SEC SUES THREE OF FORMER NEW CENTURY EXECUTIVES FOR FRAUD
FACTS
On Dec. 7, 2009 federal regulators accused three former top executives of collapsed mortgage lender New Century Financial Corp. of fraud, saying they misled investors as the company's subprime loan business was failing in 2006. The Securities and Exchange Commission filed a lawsuit seeking injunctions, and unspecified civil fines and restitution against New Century's former CEO and co-founder Brad Morrice, former chief financial officer Patti Dodge and former controller David Kenneally. The SEC also wants the three barred from serving as officers or directors of any public company and reimbursement of their bonuses or stock option awards.
New Century, then based in Irvine, Calif., had been the No. 2 U.S. maker of subprime mortgage loans, extended to borrowers with inferior credit records. The company filed for bankruptcy protection in April 2007 after disclosing accounting errors.
In its suit filed in federal court in Los Angeles, the SEC alleged that New Century's disclosures to investors falsely sought to assure them that its business wasn't at risk and was performing better than competitors, omitting significant negative information such as a dramatic spike in defaults on home loans. The three executives were aware of the negative information from numerous internal reports they received, including weekly reports that Morrice dubbed "Storm Watch," according to the SEC.
The SEC said the executives' misconduct inflicted major losses on New Century investors. In a March 2008 report, a court examiner in California found that New Century used improper accounting practices while making risky loans, creating "a ticking time bomb" that led to its rapid demise. (ap12709)
CALIFORNIA CORPORATIONS COMMISSIONER ADDS REGULATIONS UNDER THE CALIFORNIA FORECLOSURE PREVENTION ACT
FACTS
Title 10 commencing with Section 2031.1 to 2031.10 have been adopted to clarify compliance with California Civil Code Sections 2923.52 and 2923.53 to set forth the minimum requirements for a comprehensive loan modification program in order for a mortgage loan servicer to obtain an exemption from the 90-day delay in starting foreclosures as set forth below.
Until Jan. 1, 2011, and only with respect to specified loans that were recorded between Jan. 1, 2003, to Jan. 1, 2008, a mortgagee, trustee, or other person authorized to take sale is prohibited from giving a notice of sale for an additional 90 days if the loan at issue is the first mortgage or deed of trust that the property secures, the borrower occupied the property as his or her principal residence at the time the loan became delinquent, and the notice of default has been filed unless the mortgage servicer is exempt.
To apply for the exemption for certain loans from this prohibition, the mortgage loan servicer applies to the commissioner for an exemption indicating that it has implemented a loan modification program with specified features and the commissioner concludes that the program meets specified requirements according to the new regulations.
MORAL
If you do not want to wait the extra 90 days, apply for the exemption per 10 CCR §§2031.1 et seq.
CEO OF METROPOLITAN MONEY STORE GETS OVER 11 YEARS IN FEDERAL PRISON FOR MORTGAGE LOAN FORECLOSURE FRAUD
FACTS
U.S. District Judge Roger W. Titus sentenced Jennifer McCall, the chief executive of the Metropolitan Money Store, to 135 months in prison, followed by five years of supervised release, for conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit. Judge Titus also entered a judgment ordering McCall to pay restitution of $16,880,884.86.
Judge Titus also sentenced co-conspirator Wilbur Ballesteros to 63 months in prison, followed by five years of supervised release and sentenced Ronald Aaron Chapman, Jr., to seven days in prison, 10 months of home detention with electronic monitoring and five years of supervised release. Both men previously pleaded guilty to conspiracy to commit mail and wire fraud for their roles in the scheme. Judge Titus also entered judgments ordering that Ballesteros and Chapman pay restitution of $16,859,950 and $268,279.66, respectively.
McCall was a licensed mortgage broker, but was not licensed to provide credit repair. In May 2005, McCall and Joy Jackson incorporated Metropolitan Money Store, located in Lanham, Md., which offered foreclosure consultation and credit services to financially distressed homeowners. Also at that time, McCall, Jackson, Jackson's husband, Kurt Forham, and McCall's husband, Clifford McCall and other coconspirators incorporated Fordham & Fordham Investment Group, Ltd., and Burroughs & Smythe Financial Services, Inc., based in Lanham and Greenbelt, Md., to assist Metropolitan Money Store in its foreclosure consulting and credit servicing business.
From September 2004 to June 2007, Jackson, McCall, Ballesteros, Chapman and others conspired to fraudulently promise to help homeowners, who had substantial equity in their homes but were facing foreclosure because of their inability to make monthly mortgage payments, avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a year, during which time Metropolitan Money Store promised to improve the homeowners' credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. The straw buyers were paid up to $10,000 to participate in the scheme and allow the properties to be put in their names. Jackson also served as a straw buyer on several properties in Maryland.
Using the homeowners' properties, the conspirators applied for mortgages to extract the maximum available equity from the homes, and prepared and submitted fraudulent loan applications to mortgage lenders to obtain inflated loans on the target properties in the straw buyers' names. At settlements, the conspirators imposed numerous fees and required "seller contributions" which were far in excess of industry standards; they imposed fees for services which were not performed, disclosed or explained to the homeowners; and they transferred the sale proceeds out of the escrow accounts into the conspirators' business and personal bank accounts and converted a substantial portion of those funds to their personal use.
Jackson, McCall and others obtained large cashier's checks in the names of straw buyers and Metropolitan Money Store employees to conceal transactions from the lenders. Jackson and McCall misappropriated the license and bond numbers of other brokerage and credit repair companies and used them to broker loans and fraudulently improve homeowners' credit scores by adding fictitious lines of credit to their credit histories.
