FACTS
On July 29, 2010 Arizona Attorney General Terry Goddard announced he filed a lawsuit against THE GUARDIAN GROUP LLC for engaging in allegedly deceptive mortgage loan reduction services that have cost more than 2,500 consumers millions of dollars. Also named as defendants in the lawsuit are: BRYAN PREHODA, CHRISTY PREHODA, LUIS BELEVAN AND JOSE CARREON.
Goddard also called attention to a new state law which took effect July 29 that prohibits foreclosure consultants and mortgage “rescue” companies from charging upfront fees.
“This company has exploited the financial struggles of hundreds of homeowners by promising them mortgage relief it couldn’t deliver,” Goddard said. “The Guardian Group’s conduct makes the case for the state’s new foreclosure law, which prohibits the kind of large upfront fees it collected.”
The lawsuit, filed in Maricopa County Superior Court, alleges that the Scottsdale-based Guardian Group fraudulently represented itself as providing loan reduction services to homeowners struggling to make their mortgage payments. The company charged consumers an average advance fee of $1,595 for mortgage loan refinancing services, which it rarely provided. It collected fees from more than 2,500 consumers for enrollment in its Principal Reduction Program since August 2009.
The company, which markets nationally, made claims it would negotiate with lenders to purchase a consumer’s note for less than face value and sell the note in an investment package to a third-party investor. Guardian Group then told the consumer that it would modify the rates and terms of the consumer’s mortgage loans and reduce the principal owed to 90% of current market value.
Guardian Group fraudulently represented to consumers that it had $5 billion allocated for its “Principal Reduction Program” because it had multiple investors prepared to purchase mortgage notes. The Attorney General’s Office learned that not one of the supposed investors actually invested money in the company.
This lawsuit was filed just before the new law regulating foreclosure consultants took effect. The law prohibits foreclosure companies from charging upfront fees and sets forth requirements that apply to foreclosure consultants. Had this law been in effect prior to the filing of the lawsuit against Guardian Group, it would have provided an additional legal avenue to pursue further recourse for consumers.
In a separate administrative action, the Arizona Department of Financial Institutions issued a Cease and Desist Order against Guardian Group for acting as mortgage broker without obtaining a license. A hearing on that matter is set for Oct. 18. (agaz72910ws)
CALIFORNIA WOMAN ARRESTED IN LAS VEGAS FOR MORTGAGE FRAUD COMMITTED
FACTS
On July 22, 2010 GUADALUPE RAMIREZ a Bakersfield real estate agent wanted on a $1 million arrest warrant in connection with an alleged mortgage fraud scheme was arrested in Las Vegas. Guadalupe Ramirez and her father had both been charged in connection with the alleged scheme, accused of getting kickbacks from $4.1 million in fraudulent mortgage loans that almost immediately went into default, according to legal filings.
The father purchased five homes between November 2006 and January 2007 and each time indicated he planned to live in the place, according to the criminal complaint filed in March 2010 in Kern County Superior Court. Owner-occupied homes are eligible for more favorable loan terms.
The father is identified as both Augustine and Agustin in court documents, and on some property records he is listed as Agustin.
Another $1 million warrant is outstanding on the elder Ramirez who remains at large, but Guadalupe Ramirez is in custody in Nevada awaiting extradition to Kern County.
The daughter had taken a job about two weeks ago with Exit United Realty in Las Vegas. Exit broker Pablo Covarrubias said Monday he had no idea she was wanted by authorities here.
Covarrubias said the younger Ramirez had very recently obtained a Nevada real estate license. The website of the Real Estate Division of the Nevada Department of Business and Industry does not list her as having a license. The agency did not return telephone calls requesting an interview.
Father and daughter are accused of conspiring to obtain inflated appraisals on homes, and lying to sellers to get them to pay what amounted to kickback payments that were not disclosed to lenders, according to the allegations listed in the complaint.
The pair each face two counts of conspiring to commit a crime, five counts of grand theft of property and eight counts of money laundering, all felonies. A conviction on all charges could mean up to 19 years in prison. (bkrsfldcal72710)
MORAL
Note that prosecutors are still working on 2006 loans and 2007.
