FACTS
On August 30, 2010 JOSEPH ANTHONY VELTRE, 68, of Orange, Calif., was sentenced to 18 years in prison after pleading guilty to stealing more than $2.6 million from investors in a Ponzi and real estate fraud scheme.
He preyed on mostly elderly investors, soliciting their money for borrowers seeking funds from non-bank lenders. The scheme lasted from 2002 to 2007, prosecutors said. Promising high, short-term returns on their investments, Veltre kept the money himself or used it to repay earlier investors.
He accepted a court offer to plead guilty to 112 felony counts, including grand theft and elder financial exploitation by a non-caregiver. In addition to the prison time, Veltre was ordered to pay $2.6 million in restitution.
Veltre ran the scheme out of two businesses, SEA VIEW FINANCIAL AND ALLIED CORPORATE INVESTMENTS, prosecutors said. The borrowers were looking to take out second and third mortgages.
In all, Veltre defrauded eight people, prosecutors said. (ocreg9110)
MORAL
This is a state prosecution and at 68 he will be 86 if he serves the full term and if he actually has a life expectancy that long.
CALIFORNIA ESCROW OFFICER PLEADS GUILTY TO FRAUD
FACTS
ON AUG. 27, 2010, DONNA DEMELLO pleaded guilty in federal court in Oakland to conspiracy to commit wire and mail fraud for her role in a mortgage fraud scheme. At the time of the offense, Demello worked as an escrow officer at Stewart Title in Milpitas, Calif.
Demello of San Jose, Calif., was indicted by a federal grand jury on May 13, 2010. She and five others, including JAMES DELBERT MCCONVILLE, were charged with conspiracy to commit mail and wire fraud in violation of Title 18, United States Code, Section 1349. The Indictment alleges that McConville purchased hundreds of condominiums throughout California in the names of straw buyers, individuals who were promised $5,000 to $10,000 for the use of their names and credit. The loan applications are alleged to have contained false information about the employment, income, and assets of the straw buyers. Demello admitted to participating in the fraudulent approval of approximately 80 loans for condominiums in Escondido, Calif., and San Marcos, Calif. The government has alleged in its filings that loans totaling more than $20 million were approved for the purchase of these condominiums in Southern California, and that more than $11 million of that was paid directly out of escrow to individuals and companies controlled by McConville.
In pleading guilty to Count One of the Indictment, Demello admitted that she conspired with McConville and others to conceal from the lending institutions the “marketing fees” paid to McConville for the sale to straw buyers of approximately 80 condominiums in Escondido and San Marcos. Demello acknowledged that marketing fees paid to McConville averaged about $150,000 per loan transaction. Demello also admitted that in furtherance of the conspiracy, she would create two “final” versions of the settlement statements on a form approved by the United States Department of Housing and Urban Development (called the HUD-1). The correct version of the HUD-1 that was provided to the seller would show a large marketing fee paid to an individual or entity associated with McConville. The fraudulent version of the HUD-1 that was sent to the lending institution would not show the payment of any marketing fee. At McConville’s direction, his “marketing fee” would be paid directly from escrow to individuals associated with him and/or one of many corporate entities he controlled, including but not limited to: DIAMOND HOUSE DEVELOPMENT, LA MIRAGE HA, EMERALD PARK HOUSING, HI INVESTMENTS, KEARNY MESA TOWNHOMES, LLC, STONEMARK ASSET PORTFOLIO, SUNSET DRIVE MEDIA, 3 MAC ASSET PORTFOLIO, 3 MAC DEVELOPMENT CORP., AND SAPPHIRE PARK HOUSE.
ARAKS DAVOUDI, a former employee of Citibank, previously pled guilty to the same conspiracy on Aug. 2, 2010, for her role in creating false verifications of deposit for straw buyers. Two others who worked for McConville have pled guilty to conspiracy to commit mail and wire fraud in a related case, United States v. RAYMOND DAVOUDI AND BAHAREH SHAMLOU, CR 10-364 SBA. McConville is currently in custody.
The sentencing of Demello is scheduled for Dec. 8, 2010, before U.S. District Court Judge Phyllis J. Hamilton in Oakland. The maximum statutory penalty for each count of conspiracy in violation of Title 18, United States Code, Section 1349, is 30 years' imprisonment and a fine of $1,000,000 or twice the gross gain or loss involved in the conspiracy, whichever is greater. (usattyndca82710)
MORAL
I would say that McConville is looking at a lot of time in Federal prison. Depending on cooperation and how good her attorney is Demello is looking at potentially a few years in a federal penitentiary.
