SACRAMENTO, Calif. – The California Department of Real Estate (DRE) continues to unearth and close down unscrupulous and unlicensed loan modification companies who prey on financially stressed homeowners. These companies seek out homeowners who are facing foreclosure and promise to obtain a loan modification, but once the homeowner pays a fee, little or nothing is done to get the homeowner’s loan modified.

In 2009, the DRE filed actions against nearly 600 persons and entities that were providing loan modification services illegally. Another 150 such actions were filed in the first four months of 2010. For a complete list of actions filed by the DRE involving loan modification complaints visit http://www.dre.ca.gov/cons_drs.asp.

“These scammers are good at what they do. They promise to save your home; offer financial relief. Instead, they take your money and provide little or no services,” stated Real Estate Commissioner Jeff Davi. “Homeowners seeking loan modification services must exercise caution and due diligence to ensure they do not fall victim to a scam.”

If you are seeking a loan modification or looking for alternatives to foreclosure, taking the following precautions can prevent you from falling for a scam:

Never pay an upfront fee. A recent change to the law makes it illegal to collect advance fees for loan modification services. The advance fee prohibition extends to attorneys, real estate licensees and foreclosure consultants.

Look for free alternatives. The U.S. Department of Housing and Urban Development (HUD) offers Foreclosure Avoidance Counseling through non-profit agencies. Go to HUD’s web site at www.hud.gov or call 800-569-4287. The HOPE NOW Alliance, which consists of a cooperative effort of home loan counselors and lenders, offers free loan modification assistance and can be contacted at 888-995-HOPE or visit its web site at www.hopenow.com.

Do it yourself. The DRE has some practical tips for homeowners who want some practical guidance in obtaining a loan modification with their lender.

Check Credentials. Do not engage the services of an unlicensed loan modification firm! Persons or companies who charge a fee for loan modification services generally must be a licensed as a real estate broker or a lawyer. Check out a broker’s credentials at the DRE’s web site at www.dre.ca.gov. Check out lawyers at www.calbar.ca.gov. And remember, never pay an advance fee for loan modification services! Also check with the local Better Business Bureau.

Appraisal Fraud can also occur when the homeowner, seller or purchaser physically alters an “honest” appraisal using methods such as digital editing

A form of mortgage fraud, whereby the value of a home is deliberately appraised above its market value. The overstated value obtained through Appraisal Fraud is commonly used to:

* Help a seller get a better price than the market would warrant
* Help a buyer get financing because the mortgage amount could be much less than the appraised value of the home
* Help a homeowner get a preferable refinance, or home equity loan

Appraisal fraud can occur when an appraiser is in on the scam, and dishonestly overstates the value of the property. It can also occur when the homeowner, seller or purchaser physically alters an “honest” appraisal using methods such as digital editing.

Appraisal fraud, is one of the most common types of mortgage fraud. To protect themselves from this, banks will often set up the appraisal themselves when doing a mortgage or refinance. Homeowners and prospective homeowners should be just as careful, and make sure that they have an independent second opinion whenever they are going to make a decision based on somebody else’s appraisal.

If you have been a victim of a scam, you need not despair. There are websites to which you can submit your complaint such as:

1. The www.Scamchecker.com/blog

This website, www.ScamChecker.com/blog, is created for visitors to learn about almost all scams that they may encounter on the internet. There may be more scams out there but this site should be a convenient starting point.

2. The www.Scamchecker.com

This website, www.Scamchecker.com is the voice of those victims who are not powerless. They can Report this website for their experience and they will submit it to all major search engines within 30 minutes.

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that two more defendants have pleaded guilty in federal court to charges related to mortgage fraud schemes, including a $12.6 million conspiracy that involved 25 upscale residential properties in Lee’s Summit, Missouri and Raymore, Missouri and a property-flipping scheme in Kansas City, Missouri.

Cynthia D. Jordan, 43, of Lee’s Summit, pleaded guilty before U.S. District Judge Howard F. Sachs on Friday, May 21, 2010, to mail fraud and wire fraud. Jordan, who was a mortgage loan broker for various mortgage brokers in the Kansas City area, admitted that she participated in a property flipping scheme. Anahit Nshanian, 30, of Long Beach, California, pleaded guilty before U.S. Magistrate Judge John T. Maughmer on Thursday, May 20, 2010, to her role in the $12.6 million conspiracy.

Jordan and Nshanian are among 18 defendants, all of whom have now pleaded guilty.

Jordan admitted that she was involved in a scheme to flip properties — buying residential properties that could immediately be sold in flip transactions for substantially more than the purchase price, without improvements to the properties. Jordan obtained mortgage loans to purchase the properties by submitting fraudulent documentation and making false representations. Jordan falsely represented that she would occupy the homes as her primary residence. As a result of the scheme, Jordan obtained money from the loan proceeds and directed loan proceeds be paid to others under the guise of false invoices and other false documents.

As part of the scheme, Jordan purchased a Kansas City property for $355,000. At the time she entered the contract, she and co-conspirators planned to sell the property before a mortgage payment was due so that she did not have to make a loan payment. Jordan signed a contract to sell the property for $555,000 five days later, for which she received $17,500. Two co-conspirators, as a result of submitting fraudulent invoices, received a total of $172,974.

Jordan also purchased another Kansas City property for $537,000 that she agreed to sell within six days of her purchase for $775,000. Jordan received $17,173 and two co-conspirators, as a result of submitting fraudulent invoices, received a total of $193,000.

Under the terms of today’s plea agreement, the government and Jordan agree that the sentence imposed should not exceed nine years in federal prison without parole. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.

