ALABAMA REAL ESTATE INVESTOR AGREES TO GO TO PRISON FOR RIGGING BIDS AT HOME FORECLOSURE SALES
On April 20, Lawrence B. Stacy, a Mobile, Ala. real estate investor, agreed to plead guilty for his role in a plot to rig bids and commit mail fraud at public real estate foreclosure auctions in Southern Alabama. So far, three individuals and one company have pled guilty.
Stacy was charged with one count of bid rigging and one count of conspiracy to commit mail fraud. According to the plea agreement, which is subject to court approval, Stacy has agreed to serve six months in prison. Additionally, Stacy has agreed to pay a $10,000 criminal fine and to cooperate with the department’s ongoing investigation.
According to court documents, Stacy conspired with others not to bid against one another at public real estate foreclosure auctions in southern Alabama. After a 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 or she was willing to pay. The highest bidder at the secret, second auction won the property.
Stacy was also charged with conspiring to use the U.S. mail to carry out a scheme to acquire title to rigged foreclosure properties sold at public auctions at artificially suppressed prices, to make and receive payoffs to co-conspirators and to cause financial institutions, homeowners, and others with a legal interest in rigged foreclosure properties to receive less than the competitive price for the properties. Stacy participated in the bid rigging and mail fraud conspiracies from at least as early as May 2002 until at least January 2007.
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act charge 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 fine. Each count of conspiracy to commit mail fraud carries a maximum penalty of 20 years in prison and a fine in an 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. (usattysodtal42012)
Most of you should remember that I have said the federal prosecutors have 10 years from the act to prosecute the people involved. Note that this started in 2002 (10 years ago) and went to 2007 (five years ago.) Anyone do any foreclosure bid rigging anywhere in the last 10 years? If so, I suggest you see your attorney and discuss the issues under attorney client privilege.
ARIZONA AMENDS LOAN ORIGINATOR LICENSING LAWS
The amendments clarify the de minimis exemption from the licensing requirement for loan originators. Under the new laws a loan originator does not include a person who originates five or fewer mortgage loans per calendar year if the source of the prospective financing also makes five or fewer mortgage loans per calendar year. The amendments provide that the Superintendent of the Department of Financial Institutions may refuse a license or suspend or revoke a license if the applicant has been involved in a misdemeanor or felony related to fraud, dishonesty or a breach of trust or money laundering. (Compliments Weiner/Brodsky, et al.)
So do five or fewer loans and no license is needed. But I would read the actual code section first if I were you. Equally important note the reasons why a license may be denied, suspended or revoked.
ARIZONA REAL ESTATE INVESTOR GETS EIGHT-PLUS YEARS IN A FEDERAL PRISON FOR MORTGAGE FRAUD
Eitan Maximov, a real estate investor, was sentenced after a six-day jury trial to nearly eight-and-one-half years in federal prison for his role in a 2006-2008 cash-back mortgage fraud scheme.
Maximov played a leadership role in the underlying conspiracy, which involved at least nine residential properties in the Scottsdale area. The objective of the conspiracy was to recruit unqualified borrowers as straw buyers, submit fraudulent loan applications on their behalf and on behalf of Maximov, obtain mortgage loans in excess of the selling price of the property, and then take the excess amount of the loans out through escrow in what is known as a "cash-back" scheme, prosecutors said.
Not only did Maximov recruit straw buyers and work with an escrow officer in order to carry out the scheme, but he also financially benefited from their involvement in the scheme, evidence showed. The purchase prices on many of the properties involved in the scheme exceeded $1 million.
Evidence at trial showed that Maximov had no legitimate employment, income, or assets to afford the numerous million-dollar properties. After a foreclosure on Maximov's primary residence, the home was stripped of its assets, further depreciating its value and the value of the homes in close proximity.
Evidence at sentencing demonstrated that Maximov returned to purchase his foreclosed property using a false name. His last address before being arrested in 2008 was a luxury condominium in the Esplanade. All of the homes purchased through the conspiracy have been foreclosed or sold at a loss to the lending institutions. Three other co-conspirators were also charged and have pleaded guilty for their involvement in the conspiracy. The conspiracy resulted in approximately $5 million in loans obtained by fraud and an actual and intended loss to lending institutions of nearly $6.5 million. (usattyaz41712)
It was reported he was a citizen of Israel. I imagine when he gets out immigration will put him on a plane for Israel.
