Brother & Sister Charged in Real Estate Scam Involving Fake Open Houses at Not-for-Sale Homes

Stephanie Abbott —  April 6, 2021 — Leave a comment

Adolfo Schoneke, 43, Torrance, California and his sister, Bianca Gonzalez, a.k.a. Blanca Schoneke, 38, Walnut, California, a brother-and-sister team were arrested today on federal charges alleging they orchestrated a $6 million real estate fraud scam in which they listed homes without the owners’ consent and collected money from multiple would-be buyers for each of the not-for-sale homes.

According to the indictment, Schoneke and Gonzalez, with the help of co-conspirators, operated real estate and escrow companies based in Cerritos, La Palma and Long Beach, California under a variety of names, including MCR and West Coast. The indictment alleges Schoneke and Gonzalez found properties that they would list for sale – even though many, in fact, were not for sale, and they did not have authority to list them for sale – and they then marketed the properties as short sales providing opportunities for purchases at below-market prices.

Using other people’s broker’s licenses, Schoneke and Gonzalez allegedly listed the properties on real estate websites such as the Multiple Listing Service (MLS). In some cases, the indictment alleges, the homes were marketed through open houses that co-conspirators were able to host after tricking homeowners into allowing their homes to be used.

As part of the alleged scheme, the co-conspirators accepted multiple offers for each of the not-for-sale properties, hiding this fact from the victims and instead leading each of the victims to believe that his or her offer was the only one accepted. The co-conspirators allegedly were able to string along the victims – sometimes for years – by telling them closings were being delayed because lenders needed to approve the purported short sales.

The indictment also alleges that Schoneke and Gonzalez directed office workers to open bank accounts in the office workers’ names. Those accounts were used to receive down payments on the homes and other payments from victims who were convinced to transfer the full “purchase price” to these bank accounts after receiving forged short sale approval letters. Schoneke and Gonzalez also allegedly directed the office workers to withdraw large amounts of cash from these accounts and give it to them – a procedure that allowed Schoneke and Gonzalez to take possession of the fraud proceeds while hiding their involvement in the scheme.

Investigators estimate that several hundred victims collectively lost more than $6 million during the scheme.

Each pleaded not guilty this afternoon to nine charges contained in an indictment unsealed after their arrests. The indictment charges Schoneke and Gonzalez with one count of conspiracy, seven counts of wire fraud, and one count of aggravated identity theft.

During the arraignments this afternoon, a trial was scheduled for June 1, 2021. Both defendants will remain in custody at least until detention hearings scheduled for Friday for Schoneke and April 13, 2021 for Gonzalez.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

If convicted of all charges, Schoneke and Gonzalez each would face a statutory maximum sentence of 162 years in federal prison.

This matter was investigated by the FBI and the Federal Deposit Insurance Corporation, Office of Inspector General. The investigation was initiated by numerous complaints to the Long Beach Police Department and the Los Angeles County Sheriff’s Department, both of which provided substantial assistance during the federal investigation.

This case is being prosecuted by Assistant United States Attorney Kerry L. Quinn of the Major Frauds Section.

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Convicted Fraudster Indicted for Providing False Information on Home Loan Application

Stephanie Abbott —  April 5, 2021 — Leave a comment

Juliana Martins, 52, North Providence, Rhode Island, has been indicted for allegedly making false statements related to her incarceration and the court-ordered requirement that she pay back the stolen money when she applied for a U.S. Federal Housing Administration-backed home mortgage.

Martins in June 2019, while serving a term of federal supervised release for having conspired to use the stolen personal identity information of numerous individuals to steal nearly $400,000 from the United States Treasury, falsely represented on a home loan application, and in July 2019 on a closing document, that there were no outstanding judgements against her, when in fact she is under court order to pay restitution to the government totaling $385,533.58.

