NATIONWIDE FORECLOSURES AND DEFAULTS STILL PREDICTED TO GO UP AND HOUSING PRICES STILL PREDICTED TO GO DOWN
FACTS
Federal Reserve officials are worried that serious delinquency and foreclosure rates are moving higher and house prices are still under downward pressure. "We have yet to see evidence of a sustained recovery for the housing market. Mortgage delinquencies for both subprime and prime loans continue to rise as do foreclosures," says the Fed chairman Ben Bernanke. The minutes of the March 16 Federal Open Market Committee reveal that Fed officials are not impressed by the improvement in home sales in the second half of last year. These same minutes state it may largely reflect "transitory effects from the first-time homebuyer tax credit rather than a fundamental strengthening of housing activity." (bkrun4810)
MORAL
If you will go back over my e-alerts for the last three years, based upon my knowledge, I predicted the recovery would not occur until 2011. I still have not changed my mind although the government has stated annually each year that next year it will recover. Well so far I outguessed the government.
GOOD NEWS AND BAD NEWS ABOUT HUD NET WORTH REQUIREMENTS
FACTS
The Department of Housing and Urban Development is raising the net-worth requirement for Federal Housing Administration-approved lenders. HUD had originally proposed raising the $250,000 net-worth requirement to $2.5 million within three years. A final rule expected to be released shortly raises it to $1 million starting next year-but there are breaks for firms that are considered "small business" lenders. "Current FHA-approved small business lenders must possess a minimum net worth requirement of $500,000," HUD said. This means an independent mortgage-banking firm with less than $7 million in total annual receipts will qualify as an FHA small business lender. One source said an FHA lender that funds roughly $250 million in loans annually should qualify for the lower $500,000 net-worth requirement. Depository institutions with less than $175 million in assets also can qualify as an FHA-approved small business lender. The final rule also eliminated FHA's approval process for mortgage brokers. (nmn4910)
MORAL
If correct, then loan correspondents will no longer need to be approved by HUD and will no longer need certified audits and lenders can use whomever they want as long as licensed. We will see what the final rule says when it appears.
CALIFORNIA RELENTS AND WILL NOT TAX "DEBT FORGIVENESS" THAT OCCURS WHEN PROPERTY IS LOST IN FORECLOSURE. ALIGNS ITSELF WITH THE INTERNAL REVENUE SERVICE
FACTS
On April 8, 2010, California state lawmakers passed Senate Bill 401 to exempt borrowers who lost homes to foreclosure or short sales in 2009 from state taxes that can run into thousands of dollars. The same is true for certain types of loan modifications. A spokesman for Gov. Schwarzenegger said he would sign the bill.
SB 401 aligns much of California's tax code with the Internal Revenue Service. The U.S. government has banned the IRS from taxing forgiven mortgage debt as extra household income from 2007 through the end of 2012. California did the same for the 2007 and 2008 tax years.
The state bill extends the state ban through 2012. The bill will affect people who had debt forgiven as they lost homes through foreclosures, short sales and deeds in lieu of foreclosure. It will also affect those who got loan modifications that cut what they owed the bank.
Borrowers can avoid state taxes on up to $500,000 in forgiven debt. Those who bought houses and never refinanced before doing a short sale, loan modification or foreclosure are unaffected. In most cases the banks just take back the houses. There is no forgiven debt and no tax bill.
Investors must pay state taxes on forgiven debt. The bill affects only people who lived in their home.
Once the governor signs this into law, California taxpayers will not have to do anything. If they qualify for federal relief on the mortgage debt forgiven, then they will also qualify for state income tax purposes. California Form 540 starts with federal adjusted gross income, so there will be no adjustment necessary. (modb4910)
MORAL
However, you may want to revisit your State Income Tax Return (Form 540) if you have already filed it to see if you need to file an amended return.
CALIFORNIA MAN SENTENCED TO FIVE YEARS IN FEDERAL PRISON FOR HUD/FHA MORTGAGE FRAUD
FACTS
On April 5, 2010, Lorenzo Espinoza, of Newport Coast, Calif., was sentenced to five years in federal prison for defrauding the Department of Housing and Urban Development by fraudulently obtaining mortgage loans that went into default. Espinoza was also ordered to pay HUD restitution of more than $614,000.
Espinoza pleaded guilty in December 2006 to conspiracy to defraud HUD, two counts of bankruptcy fraud, one count of money laundering and one count of willful failure to pay tax to the Internal Revenue Service. When he pleaded guilty, Espinoza admitted that he engaged in a scheme that ran from April 1995 until approximately May 2001 and caused HUD to suffer losses when he and his associates fraudulently purchased nearly 100 residential properties. The properties were sold at inflated market values to straw buyers who were unable to make payments on the homes. Espinoza and his associates supplied the down payments for the straw buyers and in some cases obtained bogus tax forms and paycheck stubs that were submitted with the loan applications. The lenders relied on the false documents when they approved the loans, and HUD relied on the false documents in insuring the home loans. When the straw buyers defaulted on the home loans and the lenders foreclosed on the properties, HUD reimbursed the lenders for their costs and took possession of the properties. HUD ultimately suffered losses of more than $2 million when it sold the properties for far less than the fraudulent purchase prices of the homes.
In addition to defrauding lenders and HUD, Espinoza committed bankruptcy fraud in 1999 when he filed for bankruptcy and failed to tell the United States Trustee that he owned a Rolex Daytona watch, two Ferraris and a Lamborghini. In late 2002, Espinoza laundered the proceeds of his bankruptcy fraud when he sold the Ferrari automobiles for $127,500.
