California Real Estate Fraud Report

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Two Bergen County, NJ Brokers Admit $4.6M Short Sale Fraud

June 18th, 2019 at 4:48pm

Steve Young Kang, 64, of Ridgefield, and Young Jin Son, 49, of Norwood, New Jersey, admitted to a federal judge in Newark that they recruited people to participate in the bank and wire fraud conspiracies.

Kang sold his own properties and recruited straw buyers and other people to sell properties to a co-schemer, Mehdi Kassai, for substantially less than they were worth by using false documents and cosmetic property damage. As is typical in short sale fraud scenarios, he restricted opportunities for other to purchase those properties, U.S. Attorney Craig Carpenito said.

Kassai then “sold many of those properties to third-parties at a substantial profit” – conning financial institutions out of $2.7 million in this manner, Carpenito said. In essence, Kassai and Kang “flipped” Kang’s properties, using “mortgage laundering” to build artificial equity.

Son used Mehdi Kassai to also commit short sale fraud, defrauding financial institutions and others of $1.9 million, the U.S. attorney said. Kassai, who previously pleaded guilty to his role in the scheme, is awaiting sentencing.

The case was investigated by the Bergen County Prosecutor’s Office, special agents of the Federal Housing Finance Agency Office of Inspector General and special agents of the U.S. Department of Homeland Security Investigations with making the case.

Representing the government are Senior Trial Counsel Andrew Leven of the Healthcare & Government Fraud Unit of Carpenito’s office and Special Assistant U.S. Attorneys Charlie Divine and Kevin Di Gregory of the Federal Housing Finance Agency Office of Inspector General.

Read the original article in Daily Voice.

SEC, FBI Reported to be Investigating Live Well Financial Collapse

June 18th, 2019 at 4:10pm

Live Well Financial, the forward and reverse mortgage lender that closed its doors last month, appears to be under investigation by multiple federal agencies.

According to court documents filed by two of Live Well’s creditors, Flagstar Bank and Mirae Asset Securities, both the FBI and and the Securities and Exchange Commission are investigating Live Well. The creditors joined a third creditor – Industrial and Commercial Bank of China Financial Services – to file petitions with the U.S. Bankruptcy Court in Delaware to force Live Well Financial into involuntary Chapter 7 bankruptcy.

This is following Mirae Asset Securities being contacted by the Assistant U.S. Attorney from the Southern District of New York about its own potential investigation into Live Well Financial.

Read the original article in HousingWire.

California Association of Realtors Issues “Potential Fraud Warning” about Orange County Real Estate Broker

June 11th, 2019 at 5:04pm

The following is a reprint from the website of the California Association of Realtors:

C.A.R. is reporting this particular accusation due to its scale and the many reports regarding this situation.

The California Dept. of Real Estate (DRE) has filed an accusation against Laura Preciado, a real estate broker in Fullerton, Calif., alleging a “scheme to defraud others by collecting earnest money deposits from prospective purchasers of real property and converting said trust funds…for Respondent’s own use, gain, or benefit.”

The accusation indicates she claims to be the listing agent on properties and collects earnest money deposits from multiple buyers on the same property. The DRE alleges she issued refunds to some early buyers using earnest money deposited from new buyers who made offers on other properties.

On one of the many property addresses listed in the DRE accusation, more than 10 buyers had sent deposits for the same property within a short period of time. The same pattern occurs with different properties, according to the DRE filing.

On April 16, 2019, the Orange County District Attorney’s Office amended their February 26 complaint charging her with 11 counts of felony grand theft and embezzlement (case number 19CF029). She was previously released on bail March 4, 2019, yet new allegations of continuing misconduct have surfaced against Ms. Preciado, according to information provided to C.A.R.

DRE records show she is doing business under the names AE Builder, AE Management, and similar names, as well as OCG Enterprises.  The allegations include properties in Lancaster, Palmdale, Riverside, Perris, Victorville, Sun City, Hesperia and more.

The recently published DRE accusation describes more than 50 buyers that have had these issues involving Ms. Preciado (DRE # 01473934) or her companies.  C.A.R. has not independently verified the facts of these allegations which are posted on the DRE website.

CFPB Fines Freedom Mortgage for Intentionally Reporting Inaccurate HMDA Data

June 5th, 2019 at 4:13pm

The Consumer Financial Protection Bureau (CFPB) announced it is fining Freedom Mortgage, one of the country’s largest lenders, for submitting HMDA (Home Mortgage Disclosure Act) data to the bureau that contained “errors” from 2014 through 2017.

According to the CFPB, its investigation found that Freedom Mortgage reported “inaccurate race, ethnicity, and sex information” and that “much of Freedom’s loan officers’ recording of this incorrect information was intentional” during that time.

Read the original article in HousingWire.

4 Fibs You Should Never Tell on a Mortgage Application

June 4th, 2019 at 9:04am

1. Saying a down payment loan is a gift

2. Telling whoppers about your work history

3. ‘Forgetting’ about a few debts

4. Not being truthful about who’s borrowing

Read the original article with detailed explanations of the repercussions of each of those “fibs” on Yahoo Finance.

