California Real Estate Fraud Report

This is the story of an attorney who is about to lose his right to practice law.

The California Bar Journal reported that Christopher Lee Diener (#187890) is being charged by the Orange County District Attorney’s Office with one count of conspiracy to commit grand theft, 116 counts of grand theft by false pretenses and one count of perjury. Prosecutors allege that Diener, Stefano Joseph Marrero and Terrence Green Sr. set up a loan modification business using the names Home Relief Services, LLC; US Loan Mod Processing, HRS Communications, the Diener Law Firm and Diener Law Group. Marrero and Green were the managing partners and Christopher Diener was the attorney.

Marrero and Green promised borrowers in default that they could facilitate loan modifications in 90 days if the borrowers made advance payments (illegal in California) to Diener. California Attorney General Jerry Brown has filed a claim for civil penalties against all three men, who have also received a desist and refrain order from the California Department of Real Estate to forbid them from soliciting new clients.

Read the full article in the California Bar Journal.

The Orange County District Attorney’s Office reports that real estate losses reported to its special real estate fraud unit amount to $100 million, with over 1,000 victims. The unit, formed only last year, has had 346 referrals to it for mortgage fraud (and presumably, loan modification scams) and real estate fraud both from victims and real estate professionals.

The numbers so far:

Referrals to the DA of suspected real estate fraud: 346 +

Referrals from county Clerk-Recorder: 16

Investigations received from law enforcement agencies: 17

Filed criminal cases: 29

Cases rejected for filing: 30

Cases referred to other state or federal agencies: 12

Convictions: 14

Real estate crimes by white-collar criminals show no sign of abating. Please get multiple, independent references before giving your money to someone you do not know.

Read the full article in the Orange County Register, aka OC Register.

In a press release, California Attorney General Edmund G. Brown sent out an alert to distressed homeowners: do not be duped into paying for a forensic loan audits.

According to AG Brown, forensic loan audits are the latest ploy by foreclosure consultants, mortgage relief firms, foreclosure assistance firms, loan modification firms and the like to extract upfront fees from their victims without providing any actual foreclosure relief. These firms are forbidden by law from charging advance fees, must register with Brown’s office and post a $100,000 bond. In the past year the AG’s office has shut down at least 30 of these parasitic companies and has prosecuted numerous licensed (and unlicensed) real estate professionals and attorneys who have violated the law. And the Department of Real Estate (DRE) is actively carrying out investigations and issuing cease-and-desist orders to companies and individuals who cross the line, according to Real Estate Commissioner Jeff Davi.

Read the press release on the California Attorney General’s website.

U.S. District Judge George H. King sentenced five people convicted in a foreclosure fraud scheme that victimized homeowners in foreclosure who were seeking assistance.

Judge King meted out the harshest sentence and criticism to Edward Seung Ok, who received 15 years in prison for his crimes. According to the judge, Ok fell “far short in the full acceptance of responsibility”. Among other things, Ok used the $4.6 million he stole to buy drugs and alcohol and a Lamborghini Gallardo. He violated his plea agreement by trying to hide from investigators the $1.6 million he transferred to the Bank of Nevis on the Caribbean island of St. Kitts.

Ringleader Martha Rodriguez was sentenced to 10 years and agreed to forfeit $900,000 in cash seized by the feds (see, crime does pay), interest in five homes and a truck. She spearheaded the scheme for which she was convicted while being free on bond after being charged with other real estate crimes.

Ok, Rodriguez and fellow convicted defendants Maria G. Juarez, Vladimir Stefanovic and Cynthia Valenzuela (she worked on the escrow fraud side) preyed upon homeowners in default and promised they could help save their homes by selling their homes to buyers provided by the defendants. In realty, the buyers were “straw buyers” who had no intention of purchasing the distressed properties.

Read the full article on Southern California Public Radio. More recent articles appeared in the Orange County Register and the National Mortgage Professional.

With the spotlight now shining brightly on crimes such as loan modification scams and mortgage modification fraud, the California Department of Real Estate (DRE) is taking action.

As of this writing, more than 775 licenses have either been revoked by the DRE or the licensees surrendered their licenses in the face of investigations. DRE Commissioner Jeff Davi notes that consumers who don’t check to see if their loan officer is licensed (just go to www.dre.ca.gov and do a license check) have less of a chance of receiving any restitution for loan modification fraud, since the criminal is unlikely to be carrying errors and omissions insurance.

Here are some quick statistics: in 2009, 672 licenses were revoked (up 50%) and 105 licenses were surrendered (up 80%). Over 180 Desist-and-Refrain order were issued by the DRE to almost 400 individuals or firms engaged in the loan modification business and they initiated over 2,000 investigations.

Read the Full Article in the Real Estate Channel and the message by Commissioner Jeff Davi on the DRE’s website. Also on the DRE’s website is a list of companies and individuals against which action has been taken.

In yet another case of ethnic-based crime, a former felon and two real esate brokers have been indicted and charged with 54 felony counts that include foreclosure consultant fraud, grand theft and securities fraud. The crimes were exposed in March 2009 by the San Diego Tribune.