Nshanian admitted that she was involved in a scheme to buy and sell new homes — all of which were built by Jerry R. Emerick, 40, of Raymore — in the Raintree and Belmont Farms subdivisions in Lee’s Summit and the Eagle Glen subdivision in Raymore from February 2005 through May 2007. Buyers purchased the homes at inflated prices, obtaining mortgage loans for more than the actual sale price by providing false information to mortgage lenders, then kept the extra proceeds. Buyers created shell companies for the purpose of receiving those kickbacks from Emerick, with kickbacks of up to $125,000 on each house. Emerick pleaded guilty to his role in the conspiracy and awaits sentencing.

In total during the course of the conspiracy, mortgage lenders approved loans for 25 homes totaling more than $12.6 million. From that total, buyers received approximately $2.3 million without the lenders’ knowledge. Nshanian received approximately $148,614 in kickbacks.

Nshanian purchased two properties in Lee’s Summit as part of the conspiracy. In obtaining mortgage loans, Nshanian made material misrepresentations upon which the lenders relied. Nshanian also admitted that she received money back unbeknown to the lenders.

Nshanian received a $510,000 loan for one property; after closing, she received an $89,307 kickback, of which co-defendant Jerome Shade Howard, 41, of Anaheim, Calif., received $20,693. Nshanian received a $657,500 loan for another property; after closing, she received a $80,000 kickback and Howard received $25,000.

Under federal statutes, Nshanian is subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000 and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.

This case is being prosecuted by Assistant U.S. Attorneys Linda Parker Marshall and Kathleen D. Mahoney. It was investigated by the Federal Bureau of Investigation and IRS-Criminal Investigation.

RICHMOND, VA—Chief United States District Judge James R. Spencer sentenced Robert S. Capehart, 55, of Richmond, Virginia to five years in prison on one count of mail fraud, and ordered him to pay $1,967,074 in restitution. Neil H. MacBride, United States Attorney for the Eastern District of Virginia; and Michael F.A. Morehart, Special Agent-in-Charge of the FBI’s Richmond Field Office, made the announcement.

Capehart was the president of two Virginia companies, Retirement Investment Group (RIG) and BYB Investments. Through these companies, he promoted real estate ventures, including a convenience store and multiple pieces of real estate that he purchased for rental and investment purposes. Capehart admitted to falsifying mortgage applications, check kiting and defrauding 22 investors in a Ponzi scheme.

Court documents show that from 2003 until 2006, Capehart purchased approximately 40 rental properties with little or no down payment and a large mortgage-backed loan. In obtaining the loans from banks, however, he did not fully disclose all of his real estate loan liabilities and other real estate holdings. As time passed, he would obtain new appraisals and refinance the properties based on the appreciated value of the properties without disclosing all of his liabilities and real estate holdings. After paying off the original loan, Capehart would then use the excess funds for business and personal purposes. The combined losses of Wachovia Bank NA, J. P. Morgan Chase Bank, and Suntrust Bank were approximately $252,000.

Capehart also admitted that as the real estate appreciation slowed down or disappeared in or about 2006, he could not generate additional funds by simply refinancing the properties. Therefore, he turned to private investors whom he solicited with a promissory note program carrying high interest rates, such as 20 percent over three months, equating to an annual rate of 80 percent. He represented that he would be able to pay such high rates of interest because he was investing in a variety of properties, such as the Sans Souci Hotel and Apartment Complex in Buckroe Beach, Virginia a beach house in Kure Beach, N.C., a convenience store in Richmond, Virginia and various other properties in Newport News and Hampton, Va.

Capehart solicited money from approximately 22 potential investors and induced them to invest approximately $2.053 million by making materially false, fraudulent and misleading representations. Capehart’s program was a Ponzi scheme, in which early investors are paid with the contribution of later investors rather than the profit from an underlying business activity. Capehart also lulled investors into believing that their “investment” funds would be safe and secure. To prevent the discovery of the true use of investors’ funds and forestall legal action by investors, Capehart encouraged investors not to seek the immediate return of funds but to “roll over” their investments and thereby purportedly earn even greater profits.

Court documents show that in late 2006 and early 2007, in order to continue to buy time, Capehart began kiting hundreds of thousands of dollars of checks between First Market Bank, Village Bank and First Capital Bank. The purpose of the illegal scheme is to artificially inflate the balance of a checking account to allow checks that have been written to clear that would otherwise bounce.

The case was investigated by the FBI’s Richmond Field Office. Assistant United States Attorney David T. Maguire prosecuted the case on behalf of the United States.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.usdoj.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.

MADISON, WI—Stephen P. Sinnott, United States Attorney for the Western District of Wisconsin, announced the filing of informations charging five individuals with submitting false loan applications to banks and mortgage lenders to obtain home mortgages. Specifically, the informations charged:

1. Brian Bowling, 44, of Sun Prairie, Wisconsin, with wire fraud;
2. Jason Khodadad, 29, of Madison, Wisconsin, with conspiracy to submit a false loan application;
3. Joseph Bowman, 59, of Black Earth, Wisconsin, with conspiracy to submit a false loan application;
4. Joshua Hughes, 28, of Madison, with conspiracy to submit a false loan application; and
5. Richard Hurkman, 62, of Oshkosh, Wisconsin, with conspiracy to submit a false loan application.

If convicted of wire fraud, Bowling faces a maximum penalty of 30 years in prison. If convicted of conspiracy to submit a false loan application, Khodadad, Bowman, Hughes, and Hurkman each face five years in prison.

The informations charged that the defendants defrauded banks and mortgage lenders by submitting loan applications for home loans that, among other things, inflated the borrowers’ income amounts, exaggerated assets and understated liabilities, falsified employment information, misrepresented the source of downpayment funds, and omitted secondary financing information.

Hughes and Bowman pleaded guilty on Wednesday May 19, 2010, in U.S. District Court in Madison before Judge Barbara Crabb. Sentencing for Bowman is scheduled for July 22, 2010, at 1:20 p.m. Sentencing for Hughes is set for July 29, 2010, at 1:20 p.m.

