AND NOW FOR THE TOP FIVE MORTGAGE FRAUD STATES AND I BET YOU CAN GUESS FOUR OF THE FIVE
FACTS
California now has the highest risk of mortgage fraud. Nevada drops to second place and coming in third is Arizona. Florida remains in fourth place followed by Colorado in fifth place. (mnm21810)
MORAL
Do you realize over the years and I do mean years, California, Florida and Nevada have consistently been the top three? This is a somewhat dubious honor.
MORTGAGE FRAUD CRIMES UP 7.5% FROM ONE YEAR EARLIER
FACTS
Suspicious activity reports filed in the third quarter of 2009 showed a 7.5% increase in possible mortgage loan fraud over a year earlier, the Financial Crimes Enforcement Network reported on Feb. 18, 2010.
Forty-two percent of the reported activity took place in California and Florida, while the greater Miami, Los Angeles and New York areas topped the list of metropolitan locations.
The Bank Secrecy Act requires financial institutions to file suspicious activity reports, or SARs, with FinCEN when they identify or suspect fraudulent activity. FinCEN, a unit of the U.S. Treasury Department that provides and analyzes financial intelligence, administers the Bank Secrecy Act.
The report covered the period from July 1 to Sept. 30, 2009. FinCEN said that 15,697 mortgage loan fraud SARs had been submitted during the quarter, up 7.5% over the third quarter from 2008.
(reuters21810)
MORAL
Remember the 3,250 extra employees I mentioned the FBI was in the process of hiring? I suggest that anyone thinking about cutting corners, think twice. And if that is not enough be sure they can pay their attorney when the people with gold badges come around.
ALABAMA MAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On Feb. 18, 2010, Al Carson Rockett Jr. pleaded guilty in federal court to mail fraud charges connected to a mortgage fraud scheme that totaled more than $1 million. He agreed to forfeit $1,090,046 to the government as proceeds of illegal activity.
Four mail fraud counts involve parcels containing mortgage-application documents sent by a private postal carrier from Birmingham to mortgage companies in June, July and August 2005. The mortgage fraud ring operated between 2004 and 2006. Count Five of the information sought the forfeiture from Rockett.
According to Rockett's plea agreement, he conducted the mortgage fraud as follows: He convinced people they could buy houses from him without any down payment or closing costs and without the need for documents to support a loan application. Buyers were told the houses were ready to be used as government-subsidized rental properties, that tenants were available to move in immediately and rent payments would exceed the mortgage payments. In many instances, however, there were no tenants, the buyers couldn't make the mortgage payments, and the properties quickly fell into foreclosure.
On other loans, Rockett stated on loan documents that buyers were making down payments when, in fact, Rockett was making the payment.
None of the loan documents disclosed Rockett was paying each buyer between $3,000 and $10,000 as an inducement to buy his properties. The mortgage loan documents involved required that all cash payments between a buyer and seller associated with a real estate transaction be disclosed.
HUD Inspector General Kenneth Donohue said Rockett's case is an example of how his office, working with law enforcement agencies and U.S. Attorneys' Offices across the country, will pursue individuals who are participating in mortgage fraud schemes, which are eating away at the economic heart of this country. "We will use whatever means necessary -- both civil and criminal -- to isolate and punish mortgage companies' leadership and personnel who are corroding the soundness of HUD programs," Donohue said. (usattyndal21810)
MORAL
Notice that the loans occurred in years of stated income loans? Notice they were five and six years ago. If anyone is involved in knowingly allowing a borrower to "state income" the loan officer and/or mortgage broker new to be false then they can be and in fact are indicted for mortgage fraud. Did you also notice the government is very active in seeking the forfeiture or the amount of money lost by the lenders and/or borrowers? If you were involved in any of this how much equity do you have in anything? As an aside, our bankruptcy attorney will tell you that restitution forfeiture orders are not dischargeable in bankruptcy.
