California Real Estate Fraud Report

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Archive for the 'REO Fraud' Category

Scathing Criticism of Fannie Mae and Freddie Mac by FHFA-OIG

April 8th, 2014 at 9:04am

The Office of the Inspector General (OIG)  for the Federal Housing Finance Authority (FHFA) says the two agencies allowed fraud in the inspections of its foreclosed properties (REO fraud).

The OIG noted that both Fannie Mae and Freddie Mac did not provide proper oversight of the vendors conducting inspections. It sited once instance where an inspection report appears to have been copied from another one. Other red flags were property photos that did not match property descriptions and blurry photos.

My simple (and obvious) solution to the vendors engaging in fraud: a permanent ban from REO property assignments and a claw-back of the fees they earned by dishonesty. It will never happen, of course, just as the Fannie Mae and Freddie Mac employees in charge of oversight will keep their jobs and move on to new promotions without so much as a mark on their personnel records.

Read the original article on HousingWire.

Former Fannie Mae Employee Convicted of Soliciting Kickbacks for Foreclosure Assignments

March 20th, 2014 at 9:36pm

Any person who pays attention to the real estate market knows that fraud in the assignment of foreclosed “REO” properties and short sales is much too common.

Last Friday, one of the few prosecutions for REO fraud closed as Armando Granillo, a former employee of Fannie Mae, was convicting of soliciting kickbacks from a real estate broker. His offer to broker Angus “Gus” Maughan, which was to steer foreclosed home listings to Maughan in exchange for 20% of the sales commission, failed simply because Maughan is honest and called federal agents to report Granillo.

Granillo, who was convicted by a jury in less than two hours of three counts of fraud, offered the defense that he was only intending to cheat the real estate agent (Maughan), not Fannie Mae.

During a sting at a Mexican restaurant in Tucson, Arizona, in which Gus Maughan was wearing a button camcorder, Granillo claimed that he could help the broker “put other Realtors in Tucson out of business.” He also suggested that kickbacks were common at Fannie Mae and that he needed the extra money to pay for treatment for his daughter’s autism. Referring to his colleagues at Fannie Mae, he said “I think they’re a bunch of crooks.”

Whether or not kickbacks and dishonesty at Fannie Mae are common may come out in litigation between Fannie Mae and Karen Frisone, a real estate broker in Colorado. Information on that case can be found be clicking on this link.

Armando Granillo was prosecuted by Asst. U.S. Atty. Stephen I. Goorvitch.

Read the original story in the Los Angeles Times.

Denver Broker in Battle with Fannie Mae about Alleged Fraud There

February 7th, 2014 at 8:14am

Selling REOs (bank-owned homes) can be a lucrative business line for real estate agents who land accounts with lenders. The big money involved can become a temptation for employees working inside banks’ REO departments, for some real estate agents and brokers and construction and repair crews.

A Denver real estate broker who was an REO broker has filed a counter-claim against the Federal National Mortgage Association (Fannie Mae) after the latter pre-emptively sued her, claiming that it was entitled to declaratory relief when it terminated its Master Listing Agreement (MLA) with her brokerage.

In her federal lawsuit, Karen Frisone and her brokerage K.O. Real Estate in Westminster, Colorado, allege that Fannie Mae employees repeatedly rebuffed her reporting of alleged fraud committed by other Fannie Mae  REO brokers, threatened her with retaliation via the loss of future REO assignments and on one occasion, solicited a bribe. Frisone said she was required under the terms of her MLA to report suspected fraud and had investigated her suspicions before bringing what she believed to be fraudulent conduct on the part of other REO brokers to Fannie Mae.

Frisone’s story is not the first where a Fannie Mae REO broker has complained about corruption at the agency. A posting in the California Real Estate Fraud Report in March 2013 reported the indictment of  Fannie Mae employee Armando Granillo, whose alleged solicitation of a bribe from a Tucson real estate agent was recorded by the feds.

