January 20th, 2012 at 9:19am
In 2004, corporate giant General Electric (GE) jumped into the booming subprime market by purchasing WMC Mortgage Corp. in Burbank. In short time, WMC loan officers, who, according to a former auditor, numbered shoe salesmen, strippers and a porn actress as their employees, began earning commissions as high as $1 million annually.
Years later, the FBI and Justice Department are finally looking into the defunct lender, perhaps as a reaction to Occupy Wall Street protests over Wall Street greed and excesses, or the extremely high numbers of defaults of WMC loans in the country’s most devastated real estate markets. Only New Century Financial Corp. in Irvine had more foreclosures on its subprime loans (subprime loan fraud).
Whistleblowers who claimed their complaints about loan officers falsifying loan documents (loan fraud) were ignored, are now coming out of the woodwork. Former compliance manager Dave Riedel recalls how a WMC manager told him “Fraud pays.” WMC eventually demoted Riedel and took away his work, effectively shooting the messenger, much as Bank of America had done with whistleblower Eileen Foster, a former internal auditor with Countrywide Home Loans in Boston. Foster was the subject of an earlier posting in the California Real Estate Fraud Report.
Read the original article in the Los Angeles Times and iWatch News at the Center for Public Integrity.
October 21st, 2011 at 8:27am
This blog usually concerns itself with arrests, prosecutions and convictions for real estate fraud and mortgage fraud.
Today, I’m happy to write that eight investigators with the SEC have been honored with the 2011 Award for Excellence in Investigations by the Council of the Inspectors General on Integrity and Efficiency (CIGIE).
In 2009, Colonial BancGroup Inc. and Taylor, Bean & Whitaker Mortgage Corp. both collapsed due to the fraud committed by former Taylor, Bean & Whitaker chairman Lee B. Farkas and four others. Farkas and his co-conspirators scammed the taxpayers’ via the Troubled Asset Relief Program (TARP) by selling $1 billion of worthless mortgage assets to Colonial, which was later seized by the U.S. government and sold to BB&T Corporation. Farkas was sentenced to 30 years in prison.
Since the original arrests, the former CEO of Taylor, Bean & Whitaker has also been charged, as well as a C-suite executive and supervisor of Colonial.
In addition to the SEC investigators, staff at the following agencies were honored as was the Eastern District Court of Virginia:
Department of Housing and Urban Development (HUD) - Office of Inspector General
Federal Deposit Insurance Corp. (FDIC) - Office of Inspector General
Federal Housing Finance Agency (FHA) – Office of Inspector General
Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP)
Federal Bureau of Investigation (FBI)
Department of Justice (DOJ)
Read the original article in LoanSafe.
January 8th, 2010 at 2:13pm
A father and son team of appraisers who worked closely with subprime lender Quick Loan Funding in Costa Mesa have been charged with appraisal fraud by the Orange County District Attorney’s Office. the California Office of Real Estate Appraisers also participated in the investigation.
Landmark Equities Group owner James Meritt Eaton, 60, and his son Brian Changler Eaton, 28, have been charge with more than 20 felony counts of grand theft, conspiracy and fraud. The two men, along with their associate Michael John Bell, are accused of overstating the prices of properties they appraised for Quick Loan Funding, where they had an office. Shockingly, Eaton Sr. is alleged to have gone so far as to fly to his branch office in Dublin, California, where he personally fired an employee for refusing to give him the passwords of other employees so that he could access and change the values of appraisals those employees had performed.
Read the Full Article in the Orange County Register.
November 6th, 2009 at 10:42am
After what seems to be an eternity to jilted investors and an army of employees who lost their jobs, former Countrywide CEO Angelo Mozilo was denied his request to dismiss charges of securities fraud by the Securities and Exchange Commission by U.S. District Judge John F. Walter. This means Mozilo, who has fought the SEC’s lawsuit, initiated this past June, alleging that Mozilo and former Countrywide CFO Eric Sieracki and former COO David Sambol misled investors about Countrywide’s financial condition.
Mozilo, who founded Countrywide in 1969 and built a sandcastle of an empire on making loans to people with low credit scores, is the name most credited with laying the foundation for both the run-up in housing prices in the early 2000s and the inevitable bubble burst and collapse of the real estate market. Intentionally or not, he also created a new industry – mortgage modifications – that has spawned another wave of fraud against consumers.
Note: the creation of FICO scores by Fair Isaac is a time-proven means of measuring the risk of lending money. That the vast majority of lenders threw out the use of the scores and just plain common sense about lending large sums of money to unresponsible people shows the power of peer pressure and herd mentality.
July 31st, 2009 at 12:59pm
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.