During the conspiracy, Jackson and McCall provided Ballesteros, a licensed real estate agent who served as a closing agent on more than 60 straw buyer properties, with more than $100,000 in kickback payments to process real estate closings quickly. Whenever Jackson or McCall requested, Ballesteros permitted Metropolitan Money Store employees to close loans without him or any other closing agent being present. Jackson and McCall directed others to prepare fraudulent settlement documents that contained false information. Jackson and Kurt Fordham also paid bank employees to provide false income balances for straw buyers to lenders; add straw buyers and others onto accounts for lender verification purposes; transfer money into accounts to show a certain amount of money was in a bank account and thereafter return those funds to the original account; and shift money between Metropolitan Money Store and F&F accounts to facilitate loans in straw buyer's names.
In September 2005, Chapman was hired to work as a loan officer for MMS, although he did not have any experience in the mortgage or financial services fields. Chapman was paid a commission based upon a percentage of each loan that he closed and received at least $66,870 from Jackson drawn on the fraudulently obtained equity transferred into accounts controlled by other conspirators. Victim homeowners directed title companies to disburse proceeds of sales of their homes to RAC Investment Property LLC, a company Chapman owned. Chapman and others caused at least a total of $268,279 in equity proceeds from mortgage loans to be wire transferred into Chapman's RAC Investment bank account. Chapman was aware that the commissions received from Jackson and MMS and the funds that were deposited into RAC Investment Property LLC's bank account, were probably the proceeds of fraud, but he deliberately avoided learning the truth as to the fraudulent nature of the funds.
Finally, Jackson and McCall directed others to transfer the equity proceeds of homeowners into the general checking accounts of Metropolitan Money Store and F&F, as well as Jackson and McCall's personal accounts.
Ten defendants, including a lawyer, mortgage broker, real estate agent, loan processor and company officers have pleaded guilty in this scheme. Joy Jackson, president of the Metropolitan Money Store was sentenced to 151 months in prison. Jackson's husband, Kurt Fordham, was sentenced to 10 years in prison for his participation in the scheme. On Sept. 14, 2009, Judge Titus sentenced Richard Allison, an attorney who provided legal services to MMS, F&F and Burroughs & Smythe, to 18 months in prison; and Carlisha Dixon to five months in prison and five months home detention. On October 5, 2009, Judge Titus sentenced Jennifer McCall's husband, Clifford McCall to four years in prison and Jennifer McCall's daughter, Chandra Jones to 33 months in prison. Katisha Fordham, Kurt Fordham's sister, was sentenced to one day in prison, followed by five months home detention and five months supervised release. (usattymd12709)
MORAL
The government went back over five years, sent 10 people to federal prison without parole, some for over 11 years and five years, one a lawyer who loses his license and job with pension with the government. It is never worth it. The fear it creates when the investigation starts is unreal.
FORMER MASSACHUSETTS BANK OF AMERICA EMPLOYEE PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On Dec. 9, 2009, Clarista Bramble, a former Bank of America employee, was convicted of nine counts of wire fraud in federal court for creating false documents to secure approval of mortgage loan applications.
The prosecutor told the court that had the case proceeded to trial the government's evidence would have proven that during the time Bramble was a bank employee from December 2006 to July 2007, she created false bank documents reporting fictitious balances for accounts in the names of people applying for loans from mortgage lending companies. Bramble received cash payments and other financial benefits from others engaged in the scheme, knowing the false documents would be used to fraudulently secure mortgage loans.
Judge Tauro scheduled sentencing for March 17, 2010. Bramble faces up to 20 years' imprisonment, to be followed by three years of supervised release and a $250,000 fine on each count. (usattyma12909)
MORAL
That is one way to get a VOD, bribe the bank employee. Now the bank employee goes to federal prison and it is more likely than not the people she did it for will join her very shortly.
PRICE FLIP A HOME IN MINNESOTA AND GET INDICTED FOR FEDERAL MORTGAGE FRAUD
FACTS
On Dec. 9, 2009, a federal indictment charged a Minnesota pair for allegedly orchestrating a mortgage fraud scheme in which they stole more than $2.5 million from lenders nationally by obtaining fraudulent loans for the purchase of 35 homes in the Twin Cities. The indictment charges Zack Zafer Dyab, of Golden Valley, and Julia Alexander Rozhansky of Minnetonka, with one count of conspiracy to commit wire fraud, six counts of mortgage fraud through use of interstate wires, and one count of engaging in a monetary transaction involving criminally derived property.
The indictment alleges the defendants conspired to induce through fraudulent means numerous mortgage lenders throughout the U.S. to loan substantial sums of money to unindicted co-conspirators, who were relatives of Rozhansky. From 2003 through 2006, Dyab and Rozhansky allegedly recruited these co-conspirators to act as straw buyers in the purchase of 35 single-family homes in the Twin Cities.
In some instances, the defendants allegedly arranged for the straw buyers to purchase properties at inflated prices directly from Dyab, a mortgage broker, or his company, American Choice Lending Inc., where Rozhansky was employed. In other instances, the defendants allegedly arranged for the straw buyers to purchase properties at inflated prices from third-party sellers. After those sales, the defendants purportedly caused the sellers to pay them a portion of the sale proceeds. In addition, the defendants sometimes allegedly had a real estate broker receive purported real estate "commissions" from transactions, which the broker then signed over to Dyab. By taking for their personal use substantial portions of the loan proceeds from all of these transactions, the defendants caused more than $2.5 million in loss to the lenders during the life of the scheme.
Defendants allegedly submitted false mortgage loan applications that greatly exaggerated the monthly income and bank account balances of the straw buyers. They purportedly deposited funds into the bank accounts of straw buyers in order to trick lenders into believing the buyers had substantial liquidity. They also allegedly provided straw buyers with funds to bring to transaction closings, to be passed off as their own down payment money. The defendants allegedly led lenders to believe the straw buyers intended to live in the homes they bought, even though they knew the straw buyers intended to own the homes for less than a year before selling them to third-party straw buyers, who would then proceed to default on their mortgage loans.
