California Real Estate Fraud Report

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Archive for the 'Editorials' Category

An IOU from Taxpayers to Congress

August 2nd, 2011 at 11:49am

From the Los Angeles Times:

Dear Congress:

Last year I mismanaged my funds, and this year my family and I cannot decide on a budget.

Until we have come to a unified decision that fits all of our needs and interests, we will have to shut down our checkbook and will no longer be able to pay our taxes.

I’m sure you will understand.

Thank you very much for setting an example we can all follow.

Tom Ball

Santa Barbara

 

American Home Shield Settles Class Action Lawsuit

July 5th, 2011 at 8:15pm

When a home is purchased, the seller typically pays for a one-year home warranty plan. The purpose of the plan is to ensure that the new homeowner will not be surprised by – and saddled with – expensive repairs to major appliances and fixtures just as s/he is getting accustomed to making mortgage payments.

Now word is out that a class-action lawsuit against American Home Shield (AHS) is being settled by the mega home warranty insurer, after scores of homeowners-plaintiffs charged that AHS was paying kickbacks to real estate agents for pushing their product over that of competitors. They complained that agents were working in their (the agents’) own interests over that of their home buying clients and further that by doing so the agents were violating the federal RESPA Act (Real Estate Settlement Practices Act).

The good news is that American Home Shield is settling. The bad news is that the National Association of Realtors (NAR), the national lobbying group, is defending the kickbacks and denying that they are settlement services covered by RESPA. 2010 NAR President Vicki Cox Golder confuses the job Realtors® have of explaining home warranty plans with the fiduciary obligation Realtors® further have to disclose that they are profiting by steering their clients to particular products.

Intentionally failing to disclose these cozy relationships is, in my opinion, just another form of real estate fraud. Realtors® should not take this money, which is probably added on to the cost of the warranty by vendors such as American Home Shield. That alone is a breach of the agent’s fiduciary duty to make his or her client’s interest the priority, not the agent’s wallet.

Read the original article in the Los Angeles Times.

Mortgage Fraud Statistics Are Bogus

May 10th, 2011 at 5:43pm

An article in today’s issue of the Los Angeles Daily News reports that mortgage fraud declined by 41% in 2010. The article further explains that the numbers are “based on confirmed cases of fraud reported to the (LexisNexis Mortgage Asset Research) Institute by lenders and others in the mortgage industry.”

Below is my commentary on this report:

This mortgage fraud index is a faulty statistic. It is 100% dependent on reporting by lending institutions, which were the originators of much of the mortgage fraud that occurred. One might just as well ask foxes for an accurate count of the chickens in a hen house. All the lenders have to do is “report” less fraud and voila! – there is “less” fraud.
 
I know personally that the fraud departments of the major banks are extremely resistant to taking reports and evidence of mortgage fraud; they just don’t want to be bothered.
 
Read the original article in the Daily News.

The Public Banking Institute

May 10th, 2011 at 1:29pm

Dear Readers,

As the economic fall-out from the irresponsible lending practices of the big banks continues, we have to look to ourselves to solve this ongoing crisis. The banks are still lying about their willingness to consider loan modifications and still foreclosing on borrowers who have fulfilled the terms of their loan modifications or for whom bank representatives agreed to approve a short sale. The federal government and our elected representatives are doing little or nothing because their pockets are lined with campaign contributions, gifts and sweetheart deals from banking interests. Republicans and Democrats are equally guilty.

In addition, lenders such as Bank of America have reinstituted annual fees for the use of their credit and debit cards and have weasled exceptions to the limit on interest rates so they can steal even more. In biblical times, the name for these exorbitant fees was “usury.”

There is only one answer to the destruction caused by the big banks and that is for all of us to let our state representatives know that we want public banking introduced into our states.