Consumer Financial Protection Bureau Settles with BSI Financial Services

June 4th, 2019 at 8:37am

The following is a press release from the Consumer Financial Protection Bureau:

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (Bureau) today announced a settlement with BSI Financial Services (BSI), a mortgage servicer headquartered in Irving, Texas. BSI Financial Services is the operating name for Servis One, Inc.

The Bureau found that BSI violated the Consumer Financial Protection Act of 2010, the Real Estate Settlement Procedures Act, or the Truth in Lending Act by:

  • Handling mortgage servicing transfers with incomplete or inaccurate loss mitigation information. This resulted in failures to recognize transferred mortgage loans with pending loss mitigation applications, in-process loan modifications, and permanent loan modifications;
  • Handling mortgage servicing transfers with incomplete or inaccurate escrow information resulting in untimely escrow disbursements;
  • Inadequately overseeing service providers, resulting in untimely escrow disbursements to pay borrowers’ property taxes and homeowners’ insurance premiums;
  • Failing to promptly enter interest rate adjustment loan data for adjustable rate mortgage (ARM) loans into its servicing system, resulting in BSI sending monthly statements to consumers that sought to collect inaccurate principal and interest payments; and
  • Maintaining an inadequate document management system that prevented BSI’s personnel or consumers from readily obtaining accurate information about mortgage loans.

Under the terms of the consent order, BSI must, among other provisions, pay a civil money penalty of $200,000 and pay restitution estimated to be at least $36,500. It must also establish and maintain a comprehensive data integrity program to ensure the accuracy, integrity, and completeness of the data for loans that it services, and implement an information technology plan to ensure BSI’s systems are appropriate give the nature, size, complexity, and scope of BSI’s operations.

The consent order is available at: https://files.consumerfinance.gov/f/documents/cfpb_servis-one-inc-BSI-financial-services_consent-order_2019-05.pdf 

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations, by making rules more effective, by consistently enforcing federal consumer financial law, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

First American Data Leak is a Recipe for Escrow Fraud

May 31st, 2019 at 6:08am

Real estate insurance giant First American Financial has verified that a “design defect” made it possible for anyone with nothing more than a web browser to access up to 885 million customer files dating back to 2003. This is according to cybersecurity journalist Brian Krebs, who was the first to report the data breach in his report KrebsOnSecurity.

These unsecured digital documents included bank account numbers and statements, social security numbers, mortgage and tax records, drivers license images and wire transaction receipts.

You can also read about FirstAm’s response on a dedicated page on its website Information Security Incident Update.

Read the original article in Verdict.

Freddie Mac – True Lies: Falsified College Transcripts Flunk 13 Loans

May 30th, 2019 at 1:46pm

This article is a direct re-post from the Freddie Mac website and can be found by clicking here. Congratulations to the eagle-eyed investigator who uncovered the mortgage fraud.

Falsified College Transcripts Flunk 13 Loans

When you graduated from college, it’s likely you couldn’t buy a home faster than you could frame your diploma.

That’s why it seemed suspicious to one of our Sellers when two mortgages originated by the same loan officer had almost identical borrower profiles. Both borrowers claimed to be recent college graduates, had limited work histories, had the same job with the same employer and had been qualified for a home loan in northern California. The Seller reported these concerns to Freddie Mac.

13 Suspicious Loans − One Originator

Once the Seller’s report came in, our fraud investigator began digging into the case.

She started by running an exposure check on the loan officer at the company that originated the loans. She ran a report to identify loans sold to Freddie Mac that were associated with the loan officer’s Nationwide Mortgage Licensing System (NMLS) identification number.

The investigator then looked for similarities and patterns across those loans, including in the loan applications and other documents. In addition to the two loans reported by the Seller, she discovered another 11 loans where the borrowers claimed to be recent college graduates. The same loan officer originated a total of 13 such loans. Each loan had different borrowers; some had one borrower and others had a borrower and co-borrower.

The borrowers’ employment documentation was limited to only a couple paystubs and did not include W-2s or tax returns, each claimed to work at one of just two companies and stated that they attended public colleges or universities in California or Washington. Our investigator contacted each institution to verify whether the borrowers had recently graduated. In every instance, the schools had no record of them.

Prior Conviction

Additionally, the investigator searched certain databases and learned that the loan processor’s California real estate license had been revoked years earlier due to a prior conviction for, among other things, wire fraud conspiracy. The loan processor was not licensed in California when the loans in this case were originated.

Lack of Controls

When our investigator visited the company that originated the loans, she discovered the office had been shuttered and the only remaining employee was the broker. “There were still flyers in the windows promoting properties for sale, but the office had clearly been closed for some time,” she says.

The broker stated that he wasn’t aware of any of the falsified documents in the loan files and didn’t know that the loan processor had a criminal record. While the broker claimed that the company had some controls in place to supervise loan origination, the proper controls ultimately weren’t in place to prevent the fraud from occurring.

