November 14th, 2008 at 11:55am
The San Mateo County Investment Pool has filed a civil lawsuit against executives for Lehman Brothers Holdings Inc., accusing them of concealing information from investors about the firm’s losses in the real estate market while taking home lucrative bonuses.
The investment pool, which represents public agencies that invested in Lehman, lost more than $150 million when Lehman Brothers went bankrupt. They are suing the executives and the firm’s auditor, Ernst & Young, alleging fraud, negligent misrepresentation and violations of California law and the federal Securities Act.
According to Supervisor Mark Church:
“The theory here is the top management fraudulently represented that the company was financially strong at a time when they were about to declare bankruptcy. What makes this case so outrageous is all the while, they were siphoning off millions of dollars for their personal benefit, leaving good-faith investors holding the bag. It hurts our schoolchildren, our transit projects, and other essential services that we provide.”
Lehman Brothers was also in the news as the source of tens of millions of dollars lent to the Beverly Hills real estate fraud, appraisal fraud and mortgage fraud ring, whose accused members include Mark Alan Abrams, Charles Elliott Fitzgerald, Joseph Babajian and Kyle Grasso. Read earlier articles in the California Real Estate Fraud Report and another in Mortgage Law Central.
Read the Full Article in the San Jose Mercury News.
November 10th, 2008 at 9:08pm
James B. Duncan and Hendrix Montecastro were two of three principals of a number of companies, two of which, Pacific Wealth Managment and Stonewood Consulting, Inc., are accused by the Securities and Exchange Commission (SEC) of defraud almost 100 investors out of more than $11 million, forcing many of them into foreclosure. Now Dundan’s father and Montecastro’s mother-in-law have been arrested on charges of making false statements on loan applications - mortgage fraud and loan fraud.
Real estate lawsuits filed by the investors accused Pacific Wealth and its affiliates and companies of committing loan fraud by falsifying loan applications. Appraisal fraud was an integral part of the conspiracy by making the properties to be purchased look to be worth more than they were.
As with many other real estate fraud schemes reported in the California Real Estate Fraud Report, Washington Mutual, aka WaMu, was the willing lender. WaMu is itself under investigation by several attorneys general for pressuring appraisers at eAppraiseIT, to inflate appraisals of properties with subprime loans in order to increase profits.
Read the Full Article in the Press Enterprise.
November 7th, 2008 at 9:43am
Appraisal fraud is the rarely mentioned, but often essential, ingredient in real estate fraud or mortgage fraud and other real estate crimes. Without an appraisal justifying the listed price of a home, mortgage fraud cannot occur.
In California, one of the most well-publicized stories of real estate fraud and mortgage fraud is taking a turn, as the state regulatory agency responsible for overseeing appraisers wants to revoke or suspend the license of a Bakersfield real estate appraiser who appraised more than a hundred homes for the former Crisp and Cole company. The appraisal fraud part of this real estate fraud investigation is being managed by the FBI.
Read the Full Article on the 32-page accusation complaint filed against Kirk “Mark” Newton by the Office of Real Estate Appraisers (OREA).
November 5th, 2008 at 9:43am
In the latest example of foreclosure fraud, The California Attorney General’s office announced this week that it had filed criminal charges against eight individuals it believed ran a mortgage fraud loan modification ring under the name of First Gov, also called Foreclosure Prevention Services. Homeowner-victims were conned out of more than $700,000 by the scammers, who mailed fliers offering to renegotiate mortgages, reduce monthly payments and transfer delinquent loan amounts to the revised loan.
Many of the group’s fliers — printed on goldenrod paper in yellow envelopes — are still circulating.
Read the Full Article in the Los Angeles Times.
November 4th, 2008 at 8:59am
A federal judge has ordered Jose Serrano, 45, to pay more than $219,000 in restitution to Washington Mutual Bank (WaMu) and to serve 15 months in prison for his role in a subprime mortgage fraud scam in Stockton. The real estate fraud ring involved the purchase of 10 homes.
Washington Mutual loan officer John Ngo, ringleader Iftikhar Ahmad, mortgage broker William Bridge, Bridge’s brother Paul and Manpreet Singh have pleaded guilty and are awaiting sentencing. The sole hold-out in the mortgage fraud ring, Joel Blanford, did not cooperate with prosecutors and awaits trial.
Read the Full Article on ABC News10.
