October 4th, 2013 at 11:46am
David Noonan, an attorney for eight of the investors who lost everything by putting their faith and savings into builder Kelly Gearhart and lender Jay Miller argued last week in court that the three escrow companies were essential to the men’s real estate investment fraud scheme.
In referring to Cuesta Title, Stewart Title and Stewart Title Guaranty, Noonan said, “They are joined at the hip. They were all mutually interested in maximizing their returns.”
Gerard Kelly, the attorney representing Stewart Title of California, said his clients did nothing except to close escrows as they always had done and that “There wasn’t a single trace of a paper trail to suggest any misconduct in this case.”
Mack Staton, Cuesta’s attorney, pointed the finger of blame to Gearhart and Miller as being the sole individuals who committed the fraud. Gearhart and Miller have declared bankruptcy and are neither parties nor witnesses to this $3.9 million trial.
Jay Miller, the former principal of Hurst Financial, has been convicted of fraud. Kelly Gearhart has pleaded not guilty to the federal fraud charges against him and has not yet been tried.
Read the original article in the San Luis Obispo Tribune. There are also numerous articles about Kelly Gearhart, Jay Miller and Hurst Financial that can be found by searching the California Real Estate Fraud Report.
October 4th, 2013 at 11:26am
The numbers keep getting bigger and bigger.
Mary Armstrong, 52, of Las Vegas has been sentenced in San Diego to nearly 8½ years in federal prison after pleading guilty for masterminding a $100 million mortgage fraud scheme.
My calculator tells me that Armstrong will leave prison a wealthy woman, as the court ordered her to pay only $500,000 to her victims, according to the U.S. Attorney’s Office.
Armstrong, whose boyfriend William Fountain received a 3 1/2 year sentence, was the brains behind a scheme in which straw buyers were recruited to buy homes for inflated prices. The six conspirators divided approximately $15 million for their efforts.
Read the original article in The Republic.
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.
October 4th, 2013 at 10:57am
Three police officers with more tenacity and hard work than money pulled off busting a real estate fraud ring that involved identity theft and losses of over $1 million.
The California City Police Department has a staff of less than 20. But when Reserve Officers Michael Katz and Chris Christopher (now deceased), and Sgt. Jeff Takeda heard about a case in November 2008 in which an identity theft in Anaheim was used to purchase property in California City, they went to work.
According to Officer Katz, the defendants, who built six houses, did so “in a plummeting market, a market with no buyers. The (suspects) used a combination of what’s called straw buyers and identity theft victims to sell the houses to.” The builders found a cooperating appraiser, who “super-inflated” the valuation for the houses, giving the defendants excess proceeds to skim. The true values were less than half of the appraised amount, which the banks found out during their investigations.
The defendants are appraiser Nathaniel Acree, 65, of Long Beach; broker Jay Langer, 51, of San Juan Capistrano; Khalid Malik Abdul Ali, 60, of California City; Angie Cachu, 44, of Orange; and notary Elizabeth Torres, 28, of Santa Ana. All of them are in custody except Torres and Angie Cachu, whose whereabouts are unknown.
Referring to the three officers, Kern County Deputy District Attorney Gordon Isen noted, “They did an excellent job investigating the case and drafting the report.” Isen is prosecuting the case.
Read the original article in the Bakersfield Californian.