May 24th, 2009 at 11:16am
New York State Attorney General Andrew Cuomo made headlines last year when he began an investigation into now-defunct Washington Mutual Bank’s – aka WaMu – unholy relationship with eAppraiseIT. eAppraiseIT is a subsidiary of title company First American Corporation and its primary source of appraisal work was from WaMu. Cuomo alleged that WaMu essentially blackmailed eAppraiseIT by threatening to take its appraisal business away if the appraising firm didn’t pump up appraisal values so that WaMu loan officers could collect higher commissions on subprime loans it underwrote. And WaMu executives in turn were “rewarded” with higher bonuses.
Now Cuomo is letting the very scoundrels he investigated off the hook, and closing his investigation of them, in exchange for getting the FHA (Federal Housing Financing Agency), FNMA (Fannie Mae) and FMAC (Freddie Mac) to agree to changes in the way appraisals are now performed.
Read about how Cuomo might be adding himself to the list of authorities who are hurting consumers more than helping them with this sweetheart deal:
Examiner.com and Philly.com
Read the original article about Cuomo’s lawsuit and a civil lawsuit filed by appraiser Jennifer Wertz and attorney Stephen Danz in the California Real Estate Fraud Report.
May 15th, 2009 at 9:58am
The Securities and Exchange Commission, aka the SEC, is supposed to be the government’s watchdog in the war against insider trading, executives feathering their own nests at the expense of shareholders, and other forms of corporate corruption.
Yet many observers would say the SEC has been asleep at the wheel since at least 2000, when subprime lenders sprang up like mushrooms in a bog. When the Attorneys General of several states started investigating lenders such as Countrywide and WaMu for everything from mortgage fraud to appraisal fraud, the SEC still didn’t bat an eye. And the backs of members of Congress were too weighted down with campaign contributions from the banking industry for them to either see or care the inevitable and certainly forseeable outcome to the U.S. and world economies from the insatiable greed of that industry.
The political winds are changing: SEC staff are now recommending that Countrywide founder and former CEO Angelo Mozilo, arch-symbol of the subprime run-up and meltdown, be charged with fraud, insider trading and failing to disclose to Countrywide shareholders the risks the company was taking. Mozilo was sent a Wells letter last week informing him of the likely charges. Wells letters are sent by the SEC and unless the SEC’s 5-member commission overturns the recommendations of the staff, Mozilo will likely face the civil charges.
Mozilo is also the target of separate criminal investigations by the federal government. Besides the investigations by the Attorneys General in four states (California (AG Jerry Brown), Illinois (AG Lisa Madigan), New York (AG Andrew Cuomo) and Florida), Mozilo is facing numerous class action suits from unhappy shareholders and loan borrowers who claim they were misled as to the terms of their loans.
According to a recent article in the Wall Street Journal, Mozilo modified his executive plan with Countrwide in 2006 and increased the sales of his stock from $60 million in 2006 to $130 million in 2007. His attorney, David Siegel of Irell & Manella, denies that Mozilo bears any responsibility for the types of loans his client marketed, and that the stock sales were proper.
This article is also published in Examiner.com.
Sell also the Los Angeles Times and the Wall Street Journal.
January 4th, 2009 at 12:24pm
The “little man” whose taxes are bailing out Wall Street giant Citigroup is getting a boot in the face when it comes to loan modifications. But at the same time Citigroup is bending over backwards to help the owner of Quick Loan Funding, the subprime lender whose risky lending practices contributed to Citigroup’s near collapse.
Daniel Sadek, founder of Quick Loan Funding, got an offer from Citi Residential Lending to modify its loan terms when he fell behind on his mortgage payments at 65 Briar Lane in Irvine, which may not even be his primary residence. He never made one payment on the new loan and on December 18, 2008 City filed a Notice of Default against Sadek.
On the other hand, Dave Karecki, 47, has been unable to get lenders Citi and Countrywide to modify $420,000 in mortgages on his Norco home after he lost his job and his wife’s hours were cut back on her job as a teaching aide. Their home is now worth approximately half of what they paid for it.
“They’re not working with us,” Karecki said. “My frustration is I call back and call back and get a different person every time and they tell me to refax everything. It’s an absolute circus.”
Read the Full Article in the OC Register by John Gittelsohn.
November 24th, 2008 at 12:37pm
Five loan officers from Creative Financial Solutions, Inc. (CF) have pled guilty to wire fire and admitted that CFS, a mortgage brokering company, obtained mortgage loans for unqualified borrowers by submitting false loan applications, false bank statements, and false income documentation. In total, the lenders who funded their loans, may have lost up to $16 million on properties that have been foreclosed or are in the foreclosure process.
Read the Full Article in the Imperial Valley News.
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.
