Five Mortgage Brokers In San Diego Submitted False Applications, Bank Statements, And Income Documentation To Defraud Mortgage Lenders

25 11 2008

“…submitting false loan applications, false bank statements, and false 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. These fraudulent loans resulted in actual losses to the victim lenders ..”

“…CFS did not fund loans but received commissions from the lenders when the loans closed. The five individuals were loan officers at CFS; in addition to the commissions, they often received kickback payments when loans closed…”

 http://www.imperialvalleynews.com/index.php?option=com_content&task=view&id=3384&Itemid=2

San Diego, California - United States Attorney Karen P. Hewitt announced that Rafael Santiago and Angel Armendariz pled guilty in federal court in San Diego to conspiring to commit wire fraud. On November 13, 2008, co-defendants Abner Betech, Said Betech, and Aviva Betech pled guilty to conspiring to commit wire fraud as well. These five individuals entered their guilty pleas before United States District Judge Thomas J. Whelan.

According to court documents, Rafael Santiago, Abner Betech, Said Betech, Aviva Betech, and Angel Armendariz admitted to devising a plan to defraud and to obtain money and property by false and fraudulent means, related to mortgage fraud. In 2005, Abner Betech, Said Betech and others founded Creative Financial Solutions, Inc. (“CFS”), a mortgage brokering company formerly located at 707 Broadway Avenue, Suite 1720, San Diego. CFS was in the business of sending loan application packages and other documents to lenders for review and funding. CFS did not fund loans but received commissions from the lenders when the loans closed. The five individuals were loan officers at CFS; in addition to the commissions, they often received kickback payments when loans closed.

These five individuals admitted that CFS obtained mortgage loans for unqualified borrowers by, among other things, submitting false loan applications, false bank statements, and false 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. These fraudulent loans resulted in actual losses to the victim lenders including the following: unrecovered loan proceeds, unpaid mortgage payments, the costs of recovering the properties through foreclosure, the costs of maintaining the recovered properties, and the costs of selling the properties after they had been foreclosed.

The sentencing for Rafael Santiago, Abner Betech, Said Betech, and Aviva Betech is scheduled for April 13, 2009, and sentencing for Angel Armendariz is scheduled for April 20, 2009. A sixth defendant, Lucette Montane, remains at large.





Claim That Subprime Loans Expanded Homeownership A “Fraud” As They Were Designed to “Fail”

24 11 2008

“…Carr, of the National Community Reinvestment Coalition, said that in hindsight the claim that subprime loans expanded homeownership was “a fraud.” Subprime loans, with their low teaser rates and expensive prepayment penalties, were “designed to fail.”

“…(in) Orange County, where subprime lending giants New Century, Fremont, Option One and Argent all were based. Subprime accounted for less than 10 percent of all home loans made in the county between 2004 and 2007. But in central Santa Ana – today the county’s foreclosure hotspot – the subprime share topped 40 percent…”

http://www.ocregister.com/articles/subprime-percent-home-2233845-lending-loans

For a few delirious years, subprime mortgages brought fat profits to Orange County lenders – plus Mercedes, Beemers and the occasional Lamborghini for their salespeople.

Subprime loans left a more lasting impact elsewhere, in places like Fresno and Moreno Valley, Florida and Michigan – areas now suffering from massive foreclosures.

A Register analysis shows that subprime loans were concentrated in the less prosperous, less stable corners of the nation. The Register studied 43 million prime and 12 million subprime loans made between 2004 and 2007.

The analysis shows how subprime loans evolved from a niche product, largely confined to Texas and the Deep South, into a nationwide phenomenon. But even as subprime went national, it played a much bigger role in some housing markets than in others. (Click here to see maps of both California and U.S. from 2004-2007).

Consider two cities: During the height of the bull market, residents of New York City got just 3 percent of their home loan money from subprime mortgages. In hard-pressed Detroit the figure was 31 percent.

Now look home, to Orange County, where subprime lending giants New Century, Fremont, Option One and Argent all were based. Subprime accounted for less than 10 percent of all home loans made in the county between 2004 and 2007. But in central Santa Ana – today the county’s foreclosure hotspot – the subprime share topped 40 percent.

A series of maps shows subprime lending spreading year by year from the South to California to the Midwest and Northeast.

The maps are “like you’re looking at X-rays of a cancer patient,” said Jim Carr, chief operating officer of the National Community Reinvestment Coalition, a nonprofit that promotes lending to low-income areas. “(2004) and ’05 is when it went viral.”

Subprime lending mushroomed from less than 10 percent of national home loan volume in 2004 to 20 percent in 2005 and 24 percent in 2006. In 2007 as major lenders failed, subprime fell to 15 percent of national home loan volume.

Subprime’s sudden collapse gave counties that depended on subprime loans a bitter foretaste of the credit crunch. While total home loan volume dropped 21 percent nationwide in 2007, it slumped by 43 percent in Riverside and San Bernardino counties. The crunch was even sharper in parts of the San Joaquin Valley: Home lending dropped 50 percent in San Joaquin and 55 percent in Merced.

Easy credit helped the valley prosper in the first half of the decade. Its urban centers grew twice as fast as the state did. Cotton fields and vineyards gave way to new homes from Bakersfield north to Stockton.

“The subprime lending practices definitely lent fuel to the economy,” said John Mahoney, director of the Real Estate & Land Use Institute at Cal State Fresno. “That single element alone is what expanded this market to unsustainable levels.”

Mahoney has studied the new home market in Fresno for years. Between 2004 and 2006, he said, the number of new housing units produced each year doubled. The median price also doubled.

Easy money was “the primary component that fueled the overbuilding, the overpricing,” Mahoney said. It was “a marketing cycle that fed on itself.”

It couldn’t last. In 2007 home lending volume in Fresno County slumped 37 percent, builders stopped building and the first foreclosure signs appeared.