Khodadad is scheduled to plead guilty on Tuesday May 25, 2010, at 1:40 p.m. Bowling is scheduled to plead guilty on Friday May 28, 2010, at 1:20 p.m. Hurkman’s plea hearing has not yet been set.

These cases are part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

The charges are the result of an investigation conducted by the Madison office of the Federal Bureau of Investigation. The prosecution of this case has been assigned to members of the Financial Fraud Enforcement Task Force in the U.S. Attorney’s Office in Madison.

SAN DIEGO—A 10-count indictment has been unsealed charging six individuals with conspiracy to commit wire fraud and wire fraud, announced U.S. Attorney Karen P. Hewitt. The defendants are charged with submitting false and fraudulent mortgage loan applications and related documents to banks and other lending institutions, thereby inducing the institutions to make approximately 36 loans totaling approximately $20,800,000.

The defendants charged with participating in the conspiracy are: Brian Andrew La Porte; Daniel John Schuetz; Michael Wayne Wickware; Roxanne Yvette Hempstead; Darryl Anthony Wallace, aka Darryl Anthony White; and Terrence Smith, aka Terry Lee Smith. The indictment alleges that the defendants devised a scheme to defraud mortgage lenders and to obtain money and property by false and fraudulent means and diverted the proceeds for their personal use and benefit.

According to the indictment, from May 2008, the defendants agreed to submit false loan applications to mortgage lenders to obtain financing to purchase residential properties. The defendants recruited “straw buyers” who had sound credit histories but who otherwise would not have qualified to purchase the residential properties selected by the defendants. The indictment further alleges that, as part of the conspiracy, Brian Andrew La Porte and Daniel John Schuetz prepared fraudulent loan applications on behalf of the straw purchasers, falsely stating the employment and monthly salaries of the straw purchasers.

The indictment further alleges that the defendants submitted fraudulent loan applications on behalf of the straw purchasers to mortgage lenders, including OwnIt Mortgage Solutions Inc., WMC Mortgage Corp., Argent Mortgage Company, Countrywide Home Loans, First Franklin, Finance America LLC, and other mortgage lenders. The defendants then caused escrow agents to disburse the funds to the defendants and others so that the defendants could divert to themselves and others the proceeds of the fraud.

President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who working together to launch a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. The Special Inspector General for the Troubled Asset Relief Program co-chairs the task force’s Rescue Fraud Working Group.

The case is the product of an investigation by agents of the FBI and is being prosecuted in San Diego federal court by Assistant U.S. Attorney Jonathan I. Shapiro.

An indictment itself is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the government meets its burden in court of proving guilt beyond a reasonable doubt.

Additional Information:

Case Number: 10cr1863LAB

Brian Andrew La Porte Age: 34 San Diego, California

Daniel John Schuetz Age: 37 San Diego, California

Michael Wayne Wickware Age: 54 Temecula, California

Roxanne Yvette Hempstead Age: 53 Chula Vista, California

Darryl Anthony Wallace Age: 47 San Diego, California

Terrence Smith Age: 45 San Diego, California

Summary of Charges:

Count 1:
Title 18, United States Code, Section 1349 – Conspiracy to Commit Wire Fraud
Maximum Penalties: 20 years in custody, $250,000 fine

Counts 2-10:
Title 18, United States Code, Section 1343 – Wire Fraud
Maximum Penalties: 20 years in custody, $250,000 fine

The defendants are next scheduled to be in court on June 28, 2010 at 2:00 p.m. before United States District Court Judge Larry A. Burns.

SALT LAKE CITY—A federal grand jury returned a 15-count indictment Wednesday afternoon charging Joshua Lee Butcher, age 28, of Salt Lake City, with bank fraud and false statements to a financial institution in what the indictment alleges was a scheme to get construction loans approved using false pretenses.

This week’s indictment follows an investigation by the FBI and the Utah Mortgage Fraud Task Force.

According to the indictment, Salt Lake Credit Union and Transwest Credit Union approved and funded construction loans relying on what they believed to be true and accurate borrower financial information which met their respective loan underwriting standards.

The indictment alleges Butcher worked with both credit unions to broker loans for new home construction ranging from approximately $384,000 to $637,000. Butcher met with potential borrowers to obtain necessary financial information for the completion of a loan application. In these meetings, borrowers provided Butcher with accurate information about their income and assets. At times, borrowers also provided supporting documentation. Based on this information, the indictment alleges Butcher knew borrowers would not qualify for construction loans in the range they were seeking.

The indictment alleges that Butcher prepared and submitted false loan applications on behalf of the borrowers to the credit unions to induce approval and funding of construction loans under false pretenses and to cause the payment of broker fees to him which he was not entitled to receive.

The indictment alleges that in order to qualify borrowers for the construction loans, Butcher falsified loan applications by overstating borrowers’ income and, at times, identifying assets which borrowers did not own. Additionally, construction loans offered by the financial institutions he was working with were intended to be used for homes occupied by borrowers as their primary residence as opposed to an investment intended to be resold at a profit shortly after the completion of construction, according to the indictment. Despite knowing some borrowers were not intending to use the home as a primary residence, Butcher falsified the application to show the property would be the borrower’s primary residence. The indictment also alleges he provided false employment information for borrowers.

The indictment alleges eight counts of bank fraud and seven counts of false statements to a financial institution. The potential maximum penalty for each bank fraud count is 20 years in prison and a fine of $250,000. The potential maximum penalty for each false statement count is 30 years in prison and a fine of $1 million. Butcher will be issued a summons for an initial appearance in federal court.

An indictment is not a finding of guilt. Individuals charged in indictments are presumed innocent unless or until proven guilty in court.