FIVE IN LOS ANGELES GET PRISON SENTENCES FOR $13 MILLION MORTGAGE FRAUD
FACTS
On Feb. 17, 2010, Martha Rodriguez, who pleaded guilty to mail fraud and money laundering charges in relation to the scheme that ran from May 2003 until November 2005, was sentenced to 120 months in prison. In issuing the decade-long sentence, Judge King noted that Rodriguez perpetrated the mortgage fraud scheme while she was free on bond after being charged in another real estate fraud scheme.
Edward Seung Ok, who pleaded guilty to mail fraud, was sentenced to 15 years in prison. Judge King ruled that Ok violated his plea agreement by failing to provide investigators with access to an account in the Bank of Nevis on the Caribbean island of St. Kitts into which Ok had transferred more than $1.6 million during the course of the fraudulent scheme. In his plea agreement, Ok had agreed to repatriate and transfer to the government all of the funds in that account. In addition to continuing to conceal the money, Ok transferred more than $1 million of the off-shore money into a secret account in the United States, where he could access the funds for his personal expenses, which included golf club memberships, illegal drugs and a $235,000 Lamborghini Gallardo. Addressing the court during yesterday's hearing, Ok admitted that he spent more than $1 million of the money he had hidden in the off-shore account during a two-year period when he was free on bond in this case.
The prison sentences stem from a fraud case in which Rodriguez, Ok and three others used computerized databases that list homes going into foreclosure to locate victims, who were promised refinancing services. The scheme was operated through Rodriguez's real estate and escrow agencies, Silvernet Properties in Downey and Bellasi Escrow in Seal Beach. Instead of obtaining refinancing, Rodriguez and her co-schemers submitted loan applications in the names of straw buyers who were purportedly buying the properties. In some cases, the defendants paid the straw buyers for the use of their personal information. In other cases, the defendants used personal information of people without their knowledge. The loan applications for the straw buyers -- which always contained false information -- caused a series of lenders to fund more than 100 mortgages worth more than $40 million. The loan proceeds were used to pay off the loans in default, sometimes to make a few mortgage payments on the new loans, and to provide some instant cash to homeowners. However, Rodriguez and her co-schemers skimmed off the remaining proceeds, typically representing the bulk of the homeowner's equity.
Even though they were promised that they would be able to keep their homes, the victim homeowners usually lost title to their homes. The lenders suffered losses when the straw buyers then failed to make loan payments and the new loans went into default. Lenders were often unable to foreclose because the straw buyers did not know the properties were in their names. The scheme targeted commercial lenders and more than 100 homeowners across the Southland.
Three other defendants in this case were sentenced on Feb. 17, 2010. They are:
Cynthia Valenzuela, who pleaded guilty to mail fraud, was sentenced to one year and one day in prison; Vladimir Stefanovic was sentenced to 18 months in prison; and Maria G. Juarez was sentenced to three years in prison, in part because, after she was arrested on the case, she continued to perpetrate loan fraud while she was free on bond. (usattycdca21810)
MORAL
There is a lot of chutzpah in this case, or did you notice? Rodriguez out on bond for one fraud commits more fraud. Ok agrees as a plea deal to give secreted funds to the government and then spends the money on among other things a Lamborghini Gallardo. Juarez while on bond continues to do loan fraud like Rodriguez. I would say that takes a lot of guts. Stupidity, but a lot of guts.
Did you notice the federal prosecutors went back to loans from 2003 to date? That is because they have 10 years in which to prosecute mortgage fraud.
SANTA CLARA AND SAN MATEO FORECLOSURES ON THE RISE
FACTS
Foreclosures rose 37% in Santa Clara County in January 2010 from December 2009 and 71% in San Mateo County. (sjmernws21610)
MORAL
Remember what I have been saying for the last two years? This will not spike until 2012. The politicians want to paint a rosier picture as do others. But no one is accounting for the five year "step up" mortgages from 2006 and 2007. What happens when these step up mortgages amortize then? More people will walk away. Notwithstanding the bankers starting to face reality (if they are), they need to modify or principally reduce the mortgages to make them affordable if they really want to keep people in their homes and stop the runaway foreclosures and reduction in value of the homes.