If convicted, the defendants face a potential maximum penalty of five years in prison on the conspiracy charge, 20 years for each count of mortgage fraud, and 10 years on the monetary transaction charge. All sentences are determined by a federal district court judge. (usattymn12909)
MORAL
1. Straw buyers. 2. Purchase price inflated. 3. Exaggerated income. 4. Loan officer puts funds into borrower account or adds borrower to loan officer account. 5. State on 1003 primary residence and never move in. 6. Loans occurred 2003 and ended 2006 (three years ago!). Any of this sound familiar. Now you can say the borrower told you this and you can say you believed it but guess what the borrower tells the FBI? Note although it ended three years ago, the parties are now indicted. If you have been involved in stated income loans with exaggerated income I strongly suggest you see your lawyer now before the FBI sees you later.
IN MINNESOTA, ONE PROPERTY, ONE FRAUD LOAN AND ONE GUILTY PLEA
FACTS
On Dec. 9, 2009, Jeffrey Michael Tayler of Blaine pleaded guilty to defrauding CitiMortgage out of $588,200.51 through a mortgage fraud scheme. Taylor pleaded guilty to one count of conspiracy to commit wire fraud in connection with this crime. Taylor was charged on Nov. 13, 2009.
In his plea agreement, Taylor, the owner of First Solution Lending, a mortgage lending company in Maple Grove, admitted conspiring with an unnamed person to obtain money by securing a second mortgage on an Arizona property based on a fraudulent loan application. Taylor acquired the Arizona property in April 2005 for $1.5 million, and in March 2006, he attempted to sell it for $1.85 million. He held little equity in the vacation get-away.
When the property failed to sell, Taylor initiated his fraud scheme by falsifying loan documents. Taylor stated that an individual, who was really his unindicted co-conspirator, had purchased the property in 2005 for $2.26 million and had $825,000 of equity in it. Those documents then were submitted to CitiMortgage, which routinely funded mortgage loans originated by Taylor's company.
Based on the fraudulent application, CitiMortgage loaned the unindicted co-conspirator $592,500, secured by a worthless second mortgage on the Arizona property. The loan proceeds were transmitted by interstate wire.
In entering his guilty plea, Taylor also admitted causing the unindicted co-conspirator to hand over to him the loan proceeds. In addition, neither Taylor nor his co-conspirator made any loan payments to CitiMortgage. Taylor faces a potential maximum penalty of five years in prison for his crime. Judge Tunheim will determine his sentence at a future date. (usattymn12909)
MORAL
Now you might ask why was the co-conspirator unindicted? Maybe because he had a very sharp lawyer that got to the U.S. Attorney or FBI first and "cut a deal?" Could be. In either event, Taylor loses his right to vote, right to hold public office, right to obtain certain licenses, right to be a mortgage broker ever again and if he is not a citizen he gets a mandatory right to be deported, even if he has a green card.
ANOTHER GUILTY PLEA FOR MORTGAGE FRAUD IN MINNESOTA
FACTS
On Dec. 7, 2009, Dustin LaFavre pleaded guilty in federal court to bilking more than $7 million from at least 15 real estate mortgage lending companies between 2005 and 2008. LaFavre admitted he conspired with a licensed real estate broker, identified as "Individual 1," to defraud the mortgage lenders. Specifically, he and Individual 1 solicited real estate buyers by telling them they would receive significant cash from the proceeds of the mortgage loans. With the assistance of Individual 1, LaFavre then negotiated the value of single pieces of property as well as property groupings, known as bulk purchases, in an effort to inflate the sale prices of that real estate. Those inflated prices were reported to and ultimately approved by lenders. Then, after transaction closings, LaFavre and Individual 1 divided among themselves and the buyers the difference between the inflated sale prices and the true sales prices.
LaFavre helped buyers qualify for their mortgage loans by creating false verifications of employment, depositing money into their bank accounts to make their balances appear higher, providing them with down payments, and working with mortgage brokers and loan officers who were willing to prepare false documentation for submission to lenders.
LaFavre and Individual 1 sold at least 172 properties during the course of this scheme. In furtherance of the scheme, LaFavre sent false documents via the U.S. Mail as well as commercial carriers. He also caused wire transfers of mortgage loan proceeds from which he and others obtained cash kickbacks.
LaFavre faces a potential maximum penalty of 20 years in prison for his crime. (usattymn12709)
FIVE INDICTED IN FORECLOSURE RESCUE AND MORTGAGE FRAUD SCHEME SCAM INVOLVING LAWYERS, MORTGAGE BROKERS, AND MORE THAN $14.6 MILLION IN LOANS IN PHILADELPHIA
FACTS
On Dec. 8, 2009, a 15-count indictment was filed against five defendants charged in a $14.6 million mortgage fraud scheme that resulted in at least 35 fraudulent mortgage loans. Charged are Edward G. McCusker and John Alford Bariana, owners of Axxium Mortgage, Inc., McCusker's wife, Jacqueline, and Jeffrey A. Bennett and Stephen G. Doherty, owners of the Doylestown law firm Bennett & Doherty, P.C.
According to the indictment, the defendants targeted financially distressed homeowners facing foreclosure, falsely promised them help in saving their homes, engaged in real estate transactions with straw purchasers, and obtained dozens of fraudulent mortgages. The defendants took whatever equity the homeowner had left, funneled it through various shell corporations they controlled, used some of it to pay the new mortgages, and put the rest of the equity into their own bank accounts.
