California Real Estate Fraud Report

Michael Hurd, 37, a Salt Lake City man, has pleaded guilty in a unique form of mortgage fraud: a “seller-funded down payment assistance program” (his phrase) to assist borrowers to purchase their homes was nothing more than the borrowers unknowingly self-funding their own loans. The crimes to which he pleaded guilty were mail fraud, conspiracy to commit wire fraud and bank fraud, all related to the purchase of 20 properties in Modesto, which he flipped.

Hurd’s reach extended across the country; he has also pleaded guilty to flipping properties illegally in West Virginia by utilizing pumped-up appraisals (appraisal fraud). The lenders lost $5.5 million as a result.

Read the original article in the Central Valley Business Times.

The California City Police Department operates with a small staff of 20. Yet this group of extraordinarily talented and dedicated professionals took a referral on what appeared to initially be a minor identity theft case and dug deeper until their investigation bore fruit in the form of five arrests.

Those arrested were appraiser Nathaniel Acree, 65, of Long Beach; broker Jay Langer, 51, of San Juan Capistrano; Khalid Malik Abdul Ali, 60, of California City; Angie Cachu, 44, of Orange; and notary Elizabeth Torres, 28, of Santa Ana. Their scheme was one familiar to readers of the California Real Estate Fraud Report:  purchase properties at inflated appraisal values, skim the phony equity off the top and use straw buyers to purchase the inflated-value homes.

Three reserve officers for California City performed much of the investigative work: Reserve Officer Michael Katz, Reserve Officer Chris Christopher (now deceased), and Sgt. Jeff Takeda.

The case is being prosecuted by Kern County Deputy District Attorney Gordon Isen. The case included the assistance of the investigative arm of the Orange County District Attorney’s Office and the US Postal Service.

Read the original article in the Bakersfield Californian.

Six people  have been indicted by a federal grand jury for mail fraud in relation to a mortgage fraud scam.

 According to the U.S. Department of Justice, Temika Reed, 31, a straw buyer,  bought seven houses in Solano County between October 2006 and January 2007, telling the lenders in each case that the loan was to purchase a home that would serve as her primary residence. Her co-defendants are also charged with mail fraud; their role was to falsify Reed’s income and employment history. They are Buena Marshall, 65, and Jake Weathers, 35, of Sacramento; Deborah Loudermilk, 53, and Kadest Harris, 57, of Suisun City; and Reginald Dodson Sr., 40, of Tracy.

Reed’s pay for acting as a straw buyer was the proceeds from getting inflated appraisals for the homes as well as falsifying repair issues.

Read the original article in the Silicon Valley Mercury News.

Appraisers all across the country are being stiffed out of their fees, as the company that ordered them to perform appraisals has ceased operations after its CEO settled with the Securities and Exchange Commission (SEC) for his involvement in a $35 million Ponzi scheme.

Aman Makkar, the CEO of AppraisalLoft, said he is merging his company with another and that his company’s debts will be paid once the merger is complete. Some appraisers are owed as much as $5,500 for their services.

AppraisalLoft was a middle-man that took orders from banks to have appraisals performed on properties. The Home Valuation Code of Conduct (HVCC), which was the brainchild of former New York Attorney General Andrew Cuomo, was supposed to stop collusion between banks and appraisers to fix prices on home appraisals by introducing intermediaries. Most real estate professionals have concluded that the HVCC has been a disaster and among other outcomes, resulted in lower fees to appraisers, the difference going to the intermediaries.

Read the original article in SignOn San Diego.

One of the remaining defendants in the Beverly Hills mortgage fraud story that dates back 10 years and costs Lehman Brothers Bank tens of millions of dollars has been sentenced to prison.

U.S. District Judge Dean D. Pregerson sentenced Richard A. Maize, 53, a former Beverly Hills mortgage banker, to 18 months in prison. Maize pleaded guilty to conspiracy to commit bank fraud, loan fraud and making a false statement on a federal tax return.

Maize, a co-founder of mortgage banking firm Americorp Funding, was central to the conspiracy, in which the other defendants either brokered their straw buyer loans to Maize, bought and sold the real estate (the Realtors®) or provided the appraisals. The fraudulent appraisals and loan applications were submitted to the victim banks. In one case, a $735,000 home in Bel Air was sold to a straw buyer for $2.37 million.

The previously sentenced defendants are:

Charles Elliott Fitzgerald, 50, of Newbury Park (168 months in federal prison)
Mark Alan Abrams, 50, of Long Beach (78 months)
Jamieson Matykowski, 37, of Laguna Niguel (18 months)
Lila Rizk, 44, of Rancho Santa Margarita, an appraiser (36 months)
Kyle Grasso, 40, of Santa Monica (12 months). Amazingly, Kyle Grasso‘s real estate license was never revoked by the California Department of Real Estate, but he allowed it to expire.

Considering the sentences Of Matikowski and Rizk, in my opinion, Richard Maize got a light sentence.