According to the indictment, when responding to requirements to truthfully disclose to the bank her credit report, assets, liabilities, and income, Martins falsely stated to the bank that “the reason I have a job gap in my employment was because I was away on a family emergency for over two years,” when in fact during that time she was incarcerated in federal prison. Additionally, it is alleged, Martins provided a false explanation for an inquiry from the Department of Justice on her credit report.

In March 2014, Martins pleaded guilty to conspiracy to embezzle United States Treasury checks, theft of government property, and aggravated identity theft, admitting that she was a leader of a criminal enterprise that possessed hundreds of people’s personal identifying information that was used to open bank accounts into which fraudulently obtained government checks were deposited. Martins was sentenced in September 2014 to serve 48 months in federal prison to be followed by three years of federal supervised release.

On Friday, a federal grand jury returned an indictment charging Martins with making false statements on bank loan applications, announced Acting United States Attorney Richard B. Myrus and Christina D. Scaringi, Special Agent in Charge of the Northeast Region of the U.S. Department of Housing and Urban Development – Office of Inspector General.

The indictment requires, upon conviction, that Martin forfeit to the government her interest in her North Providence house and property.

A federal indictment is merely an accusation. A defendant is presumed innocent unless and until proven guilty.

Martins is scheduled to appear before U.S. District Court Magistrate Judge Patricia A Sullivan on Tuesday for a supervised release violation hearing.

The case is being prosecuted by Assistant U.S. Attorney Sandra R. Hebert.

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House-Flipping Fraud Sends Man to Prison

Stephanie Abbott —  March 24, 2021 — Leave a comment

Christopher Grooms, 41, Savannah, Georgia pled guilty to an Information charging him with a scheme to enrich himself by repeatedly borrowing money against the same pieces of property will go to prison for fraud.

As described in court documents and testimony, Grooms operated several real estate investment companies that acquired and resold real estate. From 2013 to 2018, Grooms devised a scheme in which one of his companies would purchase a property using borrowed funds, and he would then falsify documents to show that the lien against the property had been satisfied. He would then secure additional loans against the property, repeatedly filing fraudulent paperwork to show the property was unencumbered by liens.

Grooms used the scheme at least 24 times for nearly $3 million in fraudulent loans from multiple financial institutions. The properties used in the scheme were located in Georgia cities including Savannah, Hinesville, Glennville, Midway and Allenhurst.

Grooms was sentenced to 33 months in federal prison, ordered to pay $1,645,267.95 in restitution, and a forfeiture money judgment totaling $2,937,881.43, said David H. Estes, Acting U.S. Attorney for the Southern District of Georgia. After completion of his prison term, Grooms must serve four years of supervised release.

There is no parole in the federal system.

“The Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG) is committed to holding accountable those who waste, steal, or abuse the resources of the government-sponsored enterprises regulated by FHFA.  We are proud to have partnered with the U.S. Attorney’s Office for the Southern District of Georgia in this case,” said Edwin S. Bonano, Special Agent-in-Charge, FHFA-OIG, Southeast Region.

“This sentence should serve as a stark reminder that such greed as seen in this case comes with a bigger cost,” said Chris Hacker, Special Agent in Charge of FBI Atlanta. “The FBI recognizes the impact on the banking institution and will continue to dedicate investigative resources to target fraud in its many forms.”

“Financial fraud temporarily enriches criminals at the long-term expense of legitimate businesses,” said Acting U.S. Attorney Estes. “As Christopher Grooms discovered, our law enforcement partners are adept at rooting out these schemes, and his ill-conceived investment in criminal activity is returning a dividend of time behind bars.”

“Committing high-level fraud will not be tolerated in Georgia,” said Georgia Bureau of Investigation (GBI) Director Vic Reynolds. “The GBI worked hard on this investigation with local and federal partners to bring this case to a successful prosecution.”

The case was investigated by the FBI, the Federal Housing Finance Agency Office of the Inspector General, the GBI, and the Tattnall County Sheriff’s Office, and prosecuted for the United States by Assistant U.S. Attorneys Tara M. Lyons and Asset Recovery Unit Chief Xavier A. Cunningham.