The indictment alleges that the defendants promised financially distressed homeowners that they would find an "investor" who would help them save their home. The defendants would then arrange for a straw purchaser to obtain a fraudulent mortgage and then transfer of the title of the homeowner's residence to the straw purchaser. Using their company Axxium Mortgage, Edward McCusker and Bariana, along with Jacqueline McCusker obtained the fraudulent mortgages by submitting false documents to mortgage lenders and making false claims about the straw purchasers' finances. The defendants also concealed from the lender the fact that the homeowner was going to continue to reside in the home and that the mortgage payments were going to continue to be made, in part, by the distressed homeowner and funneled through the straw purchaser. Bariana and Jacqueline McCusker each acted as straw purchasers for 10 homes. The defendants also recruited at least seven other persons to act as straw owners in order to obtain additional fraudulent mortgages.
Doherty solicited and referred distressed homeowners to Edward McCusker and used fraudulent bankruptcy filings for some of the distressed homeowners to delay foreclosure until McCusker had obtained an investor and a mortgage. Bennett handled the closings for the real estate transfers, manipulating the information provided to the lender in order to hide the nature of the scheme until after the loan was funded.
The defendants are charged with conspiracy to commit mail and wire fraud, mail and wire fraud, and conspiracy to commit money laundering. Doherty is also charged with bankruptcy fraud.
Defendants Edward and Jacqueline McCusker, Jeffrey Bennett, and John Bariana face maximum sentences of 240 years' imprisonment, $3.25 million in fines, three years supervised release, and a $1,200 special assessment. Defendant Stephen Doherty faces a maximum sentence of 385 years' imprisonment, $4 million in fines, three years supervised release, and a $1,500 special assessment.
The indictment seeks forfeiture of the proceeds of the fraudulent scheme, which is alleged to be approximately $14.6 million. (usattyedpa12809)
RHODE ISLAND WOMAN GETS 46 MONTHS IN FEDERAL PRISON FOR $1.7 MILLION MORTGAGE FRAUD LOSS
FACTS
A federal judge today sentenced Lisa Torres to 46 months in federal prison for a $1.7 million mortgage fraud scheme. You may remember I reported this in October when Torres admitted that she purchased properties that had recently been foreclosed upon and then used the names of straw purchasers in sham sales at inflated prices to fraudulently obtain mortgage financing. She had enlisted others, some willing participants, others unwitting dupes, to arrange sham sales of the properties in order to obtain mortgage financing. Judge Lisi scheduled a hearing for Feb. 12 to determine the amount of restitution Torres must pay. Torres is already serving a federal prison sentence for an unrelated case in which she conspired with two attorneys to sell to drug dealers information supporting false claims that they had cooperated with federal investigators. That case was prosecuted in U.S. District Court, Massachusetts. Torres was due to be released on Jan. 26 before being sentenced today. (usattyri12909)
MORAL
Instead of getting out, she gets to stay in for almost four more years. It is never ever worth it.
RIVERSIDE COUNTY, CALIFORNIA SUPERIOR COURT JUDGE SIGNIFICANTLY LOWERS BAIL ON KEY DEFENDANT IN MORTGAGE FRAUD CASE FROM $144 MILLION TO $5 MILLION
FACTS
James B. Duncan was charged with masterminding a major securities and mortgage fraud based in Murrieta that caused hundreds of investors in California and Arizona to lose about $17 million in cash and pushed 201 Riverside County homes into foreclosure. In resetting the bail from $144 million to $5 million, the comment was made to the judge on the extraordinary seriousness of the alleged crime, in which some people lost their life savings, and said that record would tend to put the public in jeopardy if Duncan were released. It was also stated the millions of dollars of money lost and unaccounted for in the various investment schemes outlined in court by the district attorney could give Duncan "reason to flee and live comfortably."
In refusing to agree to the district attorney's demand to keep the bail at $144 million, Judge Fields said he was swayed by the arguments of Duncan's lawyer that Duncan has no previous criminal record and that in the years since he has been under investigation, starting in 2007, he has not attempted to flee, continued to reside with his wife and three children in Murrieta and surrendered his passport to the FBI.
Duncan was one of seven defendants arrested and jailed Nov. 19, 2009 and charged in a wide-ranging criminal complaint that contains 249 felony counts, including securities fraud, grand theft, elder abuse and corporate identity theft.
Other defendants released from jail after the court lowered their bail are Thuan Nhan Du and Cindi Gayle Kelly. Du's bail was lowered from $17 million to $50,000 and Kelly's bail was reduced from $17 million to $250,000. Another defendant, Charlie Sung Muk Choi, had his bail reduced from $17 million to $100,000. (present121009)
MORAL
Sort of tells you not to get arrested in Riverside County, doesn't it? The prosecution there is not known for its kindness. Note how far the bail was reduced on each of the defendants and that may indicate how reasonable you think the state prosecutors are in Riverside County.
SAN BERNARDINO DISTRICT ATTORNEY'S OFFICE SHUTS DOWN WHAT IT DETERMINES IS AN IDENTITY THEFT RING
FACTS
On Dec. 10, 2009, investigators from the San Bernardino County District Attorney's Real Estate Fraud Unit arrested three suspects and caused a fourth suspect to surrender himself. DA Investigators, assisted by San Bernardino Sheriff's Deputies and Pomona Police, arrested Juan and Karen Sopprani in Rancho Cucamonga and Luis Molina at a check cashing store in Pomona. Investigators and Deputies also attempted to arrest Earl Gutierrez in Rancho Cucamonga, but he wasn't home. He later surrendered himself to Deputies at the Rancho Cucamonga Police Department.
On March 30, 2006, Juan and Karen Sopprani sold their home in Fontana to the victim and subsequently purchased a home in Rancho Cucamonga for over $870,000 using the victim's stolen identity. The victim discovered her identity had been stolen after the victim applied for credit to purchase a home appliance.
Juan Sopprani was operating his own loan company in Rancho Cucamonga during that time. Luis Arturo Molina, Karen Sopprani's uncle, contacted the victim and she gave him personal confidential information to be pre-qualified to purchase a home. However, the victim changed her mind and told Molina to cancel the transaction.