Espinoza also pleaded guilty to willfully failing to pay income tax, admitting that he did not pay $199,053 due for the 1996 tax year. In court papers filed in relation to the sentencing, prosecutors pointed out that Espinoza had not filed tax returns for well over 10 years and owes the Internal Revenue Service more than $5 million in taxes, interest and penalties. In rejecting the defendant's request for leniency, Judge Wilson noted the multifaceted nature of Espinoza's fraud and his "extreme greed." Judge Wilson ordered Espinoza to begin serving his sentence on June 4, 2010. (usattycdca4510)
MORAL
The federal government went back 15 years to get to Mr. Espinoza and now five more years for him in federal prison and the federal system does not have parole. Not filing the tax returns just aggravated the situation. Have you filed your tax returns?
CALIFORNIAWOMEN SENTENCED TO JAIL FOR FORECLOSURE RESCUE AND LOAN MODIFICATION SCAMS
FACTS
On April 9, 2010, Attorney General Edmund G. Brown Jr. announced that Marianne Curtis of Costa Mesa and Mary Alice Yraceburu of Riverdale, who operated Fresno and Orange County-based Foreclosure Freedom, have each been sentenced to one year in jail and ordered to repay dozens of homeowners who were charged thousands of dollars in up-front fees for non-existent foreclosure-relief services.
Both women pleaded guilty in March 2010 to 71 criminal counts, including grand theft, conspiracy and unlawful foreclosure consulting. Both will serve one year in Orange County jail and an additional four years of probation. Curtis and Yraceburu charged up to $1,800 in up-front fees for loan modifications that were never delivered, Brown said.
In addition to the jail sentences, Curtis and Yraceburu were ordered to repay 36 victims a total of $32,040. If eligible victims not named in the complaint come forward, the court can order additional repayment throughout the defendants' probation term. As a condition of today's sentence, both defendants are also prohibited from any future work in the telemarketing and real estate industries.
When homeowners called the number on mailers, they were told their mortgages could be renegotiated to a lower monthly payment. Victims, however, were required to pay up to $1,800 in up-front fees and were instructed not to contact their lenders.
Victims were assured the company had "private lenders and specialists exclusive to their company who are very experienced in the options and methods used to renegotiate home loans," yet neither of the women who operated the company had real estate licenses, legal training or any experience in the home mortgage market.
Investigators found no evidence they had negotiated any successful loan modifications, and most of the victims were either forced into bankruptcy or lost their homes to foreclosure. Bank account records revealed the defendants took over $120,000 from unsuspecting homeowners.
By law, all individuals and businesses offering mortgage-foreclosure consulting or loan-modification and foreclosure-assistance services must register with Brown's office and post a $100,000 bond. It is also illegal for loan-modification consultants to charge up-front fees for their services. (caagjrybrwnprrel4910)
CALIFORNIA DRE ACCEPTS SURRENDER OF LICENSES INVOLVING LOAN MODIFICATION FRAUD ALLEGATIONS
FACTS
An accusation filed by the California Department of Real Estate accused Green Credit Solutions Inc., and its designated broker, Jeffrey Alan Chiuminatta, along with real estate salesperson Curtis James Melone, of illegally collecting advance fees from homeowners in exchange for loan modification services that were very rarely performed.
In addition to the accusation, the DRE also issued a desist and refrain order to Brian LaRuffa and Christopher Fox, unlicensed corporate officers of Green Credit, ordering them to stop illegally providing services for which a real estate license is required, including loan modifications.
Green Credit also operated under the names of www.getgreencredit.com, www.greencreditsolutions.com, www.gogreencredit.com, www.yournewcreditcompany.com, Green Credit Advisors, Green Credit Holdings, Green Credit Collections and Servicing, and Leads2Green.
The DRE and California State Bar investigated numerous consumer complaints and found that Green Credit collected advance fees for loan modification services but failed to perform the promised services, failed to provide refunds and/or failed to provide an accounting for the fees the consumers had paid. The investigation also revealed that, in some cases, Green Credit and its agents had consumers sign documents indicating the consumers would be represented by attorneys paid by Green Credit. However, only rarely did attorneys meet or communicate directly with the borrowers or perform loan modification services on behalf of the consumers. In December 2009 the State Bar seized the records of Green Credit based on its unauthorized practice of law. (cadrenwsrel32410, H-36085 LA)
MORAL
It is not over, until it is over. There is no saying what, if anything the Attorney General will do, what the FBI might do or what the Orange County District Attorney might do if anything.
A TALE ABOUT LOOMIS WEALTH SOLUTIONS IN CALIFORNIA
FACTS
One IRS special agent described the Loomis Wealth Solutions case as a real estate Ponzi scheme involving 500 properties in six states. An array of court documents reveals the individual stories.
Lawrence Leland "Lee" Loomis, a financier, investment counselor and founder of Loomis Wealth Solutions, is under investigation and suspected by agents and federal prosecutors of being at the heart of a $100 million mortgage fraud. He recruited investors to become part of a financial "family" for which he promised to serve as an unpaid financial adviser.
In August 2008, Loomis allegedly admitted to agents that he was aware of "some falsification of loan documents," but said he didn't report these crimes because he believed they were "isolated incidents" and that he did not have the requisite "criminal intent."
Garret Griffith Gililland III is a bodybuilder and white supremacist that worked for Loomis but also had his own Chico-based operation, for which he hired former mixed martial arts cage match champion Eric Clawson to collect rents and do other chores.
After Gililland and his wife fled--first to Colombia, then to a Spanish resort on the Mediterranean coast--a Sacramento man who served as his "unofficial banker" mailed him $20,000 in a Pringles chip can, which was intercepted and sent empty to Spain, but only after agents debated whether to replace the Pringles. The couple was returned after a months-long pitched battle in Spanish courts. Both are in jail awaiting trial.