A REMINDER ABOUT COLORADO DISCLOSURES
FACTS
Mortgage loan originators must use a form that itemizes all third-party fees and costs in compliance with the Colorado Law. The disclosure shall include mortgage loan originator and borrower signatures and dates in which the disclosure was completed and signed.
The new GFE designed by RESPA does not fulfill this requirement so you must generate your own. The disclosures must be made within three business days after receipt of a loan application or any moneys from a borrower. (Compliments of Weiner=, Brodsky, et al.)
MORAL
Put in the disclosure or get disciplined the Colorado Division of Real Estate.
TWO INDICTED IN BALTIMORE FOR MORTGAGE FRAUD
FACTS
On August 20, 2010 a federal grand jury in unsealed an indictment in Baltimore for JOHN STEWART MORRISON IV OF COLUMBIA, Md., on two counts of mail fraud and CLIFFORD MICHAEL SEIBERT, OF BERLIN, Md., as well as SEIBERT’S COMPANY, MODULAR HOMES WHOLESALER INC. on two counts of wire fraud in connection with a mortgage fraud scheme. Each indictment also seeks the forfeiture of the proceeds of the scheme, alleged to be $431,317 for Morrison and $363,808 for Seibert.
According to their indictments, Morrison was a mortgage originator and Seibert owned and operated Modular Homes Wholesaler. Modular Homes arranged the construction and delivery of pre-fabricated modular homes.
According to Morrison’s indictment, on Nov. 17, 2005 Morrison contracted to buy Lot #1, Rexwood Dr. in Glen Rock Borough, Pennsylvania from the original owner which disclosed to Morrison at least two documents detailing significant problems with the steeply graded parcel of land. In order for a home to be built on Lot #1, extensive soil and engineering work had to be done. The indictment alleges that Morrison failed to follow through on his purchase of Lot #1 and instead recruited P.H., who wanted to have a modular home installed on the site, to purchase the lot. Morrison allegedly failed to disclose the problems with the lot to P.H.
The indictment alleges that Morrison and another individual prepared a loan package in P.H.’s name to apply for a loan from a mortgage lender in the amount of $431,377, to finance the purchase of Lot #1 and construction of a home on the land. The package falsely represented P.H.’s monthly income. Morrison allegedly failed to disclose the problems with Lot #1 to the appraiser, thereby causing the lender to rely on a materially deficient appraisal. Still believing that the land could be built-upon without additional preparatory work, P.H. paid $115,500 for the purchase of the lot at the closing held on June 14, 2006. Morrison allegedly received $36,800 as a result of P.H.’s purchase, which amount was actually paid to the “ATLANTIC GROUP,” an entity that Morrison created and used to ensure that his name did not appear on the closing documents.
According to Seibert’s indictment, he arranged for the construction and delivery of a modular home to Lot #1 on P.H.’s behalf. Seibert prepared a draw schedule in which the lender was to pay Modular Homes a percentage of the loan funds as various stages of completion were reached in the construction and delivery of P.H.’s home. Seibert listed the total price of all services related to the modular home as $363,808. After the closing, the title company mailed a check to Seibert for $35,380 payable to Modular Homes, in accordance with the draw schedule, to begin work on P.H.’s project, including preparing the lot for construction and delivery of the home. The indictment alleges that Seibert did little work, if any, on P.H.’s behalf during this time.
The indictment alleges that on or about Aug. 7, 2006, Seibert requested that funds from the construction escrow account be wired directly to Modular Homes, rather than to P.H. Shortly thereafter, in order to persuade the lender to exempt him from the company’s general policy of paying for construction work only after receiving proof of an approved building permit, Seibert is alleged to have falsely advised the lender that Glen Rock Borough would not issue a building permit until after the foundation for the home was poured. Soon thereafter, in early August 2006, Seibert allegedly submitted his first draw request which falsely represented that the clearing and filling of the lot was complete, when in fact, no work had been done. Seibert then falsely advised the lender that the construction project had overrun in costs because the lot’s community development association was demanding that substantial engineering work be done. The indictment alleges that on August 30, 2006,
Seibert requested an advance payment of $18,575 for additional costs that would be incurred to meet the demands of the lot’s community development association, when in fact, the development association had made no such demands. Seibert’s request resulted in the lender agreeing in late October 2006 to fund $16,675 of this request.
Morrison and Seibert each face a maximum sentence of 20 years in prison on each of two counts of mail fraud and wire fraud, respectively.