Mark Boud, an Irvine real estate economist, has studied the valley market. Between February and August, he said, there were 4,133 foreclosures in Fresno and neighboring Madera County – four times more than in the same period in 2007 and 30 times the 2006 number.

Subprime is a big factor in foreclosures, Boud said. He blamed “loose lending standards,” particularly in the new-home market, for the surge in foreclosures.

Carr, of the National Community Reinvestment Coalition, said that in hindsight the claim that subprime loans expanded homeownership was “a fraud.” Subprime loans, with their low teaser rates and expensive prepayment penalties, were “designed to fail.”

Carr looks at the maps showing the spread of subprime year by year and sees a lost chance for regulators.

“As late as 2004 we could have prevented this foreclosure crisis,” Carr said. “They had an oportunity to tighten down on financial institutions whose lending behavior was clear as early as 2002-2003. It was a missed opportunity to get this problem under control.”





New York Mortgage Brokers Use “Straw Buyers” And Fraudulent Income To Defraud Lenders And Fund Cocaine Distribution Ring

21 11 2008

“…Three of the defendants charged with mortgage fraud were also indicted for participation in a cocaine distribution ring, says a spokesman for the U.S. Attorney for the Eastern District of New York…”

“…the men would trick homeowners who were in danger of defaulting on their mortgages into signing over their property titles to Home Cash or Property Cash, after promising the victims they could prevent their homes from being foreclosed upon, prosecutors say…”

“…Once the properties were bought by the straw buyers they were often re-sold to another straw buyer who had also taken out fraudulent mortgage loans. The properties were then re-sold at inflated prices. The higher the price of the property, the higher the value of the loan straw buyers would ask lenders for, prosecutors say. ..”

http://www.longislandpress.com/articles/news/570/ 

Sixteen people were charged in a grand jury indictment that was unsealed on Nov. 19 with bilking mortgage lenders out of more than $13 million dollars in loans in connection with approximately 28 Long Island properties, according to federal prosecutors. Three of the defendants charged with mortgage fraud were also indicted for participation in a cocaine distribution ring, says a spokesman for the U.S. Attorney for the Eastern District of New York.

Immigration and Customs Enforcement investigators, along with members of the Organized Crime Drug Enforcement Task Force, uncovered the two separate fraud schemes and the drug ring. The complex scams involved mortgage brokers, real estate appraisers, loan processors, and a bank employee, Gloria Espenas, the former vice president of a JP Morgan Chase branch in Nassau County.

In the first alleged scheme, Robert Guerrero, owner of Property Cash in Greenlawn, and Gary Jacques, owner of Home Cash in Huntington Station, used their companies to purchase Long Island real estate. In some cases, the men would trick homeowners who were in danger of defaulting on their mortgages into signing over their property titles to Home Cash or Property Cash, after promising the victims they could prevent their homes from being foreclosed upon, prosecutors say.
 
In other cases, the men allegedly utilized straw buyers, or stand-in buyers with good credit to secure mortgage loans for properties that Guerrero and Jacques said they could not obtain by themselves. The loans for the properties―located in towns including Huntington, Huntington Station, Greenlawn, Bayshore and Uniondale―that were secured by “fraudulently overstating,” the straw buyers’ financial condition, authorities say.  Sometimes Guerrero or Jacques would deposit checks into the straw buyer’s bank accounts or tell the mortgage lender that the buyer worked for Home Cash or Property Cash and had a high salary, to give the impression that the buyer was financially sound, according to court documents.

Once the properties were bought by the straw buyers they were often re-sold to another straw buyer who had also taken out fraudulent mortgage loans. The properties were then re-sold at inflated prices. The higher the price of the property, the higher the value of the loan straw buyers would ask lenders for, prosecutors say. In this first scheme lenders were defrauded out of nearly $9 million in mortgage loans in connection with approximately nineteen different properties.

Allegedly complicit in the scheme is Michael McEnroe, who served as a
loan processor and mortgage broker for many of the fraudulent mortgage applications. Also involved was real estate appraisers Lawrence Albers and Al Cassiano, Jr., who inflated the value of properties, so as to deceive lenders into thinking they would have a valuable home as collateral if the buyers could not pay back the loan.

Three of the men charged for fraud in the first mortgage loan scheme were also charged with distributing and conspiring to distribute more than five kilograms of cocaine. Gary Jacques is charged with separate offenses involving the importation of more than 500 grams of cocaine into the U.S.

In the second scheme uncovered in the same investigation, Michael McEnroe and Ryan Gosin, who control the Able Group, Able Funding and Able Development, and Walmart Construction located in East Meadow and Baldwin at different times. The men allegedly used the companies to fraudulently acquire mortgage loans for LI property. The men also utilized straw buyers to acquire mortgage loans for property in Merrick, East Islip and Valley Stream.

Sometimes McEnroe and Gosin would pay the straw buyer between $5,000 and $10,000 for their participation. They also told the buyers they would make all mortgage payments on their behalf. Once the straw buyer agreed to buy the property they would provide McEnroe or Gosin with their personal information, such as their social security number and their date of birth to be used on the fraudulent loan application.

Espenas, the former JP Morgan Chase branch vice president, allegedly signed and provided fraudulent verification of deposit forms in which she overstated the value of the straw buyers’ assets on deposit at the bank, so their loan would be approved.

In this second scheme, lenders were defrauded of nearly $5 million in mortgage loans in connection with approximately nine different properties. Several of the properties in both schemes are now in foreclosure.

If convicted, the defendants face a maximum sentence of 30 years in prison on each count of bank fraud or conspiracy to commit bank fraud, 20 years for each count of wire fraud, money laundering, and conspiracy to commit wire fraud or money laundering. They also face 10 years in prison on the count of stealing government funds and up to life in prison on each count of trafficking in more than five kilograms of cocaine. Gary Jacques also faces up to 40 years in prison on each count relating to the importation of cocaine into the United States.
 





