FORMER FUGITIVE OUT OF SAN DIEGO ARRESTED AND INDICTED ON MORTGAGE FRAUD CHARGES
FACTS
On Dec. 16, 2009 Lucette Montane, a fugitive since June 2008, was arraigned on a 2008 indictment in federal court. Montane surrendered to Customs and Border Protection officials on Dec. 15, 2009 at the San Ysidro Port of Entry. Agents from the Federal Bureau of Investigation and Internal Revenue Service, Criminal Investigation Division, arrested Montane based on a pending arrest warrant.
On July 18, 2008, a federal grand jury returned an indictment charging Montane and five others with devising a plan to defraud and to obtain money and property by false and fraudulent means, related to mortgage fraud. According to court documents, in 2005, Abner Betech, Said Betech and others started Creative Financial Solutions, Inc., a San Diego mortgage broker. CFS was in the business of sending loan application packages and other documents to lenders for review and funding. The defendants were loan officers at CFS and in addition to the commissions, they received payments from lenders, sellers, and buyers when loans closed.
The documents also allege that CFS obtained mortgage loans for unqualified borrowers by, among other things, concealing the true purchase price of the homes by submitting false purchase contracts; submitting false loan applications; intentionally concealing the fair market value of the home; using misleading appraisals; and submitting false bank statements and income documentation. In total, the victim lenders funded more than $16 million in loans on properties that have been foreclosed or are in the foreclosure process. The lenders have lost over $3.9 million, with potential losses in excess of $5.1 million, due to the fraudulent loans. She is charged with violations of Title 18, United States Code, Section 1349 (Conspiracy to Commit Wire Fraud), maximum penalties: 20 years' incarceration, a fine of $250,000, three years of supervised release; Title 18, United States Code, Section 1956(h) (Conspiracy to Launder Monetary Instruments) maximum penalties: 20 years' incarceration, a fine of $250,000, three years of supervised release. (usattysdca121609)
MORAL
Remember, the federal government can go back to loans that occurred 10 years ago and I have seen at least one that went back to nine years and 10 months and then the indictment came down. So if you are in the 10-year period and were involved in "creative financing" see your attorney now.
ARCHITECT OF MORTGAGE FRAUD IN SAN FRANCISCO PLEADS GUILTY
FACTS
On Dec. 16, 2009 Patricia Morgen pleaded guilty in federal court in San Francisco to wire fraud, mail fraud and money laundering. In pleading guilty, Morgen admitted that the company she founded and controlled, Chicago Development and Planning, engaged in two fraudulent schemes: (1) a Ponzi scheme that defrauded more than 400 individual investors by falsely promising that their investment funds would be used to acquire, renovate, and re-sell real estate; and (2) a mortgage fraud scheme that defrauded a mortgage broker and various mortgage lenders by use of loan applications with fraudulent income and asset statements. Morgen admitted that the loss for the two schemes exceeded $8 million. In the plea agreement, Morgen agreed to make restitution in the amount of no less than $8,439,086.
In pleading guilty, Morgen admitted that when she learned of the SEC's investigation in 2004 and she instructed employees to destroy documents and then fled to Mexico to avoid federal authorities. Morgen also admitted that she instructed an employee to contact a mortgage broker who had worked on Chicago Development and Planning real estate acquisitions in an attempt to convince the mortgage broker not to provide documents to the SEC.
On Sept. 2, 2009, Morgen's co-defendant, Michael Ware, pled guilty to similar charges involving Chicago Development and Planning's mortgage fraud scheme.
Morgen was indicted by a federal Grand Jury on Nov. 20, 2008. She was charged with 11 counts of mail and wire fraud, in violation of 18 U.S.C. §§ 1341 and 1343, as well as a single count of money laundering, in violation of 18 U.S.C. § 1957. Under the plea agreement, Morgen pled guilty to two counts of mail fraud, two counts of wire fraud, and one count of money laundering.
Morgen is currently in the custody of the Bureau of Prisons. Her sentencing is scheduled for April 7, 2010, before Judge Charles R. Breyer in San Francisco. The maximum statutory penalty for mail and wire fraud is 30 years. The maximum statutory penalty for money laundering is 10 years. (usattyndca121709)
MORAL
She is looking at about seven years in a federal penitentiary where there is no parole.
OWNERS AND OPERATORS OF VALLEY INVESTMENTS IN COLORADO INDICTED FOR MORTGAGE FRAUD
FACTS
On Dec, 15, 2009, the owners and operators of Valley Investments, Philip R. Lochmiller and Philip R. Lochmiller II, as well as a Valley Investments employee, Shawnee N. Carver, were indicted by a federal grand jury in Denver on conspiracy and fraud charges. The indictment was sealed pending the defendants' arrest. Lochmiller was arrested without incident on Dec. 16, 2009.
