California Real Estate Fraud Report

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Archive for the 'Short Sale Fraud' Category

Short Sale Fraud Still Pays as Judge Goes Easy on Defendants

April 4th, 2014 at 8:30am

Rejecting the recommendations of Assistant U.S. Attorney Gregory DammU.S. District Judge Jennifer Dorsey gave two former real estate agents only one day in custody of the U.S. Marshals Service and ordered them to pay restitution to the lenders they conned in a short sale fraud. Judge Dorsey did “sentence”  Cynthia Hosbrook, 41, and Robert Hosbrook, 52, to five years of supervised release and ordered them to pay fines of $10,000 each.

The losers here are taxpayers, who footed a trial that probably cost several hundred thousand dollars.

The Holbrooks lied to Wells Fargo and Fannie Mae, claiming they needed to do a short sale of their home due to hardship. They “sold” the Las Vegas house to Cynthia Hosbrook‘s mother for cash and continued to live in it, causing a $170,000 loss to the lenders. Unmentioned is that they got a write-down of their mortgage and a reduced property tax basis, so their fraud still appears to have paid-off.

In their plea agreement last November to one count of bank fraud each, they admitted they had committed short sale fraud in the sale of two other Las Vegas homes in 2008 and 2009.

Read the original article in the Las Vegas Review Journal.

Bank of America Employee Accused of Participating in Short Sale Fraud

March 12th, 2014 at 9:38am

Kevin Lauricella, 28, a former Bank of America employee, has pleaded not guilty after being accused of falsifying bank records, according to a 28-count grand jury indictment.

Bank of America fired Lauricella in 2011 after learning that he had allegedly taken bribes of more than $1 million to approve short sales in Southern California at below-market values.

Read the original article in the Los Angeles Times.

 

San Francisco Broker Pleads Guilty to Short Sale Fraud in SLO County

March 12th, 2014 at 9:14am

Timothy William Barnes, 37, a man who spent most of his working life in real estate, surrendered his real estate broker’s license after pleading guilty to committing bank fraud. Barnes owned and operated Apex Properties Real Estate Brokerage in San Luis Obispo.

Barnes’ office was raided in 2012 by the FBI, after they and the Federal Housing Finance Agency’s Office of Inspector General began investigating him for illegally flipping. His scheme was to understate the value of homes for which he was asking the lenders to approve short sales, concealing higher offers from other bidders and simultaneously buying and reselling the homes to the higher bidders. The properties were located in San Luis Obispo, Paso Robles, Pismo Beach and other Central Coast cities.

Read the original article in CalCoastNews.com

Connecticut Prosecutes Another Short Sale Fraud Successfully

February 19th, 2014 at 7:35am

Continuing its mission to prosecute those who engage in short sale fraud, the U.S. Attorney for the District of Connecticut announced that attorney Christopher Brecciano, 35, waived his right to indictment and decided to plead guilty to participating and a widespread mortgage fraud scam that occurred in Fairfield County and included numerous properties.

Below is the remainder of the FBI‘s press release:

“According to court documents and statements made in court, between 2006 and 2010, Brecciano, while working as an associate at a Stamford law firm, participated in mortgage fraud conspiracy that involved the purchase of numerous single and multi-family properties, primarily in Bridgeport, Norwalk, and Stamford. Brecciano acted as a closing attorney for at least 50 mortgage loan transactions in which materially false information was provided to mortgage lenders by Brecciano or his co-conspirators. The fraudulent information included false verifications of down payments for real estate transactions, false deeds, and false HUD-1 Forms. In many of the transactions, Brecciano knew that the borrower was a straw buyer and that other individuals intended to control the property and collect rent from the property. In many transactions, Brecciano distributed mortgage loan funds to the straw buyer and other co-conspirators at the closing.

Many of these properties ended up in foreclosure or in short sale transactions. In pleading guilty, Brecciano admitted that he was also involved in many short sale transactions in which he knew that the buyer and seller were working together to retain control of the property while representing to the lender that the sale was an arm’s length transaction. (Note by Monique: this is a class example of short sale fraud).