BALTIMORE TITLE COMPANY OWNER FINALLY CAUGHT AFTER ONE YEAR ON THE RUN
FACTS
On Feb. 15, 2010, Daniel E. Fink Jr., who owned and operated Homemaxx Title & Escrow LLC, a title company that conducted residential real estate closings with offices in Middle River and Parkville, Md., was arrested in Palm Beach, Fla. Fink was a fugitive since March 26, 2009 when a federal grand jury in Baltimore returned an indictment charging him with wire fraud and money laundering in connection with a scheme to defraud lenders and homeowners of over $500,000.
According to the five count superseding indictment, from February 2003 to July 2004, Fink 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 real estate closing documents for personal expenditures unrelated to real estate transactions. In connection with a particular real estate refinancing transaction by one of his customers, Fink allegedly diverted funds from the escrow account and then used the proceeds 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, and to have used $93,228 of the criminal proceeds for money laundering. The indictment seeks the forfeiture of $593,228.
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 each of two counts of money laundering.
(usattymd21610)
MORAL
Any competent attorney would have told him that running away killed any chances he may have had to stay out of federal prison which can be done even if found guilty, if the circumstances are right.
FORMER MISSOURI REAL ESTATE BROKER PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On Feb. 18, 2010, it was announced that Randall Penberthy Jr., pleaded guilty to bank fraud in connection with brokering real estate transactions between 2006 and 2007.
From 2003 through 2008, Penberthy was engaged in the business of brokering real estate transactions in the St. Louis metropolitan area and elsewhere. Penberthy marketed real estate deals to associates and investors as potential rental properties. Penberthy operated and controlled several business entities, including Covenant Financial LLC, First Choice Investment and Loan LLC, and Midwest Management LLC. Penberthy operated his business initially out of an office in Chesterfield and later moved to St. Charles.
Between late 2006 and October 2007, Penberthy devised and executed a scheme to defraud financial institutions by means of material false representations. As part of the scheme, Penberthy recruited investors to buy residential real estate directly from distressed property sellers whose homes were in danger of foreclosure. With Penberthy's assistance, investors would finance the purchases through bank loans. Penberthy would fraudulently place and record a second or third deed of trust on the property, typically in the name of First Choice or some other entity he controlled, in order to make it appear that a legitimate second or third mortgage had been placed against the property, when in fact he knew that no such legitimate second or third mortgage existed. Bank loan funds were used to pay the sales price of the property as well as to pay off the fraudulent second or third mortgage. Funds used to pay off the fraudulent second or third mortgage were paid to entities controlled by Penberthy, including First Choice and Midwest. He then used a portion of those funds to make the down payment on the property being purchased. Penberthy fraudulently misrepresented the source of down payment funds on loan documents. Penberthy's scheme has caused financial institutions to incur financial losses in excess of $500,000.
He now faces a maximum penalty of 30 years in prison and/or fines up to $250,000, when he is sentenced on May 13, 2010. (usattyedmo21810)
MORAL
The fraud is a little different here. But as you notice it is always a paper trail that leads right back to the person that did it.
MISSOURI MORTGAGE PROCESSORS INDICTED FOR MORTGAGE FRAUD
FACTS
On Feb. 11, 2010, Jeremy Beadle, president of Network Ventures, a mortgage processing and real estate brokerage business, and Rebecca J. Domecillo, an officer of Network Ventures and also participating in the operation and management of Premier Mortgage Funding, have been indicted on multiple fraud charges.
Beadle was also engaged in the rehabilitation of real estate properties in need of repairs. Beadle also operated and managed Premier Mortgage Funding, a mortgage brokerage company, owned by Network Ventures.
According to the indictment, between November 2005 and December 2008, Beadle purchased properties and resold them at higher prices based on fraudulent and inflated appraisals to individuals who were qualified for mortgages based on false loan applications.