According to the indictment, Valley Investments (which was first called Valley Mortgage) was incorporated in Colorado in 1994, and was originally engaged in the business of originating or brokering home mortgages. The business was located in Grand Junction, Col. From its inception until it closed in May 2009, Lochmiller and Lochmiller II operated and controlled Valley Investments. Beginning in approximately 1999, the Lochmillers and others entered into the affordable housing real estate development and housing sale business. The business primarily involved the acquisition, using investor funds, of vacant land or existing mobile home parks, converting them to mobile or manufactured home subdivisions.
Between November of 1999 and April 2008, Valley Investments acquired five properties purportedly to develop affordable housing subdivisions. To finance the properties, Lochmiller and Lochmiller II, advertised and solicited investments from individuals by promising a short duration high percent interest rate to be paid monthly. The advertisements characterized the investment as a "solid security" secured and recorded by a Deed of Trust in the investor's name. The Lochmillers also represented to investors that Valley Investments used investor funds exclusively to acquire the properties and finance the development of the subdivisions they owned. Further, they represented that the company generated large profits by selling manufactured homes together with lots within their subdivisions. They later promised investors a return as high as 18% on their investments. In exchange, investors were to receive a promissory note and a recorded first Deed of Trust on individual lots, worth a minimum of $20,000 at a 50% loan-to-value ratio.
From 2005 through May 2009, defendant Shawnee Carver was a full-time employee of Valley Investments, and a personal assistant to Lochmiller II. She had full and exclusive access to data and interacted with investors. The indictment alleges that Lochmiller failed to disclose a prior conviction for securities fraud in California. It also states that they failed to disclose that the Colorado Division of Securities issued a letter in June of 2001 insisting Valley Investments to cease the offering and advertising of unregistered securities. Both Lochmiller and Lochmiller II failed to disclose prior bankruptcy filings.
All three defendants were salaried employees. The indictment alleges that Lochmiller and Lochmiller II directed and caused Valley Investments to pay numerous personal expenses on their behalf. Lochmiller II also received bonuses of 1% of the amount invested through him. Between 2000 and 2009, Lochmiller and Lochmiller II caused Valley Investments to receive approximately $31,000,000 from approximately 400 investors. That is a lot of money.
The indictment alleges that from 1999 through May of 2009, the three defendants did knowingly and willfully conspire to devise a scheme to defraud, and obtain money or property by means of false and fraudulent pretenses, representations and promises. It also alleges that the defendants engaged in a scheme to commit securities fraud.
As part of that scheme, Valley Investments did not own sufficient property or assets to secure the investments as represented. Despite this fact, the defendants continued to solicit investor funds for several years despite knowing that the business was not generating sufficient profit. Because the business operation was not sustainable, the three defendants allegedly used new investor funds to make interest payments to existing investors, operate the daily activities of the business, and fund the Lochmillers' personal expenditures. The Lochmillers and Carver continued to misrepresent to investors that the business was thriving, and did not disclose to new investors how their money was being used. Also, because there were not sufficient funds, the defendants did not file all of the Trust Deeds on behalf of investors, and most of the filed Trust Deeds were not the first encumbrance of the properties named and were thus worthless. The indictment further alleges that Carver notarized forged signatures of investors for fraudulent releases of Deeds of Trust.
In May 2009 the State of Colorado Division of Securities issued a cease and desist order to Valley Investments. Less than two weeks later Valley Investments closed its doors. Further, a Denver District Court Judge appointed a Receiver over Valley Investments and all related entities.
Philip Lochmiller faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, 20 counts of money laundering, and 10 counts of mail fraud.
Philip Lochmiller II, faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, eight counts of money laundering, and 10 counts of mail fraud.
Shawnee Carver faces one count of conspiracy to commit mail fraud and securities fraud, one count of conspiracy to commit money laundering, and 10 counts of mail fraud.
Conspiracy carries a penalty of not more than five years' incarceration, and up to a $250,000 fine. Conspiracy to money laundering carries a penalty of not more than 20 years in federal prison, and a fine of up to $500,000. Money laundering carries a penalty of not more than 10 years' incarceration and a fine of up to $250,000. The penalty for mail fraud is up to 20 years incarceration and not more than a $250,000 fine. (usattyco121609)
MORAL
First, $31 million is a lot of money especially if the Federal prosecutors consider it a loss. Second, it means a lot of time in prison if they are convicted.