The notary public was identified as Earl Richard Gutierrez, Juan Sopprani's brother-in-law. The victim never appeared before Gutierrez, who notarized the falsified loan documents, deeds of trust and grant deeds in these fraudulent real estate transactions. The suspects were arrested without incident and transported to the Sheriff's West Valley Detention Center in Rancho Cucamonga with a bail of $2,422,000. (dasbco121109)
SOUTHERN CALIFORNIA WOMAN ARRESTED FOR PROMISING LOW INTEREST LOANS FROM FEDERAL RESERVE BANK
FACTS
On Dec. 11, 2009 Pamela Terry was arrested at a hotel in West Hollywood, Calif., on wire fraud charges that allege she collected hundreds of thousands of dollars in advance fees from victims who were promised low-interest, multi-million dollar loans from the "Federal Reserve Bank."
Terry is named in a criminal complaint filed on Nov. 9 that charges her with one count of wire fraud, a felony offense that carries a statutory maximum sentence of 30 years in federal prison. The affidavit in support of the complaint alleges that Terry, who held herself out as an employee of the "Federal Reserve Bank," fraudulently promised more than a dozen victims 30-year business loans at a fixed rate of 2.3%. Terry told a man she hired as her loan consultant and approximately 15 identified victims that she could secure the loans without any standard documentation because she worked directly with the head underwriter of the "Federal Reserve Bank." As part of the loan program, Terry required her customers to make up-front payments that she called "minimum capital requirement," which were generally about 15% of the total loan amount.
The complaint alleges that Terry collected approximately $2 million from about 15 loan customers, none of who received a loan nor saw the return of their "minimum capital requirement." In the case of one loan customer discussed in the affidavit, Terry said the delay in the funding of a $20 million loan was being caused by the failure of IndyMac Bank. The bulk of a $600,000 payment for the "minimum capital requirement" was transferred to an account Terry controlled and, in the course of just one month, tens of thousands of dollars were withdrawn as cash or used to pay retailers such as Nordstrom, Louis Vuitton, Gucci and Chanel. (usattycdca121409)
MARYLAND MORTGAGE FRAUD TASK FORCE CONSISTING OF 22 GOVERNMENTAL AGENCIES ANNOUNCES ITS SUCCESS IN CHASING MORE THAN 250 INDIVIDUALS AND COMPANIES
FACTS
On Dec. 10, 2009 Maryland Mortgage Fraud Task Force members highlighted their progress and plans in a press conference, including the filing of criminal, civil, and regulatory actions against more than 250 individuals and companies.
U.S. Attorney Rod J. Rosenstein said, "The Mortgage Fraud Task Force, established in 2009, aims to punish past offenders and deter future violations. We expect even more cases to be prosecuted in 2010. Our priorities include pursuing mortgage brokers, lawyers, accountants, appraisers, and other professionals who generate fraudulent loans as well as con artists who market fraudulent `foreclosure rescue' and `loan modification' services."
RECENTLY FILED CASES
State of Maryland v. David Young Park
On Dec. 8, 2009, the Maryland Attorney General's Office charged David Young Park, the former president of Capital City Financial Group in Ellicott City, with theft in Baltimore County Circuit Court. In June of 2007, Park was allegedly working as a mortgage broker and assisted the victim with the refinance of her home. The victim intended to use the more than $100,000 in equity to purchase a commercial condo for her business. Following settlement, Park allegedly obtained the victim's proceeds from the title company without the victim's knowledge, deposited them into his escrow account and spent the money on various personal and business expenses over the course of two weeks.
Felony theft is punishable in Maryland by a maximum sentence of 15 years' incarceration and a $25,000 fine.
United States v. James Fox II and James Dan
A federal indictment was returned on Dec. 8, 2009 against two loan officers employed at a mortgage brokerage in Annapolis, Md. From April 2006 to February 2009, James William Fox II and James Hooper Dan are alleged to have identified potential victims who were unable to make the mortgage loan payments on their homes. Instead of "rescuing" the victims from foreclosure as promised, the defendants allegedly obtained new mortgage loans in their own names or in the names of straw purchasers at even higher monthly mortgage payments than the victims had originally been paying, stripped the properties of equity, falsified information on loan applications, and failed to make the mortgage payments on behalf of the victim sellers as promised. Fox and Dan allegedly caused lenders to lose over $1.7 million in fraudulently obtained mortgage loans and caused the individual victims to lose over $650,000 in equity in their homes. The indictment seeks the forfeiture of the total loss of $2,350,000.
Dan and Fox face a maximum sentence of 20 years in prison for conspiracy to commit wire fraud and 20 years in prison for wire fraud.
United States v. Daniel Fink, Jr.
A federal grand jury indicted Daniel E. Fink Jr. for wire fraud and money laundering. Fink owned and operated Homemaxx Title & Escrow LLC, a title company that conducted residential real estate closings. From February 2003 to July 2004, Fink is alleged to have caused Homemaxx to fail to pay outstanding first mortgages on real estate transactions or to record deeds in the real estate records of local and state governments. Fink allegedly transferred substantial amounts of money from a Homemaxx escrow account into other Homemaxx accounts, as well as to accounts not associated with Homemaxx, and used the money intended to be disbursed pursuant to a HUD-1 for personal expenditures unrelated to real estate transactions. In connection with a particular real estate refinancing transaction by one of his customers, Fink diverted funds from the escrow account and then used the proceeds of his fraud scheme to purchase a new 2004 CLK Mercedes. As a result of this scheme, Fink is alleged to have defrauded lenders and homeowners of more than $500,000. The indictment seeks the forfeiture of this amount.
Fink faces a maximum sentence of 20 years in prison and a $250,000 fine for each of the three counts of wire fraud and 10 years in prison and a $1 million fine for money laundering. Fink is a fugitive.