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SPRINGFIELD, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that three former mortgage brokers were among five co-defendants sentenced in federal court for their roles in a $1.2 million mortgage fraud scheme.

Charles M. Davis, 35, of Rogersville, Mo., was sentenced by U.S. District Judge Gary A. Fenner on Monday, May 17, 2010, to four years and three months in federal prison without parole. The court also ordered Davis to pay $1,271,590 in restitution. Scott Allen Kassebaum, 42, of Ozark, Mo., was sentenced to two years in federal prison without parole and ordered to pay $209,100 in restitution; his wife, Cheryl Joan Kassebaum, 43, was sentenced to 15 months in federal prison without parole and ordered to pay $497,200 in restitution. Steven Ray Spencer, 49, of Carl Junction, Mo., was sentenced to two years and six months in federal prison without parole and ordered to pay $436,556 in restitution. Shanda Lynn Moore, 45, of Springfield, Mo., was sentenced to three years of probation, including six months of home confinement and a $3,000 fine and restitution of $262,755.

Davis, a former mortgage broker who was the owner of Master Marketing Consultants, pleaded guilty to his participation in two separate conspiracies to obtain mortgage loans for the purchase of homes based on false loan applications. Davis knew that the loan applications he prepared and submitted were false because the loan applications included overstatements of income and understatements or omissions of liabilities, falsely represented that the purchaser/borrower intended to reside in the home to be purchased, and, in some cases, stated a false place of employment for the purchaser/borrower.

A significant portion of the loan proceeds was returned to the purchasers of the homes (who also were the borrowers) without the lender’s knowledge. Davis facilitated these kickbacks to the purchasers by routing the proceeds through Master Marketing Consultants and, in some cases, through Metro Consulting Group, which was owned by the Kassebaums.

The mortgage fraud schemes involved a total of 20 houses with home mortgage loans ranging from approximately $200,000 to $500,000. The amount of loan proceeds returned to the borrowers ranged from less than $30,000 to more than $100,000. Some of the home purchasers subsequently defaulted on the loans, and the homes have been foreclosed or are in the process of being foreclosed.

In addition to the two conspiracy charges, Davis pleaded guilty to two counts of wire fraud and two counts of money laundering.

Scott and Cheryl Kassebaum, former mortgage brokers and co-owners of Metro Consulting Group, pleaded guilty to their roles in one of the mortgage fraud conspiracies with Davis that involved seven houses with home mortgage loans ranging from approximately $200,000 to more than $400,000. The Kassebaums prepared and submitted fraudulent loan applications to lenders and facilitated the return of a significant portion of the loan proceeds to themselves and other purchasers without the lender’s knowledge and outside the closing of the home purchase.

Cheryl Kassebaum also pleaded guilty to one count of wire fraud and one count of money laundering. Scott Kassebaum also pleaded guilty to one count of wire fraud and one count of money laundering.

Spencer pleaded guilty to his role in both of the mortgage fraud conspiracies. In each conspiracy, he was a purchaser and solicited other purchasers for the schemes. Spencer also pleaded guilty to one count of wire fraud and one count of money laundering.

Moore pleaded guilty to her role in one of the mortgage fraud conspiracies with Davis and Spencer. Moore admitted that she provided false employment verification for Spencer and another individual.

This case was prosecuted by Assistant U.S. Attorney Douglas C. Bunch. It was investigated by the Federal Bureau of Investigation and IRS-Criminal Investigation.

(HOUSTON) – Two sealed indictments charging Veronica Frazier, Robert Veazie and Felton Greer with fraudulently obtaining home purchase loans have been unsealed, United States Attorney José Angel Moreno announced today. Both indictments were returned under seal on May 5, 2010, and were unsealed Friday once the three defendants were in custody.

Frazier, 42, of Pearland, was charged in a five-count indictment with conspiracy and wire fraud arising from a scheme to defraud residential lenders in connection with individual condominium purchases in a building located at 917 Main Street in Houston, also known as “The Kirby Lofts.”

Veazie, 35, and Greer, 41, both of Houston, were each charged in a separate but related four-count indictment with conspiracy and wire fraud relating to the Kirby Lofts scheme, as well as in connection with other single-family home purchases in the Houston area.

Greer surrendered to FBI agents Friday morning, while Veazie surrendered to the United States Marshals Service. Both appeared before U.S. Magistrate Judge Mary Milloy who allowed them to be released upon posting $50,000 bond. Frazier was arrested by FBI agents Friday morning and is expected to appear before U.S. Magistrate Judge Nancy K. Johnson at 2:00 p.m. today.

According to the allegations in the indictment returned last week, the Kirby Lofts transactions were sham sales. From about January 2006 to October 2006, Frazier recruited individuals with good credit to act as borrowers in applications for mortgage loans to purchase units in The Kirby Lofts and, with the assistance of co-conspirators, assisted these “straw borrowers” with providing false information and documents to induce lenders to fund purchases of units in The Kirby Lofts. The indictment also alleges Frazier and other co-conspirators submitted invoices for payment from loan proceeds and used the money to pay themselves and straw borrowers from loan proceeds.

The indictment against Veazie and Greer alleges they acted as “straw borrowers” in the Kirby Lofts scheme and also for other residential loans involving single-family residential properties in the Houston area. According to the indictment, Veazie and Greer received kickbacks from loan proceeds and provided false statements and documents to induce lenders to fund the purchase loans.

The maximum penalty, upon conviction, for conspiracy and wire fraud is 20 years in prison and a fine up to $250,000.

The investigation leading to the charges was conducted by the FBI. Assistant United States Attorneys Belinda Beek and Vernon Lewis are prosecuting the case.

This indictment is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.