In the original article in the Denver Business Journal, a paragraph reports that Frisone’s attorney, Karen Fitzgerald of Dallas-based Kleiman Lawrence Baskind Fitzgerald LLP, filed a response to the July 7 suit by Fannie Mae, and argued that Frisone was “engaged in activity protected under the False Claims Act” when she reported the alleged activity. The False Claims Act

This is a very complex case. Please see the attached documents if you are interested in learning more. Although I don’t get to write about REO fraud often (some of it is detailed in a section of my book “How to Commit Short Sale Fraud . . . and Get Away with It“), that doesn’t mean it’s not common.

Note: on February 4, the judge hearing this case denied Fannie Mae’s Motion to Dismiss and Motion to Stay Discovery. See the last attachment for the court’s ruling.

130717_#1 Plaintiff’s Original Complaint

130717_#1-2 Exhibit 2 to Plaintiff’s Original Complaint

131127_KO Answer and Counterclaim

140130_KO Response to Mtn to Stay Discovery

140127_DBJ article

140128_KO Amended Answer and Counterclaim

140129_KO Response to Mtn to Dismiss

140115_FNMA Mtn to Stay Discovery

140114_FNMA Motion to Dismiss

140114_FNMA Appendix in support of Mtn to Dismiss

140204_Ruling MTD ans MTSD

 

 

Ocwen Employee and Contractor Get Prison for Bribery for REO Contracts

December 20th, 2013 at 10:27am

Publisher’s Note: This crime is very common, but rarely addressed by either the banks or law enforcement. In this case, though, the bad guys actually were caught and prosecuted.

Ronald Hurst, a former contractors, must serve two years in prison for conspiring to commit bribery and wire fraud from January 2006 until September 2007, according to the Department of Justice. His co-defendant, Bryant Carbonell, received six months of home confinement for his participation.

Both men were sentenced by Judge Philip Reinhard of the U.S. District Court for the Northern District of Illinois, where the indictments were originally filed.

Hurst and Carbonell had sub-contracts with West Palm Beach, Fla.-based Ocwen Loan Servicing, which managed foreclosed homes under its own contract with the Veterans Administration.

Court documents showed that they paid kickbacks to Ryan Piana, a former residential sales manager at Ocwen, to direct housing maintenance work to companies with which they had relationships. Piana additionally paid other Ocwen employees to participate, again, according to court documents. All are forms of REO fraud.

Ryan Piana was also indicted, ultimately pleaded guilty and was sentenced to 24 months in prison, according to a US DOJ press release.  Judge Reinhard also ordered Piana to re-pay $147,825 to the Veteran’s Administration and the Veterans Affairs Mortgage Guarantee Program, which were the victims of their crimes.

This case is the third prosecution involving Ocwen-managed properties.

No prosecutions for REO fraud in California – ever – to my knowledge.

 

RealtyTrac Posts Updates on the National Foreclosure Market

December 12th, 2013 at 12:20pm

Nationally, U.S. foreclosure activity has decreased 23% through October 2013.

The interesting statistic is that in the high-end $5 million and over homes, foreclosures are up a whopping 61% from the same time last year. The markets most affected are Los Angeles-Orange County, two markets in Florida and parts of Atlanta, New York, Long Island and Northern New Jersey.

Note to new agents: this is NOT the time to enroll in courses or “boot camps” on how to sell REOS – there aren’t any.

Read the news release on RealtyTrac.

2nd Edition of Short Sale Fraud Book is Available!

August 8th, 2013 at 3:14pm

Dear Readers and Subscribers,

In February 2012, I published the first and only book about short sale fraud, aptly titled “How to Commit Short Sale Fraud . . . and Get Away with It.” The purpose of this book is to educate the public and law enforcement about the financial and societal consequences for what is essentially an ignored and unprosecuted crime.

My book explains the economics that led to the development of short sales, how a legitimate short sale should be processed, examples of non-arm’s-length short sales, the very short list of prosecutions that have occurred and who is to blame for the lack of prosecutions. It also talks extensively about the market for REO (foreclosure) properties and the frauds that occur with those sales.