ARIZONA MORTGAGE BROKER AND FORMER ASSOCIATE ADMIT TO COMMITTING MULTIPLE TRANSACTION MORTGAGE FRAUD
On April 3, Michele Mitchell entered a guilty plea to one count of conspiracy to commit wire fraud in federal court. Codefendant Jeremy Pratt previously pleaded guilty to the same charge.
Mitchell, a Valley mortgage broker, and her former associate each admitted to conspiring to commit a multiple-transaction mortgage fraud that federal law enforcement calculates resulted in a loss to defrauded financial institutions of approximately $5,300,000. Mitchell held herself out to be a mortgage broker, loan officer, and real estate investor. She was president of Golden Opportunity Investments, which was located in Scottsdale, Ariz. Pratt operated a construction and remodeling company, Arizona Cooling Control Plus. Both admitted that between May 2005, and February 2007, they conspired to recruit straw buyers with good credit scores to purchase residential properties for purported investment purposes. In order to qualify for mortgage financing, they had the straw buyers submit loan applications and supporting documents that misrepresented their incomes, assets, liabilities, employment status, and intent to occupy the premises. At the close of escrow, Mitchell and Pratt obtained a portion of the loan proceeds as cash back to be used for mortgage payments and for their own personal enrichment.
Mitchell and Pratt each admitted that their fraudulent scheme resulted in the purchase of at least 17 residential properties by obtaining loans from financial institutions in the total amount of nearly $17 million. The residential properties were located in the Valley cities of Glendale, Scottsdale, Surprise, Goodyear, and Peoria. All 17 properties went into foreclosure when neither Mitchell nor the straw buyers made the necessary mortgage payments. The total amount of cash back fraudulently obtained by Mitchell and Pratt from these transactions was $2.46 million and federal law enforcement calculates the loss to the financial institutions, that is, the difference between the total loan amounts and the total sales prices obtained at foreclosure sales, at approximately $5.3 million.
A conviction for conspiracy carries a maximum penalty of five years in prison, a $250,000 fine, or both. Pratt’s plea agreement provides that his sentence will not exceed 24 months. Mitchell’s plea agreement contains no such restriction. (usattyaz4312)
Do you know why these and all the other frauds I have been publishing were discovered? Take a guess and see if you are correct. In this attorney’s opinion when the market crashed in 2008, there was no place to sell the homes. Until then, the market kept going up and so the perpetrators could sell the homes at a profit and the underlying lender was paid off with no reason to be suspicious. When the market crashed there was no place to sell and the foreclosures hit and the loans were checked and t he prosecutions started.
A CALIFORNIA REMINDER ABOUT A DISCLOSURE YOU MUST MAKE AS A MORTGAGE LOAN ORIGINATOR
When an agent undertakes to arrange financing in connection with a sale, lease, or exchange of real property, or when a person or entity arranging financing in connection with the sale, lease, or exchange of real property undertakes to act as an agent with respect to that property, that agent, person, or entity shall, within 24 hours, make a written disclosure of those roles to all parties to the sale, lease, or exchange, and any related loan transaction. For purposes of this section, "agent" has the same meaning as defined in subdivision (a) of Section 2079.13 of the Civil Code. (B&PC §10177.6
Guess what the next auditor will be looking for in your loan files? Have we done a preaudit of your company in the past 12 months? You may want to consider doing one with us before the DRE or CFPB does and finds violations under DRE, CFLP or Dodd Frank.
CALIFORNIA LAWYER GETS FOUR YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD
Gerald L. Wolfe, a lawyer and former real estate broker, has been sentenced to 48 months in federal prison and must pay $7,5 million to lenders in restitution. He was found to be involved in a mortgage fraud scheme involving 15 mostly foreclosed homes in Orange County which were purchased at inflated prices.
Wolfe and others who were not identified and alleged co-conspirators purchased 30 residential properties in Orange and Riverside counties between the summer of 2005 and January 2006 per the indictment.
The alleged conspirators would recruit straw buyers and use their names and credit to purchase the properties according to court documents. The loan applications had fake personal information, misled lenders and sought mortgagees for inflated sales prices per the prosecutors. Wolfe obtained approximately $2.2 million that lenders were led to believe were owed to third parties by the sellers of the property while in fact the money was being sent to Wolfe. (ocreg42112p7)
He surrendered his broker license and is no longer active as an attorney. Notice the federal prosecutors went back seven years to get him. So any loans done since 2005 that are questionable can be under federal investigation.
