California Real Estate Fraud Report

Kirk “Mark” Newton appraised more than 200 properties for the now-defunct Crisp and Cole real estate team in Bakerskfield. He is being accused by the state Office of Real Estate Appraisers of misstating measurements of the properties and over-appraised many properties that are now in foreclosure, essentially that he committed appraisal fraud. The hearing could strip him of his real estate appraiser’s license. Both David Crisp and Carl Cole have lost their California real estate licenses and the firm is being investigated by the FBI.

Read the Full Article in KGET 17.

Search the California Real Estate Fraud Report for more details on the Crisp and Cole firm and real estate fraud.

The San Mateo County Investment Pool has filed a civil lawsuit against executives for Lehman Brothers Holdings Inc., accusing them of concealing information from investors about the firm’s losses in the real estate market while taking home lucrative bonuses.

The investment pool, which represents public agencies that invested in Lehman, lost more than $150 million when Lehman Brothers went bankrupt. They are suing the executives and the firm’s auditor, Ernst & Young, alleging fraud, negligent misrepresentation and violations of California law and the federal Securities Act.

According to Supervisor Mark Church:

“The theory here is the top management fraudulently represented that the company was financially strong at a time when they were about to declare bankruptcy. What makes this case so outrageous is all the while, they were siphoning off millions of dollars for their personal benefit, leaving good-faith investors holding the bag. It hurts our schoolchildren, our transit projects, and other essential services that we provide.”

Lehman Brothers was also in the news as the source of tens of millions of dollars lent to the Beverly Hills real estate fraud, appraisal fraud and mortgage fraud ring, whose accused members include Mark Alan Abrams, Charles Elliott Fitzgerald, Joseph Babajian and Kyle Grasso. Read earlier articles in the California Real Estate Fraud Report and another in Mortgage Law Central.

Read the Full Article in the San Jose Mercury News.

James B. Duncan and Hendrix Montecastro were two of three principals of a number of companies, two of which, Pacific Wealth Managment and Stonewood Consulting, Inc., are accused by the Securities and Exchange Commission (SEC) of defraud almost 100 investors out of more than $11 million, forcing many of them into foreclosure. Now Dundan’s father and Montecastro’s mother-in-law have been arrested on charges of making false statements on loan applications - mortgage fraud and loan fraud.

Real estate lawsuits filed by the investors accused Pacific Wealth and its affiliates and companies of committing loan fraud by falsifying loan applications. Appraisal fraud was an integral part of the conspiracy by making the properties to be purchased look to be worth more than they were.

As with many other real estate fraud schemes reported in the California Real Estate Fraud Report, Washington Mutual, aka WaMu, was the willing lender. WaMu is itself under investigation by several attorneys general for pressuring appraisers at eAppraiseIT, to inflate appraisals of properties with subprime loans in order to increase profits.

Read the Full Article in the Press Enterprise.

Appraisal fraud is the rarely mentioned, but often essential, ingredient in real estate fraud or mortgage fraud and other real estate crimes. Without an appraisal justifying the listed price of a home, mortgage fraud cannot occur.

In California, one of the most well-publicized stories of real estate fraud and mortgage fraud is taking a turn, as the state regulatory agency responsible for overseeing appraisers wants to revoke or suspend the license of a Bakersfield real estate appraiser who appraised more than a hundred homes for the former Crisp and Cole company. The appraisal fraud part of this real estate fraud investigation is being managed by the FBI.

Read the Full Article on the 32-page accusation complaint filed against Kirk “Mark” Newton by the Office of Real Estate Appraisers (OREA).

Now that the ferocious and inevitable finger-pointing has begun as to who is to blame for the $700 billion corporate welfare bail-out, it’s time for those with cool heads and common sense to review the simple laws of nature in business - who controls the purse strings - to see how predictable the mortgage crisis was.

Fact: as home prices kept rising and banks and other lenders had lent to everyone who was credit-worthy, the quest began to write loans to anybody with a verifiable pulse. Centuries of underwriting standards were thrown out in the race to write loans. Hence the birth of the NINJA loan: No Income No Jobs or Assets.

Fact: borrower stupidity (and investor greed) aside, it was and still is the lending institution that decides whether the loan should be written or not. These decisions directly led to, and are therefore responsible for, the massive real estate fraud, mortgage fraud, appraisal fraud and other real estate crime such as foreclosure fraud that occurred and are which now occurring in new forms to take advantage of both real estate market chaos and the lack of sufficient law enforcement capabilities to respond.

Fact: Former Fed Chairman Alan Greenspan lied when he stated that he had no idea that large-scale defaults and price re-setting to numbers roughly equivalent to the days leading up to the lending splurge. So did Secretary of the Treasury Henry Paulson of Goldman Sachs. They both knew this was a great opportunity to make a lot of money for their industry, they knew the inevitable fall-out, and they knew that Congress - which had eagerly accepted industry largess for their own campaign coffers - would ride to the rescue with the taxpayer skewered at the end of its lance.

Fact: Congress willingly put no conditions on the bail-out: not on golden parachutes, not on year-end bonuses - some amounting to $600,000 EACH to managers and executives in “failed” lending institutions receiving bail-out money, not on corporate pork. Both political parties are as guilty as Greenspan and the Fed, Paulson and his Treasury (it’s apparently not yours and mine) and the lenders, who have not let up a bit on rewarding themselves for a combination of incompetence and fraud. See the many articles below on WaMu / Washington Mutual in the California Real Estate Fraud Report.

Fact: did you - or Congress - ever ask how Henry Paulson came up with the $700 billion figure for the bail-out? As opposed to $600 billion or $800 billion? This is just the start - there will be more bail-out money demanded by continuing to manipulate public fear and the markets.

