California Real Estate Fraud Report

A San Mateo finance manager who could have received 18 years in prison is breathing easier after receiving a sentence of 71 months for mail fraud, filing a false tax return and false claims against the United States.

Seth Sundberg, 35, was the branch manager for Access Mortgage and Financial in San Mateo and the owner of Sound Mountain Investments in San Carlos a real estate property management and investment company. He had received a $5 million refund from the Internal Revenue Service after falsely claiming to have paid about the same amount in income taxes.

Read the full article in the Daily Journal of San Mateo.

The Countrywide VIP Loan Unit, notorious for spreading its largesse to U.S. Senators such as Senator Christopher Dodd (D-CT) and  Senator Kent Conrad. (D-ND), apparently also extended its low-interest loan favors to employees of Fannie Mae, according to an article published online in CBS News that is based on documents released by the House Committee on Oversight.

Information in the documents shows that the number of low-interest loans from Countrywide’s VIP program to Fannie Mae employees spiked on two occasions: first in 1998 as Countrywide was attempting to negotiate a volume discount with Fannie Mae, and then in 2002-2003 as Countrywide was expanding its VIP Loan Unit.

In 1999 Fannie Mae did indeed write an exclusive agreement with Countrywide in which it sold Fannie Mae billions of dollars in mortgages at a volume discount. Coincidentally (or not), Countrywide CEO Angelo Mozilo extended Fannie Mae CEO Jim Johnson favorable terms on more than $10 million in personal loans.

Republican House Oversight Report on Countrywide’s “Friends of Angelo” Program

Republican House Oversight Report on the Housing Crisis

Read the full article in CBS News, which includes the names and job titles of the many, many Fannie Mae employees whose names have been turned over to investigators as a result of their having received special consideration from the Countrywide VIP Loan Unit.

Tony Huy Havens, 36, already a convicted criminal (see earlier article in the California Real Estate Fraud Report) has been indicted on 30 charges by a federal grand jury, according to U.S. Attorney Benjamin B. Wagner.

Havens, of Modesto, California, faces possible conviction on wire fraud and criminal forfeiture after seeking investors in at least eight states for high-end construction projections that were in financial distress. He gave potential investors copies of fraudulent documents purporting to show that a lender was going to make a loan to the investors pending receipt of advance fees. Havens is accused of victimizing at least 15 borrowers by collecting advance fees of at least $248,750 by wire transfers but never extending the loans.

If convicted, Tony Havens could be sentenced to 20 years in prison and a $250,000 fine on each count. Havens was investigated by the FBI and the Stanislaus County District Attorney’s Office.

Read the full article on Web News Wire.

U.S. Bankruptcy Court in Santa Rosa was the setting today for a lawsuit filed by North Coast Bank against Clem Carinalli. The bank is accusing Carinalli of providing false financial statements that overstated his worth and understating his liabilities.

Carinalli is in bankruptcy court trying to restructure a whopping $196 million of debt associated with his vast real estate holdings.

Another lender, Napa Community Bank, alleged in 2009 that Carinalli and other had defraud it out of $1.6 million by giving it false loan documents. Napa later agreed not to sue Carinalli and both parties have filed a proposal with the bankruptcy court in which Carinalli would relinquish title to the property.

Read the full article in the Press Democrat.

California Attorney General Edmund G. Brown Jr. and San Bernardino County District Attorney Michael A. Ramos announced this morning that they are filing of criminal charges against former Chairman of the San Bernardino County Board of Supervisors William Postmus and James Erwin, former Chief of Staff to Supervisor Neil Derry for the following crimes in relation to a $102 million land deal:

Postmus was charged with five felony counts, including:

- Conspiracy to Commit a Crime (Penal Code Section 182)
- Accepting a Bribe (Penal Code Section 86)
- Supervisor Accepting a Bribe (Penal Code Section 165)
- Conflict of Interest (Government Code Section 1090)
- Misappropriation of Public Funds (Penal Code Section 424)

James Erwin:

- Conspiracy to Commit a Crime (Penal Code Section 182)
- Two counts of Corrupt Influencing (Penal Code Section 85)
- Two counts of Offering a Bribe to a Supervisor (Penal Code Section 165)
- Two counts of Extortion to Obtain an Official Act (Penal Code Section 518)
- Misappropriation of Public Funds (Penal Code Section 424)
- Forgery (Penal Code Section 470)

The Attorney General’s complaint charges that Erwin took $100,000 for :inducing the Board of Supervisors to pay $102 million of taxpayer’s money to Colonies, a development company, in a fraudulent settlement and that Postmus took a $100,000 bribe for his vote to approve it”. According to AG Brown:

“These individuals engaged in conspiracy, corruption and bribery that cost San Bernardino taxpayers more than $100 million,” Brown said. “This is one of the most appalling corruption cases ever seen in California, and we will aggressively pursue this conspiracy until all of the facts are exposed.”

