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The Mortgage Fraud Blog reported yesterday that the principals of the Dorean Group were sentenced to prison by U.S. District Court Judge William Alsup. Dale Scott Heineman, 48, of Union City and Kurt F. Johnson, 45, of Sunnvale, received sentences of 21 years, 8 months and 25 years following their conviction by a jury in November 2007 of 35 counts of mail fraud.
In addition to Heineman and Johnson, four of the Dorean Group’s brokers were charged in a scheme of “debt elimination”, in which fraudulent document were recorded in order to clear their clients’ titles to properties. Once title was cleared, the Dorean Group and their clients applied for and received hundreds of thousands of dollars in loans.
The Federal Housing Finance Board gave approval on Monday for the nation’s 12 Federal Home Loan Banks to increase their purchase of mortgage-backed bonds by about $150 billion. While some terms this a step by the government to infuse money back into markets that crumbled from the housing crisis, The F Word calls this a shameless case of corporate welfare.
The purchases will be restricted to bonds guaranteed by housing finance giants Fannie Mae and Freddie Mac. Just last week, Fannie Mae and Freddie Mac were given the green light to add $200 billion of mortgage securities to their portfolios.
The latest move increases the limit on the banks’ investments to six times capital for two years, up from three times.
The taxpayer could get skewered if banks mismanage their latest infusion of cash. Says Paul Miller, a bank analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia:
“The Federal Home Loan Banks have been notoriously bad managers of interest-rate risk.”
Read the Full Article in the Los Angeles Times Business Section.
A loan agent and her friend have been charged by prosecutors in Stanislaus County with defrauding the friend’s elderly mother-in-law out of her home’s equity and thousands of dollars in annuities, resulting in her home being foreclosed. Between the two of them, Susan Faustino, 49, and Diolinda M. Machado, 50, are scheduled to be arraigned April 11 in Stanislaus County Superior Court facing a combined more than 40 charges, including grand theft, obtaining property under false pretenses, forgery and making false financial statements.
Using her mother-in-law Mary Machado’s home as collateral, Diolinda began taking out loans in January 2003 using her mother-in-law’s home as collateral; the loans were in Mary Machado’s name. The home had originally been paid off in 1996. Diolinda Machado refinanced the home three times between 2004 and 2006 and then obtained a reverse mortgage in April 2007. The prosecutor’s affidavit states that Mary Machado’s signature was on the original loan documents and were notarized by Susan Theresa Van Nieuwe, a name Faustino used. However, Faustino acted as the loan officer for one of the refinances and allowed Diolinda to falsely state her mother-in-law’s income as $3,875.
Note: Even though the following post is out-of-state, it shows more dark days ahead for home owners and other consumers.
Due to a combined lack of funding and understaffing, the Minnesota Financial Crimes Task Force has decided to no longer investigate mortgage fraud cases. Cases, if they are to be investigated, will fall on the shoulders of federal authorities in the Twin Cities area, including the FBI and prosecutors in the U.S. Attorney’s Office.
Financial crimes such as mortgage and real estate fraud are often very time-consuming. According to Chris Omodt, a Hennepin County Sheriff’s lieutenant who heads the task force, such crimes will go unchecked. Instead, they will focus on the group’s original mission of chasing down identity thieves, check and credit card fraud.
Mike Siitari, Edina police chief and oversight council chairman for the task force states:
“We don’t have the staff or funding to address it. “We have hundreds of cases of backlog.”
Note: if an agency stops investigating a crime, it no longer exists. This is great news for white-collar criminals – nobody is watching!
Edward Showalter, who was accused of defrauding over 100 investors out of $16 million in a real estate scam, was sentenced to almost 13 years in prison by a court. He had pled guilty to wire fraud in response to civil charges by the SEC and was also ordered by the court to pay over $15 million in restitution to his victims.
Using his firm High Park, which purported to be an expert in rehabbing distressed properties, and Harbor Financial, which was the supposed source of funding, Showalter placed advertisements in the Orange County Register and the Los Angeles Times.
The Commission’s complaint claimed that Showalter solicited Investments of at least $50,000 for High Park. But instead of using the investors’ funds for distressed real estate, he commingled their money and lied to them.
Investors were guaranteed monthly returns and claimed that the investments would be secured by second trust deeds. In actuality some of the trust deeds were never recorded and others had many as twenty or thirty investors in the second position.
This is not Showalter’s first run-in with the SEC, which had sued him in 1998 for running a similar scam. In June 2002, a court found Showalter in civil contempt of the 2001 order requiring him to pay $900,000 in restitution. He finally paid the prejudgment interest and civil penalties in July and August 2004.
The California Office of the Attorney General has shut down seven mortgage companies, accusing accusing a family of licensed real estate professionals of predatory lending and conning homeowners into refinancing deals that caused most to lose their homes.Attorney General Jerry Brown said his prosecutors would be seeking penalties and restitution of more than $20 million in the scam by the companies, including Lifetime Financial Inc., led by 25-year-old real estate agent Eric Pony and his sister Paulette Pony. Their mother Wilma Pony was named as a defendant in the lawsuit but not accused in the criminal case.
“As the mortgage crisis worsens, a growing number of fly-by-night companies are employing increasingly brazen tactics to push desperate homeowners into illegal and unconscionable loans,” Brown said.