 

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Businessman Sentenced for Bank Fraud

Stephanie Abbott —  March 22, 2021 — Leave a comment

David Daughtrey, 60, El Cajon, California was sentenced in federal court today on charges of bank fraud and tax evasion.

In July 2020, Daughtrey pleaded guilty to one count of conspiracy to commit bank fraud and tax fraud, and one count of filing a false tax return. Daughtrey’s illegal conduct spanned for a decade, from 2006 until 2016. For several years, Daughtrey evaded income tax by under-reporting his income and orchestrated an illegal scheme to fraudulently obtain a mortgage for his $1.8 million residence using a third party.  The total tax loss to the United States in this case was $1,053,989.63.

According to court documents, from July 2006 until April 2016, Daughtrey conspired with others to commit the crimes to which he pleaded guilty. As part of the bank fraud scheme, Daughtrey directed another individual to submit a mortgage application to a national bank to purchase a $1.8 million five-bedroom residence, and to falsely claim that the funds used as down payment belonged to, and the residence would be used by, the third party.

In reality, Daughtrey provided the funds and the home was intended to be Daughtrey’s primary residence. Daughtrey made monthly mortgage payments of approximately $8,000 for his residence but continued to represent to the bank that the third party owned the house. Daughtrey later submitted a false hardship letter on behalf of the third party in an effort to modify the terms of the loan on the home.

Over several years, Daughtrey conspired to commit tax evasion by filing tax returns listing substantially less income than Daughtrey actually earned.  Daughtrey’s tax return for the year 2012, for example, omitted at least $498,612 in income.  Daughtrey failed to report his total income in tax years 2013, 2014, and 2015, and did not file timely tax returns for subsequent years.  Daughtrey agreed to pay $1,053,989.63 in restitution to the IRS, which includes the total tax loss plus penalties and interest.

Daughtrey was sentenced to 18 months in custody and ordered to pay restitution of $1,519,590.63.

“The defendant abused our tax and banking systems for his own financial benefit, and the victims of that crime are ethical taxpayers and bank customers,” said Acting U.S. Attorney Randy Grossman. “Today’s sentence will hopefully remind others that there is a high price to pay for such deception.” Grossman thanked prosecutor Oleksandra Johnson and agents from the IRS and FBI for their excellent work on this case.

“While Mr. Daughtrey achieved business success, he failed in his obligations as an American by lying to our banks and cheating the government,” said Special Agent in Charge Ryan L. Korner, IRS Criminal Investigation. “Today’s sentencing shows that we will hold accountable those who deceive and exploit our people and financial institutions because of their greed.”

“The FBI and our partners at the IRS uncovered David Daughtrey’s mortgage fraud and tax evasion scheme using our team’s financial and fraud expertise,” said FBI Special Agent in Charge Suzanne Turner.  “Today’s sentencing serves as a warning to those who attempt to personally gain by deliberately cheating the government and the integrity of the banking system through financial fraud.  Our team of fraud experts will bring justice in these white-collar cases.”

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Final Family Member Sentenced in Short Sale Mortgage Fraud Scheme

Stephanie Abbott —  March 22, 2021 — Leave a comment

Ana Cummings, 61, Davie, Florida, the last of six South Florida family members was sentenced today to a term of imprisonment, and ordered to pay a total of $1,342,928.77 in restitution, following her conviction by way of guilty plea in August 2020, to conspiracy to commit bank fraud.

During prior hearings, Cummings’s sons, Valentin Pazmino, 34, and Rene A. Pazmino, 36, were sentenced to 27 months and 18 months of imprisonment, respectively. Her daughters, Grace Pazmin, 43, and Diana Pazmino, 31, were sentenced to 27 months and 22 months of imprisonment, respectively. Her son-in-law Jared Marble, 43, Grace Pazmino’s husband, was sentenced to 16 months of imprisonment. All sentences were imposed by United States District Judge Jose E. Martinez following guilty pleas. Pursuant to their plea agreements, the defendants made a full payment of the restitution judgment prior to their sentencings.

