Legal Corner

CALIFORNIA REAL ESTATE AGENT CONVICTED OF MORTGAGE FRAUD

FACTS

Maria Sanchez, a real estate agent from Santa Fe Springs, was convicted on June 1, 2009 for scheming with her sister to falsify home loan applications which fraudulently generated more than $1 million in proceeds. She was found guilty on 14 counts including conspiracy, money laundering, wire fraud and aggravated identity theft. Sanchez faces up to 239 years in federal prison when she is sentenced on Sept. 10, 2009. She worked for Locke Realty & Lending of Santa Fe Springs and Online Financial Services of Lawndale as a real estate agent and loan officer. Sanchez submitted forged loan applications to buy houses in El Monte, Norwalk, Paramount and Los Angeles. The applications were in the names of her sister, Beatriz Sanchez, and a sister-in-law, Martha Gonzalez. The scheme took place from 2003 to 2006.

Maria Sanchez falsified her sister's income, claiming that Beatriz Sanchez earned up to $8,900 per month. In the applications, she submitted documents she got from friends who worked at legitimate businesses that supported the claims of the inflated income. When the loans were funded, officials said Maria Sanchez obtained more than $1 million in loan proceeds from financial institutions and mortgage lenders for the properties. (usattycdcal6209)

MORAL

If anyone did business with Maria Sanchez, they may want to quality control the loans again. There is the danger of a buyback demand from the lender.

UPDATE ON MORTGAGE FRAUD IN PASO ROBLES

FACTS

The California Department of Real Estate has accused lenders Rod Jarmin and Tammy M. Jordan of substantial misrepresentation of material facts, fraud and dishonest dealings. They both own Real Property Lenders, a mortgage loan brokerage business that solicited lenders and borrowers for high-interest loans secured by real estate. The firm had more than 250 investors in $55 million worth of real estate loans, according to its last offering circular filed with the Department of Corporations in 2007.

The basic allegations filed by the state regulators on May 18, 2009 involve about 20 investors who gave Jarmin more than $1 million to invest in the construction of four single-family homes. In all the loans, the state alleges, Jarmin and Jordan concealed the fact that the money was going not to construct the homes but rather to purchase the land.

The state also alleges that after they depleted their interest reserve funds, they then illegally paid investors monthly interest payments out of the construction loans, unbeknownst to investors. Real Property Lenders is also alleged to have solicited new investors into the loans without telling them that they were already in violation of their loan agreements from earlier investors. The fraud, if found to be true, is grounds for the pair to have their real estate licenses suspended or revoked. They both have a right to a hearing before the Office of Administrative Hearings which so far as we are aware has yet to be set.

Real Property Lenders along with lender Hurst Financial is allegedly under criminal investigation, according to earlier reports by the county District Attorney's Office. Jarmin and Jordan, and their company, also face at least five lawsuits alleging financial fraud, according to the suits filed in San Luis Obispo County Superior Court.

Leaders of a third lending company, Estate Financial, are in the county jail, facing numerous felony charges involving fraud in their financial dealings. The companies allegedly took in about half a billion dollars for loans from more than 5,000 investors. (slotrib6609)

MORAL

The law does grind slowly but it does grind.

REMINDER-CALIFORNIA FORECLOSURE CONSULTANTS TO BE REGISTERED AND BONDED BY JULY 1, 2009

FACTS

Effective July 1, 2009, it will be unlawful for a foreclosure consultant, as defined in Civil Code Section 2945.1, to engage in the foreclosure consultant business unless it has registered with the Attorney General's Office. All foreclosure consultants operating in California must post a $100,000 bond. When they register they must submit the following information:

Name, address, and telephone number;

All names, addresses, telephone numbers, websites, and e-mail addresses used or proposed to be used in connection with their business;

Copies of all advertising;

Copies of each different contract the consultant will use with consumers; and

A copy of its $100,000 bond. (cc2945etal)

MORAL

Read very carefully 2945.1. It arguably covers loan modifications if you are acting outside your real estate license and collect advance fees even with a "no objection letter" from DRE if an NOD has been recorded.

