California Real Estate Fraud Report

Firing a shot across the bow of efforts by large banking institutions to settle complaints of robosigning and forcing homeowners into foreclosure when the foreclosing bank did not hold the actual mortgage, Massachusetts Attorney General Martha Coakley filed suit against five of the largest banking institutions.

The five banks are Bank of America, Wells Fargo, JP Morgan Chase, Citigroup and GMAC. AG Coakley’s move is another dagger into the efforts of the banks to craft a settlement with the attorneys general of all 50 states. California’s Attorney General Kamala Harris left the table several months ago after concluding that the settlement offer by the banks was insufficient to provide relief to homeowners who were harmed. The attorneys general for New York, Delaware and Nevada have also indicated that they want more time to investigate the actions of the banks before committing to any settlement numbers.

In April, the Office of the Comptroller of the Currency, an agency that operates under the US Treasury and that regulates national banks, reviewed the foreclosure politices of the country’s largest mortgage servicers. The OCC then wrote a report that concluded the servicers employed ”inadequate policies, procedures, and independent control infrastructure covering all aspects of the foreclosure process.”

Read the original article by MSNBC.com.

The Federal Deposit Insurance Corporation (FDIC) has announced that it has fined the chief loan officer of Circle Bank a whopping $100,000 for making “false statements and omissions” to the FDIC and bank examiners when he worked for United Commercial Bank.

Not only could Christian Lee be punished financially for “imped(ing) the bank examination process, or conceal(ing) the true nature of a bank’s financial condition from examiners, auditors, or the public”, he could be banned from working from any FDIC-insured institution, which would cost him his current job. Sandra Thompson, the director of the FDIC’s division of risk management supervision referred to Lee’s actions as “very serious misconduct” and said “the FDIC will respond accordingly.”

Lee and the nine other former United Commercial Bank officers face an administrative law hearing, before which the FDIC will plead for the harsh penalties.

United Commercial Bank, which received $298 million in TARP (Troubled Asset Relief Program) money, filed for bankruptcy soon after. It was considered one of the largest bank failures and, along with others, drained more than $2.5 billion from the FDIC’s coffers.

Read the original article in the Marin Independent Journal.

As if the major banking institutions didn’t already have enough problems, they’ve now been hit with a whistleblower lawsuit by two mortgage brokers in the Atlanta area for massive fraud against our nation’s veterans and the federal government.

The lawsuit, which was just unsealed by the federal Court in Atlanta, contains stunning accusations that the banks circumvented the “unallowable fees” portion of the Interest Rate Reduction Refinancing Loans program for veterans. This program helps current or retired veterans to refinance their homes at lower interest rates or to refinance at a shorter term than their current mortgages.

The banks are alleged to have shifted their normal fees from unallowable fees (attorney’s fees and settlement closing costs) to the “allowable fees” column, which would include credit reports, taxes and recording costs, often padding the latter with fees from the former. In one of the exhibits proffered by the plaintiffs, Wells Fargo reported a $950 title examination instead of the more customary fee ranging from $125 to $200.

The nexus for this lawsuit is that not only were more than 1 million of the refinanced loans with the alleged excessive and illegal fees charged to veterans, but that the Department of Veterans Affairs, which guaranteed the loans, will bear the losses of the homes which subsequently went into foreclosure.

The plaintiffs are Victor E. Bibby, the president and chief executive of U.S. Financial Services and Brian J. Donnelly, the firm’s vice-president of operations. They are represented by James E. Butler Jr.,  of Butler, Wooten and Fryhofer and Mary Louise Cohen, of Phillips and Cohen.

The banks targeted by the whistleblowers’ lawsuit are Wells Fargo, Bank of America (Countrywide Home Loans), J.P. Morgan Chase (Washington Mutual Bank) and Ally Bank (GMAC Mortgage), SunTrust Mortgage, CitiMortgage, PNC Bank (National City Mortgage), Mortgage Investors, First Tennessee Bank (First Horizon Home Loan), Irwin Mortgage and New Freedom Mortgage.

Read the original article in the Washington Post and National Mortgage News.

Dear Readers,

Below is a timely exerpt from my upcoming book on short sale fraud:

Bank of America, which acquired subprime lender Countrywide Financial Corp., has been ordered by the U.S. Department of Labor to reinstate a Countrywide internal investigator it had fired and to pay her $930,000. Eileen Foster had found “egregious fraud spread throughout the entire region” when she was auditing Boston-area branches, which resulted in the closing of most of those branches. An article in the Wall Street Journal reveals that the Department of Labor had concluded that Foster’s investigation found “forgery of loan documents, manipulation of borrowers’ assets and income, manipulation of the company’s automated underwriting system and destruction of valid documents.”

Several Bank of America employees said the whistleblowing Foster had been targeted and that the bank’s own investigators had a “profoundly biased view” against her.

iWatchNews, the publishing arm of the Center for Public Integrity, quotes Assistant Secretary of Labor David Michaels as saying “This employee showed great courage reporting potential fraud and standing up for the rights of other employees to do the same.”

Bank of America, which says it will appeal the order by Labor, said Foster, who filed for whistleblower protection under the 2002 Sarbanes-Oxley corporate reform act, had shown “inappropriate and unprofessional conduct with your staff and displaying poor judgment as a leader.”

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.

Almost a year after they were outed for engaging in widespread fraudulent foreclosure document signing practices, known as robo-signing, big banks are still engaging in the practice, along with the contractors.

One registrar of deeds on the East Coast said “My office is a crime scene”, referring to his office still receiving large numbers of documents with suspicious or outright fraudulent signatures.