By Phillip Mcneal

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Henry Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service, John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation, Miami Field Office, and J. Thomas Cardwell, Commissioner, State of Florida’s Office of Financial Regulation, announced that defendants Monique Mitchell, 29, of Pembroke Pines, and Sheldon Martin, 34, of Plantation, pled guilty this morning in West Palm Beach federal court to one count of making false statements on a HUD-1 Real Estate Settlement Form in connection with a mortgage fraud scheme. Sentencing has been scheduled for July 21, 2010 before U.S. District Judge Donald Middlebrooks.

According to records filed with the court and statements made during the plea hearing, defendant Monique Mitchell was employed by Attorneys Title Center, in Pembroke Pines. Defendant Sheldon Martin was a self-employed licensed mortgage broker in Plantation. At the plea, Mitchell and Martin admitted that they knowingly prepared a false HUD-1 Settlement Statement Form in connection with the January 2008 sale of a $1,250,000 home in Fort Lauderdale. The HUD-1 Form included false information to Regions Bank, the lender, about the down payment, the cash on hand at closing, and the amount repaid to the previous lender. In addition, the defendants concealed from Regions Bank money paid to The Pines Law Center at the closing.

At sentencing, the defendants face a maximum statutory sentence of up to five years in prison. Co-defendant, attorney Michael Samuda, is scheduled for trial in June 2010.

“This is a wake-up call to those in the mortgage industry who think they can get away with mortgage fraud,” said Special Agent in Charge John V. Gillies of the FBI’s Miami Division. “Submitting false information on loan documents is a crime and the FBI and its partners will investigate and prosecute those that break the law.”

Mr. Ferrer commended the investigative efforts of the U.S. Postal Inspection Service, FBI, and State of Florida’s Office of Financial Regulation. This case is being prosecuted by Assistant U.S. Attorney Jeffrey Kay.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Southern District of Florida at www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the United States District Court for the Southern District of Florida at www.flsd.uscourts.gov or http://pacer.flsd.uscourts.gov.

NEWARK, NJ—An East Stroudsburg, Penn., man pleaded guilty today to a wire fraud charge in connection with the $136 million fraud scheme that bankrupted Pine Brook, N.J.-based U.S. Mortgage Corp. and its subsidiary, CU National Mortgage, LLC, U.S. Attorney Paul J. Fishman announced.

Leroy Hayden, 47, the servicing manager of U.S. Mortgage from 2004 through Jan. 28, 2009, pleaded guilty before U.S. District Judge Katharine S. Hayden to one count of wire fraud conspiracy.

According to documents filed in this and related cases and statements made in federal court:

During the relevant period, Leroy Hayden conspired with Michael J. McGrath, Jr.—then the president and controlling shareholder of closely-held U.S. Mortgage—and several others to fraudulently sell Fannie Mae hundreds of loans belonging to various credit unions. He also provided numerous reports to credit unions falsely stating that loans that had been sold were still in the credit unions’ portfolios, and falsified records, at McGrath’s direction, to conceal these fraudulent sales. Leroy Hayden also admitted that he modified data in U.S. Mortgage’s servicing system to help carry out the scheme.

The pace of the fraudulent sales increased during 2008 and early 2009. On Jan. 27, 2009, dozens of law enforcement agents executed a search warrant at U.S. Mortgage and CU National’s Pine Brook headquarters. In the following weeks, U.S. Mortgage and CU National commenced bankruptcy proceedings.

McGrath pleaded guilty on June 12, 2009, to mail fraud, wire fraud and money laundering conspiracy charges, admitting that he hatched his scheme to prop up his company. He further admitted that he fraudulently sold hundred of loans belonging to various credit unions to Fannie Mae and used the proceeds to fund U.S. Mortgage’s operations, his personal investments, and investments he made on U.S. Mortgage’s behalf. McGrath is scheduled to be sentenced on July 6, 2010, before Judge Hayden.

The charge to which Leroy Hayden pleaded guilty carries a maximum potential penalty of five years in prison and a maximum fine of $250,000, or twice the amount of loss suffered by the victims of the conspiracy. His sentence is also expected to include restitution to the victims of the conspiracy, presently estimated at $136 million. His sentencing is scheduled for July 27, 2010.

U.S. Attorney Fishman said, “Frauds of this magnitude don’t happen without someone to cook the books and push the paper. Leroy Hayden had to decide whether to go along with his boss’ fraud or alert law enforcement to the scheme. Unfortunately, he made the criminal choice, and he answered for that choice today.”

Fishman credited Postal Inspectors of the U.S. Postal Inspection Service, under the direction of Postal Inspector in Charge David Collins; Special Agents of the IRS Criminal Investigation Division, under the direction of Special Agent in Charge William P. Offord; Special Agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward; and Special Agents of the U.S. Department of Housing and Urban Development’s Office of Inspector General, under the direction of Special Agent in Charge Joseph Clarke, for their investigation leading to this guilty plea. Fishman also thanked the U.S. Postal Service Office of Inspector General for assisting in the investigation.

The government is represented by Assistant U.S. Attorney Mark E. Coyne of the U.S. Attorney’s Office Economic Crimes Unit.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

JACKSON, MS—Gene A. Bradford, 38, of Ridgeland, was sentenced in federal court yesterday to serve 48 months in federal prison followed by 3 years of supervised release for mortgage fraud, U.S. Attorney Donald R. Burkhalter announced. U.S. District Judge David Bramlette also ordered Bradford to pay restitution in the amount of $581,508.50.