An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings. (usattymd82010)
MORAL
One is most of this occurred five years ago in 2005. Two is the government is really and I do mean really chasing mortgage fraud if you have not figured that out already. The mortgage fraud fallout starting in 2007 is the direct cause of the recession and the government blames the mortgage fraud that went wild in that time. That is the reason in this one lawyer’s opinion for all the criminal complaints, and especially the civil lawsuits against the wholesalers, mortgage brokers individually, loan officers and the borrowers. We are defending these lawsuits and they are brought by the FDIC as receiver for Downey S&L, trustees in bankruptcy representing New Century, Chase, and the United States through U. S. Attorneys under the civil penalty act which is particularly penal in nature although the lawsuits are civil. This does not include all the administrative subpoenas being sent out to investigate files of mortgage brokers where the loans were sold to Indymac and WAMU. Good Luck if you are in the loop.
FORMER MASSACHUSETTS BANK MANAGER AND TWO OTHERS INDICTED FOR MORTGAGE FRAUD
FACTS
On or about September 2, 2010 ARTHUR SAMUELS, a former manager of the Fields Corner branch of Bank of America in Dorchester, Massachusetts was indicted for wire fraud.
MICHAEL DAVID SCOTT, a Mansfield developer had been indicted in or about the week of August 25, 2010 on 62 counts of wire fraud, bank fraud, and money laundering in connection with the sale of about three dozen condominiums between 2006 and 2008.
JERROLD FOWLER OF NORFOLK, VA., ALSO WAS CHARGED WITH WIRE FRAUD for his alleged role as a recruiter for investor who participated in the alleged scheme to defraud lenders.
A lawyer for Samuels said his client “maintains his innocence and he is looking forward to his day in court."
The charges come more than eight months after a Globe story reported allegations that Scott, 44, led a team of partners to defraud mortgage lenders through the conversion of at least 50 buildings into about 170 condos in some of the city’s poorest neighborhoods.
Scott’s deals, often driven by the same group of key players, involved selling condos to local and out-of-state investors, many of whom later said they were duped. Some units sold at market prices, but never were made livable. More than 100 eventually went into foreclosure.
In written affidavits filed in federal court Amy Z. Diamond, an FBI agent, said that Scott, Samuels, Fowler, and others recruited straw buyers. In most cases, she wrote, buyers had no money invested in the deals, did not plan to live in the homes, and could not afford to make mortgage payments.
Diamond said Scott, Fowler, Samuels AND OTHERS paid people to purchase condominiums, promised them they didn’t have to invest in the sale, said mortgage payments would be paid for by tenants, and told them they would share in profits when the properties were resold. The criminal complaint also alleged the group “falsely inflated purchase prices," incorrectly said buyers would live in the homes, and falsely claimed investors’ personal assets.
Samuels’s role involved creating false documents to support loan applications, according to the FBI affidavit. He also helped recruit another investor and bought several properties “that were part of the scheme to defraud," the FBI said.
Scott is scheduled to appear before a federal judge Sept. 13. Court dates have not been set for Fowler or Samuels. (boston.com9410)
MORAL
Now working on 2006 loans. 2007-2009 yet to come. In addition, the FDIC, The United States Attorney and the United States Trustee for New Century Mortgage have filed and are filing civil lawsuits against the wholesale lenders, mortgage brokers, loan officers and the borrowers involved in any mortgage loans that are not completely accurate. Quite a few involve the “stated income” loans and the mortgage brokers are being sued civilly as being responsible for the inaccurate income in the “stated income.” We are defending these lawsuits so if you have been involved and received correspondence to buy back the loan or make the lender whole for the loss you should consult legal counsel now. Preferably before the lawsuit is filed.
NEVADA MORTGAGE LENDING DIVISION OFFERS TO SETTLE WITH INVESTORS MORTGAGE CORPORATION
FACTS
In the course of auditing Investors Mortgage Corp., the Nevada Division of Mortgage Lending has alleged that Investors Mortgage Lending had failed to keep proper trust account records. The Division has offered to stipulate to a settlement with Respondent in part as follows:
Respondent admits it failed to establish required trust accounts and those actions allowed client money to be commingled with Respondent’s own money, in violation of NRS 645B.175.
2. Respondent provided the Division a written plan of correction and with monthly trust reconciliations for the months of January 2010 through June 2010 verifying the reconciliation of all trust accounts and that no client money was missing or inappropriately used.
3. Respondent acknowledges and agrees, with full knowledge, to waive its right to have the Division file a complaint if one has not been filed by the date that Respondent executes this Agreement, or if a complaint has been filed, to go to a hearing in this matter.
