California Real Estate Fraud Report

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Iowa Realtor®, Attorney convicted in short sale fraud case

February 19th, 2015 at 1:38pm

Below is the press release from the office of the United States Attorney’s Office for the Southern District of Iowa:

A Des Moines area attorney and real estate agent were both convicted of bank fraud after an eight-day jury trial, announced United States Attorney Nicholas A. Klinefeldt. Attorney Jason Springer was convicted of seven counts of bank fraud, and real estate agent Rick Makohoniuk was convicted of one count of bank fraud, in connection with a property flipping scheme. Bank fraud carries a maximum penalty of up to 30 years in prison, a fine not to exceed $1,000,000, or both. The court also will be authorized to impose orders of restitution. United States District Judge John A. Jarvey will schedule a sentencing date at a later time.

Springer, Makohoniuk, and three other men were charged with engaging in a scheme to defraud financial institutions from approximately March 2009 to March 2011, involving approximately eighteen homes in and around Des Moines, Iowa, and a loss of approximately $400,000. Two of the other men, Nathan Smith and Patrick Steven, with the assistance of Springer and others, negotiated short sales with lenders on behalf of homeowners. Smith and Steven also purchased the homes in the short sales while deceiving the lenders into believing that the price Smith and Steven paid in the short sale was the fair market value. In fact, Smith and Steven resold the homes for a higher price the same day they purchased the home in the short sale or soon after, all without the lenders’ knowledge. Springer furthered the scheme by conducting many of the fraudulent real estate closings, including signing and submitting false HUD-1 settlement statements that stated that Smith and Steven paid cash at closing for the short sales. In some cases, Smith and Steven brought no money to closing, whereas in other cases, Smith and Steven provided checks, but there were not sufficient funds in Smith and Steven’s bank account to cover the checks they brought to closings. Springer used the proceeds of the resale to fund the short sale. Makohoniuk, a realtor, is alleged to have submitted false documents to a lender with respect to one of the homes involved in the scheme.

The three following defendants charged in the indictment each entered guilty pleas; and are scheduled to be sentenced on May 14, 2015:

Nathan Smith and Patrick Steven both pleaded guilty to one count of bank fraud; and

Jerod Hogan, a Des Moines area mortgage broker, pleaded guilty to one count of conspiracy to make a false statement to a financial institution.

This case was investigated by the Federal Bureau of Investigation and the United States Department of Housing and Urban Development-Office of Inspector General, and was prosecuted by the United States Attorney’s Office for the Southern District of Iowa.

Attorney David Biderman explains rights of borrowers in California

February 18th, 2015 at 8:41am

In this interview in DSNews, attorney David Biderman, a partner in Perkins Coieexplains the expanded role of loan servicers in the banking industry, Dodd-Frank, and the growing role of the Consumer Financial Protection Bureau (CFPB) in protecting the rights of borrowers.

Significant is this paragraph under the second bold-face section of the article:

“In California, we have our own state rules providing, essentially, rights to borrowers. The other thing is, virtually all of these regulations that were enacted after Dodd-Frank, all of them provide for private rights of action. So if there’s a violation under any kind of notices that are required, an individual borrower can sue. So there are a lot of technical violations for which a borrower has a right to bring a claim – notice of errors, information requests, payoff requests, those kinds of things. There can be problems, and then borrowers have a right to bring a claim.”

AG Eric Holder considers bankers may have responsibility in mortgage crisis

February 18th, 2015 at 8:21am

Outgoing U.S. Attorney General Eric Holder – known for his opposition to prosecuting bankers for their prominent roles in the mortgage crisis – is finally giving lip service to the notion of personal responsibility. He’s given his AGs only 90 days to determine whether to charge individuals whose firms sold toxic mortgage-backed securities to investors.

Holder has been resistant to the point of indifferent to protecting consumers, who have suffered deeply from predatory banking practices. I’m not holding my breath. My bet is that as soon as he leaves office, he goes to work either for a mega-bank or a law firm that represents banks.