Christopher Jared Warren lived high for nine days as he hopscotched from Las Vegas to Ireland to a luxurious Lebanese resort. Then he was arrested coming in from Canada with $70,000 stuffed in his cowboy boot.
Warren posted a "résumé" on the Internet just before he fled the country: "As a 19-, then 20-year-old boy, my managers and handlers taught me the ins and outs of mortgage fraud, drugs, sex, and money, money and more money. Built a fraudster by my trainers in corporate America. Mastered the fraud. Trained others in the fraud. Paid by the fraud. Mastered mortgage banking, escrow, real estate. Every scam possible: fraud for profit, fraud to fund loans for the under-qualified, fraud to evade taxes, flipping, reverse flipping, false liens, software manipulation."
Scott Edward Cavell was indicted in March 2009 on fraud, identity theft and money laundering charges. With Warren, Cavell is alleged to have stolen legitimate mortgage funds through Triduanum Financial Inc. FBI financial analysts have traced more than $4.7 million of what appears to be a Florida mortgage firm's money to gold bullion and rare coin dealers. An additional $1 million-plus was transferred to a foreign bank account. Cavell is unaccounted for.
Johnny E. "Jay" Grivette Jr., of Paradise, operated as a mortgage writer under the Loomis umbrella. He shared an office with a Loomis branch in Chico before Loomis moved operations to Roseville, and later helped form Triduanum Financial Inc.
Gililland of Chico; Warren of Folsom; and Cavell of Sacramento are charged in grand jury indictments with massive mortgage fraud and, in Gililland's case, large-scale marijuana manufacturing. Gililland, Warren and Gililland's common-law wife, Nicole Magpusao who is also charged with mortgage fraud, has pleaded not guilty. Cavell is still at large. (sacbee4410)
MORAL
This is almost as good as the PINNFUND fiasco down in San Diego several years ago. You can write a book about it. Can you believe that Warren posted an internet resume on the fraud?
DENVER WOMAN INDICTED FOR MORTGAGE FRAUD
FACTS
On April 5, 2010, Vicki Dillard Crowe, aka Vicki R. Dillard, of Denver, was indicted by a federal grand jury on charges of mortgage fraud. Crowe was arrested on April 6, 2010 by FBI agents and U.S. Postal Inspectors.
According to the indictment, beginning in June 2004, and continuing through December 2006, Crowe knowingly devised and intended to devise a scheme to defraud various financial institutions and commercial lenders and to obtain money and property from various financial institutions and commercial lenders by means of materially false and fraudulent pretenses, representations, and promises. The scheme was executed in connection with the residential mortgage loans related to 19 properties in Colorado--seven in Denver, six in Aurora, two in Centennial, and one each in Thornton, Castle Rock, Franktown and Parker. In addition, the defendant executed the scheme related to the refinancing of residential mortgage loans related to two properties--one in Denver and one in Aurora.
As part of the scheme, Crowe worked with at least one mortgage broker to obtain mortgage loans in order to purchase at least 19 residential properties, at least two of which were purchased in the name of Crowe's husband because Crowe was concerned that she would not qualify for the required mortgage loans. In order to qualify, Crowe made and caused to be made at least one materially false representation, including: 1) inflating or fabricating employment or rental income and/or assets of the defendant or her husband; 2) falsely representing defendant Crowe's job title; 3) failing to disclose all the properties she had recently purchased; 4) failing to disclose all of her financial liabilities; and 5) falsely stating that the property would be a primary residence for the borrower.
As part of the transactions, Crowe persuaded, and caused someone else to persuade, the property seller to falsely inflate the sale price of the property so that Crowe could receive the inflated portion of the sale price as "up front" money, or shortly after, the closing purchase transaction. Sometimes the up front money was falsely characterized on a HUD settlement statement as a payment to the broker, although the broker would then pay Crowe the money. At other times, the up front money was falsely characterized as a payment to a remodeling company that was supposed to perform specified remodeling work, although the work was never performed, and Crowe actually received the money that was issued to these remodeling companies.
The indictment further alleges that Crowe used much of the up front money to make the mortgage payments on the numerous properties that she had purchased. She also refinanced mortgages on a couple of the properties so that she could obtain additional money as a result of the refinance transaction.
In order to qualify for the refinancing of the mortgages, Crowe made at least one materially false statement, namely that she used some of the money that she obtained during the refinance transactions to make the mortgage payments.
Crowe faces eight counts of mail fraud, which carries a penalty of not more than 20 years' imprisonment, and up to a $250,000 fine, per count. She also faces eight counts of wire fraud, which also carries a penalty of not more than 20 years' imprisonment, and up to a $250,000 fine, per count. The indictment also includes an asset forfeiture allegation. (usatytco4610)
MORAL
Do you still take notice of how far back the federal prosecutors are going? In this case six years! We have seen this happen time and again.
TWO MEMBERS OF A REVERSE MORTGAGE FRAUD RING PLEAD GUILTY IN GEORGIA
FACTS
On April 8, 2010, Kelsey Torrey Hull and Jonathan Alfred Kimpson, both of Lithonia, Ga., pleaded guilty in federal district court to a conspiracy to defraud reverse mortgage lenders and the Federal Housing Administration as insurer of the loans. Hull pleaded guilty to an additional bank fraud charge involving mortgage fraud, and Kimpson pleaded to an additional identity theft charge.