Fact: this further leap into enormous deficit spending by the federal government is inevitably leading to the bankruptcy and selling off of the United States. Treasury bills and bonds are being sold to foreign interests because America has not lived within its means and there are few American takers for those financial instruments. Bulk sales of banks’ REOs are also finding primarily foreign purchasers as investors’ confidence in the dollar’s value continues to erode. Don’t be surprised if the next “tsunami” is uncontrolled inflation.

This is the biggest con of the 21st century.

For an excellent write-up on the man-made mortgage crisis, read this article by real estate broker Madeline Zook.

The troubles that resulted in WaMu being acquired for $1.9 billion by JPMorgan Chase seem to be 100% of its own making. They are being investigated by Andrew Cuomo, Attorney General for the State of New York, for pressuring appraisers at e-AppraiseIT to increase the value of properties so that their profits on subprime loans could be higher. Other attorneys general are investigating WaMu in their respective states.

WaMu and some of its executive officers are also the subject of civil lawsuits, one of which was filled by Chad Johnson, a partner at Bernstein, Litowitz Berger & Grossmann, on behalf of the Ontario Teachers’ Pension Plan board, a large shareholder. Says Johnson: “(CEO) Kerry Killinger pocketed tens of millions of dollars from WaMu, while investors were left with worthless stock.” With WaMu gone, he added, “it is all the more important that Killinger and his co-defendants are held accountable.”

Keysha Cooper, one of WaMu’s senior mortgage underwriters, describes a work environment in which approving loans, no matter how risky or dubious, was her job. To paraphrase the old Chiller films of the 1950s: “Volume was the order of the day”. This included strong-arming underwriters to “re-structure” loan applications until the numbers worked. Loan officers with high sales volume were rewarded with Hawaiian vacations, whereas those that balked, such as Ms. Cooper, found themselves being written-up and, in her case, being put on probation before ultimately being fired. One of the loans she ad objected to defaulted immediately; the borrower never made a single payment.

Read the Full Article in the New York Times.

Would you want a loan from a lender with the email address “scarycash@gmail.com”?

That was Garrett Gililland’s email address was, and the former (unlicensed) mortgage broker had plenty of customers before the long arm of the law came after him. According to federal authorities, Gililland is the subject of an international manhunt after being indicted on fraud charges and is part of one of the biggest current mortgage cons in the country.

Read the Full Article in The Chico Enterprise Record.

A group of predators who scammed more than 100 homeowners and lenders in Southern California are facing Judgment Day in U.S. District Court in Los Angeles for a $12 million foreclosure scheme.

Martha Rodriguez, 35, of Downey, is also awaiting sentencing after pleading guilty to defrauding the Department of Housing and Urban Development in another loan scheme. In 2006, the California Department of Real Estate issued an order to desist and refrain to the entrepreneurial Rodriguez from the California Department of Real Estate for conducting herself as a licensed real estate broker and providing residential, mortgage loan, and escrow services without ever having had a real estate license. 

Here crew included Edward Seung OK, of Torrance; Cynthia Valenzuela, 23, of Downey; Vladimir Stefanovic, 35, of Lancaster; and Maria G. Juarez, 36, of Reseda. Rodriguez operated Silvernet Properties in Downey and Bellasi Escrow in Seal Beach. Victims in foreclosure were promised by Rodriguez and her co-defendants that they would save their houses and restore their credit, then used straw buyers to purchase the homes at inflated prices. They then skimmed the profits and allowed the homes to be foreclosed and the victims evicted.

This story is reminiscent of the upcoming trials of Beverly Hills Prudential California Realtors Joseph Babajian, Kyle Grasso, developers Mark Alan Abrams and his partner Charles Elliot Fitzgerald, appraisers Lila Rizk and Scott Robinson and others, who are accused of similar schemes that left Lehman Brothers Bank out tens of millions of dollars while failing to explain why they ignored the warns of potential fraud by Keller Williams broker Christian Stevens. A good summary is on the Los Angeles FBI website.

Read the Full Article in the Downey Patriot.

At a legal forum held for real estate agents by the Silicon Valley Association of Realtors / Los Altos/Mountain View District, real estate attorneys cautioned agents and discussed issues ranging from ethics, disclosure and liquidated damages.

Attorney Stan Smith noted that the number of litigation cases is rising and that agents need to adhere to best practices. “When markets are good, we’re busy. When markets are bad, we’re really busy,” he said.

I have quoted directly from the Article in the Los Altos Crier for the benefit both of real estate professionals and consumers:

• Attribute and disclaim. Attribute where you get your information. If you didn’t verify the information, say so and cite the source of your information.

• Document, document, document. Once in litigation, people make up stories, so make sure you document everything, even telephone conversations. E-mail works best for this and is easy to confirm.

• Disclose, disclose, disclose. There is no harm in over-disclosing.

• Intentional failure to disclose is fraud.

• Keep files as long as possible.

• Be careful and knowledgeable about REO (real-estate-owned) properties. An REO is a property that goes back to the mortgage company after an unsuccessful foreclosure auction.

Ventura County prosecutors have taken another criminal off the streets. Manuel “Manny” John Perez Jr. pleaded guilty to four felony grand-theft charges in connection with a real estate scheme that caused more than $3 million in losses. Perez also pleaded guilty Monday to the felony charge of nonsufficient funds on a closed financial account. His expected sentence is 10 years and 8 months, as well as paying restitution to his victims.

Miles Weiss, who heads the Ventura County District Attorney’s unit for real estate fraud, stated that Perez, 36, of Oxnard, bilked sellers, real estate agents and lenders (Perez was unlicensed) by submitting fraudulent applications through his businesses that included inflating both the incomes of the buyers and the appraisals for the homes, mostly single-family residential.

Read the Full Article in the Ventura County Star.