A county registrar in Michigan has referred  Marshall Isaacs, an attorney with foreclosure law firm Orlans Associates, for a criminal investigation for robo-signing. Mr. Isaacs’ name has appeared on foreclosure documents that more than one county’s officials believe have been robo-signed.

Clearly, the settlement that the 14 biggest banks made with federal regulators this past April that promised a cessation of their fraudulent business practices (bank fraud) as well as paying restitution to homeowner on whom they had improperly foreclosed, is a joke.

Read the original article in the Silicon Valley Mercury News.

Does your Attorney General work for you, the consumer and taxpayer, or for Wells Fargo, Bank of America, JPMorgan Chase, CitiGroup and Ally Financial?

An article by Scot Paltrow in Reuters yesterday entitled “States Negotiating Immunity for Banks over Foreclosures” seems to indicate that our state attorneys general want to get the Foreclosure Gate scandal of mega-banks’ robo-signing homeowners into foreclosure off their desks. Never mind that some of the activities of the banks may rise to a criminal level.

The “negotiation” undertaken collectively by the attorneys general of all 50 states would let the five banks collectively pay “up to (my emphasis)$25 billion in penalties and commitments to follow new rules,” rules which any ethical institution would have followed in the first place. In exchange, the banks would receive immunity from civil lawsuits by the states.

At the least, this sounds like dismissing serious corruption by sweeping it under the rug for a pittance.

So, $5 billion per bank for massive and willful corporate malfeasance. That’s less than $100 million per state and chump change for the likes of Wells Fargo, Bank of America, JPMorgan Chase, CitiGroup and Ally Financial. And as usual, no crooked C-suite executives lose any time off the golf course in depositions or court proceedings. It’s business as usual.

According to the Reuters article, only New York State Attorney General Eric Schneiderman has objected to this wink to corporate corruption. And some of the senators on the Senate Banking Committee, including Republican Richard Shelby, have criticized banking regulators for failing to adequately investigate the robo-signing and other anti-consumer practices engaged in by the banks and their contractors, which Reuters alleges continue to this day. 

Read the original article in Reuters.

Read about public banking.

In a case that could have far-reaching effects, attorneys for a woman charged with a mortgage fraud case in Colorado, as well as the Electronic Frontier Foundation, are fighting a demand from the U.S. Department of Justice that would force her to turn over the password to her laptop.

In an amicus brief filed with the U.S. District Court for the District of Colorado, the Electronic Frontier Foundation  (EFF) claims that requiring Ramona Fricosu, a defendant in a real estate fraud prosecution, to provide her encryption codes or passwords would be a violation by the government against the Fifth Amendment to the U.S. Constitution, the right against self-incrimination.

If the reasoning of the EFF is upheld, any defendant charged with a crime could oppose a search of his or her encrypted or password-protected computer on constitutional grounds. This includes defendants charged with murder, possession and/or distribution of child pornography, drug possession, money laundering, embezzlement and white-collar crimes.

As a recent example, the search of Casey Anthony’s computer, in which forensic computer examiners found searches for the term “chloroform” and other terms related to death and killing, would never have been performed. Casey Anthony was charged with killing her 2-year old daughter Caylee Anthony but was acquitted by a Florida jury this July.

Ramona Fricosu has been charged with 22 counts of bank fraud, four counts of wire fraud, five counts of making false statements to a financial institution, and seven counts of money laundering in an attempt to take title to foreclosed homes (title fraud).

Read more about this case in DigitalTrends.

Short sale fraud has quickly become the real estate fraud du jour. Usually it is committed by property owners who want a write-down of their mortgage and it is facilitated by crooked real estate agents. No matter what the motivation, any party to this transaction is committing short sale fraud.

Now, according to Jeremy Brandt, CEO of 1800CashOffer, the banks are jumping in, allegedly in some cases demanding kick-backs of cash outside the sale. This is a clear violation of the federal RESPA (Real Estate Settlement Practices Act) law. Anyone who is caught could be prosecuted, which could result in prison time for all parties, stiff financial penalties and the revocation of professional licenses.

Brandt and Kayte Gentry of Keller Williams Integrity First Realty are telling stories of second lien holders demanding cash outside of escrow in order to release their liens, in which normally they are paid perhaps 10 cents on the dollar. Brandt says he has spoken with dozens of real estate agents across the country who have complained that banks holding these junior loans are threatening to kill the transaction unless paid under the table, i.e., the money is not declared on the HUD-1. All but except Gentry are afraid to speak up for fear of retribution from the banks.

Fingers have been pointed at JP Morgan Chase, Bank of America and CitiBank. JP Morgan Chase issued a “no comment” response (is that like taking the 5th Amendment against self-incrimination?) and BofA and CitiBank issued denials.

If the accusations are true, the banks are adding short sale fraud to the list of crimes they are committing against taxpayers and communities.

If you know of any instances of short sale fraud, please contact me by email. Your response will be kept entirely confidential.

Watch the video of the CNBC investigation here.

In a turnabout that’s poetic justice, a Florida couple served foreclosure papers on Bank of America.

Maurenn Nyergers and her husband had not only never had a mortgage with Bank of America, they had paid cash for their house. But that didn’t stop the mega-giant from filing foreclosure against them. The couple hired attorney Todd Allen, took Bank of America to court – and won a judgment against it for legal fees.

Five months later, Bank of America had still made no effort to satisfy the court’s order. So Allen called sheriff’s deputies in North Carolina, where Bank of America is based, and instructed them to remove cash from the teller’s drawer, computers and file cabinets. An hour after the “foreclosure”, the branch manager appeared with a check for the judgment.

Sweet.

Read the original article on Digtriad.com