LOS ANGELES MORTGAGE BROKER PLEADS GUILTY TO STEALING HOUSE FROM A CLIENT
FACTS
On July 23, 2010 LOS ANGELES MORTGAGE BROKER GILBERTO ERNESTO LOPEZ pleaded no contest to one count of grand theft and two counts of forgery—all felonies—in connection with the theft of a house in southwest Bakersfield. No contest is the same as a guilty plea in criminal court except the conviction cannot be used in a civil court against you. LOPEZ stole the identity of Esther Garcia of Bakersfield, after working with her on ways to reduce her taxes, according to a complaint filed in Kern County Superior Court.
He then filed real estate documents to transfer title to her Bakersfield home to one of his other clients without that client's consent, and took out a $232,750 loan against the property, using the money for personal expenses, according to court documents.
There was a problem with the Social Security number on the loan documents, though, so Lopez pulled the home out of that client's name and transferred it to a second client, also without that person's consent, and borrowed on it again to pay down the first loan and pocket still more money, said Bakersfield Police Detective Frank Wooldridge.
Garcia didn't discover the fraud until she got a tax bill, according to a probable cause declaration.
Lopez was originally charged with 23 counts of mortgage fraud-related charges but charges were reduced as part of a plea deal. Lopez could not be reached for comment. Lopez is expected to be sentenced Aug. 27, 2010. (bkrsfldca72710)
MORAL
Now you see again why you have to be careful whom you hire to work for you. Hire the wrong loan officer and if that loan officer steals someone’s identity, you could be held civilly liable under certain circumstances.
CALIFORNIA MAN DRAWS THREE YEAR PRISON TERM FOR MORTGAGE FRAUD
FACTS
JOSHUA GERVOLSTAD OF REDDING was sentenced to three years in federal prison and ordered to pay $1.4 million restitution. Gervolstad pleaded guilty in October to one count of mail fraud.
Federal prosecutors agreed to recommend that his sentence be reduced by as much as 50% if he cooperated with the government. They have said that Gervolstad’s conviction stems from his submission of inflated appraisals and fraudulent lien documents for four homes in Redding and one in Lodi. The closing statement for each house contained bogus papers requiring the payoff of a lien to TPG Investments. Gervolstad allegedly controlled TPG Investments and used its bank account to divert mortgage loan funds to himself and others. At least three of the properties were foreclosed and sold for a combined loss of nearly $1.2 million.
Gervolstad was sentenced about two months after three Redding residents and a San Antonio man were indicted by a federal grand jury on mail fraud, money laundering and other charges. That 18-page indictment indirectly linked at least one of the defendants, DARRIN ARTHUR JOHNSTON, to Gervolstad, saying Johnston formed in 2006 The Paramount Group.
During two months in 2006, Gervolstad and others received at least $925,000 of fraudulent loan proceeds.
Gervolstad would get the OK from the owners of the homes to mortgage their properties then would get the appraisal document modified so that each house appeared to have an appraised value of between $150,500 and $220,000 more than it was actually worth.
Gervolstad would fix the preliminary title report and add TPG as a lien holder for a specified amount between $145,000 and $330,000 for each mortgage.
Acting on the title report, Chicago Title, which had an office in Redding, would disburse loan funds into TPG’s bank account when escrow closed on each house. Gervolstad then would take the money and give some to each homeowner and spend the rest himself.
First Magnus Financial, which had an office in Roseville, was providing the mortgages for each transaction, according to court papers. (record.com71410usattyedca)
MORAL
Over $900,000 in two months is pretty good pay, but not enough if you have to go into a federal prison system.
CONNECTICUT MAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On July 29, 2010 JOHN JACKSON of Middletown, pleaded guilty in Hartford to a one count of conspiring to commit wire fraud stemming from a mortgage fraud scheme.
In 2006, JACKSON conspired with a New Haven-based real estate attorney and an East Hartford-based mortgage broker to defraud Mortgage Lender Network USA Inc., a Florida corporation with offices in Middletown, through the purchase of Meriden residential property. Working with the attorney and mortgage broker, JACKSON signed a loan application provided by the mortgage broker for a loan in the amount of $280,000. Both JACKSON and the mortgage broker knew that application contained several material misrepresentations, including JACKSON’s true financial condition. The application also falsely represented the purchase price of the property, which was substantially less than reflected on the loan application; that the property was to be JACKSON’s primary residence, when it was not; JACKSON’s total liabilities, which were much higher than represented on the application, and that JACKSON would provide approximately $60,000 in cash at the loan closing.