Falsified College Transcripts on the Rise

Since she investigated this case, our investigator has seen several other cases involving falsified employment. In some of those cases, false college transcripts have also been a factor. “We’re seeing an increase in false claims of higher education,” says the investigator.

She adds that underwriters often don’t think they can contact a college or university to verify attendance and/or graduation dates. It’s a simple step toward confirming that a borrower truly graduated. If the institution has a policy against sharing this information, it will let you know. “The schools I contacted in this case were willing to verify attendance,” our investigator says.

“If a borrower is dishonest about their education on their loan documentation, that’s a big red flag,” adds our investigator.

Suspect Fraud?

Freddie Mac views matters of fraud very seriously, and takes appropriate protective measures that may include, without limitation, placing the names of individuals or entities on our Exclusionary List, or E List.

If you spot or suspect fraud, let us know by contacting the Freddie Mac Fraud Hotline at 800-4FRAUD8.

Inland Empire Man Pleads Guilty to TARP Homeowner Relief Fraud

May 28th, 2019 at 10:48am

The following is a press release from the U.S. Attorney’s Office for the Central District of California:

RIVERSIDE, California – A Corona man has become the first individual to plead guilty to federal charges for fraudulently obtaining tens of thousands of dollars in mortgage assistance benefits under the portion of the Troubled Asset Relief Program (TARP) intended for homeowners hardest hit by the 2007-09 economic downturn.

Eliseo Delgado Jr., 40, entered a guilty plea on Monday to one felony count of making a false or fraudulent claim against the United States. Delgado made the first known guilty plea by an individual to fraud charges regarding TARP’s mortgage assistance program. United States District Judge Jesus G. Bernal has scheduled an October 28 sentencing hearing, where Delgado faces a statutory maximum sentence of five years in federal prison.

According to court documents, in November 2014, Delgado knowingly submitted a false application for homeowner relief benefits under the Unemployment Mortgage Assistance Program (UMA). UMA was a federally funded program under TARP that was administered in California by the California Housing Finance Authority’s Mortgage Assistance Corporation under the name “Keep Your Home California.” The program was designed to help homeowners by providing temporary mortgage assistance to eligible low-to moderate-income homeowners who became unemployed. Congress passed TARP to stabilize the nation’s financial system during the financial crisis of 2008. In 2010, using TARP money, Congress established the Hardest Hit Fund (HHF), to provide targeted aid to families in states hit hard by the economic and housing market downturn.

Delgado’s November 2014 application for homeowner relief benefits fraudulently stated that Delgado’s income had been reduced because of unemployment. In a “hardship letter” in support of his application for UMA benefits, Delgado wrote, “I have lost my job…I fell behind on my mortgage payments in 01/01/2014, earlier this year due to lack of income.” In fact, from 2009 to 2016, Delgado was self-employed at various businesses he had founded, and at no point was he unemployed. In total, Delgado fraudulently received $52,373 in UMA benefits from January 2015 until June 2016 – 18 months, the maximum length of time permissible under the program, according to court documents.

This case was investigated by the Office of the Special Inspector General for the Troubled Asset Relief Program.

This matter is being prosecuted by Assistant United States Attorney Benjamin Weir of the Riverside Branch Office.

California Attorney General Xavier Becerra Announces Sentencing of Andrew Valles

May 19th, 2019 at 10:33am
Press Release
Thursday, May 16, 2019
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SAN DIEGO – California Attorney General Xavier Becerra today announced the sentencing of Andrew Valles for operating a $2 million mortgage fraud scheme throughout Southern California. Today, Mr. Valles was sentenced to 13 years in state prison. Restitution was ordered in the amount of $2,342,957. Co-defendant Arnold Millman was previously sentenced to a state prison term of three years and four months.

“These con artists stole the life savings of decent Californians who thought they were making a smart decision for their homes and their families,” said Attorney General Becerra. “These actions will not be tolerated. My office will continue to identify, investigate, and prosecute those who prey on hardworking Californians to line their own pockets.”

The scheme occurred between 2012 and 2017. The defendants conspired using a fake insurance company, “SafeCare,” which promised to provide home loan services at a low monthly price to primarily Latino and African American families. During this time, the defendants would delay foreclosures and eviction actions by filing false bankruptcy and other court documents under fictitious names. They would instruct victims to deposit illegal advance fees and other large payments into a bank account controlled by the defendants. When the promised loan did not come through, they would proceed with the fabricated filings. The scheme took place in San Diego, Riverside, Orange, Los Angeles, and San Bernardino Counties.

The sentencing and guilty pleas are the product of a joint investigation by the California Department of Justice, the California Department of Insurance, and the Federal Housing Finance Agency Office of the Inspector General (FHFA-OIG). A third codefendant, Jemal Lilly, pled guilty and is scheduled to be sentenced on September 4, 2019.

You can locate the indictment of these defendants by clicking on this earlier post.

© Copyright 2007-2019 Monique Bryher

Legal Disclaimer.

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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