“This is among the worst we’ve ever seen,” Brown said. “This is not just exaggeration and puffing. This is straight-out, deliberate stealing and fraud.”
The accused have either surrendered their real estate licenses or had them revoked by the California Department of Real Estate. Their assets – more than $6 million in properties – were frozen and their Ferraris, Mercedes Benzes and a Bentley were also seized.
Brown expects to bring both civil and criminal legal actions against other “foreclosure consultants” and mortgage lenders he has terms “unscrupulous”.
The suspects are accused of forging signatures when consumers would not sign paperwork, making false promises about favorable loan conditions and ignoring requests to cancel loans within the three-day window provided by the federal Truth in Lending Act.
Read the Full Article on the California Attorney General’s website.
In a move that should surprise no one accustomed to hypocrisy by the Bush Administration, the Fed (that means you, the taxpayer) has stepped in to bailout Bear Stearns, one of Wall Street’s oldest investment banks. After finally admitting today that the economy is in trouble, President Bush, who has resisted bailing out homeowners under the guise that that would be “overreacting”, opened the taxpayers’ pockets via the Fed:
“It was strong action by the Fed and they did so because some financial institutions that borrowed money to buy securities in the housing industry must now repair their balance sheets before they can make further loans,” the president said.
Bear Stearns is the nation’s fifth-largest investment bank. Its troubles stem from having levereged itself heavily in mortgage-backed securities, resulting in its accumulating an astounding $2.75 billion in write-downs since last year.
Apparently, the Administration is comfortable with homeowners going out of business (being foreclosed) but not its corporate contributors.
The FBI (Federal Bureau of Investigation) has entered an investigation involving real estate fraud in Murrieta, possibly forstalling a number of civil lawsuits filed against the individuals, including several real estate agents. Up to 100 homes were lost to foreclosure since 2006, according to investigators.
After obtaining a warrant, the FBI raided the homes of James Duncan and Hendrix Montecastro, as well as Maurice McLeod on Feb. 22. In civil lawsuits filed by several dozen ex-clients of the trio, they are accused of selling homes to the plaintiffs at inflated prices and receiving excess commissions as a result. Montecastro’s mortgage brokerage, Stonewood Consulting, Inc., was also searched for financial records.
Montecastro and his father, Bob “Bayani” Montecastro, are also being investigated by the Securities and Exchange Commission and the Riverside County district attorney’s office. Both men surrendered their real estate licenses in July 2007 after they were accused by the California Department of Real Estate (DRE) of “arranging inflated appraisals, failing to account for clients’ money and concealing brokerage fees that were as high as three times the industry standards.”
Criminal charges have not been filed as of this date against any of the men.
In a scenario that has eery parallels to the Beverly Hills real estate fraud written about extensively in The F Word (see The F Word’s archives for January 16, 2008 and December 31, 2007 for details), Stonewood’s real estate agents and mortgage brokers are accused by the DRE and SEC of partnering with crooked real estate appraisers, loan officers and investment advisers to convince
The lawsuits and the civil accusations filed by the Department of Real Estate and the SEC describe a vast operation in which Stonewood’s real estate agents and mortgage brokers allegedly conspired with bogus investment advisers, at least one rogue loan officer for a national lender, and one or more appraisers to convince investors to purchase as many as 128 homes in the area. Most were later lost to foreclosure.
Other businesses allegedly operated by Duncan, Montecastro and McLeod that were covered by the FBI’s warrant included Ridgeline Investments, Sunburst Financial Systems, Palm Valley Advisers and Pacific Wealth Management LLC, a Nevada-registered outfit that is unrelated to a San Diego company of the same name.
Three sisters lost the Oak Park home where they grew up and lost about $80,000 each as a result of a scheme that included the participation of a dishonest notary. The $350,000 home, which had been paid off and inherited by Pamela Watkins and her sisters, had been transferred to their brother, who promptly sucked out the equity.
The Vallejo notary, Sofia L. Rose, had attested that the sisters signed over the house, yet the sisters had never met Rose. Rose eventually pleaded no contest in September 2006 to one felony count of filing a forged document and was sentenced to a 180-day work project (not jail!). The Watkins brother pleaded similarly and served a year in jail.
Detectives, prosecutors and investigators in Sacramento, the Bay Area and Los Angeles state that real estate frauds are often dependant on the ability of the criminals to find a notary to go along with the fraud. Since the notary’s job is to attest to the correct identity of the person signing an important document, having a crooked on the payroll can make all the difference to the success of the criminal enterprise.
Read the Full Article in the Sacramento Bee for more cases in California involving crooked notaries.
The US Department of Justice and the Federal Bureau of Investigation (FBI) have launched investigations into whether Countrywide Financial provided misleading information regarding the firm’s financial condition and loans in its security filings. This is in addition to the Securities and Exchange Commission, which has been conducting its own investigation. Countrywide is also the defendant in a class action suit by pension plans, which accuse the lender of securities fraud.
Countrywide recently reported losses of $422 million, more than twice the losses predicted by industry analysts. The Reuters news service reports that Countrywide shares fell 12.5% to $4.46 on news of the new investigation by the FBI.
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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