California Real Estate Fraud Report

One of two brothers who committed $6 million worth of foreclosure fraud by stealing the identities of notaries (notary fraud) and forging scores of grant deeds (title fraud) is going to prison for 12 years.

John Zepeda, 60, pleaded guilty to rent skimming, forgery, identity theft and conspiracy to commit grand theft. Zepeda apparently did not spend all his ill-gotten gains, as he has agreed to pay restitution to his victims.

An unnamed employee in the Stanislaus County Recorder’s Office is the hero in discovering an alleged foreclosure rescue fraud perpetrated on up to 1,000 victims.

Suspicious fillings to a company called Pacifica Group 49-II caused the Recorder’s Office to contact the Stanislaus County District Attorney’s Office. Investigator Glenn Gulley says that possibly 30 victims have been found in Stanislaus County but further digging found victims outside of the area.

The indictees include  Brent Medearis, 45, the CEO of Modesto-based VIP Financial Services; Jewell L. Hinkles, 61, aka Cydney Sanchez; Bernadette Guidry, 43; Jesse Wheeler, 34; and Cynthia Corn, 58. All five defendants have been charged with multiple counts of bankruptcy fraud; two are also facing mail fraud charges.

The 2 1/2 year investigation was undertaken cooperatively by the FBI, the U.S. Postal Service and other federal agencies, in addition to the Stanislaus County District Attorney’s Office.

Read the original article in the Modesto Bee.

Twin sisters and one of their associates have been arrested on multiple counts of operating a loan modification scam in Stockton.

Magdalena Salas, 42, the owner of Legacy Home Loans, her twin sister Angelina Mireles, 42, and Julissa Garcia, 36, were charged with 13 felonies and two misdemeanor, including conspiracy, grand theft and false advertising. The three are accused of circulating flyers in English and Spanish that guarantee to save the homes of distressed borrowers and promising a refund if the homeowner did not receive a loan modification. Homeowners were charged $5,000 upfront for these services, which is illegal in California.

The case was a cooperative investigation between the California Office of the Attorney General, the San Joaquin District Attorney’s Office, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), the California Department of Real Estate (DRE) and the Stockton Police Department. According to California AG Kamala Harris,

“These scam artists preyed on innocent homeowners who were simply trying to protect their homes and families from foreclosure. The mortgage crisis has caused tremendous damage to our state and to California families. There is nothing worse than those who seek to capitalize on this devastation by defrauding Californians who have already been victimized in this crisis.”

Salas operated not only Legacy Home Loans but also Salas Properties, Salas Estates, Peace and Freedom Legal Services and Divinity Legal Services. Magadalena Salas’ license to practice real estate was revoked in 2008, according to DRE records. Mireles and Garcia have real estate licenses but no broker affiliations, meaning they may not engage in services which require a license from the DRE.

Read the original press release by the California Office of the Attorney General.

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.

A woman out on bail when she committed new crimes has been sentenced to five years for operating a mortgage rescue scam, according to a press release by Attorney General Kamala D. Harris.

Angeline Lisa Lizarrago, 69, soon to be formerly from Fremont, was sentenced today to five years for a foreclosure scam in which numerous homeowners in the Bay Area and Central Valley were victimized by her illegal foreclosure prevention business, Avemos Financial Group. She had been charged with 23 counts of felony fraud and theft.

Michael Douglas Young, 68, the general manager of Avemos, has also been charged and will be tried in January 2012.

Lizarrago and Young had a unique marketing tactic that included placing shrines of the Virgin Mary in the lobby of their business. As with many foreclosure fraud schemes, theirs included requiring the payment of upfront fees, which is illegal in California.

The case against Lizarrago resulted from the combined efforts of the California Attorney General, Alameda County District Attorney Nancy E. O’Malley, the California Department of Real Estate (DRE) and the Fremont Police Department.

Read the press release for the California Attorney General.

The owner of a Newbury Park firm that promised to help property owners in foreclosure stay in their homes has been arrested and charged with 10 counts of mail fraud.