These defendants changed real estate records and used other fake documents to place seniors in houses worth only a fraction of the amounts represented, and divert loan proceeds to themselves. Reverse mortgages were designed to assist with the financial security of seniors, ages 62 or older. There are two types of reverse mortgages. In a refi-reverse, the senior homeowner receives money from the lender for a portion of the equity in the home they own. In a purchase money reverse, the senior receives money from the lender toward the purchase of a new home. Under both types of reverse mortgages, the senior does not have to repay the lender for as long as the senior lives in the home. However, refi-reverse mortgages fund only a percentage of the property value, requiring significant equity to remain in the property, and purchase money reverse mortgages require a significant down payment from the senior borrowers to establish equity in the property. The equity must remain in the home to cover loan principal, interest, insurance, and servicing costs upon FHA sale of the property when no longer occupied by the senior.
Hull and Kimpson took advantage of the system by faking the required seniors' down payments needed to qualify for the FHA-insured purchase money reverses. The defendants did this through bogus gift letters from "relatives" in amounts between $50,000 and $105,000. They also used fake HUD-1 Settlement Statements purporting to document the sale of the senior's non-existent assets. All down payments were actually supplied by the defendants, not the senior citizens, to be returned to the defendants upon the reverse loan closings, along with profits substantially in excess of the true sales prices of the properties. The return of funds to the defendants was disguised as either seller proceeds or lien payoffs. All such fraudulently obtained reverse mortgages included inflated appraisals.
Kimpson's plea to aggravated identity theft relates to his use of the stolen identity of realtors and their password to falsify Georgia Multiple Listing Service records to create fake property listings and sales at inflated amounts in support many of the fraudulent appraisals.
Hull also committed refi-reverse fraud by transferring properties into seniors' names to obtain refi-reverse mortgages at fraudulently inflated amounts. He thereby avoided the down payment requirement for purchase money reverses, and was able to divert loan proceeds to his shell companies, disguised as lien payoffs.
Hull was charged by a criminal information on Feb. 25, 2010. Hull could receive a maximum sentence of up to 30 years in prison and a fine of up to $1,000,000 on each of the conspiracy and bank fraud counts. Kimpson was indicted on Feb. 24, 2010. Kimpson could receive a maximum sentence of up to 30 years in prison and a fine of up to $1,000,000 on the conspiracy count, as well as a mandatory consecutive sentence of two years in prison and a fine of up to $250,000 on the aggravated identity theft charge. Sentencings for both Hull and Kimpson are scheduled for July 16, 2010 before U.S. District Judge Julie E. Carnes. (usattyndga4810)
MORAL
Where there is a will, there is a way to commit mortgage fraud. You would think they could have done a better job doing legitimate reverse mortgages. Especially refi reverse.
MARYLAND MORTGAGE BROKER INDICTED FOR $2.8 MILLION MORTGAGE FRAUD AGAINST FAMILY AND FRIENDS
FACTS
On April 2, 2010, a federal grand jury indicted Douglas Skibicki of Bethesda, Md., on charges of mail fraud, aggravated identity theft, and bankruptcy fraud, in connection with a mortgage fraud scheme in which he allegedly defrauded lenders, family, and others. The indictment was returned on March 31, 2010 and unsealed today upon Skibicki's arrest.
According to the nine-count indictment, Skibicki was a mortgage originator and/or broker for a company which operated in Laurel, Md. The indictment alleges that from April 2006 through August 2009, Skibicki, with the assistance of an appraiser and others, participated in a scheme to defraud lenders, family members, and others through a series of real estate transactions.
For example, Skibicki and Family Member 1 owned property at 5870 Deer Ridge Lane in Elkridge. On June 2, 2006, Skibicki allegedly submitted a loan application for $350,000 to refinance 5870 Deer Ridge Lane, in the name of Family Member 2. The loan application indicated that title to the property would be held by Skibicki, Family Member 1 and Family Member 2. According to the indictment, Skibicki allegedly added Family Member 2 to the title of the property without consulting or obtaining the approval of either Family Member 1 or 2. To facilitate the loan application, the appraiser working with Skibicki allegedly prepared an appraisal indicating that there was a 2,040 square foot home on the property and included a description of the home and photographs purporting to be of the front and back of the home. In fact, there was no home on the property, which was a vacant lot. The indictment alleges that the loan application submitted by Skibicki on behalf of Family Member 2 also contained several false statements as to Family Member 2's employment, income, and current address.
Further, the indictment alleges that in an attempt to conceal the fact that 5870 Deer Ridge Lane was a vacant lot and instead make it appear that there was a home on that property, and also to make it appear that Family Member 2 was earning rental income from leasing that home, Skibicki caused a fraudulent Single Family Dwelling Lease to be provided to the lender, falsely indicating that 5870 Deer Ridge Lane had been rented for a one-year term beginning on Jan. 1, 2006, for a monthly rent payment of $2,875. A former co-worker and longtime friend of Skibicki was listed on the lease as the real estate agent who had negotiated it, and Family Member 2 was identified on the lease as one of the landlords/owners of 5870 Deer Ridge Lane. According to the indictment, the signatures of the real estate agent and Family Member 2 were forged on this lease and neither individual had any knowledge of, or involvement with, this purported lease. Based on the fraudulent information provided by Skibicki, the lender provided a loan of $350,000 in the name of Family Member 2. The indictment alleges that the signatures of Family Members 1 and 2 were forged on the settlement statement.
The indictment alleges that Skibicki obtained mortgages on five additional properties in the names of family members and others. According to the indictment, in each instance the loan application contained false statements as to the family members and others whose names Skibicki used on the application. In some instances, the family members and others allegedly had agreed to allow Skibicki to use their names, with Skibicki promising that he would make the payments and/or remove their names from the property after some specific amount of time. However, the indictment alleges that the family members and others often had no idea that Skibicki had used their name and personal information to facilitate the transactions. The indictment further alleges that five of the properties went into foreclosure after Skibicki failed to make the promised loan payments. According to the indictment, Skibicki received loans worth $2,829,971 as a result of the scheme.