North Dakota is currently the only state that has public banking. Established in 1919, the Bank of North Dakota (BND) returns deposits back to the state in the form of loans. Not coincidentally, according to the Public Banking Institute, “As of the spring of 2010, North Dakota was also the only state sporting a major budget surplus; it had the lowest unemployment and default rates in the country; and it had the most community banks per capita, suggesting that the presence of a state-owned bank has not only not hurt but has helped the local banks.”

My money has been deposited with a local credit union for almost 35 years. The next time you deposit your money or take out a loan with Wells Fargo, JP Morgan (Washington Mutual), Bank of America and the other big banks, remember that you are supporting the corrupt, greed-driven private banking system that has resulted in tens of thousands of jobs being lost, as well as ruining thousands of lives.

Ellen Hodgson Brown, an attorney an author, is a founder of the Public Banking Institute. The Institute’s mission is to re-establish public banking and fiscal stability in all of our United States. Her book Web of Debt, a history of banking in the United States, is a must read for any thinking person, regardless of their political party affiliation.

Stabilizing the real estate market with toxic paper

April 6th, 2010 at 5:55pm

Congress and the previous administration sat by and fiddled while mega-banks like now-deceased Countrywide Home Loans and Washington Mutual (WaMu) wrote loans to everyone who didn’t deserve one. Seems like all the campaign contributions and junkets blinded our elected representatives from the waterfall they were about to throw taxpayers off of.

The current administration has had little to no effect on the completely predictable burst of the real estate bubble. Of the several million mortgage defaults in this country, only a fraction of those borrowers ever received a loan modification.

The latest attempt to bail water involves rewarding the irresponsible at the expense of those of us who were prudent. The Obama Administration has made changes to its Home Affordable Modification Program, aka HAMP, the $75 billion taxpayer-funded handout whereby banks are “incentivized” to offer reduction in principal in a dual attempt to keep borrowers in their homes and reduce foreclosures, the latter of which will certainly cause the real estate market to keep cycling downward, imperiling the equity of homeowners who purchased their home with a genuine down-payment, steady income and good credit.

But who is the Administration really rewarding: distressed homeowners or Wall Street? Bloomberg News, on March 30, said that subprime mortgage securities – the toxic paper that Wall Street created and gorged itself upon until the bubble popped – is now hot, hot, hot again because the principal reductions some homeowners receive will make it less likely that they will default. Voila! Spray that smelly paper with perfume and now the hedge funds want their drug again. Being that these toxic mortgages are being blessed by FHA insurance courtesy of the taxpayer, the super wealthy once again can thank the administration and their favorite stooge, Treasury Secretary Timothy Geithner.

Heaven help the rest of us.

Read one view of the re-securitization by Eurasia Review.

Light sentence for real estate agent Kyle Grasso in Beverly Hills fraud

March 2nd, 2010 at 12:04pm

Kyle Grasso, a central figure in the Beverly Hills real estate fraud and mortgage fraud conspiracy that captured headlines and temporarily resulted in his enrichment at the expense of Westside property owners as well as contributing to the fall of Lehman Brothers Bank, received a sentence of only a year and a day in jail. Grasso was also ordered to repay a portion of the $13 million restitution that was determined to be the losses for the crimes he and his co-conspirators committed. Grasso was convicted of conspiracy, bank fraud, loan fraud and money laundering.

U.S. District Judge Dean D. Pregerson imposed the sentence. Inexplicable to me is how Judge Pregerson could refer to the sentencing as “difficult” because “Mr. Grasso is fundamentally a decent person. Sometimes people make stupid decisions.” Yes, Judge, but fundamentally decent persons don’t conspire to steal $13 million. It is only logical to assume that Grasso and his mortgage fraud gang would have stolen more if they hadn’t gotten caught.

No wonder there is so much real estate fraud and mortgage fraud: judges feel badly about sentencing criminals but not for the havoc their crimes wreaked on the local real estate market.