According to court documents, various defendants participated in a series of ten fraudulent real estate short sale transactions in South Florida between May of 2012 and June of 2015. Cummings and Grace Pazmino participated in all ten of the fraudulent short sales. Diana Pazmino and Valentin Pazmino each participated in nine of the fraudulent short sales. Marble participated in three of the fraudulent short sales. Rene A. Pazmino participated in two of the fraudulent short sales.  In each short sale transaction in which they participated, the defendants made materially false statements to a financial institution in order to defraud it into approving the short sale. Specifically, the defendants executed short sale affidavits and affidavits of arm’s length transactions falsely attesting that the sales were between unrelated, unaffiliated parties. In reality, the sales were between and among the defendants, companies controlled by the defendants, and/or individuals recruited by a defendant to participate in the fraud scheme. Members of the conspiracy also executed HUD-1 Settlement statements misrepresenting that the named buyer made the required cash-to-close payment.  In reliance on these material representations, various financial institutions authorized property sales for amounts less than the outstanding principal balances due on mortgages they held on the properties, thereby incurring losses.

Ariana Fajardo Orshan, United States Attorney for the Southern District of Florida, Tyler R. Hatcher, Acting Special Agent in Charge, Internal Revenue Service-Criminal Investigation, Miami Field Office, and Special Agent in Charge Edwin S. Bonano of the Federal Housing Finance Agency – Office of Inspector General (FHFA-OIG) Southeast Region made the announcement.

U.S. Attorney Fajardo Orshan commended the investigative efforts of the Internal Revenue Service-Criminal Investigation, Miami Field Division and the Federal Housing Finance Agency – Office of Inspector General Southeast Region.

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 District Court for the Southern District of Florida at www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov, under case number 19-cr-20606-JEM.

 

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Eleven Plead Guilty to Running a Mortgage Fraud Scheme

Stephanie Abbott —  March 19, 2021 — Leave a comment

Eric Hill, 50, Tyrone, Georgia, Robert Kelske, 52, Smyrna, Georgia,  Fawziyyah Connor, 41, Tyrone, Georgia, Stephanie Hogan, 57, Norcross, Georgia, Jerod Little, 42, McDonough, Georgia, Renee Little, 33, McDonough, Georgia, Maurice Lawson, 36, Powder Springs, Georgia, Todd Taylor, 54, Fairburn, Georgia, Paige McDaniel, 49, Stockbridge, Georgia, Donald Fontenot, 52, Locust Grove, Georgia, and Anthony Richard, 44, Locust Grove, Georgia, have pleaded guilty to conspiracy to defraud the United States in a mortgage fraud scheme spanning more than four years and resulting in the approval of more than 100 mortgages based on fabricated documents and false information.

According to the charges and other information presented in court: The defendants participated in a conspiracy in which homebuyers and real estate agents submitted fraudulent loan applications to induce mortgage lenders to fund mortgages.

Listing agents Eric Hill and Robert Kelske represented a major nationwide homebuilder and helped more than 100 homebuyers who were looking to buy a home, but who were unqualified to obtain a mortgage, commit fraud.  The agents instructed the homebuyers as to what type of assets they needed to claim to have in the bank, and what type of employment and income they needed to submit in their mortgage applications.

Hill and Kelske then coordinated with multiple document fabricators, including defendants Fawziyyah Connor and Stephanie Hogan, who altered the homebuyers’ bank statements to inflate their assets and to create bank entries reflecting false direct deposits from an employer selected by the real estate agent.  The document fabricators also generated fake earnings statements that matched the direct deposit entries to make it appear that the homebuyer was employed, and earning income, from a fake employer.  Other participants in the scheme then acted as employment verifiers and responded to phone calls or emails from lenders to falsely verify the homebuyers’ employment.  Defendants Jerod Little, Renee Little, Maurice Lawson, Todd Taylor, Paige McDaniel and Donald Fontenot acted as employment verifiers.  Hill and Kelske coordinated the creation and submission of the false information so that the lies to the lenders were consistent.