Bradford, who pled guilty in November, 2008 to federal money laundering charges in connection with a $1 million mortgage loan fraud scheme, worked as a mortgage broker in Hinds County and Madison County doing business as Guardian Financial Group, LLC. From January 2003 through approximately December 2004, Bradford, and others acting at his direction, prepared false documents to insure that lenders would make mortgage loans to prospective borrowers. If the mortgage loans were successful, Bradford received a fee for his brokerage services. In order to obtain funding for borrowers who were otherwise unqualified to receive mortgage loans, Bradford, and others acting at his direction, would fabricate various kinds of documents, including fictitious social security benefit statements, false income and/or employment information, false verifications of rent, or false verifications of bank funds on deposit. False entries were also included on HUD-1 Settlement Statements submitted to various lenders with the final loan packets which reflected that the borrower paid cash at the closing of the loan when no such funds were paid by the borrower.

This case was the result of a joint investigation by the Internal Revenue Service and the United States Postal Inspection Service, assisted by other participating agencies in the Jackson Financial Crimes Task Force, including the Federal Bureau of Investigation, Federal Deposit Insurance Corporation-Office of Inspector General, Housing and Urban Development-Office of Inspector General, Mississippi Secretary of State’s Office, Mississippi Real Estate Commission and Appraisal Board, Mississippi Department of Banking and Consumer Finance.

PHOENIX—April J. Lucero, 46, of Phoenix, Ariz. was sentenced on May 10, 2010 to two years in prison for her conviction in August 2009 for her involvement in a mortgage fraud scheme in Phoenix, Ariz. Lucero pleaded guilty to one count of Conspiracy to Commit Mail, Wire and Bank Fraud, a felony, related to her participation in a two year conspiracy involving the purchase of 37 properties using fraudulent loan documents. Seven other co-conspirators were also charged and have pleaded guilty for their involvement in the conspiracy.

“Lucero worked the system by conspiring with home loan straw buyers who had no intention of ever taking up residence,” said Dennis K. Burke. “This type of fraud scheme undermined the Valley housing market leading up to its collapse.”

The case against Lucero was based on an investigation by the FBI, which indicated that from 2005 through March 2007 she conspired to commit mortgage fraud in Phoenix. Lucero fraudulently submitted mortgage loan applications, on behalf of straw buyers, under false pretenses, obtaining and disbursing the proceeds of fraudulently obtained loans, including directing portions of the proceeds in the amount of $735,000 to a bank account in Lucero’s control. Lucero used her skill as a loan officer to prepare the mortgage loan applications for a borrower misrepresenting salary, assets and liabilities. Lucero used the proceeds from the fraud for personal expenses. Lucero received a lesser sentence due to her early guilty plea and cooperation. The entire conspiracy resulted in a loss to lending institutions of approximately $9.5 million.

The investigation in this case was conducted by the FBI. The prosecution is being handled by Kevin M. Rapp and Charles W. Galbraith Assistant U.S. Attorneys, District of Arizona, Phoenix.

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FBI official says cities like Gary are still reeling from recent unscrupulous lending tactics

GARY, IN – The effects of the mortgage fraud that helped bring down the nation’s economy and resulted in the financial industries’ federal bailout are still being felt throughout Northwest Indiana.

That was part of the message FBI official Michael Prendergast delivered to members of the Gary Chamber of Commerce during the group’s monthly luncheon meeting at The Buffet & Grill. Prendergast has been assigned to the Gary/Merrillville FBI office for the past 19 years. Among this duties are investigating political corruption, civil rights violations and fraud, including mortgage and securities fraud.

Mortgage fraud became prevalent when mortgage loans were given to people who were not credit-worthy and unable to make those payments. It was a far-reaching scheme that originated with a network of those who could manipulate the system, Prendergast said. In some cases, this fraud included real estate agents, appraisers, title companies, mortgage companies and bank employees.

Many of these mortgage schemes grouped four, five or more residential properties together and obtained loans for more than the properties were worth, Prendergast said.

“They used a model from Las Vegas where the market was manipulated and properties were marked up,” he said. “They promised people who took out the loans that they would provide renters. Well, the renters disappeared after two months, and the owners were left holding the bag.”

Eventually as big banks, such as Chase and Wells Fargo, began buying these mortgages on the secondary market, officials realized the people who had title to the properties couldn’t pay for the loans.

In addition, insurance companies began selling securities based on these mortgages to investors.

Federal money from the Department of Housing and Urban Development also ended up in these schemes.

“Up here in blighted areas like Gary, East Chicago and Hammond, there were multiple schemes to get people to invest in abandoned properties,” Prendergast said. “Some investors got money for rehabbing, but the work was never done and the money skimmed off.”

These faulty mortgages often didn’t include property taxes, so the owners were dunned for back taxes and the property ended up foreclosed and in the sheriff’s sale.

The ripple effect has been a new wariness about investing in places like Gary, Prendergast said. Tighter controls and credit requirements are also freezing some borrowers out of the market, even for single-family primary residences.

Banks are cooperating in the FBI investigation, Prendergast said, and the FBI is going after those who took out the mortgages.

“We may have to be hard on victim-buyers to get information on who organized these mortgage frauds,” he said.

Another problem has arisen because of the amount of money the federal government has given Gary that still hasn’t been accounted for, Prendergast said.

“The federal government gives money out like a faucet turned on, but they don’t track it,” he said. “Tracking funds in Gary is difficult.”

People want to invest in Gary and have good motives, Prendergast said, but because of the misuse of funds, these efforts are being stymied.

By Lu Ann Franklin

ALEXANDRIA, VA—Ruben Rojas, 30, of Vienna, VA, was sentenced today to 60 months in prison, followed by five years of supervised release, for leading a mortgage fraud scheme that caused more than $9 million in losses. Rojas was also ordered to pay restitution in the amount of $9.5 million. A lawful permanent resident from Bolivia, Rojas will be turned over to immigration authorities for deportation proceedings following his release from prison.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia; Col. David Rohrer, Fairfax County Chief of Police; and Shawn Henry, Assistant Director in Charge of the FBI Washington Field Office, made the announcement after sentencing by United States District Judge Gerald Bruce Lee. Rojas pled guilty to conspiracy to commit wire and bank fraud on Dec. 22, 2009.

