Who to Contact Regarding Mortgage Fraud

Who to Contact Regarding Mortgage Fraud

By Daniel Edstrom
DTC Systems, Inc.

The following is a press release issued by the  Department of Justice FBI’s Sacramento Office.  It represents a fairly comprehensive list of who is going after mortgage fraud.  While this press release covers the Sacramento and Fresno areas of California, it is highly likely there is a similar task force in your area.

Department of Justice Press Release

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For Immediate Release
June 16, 2011
United States Attorney’s Office
Eastern District of California
Contact: (916) 554-2700 (916) 554-2700

U.S. Attorney Announces Results of Mortgage Fraud Prosecutions in 12 Months Since Operation Stolen Dreams

SACRAMENTO, CA—U.S. Attorney Benjamin B. Wagner announced that a grand jury returned a nine-count indictment today against Alonzo Jackson Brown III, 44, of Fairfield, charging him in connection with an investment fraud scheme and a mortgage fraud scheme.

This case is the product of an investigation by the FBI and the U.S. Postal Inspection Service. Assistant U.S. Attorney R. Steven Lapham is prosecuting the case. Brown is scheduled to be arraigned today before U.S. Magistrate Judge Kendall J. Newman.

According to court documents, Brown is a licensed real estate broker who used that position to perpetrate a mortgage fraud scheme. Brown is accused of submitting fraudulent loan applications in the names of unwitting individuals for the purchase of residential properties at greatly inflated prices. Several of the properties were owned by Brown himself. Among other things, the loan applications falsely stated the applicant’s true income, employment, assets, liabilities, and intent to occupy the property as a primary residence. When these loans funded, Brown obtained large payouts in the form of cash back to the seller. Because the nominal buyer of the properties was unaware of these transactions, to avoid causing any red flags, Brown would make the mortgage payment on these properties for several months before walking away and permitting the home to go into foreclosure. His actions resulted in alleged actual loss of at least $1.5 million.

In a separate case, Leonard Bernot, 46, of Laguna Hills, pleaded guilty today before U.S. District Judge Kimberly J. Mueller to conspiracy to commit mail fraud for his part in a wide-ranging “foreclosure rescue” scheme involving Head Financial Services Inc. Originally indicted on February 28, 2008, Bernot and 10 other defendants were charged with conspiring to defraud financially distressed homeowners by promising them that their homes could be saved from foreclosure and their credit repaired if the names of straw buyers were added to, or replaced on, the homes’ property titles. Bernot and others allegedly would obtain mortgage loans on each of the homes, thereby extracting substantial equity, a scheme sometimes referred to as “equity stripping.” Often, the homeowners were left paying “rent” to the conspirators. The rent would often be nearly as much as the prior mortgage payment the homeowner had been unable to pay. When the homeowners were unable to keep up with the payments, they were often evicted from their homes. The cases of several co-defendants, including Charles Head, the founder of Head Financial Services Inc., are still pending.

This case is the product of an investigation by the FBI and IRS-Criminal Investigation. Assistant U.S. Attorneys Matthew Stegman and Michael Anderson are prosecuting the case. Bernot will be sentenced before Judge Mueller on September 1, 2011.

Today’s announcement comes almost exactly a year after the conclusion of a nationwide sweep, Operation Stolen Dreams, that targeted mortgage fraudsters throughout the country and was the largest collective enforcement effort ever brought to bear in confronting mortgage fraud. The operation was organized by the Mortgage Fraud Working Group of President Obama’s interagency Financial Fraud Enforcement Task Force, which was established to lead an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. U.S. Attorney Wagner is a co-chair of the Mortgage Fraud Working Group. Between March 1, 2010 and June 18, 2010, Operation Stolen Dreams involved 1,517 criminal defendants nationwide, including 525 arrests, representing an estimated loss of more than $3 billion. The operation also resulted in 191 civil enforcement actions and the recovery of more than $196 million. During the three-and a-half-month sweep in 2010, the Eastern District of California charged 46 defendants with felony mortgage fraud offenses and secured 11 guilty pleas.

Results of Mortgage Fraud Prosecutions Since Operation Stolen Dreams

U.S. Attorney Wagner said: “Mortgage fraud continues to be a major problem in this region, which has cost banks, borrowers, and homeowners tens of millions of dollars. Prosecuting mortgage fraud continues to be a major focus of this office. While last year’s Operation Stolen Dreams was a success, it did not mark the end of our focus on mortgage fraud. As the results announced today illustrate, we are continuing to relentlessly pursue fraudsters in the real estate and mortgage industries. In addition to the results announced today covering the last 12 months, we have additional cases under investigation, and expect to bring more indictments in the near future.”