Missouri Mortgage Brokers Defraud Lenders Through “Down Payment Kickback” Scheme

21 11 2008

“…Investigators believe Davis, Spencer and Moore were involved in a scheme to defraud home mortgage lenders from January 2006 through February 2007. Davis and Spencer solicited persons to buy homes with the understanding that they would return a significant portion of the purchase price of the home to the purchaser afterward….”

“…prepared loan applications, investigators say, on behalf of the prospective purchasers that contained material false statements, and submitted those applications to lenders outside Missouri. Davis did not disclose to the lenders that a significant portion of the home’s purchase price would be returned to the purchaser…”

http://www.ky3.com/news/local/34838834.html

 Several mortgage brokers are among six area residents indicted by a federal grand jury on Thursday for participating in several related mortgage fraud schemes in Christian and Greene counties.

Charles Davis, 34, of Rogersville; Cheryl Kassebaum, 42, and her husband, Scott Kassebaum, 42, of Ozark; Randall Hall, 59, and Shanda Moore, 44, both of Springfield; and Steven Spencer, 47, of Carl Junction are charged in a 55-count indictment.

Davis, a former mortgage broker, was the owner of Master Marketing Consultants. The Kassebaums, former mortgage brokers, were owners of Metro Consulting Group. Hall is a former mortgage broker.

Investigators believe Davis, Spencer and Moore were involved in a scheme to defraud home mortgage lenders from January 2006 through February 2007. Davis and Spencer solicited persons to buy homes with the understanding that they would return a significant portion of the purchase price of the home to the purchaser afterward.

Davis then prepared loan applications, investigators say, on behalf of the prospective purchasers that contained material false statements, and submitted those applications to lenders outside Missouri. Davis did not disclose to the lenders that a significant portion of the home’s purchase price would be returned to the purchaser.

Moore’s role in the conspiracy was to verify the false income and employment information contained in the fraudulent loan applications.

This scheme involved 13 houses, according to the indictment, with home mortgage loans ranging from approximately $200,000 to $500,000. The amount of loan proceeds returned to the borrowers ranged from less than $30,000 to more than $100,000.

Some of the home purchasers defaulted on the loans, and the homes have been foreclosed or are in the process of being foreclosed.

In addition to the conspiracy, Davis is charged with 13 counts of wire fraud and Spencer with six counts of wire fraud related to the transfer of loan proceeds in this scheme.

Davis is also charged with 13 counts of engaging in monetary transactions in criminally derived property and Spencer with six counts of engaging in monetary transactions in criminally derived property. Those counts relate to the transfers of funds back to the borrowers in this scheme.

The indictment also charges that Davis and the Kassebaums were involved in a similar mortgage fraud conspiracy from March to July 2006. This scheme involved seven houses, according to the indictment, with home mortgage loans ranging from approximately $200,000 to more than $400,000.

The amount of loan proceeds returned to the borrowers ranged from less than $30,000 to nearly $100,000. Some of the home purchasers subsequently defaulted on the loans, and the homes have been foreclosed or are in the process of being foreclosed.

In addition to the conspiracy, Davis and Cheryl Kassebaum are charged with seven counts of wire fraud and Scott Kassebaum with two counts of wire fraud related to the transfer of loan proceeds in this scheme.

Davis and Cheryl Kassebaum are also charged with seven counts of engaging in monetary transactions in criminally derived property and Scott Kassebaum with two counts of engaging in monetary transactions in criminally derived property related to the transfers of funds back to the borrowers in this scheme.

The indictment charges that Hall and Spencer were involved in a similar mortgage fraud conspiracy from November 2005 to October 2006. This scheme involved nine houses, according to the indictment, with home mortgage loans ranging from less than $300,000 to more than $750,000.

The amount of loan proceeds returned to the borrowers ranged from$15,000 to more than $141,000. Some of the home purchasers subsequently defaulted on the loans, and the homes have been foreclosed or are in the process of being foreclosed.

In addition to the conspiracy, Hall and Spencer are charged with nine counts of wire fraud related to the transfer of loan proceeds in this scheme. Hall and Spencer are also charged with three counts of engaging in monetary transactions in criminally derived property related to the transfers of funds back to the borrowers in this scheme





Senator Christopher Dodd (Connecticut) Received “Special Treatment” From Mortgage Industry He Now Aims To Reform

20 11 2008

“…Dodd gallops the gamut from calling the allegations of special treatment “outrageous” to pledging repeatedly and specifically to release documents related to the $800,000 in sweetheart deals he got from Countrywide…”

“…Dodd, however, signed some but not all of his loan documents himself. Agents of Countrywide signed his $275,042 Connecticut mortgage. His previous mortgage with Countrywide was paid off but the new mortgage did not appear on the local land records for an astonishing 16 months. For nearly a year and a half, Countrywide failed (or declined) to secure its interest in Dodd’s home by taking the ordinary and essential step of presenting the documents to the local town clerk and recording them in the land records….”

“…Dodd refuses to say whether his Senate campaign committee’s payments of $60,000 last summer to a Washington law firm, which has a history of representing Democratic senators in trouble, were for his defense in the Senate ethics investigation of his dealings with Countrywide…”

http://www.courant.com/news/opinion/editorials/hc-rennie1109.artnov09,0,7916474,print.column 

As the Democrats moved toward victory at the end of October, a story by NBC’s Lisa Myers set Dodd apart from his triumphant fellow Democrats. Myers reported that federal agents are investigating the notorious “Friends of Angelo” list maintained by subprime mortgage giant Countrywide Financial’s co-founder Angelo Mozilo. Dodd was the most prominent member of that exclusive club.

Since the Dodd story broke in June, the five-term senator has offered contradictory fragments of explanations and intentions. Scheherazade after a six-pack of Red Bull would not have told more desperate tales. Dodd gallops the gamut from calling the allegations of special treatment “outrageous” to pledging repeatedly and specifically to release documents related to the $800,000 in sweetheart deals he got from Countrywide.