Commissioner of Financial Regulation Acts Against Loan Originator with Equitable Trust Mortgage Corporation
Pursuant to an investigation by the Maryland Department of Labor, Licensing and Regulation, Division of Financial Regulation, on Dec. 10, 2009, the Commissioner of Financial Regulation issued a summary order to cease and desist and a summary suspension of mortgage loan originator licenses against Nicholas Elko for allegedly engaging in an illegal foreclosure rescue scheme whereby Elko, a licensed loan originator with Baltimore-based Equitable Trust Mortgage Corp., obtained the title to a Maryland residential property in foreclosure after promising the homeowner that he would convey title back to her after a period of time. Instead, Elko allegedly refinanced the property multiple times through ETM. Each time that the property was refinanced, Elko allegedly stripped more and more equity out of the home, ultimately conveying the property to his mother.
BALTIMORE CITY STATE'S ATTORNEY'S OFFICE
STATE v. GREGORY TODD ALTER
The Baltimore City State's Attorney's Office indicted Gregory Todd Alter, co-owner of All Star Settlement Co., on charges of conspiracy to commit theft and issuing a counterfeit deed. On May 14, 2008, Alter conducted a settlement in which a home on Surrey Drive, Baltimore was sold for $40,000. On June 14, 2008 another settlement took place at All Star where the same property was sold to an innocent third party for $90,000. The true owner of the property was Mildred Sheehan, an 85-year-old woman who lives in Massachusetts and had not been to Maryland in 35 years. She never signed any deed nor was she ever aware her property was being sold. Alter received $7,000 from the first transaction and then forwarded a fraudulent deed to the buyer's lender for the second transaction. He received an additional $2,000 from the second transaction. The scheme was discovered in September 2008, when Mildred Sheehan decided to sell the property and hired a realtor who placed a for sale sign on the property. The buyers who had purchased the property in June 2008 then realized that they had been defrauded. Alter pled guilty to both charges and was sentenced to five years suspended, three years probation.
PRINCE GEORGE'S COUNTY STATE'S ATTORNEY'S OFFICE
STATE v. NATHANIEL WRIGHT
STATE v. AARON BOWE
The Prince George's County State's Attorney's Office Mortgage Fraud Unit prosecuted Nathaniel Wright and Aaron Bowe, who promised victims that their company could save the victims' homes from going into foreclosure by participating in their rent back program. The defendants then used an unsuspecting straw buyer's credit information to obtain loans. As a result of the defendants' false promises, the victims transferred title to their homes and lost approximately $80,000 per victim. Wright and Bowe were convicted of felony theft and violating Protection of Homeowner in Foreclosure Act Law and were ordered to pay restitution totaling $220,000.
CONSUMER PROTECTION DIVISION, MD OFFICE OF THE ATTORNEY GENERAL CONSUMER PROTECTION DIVISION v. RODNEY SPELLEN, ET AL.
The Office of the Maryland Attorney General, Consumer Protection Division, filed a complaint in Baltimore City Circuit Court against Rodney Spellen, Mid Atlantic Consulting, Inc., Jemel Lyles, Absoloot Ventures Inc., Brian Boyd, 1st Choice Property Management Firm, Inc., Sahar Ali, Alan Muniu, Phillip George, Certified Title & Escrow, Inc., and Reggie Simmons, alleging that the defendants promised to save consumers' homes from foreclosure and restore their credit when, instead, they attempted to take title to the homes and strip the home equity. On Nov. 9, 2009, the court entered summary judgment as to liability in favor of the Consumer Protection Division and against each of the defendants except Reggie Simmons. A trial was held on Nov. 23rd and 24th, 2009 to determine Simmons' liability, and the appropriate measure of damages, restitution, penalties and costs for each of the defendants. The court has not yet issued a decision. The case was originally investigated and referred by the Maryland Department of Labor, Licensing and Regulation - Division of Financial Regulation.
MARYLAND DEPARTMENT OF LABOR, LICENSING AND REGULATION - DIVISION OF FINANCIAL REGULATION
The Office of the Commissioner of Financial Regulation issued summary orders to cease and desist, and in some cases, summary suspensions of Maryland mortgage lender licenses and mortgage loan originator licenses against the following individuals and businesses on the following dates:
Commissioner of Financial Regulation v. ATT Mortgage Co., Shawpin Jong, et al.
ATT Mortgage Co., Shawpin Jong a/k/a Steve Chung, and various other companies and individuals on Dec. 10, 2009 for allegedly engaging in, or conspiring to engage in, mortgage fraud. ATT Mortgage allegedly obtained at least 11 different mortgage loans for borrowers after submitting fraudulent employment information to a single lender, falsely claiming that the borrowers were all employed by ASI Alpha Scientific. Both ATT Mortgage and ASI Alpha Scientific are allegedly owned and operated by the same individual, Shawpin Jong a/k/a Steve Chung, at the same location.
Commissioner of Financial Regulation v. The Shmuckler Group LLC, Nova Key LLC, Howard R. Shmuckler, Alon Fisch and Ted Dubin
The Shmuckler Group LLC, Nova Key LLC, Howard R. Shmuckler, Alon Fisch and Ted Dubin on Dec. 10, 2009 for allegedly engaging in illegal loan modification activities by collecting up-front fees from Maryland homeowners in default on their residential mortgage loans prior to completing all promised services, in exchange for promises to assist them in obtaining a loan modification from their mortgage lender. The respondents also allegedly failed to obtain a Maryland credit services business license. These respondents allegedly collected over $1.2 million in up-front fees while promising to modify 372 different Maryland residential mortgage loans (charging an average of $3,440 in up-front fees to each Maryland resident, with amounts varying between $1,750 and $6,000). However, respondents allegedly obtained loan modifications or analogous results in only a quarter of those cases, yet refused to provide any refunds to Maryland consumers. These respondents operated primarily out of Northern Virginia.