Through this scheme, lenders suffered losses of more than $7 million.

Brecciano pleaded guilty to one count of conspiracy to commit wire fraud and bank fraud. He is scheduled to be sentenced by Chief U.S. District Judge Janet C. Hall on May 7, 2014, and faces a maximum term of imprisonment of 30 years.

This ongoing investigation is being conducted by the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorney Ann M. Nevins and Special Assistant U.S. Attorney John McReynolds.”

Rare Prosecution of Short Sale Fraud in Northern California

January 24th, 2014 at 6:00am

A Fremont real estate agent was arrested this week after being indicted by a federal grand jury in connection with helping a man commit short sale fraud in the sale of his home.

Minerva Sanchez, 47, was arrested and arraigned in San Jose federal court, where she pleaded not guilty to conspiring to commit bank fraud.

In a case dating back to March 2010 in which authorities allege lender Tri Counties Bank and Freddie Mac collectively lost over $350,000 Sanchez represented Agustin Simon, 52, in the short sale of his home located in Patterson. Sanchez is accused of recommending that he use her son as a straw buyer to purchase the home in a short sale. The idea was that Simon would eventually take title back to his home.

Before a lender approves a short sale, the seller must submit a letter detailing financial hardship and both the seller and his agent must sign an “arm’s length” affidavit affirming the sale is to a buyer unrelated to the seller by relation, business or acquaintance. Prosecutors said both Simon and Sanchez fraudulently signed the arm’s-length affidavit and both misrepresented his ownership of other real estate assets. Simon allegedly had enough money that he was able to give $355,000 to Sanchez’ son to effect the purchase. Both lenders ultimately approved the short sale.

In addition to receiving commission for representing Simon, Minerva Sanchez also received 75% of the commission paid to her son’s real estate agent.

It is not known whether Sanchez’ son is being charged in this case.

In June 2013, Agustin Simon pleaded guilty to conspiring to commit bank fraud in connection.

Read the original article in the Modesto Bee.

You can learn everything about short sale fraud by reading my e-book “How to Commit Short Sale Fraud . . . and Get Away with It.”

Realtors Indicted for Operating Mortgage Fraud, Short Sale Fraud Schemes

December 5th, 2013 at 9:04pm

Two Stockton Realtors have been arrested by federal agents and charged with operating a unique mortgage fraud-short sale fraud business,  according to U.S. Attorney Benjamin Wagner.

Lillian Marquez, 38, and Michael Keatts, 56, were charged in a federal grand jury indictment with conspiring to commit mortgage fraud and with nine counts of mail fraud.

According to the indictment, both defendants enjoyed a long run: from February 2006 through August 2012 or later, both Marquez and Keatts submitted loan applications in which fraudulent pay stubs and tax documents were submitted to lenders.

The other side to the defendants’ business was that they allegedly facilitated short sale fraud. In a classic short sale fraud scheme, they would assist the homeowners in default with selling their homes to straw buyers. The “sellers,” however, would remain in their homes at much-reduced mortgages and lowered property taxes. Of course, they would also be relieved of paying taxes on the gains they received by not having to pay either the IRS or Franchise Tax Board (FTB) on their loan foregivenes. Both agencies are completely asleep-at-the-wheel when it comes to short sale fraud, as is most of law enforcement.

Even if these defendants are convicted, I doubt either of the above agencies will lift a finger to prosecute them, the straw buyers or the “sellers,” including putting a lien on the houses. The feds, including the Department of Justice, are too busy pretending to prosecute crooked bankers.

Read the original article in the Central Valley Business Times.

Banks Should Look in the Mirror for Mortgage Fraud Blame

December 5th, 2013 at 8:26pm

This interesting article, published in MortgageOrb, points out the paradox that if banks don’t collect mortgage fraud data and report it, other banks fall “victim” to fraud by the same borrower.