In another aspect of the scheme, real estate agent Anthony Richard falsely claimed to represent homebuyers as their selling agent in order to receive commissions from the home sales.  In reality, Richard had never even met the homebuyers he claimed to represent.  To avoid detection, he often notified closing attorneys that he would be unable to attend the closing and sent wire instructions for the receipt of his commissions.  When Richard received his unearned commissions, he kicked back the majority of the commissions to Hill or Kelske for enabling him to be added to the deal, keeping a small share for his role in the scheme.

Many of the loans are insured by the Federal Housing Administration (FHA) resulting in claims being paid for mortgages that have defaulted.

“These defendants brazenly manipulated the real estate lending process by using their knowledge of the system,” said Acting U.S. Attorney Kurt Erskine.  “Mortgage fraudsters threaten the soundness of the real estate market in our community and divert critical resources away from those borrowers who properly qualify for loans.  Rooting out bad actors who attempt to abuse the system for their own personal gain makes the mortgage lending system safer and fairer for everyone.”

“These defendants who dragged down our economy by using deception, will now be sentenced and forced to reimburse the victims of their conspiracy,” said Chris Hacker, Special Agent in Charge of FBI Atlanta. “The FBI is committed to combating such criminal activity to protect our citizens and the real estate market from predators who are most interested in pocketing money that they have no right to.”

“These offenders engaged in blatant criminal acts with the sole purpose of enriching themselves at the cost of a federal housing program designed to assist millions of American homebuyers.  Their fraudulent undertaking strikes at the fiscal integrity of the FHA and we will work diligently in conjunction with our law enforcement partners to hold them accountable” said Wyatt Achord, Special Agent in Charge, HUD Office of Inspector General.

“The Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG) is committed to holding accountable those who waste, steal, or abuse the resources of the Government-Sponsored Enterprises regulated by FHFA.  We are proud to have partnered with the U.S. Attorney’s Office for the Northern District of Georgia in this case,” said Edwin S. Bonano, Special Agent-in-Charge, FHFA-OIG, Southeast Region.

These defendants have agreed to pay restitution to the victims of their conspiracy, including the Department of Housing and Urban Development, which insures many of the residential mortgages in the United States. Sentencing hearings have been set for these defendants before U.S. District Judge Mark H. Cohen.

A twelfth defendant, Cephus Chapman, 49, Warner Robins, Georgia is awaiting trial.  Members of the public are reminded that the indictment only contain charges.  The defendant is presumed innocent of the charges and it will be the government’s burden to prove the defendant’s guilt beyond a reasonable doubt at trial.

This case is being investigated by the Federal Bureau of Investigation, Department of Housing and Urban Development Office of Inspector General, and Federal Housing Finance Agency Office of Inspector General.

Assistant U.S. Attorneys Alison Prout and Ryan Huschka are prosecuting the case.

For further information please contact the U.S. Attorney’s Public Affairs Office at USAGAN.PressEmails@usdoj.gov or (404) 581-6016.  The Internet address for the U.S. Attorney’s Office for the Northern District of Georgia is http://www.justice.gov/usao-ndga.

 

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Four Charged With Wide-Ranging Mortgage And Insurance Fraud Scheme

Stephanie Abbott —  March 4, 2021 — Leave a comment

Robert Morgan, Todd Morgan, Frank Giacobbe, and Michael Tremiti, have been charged with conspiracy to commit wire fraud and bank fraud for their roles in a wide-ranging mortgage fraud scheme.