Still claiming “there’s nothing there,” Dodd refuses to say whether his Senate campaign committee’s payments of $60,000 last summer to a Washington law firm, which has a history of representing Democratic senators in trouble, were for his defense in the Senate ethics investigation of his dealings with Countrywide. He suggested, before he fled to his third home in Ireland in August, that Countrywide was not cooperating in providing information.

Dodd still claims there was nothing unusual about the $800,000 in mortgages he got from Countrywide in 2003, but records refute that, too. Documents indicate that Dodd was getting a mortgage of $276,150 on his second home in Connecticut on July 3, 2003. The amount was reduced to $275,042 and the mortgage he was refinancing was paid off.

Dodd and his wife also got a home equity loan on their Connecticut property in East Haddam from Countrywide that day. But the course those loans took was very strange. The standard routine is for the homeowner to sign the loan documents, the borrowed money is sent to the lender being paid off and the new mortgage is recorded on local land records within a few days.

Dodd, however, signed some but not all of his loan documents himself. Agents of Countrywide signed his $275,042 Connecticut mortgage. His previous mortgage with Countrywide was paid off but the new mortgage did not appear on the local land records for an astonishing 16 months. For nearly a year and a half, Countrywide failed (or declined) to secure its interest in Dodd’s home by taking the ordinary and essential step of presenting the documents to the local town clerk and recording them in the land records.

This is exceedingly rare in the mortgage business. No wonder Dodd refuses to lift the veil on his deals with the generous lender that went bust this year.

Last month, amid tumbling approval ratings, renewed questions and scorching editorials in The Wall Street Journal and the usually friendly New York Times, Dodd unveiled a new tablet of nonsense. He announced that for the previous five months he’d really meant to say that he wouldn’t release any documents until the Senate Ethics Committee completes its investigation. The senator is terribly disappointed that the investigation has taken this long. He left out that nothing in the committee’s rules precludes him from releasing the documents to the public.

A July statement from the committee, however, may explain why it hasn’t confirmed Dodd’s contention that there’s “nothing there.” It announced: “Absent special circumstances, it has been the long-standing policy of the committee to defer investigation into matters where there is an active and ongoing criminal investigation and proceeding so as not to interfere in that process.” Clever Lisa Myers’ story of federal law enforcement’s investigation of the “Friends of Angelo” may explain the delay.

This is not the sort of story jubilant Democrats want unraveling around one of their prominent senators. It interrupts the narrative of changing the world. Dodd may learn that President-elect Barack Obama’s righteous wind, having dispatched so many Republicans, can cut down a Democrat who is not so nimble in explaining himself.





“Mortgage Fraud”: Husband And Wife Are “Bonnie and Clyde” Of Mortgage Fraud In Las Vegas

19 11 2008

  “…Mazzarella and Grimm were the Bonnie and Clyde of mortgage fraud — among the greediest of a band of swindlers who took advantage of lax lending standards at profit- hungry banks, which stopped verifying income and assets for even questionable borrowers…”

“…They told the straw buyers they would pay the mortgages. Then they skimmed thousands of dollars from each of more than 432 transactions, the indictment says, stashing the cash in 80 bank accounts…”

http://www.bloomberg.com/news/marketsmag/mm_1208_trim2.html

Eve Mazzarella was a Las Vegas success story. The high-school dropout and former housemaid moved to the Nevada city in 2000 from Seattle, got a certificate from the ABC Real Estate School and started selling houses in what would become the hottest market in the country.

In 2006, Mazzarella recorded sales of $13.8 million and made the National Association of Realtors’ “30 Under 30” list, which names the best young agents in the nation. Mazzarella started her own company, Distinctive Real Estate & Investments Inc., in December 2003. She whipped around town in a Mercedes-Benz sport utility vehicle. She planned to build a three-story office building in Vegas’s shabby downtown north of the Strip and preserve a historic house on the site by lifting it onto the roof.

Her competitors were impressed. “She was an up and comer with a brilliant future,” says Forrest Barbee, a broker at Prudential Americana Group, a Las Vegas agency where Mazzarella once worked.

The dream ended at about 5 a.m. on March 13, when federal agents smashed through the door of a stucco home on a quiet, grassy cul-de-sac looking for Mazzarella, 31, and her husband, Steven Grimm, 45, an erstwhile mortgage broker.

The day before, the U.S. Attorney for Nevada had indicted the couple on 6 counts of bank fraud, later revised to 13. Prosecutors say the pair recruited fake — or “straw” — buyers to apply for loans to purchase 227 properties worth $107 million. They told the straw buyers they would pay the mortgages. Then they skimmed thousands of dollars from each of more than 432 transactions, the indictment says, stashing the cash in 80 bank accounts.

Bonnie and Clyde

They allegedly arranged fake sales on some houses five times. Then, according to the indictment, they walked away from the mortgages, leaving lenders in the lurch.

If prosecutors are right, Mazzarella and Grimm were the Bonnie and Clyde of mortgage fraud — among the greediest of a band of swindlers who took advantage of lax lending standards at profit- hungry banks, which stopped verifying income and assets for even questionable borrowers. Buyers who gave false information to mortgage lenders are technically guilty of fraud themselves. Yet authorities are mostly targeting schemes such as the one allegedly perpetrated by Mazzarella and Grimm.

What happened in Vegas didn’t stay in Vegas. Similar schemes across the country helped pump up a housing bubble whose rupture has triggered a global banking crisis, prompted government intervention not seen since the Depression and helped precipitate what economists predict will be a long and painful recession.

Plea: Not Guilty

Mazzarella and Grimm have pleaded not guilty to conspiracy and bank fraud in Nevada federal court in Las Vegas. They couldn’t be reached for comment on this story. Mazzarella’s attorney declined to comment; Grimm’s didn’t return phone calls.

Mazzarella’s father, a real estate lawyer in San Diego, says his daughter is innocent. “She was putting money in Las Vegas real estate like everyone else,” Mark Mazzarella says. “The targets are going to be higher up the food chain.”