In November 2005, Beadle purchased five distressed properties located in St. Louis on Labadie Ave. for $32,000 each. He made limited renovations to the properties and then sold them. He submitted false mortgage loan applications overstating the borrowers' monthly income and falsely representing that they would occupy the properties as their primary residences. Beadle provided the funds for the down payments on the sales by depositing funds into the borrowers' accounts. Beadle received the sales proceeds when the properties were sold. Between March and September 2006, the indictment alleges that Beadle realized a profit of approximately $160,000 from the sale of the properties.
On Sept. 8, 2006 Beadle purchased a property located on Normandy Drive in Lake St. Louis for $315,000, which he resold for $411,000 in January 2007. Beadle prepared a false mortgage loan application for the buyer misrepresenting the borrower's income and assets. Beadle received a profit of $89,000. Beadle also purchased properties from homeowners who were in financial difficulty and in danger of foreclosure. He falsely represented to these sellers that they could rent the property and remain in their homes, and that the mortgage would be paid using the rent payments made by the residents of the property.
In January 2006, Beadle offered to purchase real estate properties from individuals who needed to refinance the mortgages on their residences because they were in danger of foreclosure. Beadle offered to purchase these properties for a price in excess of the balance of the existing mortgage. He told the sellers they could rent the properties and he would apply the rent payment to the mortgage. However, he did not apply all the rent payments to the mortgage. Beadle failed to make the mortgage payments as agreed, and these properties were foreclosed, resulting in losses to the mortgage lenders.
The indictment alleges that Domecillo employed family members at Premier Mortgage Funding and also used family members, including her mother and daughter, as straw parties in real estate transactions she arranged. Between June 2005 and December 2008, Domecillo arranged for the purchase of real estate by straw parties, including family members, for a price in excess of the sales price set by the seller, and applied for mortgage loans in the names of the straw parties. Domecillo supplied fraudulent information to mortgage lenders on behalf of the straw parties, including false information about their income, employment, the purpose of the loan, current rental agreements on the property, and assets. At the time of closing of the sale of the property, Domecillo supplied fraudulent invoices to the closing agent, allegedly representing the cost of repairs to the property, which were to be paid from the seller's proceeds. The indictment states that Domecillo received the funds but used them for her own benefit, instead of for repairs on the properties.
Domecillo acted as the real estate manager of the properties purchased by the straw parties and assumed responsibility for collecting all rent payments and making the mortgage payments on properties. However, the indictment alleges that because Domecillo failed to make the mortgage payments, these properties were foreclosed, resulting in losses to the mortgage lenders.
Jeremy Beadle was indicted on seven felony counts of wire fraud and two felony counts of mail fraud. Domicile was indicted by a federal grand jury on eight felony counts of mail fraud. If convicted, each count of the indictment carries a maximum penalty of 20 years in prison and/or fines up to $250,000. (usattyedmo21110)
MORAL
She involves her mother and daughter according to the indictment. Again note this is occurring during the stated income years. You wonder if the lenders were doing their underwriting?
NEVADA ATTORNEY GENERAL INDICTS MAN FOR FORECLOSURE SCAM
FACTS
On Feb. 19, 2010, Jeffery Tye Brown was indicted on four felony counts of theft and one felony count of forgery in connection with the operation of DB Financial Services, a foreclosure rescue business located in Henderson, Nev., Attorney General Catherine Cortez Masto said. Brown was accused of misleading customers into believing that, for a fee, he would guarantee resolution of a victim's pending mortgage foreclosure.
The indictment alleges that between December 2007 and February 2008, Brown contacted victims whose homes were going into foreclosure and obtained advance payments of $999 for foreclosure rescue services that he never performed. He failed to give refunds despite promising them in his contracts and advertising. He also forged documents to the state Mortgage Lending Division to cover up the criminal activity.
