspirators conducted this scheme on approximately 30 properties in Connecticut. As a result, various lenders suffered total losses of approximately $4.75 million.
Chief Judge Thompson ordered Babar to pay restitution in the amount of $4,749,024.76. On Feb. 1, Babar pleaded guilty to one count of conspiracy, eight counts of wire fraud, one count of mail fraud, and four counts of making false statements to the government. (usattyct112811)
MORAL
Remember what I have been saying. It takes about two years for the federal government to get together all the paperwork to make a case and an indictment on average. But they have 10 years from the date of the offense to file the indictment. Here they used loans that funded four years ago. The federal prosecutors are still hard at work, as you will note from the recent spate of California prosecutions and convictions.
CONNECTICUT MAN SENTENCED TO 18 MONTHS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On Nov. 29, Christian Tudorof of Stamford was sentenced by United States District Judge Janet Bond Arterton in New Haven to 18 months of imprisonment, followed by three years of supervised release, for his involvement in a $4 million mortgage fraud scheme. He pleaded guilty to one count of wire fraud.
Between December 2006 and March 2007, Tudorof submitted mortgage applications to a number of different mortgage lenders in association with the purchase of residential properties in Florida, Arizona, and Connecticut. In many of the mortgage applications, Tudorof provided false information and failed to disclose information to the mortgage lender. For example, after Tudorof obtained one mortgage to purchase a home in Florida, he deliberately failed to disclose the existence of this mortgage when he applied for mortgages on the other properties purchased in his name. He also falsely represented in the mortgage applications that he intended to live in some of the homes that he intended to purchase when, in fact, he had no intention of occupying these homes.
Tudorof obtained more than $4 million in mortgages from mortgage lenders and purchased at least six properties. After he failed to service the mortgages, each of the homes he purchased was sold in foreclosure. As a result, the mortgage lenders suffered losses of more than $2 million. Judge Arterton ordered Tudorof to pay restitution in the amount of $2,099,400. (usattyct112911)
MORAL
Imagine what would happen if he had to plead to two or more counts of wire fraud. Basically, if anyone uses the phones or emails or letters or faxes to further the scheme to defraud the federal prosecutor can charge the person with mail fraud or wire fraud among other charges. This is true even if the content was purely innocent such as mailing a preliminary title report. Note that the prosecutors are working loans that funded in 2006!
IN CINCINNATI, SIX FAMILY MEMBERS AND AN EMPLOYEE OF ONE OF THE COMPANIES THEY OWNED HAVE ALL BEEN SENTENCED FOR MORTGAGE FRAUD
FACTS
Six family members and an employee of one of the companies they owned have been sentenced in U.S. District Court for a mortgage fraud scheme involving nine properties they bought and sold for their own use between 2004 and 2009.
On Dec. 1, Debbie Sferrazza received 46 months in prison followed by 10 years of supervised release. She pleaded guilty to one count of conspiracy to commit wire and mail fraud, one count of money laundering, and three counts of filing false income tax returns. She was ordered to pay $384,537 in restitution to the lenders she defrauded and $151,671.48 to the IRS.
Between 2004 and 2009, Debbie Sferrazza started several mortgage brokerage companies in the area. Over the years, she used the different companies to help perpetrate the fraud and avoid detection of the fraud. She was the sole owner and operator of the companies and their final office was operated out of her house.
“The Sferrazza brokerage companies provided loan services for numerous clients over the years that involved allegations of fraud,” Assistant U.S. Attorneys Timothy Mangan and Jennifer Barry told the court in a sentencing memorandum filed with the case. “However, out of practical necessity, the indictment focused strictly on nine properties that were bought and sold for personal gain and use by the Sferrazza family.” All the properties involved eventually landed in foreclosure.
Debbie Sferrazza's husband, Salvatore Sferrazza, received three years of probation, including 10 months of home confinement. Salvatore Sferrazza pleaded guilty to one count of conspiracy to commit wire and mail fraud and one count of money laundering. He was ordered to pay restitution of $71,709.80 to the lenders.
Heather Ashurst was sentenced to two years of probation and ordered to pay $99,406.96. She pleaded guilty to one count of conspiracy to commit wire and mail fraud.
Whitney Bonapfel, Debbie Sferrazza's daughter, was sentenced to two years of probation for making a false statement or report to HUD (a misdemeanor offense).
James Ashurst was sentenced on June 29, 2011 to one day in jail, three years of supervised release and ordered to pay $99,406.96 in restitution. James Ashurst pleaded guilty to one count of conspiracy to commit wire and mail fraud, and one count of money laundering. He is the husband of Heather Ashurst and a son of Debbie Sferrazza.
Keiron Ashurst received 12 months and a day in jail plus ordered to pay $138,500 in restitution. He is the brother of Debbie Sferrazza, and also a citizen of Great Britain who may face immigration consequences.
Tabatha Sturgill received 12 months and a day in jail for conspiracy to commit wire and mail fraud and for filing a false income tax return. She was ordered to pay $384,537.18 in restitution.
James and Heather Ashurst lived in the houses, worked for Debbie Sferrazza at the mortgage businesses, and were involved in the laundering of funds. Salvatore Sferrazza was often present at and involved in the mortgage business and laundering of funds, but was not officially an employee. Keiron Ashurst did not work at Debbie Sferrazza's mortgage business, but his home was fraudulently bought and sold twice in order to pull money out of the loans and save the property from foreclosure and divorce proceedings.
Whitney Bonapfel did not work for the mortgage business or live in the subject homes, but she was listed as the purchaser for a property where James and Heather Ashurst eventually lived. “The fraud scheme was fairly simple in nature, but extensive and persistent,” Mangan and Barry wrote. “The scheme involved the submission of false and fabricated supporting documentation to mortgage lenders. The supporting loan documents often included fraudulent Verifications of Employment, Verifications of Deposits, W-2 forms, pay stubs, Social Security payment letters, HUD-1 statements, and/or banking statements. The false Verifications of Employment and Verifications of Deposit for the borrower typically misrepresented not only the borrower's information, but also the verification process itself.” (In other words, a “full doc” fraud?) (usattysdoh12111)
MORAL
Did you notice the prosecutors went back seven years to 2004? I trust none of our readers have any questionable loans that go back that far. Remember, the federal government can go back 10 years for fraud loans and still prosecute as long as the indictment is within ten years of the last event to occur in the loan which is generally payment to the broker or wholesaler at sale of the loan.
SOUTH CAROLINA MORTGAGE BROKER DRAWS THREE YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On Nov. 28, Robert C. Sasser was sentenced in federal court in Columbia for wire fraud to three years' imprisonment and ordered him to pay approximately $1.6 million in restitution to Wells Fargo bank.
Sasser was a realtor and mortgage broker doing business in West Columbia. He was involved in eight real estate transactions that involved modular homes from the Aiken Housing Center and a private residence. Wachovia financed the eight mortgage loans for approximately $2.5 million. All the loans were collateralized by modular homes that were significantly overvalued.
The loan documents contained multiple misrepresentations that showed that the eight loans were fraudulent. They included grossly misstated income and asset information, forged signatures, and improper down payments. Due to subsequent foreclosures, the amount of loss suffered in this case was approximately $1.6 million, owed to Wachovia's successor, Wells Fargo. (usattysc112811)
MORAL
He changed his plea to guilty and still goes away for 3 years. I told you the sentencing was getting stiffer.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