“Ruben Rojas was motivated by one thing—greed,” said U.S. Attorney MacBride. “Nearly every home in this scheme is now in foreclosure, causing scores of homeowners to see big drops in their home equity and banks to lose millions. Mortgage fraud continues to be a big threat in this area, and we hope anyone who learns of potential fraud will report it so we can shut it down.”

According to court documents, Rojas, a real estate agent, was part of a wide-ranging mortgage fraud conspiracy in which he and others secured fraudulent loans for “straw buyers” with good credit to purchase properties for other individuals. Rojas recruited and paid several straw buyers to use their names and credit to secure financing for the properties. The straw buyers signed fraudulent loan applications in order to obtain much larger loans than they were qualified to receive; the loan applications misstated, among other things, the straw buyers’ income, assets, employment, citizenship status, and intent to live in the property. Rojas deposited large sums of money into the straw buyers’ bank accounts, or added the straw buyers to his own bank accounts, to create the appearance that the straw buyers had assets. Rojas also obtained fake bank statements, pay stubs and W-2s to corroborate the false statements in the loan applications.

During the course of the conspiracy, Rojas and his co-conspirators engaged in more than 30 fraudulent property transactions in the Eastern District of Virginia and obtained more than $24 million in mortgage loans to purchase the properties. The straw buyers defaulted on the bulk of the fraudulent loans and the properties either went into foreclosure or were short-sold for sizeable losses. As a result, more than 20 banks and lenders suffered losses in excess of $9 million.

Rojas’ sister, Lourdes Rojas Almanza, pled guilty on Dec. 17, 2009, for her role as a loan officer in the conspiracy. Almanza is scheduled for sentencing on June 4, 2010. Litcia Linares pled guilty on Jan. 8, 2010, for her role as a real estate agent in the conspiracy. Linares is scheduled for sentencing on May 13, 2010. Rojas’ brothers—Grovert Rojas and Jaime Nino Rojas—have also been charged in a superseding indictment, along with 10 straw buyers, for their involvement in the conspiracy. One of the straw buyers, Juan De La Cruz Aguayo, pled guilty on March 18, 2010. Aguayo is scheduled for sentencing on June 11, 2010.

This case was investigated by the Fairfax County Police Department and FBI’s Washington Field Office. Assistant United States Attorneys Charles Connolly and Marla Tusk prosecuted the case on behalf of the United States.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.usdoj.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.

LOS ANGELES – The owners of a used car dealership and a mortgage company in Downey were convicted in a real estate fraud case, despite the fact that one of the defendants had a voodoo shrine with the names of prosecutors and investigators, the District Attorney’s Office announced today.

Ruben Hernandez, 34, the owner of Downey Motorcars, was found guilty late Wednesday of four counts of filing a false application and three counts of grand theft, according to the District Attorney’s Office. Jurors deadlocked on one count of evading arrest and two counts each of filing a false application and grand theft He faces up to 13 years behind bars.

Co-defendant Joel Rodriguez, 44, the owner of Coast to Coast Mortgage, was convicted of six counts of filing a false application and five counts of grand theft. Jurors deadlocked on a sixth grand theft charge. Rodriguez is facing a maximum term of 14 years and four months in prison.

According to prosecutors, Hernandez bought six properties using false Social Security information and bank statements, and Rodriguez used false Social Security numbers to buy two properties, get home equity lines of credit and open a bank account.

Rodriguez was arrested shortly after the case was filed in January 2008.

Hernandez was arrested in Pasadena on Feb. 12, 2009, at the end of a brief pursuit. At the home where he had been staying, authorities discovered a voodoo shrine that included the names of the prosecutor, (more…)

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (“FBI”), Miami Field Office, Henry Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service, Michael K. Fithen, Special Agent in Charge, U.S. Secret Service, and James K. Loftus, Director, Miami-Dade Police Department, announced today the unsealing of an indictment charging Gelasio Alberto Diaz, 63, of Miami, Claudia Glaser, 41, of North Bay Village, Nereida Ramos, 45, of Miami, Antonio Pinto, 39, of Miami Beach, Emilia Fortes, 63, of West Palm Beach, Pura Machado Aguila, 40, of Miami, and Carlos Orellana, 45, of Miami Gardens, with one count of conspiracy to commit wire and bank fraud, in violation of Title 18, United States Code, Section 1349, and ten counts of substantive wire fraud, in violation of Title 18, United States Code, Section 1343. The defendants are alleged to have engaged in a mortgage fraud scheme that defrauded three financial institutions of approximately $5 million in fraudulent loans.

According to the indictment, defendants Gelasio Alberto Diaz and Nereida Ramos were employed at in Miami, Florida. According to the indictment, the defendants were involved in the fraudulent financing of mortgages for at least eight residential properties in Miami-Dade County. More specifically, Diaz and Ramos would allegedly identify properties that could be used to defraud lenders and then recruited individuals to pose as purchasers of the properties. Throughout the duration of the conspiracy, Diaz used co-defendant Claudia Glaser’s mortgage brokerage license to operate Infinity Mortgage. During this time, defendant Claudia Glaser signed-off on the mortgage loans without performing the necessary verifications. As well, defendant Nereida Ramos acted as the main loan processor for Infinity Mortgage, and was the main contact for the financial institutions and the borrowers.

