California Real Estate Fraud Report

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

The Secretary of Housing and Urban Development (HUD) says a settlement with mega-banks for their robo-signing practices is likely to be reached within several weeks.

Secretary Shaun Donovan had been negotiating the settlement, along with a coalition of the attorneys general for all 50 states, the Justice Department and federal regulatory agencies.

Banking giants Bank of America, Wells Fargo, GMAC/Ally Financial and JP Morgan Chase were accused of rubber-stamping approvals to thousands of home foreclosures per day by employees who did not read the foreclosure documents and would not have understood them if they did. This is nothing less than bank fraud, foreclosure fraud, whatever you want to call it.

Donovan and the coalition want the banks to pay $25 billion for the fraud they committed against homeowners; the banks think $5 billion is sufficient. If so, then crime still does pay.

Read the full article in the Los Angeles Times.

A Granada Hills man was sentenced to 21 months in prison for taking out home equity lines of credit (HELOCs) with three banks at the same time, committing mortgage fraud.

Larry Corbi Jr., 36, was also ordered to pay a total of $356,644 in restitution to Washington Mutual, GMAC and Countrywide, according to U.S. Attorney Andre Birotte Jr. of the Central District of California, whose investigation resulted in Corbi’s guilty plea to bank fraud. 

Corbi purchased the home in November 2007 and applied for the HELOCs in March 2008.

Read the original article in Thomson Reuters.

Both Bank of America and Saxon Mortgage Services Inc., part of Morgan Stanley, are ponying up over $20 million for improperly foreclosing the properties of active duty military personnel.

Bank of America processed the foreclosures of 160 service members between January 2006 and May 2009 without obtaining court orders and without checking if the homeowners were on active duty. Many of the loans were originally underwritten by Countrywide Financial. Saxon foreclosed on 17 service members in the same fashion.

The settlements occurred after complaints were filed against the lenders with the U.S. Department of Justice, which prosecuted the case.

Read the original article in the Los Angeles Times and the press release by the US DOJ.