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HALLELUJAH! Mortgage Fraud Scamsters Finally Arrested (just 5 years too late).

By
Real Estate Agent with 1st Action Real Estate

Here's today's update "Seven Accused of Defrauding Investors of Millions"

HALLELUJAH!!!! 

If I sound ecstatic it's because the biggest fraudsters in our area have finally been charged! These three, Montecastro, Duncan and McLeod started their mortgage fraud scheme in Murrieta in 2004. Our association and our chief counsel started documenting the problem late that year. We took it to the District Attorney, the FBI, the Dept. of Real Estate, the Attorney General, local law enforcement, lenders, etc. - and nobody NOBODY would give us the time of day. 

This scam was the incentive for our Association (SRCAR) to join our neighboring Association (IVAR) in a joint fraud task force with the Giardinelli Law Group. This effort has now expanded to include Ventura County, who had started their own, and Orange and San Diego County associations. We are trying to get our state association to at least give us a forum to educate other Realtors, lenders and the public about real estate fraud. 

As Attorney Richard Ackerman puts it - 'earlier intervention would have prevented a lot of damage to both investors and the community.' These people operated unimpeded for at least three years, involving hundreds of homes throughout our valley. This spawned numerous copycats who saw that there was  money to be made and no apparent consequences

Their early scheme involved the over-bidding by $50,000 - $100,000 on homes, bringing in fraudulent appraisals, taking the excess at COE and then sticking the unwary buyers with the result. Often they preyed on the unsophisticated and found a trusting audience in their fellow Filipino community. Many Buyers purchased multiple homes with the understanding the Stonewood would help them make the over-payments until they could refinance in the rising market. Yeah, like that actually happened. 

These severely overburdened homes started the collapse in our community in late 2006 yet the fraud continued. As the economy headed south virtually every one of the hundreds of homes they had caused to be purchased went into foreclosure. As they had focused on certain neighborhoods,it was not unusual to see 8 out of 10 homes on a single street vacant and blighted as a result. 

5 years later, fraud is still with us and has morphed into other avenues to follow the trail of opportunity. But at long last there may be justice for these early perpetrators who played a large role in the early demise of our market. 

Here's to justice finally served. Helooooo Bubba !

For the complete article, please go to: Charges Filed in Major Fraud Case. pe.com

Criminal charges have been filed against James B. Duncan, Hendrix Moreno Montecastro and Maurice McLeod, three Riverside County businessmen who allegedly orchestrated a major securities and mortgage fraud that drove many investors to financial ruin in California and Arizona.

The defendants allegedly created a complex network of companies, the chief of which were Pacific Wealth Management (which has no relationship to the company of the same name in San Diego), Stonewood Consulting and Total Return Fund.

 He said while the District Attorney’s complaint concentrates on securities fraud, the U.S. Attorney will file a separate criminal complaint accusing the defendants of mortgage fraud.

Richard Ackerman, an attorney representing 85 alleged victims in a civil lawsuit against the defendants, said “It’s about time” the DA and U.S. Attorney made the move.

 “What my clients wanted from day one is exactly what’s happening today. They wanted to create enough pressure on law enforcement so these people would be prosecuted and put away for a long time for destroying people’s lives,” Ackerman said.

 The defendants allegedly persuaded investors to buy multiple homes and then broke their promise to continue paying the mortgage payments and allowed the properties to go to foreclosure. Ackerman contends that this scenario involved at least 250 houses in southwest Riverside County and contributed t the tremendous loss of home values in the region.

 Ackerman said he believes earlier intervention would have prevented a lot of the damage to both investors and the larger community.



Comments (61)

Dianne Hicks
Realty ONE Group - Poway, CA

Gene, Great news and I hope they make it as public as possible to make others realize that they too will get caught. May the sentence be steep and mighty to serve as a warning!

Nov 21, 2009 02:20 AM
Nancy McNamee
Keller Williams Realty - Roseville, CA

Makes ya wonder about public officials who don't take things seriously right from the get go.  Are they inept, on the take or just don't care...

Nov 21, 2009 02:59 AM
Peter Burr
The Buyers Agency, "Empowering Atlanta Home Buyers" - Atlanta, GA
Regional Manager. Atlanta, GA

Makes me wonder who the real scam artists are...