On approximately July 21, 2008, as part of the scheduled loan closing, Mortgage Lender wired approximately $283,000 into the attorney’s trust account. At the closing, JACKSON signed a HUD settlement statement, which was prepared by the attorney, that overstated the actual purchase price of the property by more than $150,000, and that stated that JACKSON had made an earnest payment toward the purchase. In fact, JACKSON had not made a payment. Instead, the attorney had made a payout to JACKSON.
Sentencing is set for Oct. 15, 2010, at which time JACKSON faces a maximum term of imprisonment of five years and a fine of up to $250,000. (usattyct72910)
MORAL
Commit mortgage fraud and go to prison.
THREE CHARGED IN CONNECTICUT WITH MORTGAGE FRAUD
FACTS
A federal grand jury in New Haven has returned an 11-count indictment charging STEVEN J. KOTTAGE AND GENARO R. HATHAWAY, BOTH OF WESTON, AND MARY ELLEN DURSO OF MILFORD, with conspiracy and other offenses stemming from the defendants alleged involvement in mortgage fraud.
The indictment alleges that KOTTAGE and HATHAWAY, who are married, conspired to commit wire fraud. HATHAWAY, A FORMER ATTORNEY IN CONNECTICUT AND NEW YORK, and KOTTAGE purchased and financed the property in the name of KOTTAGE’s mother by filing false loan applications to Wells Fargo Home Mortgage. In each instance, HATHAWAY served as the closing attorney on behalf of KOTTAGE’s mother and Wells Fargo. The indictment further alleges that HATHAWAY subsequently purchased the property from KOTTAGE’s mother’s estate in his own name and, in so doing, made a materially false loan application to H&R Block Home Mortgage to obtain a separate mortgage. Rather than using the sale proceeds due and owing to KOTTAGE’s mother’s estate to pay off the outstanding loans issued by Wells Fargo, KOTTAGE and HATHAWAY used those proceeds to pay off an obligation arising from a separate real estate transaction in which HATHAWAY served as the closing attorney for the seller. The losses resulting from this alleged conspiracy exceed $500,000.
The indictment further alleges that KOTTAGE, HATHAWAY, and DURSO conspired to commit bank fraud by filing a materially false loan application to Washington Mutual to refinance a condominium in Hillsboro Beach, Florida. DURSO served as the straw owner for the condo in order to obtain the fraudulent loan proceeds for the benefit of KOTTAGE and HATHAWAY.
The indictment also charges HATHAWAY with tax evasion in 2005 and DURSO with filing false tax returns from 2004 to 2008.
The indictment charges KOTTAGE and HATHAWAY with two counts and DURSO with one count of conspiracy, a charge that carries a maximum term of imprisonment of 30 years on each count. The indictment further charges KOTTAGE and HATHAWAY with two counts of wire fraud, a charge that carries a maximum term of imprisonment of 30 years on each count. KOTTAGE, HATHAWAY and DURSO are each charged with one count of bank fraud, which carries a maximum term of imprisonment of 30 years. The one count of tax evasion against HATHAWAY carries a maximum term of imprisonment of five years, and the five counts of filing false tax returns against DURSO carry a maximum term of imprisonment of three years, on each count. (usattyct72810)
MORAL
The federal authorities are still at it, hot and heavy and probably will continue to do so for the next two years.
ILLINOIS ENACTS TRANSFER FEE COVENANT ACT THAT VOIDS RECORDINGS AFTER TRANSFER DATE.
FACTS
Illinois has enacted the Transfer Fee Covenant Act. Public Act 96-1345. This becomes effective Jan. 1, 2011. A transfer fee covenant or a lien to secure payment of a transfer fee recorded after the effective date of this law is void, unenforceable and does not run with the title to the property. Private transfer fee covenants, which would require future buyers or sellers to pay a private transfer fee to whoever is designated in the covenant on all future transfers, is invalid and against public policy. A transfer fee covenant or a lien to secure the payment of a transfer fee that is recorded after the effective date is void, unenforceable, and does not run with the title to the real property.