Commissioner of Financial Regulation v. U.S. Equity Solutions, et al.
U.S. Equity Solutions, LLC, Mortgage Rehabilitation, LLC., Rodney Scott Getlan, Chad Edwards, Brent MacDonald, Jennifer Streaks, Richman and Associates, Inc., and others on Nov. 24, 2009 for allegedly engaging in illegal loan modification activities by collecting up-front fees from over 160 Maryland homeowners in default on their residential mortgage loans, in exchange for promises to assist them in obtaining a loan modification from their mortgage lender, and failing to obtain a Maryland credit services business license. These Respondents operated primarily out of Maryland, with the exception of Richman and Associates, which operated out of California.
Commissioner of Financial Regulation v. Save My HomeUSA, Inc., et al.
Save My Home USA Co., Inc., LM Processing, Jason McCallum, Chad Buchanan, Justin McCallum, and others on Nov. 24, 2009 for allegedly collecting up-front fees from Maryland homeowners in default on their residential mortgage loans, in exchange for promises to assist them in obtaining a loan modification from their mortgage lender, and for failing to obtain a Maryland credit services business license. These Respondents operated primarily out of Madison Heights, Mich.
Commissioner of Financial Regulation v. GIAN Inc., ASM Inc., Roberto T. Aiello and Trevor S. Smith
GIAN Inc., ASM Inc., Roberto T. Aiello and Trevor S. Smith on Nov. 24, 2009 for allegedly collecting up-front fees from Maryland homeowners in default on their residential mortgage loans, in exchange for promises to assist them in obtaining a loan modification from their mortgage lender, and for failing to obtain a Maryland credit services business license. These respondents operated primarily out of Santa Ana, Calif.
Commissioner of Financial Regulation v. Help Modify Now Inc., et al.
Help Modify Now Inc., Help Modify Now Debt Solutions Inc., Chas Bain, Larry Gunter and others on Nov. 24, 2009 for allegedly collecting up-from fees from Maryland homeowners in default on their residential mortgage loans, in exchange for promises to assist them in obtaining a loan modification from their mortgage lender and for failing to obtain a Maryland credit services business license. These Respondents operated primarily out of California and Nevada.
Commissioner of Financial Regulation v. Equity Recovery Services LLC, The Malone Financial Group LLC., Richman and Associates, Inc., The Law Offices of Erica T. Itzhak & Grace B. Kilchenstein, et al.
Equity Recovery Services LLC, The Malone Financial Group LLC, Richman and Associates, Inc., Steven R. Forrest, Jesse Malone, George Denikos, Jason Denikos, Jim Richman, the Law Offices of Erica T. Itzhak & Grace B. Kilchenstein, and others on Nov. 24, 2009 for allegedly collecting up-front fees from Maryland homeowners in default on their residential mortgage loans, in exchange for promises to assist them in obtaining a loan modification from their mortgage lender, and for failing to obtain a Maryland credit services business license. Equity Recovery Services LLC and the Malone Financial Group LLC are located in Maryland. Richman and Associates operated primarily out of California, while The Law Offices of Erica T. Itzhak & Grace B. Kilchenstein has offices in New York and Maryland.
MORAL
You want to play then you gotta pay. There are comparable coops in other states such as Arizona, California, Florida, Georgia, and Nevada to name a few. How do I know? Because I am representing several people that have been charged in several of the states.
NEVADA BANKRUPTCY COURT UPHOLDS LINE OF CASES THAT MERS CANNOT FORECLOSE ON OWNER'S PROPERTY BECAUSE IT CANNOT PROVE IT OWNS THE PROMISSORY NOTE
FACTS
U.S. District Judge Kent Dawson upheld a bankruptcy court ruling that makes it harder for lenders to foreclose on home mortgages. The case, which was heard by a panel of federal judges in November, concerned whether Mortgage Electronic Registration Systems Inc., or MERS, could foreclose on residences on behalf of lenders. The electronic system records the ownership of residential mortgages for the mortgage banking industry.
Judge Dawson said the company could not foreclose on a home because it did not provide evidence that it held the note on the residence and didn't show that it was an agent of the lender.
MERS asked bankruptcy Judge Linda Riegle for permission to start foreclosure proceedings against a property owned by Lisa Marie Chong. Bankruptcy trustee Lenard Schwartzer objected, saying the electronic system was not a "real party in interest" in the mortgage loan. Like many mortgages, Chong's loan had been securitized, meaning it had been pooled or packaged into a security held by investors.
MERS was unable to show that it had possession of the note. The bankruptcy judge ruled in Schwartzer's favor. The decision was appealed to federal court. In his decision, Judge Dawson said the registration system does not lose money when borrowers fail to make payments on home mortgages. Judge Dawson ruled that MERS must at least provide evidence that it was a representative of the mortgage loan holder, which it failed to do.
"Since MERS provided no evidence that it was the agent or nominee for the current owner of the beneficial interest in the note, it has failed to meet its burden of establishing that it is a real party in interest with standing," Judge Dawson said, affirming the bankruptcy court ruling.
Although the decision is believed to be the first of its kind in Nevada, the Kansas Supreme Court made a similar finding in a similar case. (lvrevjl12909)
MORAL
For similar authority see California Civil Code section 2932.5, In re Raymond Varga, Ch. 7, Judge Bufford, LA 08-17036SB,(10-21-08), In re Dimmings ND, OH, 2008, 386 B.R. 199; 2008 Bankr. LEXIS 991, related cases in Ohio, 07CV2466, 2525, 2527, 22549, 2558, 2549, 2558, 2563, 2575, 1939, 1606; plus the Kansas Supreme Court. What does it mean? If MERS is the beneficiary on the mortgage and cannot prove it owns the note or is an agent of the note holder in writing, then MERS cannot foreclose and the borrower may wind up living in the house forever!