Herb Brown, Special Agent in Charge of the Sacramento FBI, said “These cases provide a glimpse of just how pervasive Mortgage Fraud is in the Eastern District of California. This growing crime problem is a very real threat to the American dream of home ownership for many of our citizens. We must and will continue to pursue those industry insiders who abuse and exploit the mortgage and real estate process for their own personal gain.”

“Victims of mortgage fraud may include the banks that loan the money, but also include all homeowners and would-be homeowners who end up paying for this type of fraud,” said Scott O’Briant, Special Agent in Charge, IRS-Criminal Investigation. “IRS-CI is committed to pursuing those who line their pockets with profits from these schemes.”

“Mortgage fraud has burdened neighborhoods with abandoned and deteriorating properties as well as caused an urgent reliance on the government, and ultimately the taxpayer, to bolster devastated communities,” said Wayne North, Special Agent in Charge of HUD’s Office of Inspector General. “HUD OIG is deeply committed to working with our law enforcement partners in the continuing efforts to bring to justice those that seek to enrich themselves at the expense of our communities.”

“Mortgage fraud is a priority for the Postal Inspection Service,” said U.S. Postal Inspector in Charge Adam Behnen. “We will continue working with our partners in law enforcement a will present cases to the U.S. Attorney’s Office as they arise.”

Since the end of Operation Stolen Dreams on June 18, 2010, 13 of the 46 defendants charged in that operation have pleaded guilty to federal offenses, and five have been sentenced to prison terms. Prison sentences imposed so far on Operation Stolen Dreams defendants have been as high as 82 months in prison. In two cases involving three defendants, restitution or forfeiture orders totaling more than $1.9 million were imposed.

In addition, since the end of Operation Stolen Dreams one year ago, prosecutors in this office have filed 17 new indictments or informations charging 47 new defendants with mortgage fraud offenses. Cases charged in the last 12 months involve many tens of millions of dollars of alleged losses. The prosecutions involve a variety of alleged fraudulent schemes, ranging from a 10-defendant case involving a property-flipping scheme in Kern County, to an eight-defendant Sacramento area cash-back scheme using fraudulent liens, to a series of cases relating to bid rigging at foreclosed property auctions in San Joaquin County, to cases in which residences were acquired with false purchaser information for use as indoor marijuana grow houses.

In addition to all of those cases, the office continues to litigate a very large number of mortgage fraud cases initiated prior to Operation Stolen Dreams. During the last 12 months, prosecutors in this office have obtained guilty pleas or convictions of another 27 defendants and prison sentences of another 10 defendants in 25 other federal criminal mortgage fraud cases. For those 10 defendants, sentences have ranged up to 37 months in prison, and total restitution orders have exceeded $2.25 million.

Below are brief summaries of some of the significant mortgage fraud cases brought since June 18, 2010:

  • United States v. David Crisp, et al., 1:11-cr-026 LJO, (FBI and HUD-OIG) The indictment alleges that, from approximately January 2004 to September 2007, the defendants operated real estate businesses in Kern County through which they submitted fraudulent loan applications with misrepresentations concerning the borrower’s income, assets, employment status, and intended use. They allegedly perpetrated the scheme in part by selling single homes on multiple occasions, through a series of fraudulent transactions to co-defendants, straw buyers, and others in order to artificially inflate the prices of the residences. The scheme involved more than $20 million in losses to lenders.
  • United States v. James Lankford and Jon McDade, 1:10-cr-398 AWI, (FBI and Stanislaus County District Attorney’s Office) Alleged $10 million equity-skimming mortgage fraud scheme in the Modesto area, in which Lankford and McDade targeted elderly property owners who wanted to sell their property with no listing agent. They allegedly induced the elderly property owners to sell their homes to the defendants using a contract for the seller to take a note for a portion of the purchase price involving interest-only payments to the seller for five to 10 years, then obtained conventional financing to purchase the same properties in the form of a mortgage from a lending institution, using false information in the mortgage applications. The defendants allegedly did not disclose to the lending institutions the seller-backed financing, diverted the proceeds of the mortgage loans to themselves, and lulled the elderly property owners by mailing them monthly interest-only payments. Many of the properties were later allowed to go into foreclosure, or were sold in short sales through Lankford’s real estate business. The conduct caused losses to the victim elderly property owners, lending institutions, and banks of at least $10 million.
  • United States v. Richard Northcutt, 2:11-cr-038 MCE; United States v. Theodore Hutz, 2:10-cr-238 EJG; United States v. Yama Marifat, 2:11-cr-039 EJG; United States v. Gregory Jackson, 2:11-cr-090 EJG, (FBI and San Joaquin County District Attorney’s Office) Prosecutions of participants in bid-rigging scheme involving auctions for foreclosed properties in San Joaquin County public auctions.
  • United States v. Vera Kuzmenko, et al., 2:11-cr-210 JAM. (FBI and IRS-CI) The indictment charges eight Sacramento-area defendants with perpetrating a scheme in which they originated more than $16.3 million in residential mortgage loans on 14 homes purchased through straw buyers, and extracted loan proceeds at closing through bogus liens. All of the homes went into foreclosure, causing losses of approximately $9.6 million.