Shortly after execution of a search warrant on the DB Financial offices in 2008 by the task force, Brown fled the country. He has been extradited back to this country from the Philippines, where he was hiding to evade authorities. (lvsnrv21910)
MORAL
Foreclosure scam, loan modification, no matter what you call it. Be sure you can deliver and if not refund the money or you will be needing legal counsel as Brown now does. Even running away to the Philippines did not help.
NEW YORK REAL ESTATE LAWYER ARRESTED FOR MORTGAGE FRAUD
FACTS
On Feb. 17, 2010 Lewis Cheri co, a Eastchester, N.Y. real estate lawyer who also practiced in New York City, was arrested on an indictment charging him with mortgage fraud, obstruction of justice and money laundering.
According to the indictment filed in Manhattan federal court, from July through December of 2002, Cheri co participated in a fraudulent real estate investment scheme which had, as its primary objective, the purchase of multimillion dollar residential properties in various communities in Westchester County, including Purchase, Eastchester and Rye, with loans obtained through the submission of false and misleading information to banks and other lenders. Many of the loans were equal to or in excess of one hundred percent of a property's actual sale price, so that the defendant and his coconspirators did not have to put any of their own money at risk in the transaction.
Cheri co served as the attorney for various coconspirators in negotiating and closing the fraudulent purchases that were part of the scheme. Cheri co and his co-conspirators submitted to numerous federally insured banks various documents, including loan applications, contracts of sale, deeds, real estate transfer documents, and title reports. Those documents contained materially false or misleading information about the income, assets, existing debt and credit-worthiness of the borrower, the chain of title to the property, and the sale price of the home, as well as the borrower's intent to reside in the property as a primary residence, when, in fact, the properties were typically purchased for investment purposes. As a result of the scheme to defraud, Cheri co and his co-conspirators obtained millions of dollars in loan proceeds, enabling them to control certain properties that they otherwise would not have been able to purchase and finance.
The indictment also charges Cheri co with laundering the illegal proceeds obtained from the sale of one of the properties used in the mortgage fraud scheme by transferring the proceeds from a bank account controlled by Cheri co to an account that was controlled by one of his co-conspirators, Dominick DeVito. The transaction was designed to conceal and disguise the nature, location, source, ownership, and control of the illegal proceeds.
The indictment further charges Cheri co with obstruction of justice, and conspiracy to obstruct justice, in connection with the 2003 sentencing of DeVito, following DeVito's conviction in United States v. Pasquale Parello, et al., in United States District Court for the Southern District of New York on charges of racketeering and mortgage fraud. Specifically, Cheri co assisted DeVito in concealing profits that DeVito earned from the sale of a property located in Purchase, and in submitting an affidavit containing false and misleading information about the sale to the United States Probation Office.
If convicted, Cheri co faces a maximum sentence of 30 years in prison on each of the six counts of mortgage fraud, 20 years in prison on the money laundering count, 10 years in prison on the obstruction count, five years in prison on the conspiracy to obstruct justice, and a fine of the greater of $1,000,000, or twice the gross gain or loss resulting from the crime. (usattysdny21710)
MORAL
A lawyer spends four years going to college. Then three years going to law school. Then sits three days for a bar examination, New York's being one of the toughest in the nation and then risks it all for fraud, and if convicted loses his license, right to vote, right to hold office and a litany of other disabilities. I have never really understood why they would do it considering the hard work it took to get the license.
PENNSYLVANIA COUPLE PLEAD GUILTY TO MORTGAGE FRAUD
FACTS
On Feb. 11, 2010, Randy and Elleni Berger, residents of Pittsburgh, pleaded guilty in federal court to charges of wire fraud conspiracy in connection with a mortgage fraud scheme. Elleni Berger also pleaded guilty to a charge of filing a false tax return.
The Bergers operated All Credit Finance, which was a mortgage broker company that assisted borrowers obtain financing collateralized by real estate. The couple participated in a conspiracy in which they and other members of the conspiracy submitted fraudulent loan applications on behalf of borrowers that overstated their financial condition, and a series of fraudulent documents that supported those misrepresentations. In addition, Randy and Elleni Berger submitted appraisals that were fraudulent in that the appraisals overstated the values of the properties that were serving as collateral for the loans, and represented that they had been prepared by licensed appraisers when, in fact, they were not prepared by licensed appraisers. Elleni Berger also filed false tax returns that were false in that they reported significantly less income than she actually earned.