OREGON MORTGAGE BROKER INDICTED FOR FRAUD
FACTS
A Federal Grand Jury has indicted a Portland, Ore. mortgage broker for bank fraud related to the sale of his parent's home in 2006. Alex Z. Biscocho is accused of devising a scheme to defraud First Franklin Financial Corp. during the time he was a mortgage broker at Countrywide Mortgage. Biscocho is alleged to have prepared a loan application, on behalf of a third-party borrower, which contained falsified and inflated income and asset information. The indictment further alleges that, at closing, the borrower became concerned about information contained in the closing documents and refused to complete the transaction. Without the borrower's knowledge, according to the indictment, Biscocho then closed the $475,000 loan and thereafter made two loan payments from his personal account, including one check that was made to appear as if the borrower was the payor.
Biscocho appeared before U.S. Magistrate John V. Acosta on Dec. 18, 2009 for arraignment on the bank fraud charges. The crime of bank fraud carries a maximum penalty of 30 years in prison and a maximum fine of $1,000,000. (usattyor121809)
MORAL
I know you are innocent until proven guilty but how stupid can you get? First, it is alleged he let the borrower see the false information. Then the borrower says no deal and then he closes the deal in the borrower's name anyway as if the borrower would not find out.
WISCONSIN TAX PREPARER INDICTED FOR MORTGAGE FRAUD
FACTS
On Dec. 17, 2009 a two-count indictment was unsealed charging Gail L. Mendez of Sun Prairie, Wis., with bank fraud involving mortgage applications and making false statements in connection with a loan application. It was unsealed following the defendant's arrest on Dec. 17, 2009, in Laredo, Texas. If convicted, defendant Mendez faces a maximum penalty on each count of 30 years' imprisonment and a $1,000,000 fine.
The indictment charges that Mendez engaged in a mortgage fraud scheme in 2006 and 2007, while working as a tax preparer doing business as Mendez Connections in the Madison area.
In 2006 and 2007 Park Bank had a mortgage program that allowed borrowers to apply for a mortgage using an Individual Tax Identification Number instead of a Social Security Number. An ITIN is a nine-digit tax processing number issued by the Internal Revenue Service to aliens who are required to have a U.S. taxpayer identification number but are not eligible to obtain a Social Security Number. Under Park Bank's ITIN mortgage program, a borrower applying for an ITIN loan was required to provide the bank with copies of the borrower's income tax returns for the prior two tax years.
Count one of the indictment charges Mendez with bank fraud. The count alleges that Mendez, along with other co-schemers not named in this indictment, engaged in a scheme to defraud Park Bank. The count alleges that in connection with numerous ITIN mortgage loan applications Mendez and her co-schemers knowingly fabricated and presented to Park Bank bogus tax returns that falsely inflated the borrowers' income and had not been filed with the IRS. It is specifically alleged that Mendez and her co-schemers submitted to Park Bank false returns in connection with 19 loans totaling more than $3,300,000.
Count two charges Mendez with making false statements in connection with her own loan application at AmTrust Bank. The count alleges that in November 2007 Mendez applied to AmTrust Bank for a $349,000 loan to finance her purchase of her residence from her then-husband. It is alleged that in support of that application Mendez submitted to AmTrust Bank a 2005 income tax return in her name showing total income of $169,237 and a 2006 income tax return in her name showing total income of $170,825. The indictment alleges that the 2005 return actually filed with the IRS by Mendez reported total income of only $29,402, and that the 2006 return actually filed with the IRS by Mendez reported total income of only $40,868.
Following the arrest of Mendez, the United States moved for her detention to be transported in custody from Texas to Madison for arraignment on the charges and a detention hearing. A charge is merely an accusation and that a defendant is presumed innocent until and unless proven guilty. (usattywdwi121809)
MORAL
Now you know aliens can use ITIN when they do not have a Social Security Number. However, Ms. Mendez has a lot of prison time to look forward to if convicted.
TRUTH IN LENDING NOW REQUIRES THE TRANSFEREE OF LOANS TO NOTIFY THE BORROWER WITHIN 30 DAYS OF THE DATE OF TRANSFER
FACTS
The purchaser or assignee that acquires the loan must provide the required disclosures in writing no later than 30 days after the date on which the loan is sold or otherwise transferred or assigned. The Federal Reserve Board is issuing this interim rule, effective immediately upon publication, so that parties subject to the statutory requirement have guidance on how to comply. However, to allow time for any necessary operational changes, compliance with the interim final rule is optional for 60 days from the date of publication; during this period, covered persons would continue to be subject to the statute's requirements.
This was effective Nov. 20, 2009. It is optional until Jan. 19, 2010. (74fr60143;Truth in Lending 11-10-09) See 12 CFR §226.39.
MORAL
Failure to comply leaves the transferee subject to civil liability. This applies to persons that acquire more than one mortgage loan in a 12-month period.
CALIFORNIA MAY SEE MORE FORECLOSURES IN 2010
FACTS
Foreclosures are predicted to go up in 2010 because the foreclosures in 2009 are artificially low due to lenders holding back on the foreclosures so as not to flood the market.