California has yet to indict any bankers, whether it is from the U.S. Attorneys’ offices or the office of California Attorney General Kamala Harris.

Read the full article in DSNews.

Three deputy sheriff brothers acquitted by judge in mortgage fraud case

February 13th, 2015 at 3:18pm

In an article from the Los Angeles Times, U.S. District Judge Manuel Real acquitted brothers Billy, Benny and Johnny Khounthavong of conspiracy and fraud charges after the prosecution rested its case.

Judge Real’s ruling was that no reasonable jury would convict the brothers because the prosecution had not shown enough evidence to prove the three had intended to defraud banks.

The prosecution does not have the right to appeal the judge’s ruling.

Hopefully, the men will be taken off leave and go back to work soon.



What Americans can learn from the German and Swiss banking systems

February 12th, 2015 at 4:05pm

This article is not at all off topic: the nation’s banking system and how President Obama and banking interests are trying to make it impossible for consumers to bring public banking to America. Yep, when it comes to big money, Obama is no liberal: he is the hand-maiden to his masters, the big banks.

If you don’t like this, then stop complaining, pull your money out of Wells Fargo, BofA, etc. and put it into a credit union.

The difference between a bank and a credit union is simple: banks work for their investors/stockholders and their profits are often sent overseas. Credit unions work for their members (you) who are the “stockholders”) and their money is recirculated back into the local community. Again, that’s you.

Read the original article by Ellen Brown, author of Web of Debt, in Alternet.


CFPB files enforcement actions against three lenders for misleading the public

February 12th, 2015 at 2:17pm

The Consumer Financial Protection Bureau (CFPB) has filed enforcement actions against Flagship Financial Group, American Preferred Lending and All Financial Services, alleging they mislead consumers by implying their products were government approved.

The first two companies have settled but All Financial Services is fighting the charges.

Read the full article in Reuters.


Ocwen business partner HLSS subject of class action

February 12th, 2015 at 8:37am

The Los Angeles law firm of Glancy Binkow & Goldberg LLP notified HLSS shareholders  that it has a filed a class action lawsuit against Home Loan Servicing Solutions (HLSS), a firm with strong business ties to Ocwen. The lawsuit alleges that HLSS failed to disclose to is its investors the extent that its business depended on Ocwen, as well as the now well-publicized extent of Ocwen‘s problems.

In late 2014, Ocwen paid $150 million to settle allegations by the office of Benjamin Lawsky, New York’s Superintendent of Financial Services. Ocwen‘s CEO, William Erbey, resigned – not only from Ocwen but also as the non-executive chairman on the HLSS board.

Read the original article in DSNews.

Real estate agent who committed short sale fraud gets prison

February 11th, 2015 at 9:51am

Yeon Han, 53, the owner/operator of Pacific Realty in Annandale, Virginia, was sentenced to 30 months in prison and three years of supervised release for her role in mortgage fraud, short sale fraud and tax fraud conspiracies, according to the FBI. She was also ordered to pay $1,022,143.95 in restitution to the victims of her crimes, according to the FBI.

Han pleaded guilty to two counts of conspiracy to commit wire fraud in May 2013.

The first scheme was a short sale fraud, in which Han and her-conspirators inflated the costs required to convey clear title for a short sale transaction, then convinced the (stupid) lender that the costs were legitimate. After gaining approval, the conspirators falsified the HUD-1 settlement statement. When the property closed escrow, the inflated portion was distributed among the conspirators.

The second scheme was a tax fraud conspiracy with James Sohn and was not real estate-related.

Read the FBI press release.

CFPB fines NewDay Financial for kickbacks, deceptive mortgage advertising

February 11th, 2015 at 8:43am

The following is a press release by the Consumer Financial Protection Bureau (CFPB):

Today, the Consumer Financial Protection Bureau (CFPB) took action against NewDay Financial, LLC for deceptive mortgage advertising and kickbacks. NewDay deceived consumers about a veterans’ organization’s endorsement of NewDay products and participated in a scheme to pay kickbacks for customer referrals. NewDay will pay a $2 million civil money penalty for its actions.