There are a number of previous posts on this blog about this massive mortgage fraud.

Read the original article in the Los Angeles Independent.

A Bakersfield real estate agent and her parents have pleaded no contest to a number of felonies related to the fraudulent purchase of residential properties (mortgage fraud).

In describing his case against Guadalupe Ramirez, her mother Maria Ramirez and father Augustine Ramirez, prosecutor Gordon Isen of the Kern County Deputy District Attorney‘s Office  said “No one could possibly claim that this was innocent conduct that was just misunderstood.”

The Ramirez family was accused of conspiring to buy the homes  using pumped up appraisals (appraisal fraud).  Augustine Ramirez told lenders they he intended to live in the homes (at least 5) and then defaulted immediately, skimming the cash from the top. The lenders lost $4.1 million as a result.

You will find an earlier article about Guadalupe Ramirez by search this blog.

Read the original article in the Bakersfield Californian.

Three men have been indicted by a federal grand jury on charges related to a mortgage fraud conspiracy in which lenders were defrauded out of $1 million.

The indictment charges Sean McClendon, 35, and Anthony Williams, 44, with buying four properties in the Sacramento area from Anthony Salcedo, 30. The two were paid kickbacks by Salcedo, which is illegal under the federal RESPA rules, and used straw buyers to make the purchases. In addition, McClendon, who was a loan officer, processed the loan paperwork and falsified the income and assets of the straw buyers in order to get the loans approved (loan fraud, mortgage fraud). The values were overstated (appraisal fraud) in order for the men to create false equity (equity skimming) and get their “referral fees” (the kickbacks).

The homes were subsequently foreclosed by the lenders.

Given the relatively small dollar amount of this fraud compared to other cases and the fact that the mortgage fraud occurred between 2005 and 2006, one wonders if the men thought they would escape detection and prosecution.

Read the original article in the Central Valley Business Times.

William E. Baker, owner of Baker & Baker Construction, has pleaded guilty in federal court to one count of mail fraud for his part in a multimillion dollar scheme to defraud banks (loan fraud, mortgage fraud).

Baker, 65, confessed to conspiring with Garret Griffith Gililland III, 30 to inflate the prices of homes he built (appraisal fraud) by, among other things, lying about improvements. After escrow closed, he would rebate some of the profit from the fraud to companies owned by Gililland.

Garret Gililland has already pleaded guilty in this complex real estate fraud case. You can read about him in earlier articles in the California Real Estate Fraud Report by entering his name in the search box.

Read the original article in the Sacramento Bee and the Chico Enterprise Record.

Tony Huy Havens, of Modesto has been indicted by a  federal grand jury on Thursday returned a two-count indictment for conspiring to commit mail fraud and mail fraud in a mortgage fraud scheme.

Havens, 37, has already been convicted in 2009 of mortgage-fraud related crimes and is serving a five year sentence in Wasco State Prison. Last month, he was indicted with 30 real estate fraud-related crimes. There are at least four articles detailing his escapades on the California Real Estate Fraud Report.

In the current indictment, Tony Havens is alleged to have devised a “Gift Program” that consisted of him bringing buyers and sellers together who would set the price for a property. They would further agree to “sell” the property for $100,000 or more above that price, after which the purchaser would obtain a loan for the higher amount. The amount in excess would be returned to the buyer, who would use some of it as a down-payment on the property.

How this scheme, which occurred with eight homes in Stanislaus and San Jaoquin Counties, passed muster with appraisers (possible appraisal fraud) and underwriters, remains a mystery. The indictment is the result of a joint investigation between the Stanislaus County District Attorney’s Office and the FBI.

Read the original articles in the Central Valley Business Times and the Modesto Bee.

Where there’s taxpayer money without strong controls and oversight . . . there’s someone ready to take it.

The U.S. Department of Housing and Urban Development (HUD) is looking into allegations of misappropriation of funds by the Stanislaus Community Assistance Project  (SCAP), a non-profit in Modesto. HUD is involved because, according to the Modesto Bee, the Stanislaus County District Attorney said her real estate fraud unit is too busy investigating other cases of real estate fraud to look into this case, which involves over $8 million in federal taxpayer money.

Modesto builder Rod Lowe and other residents are suspicious that Modesto officials have given the green light for SCAP to purchase and renovate houses and apartment buildings for sums far greater than a private investor would require. One example was a 30 unit apartment building, all single units, in which the price the city paid was $2.5 million in federal Neighborhood Stabilization Program funds. Unlike the customary practice of the buyer or the buyer’s lender selecting the appraiser, the seller of the apartment building was allowed to pick the appraiser. Makes sense . . .

In another case, SCAP bought a home for $180,000 then spent $160,000 in extensive upgrades. SCAP Executive Director Denise Gibbs then moved her parents to the home, although they already owned two of their own.

Modesto is one of the hardest hit cities by the real estate crisis. My guess is that many homes in foreclosure could be acquired for less than $100,000.

Read the original article in the Modesto Bee.