Among the individuals who were recruited as straw purchasers were co-defendants Antonio Pinto, an employee at Infinity Mortgage, Emilia Fortes, Pura Machado Aguila and Carlos Orellana. Once a property was purchased, Diaz and Ramos would make the mortgage payments until the property could be flipped at an inflated price. The defendants used the profits made from “flipping” the properties to other straw purchasers to buy additional properties and make payments on the mortgages. Eventually, the defendants stopped making the loan payments and the properties went into foreclosure, resulting in significant losses to Countrywide Home Loans, Fremont Investment & Loan, WMC Mortgage and other lenders.

Special Agent in Charge John V. Gillies stated, “The FBI views mortgage fraud as a significant crime problem. The mortgage lending and housing market have a considerable overall effect on the nation’s economy and combating mortgage fraud will remain a top priority for the FBI.”

If convicted, the defendants face a maximum statutory sentence of 20 years in prison on each count of conspiracy and substantive wire fraud.

Mr. Ferrer commended the efforts of the FBI, the U.S. Postal Service, the U.S. Secret Service and the Miami-Dade Police Department. This case is being prosecuted by Assistant U.S. Attorney Cristina Pérez Soto.

An indictment is only an accusation, and the defendants are presumed innocent unless and until proven guilty.

Steven M. Dettelbach, United States Attorney for the Northern District of Ohio, announced today that four informations have been filed against Russell E. Krouse, Jason E. Davis, Harry L. Gongloff, and Steven M. Taylor, charging them with multiple counts of wire fraud in connection with mortgage fraud schemes which caused $710,000 in losses to Aegis Funding Corporation and New Century Mortgage.

Russell E. Krouse, age 45, currently resides in Ontario, Canada. Jason E. Davis, age 35, currently resides in Lorain, Ohio. Harry L. Gongloff, age 35, currently resides in Lorain, Ohio. Steven M. Taylor, age 35, currently resides in Elyria, Ohio.

The informations allege that Davis, Gongloff, and Taylor (“the sellers”) purchased depressed homes in the cities of Elyria and Lorain, Ohio, which were later renovated to resell to prospective home buyers. The sellers advertised their homes for sale in local publications and represented that there would be no money down and no closing costs to the buyer. Krouse, a mortgage broker with Majors Financial Group, processed the loans for the sellers.

The informations allege that the defendants made fraudulent misrepresentations to the mortgage lenders by providing undisclosed down payment assistance to the buyers and by submitting fictitious bank statements and verifications of rent to the mortgage companies in support of the loans.

If convicted, the defendants’ sentences will be determined by the Court after review of factors unique to this case, including the defendants’ prior criminal records, if any, the defendants’ roles in the offense and the characteristics of the violation. In all cases the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.

This case is being prosecuted by Assistant United States Attorney Vasile C. Katsaros, following an investigation by the Federal Bureau of Investigation, HUD-OIG and the Lorain County Prosecutor’s Office.

An information is only a charge and is not evidence of guilt. The defendants are entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

BIRMINGHAM—Federal prosecutors have charged the owner of a Birmingham property title company with mail fraud in connection to a mortgage fraud scheme, U.S. Attorney Joyce White Vance announced.

Jerry Eugene Parker, owner of Central Alabama Title, is charged in an information filed Thursday in U.S. District Court with two counts of mail fraud.

According to the information, Parker, 59, of Hoover, aided and abetted others to perpetrate a fraud through the mail that assisted in the commission of a larger mortgage fraud.

“Title companies are supposed to protect lenders and property owners by making sure that the person seeking a loan on a property is the rightful owner. They are in a position to catch fraud,” Vance said. “This defendant violated the core of his position of trust by not only allowing a fraud to go unchecked, but by assisting in carrying it out. This type of financial fraud is a priority of this Justice Department. It will be prosecuted,” she said.

The information describes the fraud as follows: Parker, while owning and operating Central Alabama Title between January 2005 and July 2007, would obtain the title of a property to be sold and apply for a refinance loan on the property. When the time came to close on the refinance loan, Parker, or an employee of his, would change the title of the property to fraudulently reflect that the person applying for the refinance loan was the current property owner. Parker also back-dated the title to reflect that the person seeking the refinance loan was the past and current owner of the property.

The information charges that Parker made the changes so it would appear to the lending institution that the person applying for a refinance loan was the owner who held a legitimate equity in the property. In truth, the person applying for the loan was a new buyer who would not have been eligible to receive a refinance loan.

The maximum sentence for counts one and two is 20 years in prison and a $1 million fine for each count.

Special agents of the Federal Bureau of Investigation and the Department of Housing and Urban Development’s Office of Inspector General investigated the case. Assistant U.S. Attorney Patrick Carney is prosecuting it.

This prosecution is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Members of the public are reminded that the information contains only charges. A defendant is presumed innocent of the charges and it will be the government’s burden to prove a defendant’s guilt beyond a reasonable doubt at trial.

12% of all cases in the country were filed from the metro area in 2009

New York has earned the dubious honor of being the nation’s leader in mortgage fraud last year, according to a report from the LexisNexis Mortgage Asset Research Institute.

MARI’s 12th Periodic Mortgage Fraud Case Report shows that of the 67,190 suspicious-activity reports filed with the Financial Crimes Enforcement Network last year, 12% came from the New York metro area.

“The data suggests that in 2009, there was a 7% increase in the number of incidents of fraud reported on top of the 26% increase reported in 2008,” said Jennifer Butts, the institute’s manager of data processing, and the report’s co-author. “While this is a noticeable increase, we believe that mortgage fraud is significantly understated.”

The report, which also ranks the top 10 states in terms of reported mortgage fraud, ranked New York second last year, up from third in 2008.

Application misrepresentation — which was 59% of all reported fraud types — topped the list for the sixth year in a row as the most common type of fraud last year. Appraisal and valuation misrepresentation came in second place, increasing to 33% in 2009 from 22% in 2008.

MARI didn’t have the figures broken down for New York City or state.

By James Comtois