California Real Estate Fraud Report

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.

A federal district court judge in Chicago has given approval to consolidate eight separate lawsuits against JP Morgan Chase for reducing, freezing or canceling the credit lines of its consumers based on automated appraisal software.

Judge Rebecca Pallmeyer’s ruling rejected the motion by the lending giant to dismiss the case, whose litigants reside California, Minnesota, Illinois, Texas, Arizona and Ohio. If, as expected, other customers of JP Morgan Chase join the litigation, it could develop into a huge class action lawsuit.

The lawsuit will test two (2) important concepts: first, whether the federal Truth in Lending Act applies to home equity lines of credit (HELOC) and whether automated appraisal software is so accurate it may used in place of the traditional human appraiser.

In the past, online real estate company Zillow was sued by homeowners claiming its estimated appraisals were inaccurate. Zillow is now the target of a lawsuit by CoreLogic, which claims CoreLogic holds the patent to “automated valuation software“. And CoreLogic has been sued by the FDIC for “gross negligence, breach of reps and warranties, and other breaches of contract for providing defective and/or inflated appraisals” in its appraisal work for now-defunct Washington Mutual, aka WaMu according to a blog post in the Big Picture.

Read the original article in the Los Angeles Times.

Defunct subprime lender Washington Mutual, aka WaMu, and several of its business partners have agreed to settle a class-action lawsuit by pension plans and investors, who accused them of securities fraud.

The settlement agreement requires Washington Mutual to pay $105 million; Goldman, Sachs & Co. and a group of underwriters  to pay $85 million; and Deloitte & Touche to an additional $18.5 million. 

The largest loser was the (Canada) Ontario Teachers’ Pension Plan Board, claiming to have suffered $24 million in losses. The remaining plaintiffs were smaller pensions, investor groups and individuals. Their lawsuit accused WaMu and its executives of securities fraud by filing false financial reports and painting an unrealistic picture of its underwriting standards.

The U.S. seized WaMu in 2008 and sold its assets to JP Morgan Chase for $1.9 billion. 

Earlier articles in the California Real Estate Fraud Report reported accusations that former Washington Mutual employees pressured appraisers to overvalue properties (appraisal fraud, real estate fraud) and push well-qualified loan borrowers into more profitable subprime loans (mortgage fraud) that were unnecessarily costly to those consumers.

Read the original article in the Los Angeles Times.

A federal jury deliberated for only an hour before finding an Irvine attorney guilty in a mortgage fraud scheme that cost lenders $2 million.

Gerald L. Wolfe, 41, is an attorney who also was a real estate broker until he surrendered his license in 2009. He was convicted on one count of conspiracy to commit wire fraud. Wolfe and his co-conspirators, Andrew and William Bohuslavizki, used straw buyers to purchase 15 distressed or foreclosed homes in Orange County. The mortgage fraud was due to not only to not only falsifying the loan applications of the straw buyers (loan fraud) but getting inflated appraisals as well.

The Bohuslavizkis pleaded guilty to the same charge and are awaiting sentencing.

Read the original article in the OC Register (Orange County Register).