California Real Estate Fraud Report

A business in the Stockton area run by a woman who lost her real estate license, yet continued to act as a licensed agent, is now the focus of an investigation by the San Joaquin County District Attorney’s Office.

The California Department of Real Estate (DRE) revoked the license of Magdalena Salas, aka Maggie Salas, in 2004. In 2010, the DRE ordered her to “desist and refrain. By then Salas was running several businesses, including Legacy Home Loans & Real Estate, Peace and Freedom Legal Services and Divinity Real Estate. District Attorney investigators say that Salas advertised free loan modification services on Spanish-language television, radio and billboards (affinity fraud, ethnic fraud). But when clients came in, she allegedly extracted large sums of advance fees to stop their foreclosures and help them obtain loan modifications (loan modification fraud, loan modification scams).

It has been illegal since 2009 in California to charge advance fees to perform loan modification services.

Read the original article in the Stockton Record.

Three men have been indicted by a federal grand jury on charges related to a mortgage fraud conspiracy in which lenders were defrauded out of $1 million.

The indictment charges Sean McClendon, 35, and Anthony Williams, 44, with buying four properties in the Sacramento area from Anthony Salcedo, 30. The two were paid kickbacks by Salcedo, which is illegal under the federal RESPA rules, and used straw buyers to make the purchases. In addition, McClendon, who was a loan officer, processed the loan paperwork and falsified the income and assets of the straw buyers in order to get the loans approved (loan fraud, mortgage fraud). The values were overstated (appraisal fraud) in order for the men to create false equity (equity skimming) and get their “referral fees” (the kickbacks).

The homes were subsequently foreclosed by the lenders.

Given the relatively small dollar amount of this fraud compared to other cases and the fact that the mortgage fraud occurred between 2005 and 2006, one wonders if the men thought they would escape detection and prosecution.

Read the original article in the Central Valley Business Times.

James Hurst Miller, 63, president of defunct hard money lender Hurst Financial Inc., has been charged by the U.S. attorney in Los Angeles with federal fraud and money laundering.

The allegations are with respect to several projects Hurst and developer Kelly Gearhart  proposed to build, into a large golf course. The 1,200 Central Coast people who put money into the project in what prosecutors claim was a $100 million real estate investment fraud. Specifically, Hurst is facing four counts of wire fraud, mail fraud, money laundering, making a false statement to a bank and assisting Kelly Gearhart in fraudulently obtaining funding for his construction project. Prosecutors allege that the investment money was diverted to pay for prior loans his business made (hard money loan fraud).

Miller used Cuesta Title, also no longer in business, to clear title on some of the projects by stating falsely that the loans had been repaid (title fraud). He would then take out subsequent loans using his investors’ money

The projects for which Miller solicited investors were in the Beacon Road and Vista Del Hombre real estate development projects in Paso Robles and the Salinas River real estate development project in Templeton.

Many of James Miller’s investors, including elderly investors (elder financial fraud) have lost their life’s savings and homes. One is a 68 year old Cambria woman who suffers from multiple sclerosis and now lives in an assisted care facility because she was unable to keep her home because of her investments with Miller.

Read the full article in the CalCoastNews.

Carlos Gonzalez thought he was buying the home in Newman, near Modesto, when he gave his real estate agent $22,000. But he had bad credit and was unemployed, so Erica Burdg, his agent, convinced Gonzalez to let her husband buy the house as an investor.

Burdg is now on trial for allegedly swindling Gonzalez out of his $22,000. She says her husband purchased the home and rented it back to Gonzalez for $1,200 a month in order to establish a history of making regular payments. Gonzalez says he thought he had purchased the house and was unhappy to find out that Burdg’s husband was making mortgage payments of ony $900.

Although Burdg stated she should have returned the $22,000 to Gonzalez, she sold the home to her son and collected $1,000 from the bank as a fee for selling it at a higher interest rate.

Read the original article in the Modesto Bee.

One of the hazards of selling REO (bank-owned) properties is what happens between the Trustee Sale (foreclosure) and moving the new family in: squatters and vandals. This creates stress for the neighbors, more work for law enforcement, losses for the insurance carriers and depreciates property values.

Sometimes the vandalism is caused by the former owners; in a sense, it is a form of REO fraud since part of the purpose of the vandalism is to deprive the bank of part of its asset.

Ann Brenoff of AOL Real Estate interviewed me and another real estate agent for this article she wrote. Click here to read it.

The FBI has released a comprehensive report detailing the state of mortgage fraud in the country. According to their research, the states most affected by mortgage fraud and other real estate crimes are the same states where housing prices escalated rapidly during the mid-2000s: California, Florida, Michigan, Nevada, Arizona, Texas, New York, Illinois, Georgia and New Jersey.