According to the indictment, after Skibicki had failed to make payments on a mortgage he had obtained in the name of a Family Member 3, the lender instituted foreclosure proceedings and the property was scheduled to be put to auction on Aug. 11, 2009. The indictment alleges that in order to conceal his scheme, Skibicki caused a Chapter 13 bankruptcy petition to be filed on Aug. 11, 2009, in the name of his friend, who was a co-owner of the property, in order to stop the auction of the property.
Skibicki faces a maximum sentence of 20 years in prison and a fine of $250,000 or twice the gross loss or gain of the offense, if greater than $250,000, on each of six counts of mail fraud; a mandatory two years in prison, consecutive to any other sentence, on each of two counts of aggravated identity theft; and a maximum of five years in prison for bankruptcy fraud. Skibicki was released under the supervision of U.S. Pre-trial Services. As a condition of his release Skibicki is prohibited from working in the financial services industry. He is scheduled to be arraigned on April 16, 2010 at 2:00 p.m. (usattymd4210)
MORAL
He is innocent until proven guilty but if guilty with friends like him you do not need to find any enemies.
NEVADA MAN PLEADS GUILTY TO FELONY MORTGAGE FRAUD IN CONNECTION WITH FORECLOSURE RESCUE BUSINESS
FACTS
On April 7, 2010, Jeffery Tye Brown of Henderson pled guilty to felony mortgage fraud in violation of NRS 205.372, in connection with the operation of DB Financial Services, a foreclosure rescue business located in Henderson.
The crime is a Category C felony and carries a potential jail sentence of one to 10 years and/or a fine of up to $10,000. In addition, the plea agreement requires Brown to execute Confessions of Judgment to the individual victims in an amount totaling $19,407.00.
The state charged Brown with falsifying loan applications which he submitted to lenders by inflating the incomes of his victims in order to demonstrate a better financial condition or ability to pay a monthly mortgage. In other cases, he misled customers into believing that, for a fee, he would guarantee resolution of a victim's pending mortgage foreclosure.
The state's case against Brown was based on an investigation by the Attorney General's mortgage fraud task force which revealed that between December 2007 and February 2008, Brown contacted victims whose homes were going into foreclosure and obtained advance payments upwards of $999.00 for foreclosure rescue services that he never performed. He failed to give refunds despite promising refunds in his contracts and advertising. He also forged documents to the 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 mortgage fraud task force, Brown fled the country. He was extradited back to the U.S. from the Philippines, where he was in hiding to evade authorities. The plea agreement requires Brown to forfeit monies seized from his company to pay for the costs of his extradition from the Philippines.
A sentencing date has been scheduled for June 9, 2010, in front of District Court Judge Kenneth Cory. Under the terms of the agreement is not eligible for probation and will serve a minimum of 12 to 30 months in the Nevada State Prison. (agnv4710)
MORAL
Who is next in the loan modification-foreclosure rescue market to be arrested? Indicted?
NEW MEXICO ENACTS THE MORTGAGE FORECLOSURE CONSULTANT FRAUD PREVENTION ACT
FACTS
New Mexico passed a House Bill 205l enacting the Mortgage Foreclosure Consultant Fraud Prevention Act, which will be effective May 19, 2010. Foreclosure consultants are required to have a written foreclosure consulting contract with an owner. Foreclosure consultants are required to provide owners a Notice of Rescission Rights and Rescission of Contract Form. In addition, owners are allowed to rescind a foreclosure consulting contract until midnight of the third business day after the day on which the owner signs a foreclosure consulting contract.
MORAL
If you are going to be a foreclosure consultant in New Mexico after May 19, I suggest you read the bill in detail or look forward to severe punishment in the alternative from the State of New Mexico.
THREE ATTORNEYS, TWO REAL ESTATE BROKERS, AND FIVE OTHERS INDICTED IN NEW YORK FOR $10 MILLION MORTGAGE FRAUD SCHEME
FACTS
On April 6, 2010 in Brooklyn, N.Y., an indictment was unsealed charging 10 defendants, including three attorneys and two licensed real estate brokers, with conspiracy, bank fraud, and wire fraud arising out of their mortgage fraud scheme. The indictment alleges that the defendants fraudulently obtained over $10 million in loans from American Home Mortgage, Fremont Bank, BNC Mortgage (a subsidiary of Lehman Brothers), and WMC Mortgage (a subsidiary of GE Money Bank).
The indictment charges Akin Ayorinde, Hervin Henry, Anthony Onua, Umana Otom, Max Shimba, John Star, Anthony Suazo, Marisol Vasquez and two others with conspiracy to commit bank and wire fraud. In addition, Ayorinde, Henry, Onua, Oton, Shimba, Star, Suazo and two others are charged with bank fraud, and Ayorinde, Henry, Onua, Shimba and two others are charged with wire fraud.
As detailed in the indictment, from January 2005 to May 2007, Ayorinde, Onua and Star purchased properties located in Brooklyn and Queens. Ayorinde and Onua are attorneys licensed to practice in the State of New York, and Star is a real estate broker licensed in the State of New York. As part of the scheme, the defendants allegedly submitted false loan applications to create the appearance that the properties were being purchased by creditworthy individuals, when, in fact, the properties were purchased at inflated prices by straw buyers who were controlled by Ayorinde, Onua and Star. Henry, a real estate broker licensed in the State of New York, recruited many of these straw buyers. The indictment charges that Suazo furnished fraudulent appraisals to support the inflated purchase prices of the properties, and Onua, Shimba and Marisol Vasquez provided fraudulent title abstract reports and other documentation that falsely enhanced the purported value of the properties. These false documents induced lenders to issue loans which were far in excess of the true value of the properties.