According to the indictment, between 2007 and January 2019, the defendants conspired with Kevin Morgan, Patrick Ogiony, Scott Cresswell, and others fraudulently to obtain funds from financial institutions such as Arbor Commercial Mortgage, LLC, Berkadia Commercial Mortgage, LLC, UBS and Deutsche Bank, and government sponsored enterprises, including Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal National Mortgage Association (Fannie Mae).

During the course of the conspiracy, the defendants engaged in a scheme to defraud financial institutions and government sponsored enterprises by providing false information to lenders in support of applications for mortgage loans to purchase properties, refinance properties or build properties. As part of the applications for mortgage loans, the defendants submitted inflated and false rent rolls which included non-existent tenants and inflated rents to fraudulently increase the income for a building in order to justify a loan amount that they would not otherwise qualify for.  Similarly, in order to further inflate the income, defendants told lenders they were receiving fake fees, such as stating that residents paid for cable when it was actually included in the rent.  Defendants also fraudulently reduced and improperly capitalized expenses in order to make the property appear to generate more income to, again, justify a larger mortgage loan than they would otherwise qualify for.

The defendants took steps to conceal the fraud from the lenders, including by making vacant units appear occupied during inspections by turning radios on in vacant units, by placing welcome mats and shoes in hallways outside vacant units, and by paying individuals to pretend to be tenants in units the inspectors would enter.

In the wire fraud conspiracy to defraud insurers, Todd Morgan and Robert Morgan are accused of conspiring with Kevin Morgan and Scott Cresswell to present false and inflated contracts and invoices to insurance companies for repairs after damages to properties in Robert Morgan’s real estate portfolio.

While the loans which were the subject of defendants’ alleged fraudulent conduct exceeded $400 million in value, the total loss sustained by financial institutions and government sponsored enterprises throughout the mortgage fraud scheme is currently estimated to exceed $9,500,000. The loss resulting from the insurance fraud scheme is currently estimated at approximately $3,000,000.

The defendants were arraigned before U.S. Magistrate Judge H. Kenneth Schroeder and were released on conditions.

Defendants Kevin Morgan and Patrick Ogiony were previously convicted of conspiracy to commit bank fraud, and defendant Scott Cresswell was previously convicted of conspiracy to commit wire fraud for their roles in the multi-million dollar fraud scheme. All three defendants are awaiting sentencing.

The defendants each face charges of wire and bank fraud. Robert and Todd Morgan are also charged with defrauding insurance companies. The charges carry a maximum penalty of 30 years in prison and a fine in the amount of double the loss caused by the crimes.

U.S. Attorney James P. Kennedy, Jr. made the announcement.

“Upon executing search warrants in this case, my Office, together with our law enforcement partners, acted quickly to take action in an effort to try to limit the amount of damage occasioned by the defendants’ alleged widespread fraud,” noted United States Attorney Kennedy.  “While that effort succeeded in that objective, the unfortunate truth is that the swiftness with which we moved may have also contributed to the reasons for which the original indictment in this case was dismissed by the Court.  In the end, however, this new indictment now ensures that the defendants will be held to answer for the serious crimes alleged therein.”

The indictment is the result of an investigation by the Federal Bureau of Investigation, under the direction of Special Agent-in-Charge Stephen Belongia, and the Federal Housing Finance Agency, Office of Inspector General, under the direction of Special Agent-in-Charge Robert Manchak, Northeast Region.

The fact that a defendant has been charged with a crime is merely an accusation and the defendant is presumed innocent until and unless proven guilty.

 

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R. E. Developer Charged in Mortgage Fraud Scheme

Stephanie Abbott —  February 2, 2021 — Leave a comment

Andrzej Lajewski, 53, formerly of Wheeling, Illinois, a real estate developer, who owned Des Plaines-based Highland Consulting Corp., and Chicago-based Quality Management and Remodeling Inc., has been indicted with three others for allegedly participating in a mortgage fraud scheme that defrauded financial institutions out of at least $3 million.