Mazzarella and Grimm’s alleged scheme was just one of many in Las Vegas, where, throughout much of this decade, people wagered on houses like they were numbers on a roulette wheel. The advent of no-document “liar loans” fueled the frenzy, as maids, parking attendants and casino workers borrowed big to roll the dice on subdivisions rising amid the mesquite.

Like the city’s replicas of Venice’s canals and New York’s skyline, Las Vegas real estate became a caricature, rising faster and booming bigger than in the rest of the nation.





Beware New Fraud From “Foreclosure Consultants” Who Collect Fees Illegally And Don’t Perform

19 11 2008

“…the seven companies collected upfront fees and then failed to negotiate or perform any services on behalf of the homeowners, leaving them at risk of losing their homes…”

“…the company promised a “money-back guarentee (sic)” on its web site and that it has a 97 percent success rate and a “combined 25 years of real estate, financial and lending experience.” By this evening it had removed the misspelled “guarentee.”

http://www.rrstar.com/news/x1720658976/Attorney-general-sues-Rockford-company-for-mortgage-fraud 

A mortgage-rescue company with a Rockford office was one of seven sued by Illinois Attorney General Lisa Madigan today.

Madigan’s office filed the lawsuit in Winnebago County Circuit Court against StopMyForeclosure.net, which appears to have a location on the 3900 block of Abbotsford Road, for violating the state’s Illinois Mortgage Rescue Fraud Act. The act prohibits companies from requiring payment from consumers before completing all terms of a rescue contract.

Madigan claims the seven companies collected upfront fees and then failed to negotiate or perform any services on behalf of the homeowners, leaving them at risk of losing their homes.

A record wave of foreclosures locally and nationally have pushed the economy to the brink of recession. As foreclosure actions have increased, so have the number of companies promising help to homeowners behind on payments.

Madigan has sued 22 companies, including those sued today, so far this year for violating the state mortgage rescue fraud act.

“There are so many of these companies, and most have no idea that the state has a law that restricts what they do,” said Bob Campbell, executive director of the Rockford Affordable Housing Coalition, a U.S. Housing and Urban Development-certified housing-assistance organization. “Since they don’t know that the law is in place, most of these for-profit companies end up violating the law.”

Early today, the company promised a “money-back guarentee (sic)” on its web site and that it has a 97 percent success rate and a “combined 25 years of real estate, financial and lending experience.” By this evening it had removed the misspelled “guarentee.”

The site also displays two seals of approval by the Better Business Bureau.

Dennis Horton, executive director of the Rockford office of the Better Business Bureau, said he believed both BBB symbols are pirated.

“This company is not registered with the BBB anywhere in the United States,” Horton said.

Rhonda Poshka, who said she is owner of the Queen Oak, Ariz.-based company, said the company is registered with the Arizona Better Business Bureau but not accredited.





Mortgage Banker Duped Borrowers Into Signing “Two Sets Of Loan Documents”, Selling Phony Loan To Investor And Leaving Victims With Mortgages They Didn’t Know They Had

18 11 2008

lgfp1667wanted-jack-sparrow-pirates-of-the-caribbean-2-poster

“…They said Taneja prepared some legitimate mortgages, mostly for members of the Indian community, but would dupe people into signing dual sets of loan documents. He would then create a fictitious mortgage based on the second set of documents and sell the phony loan to an investor, which would leave the victims with mortgages they didn’t know they had….”

“…Prosecutors said he created bogus mortgage loans, sold legitimate loans to more than one buyer and pocketed the proceeds of refinancings…”

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/13/AR2008111302145_pf.html 

He was an icon in the local Indian community, a flashy movie producer who invested millions in Bollywood films and brought Indian musical acts to the Washington area.

Vijay K. Taneja had an aura about him, a celebrity image that made people trust him, according to people who know the Fairfax County businessman. Problem was, Taneja admitted in federal court yesterday, his entertainment ventures were financed with money obtained through an extensive mortgage fraud scheme.

Taneja pleaded guilty in U.S. District Court in Alexandria to a fraud enterprise that cost banks at least $33 million, the largest mortgage fraud case in Virginia in almost 20 years and among the largest nationally. Prosecutors said he created bogus mortgage loans, sold legitimate loans to more than one buyer and pocketed the proceeds of refinancings.

“That’s an incredible amount of loss,” said Adam Lee, supervisory special agent for financial crimes in the FBI‘s Washington field office, which operates one of 42 new bureau task forces nationwide focusing on escalating mortgage fraud.

Taneja, 47, of Fairfax City entered his plea to one count of conspiracy to commit money laundering in a soft, hesitant voice. U.S. District Judge Claude M. Hilton asked him no specific questions about the case, and he declined to comment afterward. His attorney, Robert P. Trout, declined to comment as well. Taneja faces up to 20 years in prison when he is sentenced Jan. 30.

Prosecutors told the judge that Taneja invested millions of his mortgage proceeds in Indian films and theatrical productions through one of his companies, Elite Entertainment, and that they are still trying to untangle the financial web. “He has millions of dollars unaccounted for,” Assistant U.S. Attorney Stephen Learned said as he asked Hilton to order Taneja to be electronically monitored to ensure that he doesn’t flee before sentencing. “There’s so much money, and it’s difficult to figure out where it all went.”

Trout emphasized that Taneja, a U.S. citizen, has cooperated extensively with the government, and Hilton ordered him released on a personal recognizance bond.

Members of the Washington region’s tightly knit Indian community said Taneja was revered by many because of his show business connections and insistence on doing business mainly with others in the community.

He brought renowned Indian acts to the United States and also invested in the entertainment industry in India.

“He knew people in the film and music industry, and he produced these shows,” said Anuj Sud, a Maryland lawyer who said several of his relatives were victimized by Taneja. “People see this guy out there involved in Bollywood and the attraction is, ‘Hey, this guy is popular.’ “

David Lamb, a Washington lawyer who represents several of Taneja’s victims, said that “everyone looked up to him. He had all this big flashy money, and they thought he was a star. He could get them to do things for him.”