Here is the link to the criminal complaint.

Read the press release on the Attorney General’s Website.

Countrywide Home Loans has new troubles, as a senior financial analyst was arrested by the FBI and charged with downloading and selling customer data to an unauthorized party.

Rene L. Rebollo Jr., 36, a Pasadena resident, was arrested at his home and Wahid Siddiqi, 25, of Thousand Oaks was also arrested by both the FBI and the Simi Valley Police Department for having purchased the stolen customer files.

In a page from the book “How to Steal from Your Employer and Assure Getting Caught”, although Rebollos worked Monday through Friday, he would go to Countrywide offices and access the databases for about an hour on Sundays.

Read the Full Article in the Ventura County Star by Jenni Mintz.

In an article posted on its own website January 14, 2008, the FDIC outlines its proposed rules for how to reimburse account holders should their banking institution fail. This is significant because the larger banks have more than 50 million deposit accounts and because the FDIC has in fact never supervised the distribution of insured funds beyond 175,000 accounts - and that was in a bank failure that occurred in 2007 .

Quoted from the FDIC website, and signed by Mitchell Glassman, FDIC Director of Resolutions and Receiverships:

• Part 1 proposes a rule governing how and at what point deposit account balances would be determined in the event of an insured depository institution failure. This part would apply to all insured depository institutions.
• Part 2 proposes requirements to facilitate the process for determining the insurance status of depositors of large insured depository institutions in the event of failure. As proposed, the Part 2 requirements currently would apply only to the 159 insured depository institutions with at least $2 billion in domestic deposits and either (1) more than 250,000 deposit accounts or (2) total assets over $20 billion, regardless of the number of deposit accounts. These “Covered Institutions” amount to less than two percent of the more than 8,500 insured depository institutions.

Read the Proposed Rule changes

[The following, published in Mortgage News Daily,  is not an article about mortgage fraud per se; however, it indicates the severity of the situation and is descriptive of the resistance by the "big player" lenders to take action. There is an inexplicable sense of bewilderment as to how underwriting practices of the past few years are directly responsible for much of the current chaos and, unfortunately, still an apparent unwillingness to take decisive steps to mitigate what common sense dictates should be done to get themselves, homeowners, and local economies back on track. For the informed reader, this article is worth reading in its entirety. Anybody who thinks that there is such a think as "compassionate corporate capitalism", or "enlightened self-interest" (the term used in this article), might think otherwise after reading it.]

In a conference call/press conference on Thursday, the Conference of State Bank Supervisors (CSBS) released its first report on loss mitigation efforts as reported by 13 major residential mortgage servicers. Iowa Attorney General Tom Miller explained that the report grew out of a concern dating back to last summer that the nation was facing a “foreclosure avalanche.” The AG said at that point the bank regulators and attorneys general who were expressing that concern were looking at the impact of individual foreclosures on the family and the community and had no idea of the collateral damage that would later emerge from the poor underwriting standards. They were, however, convinced that the avalanche could be mitigated by enlightened self interest. Such self-interest should come together where the borrower could afford to make payments in an amount that the owner of his loan could afford to accept.

A State Foreclosure Prevention Working Group was formed and met with 20 of the largest servicers of subprime loans. Most of these servicers agreed that loss mitigation made a lot of sense and signed on to the “enlightened self-interest” proposition. However according to Mark Pearce, North Carolina Deputy Commissioner of Banks, there was an immediate disconnect between what servicers said they were doing to ameliorate the problem and what the Working Group was hearing from borrowers and non-profits seeking to help those borrowers so the Group moved to collect data directly from servicers to verify what was going on. One immediate need was develop a metric of definitions so that “loss mitigation” or “repayment plan” meant the same thing to all players. The Group is now collecting data from 13 servicers representing 58 percent of the subprime market. Six servicers have either declined to provide information or are in negotiations to work out confidentiality concerns. Chase and Wells Fargo have declined to participate based on advice from the Office of Comptroller of the Currency which OCC has refused to change and Washington Mutual along with Chase have refused to provide data because of their participation in the Hope NOW Alliance While the report stated that many of the servicers participating in the data collection had not yet set up the kinds of tracking systems that would allow data to slice and dice information too finely, (e.g.was the loan modification an interest rate modification, a term modification, or a reduction in the amount owed?) this first report, containing data from last October, did contain some findings, the most interesting being that seven out of ten seriously delinquent borrowers are not on track for any loss mitigation option (my emphasis).

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