** Now for a truly macabre twist: Syd Leibovitch, owner of Los Angeles-based Rodeo Realty, sent out an announcement to Realtors two days ago that he has hired Joseph Babajian, the former partner and real estate agent who was also charged in the Beverly Hills mortgage fraud but was the only one who was acquitted of the approximately dozen charged. Why anyone would want to brag about hiring Babajian or even think it is a good idea has many of us who have remained scandal-free scratching our heads.

Read the full article on CBS News.

Wells Fargo Does the Right Thing – Fires Callous VP

September 14th, 2009 at 9:00pm

Talk about dancing on somebody’s grave or fiddling while Rome burns.

Americans are sick to death of reading news articles about banking executives who are still receiving huge bonuses after running their businesses into the ground and being bailed-out by taxpayers. That’s why it was nice to finally read an article about boorish, callous behavior by a highly-paid banker that was dealt with swiftly, correctly and without excuse by one of the largest banks in the U.S.

The story was about how now-former Wells Fargo Senior Vice-President Cheronda Guyton drank her own poison, embarrassed her employer and outraged a neighborhood. Ms. Guyton’s profile on LinkedIn as of September 14 self-describes her as being the “Head of Commercial ORE” – commercial foreclosed properties at Wells Fargo. This is how she apparently gained access to the property, which the former owners lost as a result of having invested heavily with Ponzi-king and master swindler Bernard Madoff.

According to a story published in the Los Angeles Times‘ Business Section on September 12, Guyton used her position at Wells Fargo to help herself to the spoils of war – a $12 million Malibu Colony beachfront home. She apparently spent time there with her family this summer, perhaps even lived there, and threw lavish parties, by accounts given by the neighbors.

Before going further, this author acknowledges that she has a business relationship with Wells Fargo’s residential REO division, Premiere Asset Services (PAS) and that she is one of their active REO agents. That said, this author is also aware that Wells Fargo is quick to fire any REO agent they feel has engaged in unethical or questionable conduct in the selling of its properties.

It’s refreshing to read that one of the largest banking institutions in this country has the same rules for its executives as for its line-level employees, vendors and Realtors. Although at least one Realtor interviewed for the L.A. Times article thought it was fine for Wells Fargo to use the foreclosed property as it wanted, he misses the point, which is that perception is important too. The perception in this case is that Wells Fargo, in the guise of its employee Cheronda Guyton, couldn’t care less about people who have lost their homes – let’s dance on their graves, as it were.

For once, this author is happy to report in the California Real Estate Fraud Report that a big bank did the right thing without hesitation: it didn’t make excuses, didn’t cover-up the story and didn’t give Ms. Guyton a promotion and a bonus. She got exactly what she earned for her behavior – a well-deserved termination. Perhaps with some of her free time, she can review her MBA courses at USC for a lesson in ethics.

This editorial is also published in Examiner.com under the L.A. Fraud Examiner.

Eyes Wide Shut to the Bernard Madoffs of the World

July 2nd, 2009 at 10:18pm

In an article published today on its website, the Association of Certified Fraud Examiners’ chairman questions what the best way to prevent fraud is, and whether our society can do more to prevent fraud than it is doing currently.

Joseph T. Wells is a former FBI agent and CPA who specialized in fraud cases before he founded the Association of Fraud Examiners (ACFE) and developed the rigorous training program that can result in professionals earning the CFE – Certified Fraud Examiner certification.

Published on the ACFE’s website today, Wells’ article first reviews how Bernard Madoff created the largest Ponzi scheme ever recorded, then describes the mathematical impossibility of Madoff’s scheme and that it was bound to unravel. All Ponzi schemes depend on earlier groups of investors being paid off by later, larger groups. Eventually it becomes exhausting for the person operating the Ponzi scheme to keep the fraud going; we all know the rest.