Nov 21, 2009 04:08 AM
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison

Tere - it is just the tip of the iceberg for our region. We're hoping a couple of the other big copy-cats at least get honorable mention in the police log. As well as a few real estate agents and appraisers who climbed right up on the bandwagon.

Unfortunately because it takes soooo long to come to prosecution, the frauds have already morphed 2 or 3 or more times and manage to stay out in front of the cops. The ringleader of this group had been busted for running the same scam in 3 other states and just had his hands slapped - so he'd just take his act on the road like the snake-oil peddlers of old. He found more willing accomplices and a ton of victims in SoCal.

Even though this scheme had been cracked he remained in business on-line until very recently making pitches to separate suckers from their money. It may be a little harder to do from the inside and with bail set at $144 million, he may be inside for awhile.

Nov 21, 2009 04:55 AM
Harrison K. Long
HomeSmart, Evergreen Realty - Irvine, CA
REALTOR , GRI, Broker associate, Attorney

Gene ... Thanks for your article about success of the criminal prosecutions of the scammers on the about 250 homes and lending at Riverside County.

Nov 21, 2009 05:11 AM
Jirius Isaac
Isaac Real Estate &TriStar Mortgage - Kenmore, WA
Real Estate & loans in Kenmore, WA

It is ridiculous what people continue to get away with as so called "professionals."  We have to figure out an easier way to be able to hold them responsible.

Nov 21, 2009 05:44 AM
Kenneth Young
Uni International LLC - Virginia Beach, VA

Gene, this story doesn't surprise me at all.   We're here selling loan notes on homes, alot of them are non-performing, which means that those that will buy them will either do loan mods. on the property or foreclose.   It is a good deal for the investor because their getting the note at about 30-45 cents on the dollar on the balance of the loans, but having to look back over the loan's paperwork, there were "red flags" all over alot of the loans in the first place.

Appraisals were to high, credit scores were way to low, wages that couldn't support payment of the loans, the list goes on and on.   Currently we have over 1000 non-performing home loan notes just like this now for sale in Florida.   Investors win.  Home owners and lending institutions lose.  But it didn't have to be this way.

Nov 21, 2009 07:09 AM
Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living

There have been mortgage fraud and real estate scams all across the country.  The sad thing beside the perpetrators not being caught or prosecuted is that home "values" in the affected areas began to grossly inflate as a result of these higher "purchase prices".  Those homeowners thought their homes went up in value along with their tax assessments.  These scams do not just hurt the immediately involved but also many others who are unsuspecting.

Nov 21, 2009 08:03 AM
Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living

There have been mortgage fraud and real estate scams all across the country.  The sad thing beside the perpetrators not being caught or prosecuted is that home "values" in the affected areas began to grossly inflate as a result of these higher "purchase prices".  Those homeowners thought their homes went up in value along with their tax assessments.  These scams do not just hurt the immediately involved but also many others who are unsuspecting.

Nov 21, 2009 08:03 AM
Lyn Sims
Schaumburg, IL
Real Estate Broker Retired

So much for watching out for the consumers! Some of these depts you have to hit them over the head with a hammer.  Good post.

Nov 21, 2009 09:21 AM
Michael Ford
San Diego, CA
California+Hawaii+Oregon

about time!   thank you gene for bringing some esteem back to our trade and being part of the solution.

i've watched and shaken my head as certain ethnic groups went about the business of shanking their own...and it seemed to me like they did it for sport.

years ago i contacted the district attorney here in san diego and got completely ignored as i tried to report a similar senario as you describe.   since i wasn't a principle they told me i had no "privity"...i was trying to do a good deed and got shut down.  i am certain  the dumbass deputy DA i was talking to had no idea what she was talking about. 

tere rice, #44, i have heard escrows tell tales of only part of the loan docs being signed in their office and the rest of the disclosures being "notarized" by a "sign up service" at a different location, after the borrower had left.  so while there were no guns to  the head there were plenty of flat out crooked loans made and the borrowers did not always know what was going on.  i can show you a file i am working where the whole thing is in english...note, TD, disclosures, all of it.  the lender made a nice tidy package and presented it at  the closing.   The thank you note is in espanol.  the DRE has a rule that if you negotiate in spanish you generate docs the same way...the borrower in question had no idea what he was signing.  the lender was Countrywide...i am waiting for the class action lawsuit brought by the tens of thousands of hispanics they preyed on.