Prosecutors from the San Diego District Attorney’s Office charge that Edmundo Rubi operated a  scheme while he was in prison, opening a bank account under Amerisian Trust. He, Joseph Encarnacion, and co-defendants Benjamin Hebron and Gloria Hebron set themselves up as consultants, using a sales pitch on their now-closed website that encouraged “American and Asian brothers and sisters” to “let your estate work for you”. Many of the victims were Filipinos struggling to pay their mortgages after the interest rates accelerated but none of them obtained loan modifications as a result of their working with the defendants.

It is illegal in California to charge upfront fees for loan modification consulting. Read here to be linked to the California Attorney General’s Office.

Read the Full Article in the San Diego Union Tribune.

On September 10, 2009, California Attorney General Edmund G. Brown met local residents and community activists at a town hall meeting organized by Los Angeles City Councilman Alarcon at Mission College in Sylmar. The purpose of the meeting was to discuss loan modification fraud by con artists - including some attorneys - as well as the general unwillingness of banks that have received bail-out money from the federal government to modify the terms of distressed borrowers’ loans.

There has been no shortage of news regarding Attorney General Brown’s efforts to stamp out loan modification fraud by prosecuting those who prey on homeowners in default. This author has published a number of articles in both Examiner.com and the North Valley Community News advising borrowers to use extreme caution when dealing with loan modification consultants, and if they do, the questions that should be asked of these persons. Number One, though, is not to pay these individuals and firms any upfront money unless the firm is run by a licensed real estate broker or an attorney who has filed a plan of their business practices with the state of California Department of Real Estate (DRE).

Despite this, I get several emails and phone calls each week from homeowners who, through a combination of ignorance and desperation, caved in to the siren calls of loan modification firms.

Because the public still has not gotten the message about loan modification fraud, during the town hall meeting with Attorney General Brown, I got up and asked him to do the following to stop the fraud NOW:

When the County Recorder sends out a Notice of Default (NOD) to a homeowner who has defaulted on his or her mortgage, attached or enclosed with the NOD should be a letter with official letterhead from the Office of the California State Attorney General warning homeowners about loan modification scams. The cost to the state is minimal in terms of outlay, but over time, it will reduce the number of cases the Attorney General has to file against loan modification firms and attorneys which may be breaking the law with respect to modifying the loans of homeowners who cannot pay their mortgages.

If YOU want to stop loan modification fraud, please call or write your state senators and assembly members and ask them to lobby the Attorney General’s office to place educational information in the Notice of Default mailings from the County Recorder. You will be helping your neighbors, your community and perhaps even yourself.

This article is also published on Examiner.com by the L.A. Fraud Examiner.

Speaking at a foreclosure prevention workshop last week, Orange County District Attorney Tony Rackauckas and Assistant District Attorney Elizabeth Henderson, made it clear that their latest mission is to crack-down on real estate fraud.

Once the epicenter of of the subprime industry, Orange County is suffering record foreclosures like most regions of California. Says Henderson, “The only thing worse is being the epicenter of an earthquake”. She said that real estate fraud cases comprise 30% of the D.A.’s major fraud unit investigations, up from 10% before the collapse of the mortgage industry. The D.A. has two prosecutors and a paralegal devoted to real estate fraud now, and Henderson said bluntly “We want to send people to jail”.

Henderson and Rackauckas are also intensely focused on mortgage foreclosure rescue scams, aka loan modification scams. They have been co-participants in the investigations by Attorney General Edmund G. Brown’s office that have resulted in numerous arrests and  shut-downs of such businesses (see previous articles on the California Real Estate Fraud Report) and are warning scammers that they will even look to prosecute the smaller players that are scamming desperate homeowners.  Many of these people not only lose the $2,000 - $3,500 they pay the foreclosure rescue firms, they lose their house because these firms do little or nothing to keep the homeowner’s firm out of foreclosure.

Read the Full Article in the Orange County Register by Mathew Padilla.

No news to honest real estate professionals, home buyers and sellers: the San Fernando Valley is “awash” in real estate fraud, mortgage fraud, appraisal fraud, foreclosure fraud, rental fraud - you name it, we have it.

Residents wanting to learn more about foreclosure fraud were treated to excellent speakers at a meeting hosted by the Shepard of the Hills church in Porter Ranch. Detective Erin Camphouse, of the LAPD Real Estate Fraud Unit observed  “I think the Valley and South Los Angeles are two higher frequency areas (of foreclosure fraud).”

Read the Full Article in the San Fernando Valley Sun.

According to the Contra Costa Times “Mortgage fraud has increased so dramatically in the San Joaquin Valley that a task force of federal, state and local agencies has been formed to fight back”.

My question - and probably yours too - is where has mortgage fraud NOT increased?

In unprecedented cooperation between federal and local agencies, the FBI, IRS, Secret Service, Department of Housing and D.A.s in Fresno, Tulare have formed a task force to investigate mortgage fraud and other foreclosure scams in the central region of California. The FBI has already set up 65 similar task forces around the country.

Here’s some unsurprising statistics: in 2008,  the FBI received 28,873 reports of suspected mortgage fraud in the U.S. and had more than 2,000 cases under investigation. But they only opened 734 cases, about 2.5% of the total reported. Not good news for victims . . .

Read the Full Article in the Contra Costa Times.