A third attorney, Oton, who is also licensed to practice in the State of New York, assisted the defendants in the fraud. Ayorinde, Onua and Oton served as attorneys at the closings and allegedly were aware that there were fraudulent misrepresentations made to lenders in connection with the closings.
The maximum term of imprisonment for any defendant convicted of conspiracy to commit bank and wire fraud is 30 years. The indictment also seeks forfeiture of the proceeds of the defendants' bank and wire fraud activities, including a criminal forfeiture money judgment and money traceable to the offenses. (usattedny4610)
MORAL
I want you to all to note that the greater majority of the cases I have been reporting on, including others where we represent or have represented people charged with mortgage fraud deal with mortgagees that funded from 2004 on.
THREE NEW YORKERS PLEAD GUILTY IN NEW JERSEY TO CONSPIRACY TO COMMIT A MILLION DOLLAR MORTGAGE FRAUD
FACTS
On April 8, 2010, Tula Rampersaud, her husband, Sudesh Rampersaud, both from Hollis, N.Y., and Steven Boswell of Flushing, N.Y., each pleaded guilty before United States District Judge Renée M. Bumb to separate one-count informations charging them with conspiracy to commit wire fraud. The three guilty pleas are the latest phase in an ongoing investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division into fraudulent mortgage loans in southern New Jersey.
The Rampersauds and Boswell conspired with Jong Shin and others, from June through December 2006, to obtain more than a million dollars of mortgage loans for unqualified borrowers in order to purchase seven houses in Atlantic City at inflated prices. Shin was indicted with conspiracy to commit wire fraud and conspiracy to commit money laundering on March 24, 2010. The case against Shin is pending.
At their guilty plea hearings, Tula Rampersaud, Sudesh Rampersaud and Boswell admitted that they served as straw purchasers for Shin, falsifying financial information on mortgage documents and purchasing properties in return for promises of cash payments. Tula Rampersaud stated that she met Jong Shin while they were colleagues at a home health care company, and that she was promised $5,000 in return for purchasing a property. Boswell admitted that he had previously been married to Shin, and was promised $3,000 in return for his role in the scheme. (That is one way to get back at an ex-husband.)
In exchange for purchasing properties in their names, Shin promised the Rampersauds and Boswell that they would not have to pay deposits or closing costs to acquire the properties, would not have to make monthly mortgage payments, and would receive cash after the closing for allowing their names and credit information to be used to buy the properties. In completing the borrowers' loan applications, the coconspirators claimed fake employers, inflated incomes, false bank account balances, and fictitious assets in order to induce the lenders to extend the mortgage loans. The count of conspiracy to commit wire fraud to which the defendants pleaded guilty carries a maximum sentence of 30 years in prison and a maximum fine of not more than $1 million. Sentencing for all three defendants is scheduled for Aug. 2, 2010, before Judge Bumb. (usattynj4810)
MORAL
As I have been saying ad nauseam, the federal prosecutors are going after all fraud mortgage loans where there is a "material" loss. They enlarged the task force. They consider primary residence when checked as fraud when the buyer never moves in and they are chasing the straw buyers.
OREGON UPDATES UNFAIR TRADE PRACTICES ACT TO INCLUDE MORTGAGE LENDERS AND BROKERS THAT CAN BE SUED BY THE AG
FACTS
Oregon House Bill 3706 A has been passed such that the Unfair Trade Practices Act includes loans and extensions of credit in definition of "real estate, goods or services" for purposes of UTPA. It adds mortgage bankers, mortgage brokers, loan originators, pawnbrokers, and persons prohibited from making certain consumer loans in course of business without license to definition of "state-regulated lender." Narrows scope of conduct by state-regulated lenders to be acted on by Department of Justice at request of Department of Consumer and Business Services to that involving loans or extensions of credit. Declares emergency, takes effect on passage.
MORAL
Do mortgage loans in Oregon without a license or mislead the consumer and the Department of Justice will chase you down.
OREGON FINES AMERICAN GENERAL SALEM BRANCH $75,000 FOR DUMPING CHECKS IN TRASH WHICH COULD HAVE CAUSED IDENTITY THEFT
FACTS
The Oregon Department of Consumer and Business Services has taken action against American General Finance for an incident that could have potentially exposed its customers to identity theft. The department ordered the company to pay $75,000 in penalties and other costs, and required heightened supervision of employees to ensure they properly safeguard customers' personal information. DCBS also conditioned the company's licenses for its Oregon branch offices for two years, which means the company is under increased scrutiny to protect personal information in its custody and faces significant consequences if it fails to safeguard customers' information.
The discipline resulted from an incident at the company's Salem branch office in April 2007. An American General Finance branch manager improperly discarded 773 checks made payable to the firm by Oregon residents. Rather than use the office's on-site shredder, the manager placed the items in the trash. The checks, intact and unaltered, display individuals' names, addresses, bank account numbers and-in one instance-Social Security number. The checks were found in a dumpster close to the American General Finance office on a busy commercial thoroughfare by a property custodian rearranging the massive container to allow more bags to fit in the unlocked, unfenced receptacle. The custodian regularly encountered dumpster divers at this location in search of information of value.