This second edition updates a lot of information based on events that have occurred since the original publication. There are new cases that have been prosecuted – but sadly, just a handful – and more literature on the topic of short sale fraud including more schemes. I’ve also updated some of my recommendations as to what can be done to mitigate this increasingly ubiquitous crime.

If you are in agreement that short sale fraud is a problem in your community, I urge you to read my book, which has been written and organized very much like a white paper. It has extensive footnotes in the form of hyperlinks and addresses most of the issues and complexities surrounding short sale fraud.

My book can be purchased for Kindle devices on Amazon.com at this link:

http://www.amazon.com/Commit-Short-Sale-Fraud-ebook/dp/B0078P4056

(Note: if you do not own a Kindle, you can still purchase and read the Kindle version on your computer and/or laptop by downloading the free application from Amazon.com.)

If you have an iPad, you can purchase my book on Smashwords at this link: https://www.smashwords.com/books/view/131921

Many thanks to all my readers for their support, their kind words of encouragement and their observations.

Monique Bryher / Publisher
California Real Estate Fraud Report

p.s. As a sidebar, there are now other professionals raising their voices against short sale fraud, e.g., this link at Nolo Press is called “Short Sale Fraud: Three Scams to Avoid.”

FHFA-OIG to Scrutinize Fannie Mae, Freddie Mac for REO Sales

May 31st, 2013 at 8:41am

REO (foreclosure) sales are winding down; investors will tell you the inventory is dwindling. This is due to the banks finally waking up years after Realtors® told them it was better for the bottom-line to allow homeowners to do a short sale.

HUD, FHFA, Fannie Mae and Freddie Mac (the latter two are GSEs) still have sizeable REO inventories across the country. Now the Office of the Inspector General for HUD (HUD-OIG) and the Office of the Inspector General for FHFA (FHFA-OIG) are taking aggressive steps to study how those inventories can best be managed, how to reduce REO fraud and to ultimately reduce inventories with minimal negative impact to neighborhoods.

FHFA-OIG has implemented an evaluation strategy, the objective of which is to learn whether both FHFA and the GSEs are maximizing financial recoveries and minimizing the negative effects of foreclosures on affected communities during their management of REOs. Part of FHFA-OIG’s task will be to audit the effectiveness of these REO management activities and determine if proper risk management controls have been established to avoid fraud and abuse.*

*Note: having sold REOs for banks and seen first-hand how some agents manipulate sales, including property management, for their own benefit (REO fraud), I’d say the FHFA-OIG has a difficult task ahead.

Read the entire well-written article in HousingWire.com.

Fannie Mae Sales Associate Indicted for Demanding Kickbacks for REO Referrals

March 27th, 2013 at 4:50pm

A former Fannie Mae employee who demanded kickbacks in exchange for handing out REO listings (REO fraud) got stung when a real estate broker informed the feds and participated in taking down the man.

Armando Granillo, 44, who worked out of Fannie Mae’s Irvine, California office as an REO specialist, has been indicted on three counts of wire fraud. Granillo’s job was to review applications from prospective listing agents for Fannie Mae foreclosures.

The honest broker is located in Tucson, Arizona. Granillo travelled to Phoenix to meet the broker in anticipation of a 20% “referral fee” for himself, which amounted to $11,200 of the broker’s legitimate commissions. During the meeting, which was recorded by the investigators from the Federal Housing Finance Agency’s Office of Inspector General, Granillo is alleged to have stated that the kickbacks were “a natural part of business.”

The U.S. Attorney’s Office for the Central District of California is the prosecuting agency for this case. Armando Granillo is out on bail pending his arraignment. Read a copy of their press release by clicking here.

This prosecution for REO fraud is a first . . . and just the tip of the iceberg for this type of real estate fraud. Any real estate agent who has sold REO properties knows that kickbacks to bank employees occurs. Some of the worst REO listing agents get listing after listing and yet do a poor job of marketing, showing and maintaining bank-owned properties, even ones where their relatives get the trash-out and remodeling contracts from the banks. They rarely, if ever, respond to or return phone calls from buyers’ agents. Ever wonder why that is?