Although the $33 million loss was borne by four financial institutions — First Tennessee Bank, Franklin Bank, Wells Fargo Bank and EMC Mortgage Corp. — prosecutors said numerous area residents were victimized as well. They said Taneja prepared some legitimate mortgages, mostly for members of the Indian community, but would dupe people into signing dual sets of loan documents. He would then create a fictitious mortgage based on the second set of documents and sell the phony loan to an investor, which would leave the victims with mortgages they didn’t know they had.

One area business owner said her credit was ruined because she obtained several mortgages with Taneja and only later realized that he had taken out several more in her name. “When I went to refinance my house, they told me I had $6 million in mortgages,” said the woman, who declined to be identified.

Court documents say Taneja’s main company, Financial Mortgage Inc., also did refinancings and defrauded banks by not paying off the first mortgages. For example, a customer would borrow $500,000, intending to receive $100,000 as cash and use $400,000 to pay off his first mortgage. Taneja would give the customer the $100,000 and pocket the $400,000. The bank that held the first mortgage wouldn’t notice because it didn’t know there had been a refinancing.

Taneja also admitted that he would take out a mortgage loan and then sell that loan on the secondary mortgage market to more than one investor, pocketing the proceeds. Federal investigators said the banks were slow to catch on to the schemes because they were eager to lend money in the soaring housing market.

“The banks were not doing due diligence,” said one law enforcement official, who declined to be identified because he was not authorized to speak about the case. “They saw mortgages as a good source of revenue, and he took advantage of that mentality. He took advantage of the height of the real estate boom.”

Federal officials said Taneja’s scheme escalated as the nation’s economy spiraled downward. He was also a real estate developer — his four companies filed for bankruptcy protection this year — and officials said he booked more phony mortgages as housing prices fell.

Agent Lee said that mortgage fraud is “an absolute top priority” for the FBI and that investigators are focusing on Northern Virginia because of a high rate of foreclosures. A spokesman for the Internal Revenue Service, which also investigated Taneja, said that agency is zeroing in on mortgage fraud as well.

Federal mortgage fraud prosecutions have more than tripled in the past two years, according to Justice Department statistics, and experts said even more cases are coming as banks take bad loans off their books.

“That’s when we’ll see why these loans went so bad, and there will be criminal investigations,” said Curt Novy, a California broker who testifies as an expert witness in mortgage fraud cases.





Predatory Mortgage Brokers And Lenders Made Loans That Were Designed To Fail If Not Refinanced

17 11 2008

“These lenders that have gone out of business and bankrupt were making loans that were designed to fail.”

 

“…Housing analysts have characterized the problems in the South Bay as young, first-time home buyers being taken advantage of by predatory lenders. But Little Lake Street attracted people of all motivations: amateur investors, speculators and even one man who said he was part of a fraud scheme. More than half of the buyers gambled by purchasing multiple properties during the housing boom, according to deeds filed with the county…”

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http://www.signonsandiego.com/news/metro/20081116-9999-lz1n16street.html 

Greed and naivete collided on Little Lake Street in the fall of 2004.

It produced easy money for specula-tors and mortgage brokers and short-lived happiness for families who bought houses they couldn’t afford to keep. Few streets in the county have witnessed as dramatic a turnaround as Little Lake.

Nestled in the heart of the sprawling Otay Ranch development in eastern Chula Vista, the new homes generated so much interest that people spent months on waiting lists, just for the option to buy.

Prices on one block peaked in 2005, a few months after homes hit the market.

Since then, 13 of the 23 houses – 57 percent – have fallen into fore-closure, making it one of the tightest concentrations in the county, according to a San Diego Union-Tribune analysis of MDA DataQuick information.

Subprime loans, the high-interest mortgages sold to people with blemished credit, were rampant in the census tract surrounding Little Lake Street. Of the 3,600 loans sold in that tract in the past three years, more than 1,000 were subprime.

That’s the most of any tract in the county, according to a Union-Tribune analysis of federal data.

But the problem wasn’t confined to subprime mortgages. Many home buyers gorged on easy credit. Tempted by persuasive mortgage brokers and lenders, they bought multiple half-million-dollar homes completely on credit, most with terms to pay only interest or adjustable interest rates that quickly soared.

About 12 percent of foreclosed properties likely belonged to investors who walked away from at least two houses in the past three years, the Union-Tribune found in an analysis of the 30 census tracts in the county with the highest rates of foreclosure.

On Little Lake Street, the owners who were forced to give up houses are people of modest means — construction workers, a postal service mechanic, a community college instructor and a Navy couple, among others. Many are minorities and immigrants with little education. Most are in their mid-30s to mid-50s.

Housing analysts have characterized the problems in the South Bay as young, first-time home buyers being taken advantage of by predatory lenders. But Little Lake Street attracted people of all motivations: amateur investors, speculators and even one man who said he was part of a fraud scheme. More than half of the buyers gambled by purchasing multiple properties during the housing boom, according to deeds filed with the county.

Looking back, several say they erred by trusting mortgage brokers and lenders who told them they could afford it. Some feel a twinge of guilt about the nation’s credit crisis and the role their bad mortgages played in prompting the historic $700 billion government bailout passed last month.

They continue to struggle with the emotional toll of losing their homes and grapple with what they consider the unfairness of it all. During the overheated market, thousands swarmed the South Bay and took out risky mortgages.

“All people did it,” said JesÚs Muñoz, a construction worker who lost his Little Lake Street house in March. “They were investing and selling. If other people can do it, why not me?”

 

An idyllic setting

Little Lake Street doesn’t look its part as ground zero for San Diego’s foreclosure crisis.

The houses were designed to reflect country French architecture when they were built four years ago. Many are 1,600 square feet and feature stone and brick archways and old-fashioned shutters painted in olive greens, slate blues and sunny yellows. Neatly trimmed bushes line the fronts of houses. Chimneys peek over second-story roofs.