FLORIDA MORTGAGE FRAUDSTER GETS 65 MONTHS IN FEDERAL PRISON

FACTS

Defendant Jose G. Martin was sentenced today by U.S. District Court Judge Marcia Cooke to 65 months in federal prison, to be followed by three years of supervised release. Judge Cooke also ordered a restitution hearing to determine the identity of the victims to be paid by Martin in connection with the $3,198,278 in restitution for losses that resulted from Martin's participation in a mortgage fraud scheme.

Martin was arrested in January 2009 for facilitating the fraudulent sale of seven residential properties through straw buyers. The scheme resulted in more than $6.6 million in fraudulent loans. Defendant Martin personally received more than $1 million in gross proceeds. The defendant pled guilty to one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. §1349, and one count of wire fraud, in violation of 18 U.S.C. §1343.

At the closings, defendant Martin submitted fraudulent invoices for construction work on these residential properties, and received hundreds of thousands of dollars as payment for construction work that was never performed. Defendant Martin used these proceeds to pay the straw buyers and other co-conspirators, and kept a portion of the money for himself. After the closings, defendant Martin and the straw buyers failed to make payments on the mortgages to the victim lenders, and the properties went into foreclosure.

Martin repeatedly flipped one property three times within approximately two years, more than doubling the price of the property from $550,000 to $1,200,000. The property went into foreclosure with a large loss to the lender. (usattysdfl6309)

MORAL

It is difficult to win at trial. Especially when the evidence is all documentary. Do not do it.

INDIANA NOW REQUIRES YOU TO GIVE 30 DAYS NOTICE BEFORE YOU SUE TO FORECLOSE ON THE OWNER OF THE PROPERTY

FACTS

Effective July 1, 2009 Indiana requires that all lenders and servicers provide a pre-lawsuit notice before filing a complaint in a foreclosure action. The notice must tell the debtor that the debtor is in default, encourage the debtor to obtain assistance from a mortgage foreclosure counselor, and must list the contact information for the Indiana Foreclosure Prevention Network. The notice must be given to the debtor at least 30 days before filing a complaint to foreclosure on the real property. The debtor has the additional right to schedule a settlement conference once the lawsuit is filed. Lenders and servicers that file a foreclosure action on a debtor's primary residence are required to include with the complaint a notice telling the debtor of the right to the settlement conference. The notice must inform the debtor to schedule the settlement conference by notifying the court within 30 days of the date the notice is served. (alrg52609)

MORAL

The states are making it harder and harder for lenders to foreclose on the debtor's home.

NEW YORK LAWYER ARRESTED FOR MORTGAGE FRAUD

FACTS

On June 2, 2009, Hugh Zuber, a lawyer employed by the Office of the Corporation Counsel for the City of New York, was arrested for fraud, including mortgage fraud, in connection with the purchase and sale of two buildings, and for forging the signature of a bankruptcy judge on a false bankruptcy court order concerning one of the purchases. The criminal complaint unsealed today in Manhattan federal court alleges: in April 2006, a property owner in the Bronx retained Zuber to represent him in the sale of a building. Zuber arranged the sale of the property to Alana Property Management LLC for $950,000, but did not disclose to his client that he had created Alana Property, and that his sister managed the company. At Zuber's urging, his client agreed to sell the property to Alana Property for $400,000 in cash and a $550,000 ten-year note, purportedly secured by a mortgage that Zuber's client issued directly to Alana. Alana Property then financed the February 2007 purchase of the property in part via a $705,000 mortgage which it obtained based on a loan application that omitted material facts regarding the transaction. Alana Property diverted a portion of those loan proceeds for its own, unrelated purposes, and provided only approximately $400,000 to Zuber's client. After the closing, Zuber made payments for some months on both the mortgage and the note. When Zuber and Alana Property failed to make payments additional on the note, Zuber, among other things, presented to the client documents relating to a lawsuit he had purportedly filed against Alana Property in New York State court, and a May 2008 "Order Confirming Plan" that had purportedly been issued in bankruptcy proceedings involving Alana Property. There were in fact no such proceedings in New York State or federal bankruptcy court.