PRESIDENT OF GUYAMERICAN FUNDING CORP. AND EIGHT OTHERS CHARGED IN NEW YORK MORTGAGE FRAUD SCHEME THAT ALLEGEDLY DEFRAUDED BANKS OUT OF MORE THAN $23 MILLION
FACTS
On Dec. 10, 2009 David Ranmauth, the president of GuyAmerican Funding Corp., surrendered to authorities in connection with a scheme that defrauded banks out of more than $23 million in home mortgage loans. Ranmauth is charged in a Superseding Indictment with bank fraud and wire charges along with eight other defendants who were previously charged in the same scheme in October 2009.
According to the Superseding Indictment Ranmauth facilitated a massive mortgage fraud scheme that was being conducted though a GuyAmerican branch office located on Liberty Avenue, in Jamaica, N.Y. Three of the defendants previously charged in the scheme, Peggy Persaud, Orette Killikelly and George Esso, were loan officers at GuyAmerican, and received thousands of dollars in commissions based on fraudulent loan applications submitted to lenders.
Three other defendants previously charged in the scheme, Elton Lord, Rafick Baksh and Mahamood Hussain, worked with GuyAmerican loan officers to recruit homeowners in financial distress who were willing to sell their homes. They used straw buyers to perpetrate their scheme. The defendants arranged home sales between these distressed sellers and these straw buyers, and obtained mortgage loans using fraudulent representations, including about the supposed purchasers' net worth, employment, and income. The defendants re-sold, or flipped, properties multiple times between different straw buyers, stripping the equity from those properties as they were resold with inflated market values.
The loan applications submitted to the lenders contained numerous false statements about the straw buyers, who often had little or no assets and modest or no incomes. The loan applications therefore contained false statements about the supposed borrowers' employment, income, assets, and exiting debt. In addition, the loan applications falsely represented that the straw buyers intended to reside in the properties, when in fact they did not. Cheddi Goberdhan and Ravi Persaud, who acted as the closing attorneys for most of the transactions and facilitated the fraud by disbursing illicit payments to co-conspirators, were also previously charged.
After becoming aware that fraudulent loans were being submitted under the GuyAmerican license, Ranmauth directed through a loan officer at GuyAmerican to have the closing attorneys set aside six months' worth of mortgage pavements from the closing proceeds, so that the lenders would not discover the scheme. Ranmauth was also aware that Lord, Baksh and Hussain were engaging in equity stripping in the sham real estate transactions, but permitted them to originate additional fraudulent loans under the GuyAmerican license, and continued to make commission payments to loan officers in connection with the fraudulent loans.
Ranmauth is charged with conspiracy to commit bank fraud and wire fraud. If convicted, he faces a maximum sentence of 30 years in prison. (usattysdny121009)
MORAL
I have told you to the point of boredom that the federal government is chasing fraud that has occurred in the last 10 years. They are looking at the loans that helped drag the market down which are a lot of stated income loans. The excuse that the borrower told the loan officer or broker he made the money does not work and is not believed by federal agents in this lawyers' opinion. If you have a questionable loan see your attorney or at least one that is knowledgeable in the industry so they can show you ways to legally mitigate the problem and reduce the probability of going into a federal prison. Remember people are innocent until proven guilty beyond a reasonable doubt. BUT, how much is it costing them to prove it?
OHIO MAN JOINS SOME OF HIS FIVE COMPATRIOTS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
A former Centerville man, Julian M. Hickman, was sentenced Dec. 10, to 33 months in federal prison for his role in an extensive mortgage fraud scheme. He is the second of six co-defendants to be sentenced. The first, Jessica A. Zbacnik, was sentenced Dec. 3 to 30 months in prison.
The scheme affected 63 investors and led to foreclosure against owners of more than 90% of the properties. Hickman pleaded guilty in December 2008 to two counts of conspiracy and three counts of willful failure to file income tax returns.
Hickman admitted that, between March 2002 and June 2008, he and others recruited unsuspecting individuals to buy residential properties, many of them dilapidated, at prices artificially inflated above legitimate fair-market values. Hickman admitted that he participated in 107 separate fraudulent real estate closings between March 2002 and June 2006. Hickman and his co-conspirators netted more than $3.8 million from the deals. Hickman failed to file federal income tax returns in 2003, 2004 and 2005. In 2003, Hickman received gross income in excess of $680,000. In 2004, Hickman received gross income in excess of $830,000. In 2005, Hickman received gross income in excess of $200,000.
Zbacnik pleaded guilty July 29, 2009 to one count of conspiracy to commit money laundering and one count of conspiracy to commit mail fraud, wire fraud and money laundering. Zbacnik admitted that she had helped arrange, facilitate and manipulate documents associated with real estate sales and closings. The purpose was to fraudulently obtain excess mortgage loan proceeds generated from the sale of residential properties.
There are four co-conspirators who are still awaiting sentencing:
Edward McGee who pleaded guilty on May 12, 2009 to conspiracy to commit money laundering.
Kenneth O. McGee, son of Edward, who pleaded guilty May 12, 2009 to conspiracy to commit mail fraud, wire fraud and money laundering and conspiracy to commit money laundering.
Robert Mitchell, who pleaded guilty to conspiracy to commit mail fraud, wire fraud and money laundering and conspiracy to commit money laundering on March 11, 2009.
Kamal J. Gregory, who pleaded guilty to conspiracy to commit mail fraud, wire fraud and money laundering and conspiracy to commit money laundering on April 14, 2009. (daytonohdlynws121009)
MORAL
Notice how some of them drag their family members in causing them to be indicted as well. Nice father in this case wasn't he?
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