John Marcus Desenberg, 44, was arrested by the FBI after its investigation into the practices of his business Creative Lending Solutions, which focused on distressed homeowners in Merced and Placer Counties. Desenberg allegedly solicited these homeowners to sell their homes to “investors,” who would allow the homeowners to remain in their homes while the investors made the mortgage payments. After a year of purportedly rebuilding their credit, the homeowners would be allowed to purchase their homes.

In reality, Desenberg, according to the indictment, did not monitor either the payments by the investors or the credit of the homeowners and their homes fell into foreclosure (real estate fraud, foreclosure fraud).

Read the original article in the Central Valley Business Times.

The office of California Attorney General Kamala Harris has served subpoenas to Bank of America regarding the sale of mortgage-backed securities (MBS) to institutions done by Countrywide Financial, which BofA purchased in 2008.

California’s AG, which was in talks with the attorneys general of all 50 states to negotiate settlements with all the large banks (BofA, Wells Fargo, JP Morgan Chase, et. al.) with respect to the banks’ foreclosure practices, left those talks when Harris determined the settlement amounts were insufficient.

Harris’ pursuit of BofA could be costly to the banking giant: under California’s False Claims Act, defrauding the state via any of its institutional investors such as pension or other funds, could result in awards of three times the amount of the claim. If any employees of Bank of America step forward with solid evidence, they could be entitled to a percentage of those damages as a whistleblower.

Read the original article in the Los Angeles Times.

Two men have been arrested and charged with 45 counts related to an alleged foreclosure rescue scam which prosecutors say cost $17 million in losses.

Stephan Andrew Easterly and Emanuel Percival were arrested at the offices of Fidelity Group Realty in Fontana. Fidelity has operated under dozens of DBAs according to the DRE‘s website. According to Deputy District Attorney Michael Fermin, most of the victims were in foreclosure and paid between $3,500 and $7,000 (loan modification fraud) to get either get their loans paid off (??) or monthly payments reduced.

Easterly and Percival are accused of holding themselves out as “authorized” bank representatives and signing and filing documents indicating the mortgages were paid off (title fraud). In addition, prosecutors said that Easterly made up his own checks to show the homeowners the loans were paid off.

Read the original article in National Mortgage News.

Defaulting homeowners who thought they were out of options thought Stephen Easterly and Emanuel Percival were the answer to their dreams. Easterly,  who was employed by Fidelity Group Realty in Fontana, approached the homeowners in church and told them the banks had to prove they hadn’t done anything fraudulent with respect to the loans. He even paid up their back property taxes and other debts.

But Easterly and Percival were also charging the homeowners for their time. Charging upfront fees to help with loan modification or other mortgage assistance is illegal in California. They also gave the homeowners the impression that the banks had written down the principal, which would lower the homeowners’ monthly payments.

According to Lance Cantos lf San Bernardino County District Attorney’s Office, both Easterly and Percival are being held on bails of $1 million bail and $500,000 respectively.

Read the original article in KABC-TV Los Angeles.

The FBI has released a comprehensive report detailing the state of mortgage fraud in the country. According to their research, the states most affected by mortgage fraud and other real estate crimes are the same states where housing prices escalated rapidly during the mid-2000s: California, Florida, Michigan, Nevada, Arizona, Texas, New York, Illinois, Georgia and New Jersey.

The most prevalent mortgage fraud schemes reported by law enforcement agencies and private industry during fiscal year 2010 included loan fraud in the origination process, mortgage rescue fraud, real estate investment fraud, equity skimming, short sale fraud, illegal property flipping, title fraud, escrow fraud (incl. settlement), commercial loan fraud, builder bailout schemes, loan modification fraud and reverse mortgage fraud.

The FBI notes that short sale fraud has become so prevalent that organized crime committed by Asian, Armenian, Balkan, Eurasian, Russian and La Costra Nostra groups has infiltrated lending institutions in order to have access to financial information, mortgage origination software, notary seals and licensure information.

In other words, all forms of real estate fraud are alive and well and it is being committed by both licensed real estate professionals and unlicensed individuals and criminal organizations. Law enforcement is bailing water out of a ship that needs enormous reinforcements just to stay afloate.

This is an excellent report with a lot of detail and is well-worth reading.

Click here to read the report on the FBI’s website. There is also an excellent synopsis on Inman News.