The 2007 incident pre-dated enactment of the Oregon Consumer Identity Theft Protection Act. That law imposes a variety of sanctions for failure to safeguard consumer information, including civil penalties of up to $500,000 per occurrence. However, in this case, the department was able to take action because of a breach of other standards applicable to consumer finance companies.
American General Finance has taken corrective action since the incident. The firm has also paid $75,000 to the state of Oregon, including a $25,000 contribution to the department's consumer education fund. (ORdcbs4710)
MORAL
Note that American General is being disciplined for something that happened three years ago. Further the custodian for the building was sorting the trash and found the checks.
PENNSYLVANIA LOAN OFFICER PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On April 6, 2010, Daniel Gillen, a resident of Mt. Lebanon, Pa., pleaded guilty in federal court to charges of wire fraud conspiracy, money laundering conspiracy and tax evasion in connection with a mortgage fraud scheme.
Gillen pleaded guilty to three counts before United States District Judge Joy Flowers Conti. Gillen was a loan officer for several different mortgage broker companies who submitted fraudulent loan applications and supporting documents that misrepresented borrowers' income and assets. He also conspired with Kenneth Cowden, who, as part of the conspiracy, prepared fraudulent appraisals for Gillen and others that overstated the true values of the properties serving as collateral for the loans. Gillen, even though he was not a licensed appraiser, also prepared fraudulent appraisals as part of the conspiracy that overstated the true values of the properties serving as collateral for the loans.
Gillen also laundered money in connection with the mortgage fraud scheme by reinvesting profits from the scheme back into the scheme. In addition, Gillen filed false tax returns that understated his income and engaged in other activities designed to evade his tax obligations.
Judge Conti scheduled sentencing for Aug. 20, 2010. The law provides for a total sentence of 45 years in prison, a fine of $750,000, or both. (usattywdpa4710)
MORAL
Busy wasn't he? The IRS does not like it when you do not tell them all the money you earn.
EIGHT CONVICTED OF MULTI-MILLION DOLLAR FRAUD IN DALLAS
FACTS
On April 8, 2010, eight defendants were found guilty of various offenses related to their role in a mortgage fraud scheme they operated in the Dallas area from March 2002 to January 2006.
The lead defendant in the case, ERIC RULACK FARRINGTON, JR. of Irving, Texas, was the president of ERIC FARRINGTON SEMINARS, INC. AND PRESTIGE CAPITAL CORPORATION, WHICH DID BUSINESS AS FARRINGTON MORTGAGE GROUP. HE WAS A MANAGER OF EFC INVESTMENTS, LLC, WHICH DID BUSINESS AS EFC MANAGEMENT COMPANY. All were located in Dallas. The jury convicted Farrington on all 32 counts of the superseding indictment. Other defendants, their roles, and counts on which they were convicted are:
JANICE LITTLE SHEPHERD OF IRVING, Farrington's former fiancé, was a mortgage broker who did business as EFC CAPITAL MORTGAGE COMPANY, in Dallas. She was convicted on one count of conspiracy to commit wire fraud, 11 counts of wire fraud and aiding and abetting and four counts of engaging in a monetary transaction with criminally derived property and aiding and abetting.
REGIS LAMONT WILLIAMS OF DALLAS, was a Texas certified real estate appraiser who did business as EXECUTIVE CERTIFIED APPRAISAL. He was convicted on one count of conspiracy to commit wire fraud, one count of bank fraud and aiding and abetting, nine counts of wire fraud and aiding and abetting and five counts of engaging in a monetary transaction with criminally derived property and aiding and abetting.
KEVIN RAY SANDERSON OF IRVING, was a business associate of Farrington and the vice president of FARCO CONSTRUCTION, INC., DALLAS, WHICH ALSO DID BUSINESS AS FARRINGTON MORTGAGE GROUP. He was convicted on one count of conspiracy to commit wire fraud, one count of bank fraud, four counts of wire fraud and aiding and abetting and one count of money laundering.
JAMES EDWARD JONES OF DALLAS, WAS A REAL ESTATE AGENT. He was convicted on one count of conspiracy to commit wire fraud and two counts of wire fraud and aiding and abetting.
EDWIN TERRENCE BELL OF FORT WORTH, was in the real estate management business and was the PRESIDENT OF TOGETHERNESS, INC. BELL ALSO DID BUSINESS AS THE TOGETHERNESS GROUP AND TTG, INC. He was convicted on one count of conspiracy to commit wire fraud, five counts of wire fraud and aiding and abetting and two counts of engaging in a monetary transaction with criminally derived property and aiding and abetting.
MICHEAL LEWIS ANDREWS OF PLANO, TEXAS, WAS CHIEF EXECUTIVE OFFICER OF SECOND CHANCE MORTGAGE, INC. AND DID BUSINESS AS 2ND CHANCE MORTGAGE. He was convicted on two counts of wire fraud and aiding and abetting.
ROBERT JOHN MASON OF OAK LEAF, TEXAS, WAS AN EMPLOYEE OF PRESTIGE CAPITAL CORPORATION. He was convicted of two counts of wire fraud and aiding and abetting.
Prior to trial, MARCUS ALLEN PARKER OF ROWLETT, TEXAS, who was an associate of defendant Kevin Ray Sanderson, pleaded guilty to one count of conspiracy to commit wire fraud. In addition, prior to trial, charges were dismissed against Tony Earl Anderson of Dallas and Christopher N. Williams of Flower Mound, Texas. All three testified as government witnesses.
The statutory maximum penalties for conspiracy to commit wire fraud and wire fraud are 20 years in prison and a $250,000 fine, per count. The maximum statutory penalty for bank fraud is 30 years in prison and a $1 million fine, per count. The statutory maximum penalty for money laundering is 20 years in prison and a $500,000 fine, per count. The maximum statutory penalty for engaging in a monetary transaction with criminally derived property is 10 years in prison and a $250,000 fine, per count.