All that being the case, what is most surprising is that ten years ago, a CFE named Harry Markopolos, hired by a Madoff rival to reverse-engineer Madoff’s successful strategy, determined that Madoff was most likely operating a Ponzi scheme, yet Markopolos’ verbal and written reports to authorities such as the SEC (Securities and Exchange Commission) were rebuffed. All those early investors were laughing all the way to the bank and future wannabe investors plus Madoff’s many friends in the federal government, had their collective ears and eyes wide shut.

Joseph Wells argues that in addition to the prison sentence handed out to Bernard Madoff, Madoff also should be required to educate consumers from the confines of his prison cell about how he conceived and carried out his Ponzi scheme for so long. This, argues Wells, is one of the best ways to prevent fraud: by educating and deterring.

But in the case of Bernard Madoff, it is not clear whether the public being educated would have had much, if any, impact or a deterrence effect upon Madoff. As noted, Madoff never advertised his services or successes, so there was essentially a wall of ignorance separating each investor group from the other. It was this inability to see the forest through the trees, as well as most investors trusting their investment managers to have knowledge of the true abilities of the world’s Madoffs, that allowed Madoff to operate freely and without concern of being detected for so long.

Click here to read the editorial by Joseph Wells on the ACFE website.

The Latest Real Estate Fraud: How Do Some Renters Rip-off Banks – and Taxpayers?

June 28th, 2009 at 11:21pm

Here’s a scheme that has sprouted from the increase in bank-owned, aka REO (real estate owned) market. It should outrage every honest, hard-working person who plays by the rules and doesn’t want to subsidize those who don’t.

Read my article on my channel as the L.A. Fraud Examiner on Examiner.com

Are Short Sales and REOs the New Wave of Real Estate Fraud?

June 23rd, 2009 at 11:43am

That’s strong language. Unfortunately, many real estate agents and their buyers, after being shut out of numerous purchases of homes, are concluding just that.

In a conventional sale of a residential property (but this applies to commercial and industrial too), the buyer’s agent, also known as the “selling agent”, presents a written offer to purchase to the listing agent. The listing agent then presents that offer to the seller(s), who can accept the offer, make a counter-offer, or reject the offer outright.

Conventional sales are a rare beast these days, replaced in disproprtionate quantities by short sales and REOs, both of which present opportunities for less-than-ethical behavior by some listing agents, along with their sellers. In some neighborhoods in the San Fernando Valley, I’ve calculated that 93% of the properties currently listed, are foreclosure properties, either short sales, or REOs.

In contrast to the above description of a conventional sale, both the short sale and REO (Real Estate Owned, bank-owned properties) involve negotiation with a bank, lender or servicing firm that represents an investment bank, e.g., Deutsche Bank. Under such circumstances, neither the buyer nor his/her agent has the ability to meet the seller/bank. They therefore have no assurance that their offer was actually transmitted to the lending institution for consideration.

Why, do you ask, wouldn’t the listing agent transmit all offers – especially when there is multiple bidding for a property – to the seller/bank? There is only one reason: the listing agent has his/her own buyer and wants to “double pop”, or collect both commissions. If the listing agent’s own buyer does not have the highest offer, s/he moves their buyer to the top of the pile by not transmitting all the offers. The bank doesn’t know, and the other buyers and their agents don’t know either. They’re just told their own offer was rejectd. Only after escrow closes, when they see that the selling (buyer’s) agent was also the listing agent, and the sale price was lower, do they realize what happened.

What next? What can buyers who have been defrauded out of a purchase do? Very little, for the most part. Most banks hide their asset management (REO) and short sale departments because they don’t want contact with the public. Even their fraud departments show little interest in following up on complaints by jilted buyers or their agents. And the listing agent, who was the doorkeeper to the entire transaction, certainly won’t confess to his/her tactic.

For another story on buyer frustration with short sales, see this in the San Bernardino County Sun. There is a brief paragraph with me at the end of the article. The newspapers’ editors apparently didn’t want to touch the topic of real estate fraud.

© Copyright 2007-2018 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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