In California where 30% of borrowers owe more than their homes are worth, the options are these:
* Banks can reduce principal balance. That is, cut the amount borrowers owe to reflect today's home values, which historically they do not do.
* Lenders could allow more short sales, in which lenders accept sales prices below what they're owed. A new buyer moves in, the negative equity is wiped out. But the lender tends to reserve its right to pursue the seller for the negative money it did not get. The seller needs to remove this clause or he may find the lender suing him after the sale.
* Foreclose. It moves out people who can't afford the house and moves in someone who can. However if there is a second mortgage on the property and the lender forecloses on the first mortgage, the holder of the second mortgage may be able to sue you for nonpayment of the second mortgage.
REMINDER ABOUT ONE OF THE NEW REVISIONS TO THE CALIFORNIA FORECLOSURE LAWS
FACTS
This law applies to residential mortgage loans that were made between Jan. 1, 2003 and Dec. 31, 2007.
1. The lender may not file a notice of default until after contact is made with the borrower or 30 days after exercising due diligent attempts to contact the borrower. The lender shall contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure. The lender must also notify the borrower during the initial contact that he or she has the right to request a subsequent meeting and, if requested, the subsequent meeting must take place within 14 days.
2. The lender must provide a toll free number made available by HUD to find a HUD-certified housing counseling agency. (CC §2923.5(a)(1)(2))
3. The notice of default when recorded under Civil Code Section 2924 must include the lender declaration that it has contacted the borrower, or tried with due diligence as defined by the statute to contact the borrower. (CC§2923.5(b))
MORAL
What does this mean to you? If the lender fails to comply, then foreclosures can arguably be prevented for failure to comply and a lawsuit with a lis pendens can be filed for failure to comply thereby temporarily stopping the foreclosure and giving the borrower more time to make arrangements to refi, move or modify as the case may be. So be sure to document everything to the lender by certified mail.
REMINDER ABOUT THE CALIFORNIA FORECLOSURE PREVENTION ACT
FACTS
Unless the lender has applied for and received an exemption, the act provides an additional 90 days aside from the 90 days given before a Notice of Sale can be served and recorded. The exemption (which in all probability most lenders have applied for and received-you need to check if the exemption was granted) means the lender does not have to give the extra 90 days before recording the notice of sale. The mortgage loan servicer must have applied for and received the exemption indicating it has implemented a loan modification program with specific features and is acceptable to the commissioner of the Department of Corporations. Additionally, the Notice of Sale must have a declaration from the mortgage loan servicer that there is a temporary or permanent order of exemption from this law signed off by the commissioner of Corporations. (CC §§2923.52-2923.55).
MORAL
Between the laws cited here and the ones above and the MERS being a beneficiary, a borrower can stay in his home for quite a while.
NOTICE OF SALE MUST BE REDONE IF POSTPONED MORE THAN 365 DAYS
FACTS
Although there is no limit on the number of postponements of a nonjudicial foreclosure sale (CC §2924g), if the sale proceedings are postponed for a period of periods totaling more than 365 days from the date set in the notice of sale, the scheduling of any further sale proceedings must be preceded by giving a new notice of sale pursuant to CC §2924f, 2924g(c)(1)(2)/.
MORAL
If you are in foreclosure and working your way through a loan modification, short sale or something else, keep track of any sale date. If the lender or servicer agrees to continue it be absolutely certain it is done in writing and you confirm it with the trustee conducting the sale by checking the phone number and trustee sale number.
WHEN A TENANT OCCUPIES THE CALIFORNIA FORECLOSED PROPERTY, THE TENANT GETS 60 DAYS NOTICE TO VACATE INSTEAD OF THREE
FACTS
A tenant or subtenant of a rental housing unit at the time the property is sold in foreclosure shall be given 60 days written notice to quit before the tenant or subtenant may be removed from the property. This does not apply if a party to the promissory note remains in the property as a tenant or subtenant. (CC§1161b). Federal law signed by President Obama provides the tenant must get 90-days notice before the tenant has to vacate a property based on foreclosure of the property. Moreover if the tenant is a "bona fide" tenant with a lease entered into before the notice of foreclosure, the tenant has the right to occupy the premises until the end of the remaining term of the lease unless the property is sold to a purchaser that will occupy the unit as a primary residence.
MORAL
Can you imagine a tenant with a three-year lease before the property goes into foreclosure?
A REMINDER ABOUT CALIFORNIA LEASE LAW
FACTS
If there is no certificate of occupancy for the premises, then the lease is illegal. A landlord cannot recover a money judgment. What is more, the tenant may be able to recover any rent it paid as well as attorney fees. (Maria de Jasus Lagunas Espinoza v. Guidelja Calva (12-16-08, 4th Dist.) 169 CA 4th 1393)
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