The street is quiet these days. Several homes are vacant, a couple of which have bank-owned for-sale signs staked out front.

 

NANCEE E. LEWIS / Union-Tribune
Little Lake Street in the Otay Ranch community of Hillsborough is an epicenter of the county’s foreclosure crisis. Some houses have sold at auction for up to 50 percent less than their selling prices in 2004, when they were new. Some homes are vacant, with bank-owned for-sale signs out front.

The emptiness of the street is a stark contrast to the frenzied rush that occurred in 2004, when people lined up to buy the houses before they were built.

Many buyers on Little Lake Street, including Terry Louise Washington, said they were bombarded with messages from family, friends and co-workers to invest in property before theprices climbed out of reach. Washington, a community college instructor, heard that message repeatedly at church and even by a speaker at her high school reunion.

“I thought I did the right thing” in buying the house as an investment, said Washington, who used an inheritance from her grandmother for her $118,000 down payment. “People told me it’s the way to make it in life.”

Washington is one of four foreclosed homeowners on the block who put down more than 5 percent. She is the only one who did not refinance and retrieve the down payment before losing her house.

John and Helen D’Ercole, longtime Navy employees, felt they weren’t taking a risk when they bought the house a few doors down for $513,000, with a $200 down payment.

More than half of those interviewed said they rented out the homes.

Some were looking to turn a quick profit.

Joseph Spinali, a mechanic for the U.S. Postal Service, said he was hired by a real estate agent who promised him $10,000 to use his name and credit to buy and immediately sell a house on the block.

Spinali said he was a “strawbuyer,” meaning he only posed as the buyer in loan documents. The deal went sour, Spinali said, when the market tanked.

He has sued the agent, June Rhodes, saying that she never repaid $52,661 in loans and that she ruined his credit by letting the house slide into foreclosure. In a brief interview, Rhodes denied having hired Spinali as a strawman, which could constitute fraud if loan documents were forged.

“It’s very complicated,” Rhodes said. “I really don’t think it’s anybody’s business but Joe’s and mine.”

At least two buyers on the street flipped houses within weeks of their purchase, driving up property values by $20,000 and $71,000.

“There was a flipping fever,” said Carlos Aguirre, a community development specialist for National City. “There were small real estate brokerages opening up, enticing people, telling them to hold the new houses for just two or three days. It became the worst of the worst.”

 

Loans ‘designed to fail’

The loans sold on Little Lake Street featured some of the riskiest and most expensive elements available at the time: no down payments, adjustable interest rates capped as high as 14 percent, interest-only or negative amortizing loans and prepayment penalties, which assigned hefty charges for refinancing.

“So many of these loans were predicated on the idea that they would be refinanced,” said Kevin Stein, associate director of the California Reinvestment Coalition, which works with nonprofits to counsel distressed borrowers.

“These lenders that have gone out of business and bankrupt were making loans that were designed to fail.”

It didn’t take long for Little Lake home buyers to run into problems.

Several defaulted on their mortgages before their interest rates ever adjusted upward, according to county deeds.

The combination of the banks’ loose underwriting, the weakening economy and declining home values trapped many people, Stein said. When housing prices were rising, owners were able to refinance or sell to avoid falling behind on payments. But in a falling market, there was no way out.

Mary Ann Erickson helps families struggling with the threat of fore-closure at the San Diego nonprofit Community Housing Works. Time and again, Erickson said, she encounters Latinos who signed up for loans through family members and friends who had little lending expertise.

“The brokers were totally uninformed,” said Erickson, who has reviewed scores of loan packets. “I don’t even think these people knew what the repercussions of their deals would be.”

Several of the Little Lake Street families said they couldn’t remember the names of their mortgage brokers. They were just friends of friends.

Some now question the figures in their loan documents.

Ernesto Guevarra, a health care worker who lost his Little Lake Street house last year, provided the Union-Tribune with loan documents quoting finance charges of $4,000 that jumped to $30,000 at the time of signing. Guevarra reluctantly paid the fees by including them in the loan.

He said he was pressured to sign the paperwork despite the sharp increase in charges. He also said his broker quoted a lower interest rate that never materialized, and inflated his bank account balance on statements to qualify for a larger loan — though Guevarra was unable to provide copies of forged bank statements.

An official at the mortgage brokerage, Millennium Financial and Realty in Chula Vista, said the company never falsified documents or forced Guevarra to sign the contract.

“I think Mr. Guevarra is mistaken about what he remembers,” said Eliel Guerrero, Millennium Financial’s president.

Guerrero blamed the lender, Argent Mortgage, for providing an incorrect estimate on the original fees. Millennium pocketed $18,600 in the transaction, a 3 percent commission, which Guerrero said is “not excessive.”

Mortgage brokers say it’s unfair to blanket them with blame.

“Credit was lax,” said Ed Smith Jr., president-elect of the California Association of Mortgage Brokers. “The problem wasn’t the distribution channel. It was the availability of the loans.”

Guevarra is not the only Little Lake property owner who faults others. One accused his seller of swindling his down payment. Several criticized their lenders for not renegotiating their mortgages when they lost work. Others blame the government for lax oversight of the lending industry.

Without documentation and hard evidence to prove wrongdoing, law enforcement officials say it’s virtually impossible to conclude who is at fault.

Michael Groch, who heads the economic crimes division for the District Attorney’s Office, said his staff is researching and investigating about double the number of real estate fraud cases from two years ago. But Groch is hesitant to say just how large a role wrongdoing and fraud played in the county’s foreclosures.

“Sometimes when people are in a difficult financial situation, such as foreclosure or bankruptcy, they look for explanations that aren’t as embarrassing as their having made mistakes,” he said. “But other times, they are victims of crime, especially these days.”





Subprime Lenders Exempt From “Community Reinvestment Act” Law Responsible For Mortgage Crisis

15 11 2008

“It is subprime that’s really causing it,” Hayes said of the mortgage crisis. “But CRA did not force anyone to do subprime.”

“…most of the lenders who made risky subprime loans were exempt from the Community Reinvestment Act. And many of the lenders covered by the law that did make subprime loans came late to that market – after smaller, unregulated players showed there was money to be made…”

http://www.ocregister.com/articles/loans-subprime-banks-2228728-law-lenders 

“…people are charging that the Community Reinvestment Act of 1977 forced banks to make bad loans, leading to financial Armageddon.

There’s just one problem: It isn’t true.

A Register analysis of more than 12 million subprime mortgages worth nearly $2 trillion shows that most of the lenders who made risky subprime loans were exempt from the Community Reinvestment Act. And many of the lenders covered by the law that did make subprime loans came late to that market – after smaller, unregulated players showed there was money to be made.

Among our conclusions:

  • Nearly $3 of every $4 in subprime loans made from 2004 through 2007 came from lenders who were exempt from the law.
  • State-regulated mortgage companies such as Irvine-based New Century Financial made just over half of all subprime loans. These companies, which CRA does not cover, controlled more than 60 percent of the market before 2006, when banks jumped in.
  • Another 22 percent came from federally regulated lenders like Countrywide Home Loans and Long Beach Mortgage. These lenders weren’t subject to the law, though some were owned by banks that could choose to include them in their CRA reports.
  • Among lenders that were subject to the law, many ignored subprime while others couldn’t get enough.
  • Among those standing on the sidelines: Bank of America, which made no subprime loans in 2004 and 2005; in 2006 and 2007 subprime accounted for just 2 percent of its loan portfolio. Washington Mutual, meanwhile, raised its subprime bet by 20 times to $5.6 billion in 2006 – on top of its already huge exposure through its ownership of Long Beach Mortgage.

Since the federal takeover of mortgage giants Fannie Mae and Freddie Mac in September and particularly since the federal bailout of Wall Street, some have argued that the reinvestment law is to blame for the mortgage meltdown and credit crunch.

In a Sept. 22 editorial, The Wall Street Journal said that the law “compels banks to make loans to poor borrowers who often cannot repay them. Banks that failed to make enough of these loans were often held hostage by activists when they next sought some regulatory approval.”

In a Sept. 15 editorial, Investors Business Daily wrote that by strengthening the reinvestment law in the late 1990s, President Clinton “helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but ‘predatory.’ “

And in an Oct. 13 op-ed in The Register, Chapman University President James Doti, an economist, wrote that the law “pressured banks to make loans and mortgages to people who might not be the best credit risk. In fact, Clinton administration Attorney General Janet Reno threatened legal action against banks that didn’t loosen up mortgage requirements.”

The criticisms of the reinvestment act don’t make sense to Glenn Hayes. He runs Neighborhood Housing Services of Orange County, which works with banks to provide CRA loans to first-time homebuyers. In its 14-year history, the nonprofit has helped 1,200 families buy their first homes. Score so far: No foreclosures and a delinquency rate under 1 percent.

“It is subprime that’s really causing it,” Hayes said of the mortgage crisis. “But CRA did not force anyone to do subprime.”

Bob Davis, executive vice president of the American Bankers Association, which lobbies Congress to streamline community reinvestment rules, said “it just isn’t credible” to blame the law CRA for the crisis.

“Institutions that are subject to CRA – that is, banks and savings asociations – were largely not involved in subprime lending,” Davis said. “The bulk of the loans came through a channel that was not subject to CRA.”

Congress passed the Community Reinvestment Act to crack down on “redlining,” the practice by banks of refusing loans to neighborhoods where most residents are minorities or earn low incomes. The law applies to all federally insured banks and thrifts that take deposits. It generally requires banks to help potential customers near their branches, typically by making loans, investing or providing other services such as financial education.

A companion law, the Home Mortgage Disclosure Act, requires every large home lender to report annually on every home loan application they receive. (No names or streets are listed.) Those reports feed a database that in turn allows regulators, community activists and others to monitor home lending in virtually every neighborhood in America.

Beginning in 2004, federal regulators also have required lenders to report on high-priced loans – those with rates at least three percentage points higher than U.S. Treasury notes of comparable maturity. While the mortgage industry defines subprime loans by credit scores, Federal Reserve Board analysts believe that subprime and Alt-A loans fall into their high-priced loan category.

The Register used that database for its analysis. During the four years covered by our analysis, lenders made 55 million home loans, including 12 million subprime loans.

In its glory days, subprime lending was a lucrative business that paid six-figure salaries to 20-something salespeople and made fortunes for top execcutives. Nowhere were the riches more evident than in Orange County, home to industry giants New Century, Ameriquest, Argent and Fremont.

But the money spread far beyond Orange County, thanks to Wall Street’s years-long love affair with subprime. In 2005 and 2006, subprime lenders sold about 70 percent of their loans by dollar volume to investors – principally to finance and insurance companies or by packaging the loans in highly rated securities.

Fannie and Freddie, the federally sponsored mortgage buyers, were bit players in this market. Together they bought about 3 percent of all subprime loans issued from 2004 through 2007, most of that in 2007 alone.

In 2007 Wall Street turned its back on subprime. That year, subprime lenders were forced to keep 60 percent of their loans on their own books or on the balance sheets of their affiliates.

That was the last fatal step in a financial high-wire act.

Since then, most of the 25 companies that dominated subprime lending between 2004 and 2007 have shut down or been sold at fire-sale prices.

Just eight of the 25 top subprime lenders were subject to the reinvestment law. But among those eight are two of the summer’s most prominent failures – Washington Mutual and IndyMac Bank. Together with its Long Beach Mortgage subsidiary, WaMu made $74.2 billion in subprime loans. IndyMac specialized in “Alt-A” loans to customers who had good credit but couldn’t qualify for top-drawer loans.

pirates-caribbean-4

“…Fannie and Freddie, the federally sponsored mortgage buyers, were bit players in this market. Together they bought about 3 percent of all subprime loans issued from 2004 through 2007, most of that in 2007 alone…”








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