According to an indictment returned Jan. 28, 2021, Lajewski schemed with two mortgage professionals and the owner of a remodeling company to fraudulently obtain at least $3 million in mortgage loans by making and causing to be made materially false representations to financial institutions regarding the buyers’ qualifications for the loans. The false representations concerned the buyers’ employment history, income, assets, source of down payment, and intention to occupy the properties, the indictment states.  In some instances Lajewski fraudulently claimed to lenders that the buyers were employed by his companies – even though he knew that was untrue – to help the buyers qualify for the mortgage loans, the indictment states.

The alleged fraud scheme lasted from 2010 to 2016 and involved numerous properties on the South Side of Chicago.

The indictment charges multiple counts of financial institution fraud against Lajewski, and two mortgage professionals – loan originator Agnieszka Siekowski, 46, Northbrook, Illinois and loan processor Aldona Bobrowicz, 45, Arlington Heights, Illinois and the home remodeler, Andrzej Bukowski, 66, formerly of Wheeling, Illinois.  Arraignments for Siekowski and Bobrowicz are scheduled for Friday at 10:00 a.m. before U.S. District Judge Martha M. Pacold.  Arraignments for Lajewski and Bukowski have not yet been scheduled.

The indictment was announced by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois; and Brad Geary, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General.  The government is represented by Assistant U.S. Attorneys Kalia Coleman and Jason Yonan.

The public is reminded that an indictment is not evidence of guilt.  The defendants are presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.  Each count of financial institution fraud is punishable by up to 30 years in federal prison.  If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.

 

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Attorney General Co-Leads Bipartisan Coalition Fighting for Homeowners

Stephanie Abbott —  January 29, 2021 — Leave a comment

Minnesota Attorney General Keith Ellison and New York Attorney General Letitia James today led a bipartisan coalition of 33 attorneys general in opposing a proposed class action settlement that would permit PHH Mortgage Corporation and its predecessor corporation, Ocwen Loan Servicing, LLC (collectively “PHH”), to continue to profit from often-illegal payment-processing fees that they charge to homeowners.

For years, PHH has been charging more than 17,000 homeowners in Minnesota and close to a million homeowners nationwide, a fee – anywhere from $7.50 to $17.50 each time – solely to make their monthly mortgage payment if that payment is made by phone or through the homeowner’s online account. Nowhere in these homeowners’ mortgage contracts is there authorization for such fees. In fact, PHH does not charge “processing” fees when its customers pay by check or set up automatic debit payments.

But under the terms of the proposed class settlement — a settlement that was hastily entered into only five months after the complaint was filed — PHH would be permitted to continue to charge these fees, up to $19.50 per month, for the remaining life of the loan, which for many Minnesotans could be another 20 to 30 years. In exchange, homeowners will receive a paltry, and for some, illusory, one-time monetary payment. In addition, the proposed settlement seeks to authorize these unlawful fees through an unwritten, mass amendment of the mortgages, a violation of most states’ statutes of frauds, a centuries-old legal doctrine that requires contracts related to property be in writing and signed by the parties.

As if transforming homeowners into a profit center in violation of states’ laws was not enough, the proposed settlement is designed to ensure that a portion of the monetary relief intended for homeowners will actually end up in PHH’s hands. For homeowners whose loans are still serviced by PHH, the only relief will be a credit to their account, with late fees being paid before any credit is applied to the unpaid principal balance of the mortgage. As a result, these credits toward late fees are more of a self-dealing payment to PHH rather than any kind of relief to the homeowner.

Finally, any settlement funds not distributed to the class member homeowners will be returned to PHH. Such a feature in a class-action settlement often suggests to courts that the settlement simply benefits the attorneys involved and is not in the best interest of the impacted class members.

Attorneys General Ellison and the coalition filed an amicus brief in U.S. district court in Florida opposing the proposed settlement in Morris et al. v. PHH Mortgage Corporation, et al.

