The Federal Bureau of Investigation arrested a former California mortgage broker earlier this month at his home for a violation of bank fraud.
Donald Totten allegedly ran a mortgage brokerage business from Rancho Santa Fe, Calif., where he obtained $2.2 million in mortgage loans using false information and siphoned hundreds of thousands of dollars from the sale of the properties.
According to a federal complaint filed with the U.S. District Court of Southern California, from 2002 until 2007, Totten was a mortgage loan officer who acted as a broker using licenses held by others. Totten operated under the business names Integrated Home Loans, Integrated Lending, Money World, Island Financial and Little Angels Living Trust.
As a broker, Totten worked on behalf of borrowers to obtain mortgage financing from independent lenders, the complaint stated.
But the complaint says that in 2006, Totten arranged a series of real estate transactions with a Chula Vista property owner who was having a hard time making his mortgage payments. Totten first entered into a partnership with an investor from Carlsbad, Calif., promising to share the maintenance costs of the properties and then split the proceeds when the property was resold.
In order to purchase properties, Totten employed a straw buyer—the investor’s girlfriend who was not named in the complaint—who had no intention of living in the acquired assets despite certifications on the loan application stating this was going to happen. Besides providing significant downpayments from his own funds, Totten falsified the straw buyer’s loan application by inflating her income and assets so the lender would grant a mortgage.
Subsequently, Totten and his loan processor who worked at Money World, then sent inaccurate supporting documents to the lenders to justify the application was valid, when in reality it was not.
Additionally, the complaint charges Totten with buying four homes for the same straw buyer simultaneously by intentionally failing to disclose to each lender that the borrower was in the process of buying multiple properties.
As part of the alleged fraudulent scam, Totten earned a large commission on these transactions and had proceeds from the sales sent directly to his own bank accounts as kickbacks. Furthermore, the complaint alleges that Totten concealed his receipt of these payments from the lenders by directing them to Island Financial, a company the defendant controlled.
Overall, the complaint claims that Totten took in approximately $192,000 in kickbacks alone from the four sales.
After the sales closed, Totten then supposedly had the straw buyer sign over the deeds of the properties to a trust he also controlled, therefore granting him ownership. Eventually, the four mortgages ended up defaulting and the properties were foreclosed. The lenders and secondary mortgage purchasers including Fannie Mae and Freddie Mac suffered losses as a result of these foreclosures.