The good news is that REO listings are significantly down  – 67%  according to my research – in certain sections of Los Angeles. So REO fraud is being extinguished as banks have come to the astounding conclusion after seven long years that it makes better business sense to do short sales or provide creative financing terms to keep borrowers in their homes than to foreclose.

Read the original article in Inman News.

California DRE Revokes Record Number of Real Estate Licenses for FY 2011-2012

August 7th, 2012 at 7:05am

The fall in real estate markets has not only cost property owners their equity and many times the loss of their homes, it’s also been a magnet for scammers. Some are licensed real estate agents; others are not. Since the top of the market in fall 2006, there has been a flood of real estate crimes consumers had no concept of: real estate fraud, short sale fraud, REO fraud, Ponzi schemes, real estate investment fraud, foreclosure rescue scams and loan modification scams. In a number of cases, those crimes were carried out within certain ethnic or religious circles (affinity fraud).

The California Department of Real Estate, the primary means of investigating housing-related crimes, has responded by revoking a record number of real estate licenses for the fiscal year ending June 30, 2012. Here is a summary of the DRE’s August 6 press release:

781 real estate licenses revoked (up 14% from 681 the prior fiscal year)

190 real estate licenses suspended for cause (up 80% from 106 the prior fiscal year)

138 real estate licenses surrendered by the licensees (up 20% from 115 the prior fiscal year)

213 desist and refrain orders, typically ordered against an unlicensed individual or business

And now . . . my editorial

Why are there so many disciplinary actions in real estate? Very simply, because the barrier to entry is so low. This I blame on the California Association of Realtors, the trade and lobbying association for Realtors®, which gets its strength from the number (=volume) of dues-paying members under its wing. If you’re 18 years old and haven’t committed a major financial crime, you can get your real estate license.

Real estate training schools are big business. RealEstateExpress.com, a real estate “training” website, starts the first paragraph of its web page on licensing requirements by announcing “Getting Your Real Estate License In California is Not Difficult…” Although they state that “eight statutory college-level courses” are required for a prospective licensee to sit for the salesperson’s (aka “real estate agent”) exam, anybody who has attended even community college knows these courses are anything but college level. Prospective licensees are encouraged to sign-up for “boot camps” that are simply mass cramming sessions that show attendees what questions they must know in order to pass the exam. The purposes of these schools is in no way to inspire learning or to impart knowledge. That, along with taking online “practice exams” over and over until the answers are memorized, constitute the sum-and-total of what it takes to get a real estate license.

OIG to Audit Fannie Mae and Freddie Mac REO Servicing

June 18th, 2012 at 8:53am

The Office of the Inspector General for the Federal Housing Finance Agency (FHFA-OIG) has announced it is going to perform an expansive audit of Fannie Mae and Freddie Mac that targets the sale and management of REOs (Real Estate Owned, aka foreclosed properties).

The importance of such an audit cannot be overstated: the Fannie and Freddie have more than 173,000 foreclosed homes in their inventory as of the end of the first quarter of 2012. Although that is less than the 218,000 they hold the prior year, it is sufficient volume that FHFA will be making a determination as to whether the housing giants are maximizing the recovery of the properties and at the same time, minimizing the economic impact to surrounding neighbors, including, presumably, blight.

Read the original article in HousingWire. A copy of the FHFA‘s white paper can be read by clicking here.

© Copyright 2007-2015 Monique Bryher

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The information and notices contained on The California Real Estate Fraud Report are intended to summarize recent developments in real estate fraud, mortgage fraud, short sale fraud, REO fraud, appraisal fraud, loan modification scams, loan modification fraud and other real estate related crimes occurring in Los Angeles and California. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about real estate fraud, mortgage fraud and appraisal fraud matters or who believe they require legal counsel should seek the advice of an attorney.

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