In 2006, Zuber represented a Spring Valley, N.Y., property owner in the sale of a house to an individual for $625,000. Zuber did not disclose to his client that he had a business relationship with the purchaser. At Zuber's urging, his client agreed to sell the property to the purchaser for $425,000 in cash and a $200,000 ten-year note, purportedly secured by a mortgage that Zuber's client issued directly to the purchaser. The purchaser then funded the transaction in part via a $500,000 mortgage obtained via a loan application that omitted material facts regarding the transaction. Following the July 2007 closing Zuber made payments for some months on both the mortgage and on the note. When payments on the note ceased and the seller advised the purchaser that he was in default, the purchaser denied that he had issued a mortgage to the seller. Zuber then told his client that he had "messed up" and that he would try to make it up to the client, but failed to do so.

ZUBER, of Monsey, N.Y., was charged with one count of conspiring to commit wire and mail fraud, and one count of forging a judicial signature. The conspiracy charge carries a maximum sentence of 20 years in prison and a fine of $250,000 or twice the gross gain or loss from the offense. The forged judicial signature charge carries a maximum sentence of five years in prison and a fine of $250,000 or twice the gross gain or loss from the offense. (usattysdny6209manhattenct)

MORAL

New York attorney employed by the city of New York is innocent until proven guilty. But, if proven guilty will lose his license and career when he was already making a good living. Why?

13 PEOPLE IN NEW YORK CHARGED WITH SUB-PRIME MORTGAGE FRAUD INVOLVING OVER $10 MILLION

FACTS

On May 28, 2009 a five-count indictment was unsealed charging MICAH MEYERS, STEPHEN CAPUTO, DAWN HUGHES, FNU LNU, a/k/a "Eddie Garcia," JAKOB GEARWAR, BRIAN URRARO, MICHAEL DIDIO, DANIEL HAMPTON, JENNIFER MOSCHITTA, VICTOR AVENDANO, ADRIAN AVENDANO, JANET MCGUINNESS and LIAM LEAVEY with a sub-prime mortgage fraud scheme involving dozens of mortgages, totaling more than $10 million, on residential properties in Long Island and the New York City area.

According to the indictment filed in Manhattan federal court, from 2005 through 2007, the defendants, many of whom were employees of the Islip, N.Y., mortgage brokerage firm Bridgewater Funding LLC, targeted residential properties, generally in the $200,000 to $500,000 range, in Long Island and the New York City area. In some instances, the defendants targeted properties whose homeowners were facing foreclosure, and fraudulently convinced them that selling their properties to the defendants would be a way to pay off their debts and "save" their homes. In other instances, the defendants identified target properties they believed could be resold quickly, or "flipped." To purchase the properties, the defendants, either directly or in the name of straw purchasers, submitted mortgage loan applications that contained false information regarding, for example, the applicant's creditworthiness and intention to live in the residence. The loans thereby obtained typically exceeded the actual purchase price of the property, producing a "spread" from which the defendants profited. Straw purchasers, who were recruited via payment of substantial fees, promises of investment profits, and otherwise, were told not to worry about mortgage payments because the defendants would make the payments for several months and thereafter repurchase and/or resell the property. In fact, the defendants often failed to make mortgage payments, causing certain affected straw buyers to go into default on their mortgages.

Mortgage lenders were forced either to foreclose on those properties or to re-purchase the properties from the straw buyers for less than the face amount of the loan. This often left the original homeowner (who had been promised that selling his or her home would be a way to "save" it) facing eviction. In other instances, the defendants rented the property to tenants and used the rent and other monies earned from the scheme to make mortgage payments on behalf of the straw buyers for a certain period of time before allowing the mortgages to go into default. In other instances, the defendants made mortgage payments for several months before "flipping" the property to yet another straw purchaser -- who fraudulently obtained a new mortgage with the defendants' assistance, restarting the fraudulent scheme.