4. Respondent shall, pursuant to NRS 645B.670 and/or NRS 622.400, pay an administrative fine to the Division in the amount of Three Thousand Five Hundred Dollars and No Cents ($3,500.00) and the Division’s investigative costs in the amount of One Hundred Eighty Dollars and No/Cents ($180.00). Respondent shall make payment, in full, to the Division of the administrative fine and investigative costs upon its execution of this agreement.
There are other conditions but mostly administrative. (nvmld9410)
MORAL
Keep bad records. Get disciplined. Remember these have to be reported under the S.A.F.E. Act if you are a Mortgage Loan Originator. Remedy: Keep good records. Do not get disciplined. Do not report under the S.A.F.E. Act. Sounds almost like monopoly.
IN NEW JERSEY PRINCIPAL OF A MORTGAGE BROKERAGE FIRM INDICTED FOR MORTGAGE FRAUD
FACTS
On Aug. 31, 2010 RONALD J. O’MALLEY, the former chairman and a commissioner of the Bergen County Improvement Authority and a principal in a Ridgewood, N.J. mortgage brokerage firm, was charged in a 68-count indictment along with a loan officer and vice president of the firm for perpetrating an alleged mortgage fraud scheme.
O’Malley of Upper Saddle River, N.J., and Laura-Jean Arvelo of River Vale, N.J. were charged with conspiring with each other, EDWARD OLIMPIO, RACHELL FISCHBEIN, and others to commit wire fraud in connection with fraudulent mortgage and home equity loans brokered by DIVERSIFIED FINANCIAL GROUP, D/B/A RESIDENTIAL MORTGAGE CORPORATION between 2006 and 2009. O’Malley and Arvelo are each also charged with individual wire fraud, bank fraud, and loan application fraud counts in connection with specific loans.
Olimpio and Fischbein pleaded guilty on July 22, 2010, before United States District Judge Susan D. Wigenton, admitting to conspiring to commit wire fraud in connection with the scheme.
O'Malley and Arvelo are charged with using false statements and phony documents to trick lenders into making mortgage loans and, in the process, exploiting the credibility of a public agency to enrich themselves.
According to the Indictment, other documents filed in this case, and statements made in court: O’Malley, Arvelo, and other participants in the mortgage fraud scheme falsely represented on mortgage loan applications and other documents that certain borrowers received a salary from BCIA who did not actually work there. In support of these false representations, O’Malley and Arvelo arranged for the BCIA staff to respond to telephone calls from banks and other mortgage lenders who called to verify the claimed BCIA employment. O’Malley, Arvelo, and others also created and arranged for the creation of false and fraudulent BCIA pay stubs and IRS Forms W-2, which were also submitted to lenders.
Additionally, O’Malley, Arvelo, and the other co-conspirators made false representations regarding borrowers’ employment at places other than the BCIA, and created similar false documentation in support of those claims. The co-conspirators also created false asset information for borrowers, including by pasting a borrower’s name and address into O’Malley’s own bank and brokerage account statements and by preparing phony “leases” for borrowers purporting to show rental income to the borrowers that did not in fact exist.
When lenders began to detect problems with certain loans, O’Malley and his co-conspirators provided additional false information to the lenders in response to their inquiries. For example, in July 2007, a lender discovered that pages from a savings passbook had been falsified to show the borrower’s name and address rather than that of the true owner of the account. The bank issuing the passbook identified the account in question as belonging to O’Malley, and contacted O’Malley to discuss the matter with him. In response, O’Malley claimed that the briefcase containing his passbook had been stolen from him that March and used without his knowledge to obtain a mortgage loan. In fact, the same passbook had been falsified and used by Residential Mortgage to obtain a loan for another borrower prior to the date that the alleged theft took place.
The total amount the defendants made through fees, while still being determined, is at least between $200,000 and $400,000.
Both defendants are charged with one count of conspiring to commit wire fraud, which carries a maximum potential penalty of 20 years in prison and a $250,000 fine. O’Malley is also charged with 25 individual wire fraud counts, 21 bank fraud counts, and 21 loan application fraud counts. Arvelo is charged with 14 individual wire fraud counts, 10 bank fraud counts, and 10 loan application fraud counts. The individual wire fraud counts each carry a maximum potential penalty of 20 years in prison and a $250,000 fine; the bank and loan application fraud counts each carry a maximum potential penalty of 30 years in prison and a $1 million fine. (usattynj83110)
MORAL
Remember, an indictment is just a charge. They are innocent until proven guilty in a court of law. But if convicted, they are looking at a lot of prison time and the federal prisons system has no parole. Also note the loans go back to 2006 four years ago. As I have been saying for the last three years at least, If you have been near or involved even remotely with mortgage fraud, run do not walk to your attorney before the “gold badge” walks to your front door. At lease you will know where you stand if the attorney is competent.