The law will continue to allow a form of transfer fee covenant currently used in some housing developments to fund the conservation of an environmentally sensitive parcel adjacent to several property owners who pay a fee for its maintenance
MORAL
That is one way to build a very good retirement plan for the developer. Build a subdivision and make sure everyone who buys pays a transfer tax to the developer and when they sell to someone else another fee is paid on into infinity.
FTC BANS EIGHT MARKETERS FROM SELLING MORTGAGE MODIFICATIONS OR FORECLOSURE RELIEF SERVICES AND FINES ONE $11.5 MILLION
FACTS
Eight marketers are banned from selling mortgage modification or foreclosure relief services under settlements with the Federal Trade Commission. The FTC alleged that the marketers charged homeowners up-front fees and falsely claimed they could get their mortgage loans modified or prevent foreclosure on their homes. The settlements in three separate actions are part of the FTC’s ongoing efforts against scams that target financially distressed consumers.
The FTC settled with the following companies:
FEDERAL LOAN MODIFICATION LAW CENTER. STEVEN OSCHEROWITZ settled FTC charges that he and others advertised and sold a so-called “Federal Loan Modification program.” They charged up to $3,000, much of which they required up-front, but Federal Loan Modification often failed to live up to the promised results, according to the FTC’s complaint. The settlement order against Oscherowitz permanently bans him from selling mortgage relief services AND FROM TELEMARKETING ANY GOOD OR SERVICE. Under the order, Oscherowitz also is prohibited from misrepresenting any good or service, selling or otherwise benefiting from customers’ personal information, and failing to dispose of customer information properly. The ORDER IMPOSES AN $11.5 MILLION JUDGMENT AGAINST OSCHEROWITZ, WHICH REPRESENTS THE AMOUNT CONSUMERS PAID TO THE DEFENDANTS WHILE HE WAS INVOLVED IN THE ALLEGED SCHEME. Any money collected to satisfy the judgment will be paid to injured consumers if practicable, or to the U.S. Treasury as disgorgement of ill-gotten gains. Two individual and three corporate defendants already have settled charges against them in this case, and the FTC continues to pursue its case against five other defendants.
LOSS MITIGATION SERVICES. DEAN SHAFER, MARION ANTHONY “TONY” PERRY, AND BERNADETTE PERRY (ALSO KNOWN AS BERNADETTE CARR AND BERNADETTE CARR-PERRY) settled allegations that they falsely promised that a loan modification was assured or virtually assured if consumers paid an advance fee of up to $5,500. Shafer and the Perrys, who were principals of Loss Mitigation Services Inc. and SYNERGY FINANCIAL MANAGEMENT CORP., DOING BUSINESS AS DIRECT LENDER OR DIRECTLENDER.COM, also allegedly misrepresented that the companies were a department of, or affiliated with, the consumer’s lender or mortgage servicer. In addition, Shafer and the Perrys falsely claimed that consumers would receive refunds if LMS or Direct Lender failed to secure a loan modification. In many cases, the defendants failed to obtain loan modifications for consumers, and some consumers lost their homes while waiting for the promised results. Under the settlement orders, SHAFER AND THE PERRYS ARE BANNED FROM SELLING MORTGAGE RELIEF SERVICES. THE ORDERS ALSO IMPOSE A $6.2 MILLION judgment that is suspended due to their inability to pay. In addition to the orders against Shafer and the Perrys, the FTC obtained a default order against LMS and Direct Lender, banning them from selling mortgage relief services and ordering them to pay $6.2 million.
HOPE NOW MODIFICATIONS. BROTHERS SALVATORE AND NICHOLAS PUGLIA, HOPE NOW MODIFICATIONS LLC AND HOPE NOW FINANCIAL SERVICES CORP. settled FTC charges that they falsely claimed that they could obtain mortgage loan modifications in all or virtually all cases and would refund consumers’ money if they failed, and that they were affiliated with, or part of, the HOPE NOW Alliance, a free federal homeowner assistance program. In addition to banning the defendants from selling mortgage relief services, the settlement order against them permanently bars them from misrepresenting any good or service, violating the Telemarketing Sales Rule, selling or otherwise benefiting from their customers’ personal information, and failing to dispose of their customer information properly. The order also imposes a JUDGMENT OF ALMOST $5.3 MILLION, WHICH WILL BE SUSPENDED WHEN THE DEFENDANTS SURRENDER ALL OF THE FUNDS IN THEIR BANK ACCOUNTS, WHICH WERE FROZEN BY THE COURT. (ftc72610)
MORAL
Don’t mess with the FTC.