November 2nd, 2008 at 11:03am
The troubles that resulted in WaMu being acquired for $1.9 billion by JPMorgan Chase seem to be 100% of its own making. They are being investigated by Andrew Cuomo, Attorney General for the State of New York, for pressuring appraisers at e-AppraiseIT to increase the value of properties so that their profits on subprime loans could be higher. Other attorneys general are investigating WaMu in their respective states.
WaMu and some of its executive officers are also the subject of civil lawsuits, one of which was filled by Chad Johnson, a partner at Bernstein, Litowitz Berger & Grossmann, on behalf of the Ontario Teachers’ Pension Plan board, a large shareholder. Says Johnson: “(CEO) Kerry Killinger pocketed tens of millions of dollars from WaMu, while investors were left with worthless stock.” With WaMu gone, he added, “it is all the more important that Killinger and his co-defendants are held accountable.”
Keysha Cooper, one of WaMu’s senior mortgage underwriters, describes a work environment in which approving loans, no matter how risky or dubious, was her job. To paraphrase the old Chiller films of the 1950s: “Volume was the order of the day”. This included strong-arming underwriters to “re-structure” loan applications until the numbers worked. Loan officers with high sales volume were rewarded with Hawaiian vacations, whereas those that balked, such as Ms. Cooper, found themselves being written-up and, in her case, being put on probation before ultimately being fired. One of the loans she ad objected to defaulted immediately; the borrower never made a single payment.
Read the Full Article in the New York Times.
October 26th, 2008 at 9:51am
Although many jilted investors have cheered at the recent arrests of the mother-and-son leaders of the bankrupt Paso Robles-based Estate Financial, they are only one group of a growing number of investors in the Central Coast who have had troubles with mortgage and lending firms.
Besides Estate Financial, other hard money lenders who are biting the dust are:
- Atascadero-based Hurst Financial, which had at least $86 million in investments last year, has had its license revoked by the California Department of Corporations and has been accused of fraud in September in filings by the Department of Real Estate. Hurst Financial has been the subject of several posts in the California Real Estate Fraud Report.
- Real Property Lenders of Paso Robles had its license revoked by the Department of Corporations in May. It had about $55 million in loans as of 2007,
- 21st Century Mortgage, also of Paso Robles, closed down abruptly about a year ago with no notice to its investors. Other firms eventually bought most of the loans.
Estate Financial is still the king of fraud allegations at the time of this writing. Their $170-million in loans were frozen and put under court control after the state revoked its license to sell real estate investments. On October 16, Estate Financial’s President, Karen Guth, and her son Joshua Yaguda were arrested at their Paso Robles ranch by investigators from the SLO County District Attorney’s Office.
Read the Full Article in the San Luis Obispo New Times.
October 26th, 2008 at 9:34am
The Federal Bureau of Investigation (FBI) has published its latest statistics on mortgage fraud across the country.
Quick snapshots: California ranks 4th in the country (behind Florida, Nevada and Michigan) in “significant” reports of mortgage fraud in 2008; total estimated losses to mortgage fraud in 2008 - $4 - $5 billion; and in 2008: 523 indictments, 282 convictions.
Click here to read the full compilation of FBI statistics on mortgage fraud.
October 24th, 2008 at 12:47pm
Would you want a loan from a lender with the email address “scarycash@gmail.com”?
That was Garrett Gililland’s email address was, and the former (unlicensed) mortgage broker had plenty of customers before the long arm of the law came after him. According to federal authorities, Gililland is the subject of an international manhunt after being indicted on fraud charges and is part of one of the biggest current mortgage cons in the country.
Read the Full Article in The Chico Enterprise Record.
October 23rd, 2008 at 7:07pm
Two Milpitas mortgage brokers who used telemarketing to find and prey on fellow Latinos have been convicted of multiple counts of grand theft and forgery in a subprime mortgage scheme that amounted to $10 million.
Esperanza Valverde, 41, and Herman Covarrubias, 40, of Summit Mortgage One were accused of telling homeowners they qualified for low-interest refinance loans. However, they failed to disclose the amount of the commissions they charge (3-5 percent!), did not explain to the borrowers that the fixed rate interest was for 2 years only, and did not give borrowers copies of the loan documents until after the loans had closed, according to Santa Clara County Deputy District Attorney Yen Dang.
Read the Full Article in The Silicon Valley Mercury News.