A complete list of developments in mortgage fraud cases brought in the Eastern District of California in the last 12 months is attached.

Mortgage fraud is a priority area for the President’s Financial Fraud Enforcement Task Force. 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. For more information on the task force, visit StopFraud.gov.

In the Eastern District of California, the work of the Financial Fraud Enforcement Task Force is being carried out by two task forces, consisting of federal, state, and local investigators and prosecutors. The Sacramento Division task force includes the FBI, IRS-Criminal Investigation, the HUD Office of Inspector General, U.S. Secret Service, U.S. Postal Inspection Service, the Veterans Administration Office of Inspector General, the FDIC Office of Inspector General, the U.S. Department of Labor Office of Inspector General, the California Department of Real Estate, the California Department of Corporations, the California Department of Financial Institutions, the California Office of Real Estate Appraisers, and the District Attorneys’ Offices for Butte, El Dorado, Nevada, Placer, Sacramento, San Joaquin, Solano, and Yolo Counties. The Fresno Division task force includes the FBI, IRS-Criminal Investigation, the HUD Office of Inspector General, U.S. Secret Service, Social Security Office of Inspector General, USDA Office of Inspector General, the U.S. Trustee’s Office, the California Attorney General’s Office, the California Department of Real Estate, and the District Attorneys’ Offices for Fresno, Kings, Merced, San Joaquin, Stanislaus, and Tulare Counties.

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Author: dmedstrom

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6 thoughts on “Who to Contact Regarding Mortgage Fraud”

  1. 1.The California Department of Real Estate, ” We looked but didn’t find anything.” What did you find? They never replied. Of coarse not. Why would you and lose the dues from your members.

    2. The California Department of Corporations will decide if your case will be sent to District or Attorney General. Multiple letters sent. They never replied.

    3. District Attorney- too busy going after mortgage rescue fraud. Sorry.

    4. FBI- There must be a misunderstanding. We will call you.

    5. The California Department of Financial Institutions – handles banks. Not bankrupt lenders or mortgage service lenders.

    Understanding the crisis volume so assuming the littlest of amount and stories are not being looked at. Sorry. You are foreclosed.

  2. I am a victim of Charles Head, however I live in the state of PA. I contacted my FBI office years ago who turned my file over to the FBI in CA…I NEVER HEARD FROM ANYONE! I didn’t even know Head had been busted until I got a letter from the IRS last year saying I was entitled to receive funds. I had $250K+ in losses and found out me and the other 200 victims were supposed to get $1000.00. ONE THOUSAND. That is it…but I still haven’t received that yet! WHY was I not notified when Head was arrested? The FBI obviously knew I was a victim since they turned my name over to the IRS!~ I have mailed/emailed/called the Sacramento DA’s office NUMEROUS times and NOT ONE person EVER responded. Am I going to have to file charges against the Sacramento DA/FBI?????? COME ON~!

    1. The case is about to be dismissed against Charles Head. Check online or call the prosecutor. Good luck.

      this is his info:
      Michael Dwight Anderson , GOVT
      United States Attorney’s Office
      501 I Street
      Suite 10-100
      Sacramento, CA 95814
      Fax: 916-554-2900
      Email: michael.d.anderson2@usdoj.gov

  3. I’ve been waiting one year for a lousy $1000 restitution check. One thousand dollars and they can’t even send that in a timely fashion. Incredible.

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