A REMINDER ABOUT THE CALIFORNIA DOC-CFL AND DOC-RMLA LICENSE NMLS&R ENDORSEMENT
FACTS
Any person who provides SERVICES AS A MORTGAGE LOAN ORIGINATOR IN CALIFORNIA under the California Finance Lenders Law or the California Residential Mortgage Lending Act. Must apply for and receive a mortgage loan originator license by July 31, 2010. The MLO must also be employed by and sponsored by a Department licensee under the California Residential Mortgage Lending Act or the California Finance Lenders Law.
MORAL
Be licensed or stop originating or get in serious trouble.
A REMINDER ABOUT THE CALIFORNIA DRE LICENSE NMLS&R ENDORSEMENT
FACTS
Sept. 15, 2010 is the deadline for License Endorsement Applications for qualified residential MLO registrants to be submitted through the National Mortgage License System and Registry to be issued a license endorsement by Jan. 1, 2011.
MORAL
Have the application in with the DRE by Sept. 15, 2010 or you may not have the endorsement by Jan. 1, 2011 and you will not be doing residential mortgage loans.
TWO PLEAD GUILTY TO MORTGAGE FRAUD IN NEW JERSEY
FACTS
On July 22, 2010, EDWARD OLIMPIO OF BOONTON, N.J., AND RACHELL FISCHBEIN OF HILLSDALE, N.J., pleaded guilty to mortgage fraud. Olimpio is the co-owner of Ridgewood, N.J., mortgage brokerage firm DIVERSIFIED FINANCIAL GROUP, D/B/A RESIDENTIAL MORTGAGE CORP. Fischbein is a former Residential Mortgage employee. Both pleaded guilty to wire fraud conspiracy in connection with a mortgage fraud scheme.
They both admitted that they conspired with each other and others—including a CO-CONSPIRATOR WHO DURING THE RELEVANT TIME PERIOD SERVED AS THE CHAIRMAN AND A COMMISSIONER OF THE BERGEN COUNTY IMPROVEMENT AUTHORITY—to commit wire fraud in connection with fraudulent mortgage and home equity loans brokered by Residential Mortgage between 2006 and 2009. The scheme allegedly involved the submission to mortgage lenders of fraudulent loan applications and supporting documents that falsely claimed borrowers were employed by and receiving income from BCIA.
According to the information to which the defendants pleaded guilty and statements made in Newark federal court Olimpio and Fischbein admitted that they, along with other participants in the mortgage fraud scheme, would falsely represent on mortgage loan applications and other documents that certain borrowers were employed by and received salaries from the BCIA, when those individuals did not work there. In support of these false representations, the co-conspirators arranged for the BCIA staff to falsely respond to telephone calls from banks and other mortgage lenders seeking to verify borrowers’ employment. Olimpio and Fischbein also admitted that they and their co-conspirators created and arranged for the creation of phony BCIA pay stubs and IRS Forms W-2, which were also submitted to lenders.
Olimpio, Fischbein and their co-conspirators also made false representations regarding borrowers’ employment at places other than the BCIA, and created similar false documentation in support of such claims. They also created false asset information for borrowers, including by falsifying certain co-conspirators’ own bank and brokerage account statements to make it appear that the statements belonged to the borrowers.
Both defendants pleaded guilty to one count of conspiracy to commit wire fraud, which carries a maximum potential penalty of 20 years in prison and a $250,000 fine. (usattynj72210)
MORAL
If the agency is a public entity, I would say that was pretty stupid. Again, notice they federal prosecutors are in 2006. They are slowly but methodically working their way through the years. Next stop 2007, the heyday of the market to September 2007 when the market crashed. Now it is a different kind of payday and the federal prosecutors are collecting.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