“Affording your life is tough enough — and for years, PHH has made it tougher on 17,000 Minnesotans by charging them outlandish, unnecessary, and possibly illegal fees just for the privilege of paying their mortgage. Now, this hastily settled class action lawsuit will allow PHH to continue this harmful practice, in some cases for decades. This doesn’t pass the smell test,” Attorney General Ellison said. “The job of attorneys general is to protect the residents of our states against abuse. I’m proud that more than 30 of us have rallied to stand up for our homeowners and push back on this proposed settlement that benefits the abuser.”

Joining Attorneys General Ellison and James in filing today’s amicus request are the attorneys general of Alaska, Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and West Virginia.

 

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Call Center Manager Pleads Guilty to Defrauding Homeowners

Stephanie Abbott —  January 26, 2021 — Leave a comment

Edwin Josue Herrera Rosales aka “Josh Herrera,” 34, Washington pleaded guilty today to a conspiracy to defraud approximately 1,000 distressed homeowners facing foreclosure.  Herrera Rosales pleaded guilty to one count of conspiracy to commit wire fraud in connection with his operation of call centers that operated under the names “Sound Solutions Group,” “Community Assistance Center,” and California-based “Sienna Support Network.”

Herrera Rosales and his co-conspirators sent solicitation mailers to distressed homeowners nationwide.  The mailers promised that Herrera Rosales’ organization could reduce homeowners’ mortgage debts and lower their monthly payments.  When homeowners called the call center, operators put the callers through a phony “underwriting” process and then told the callers that the company’s legal and underwriting staff had determined it could negotiate a favorable mortgage modification in exchange for an upfront fee of $3,000.  In fact, the call center had no legal or underwriting staff, and many of the homeowners did not receive the promised modifications.

According to records filed in the case, Herrera Rosales conspired with others based in Southern California to operate the scheme.  Each week the operation sent approximately 4,000 mailers to distressed homeowners across the country.  The mailers stated that that the homeowner had been “pre-approved” for a new government program, under which Herrera Rosales’s organization could negotiate a mortgage modification.  For example, one mailer said that Herrera Rosales’s organization could reduce a borrower’s loan balance by over $140,000 and could reduce the interest rate to 2%.  The mailers urged the homeowners to call the Everett call center for assistance.

Herrera Rosales oversaw a staff of call center operators.  When homeowners contacted the call center, Herrera Rosales directed the operators to follow a script designed to make it appear as if each caller’s mortgage was being reviewed by the company’s “underwriting” and “legal department” to make sure the homeowner qualified for the supposed federal program.  In fact, the call center had no legal staff or underwriting department.  Instead, operators were instructed simply to put each caller on hold for a pre-determined amount of time, to make it appear a review was underway.  The operator then would return to the line and tell each victim that he or she was one of the “very select few” who qualified for the program—but only if the homeowner paid the call center a $3,000 fee.  If the homeowner balked at the fee, the call center staff had another script with certain “hot button” statements to persuade them to sign the documents.  It is impermissible under federal regulations to charge upfront fees for mortgage modification services.

Once the contracts were signed, the call center submitted the homeowner’s paperwork to a California-based loan processing group, which made some minimal efforts to restructure the debt.  While a limited number of customers obtained a lower monthly payment, the vast majority had no change or, in some cases, a higher monthly payment.  The call center used a phony address, and operators used aliases to disguise their identities.

Between March 2016 and May 2018, about 1,000 customers paid over $2.5 million to the various entities operated by Herrera Rosales.  After Herrera Rosales paid the expenses of the call centers and paid a share to his co-conspirators, he kept approximately $360,000.

Herrera Rosales is scheduled for sentencing by U.S. District Judge John C. Coughenour on May 4, 2021.

The announcement was made by U.S. Attorney Brian T. Moran.

The case is being investigated by the FBI.  The case is being prosecuted by Assistant United States Attorney Seth Wilkinson.

herrera_rosales_information.pdf

 

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