MICAH MEYERS, JAKOB GEARWAR and FNU LNU, a/k/a "Eddie Garcia," were loan officers employed by Bridgewater, who supervised and coordinated the recruitment of straw buyers and the submission of fraudulent loan applications and other documents to the lenders.

BRIAN URRARO was the office manager of Bridgewater, who supervised the loan officers and assisted them in submitting fraudulent loan applications and other documents to the lenders.

MICHAEL DIDIO was a loan processor at Bridgewater, who assisted loan officers in submitting fraudulent loan applications and other documents to the lenders. DIDIO also acted as a straw buyer by signing and submitting fraudulent loan applications and other documents to lenders in order to obtain home mortgage loans for multiple properties within a short period of time.

DANIEL HAMPTON falsely verified to mortgage lenders the employment information for certain straw buyers. HAMPTON also recruited individuals to act as straw buyers for the fraudulent scheme.

STEPHEN CAPUTO and DAWN HUGHES acted as the buyers' attorney, sellers' attorney, and/or settlement attorney for fraudulent transactions. CAPUTO and HUGHES knowingly assisted in closing fraudulent mortgage loans and making payments that were not disclosed to the lenders, in furtherance of the fraudulent scheme.

VICTOR AVENDANO, ADRIAN AVENDANO, JENNIFER MOSCHITTA, JANET MCGUINNESS and LIAM LEAVEY acted as straw buyers by signing and submitting fraudulent loan applications and other documents to lenders in order to obtain home mortgage loans for multiple properties within a short period of time, among other things.

The defendants are charged in the indictment with each of the following counts and face the following potential maximum penalties, per count:

The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty. (usattysdny52809)MORAL

Innocent until proven guilty but risking twenty to thirty years in federal prison if proven guilty. I trust they have good legal counsel.

EIGHT DEFENDANTS SENTENCED IN NEW YORK MORTGAGE FRAUD AND FORECLOSURE RESCUE SCAM.

FACTS

ALEKSANDER LIPKIN, a/k/a "Alex," GARRI ZHIGUN, GALINA ZHIGUN, JOSEPH PAPERNY, FAINA PETROVSKAYA, JOHN GELIN, TOMER SINAI and DANIEL MIKHLIN were each sentenced by United States District Judge RICHARD J. HOLWELL in Manhattan federal court for their roles in a multimillion-dollar, sub-prime mortgage fraud scheme. LIPKIN was sentenced to 110 months in prison for his role as a leader of the mortgage fraud scheme as well as his involvement in another foreclosure rescue scheme.

From 2004 through January 2007, LIPKIN was a leader in a mortgage fraud scheme involving mortgage brokers and loan processors who worked at the Brooklyn mortgage brokerage firm, AGA Capital NY Inc., and its successors, as well as real estate appraisers, loan account executives, a paralegal, a lawyer, straw buyers, and others. LIPKIN and his co-defendants submitted loan applications containing false information and material omissions, as well as other false documentation such as bank statements, to obtain loans that otherwise would not have been funded. Acting through straw purchasers, LIPKIN and his partner, GARRI ZHIGUN, purchased a block of 10 rent-regulated condominium apartments. LIPKIN, GARRI ZHIGUN and their associates obtained mortgages for the straw purchasers to finance 100% of the purchase price of the apartments. However, none of the documents submitted to the lenders disclosed that certain buyers were seeking to purchase more than one apartment as a "primary residence," or that the apartment was already occupied and therefore unsuitable for a primary residence, or that the apartment was subject to rent regulation laws.

Months after initial purchase of the block of apartments, LIPKIN, GARRI ZHIGUN and their co-defendants "flipped," the apartments to other straw buyers, at prices almost twice the amount of the initial purchase price. They submitted false information and documents to lenders, and obtained almost $13 million in additional loans. Most of those additional loans are now in foreclosure.

During the course of the mortgage fraud scheme, AGA Capital, and its successors, brokered over 1,000 home mortgages and home equity loans with a total face value of at least $200 million dollars and earned at least $4 million in commission fees on the loans. The various lenders defrauded by the scheme have claimed actual losses of approximately $11.6 million on loans that have completed foreclosure.