74-YEAR-OLD CALIFORNIA WOMAN IS SENTENCED TO EIGHT YEARS IN STATE PRISON
On April 20, Sushama Devi Lohia was sentenced to eight years in state prison. She was charged with conspiracy to commit more than $16 million in real estate fraud. She pled guilty to 60 felony counts related to the fraud and 10 counts of tax evasion according to Orange County Deputy District Attorney Douglas Brannan. Pending are cases against three of her relatives, two of which are her daughters.
According to the prosecution, from 2006 to 2009, Lohia and the others obtained 15 fraudulent loans for properties through straw buyers using the straw buyer credit. The loans were all through Washington Mutual Bank. (ocr42212p10)
I have been telling everyone that Southern California would be high in fraud indictments with prosecutors working north to south. Since this is a state prosecution the sentences are generally a little harsher than federal. The offset is the state has a parole system to apply for an early release on parole. The federal system does not have a parole system.
ORANGE COUNTY, CALIFORNIA ATTORNEY AND MOTHER CONVICTED OF MORTGAGE FRAUD
On April 18, United States Attorney Laura E. Duffy announced that after a one-week trial, a federal jury in San Diego convicted Carlsbad real estate agent Aida Agusti Castro and her son, attorney Stephen Kenneth Chrysler, of multiple counts of wire fraud for their roles in an $8 million mortgage fraud scheme involving 16 properties.
After the jury returned its verdict, United States District Court Judge Jeffrey T. Miller remanded both defendants into federal custody pending their sentencing.
Chrysler, who was also licensed by the Department of Real Estate as a loan broker, owned SKC Real Estate. His mother, Castro, was a licensed sales person and an officer of SKC Real Estate, and worked as a real estate agent for the company. Evidence at trial proved that between 2005 and 2007, the two defendants created 30 separate false loan applications, along with other fraudulent supporting documents, that they submitted to mortgage lenders in order to obtain over $8 million in mortgages to unqualified borrowers, including: creating phony businesses and claiming that borrowers were the self-employed owners of those companies; inflating borrowers’ monthly incomes; creating false rental histories and citing a sham management company as the landlord; fabricating rental agreements, with made-up tenants and lease terms, and forging borrowers’ signatures on the agreements; \ altering borrowers’ bank statements to show higher bank account balances; and purchasing false CPA letters that would support the borrowers’ phony businesses.
Documents introduced into evidence proved that through SKC Real Estate, the defendants received approximately $350,000 in loan fees and real estate commissions from these fraudulent transactions. Evidence at trial also showed that the defendants targeted Spanish-speaking borrowers as clients and concealed from borrowers the fraudulent information that the defendants inserted into their loan documents. Several borrowers testified that the defendants told them to simply sign the loan documents and did not translate these documents into Spanish. As the borrowers were not financially qualified to obtain these loans, many of the mortgages went into default and the properties have been foreclosed upon.
United States Attorney Duffy commended the Federal Bureau of Investigation for their work in investigating this case.
Maximum penalties (for each count): 20 years’ imprisonment, $250,000 fine or twice the gross pecuniary gain or twice the gross pecuniary loss (whichever is greatest), $100 special assessment and three years of supervised release. (usattysdca41812)
If you read my Mortgage e-Alert religiously and the morals you will find on several occasions I have said the federal authorities were working their way north to south in California. You can see they are doing just that. I have also suggested that if anyone reading this has been involved in "funny” loans to see their attorney forthwith before law enforcement sees them. You would be surprised what an attorney can do for you under these circumstances as some of our clients could attest. See your attorney now. As an aside if you check the Attorney and DRE web sites you will find Chrysler is still an active licensed attorney but that his DRE license has expired.
TWO SAN GABRIEL VALLEY, CALIFORNIA RESIDENTS ACCUSED OF LEADING MORTGAGE FRAUD RING THAT STOLE $2.3 MILLION
A pair of San Gabriel Valley residents, Gerard Bueno and Jesus Vega Jr., are accused of leading a mortgage fraud ring, which also included seven others. One New York man and six other California residents were arrested in connection with the scheme.
Between 2007 and 2009, Bueno ran an organization he called Pres Mex Inc., while Vega ran a group called JVJ Inc., authorities said. The two are accused of fraudulently obtaining titles to six Los Angeles County homes. They then obtained loans against the properties in the names of straw buyers, two of which were identity theft victims. All six loans went into default.
Investigators began rounding up the nine suspects April 12 and arrested the final suspect April 18, officials said. The suspect jailed in New York was awaiting extradition to California.