Farrington, a motivational speaker who had authored a real estate book and had an infomercial on making money in real estate that ran on late night television, largely orchestrated the scheme. The defendants located single-family residences for sale in the Dallas area, including distressed and pre-foreclosure properties, and negotiated a sales price with the seller. They created surplus loan proceeds by inflating the sales price to an arbitrary amount substantially more than the fair market value of the residence, many times using inflated appraisals. In some cases, they would create a bogus outstanding mortgage lien to be discharged. They recruited individuals with high credit scores to act as borrowers and falsely represented to them that the property would be managed by the defendants and rented by a suitable tenant; that the mortgage, interest, taxes, insurance and property maintenance would be paid from the rental income; and the purchasers/borrowers would have no expenses. The borrowers had no intention to live in the property and did not have sufficient income to repay the loans. They said they relied on Farrington.
The defendants prepared and submitted fraudulent loan documents showing inflated incomes in the names of the borrowers and obtained loans in inflated amounts based on these fraudulent loan documents. Then they used the fraudulently obtained surplus loan proceeds to pay the sellers kickbacks, to conceal the fraud, and distributed the bulk of the proceeds among themselves. They would then allow the loan to go into foreclosure after a few payments were made on the loan. Following a conviction on Count One, the conspiracy, the criminal forfeiture allegation requires the defendants to forfeit $4,500,070 to the U.S. The forfeiture allegation also requires the defendants, upon conviction of any of Counts Two through 17, to forfeit various sums of money, totaling nearly $4 million, as listed in the superseding indictment. (usattyndtx4510)
MORAL
That will teach you to listen to late night infomercials. I want you to notice that some of these loans went back eight years.
THREE INDICTED FOR ALLEGED MULTI-MILLION DOLLAR MORTGAGE FRAUD IN HOUSTON, INCLUDING THE FORMER FEE ATTORNEY FOR FIRST SOUTHWESTERN TITLE CO.
FACTS
On April 9, 2010, Vincent Wallace Aldridge and Tori Aldridge, both of Fresno, Texas, surrendered themselves to federal authorities as a result of the return of a 19-count indictment arising from an alleged scheme to defraud residential mortgage lenders of more than $3.7 million in connection with home purchases in the Houston area, Vincent Aldridge is a former fee attorney of First Southwestern Title Co. and attorney with Aldridge and Associates, while Tori Aldridge is a former employee of the same title company.
The third defendant, Gilbert Barry Isgar of Katy, Texas, the co-owner of Waterford Homes, appeared before U.S. Magistrate Judge John R. Froeschner earlier this week pursuant to a summons. Isgar was arraigned and his case was set for jury selection and trial before U.S. District Court Judge Sim Lake on May 24, 2010.
The 19-count indictment accuses Vincent Aldridge, Tori Aldridge, and Isgar of conspiracy to commit wire fraud, wire fraud, conspiracy to commit money laundering and money laundering.
According to the allegations in the indictment, Vincent and Tori Aldridge and Isgar conspired to devise and execute a scheme during 2004 and 2005 to receive proceeds from real estate transactions based upon materially fraudulent information that was intentionally supplied to at least three lending institutions as the basis for an agreement between the lending institutions and borrowers.
Vincent Aldridge allegedly lured borrowers by representing the scheme as an investment opportunity. For the use of the borrowers' credit to obtain mortgage loans, they were promised $10,000 after the closing of their respective property. They were also allegedly told that the property would be sold after a year for a profit. Once a borrower agreed to the deal, Vincent Aldridge and Tori Aldridge acting as both an escrow officer and a loan processor met with the borrower to obtain the necessary personal identifying information to complete the borrower's lending package.
Prior to the submission of the lending packages to the lending institutions, it is alleged that Vincent and Tori Aldridge modified the lending package to enhance the borrower's ability to qualify for the requested loan. These enhancements, according to the indictment, included fraudulently overstating the borrower's income, misrepresenting the borrower's principal residence as rental property and misrepresenting the purchase property as the principal residence. The mortgage loans totaled approximately $3,700,000. Each property sold in amounts between $344,000 and $365,000 and was funded to First Southwestern Title by wire.
As a part of the scheme, the indictment alleges that Isgar, co-owner of Waterford Custom Homes, inflated the sales price of the properties to be purchased by the aforementioned recruited borrowers. As a part of the alleged illicit agreement between the Aldridges and Isgar, the Aldridges were to receive the proceeds of their scheme by including disbursement authorizations for attorney's fees signed by Isgar to the title company prior to closing. These amounts were listed on the loan closing documents as seller disbursements for attorney fees and were in addition to the attorney's fees stated on the attorney fee line in the closing documents.
Once the loans were funded to the title company, the Aldridges are accused of causing several checks to be drawn on the account of the title company, each totaling more than $10,000, payable to a bank account controlled by Aldridge & Associates. The checks totaled approximately $442,089 and represented a portion of the illicit proceeds obtained through the mortgage fraud scheme.
The maximum penalty, upon conviction, for the conspiracy to commit wire fraud and each of the 11 wire fraud counts is 20 years in prison as well as substantial fines. The maximum penalty for the conspiracy to launder money and for each of the six money laundering counts is 10 years in prison. A conviction for money laundering carries the most significant fine of $250,000 or twice the amount of the criminally derived property, whichever is greater. (usattysdtx4910)
MORAL
Why an attorney would risk his career and license to do this continues to amaze me. He is disbarred, disgraced and will never get his license back let alone a decent job.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