Sentencing is set for June 16, 2010. The law provides for a total sentence of 23 years in prison, a fine of $500,000, or both, for Elleni Berger, and a total sentence of 20 years in prison, a fine of $250,000, or both, for Randy Berger.
The Mortgage Fraud Task Force conducted the investigation that led to the prosecution of Randy and Elleni Berger. Federal law enforcement agencies participating in the Mortgage Task Force include the Federal Bureau of Investigation; the Internal Revenue Service, Criminal Investigations; the United States Department of Housing and Urban Development, Office of Inspector General; the United States Postal Inspection Service; and the United States Secret Service. Other Mortgage Fraud Task Force members include the Allegheny County Sheriff's Office; the Pennsylvania Attorney General's Office, Bureau of Consumer Protection; the Pennsylvania Department of Banking; the Pennsylvania Department of State, Bureau of Enforcement and Investigation; and the United States Trustee's Office. (usattywdpa21210)
MORAL
As I have been saying, the family that commits fraud together stays together (in federal prison?) Did you notice there are 11 governmental agencies cooperating with each other in nothing but mortgage fraud? If you have been overly creative, I suggest you see an attorney now rather than later to mitigate problems.
PENNSYLVANIA WOMAN GETS PROBATION FOR MORTGAGE FRAUD
FACTS
On Feb. 16, 2010, Debra Phillips of Pittsburgh was sentenced in federal court to three years of probation on her conviction of wire fraud conspiracy in connection with a mortgage fraud scheme.
Phillips, who was a licensed mortgage broker operating Equitable Lending, participated in a mortgage fraud conspiracy in which she submitted loan applications to lenders knowing that they contained false representations related to borrowers' assets. Phillips also brokered loans in which borrowers concealed from the lenders that they were borrowing money to make the down payments for real estate purchases. (usattywdpa21610)
PENNSYLVANIA MAN GETS PROBATION FOR MORTGAGE FRAUD
FACTS
On Feb. 16, 2010, Jason Jester, a resident of Pittsburgh, was sentenced in federal court in Pittsburgh to five years of probation, including four months of home detention, on his conviction of wire fraud conspiracy in connection with a mortgage fraud scheme.
Jester, along with Randy Carretta, operated Precision Mortgage, a mortgage broker business. Jester, along with other members of the conspiracy, obtained financing for individuals to purchase real estate based on material misrepresentations as to the buyers' financial condition and other misrepresentations. In addition, with the knowledge and assistance of Jester, other members of the conspiracy submitted fraudulent documents to the lenders, including appraisals that overstated the value of the property, and W-2s, pay stubs and similar documents that overstated the buyer's income. (usattywdpa21610)
MORAL
Equality of sexes. If the woman can get probation, so can a man.
WASHINGTON STATE REMINDS YOU ABOUT MORTGAGE BROKER AND LOAN ORIGINATOR LICENSE RENEWAL
FACTS
The final opportunity to renew expired Washington Mortgage Broker or Loan Originator licenses is Sunday, Feb. 28, 2010 at 5pm PST. If you do not renew your expired license by that date, it will be cancelled. This means should you want to be licensed again, you will have to reapply and meet new licensing requirements. All renewal requests must be submitted through the NMLS with additional information provided by the licensee to the Department of Financial Institutions directly.
If you already submitted your renewal request, but have outstanding renewal requirements, you have until Feb. 28, 2010 to complete those requirements or your license will cancel and you must reapply for it. The most common renewal requirements not met include failing to provide DFI with your continuing education, not completing the right amount or type of continuing education or not completing and faxing an Declaration of Activity to DFI.
MORAL
Renew now or take a very long time and expense in renewing later.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