The article then acknowledges that banks do a poor job of reporting fraud and sharing such data with each other. I would add that for the most part, the largest lenders do not care about mortgage fraud, do not aggressively pursue leads and rarely cooperate to prosecute mortgage fraud, thereby explaining why mortgage fraud is so rampant. This is even more true for short sale fraud, which is a profitable fraud committed by homeowners and generally handled by banks by simply looking the other way.

NAR Gets HUD to Pull the Plug on Forbidding Dual Agency on Short Sales

October 4th, 2013 at 11:18am

In what can only be viewed as a victory for the National Association of Realtors (NAR), the U.S. Department of Housing and Urban Development (HUD) has rolled over on a policy that would have quashed dual agency on FHA short sales beginning October 1.

Dual agency occurs when the same brokerage (not necessarily the same agent) is representing both the buyer and seller in a real estate transaction. While legal in California, dual agency is prohibited in a number of other states.

Honest, competent agents can and do complete real estate transactions, faithfully representing both sides in a residential property sale and to the satisfaction of both.

Short sales are another and very different story. In my own observations and that of other honest real estate agents, dual agency is the mother’s milk of fraud that often drives successful short sale frauds. An examination of under-market value short sales on any Multiple Listing Service (MLS), at least in California, reveals more than the standard number of escrows being closed are dual agency.

HUD had sent a letter to mortgage servicers in July, outlining anti-fraud measures designed to prevent non-arm’s-length short sales. In these “special” short sales, the borrower often does not move out of his/her home and effectively gets a generous write-down of his/her principal mortgage and any junior liens. My term for this is “mortgage laundering,” which is discussed in depth in my ebook “How to Commit Short Sale Fraud . . . and Get Away with It.” Further, the borrower does not have to pay what would normally be gains on the sale to the Internal Revenue Service and of course, the property taxes are often reduced drastically; both of which are tax evasion, in my opinion.

What remains unspoken by all the above-named parties is that short sale fraud is epidemic, is obviously highly profitable and all levels of government are content to prosecute far less than even 1% of the borrowers, real estate agents and brokerages that engage in it.

When it comes to short sale fraud, crime pays and it pays very well.

Read the original article in Inman News.

Former Michigan Supreme Court Justice Diane Hathaway Begins to Serve Sentence for Short Sale Fraud

August 14th, 2013 at 4:04pm

The bigger they are . . .

Former Michigan Supreme Court Justice Diane Hathaway, who pleaded guilty in January 2013 to one count of felony bank fraud, has begun serving her one-year, one-day sentence for committing short sale fraud.

According to Wikipedia, Justice Hathaway “was the first sitting Michigan Supreme Court Justice to be charged with a crime in nearly 40 years.”

Hathaway, 59, resigned her esteemed position from the bench eight days after entering her plea, is now an inmate at “Camp Cupcake,” the federal prison in Alderson, West Virginia. The prison earned its derisive name because the inmates enjoy the privileges of washers, dryers, microwave ovens, hair dryers, curling irons, manicures and pedicures.

Previous well-known inmates have included former Detroit Councilwoman Monica Conyers; Martha Stewart and the two women who tried to assassinate President Gerald Ford: Sara Jane Moore and Charles Manson follower Lynette “Squeaky” Fromme.

In their complaint against her, prosecutors accused Diane Hathaway of hiding assets worth more than $1 million and lying to lender ING Direct about it in order to obtain a short sale approval.

Defense lawyer Steve Fishman argued that Hathaway and her husband Michael Kingsley actually saved the bank money by accepting the short sale rather than allowing it to be taken to foreclosure auction.

If you want to read in more detail the allegations prosecutors made against Diane Hathaway and conclude for yourself why she pleaded guilty, use the search bar at the left of this blog to find them

Read the original article for this post in the Detroit News.

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.”

© Copyright 2007-2014 Monique Bryher

Legal Disclaimer.

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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