Of the 27 defendants charged in United States v. Aleksander Lipkin, et al., 25 pleaded guilty; one of the defendants -- ALEXANDER KAPLAN -- was found guilty following a jury trial and is scheduled to be sentenced on September 10, 2009.

In addition to the 110-month prison term, LIPKIN was sentenced to five years' supervised release. Judge HOLWELL also sentenced LIPKIN to a concurrent term of 110 months in prison for his role in a separate mortgage foreclosure rescue scheme to which LIPKIN pleaded guilty to, United States v. Maurice McDowall, et al., 07 Cr. 1054. LIPKIN was also ordered to forfeit $7 million and pay approximately $11.6 million in restitution.

Judge HOLWELL sentenced GARRI ZHIGUN and JOSEPH PAPERNY on May 28, 2009. GARRI ZHIGUN supervised the operations of AGA Capital and was LIPKIN's business partner, as described above. GARRI ZHIGUN was sentenced to 100 months in prison, three years' supervised release, and was ordered to forfeit $2.5 million and pay approximately $11.6 million in restitution. JOSEPH PAPERNY was a mortgage broker and was sentenced to 30 months in prison, three years' supervised release, and was also ordered to forfeit $1 million and pay approximately $11.6 million in restitution.

Judge HOLWELL sentenced GALINA ZHIGUN and FAINA PETROVSKAYA on May 21, 2009. GALINA ZHIGUN was the record owner and registered broker of AGA Capital and was sentenced to 38 months in prison and three years' supervised release. In addition, GALINA ZHIGUN was ordered to pay a fine of $7,500, forfeit $1 million, and pay $1 million in restitution.

PETROVSKAYA was a loan processor and was sentenced to time served, 30 months' supervised release with six months of home confinement, and was also ordered to pay a fine of $2,000.

JUDGE HOLWELL sentenced JOHN GELIN, TOMER SINAI and DANIEL MIKHLIN on May 20, 2009. JOHN GELIN was one of the investors who recruited and used straw buyers to purchase real estate and created fake bank statements and other fraudulent documents to submit to lenders. GELIN was sentenced to 36 months in prison, three years' supervised release and was ordered to forfeit $1 million and pay approximately $11.6 million in restitution. SINAI was a licensed real estate appraiser who inflated appraisals for the defendants. SINAI was sentenced to nine months in prison, three years' supervised release, and was ordered to forfeit $70,000. MIKHLIN was a mortgage broker and was sentenced to 27 months in prison, three years' supervised release, and was ordered to forfeit $240,000 and pay approximately $11.6 million in restitution. (usattysdny6409 as charged in United States v. Aleksander Lipkin, et al., S2 06 Cr. 1179)

MORAL

I want you to notice now they are seeking FORFEITURE in addition to RESTITUTION in addition to more prison time. If anyone reading this has been involved in mortgage fraud or foreclosure rescue scams or loan modification scams, I recommend you see your attorney now. You may see prison later but the attorney may be able to mitigate the amount of time.

STATE OF WASHINGTON NEW REVERSE MORTGAGE LAW IS EFFECTIVE JULY 26, 2009

FACTS

Chapter 149, Laws of 2009) Reverse Mortgages.

There are two types of reverse mortgages, those meeting federal underwriting requirements and regulated by the federal government, and those meeting the underwriting standards offered through other financial institutions. The non-government reverse mortgages (proprietary reverse mortgages) are offered by consumer loan companies and contain various provisions, some similar to the federal products, some not. This bill provides DFI with the authority to regulate this type of lending. The bill licenses all lenders offering reverse mortgages and requires that proprietary (private) reverse mortgage products are subject to preapproval by DFI. Lenders offering proprietary reverse mortgage products must meet certain capital requirements. Consumers who apply for proprietary reverse mortgages must have counseling and receive certain disclosures.

MORAL

If you are doing proprietary reverse mortgages there is a distinct probability you cannot meet the capital requirements. I suggest you read AND ANALYZE this bill very carefully to stay out of trouble.

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.

AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.