The nine suspects are charged with a numerous crimes including grand theft, identity theft, forgery and procuring or offering false or forged instruments. The investigation was handled by the sheriff's Commercial Crimes Bureau Real Estate Fraud Team and the U.S. Department of Housing and Development. (sgvtr41812)
State prosecutors are harder to work with then the federal ones. I do not envy the suspects.
MARYLAND CHANGES EXEMPTION LAWS BY REMOVING EXEMPTIONS
The Maryland legislature enacted SB 302, effective Jan. 1, which removes certain exemptions from the Maryland Mortgage Lender Law. SB 302 removes the exemption for persons making three or fewer loans per year and brokering no more than one loan per year. Additionally, SB 302 removes the exemption for certain subsidiaries and affiliates of certain federally regulated banks and financial institutions. .
FORMER EMPLOYEE OF NEW JERSEY MORTGAGE LENDER SENTENCED TO 21 MONTHS IN FEDERAL PRISON FOR MORTGAGE FRAUD
On April 17, Jorge Abbud a former employee of a Parsippany, N.J. mortgage lender who admitted taking $138,402 in illegitimate proceeds of multiple home sales as a result of a mortgage fraud scheme was sentenced to 21 months in prison. He pleaded guilty before U.S. District Judge William H. Walls to an information charging him with wire fraud. Judge Walls imposed the sentence in Newark federal court.
In 2008, Abbud was an employee of a Parsippany mortgage lender. He targeted homeowners in New Jersey who had equity in their homes but were facing foreclosure because of their inability to pay their monthly mortgage payments. Abbud falsely promised to help these homeowners avoid foreclosure, keep their homes, and repair their damaged credit. He instructed the homeowners to permit the titles of their homes to be recorded in the names of third-party purchasers for approximately one to three years, promising the homeowners that he would improve their credit scores during that time, obtain mortgages with more favorable interest rates for them, and return the titles of the homes to the homeowners. (sound familiar?)
Abbud then recruited straw buyers with good credit scores to act as buyers of the homes facing foreclosure. He told the straw buyers they were helping the homeowners keep their homes and that the straw buyers would make money when the homes were sold back to the original homeowners. Abbud admitted that on certain occasions, and notwithstanding his promises to the homeowners and straw buyers, the homes fell into foreclosure.
Abbud sometimes caused the straw buyers to misrepresent their income in loan applications and other documents in order to secure the loans to purchase the homes. Abbud caused the funds disbursed by the financial institution or lender underwriting the loan to be sent to individuals and entities that were not legally entitled to them. Abbud personally obtained $138,402 in illegitimate proceeds of the home sales as a result of his scheme and artifice to defraud.
In addition to the prison term, Judge Walls sentenced Abbud to three years’ supervised release and ordered him to pay restitution of $138,402 to the defrauded lender, Bank of America. (usattynj41712)
One small loss completed four years ago, and 21 months in a federal prison. Somehow it just does not seem worth it.
WASHINGTON AMENDS SHORT SALE AND FORECLOSURE LAWS
Washington enacted House Bill 2614 effective immediately. The Act added a section to Washington’s foreclosure provisions to require mortgagees that intend to release residential property in a short sale to provide a written notice to the borrower informing the borrower of the mortgagee’s intent to either waive or reserve its right to collect the full debt and that the mortgagee forfeits its right to collect the outstanding debt if the mortgagee does not initiate a court action within three years of releasing the security interest. The Act amended other foreclosure provisions to allow meetings to discuss options to avoid foreclosure to be held over the telephone if the borrower agrees and to amend certain foreclosure mediation program procedures.
The Act amended trustee sale provisions by changing beneficiary reporting requirements and revising certain notice requirements. The bill also created a process for rescinding a trustee sale under certain circumstances.
Can you imagine a lender giving up its right to sue for balance and having the three years to do it in? The lender could sell the asset. Seems better to go to foreclosure and rent the property in the interim unless you get the lender to waive the right to collect the deficiency.
WISCONSIN SHORTENS TIME TO FORECLOSE ON ABANDONED PROPERTIES
Wisconsin, revised the timing requirements for foreclosures on abandoned property. Wisconsin reduced the time the notice of sale must be printed in the newspaper from each week for six successive weeks to each week for three successive weeks. Wisconsin reduced the redemption period for abandoned property from two months to five weeks from the date of the foreclosure judgment.
Wisconsin added a provision to allow a representative of the municipality where the property is located to provide testimony or evidence to the court relating to whether the property has been abandoned and set forth certain factors the court must consider when determining if the property is abandoned.
First the state finds you abandoned the property and now it sets the time shorter for the abandonment to make sure you have less time to get it back.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE