February 19th, 2014 at 7:56am
Note: There is an earlier article about Claudia Montes and her co-conspirators which can be found on the California Real Estate Fraud Report.
Claudia Montes, 41, was sentenced by U.S. District Court Judge Janis Sammartino to 20 months in federal prison and ordered to repay more than $1 million for her role in a widespread mortgage fraud conspiracy that operated in San Diego and Orange Counties.
Montes and her cohorts successfully received money from lenders for approximately 80 mortgages by lying on their loan applications. They then allowed about 30 properties to go into default and be foreclosed upon. Her sister was one of the straw buyers.
Another one of Claudia Montes’ co-conspirators was real estate agent Kathryn Sylvester, who pleaded guilty in January to conspiracy and wire fraud after admitting she had recruited the straw buyers. Sylvester allowed her real estate license to expire in 2007, according to the California Bureau of Real Estate and will be sentenced in April.
Co-conspirators included San Diego residents Tad Lent, Roderick Michener and Timothy Shannahan, all of whom previously pleaded guilty for their roles.
My thoughts: a 20-month sentence for causing “multimillion-dollar” losses to lenders? Not much of a deterrent, IMO.
Read the original article in San Diego 6.
February 19th, 2014 at 7:35am
Continuing its mission to prosecute those who engage in short sale fraud, the U.S. Attorney for the District of Connecticut announced that attorney Christopher Brecciano, 35, waived his right to indictment and decided to plead guilty to participating and a widespread mortgage fraud scam that occurred in Fairfield County and included numerous properties.
Below is the remainder of the FBI‘s press release:
“According to court documents and statements made in court, between 2006 and 2010, Brecciano, while working as an associate at a Stamford law firm, participated in mortgage fraud conspiracy that involved the purchase of numerous single and multi-family properties, primarily in Bridgeport, Norwalk, and Stamford. Brecciano acted as a closing attorney for at least 50 mortgage loan transactions in which materially false information was provided to mortgage lenders by Brecciano or his co-conspirators. The fraudulent information included false verifications of down payments for real estate transactions, false deeds, and false HUD-1 Forms. In many of the transactions, Brecciano knew that the borrower was a straw buyer and that other individuals intended to control the property and collect rent from the property. In many transactions, Brecciano distributed mortgage loan funds to the straw buyer and other co-conspirators at the closing.
Many of these properties ended up in foreclosure or in short sale transactions. In pleading guilty, Brecciano admitted that he was also involved in many short sale transactions in which he knew that the buyer and seller were working together to retain control of the property while representing to the lender that the sale was an arm’s length transaction. (Note by Monique: this is a class example of short sale fraud).
Through this scheme, lenders suffered losses of more than $7 million.
Brecciano pleaded guilty to one count of conspiracy to commit wire fraud and bank fraud. He is scheduled to be sentenced by Chief U.S. District Judge Janet C. Hall on May 7, 2014, and faces a maximum term of imprisonment of 30 years.
This ongoing investigation is being conducted by the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorney Ann M. Nevins and Special Assistant U.S. Attorney John McReynolds.”
February 14th, 2014 at 8:32am
According to an article in National Mortgage News, Fannie Mae has announced that it plans to keep a “virtual blacklist” of appraisers it believes are “shady.” It is going so far as to warn banks and mortgage lenders to think twice about hiring these appraisers and if they do, the loans will be scrutinized more carefully.
Fannie Mae is a government-sponsored entity and bundles loans it purchases into mortgage-backed securities (MBS). Lack of prudent underwriting by banks during the early and mid-2000s in order to earn hefty commissions and bonuses caused huge losses to institutional investors and brought down some of those lenders, such as Washington Mutual and Countrywide.
Currently there are only four names on the blacklist and that list is available only to lenders.
While the new policy at Fannie Mae help get rid of some appraisal fraud and mortgage fraud, the other impact will be to cause many appraisers to be overly conservative. This could result in loans being rejected and escrows being canceled because the appraisal did not meet the agreed-upon purchase price.
February 12th, 2014 at 8:40am
Many, many articles have been posted in the California Real Estate Fraud Report about David Crisp, Carl Cole and the business they ran in the mid-2000s in Bakersfield that conned banks out of millions.
Now, Financial Times has published an extensive, compelling story that is an intense personal look at both David Crisp and Carl Cole. Writer Gary Silverman looks at their early lives, Cole’s fervent religious beliefs, how the two men came together and how their dishonest practices brought down the real estate market in Bakersfield and perhaps other areas. They and their biblically-named Tower Lending not only fell along with the market, but so did some of their close relatives and employees.
They may have gotten away with their crimes longer if not for the dogged efforts of appraiser Gary Crabtree, who is the real and only true hero of this sordid story.
Silverman correctly notes that “Banks that cheat people pay fines, but people who cheat banks do time.” Prosecutors rarely go after banks, especially in California, and when they do, they take the safe and easy path of seeking financial penalties. Regardless of how wealthy they became, David Crisp, Carl Cole and their associates were neither too big to fail nor too big to prosecute.
February 7th, 2014 at 8:14am
Selling REOs (bank-owned homes) can be a lucrative business line for real estate agents who land accounts with lenders. The big money involved can become a temptation for employees working inside banks’ REO departments, for some real estate agents and brokers and construction and repair crews.
A Denver real estate broker who was an REO broker has filed a counter-claim against the Federal National Mortgage Association (Fannie Mae) after the latter pre-emptively sued her, claiming that it was entitled to declaratory relief when it terminated its Master Listing Agreement (MLA) with her brokerage.
In her federal lawsuit, Karen Frisone and her brokerage K.O. Real Estate in Westminster, Colorado, allege that Fannie Mae employees repeatedly rebuffed her reporting of alleged fraud committed by other Fannie Mae REO brokers, threatened her with retaliation via the loss of future REO assignments and on one occasion, solicited a bribe. Frisone said she was required under the terms of her MLA to report suspected fraud and had investigated her suspicions before bringing what she believed to be fraudulent conduct on the part of other REO brokers to Fannie Mae.
Frisone’s story is not the first where a Fannie Mae REO broker has complained about corruption at the agency. A posting in the California Real Estate Fraud Report in March 2013 reported the indictment of Fannie Mae employee Armando Granillo, whose alleged solicitation of a bribe from a Tucson real estate agent was recorded by the feds.
In the original article in the Denver Business Journal, a paragraph reports that Frisone’s attorney, Karen Fitzgerald of Dallas-based Kleiman Lawrence Baskind Fitzgerald LLP, filed a response to the July 7 suit by Fannie Mae, and argued that Frisone was “engaged in activity protected under the False Claims Act” when she reported the alleged activity. The False Claims Act
This is a very complex case. Please see the attached documents if you are interested in learning more. Although I don’t get to write about REO fraud often (some of it is detailed in a section of my book “How to Commit Short Sale Fraud . . . and Get Away with It“), that doesn’t mean it’s not common.
Note: on February 4, the judge hearing this case denied Fannie Mae’s Motion to Dismiss and Motion to Stay Discovery. See the last attachment for the court’s ruling.
130717_#1 Plaintiff’s Original Complaint
130717_#1-2 Exhibit 2 to Plaintiff’s Original Complaint
131127_KO Answer and Counterclaim
140130_KO Response to Mtn to Stay Discovery
140128_KO Amended Answer and Counterclaim
140129_KO Response to Mtn to Dismiss
140115_FNMA Mtn to Stay Discovery
140114_FNMA Motion to Dismiss
140114_FNMA Appendix in support of Mtn to Dismiss
140204_Ruling MTD ans MTSD
February 6th, 2014 at 8:09am
Two men who once owned a company called Pacific Property Assets were charged with mail fraud, bank fraud and bankruptcy fraud in an a 16-count indictment that prosecutors allege was a $110 million Ponzi scheme.
John Packard, 63, Long Beach, and Michael Stewart, 66, Phoenix, Arizona, are alleged to have refinanced the apartment buildings they owned multiple times, using the proceeds for themselves, company expenses and to pay back earlier investors and lenders. When the real estate market began collapsing in 2007, the men at first allegedly lied about its financial status in order to get more loans, then went bankrupt in 2009.
The losses were $100 million to the lenders and another $91 million to the investors. Only $25 million has been recovered thus far by the banks but there has been no recovery for the investors, who numbered approximately 647.
The case against Packard and Stewart was filed by the U.S. Attorney’s Office in Los Angeles and reported in its press release.
Read the original article in UPI.
February 6th, 2014 at 7:53am
In yet another settlement with the federal government, JPMorgan Chase & Co has agreed to pay $614 million to the U.S. government. In a rare admission, the bank acknowledged it had defrauded the Federal Housing Administration and the Department of Veterans Affairs by underwriting sub-standard mortgage loans that were ineligible for insurance by those agencies. When losses from the sub-standard loans occurred, both agencies – meaning taxpayers – were required to cover them.
The case began when whistleblower, Keith Edwards sued JPMorgan in January 2013 under the False Claims Act, which allows individuals to sue government vendors for defrauding taxpayers. Edwards worked with Preet Bharara, the U.S. Attorney in Manhattan, whose office joined the lawsuit.
Similar allegations have already resulted in settlements with Bharara’s office with Citigroup Inc. and Deutsche Bank AG. The U.S. Attorney is still pursuing $2.1 billion in penalties from Bank of America after a jury decided it was liable for fraud with respect to the mortgages sold by its Countrywide unit.
Read the original article in the Chicago Tribune.
February 6th, 2014 at 7:32am
A loan processor who had been accused by prosecutors of submitting fraudulent loan applications in order to obtain loans from lenders has pleaded guilty to conspiracy to commit wire fraud.
Jun Michel Dirain, 41, was employed by Delta Homes and Lending Inc. Court documents had accused Dirain of not only inflating the income and assets of the borrowers, but also their employment and citizenship status. To support the claims of high income, Dirain and his co-defendants are alleged to have given the borrowers funds to deposit in their accounts, which was then returned after the loans were approved.
Losses to the lender amounted to approximately $4 million.
Dirain’s sentence will be imposed by U.S. District Judge William B. Shubb on April 28.
The remaining co-defendants have a status conference on February 10. They are Sacramento-area real estate agents Moctezuma Tovar, Manuel Herrera, Ruben Rodriguez and Jaime Mayorga, and loan officers Sandra Hermosillo and Christian Parada Renteria of Woodland and Sacramento, respectively.
Click on California Real Estate Fraud Report to read an earlier article about this case.
Read the original article in the Sacramento Bee.
February 5th, 2014 at 9:33am
Ilona Winegardner, 61, who owns New Life Financial Real Estate and New Life Construction, has been charged by the San Bernardino County District Attorney’s office with a variety securities-related charges. Prosecutors allege that in the space of two years, Winegardner duped investors in a real estate investment fraud.
Winegardner was arrested January 8 and is scheduled for arraignment on February 26 in Victorville.
Read the original article in the Press Enterprise.
February 5th, 2014 at 9:22am
A good way to look guilty is to flee, especially after being charged for a second time with bank fraud.
Los Angeles residents Aviv Mizrahi, 53, and Aryeh Greenes, 58, have both fled to Israel after being indicted by a federal grand jury in connection with a bank fraud amounting to $33 million. The indictments allege that the pair altered financial records in order to receive very large lines of credit, costing lenders $33 million. They face 34 counts that include bank fraud and making false statements on loan applications (loan fraud, mortgage fraud).
This is Mizrahi’s second time at bat with bank fraud: in 2012 he was charged with the same crime, fled to Israel and changed his name to Aviv Shoham Schwartz.
According to the Jewish Voice, Greenes was also a rabbi.
If they are prosecuted and convicted, both men face prison sentences of biblical proportions: 1,020 years for Mizrahi and 330 years for Greenes.
Read the original articles in the Jewish Voice and SF Gate.