Nov 21, 2009 10:29 AM
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Now if they could only bust Barney Frank and Chris Dodd, and the 19 unnamed congressmen under investigation.

Nov 21, 2009 10:35 AM
Vanessa Stalets
RE/MAX Elite - Brentwood, TN
REALTOR, Brentwood TN Homes, Real Estate

Congrats on some fruition after so long and so much work. I am with the others who have said how amazing it is that this can happen and did for so long in so many places.

Nov 21, 2009 01:49 PM
Mike Henderson
Your complete source for buying HUD homes - Littleton, CO
HUD Home Hub - 303-949-5848

This is great what you and your association did.  It is also deplorable that the elected officials ignored it.

Nov 21, 2009 01:49 PM
Marian Pierre-Louis
Fieldstone Historic Research - Medway, MA
Metrowest Boston

Your efforts sound just like the guy who tried to sound the whistle on Maddoff.  A little late but at least your efforts weren't fruitless.

Nov 21, 2009 11:08 PM
Thomas McCombs
Century 21 HomeStar - Akron, OH

As a possible defense for the lack of early prosecution of these scammers, we have to understand that the sheer number of these perps makes investigations necessarily selective. There are only so many resources available, and these cases require an enormous  amount of leg work and research.

These are sophisticated crooks -- many of them are thought to be pillars of the community until finally exposed (eg: Mader).

Prosecutors need to have a high level of expertise to bring these cases to court and to prevail there. Too often these crooks can confuse the issues long enough that the prosecutors finally give up.

I know some these people, as I'm sure most of us do, and they are very good at what they do. The best defense against this kind of thing is for all of us to report and document any activities that we believe are fraudulent, and keep the authoritys' feet to the fire. They will respond when enough pressure is put on them.

"This is a great time to buy a house".

Akron, Ohio

Nov 22, 2009 12:06 AM
DeeDee Riley
Lyon Real Estate - El Dorado Hills CA - El Dorado Hills, CA
Realtor - El Dorado Hills & the Surrounding Areas

Hi Gene,

Thanks for your post.  Though it was late in coming, I'm glad to see this group is getting what is coming to them.  We had an agentl in a different office of our company get caught for a similar senario 2 or 3 years ago.  I don't remember ever hearing the story on how her fraudulent acts were exposed but our managers go over all our contracts and we have an internal legal department so hopefully they caught it first.  I'll have to look into that more.

Nov 22, 2009 03:55 AM
Gene Wunderlich
1st Action Real Estate - Murrieta, CA
Realtor & Legislative Liaison

Thomas - your are so right. When our DA finally consented to meet with us to discuss this, he basicaly said the same thing. It's not a sexy crime and it's not easily solved. You can catch a drug dealer or a car thief, make a case and get a conviction in short rder. These kinds of crimes - you have to get wind of it, then figure out if a crime is actually being committed, then understand the laws it broke and how to prosecute, then assemble the evidence from mounains of doicuments, mls info, escrow papers, etc. Then finally you can bring charges - very time consuming. I understand that but it's very frustrating when you're on the business side of it seeing it happen every day and not being able to do something.

These people got so blatant they were literally faxing in offers - sometimes 20 a day to offices with these inflated price offers of 600,000 for a 500,000 listing etc. As an agent you are obloigated ot present all offers to your clients, the client is getting the amount they asked for - who cares if some shady bastard is making off with an extra 100 grand? It was like a perfec storm of fraud and the authorities hands were tied.

Gene - yes, the people who are ultimately responsible for the housing debacle not only face no charges but are sanctimoniously in charge of parsing the blams to others and in charge of 'fixing' the problems. God help us.

Nov 22, 2009 04:33 AM
Tina Gleisner
Home Tips for Women - Portsmouth, NH
Home Tips for Women

How sad that it took so long for our legal system to do anything.

Nov 22, 2009 04:48 AM
Kathy Opatka
RE/MAX CROSSROADS - Ocean City, MD
Serving Ocean City, MD, & The Delaware Beaches

..and I hope "Bubba" prevails!!!!!.... No plea bargains!!!!!!!!!!!!!!1

Nov 22, 2009 05:40 AM