The most prevalent mortgage fraud schemes reported by law enforcement agencies and private industry during fiscal year 2010 included loan fraud in the origination process, mortgage rescue fraud, real estate investment fraud, equity skimming, short sale fraud, illegal property flipping, title fraud, escrow fraud (incl. settlement), commercial loan fraud, builder bailout schemes, loan modification fraud and reverse mortgage fraud.

The FBI notes that short sale fraud has become so prevalent that organized crime committed by Asian, Armenian, Balkan, Eurasian, Russian and La Costra Nostra groups has infiltrated lending institutions in order to have access to financial information, mortgage origination software, notary seals and licensure information.

In other words, all forms of real estate fraud are alive and well and it is being committed by both licensed real estate professionals and unlicensed individuals and criminal organizations. Law enforcement is bailing water out of a ship that needs enormous reinforcements just to stay afloate.

This is an excellent report with a lot of detail and is well-worth reading.

Click here to read the report on the FBI’s website. There is also an excellent synopsis on Inman News.

California Attorney General Kamala Harris announced today that her office has filed suit against three law firms, four attorneys and 14 businesses that had preyed on distressed borrowers trying to save their homes.

Now that California has cracked down on loan modification fraud by forbidding firms from charging upfront fees in exchange for helping borrowers, that type of real estate fraud is fading. According to Harris, the workaround scam is to get the victims to part with up to $10,000 in order to participate in “mass joinder” lawsuits against the banks.

Among the defendants are attorney Philip Kramer and his Calabasas-based law firm Kramer and Kaslow; Encino attorney Christopher Van Son; Paul Peterson and Costa Mesa based Mesa Law Group Corp; and Mitchell Stein and his law firm Mitchell J. Stein & Associates, based in Agoura Hills.

Kramer’s firm and has been placed into receivership. In addition, the California DOJ has seized the practices of the following non-attorney defendants:
Attorneys Processing Center, LLC; Data Management, LLC; Gary DiGirolamo; Bill Stephenson; Mitigation Professionals, LLC; Glen Reneau; Pate Marier & Associates, Inc.; James Pate; Ryan Marier; Home Retention Division; Michael Tapia; Lewis Marketing Corp.; Clarence Butt; and Thomas Phanco.

This is the first action taken by the Attorney General’s Mortgage Fraud Task Force to protect consumers.

Since this network of attorneys and businesses is alleged to have operated nationwide, other states have reports and investigations of their activities.  Read this report by the Washington State Department of Financial Institutions. The defendants have also been discussed in RipoffReport.com.

Read more about this in the California Attorney General’s press release and Reuters.

A developer in Stanislaus County with an ambitious plan to build a “lifestyle center” replete with movie theaters, Sheraton Hotel, restaurants and shops near a Kaiser hospital is being sued by lenders for loan fraud.

Aruna Chopra and her family of real estate developers are accused by the lenders of concealing that Chopra owed the previous owner of her property $6.4 million. She then leveraged the land in order to obtain $2.5 million from a lender. The accusations are that a forged document was recorded to show a partial reconveyance of the property. The attorney for one of the lenders says that another forged document was recorded that rescinded the first forged document (title fraud, if proven).

In addition to the civil action, the lenders notified the Sheriff’s Department and the FBI.

Read the original article in the Modesto Bee.

The president of a real estate investment “club” that took in $2.2 million from investors has pleaded guilty to running a Ponzi scheme.

Garry Bradford, 62, ran the  Millenium Capital Group in the Sacramento area between 2004 and 2008, purportedly to invest in commercial real estate. He admitted that the money he took in from investors was used to repay earlier investors. Many of the victims had pulled equity from their homes or cashed in their retirement plans in order to invest with Bradford, who promised 18% returns.

The case was prosecuted by the office of U.S. Attorney Benjamin Wagner and heard by U.S. District Judge Garland Burrell Jr.

Bradford could receive 20 years for each of the four counts of federal wire fraud for which he pleaded guilty and a $250,000 fine.

Read the original article in the Sacramento Bee.

Walter Daniel Olmstead, 39, has pleaded guilty to conspiring to rig bids at an auction in San Joaquin County and mail fraud. So far, seven other involved in the conspiracy have entered guilty please: Anthony Ghio, John Vanzetti, Theodore Hutz, Richard Northcutt, Yama Marifat and Gregory Jackson.

Olmstead was a real estate investor who apparently conspired with others to make illicit profits at the auctions. The group would agree which person was to make the bid, while the others would refrain from bidding. After winning the bid, the property would be sold to whoever was willing to pay the most from the property. The difference would be divided among the conspirators then.

The scheme attracted attention not only from the Attorney General’s office but their Anti-Trust Division. U.S. Attorney Benjamin Wagner prosecuted the case.

Olmstead could be sentenced to 10 years in prison and a $1 million fine for the bid rigging and 30 years plus a $1 million fine for the mail fraud charge.

Read the original article in the Modesto Bee.