UTAH MAN INDICTED FOR MORTGAGE FRAUD
FACTS
On Sept. 2, 2010 Christopher D. Hales of Midvale, Utah was indicted in a 10-count federal indictment charging him with mail, wire, and bank fraud and with money laundering in connection with an alleged mortgage fraud scheme. The indictment involves two properties, one in Lindon and one in Salt Lake City.
The indictment alleges Hales and other unindicted co-conspirators executed a scheme to produce income from false appraisals to artificially inflate the purchase price of the residences. Hales arranged to purchase the homes through straw buyers and took the false equity proceeds stemming from those sales for himself, the straw buyers, and the co-conspirators.
For the Lindon property, the indictment alleges that Hales arranged for a false lien to be attached, ostensibly to renovate the house to the increased value pre-determined by Hales. Hales then arranged to obtain a loan that was approximately $194,000 more than the house was worth based on the false lien.
For the Salt Lake City property, the indictment alleges Hales and his co-conspirators arranged first for the house to be appraised at more than $250,000 than its market value, obtained a loan relying on that false appraisal and distributed the alleged fraudulent proceeds among themselves. Approximately 10 months later, Hales and other co-conspirators arranged for the house to be purchased by a straw buyer with another false appraisal that reset the house’s value at an additional $250,000 above the previous fraudulent price. According to the indictment, those proceeds were again then distributed among Hales and his co-conspirators.
For both properties, Hales used false appraisal values, false income statements, and false claims of renovations to the properties to obtain the inflated loans, the indictment alleges.
Hales was arrested on a federal warrant on Sept. 2, 2010..The potential maximum penalty for each wire and mail fraud count (two counts of each) is 20 years in prison. The potential maximum penalty for the four bank fraud counts is 30 years per count. The potential maximum penalty for the two money laundering counts in the indictment is 10 years per count. (usattyut9210)
MORAL
Look at the facts. Are any of the facts re the false information familiar? If so, you may want to examine loans where you were the interviewer or the owner of the mortgage company and think about mitigation.
VIRGINIA MAN GETS OVER FIVE YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On Aug. 27, 2010 AARON V. HERNANDEZ OF MCLEAN, VA., was sentenced to 63 months in prison, followed by four years of supervised release, for running a mortgage fraud scheme that caused more than $4.5 million in losses. Hernandez was ordered to pay more than $4.5 million in restitution and was ordered to forfeit approximately $2.4 million.
On May 21, 2010, Hernandez pled guilty to conspiracy to commit mail fraud and bank fraud. According to court documents, Hernandez was employed by a company in Woodbridge, Va., during 2006 and learned from its employees how to falsify the loan applications of prospective purchasers of vacant, sub-divided lots in North Carolina and South Carolina. The fraud included providing fake employment information and inflating buyers’ income levels, value of the real estate that they owned, or other liquid assets purportedly held by the applicants.
In December 2006, Hernandez struck out on his own and formed mortgage companies in Northern Virginia, using the same fraudulent practices he learned from his previous employer. His businesses grew to more than 10 employees, at least three of whom he conspired with to provide false and fraudulent loan applications to lenders.
Court documents list at least 14 properties that Hernandez financed through these fraudulent practices, all of which eventually resulted in foreclosure. The financial loss suffered totaled more than $4.5 million. (usattyedva82710)
MORAL
Now this is an interesting story if you pay attention. He goes to work for someone that teaches him how to commit mortgage fraud, then starts his own company to commit mortgage fraud so he can teach others to commit mortgage fraud.
STATE OF WASHINGTON ADDS NEW RULES FOR LOAN ORIGINATORS AND THOSE DOING LOAN MODIFICATIONS
FACTS
The Washington Department of Financial Institutions filed documents to continue the rulemaking to implement changes to the law. The MBPA, chapter 19.146 RCW, was amended by House Bill 2608. THE NEW LAW BECAME EFFECTIVE JULY 1, 2010. Among other things, the amendments clarify requirements for loan modification service providers. The law can be viewed here:
MORAL
Click on it. Print it. Read it. Especially if you intend to stay in the mortgage loan industry. If you need interpretation call me. But only after you read it.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