NewDay profited from the trust that veterans place in their veteran service organization,” said CFPB Director Richard Cordray. “Veterans, and any consumers getting a mortgage, deserve honest information about lender endorsements.”

NewDay is a Maryland-based, nonbank mortgage lender owned by Chrysalis Holdings, a private company. Its primary business is originating refinance mortgage loans guaranteed by the Veterans Benefits Administration. These loans are available exclusively to servicemembers, veterans, and their surviving spouses. NewDay mainly advertises its mortgage products to consumers through direct mail campaigns. Between July 2011 and July 2014, NewDay sent consumers over 50 million mortgage solicitations by postal and electronic mail.

Beginning in 2010, NewDay entered into a marketing arrangement with a veterans’ organization. The arrangement was facilitated by a broker company. As part of that agreement, NewDay paid “lead generation fees” to the veterans’ organization and the broker company. NewDay also paid a $15,000 monthly licensing fee to the broker company. As part of this arrangement, NewDay was named the “exclusive lender” of the veterans’ organization.

In targeted marketing to members of this veterans’ organization, NewDay stated that this title was based on its high standards for service and excellent value. At no point did NewDay disclose to consumers that the veterans’ organization had a financial relationship with NewDay. Under the circumstances, this failure to disclose the relationship constituted a deceptive act or practice, which violates the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

The direct mail that NewDay sent contained a recommendation from the veterans’ organization to its members. The recommendation urged members to use NewDay’s products, which, together with other telephone and web-based referral activities, constituted a referral of settlement service business. NewDay’s payments to the veterans’ organization and the coordinating company for these referral activities constituted illegal kickbacks in violation of the Real Estate Settlement Procedures Act (RESPA).

Enforcement Action

Under the Dodd-Frank Act, the CFPB has the authority to take action against institutions violating federal consumer financial laws, including by engaging in unfair, deceptive, or abusive acts or practices. NewDay is ending its relationship with the veterans’ organization and the broker company. The CFPB’s order requires that NewDay:

  • End deceptive marketing: NewDay may not engage in deceptive marketing related to mortgage credit products and may not assist others in making misrepresentations.
  • Cease deceptive endorsement relationships: NewDay may not enter into any business relationship that would involve third-party endorsements inconsistent with the Federal Trade Commission’s (FTC) guidance on endorsements and any subsequent guidance issued by the FTC or the Bureau concerning endorsements.
  • End kickbacks: The consent order requires that NewDay fully comply with the law and make no payments for referrals.
  • Pay $2 million in civil penalties: For its conduct, NewDay will make a $2 million penalty payment to the CFPB’s Civil Penalty Fund.

Click to read the Consent Order.

I’m wondering why the “Broker” was not named in the press release or Consent Order and there is no mention as to whether the Broker was also punished or penalized for its participation in this business arrangement.

Family who ran charter bus company going to prison for mortgage fraud, tax fraud

February 11th, 2015 at 7:43am

Fidencio Moreno, 52, and Arturo Moreno, 38, brothers who owned Quality Insurance Travel Inc., have been sentenced to prison for conspiracy to commit tax fraud.

Fedencio Moreno was sentenced to U.S. District Judge Lucy Koh to three years and five months in prison; Arturo Moreno received three years and five months in prison. Arturo also pleaded guilty to conspiracy to commit bank fraud.
Elena Moreno, 40, the wife of Fidencio and the bookkeeper to the business, pleaded guilty to conspiring to commit tax fraud and conspiring to commit bank fraud and was sentenced last month to one year and 10 months in prison.

While part of the prosecution by the office of U.S. Attorney Melinda Haag had to do with unreported income related to their bus service contracts, they had also been charged for submitting fraudulent loan applications to purchase four properties in San Jose owned by family members.

Arturo Moreno and Elena Moreno were ordered by the judge to make restitution to the lenders of $423,000 and to forfeit $3.3 million obtained in home loans.
Read the original article in the San Jose Mercury News.

© Copyright 2007-2017 Monique Bryher

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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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