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November, 2010

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Mortgage Fraud / Gaming the System

Saturday, November 20th, 2010

Little lies with big consequences.

MIAMI, FL–Yvette Valdes was a mortgage broker, doing business as “Best Mortgage Choice” in Homestead, Florida.

Like other mortgage brokers Valdes relied on large financial institutions, so-called “warehouse lenders,” to finance her loans. Typically, a warehouse lender wires funds direct to an escrow or loan closer, acquires the loan through closing, and re-sells the loan in the secondary mortgage market where it is packaged, or “securitized,” for investment offerings (mainly bonds).

10802 SW 244th Terrace

This business model relies on guidelines and ratings to assure investment quality. Among the critical guidelines, for a prime quality loan, is a requirement that the borrower have equity in the real property security. Thus, a loan equal to 90% of property value is rated more secure than a 100% loan. Likewise, a buyer making a 10% down payment is deemed a better risk than one with no “earnest money.”

Which explains why faking this stuff is a big deal.

Two weeks ago, Yvette Valdes pleaded guilty to federal criminal charges related to mortgages she originated against two residential properties in Miami. Also pleading guilty were her daughter Jeannine Valdes-Perez, her brother Joseph Gonzalez, son-in-law Victor Perez, and a hapless escrow officer named Catherine Maiz. All five pled to one count of conspiracy to commit wire fraud, while Valdez-Perez also pled to an additional count of wire fraud.

According to court filings, Valdes conspired with the other defendants to acquire properties at 10802 SW 244th Terrace (the “10802 Property”) and 21012 SW 122nd Court (the “21012 Property”), under false pretenses.

Prosecutors dubbed this the "21012 Property"

For the 10802 Property, Valdes arranged for her son-in-law, Perez, to submit a loan application falsifying his employment, income, and cash on hand for a down payment. Valdes then enlisted the escrow officer, Maiz, to send a letter to the warehouse lender, Argent Mortgage, saying the title company was holding $17,000 received from Perez. The statement was false. Relying on false information Argent approved the loan and wired $337,808 to fund the closing. The loan defaulted, causing “substantial loss” to Argent.

For the 21012 Property, Valdes again arranged for Perez to submit a loan application with false information, including a statement he would occupy the property as his residence. This time, Valdes instructed Maiz to create a false settlement statement (HUD-1 form) misrepresenting the source and amount of funds handled through escrow. Mainly, the HUD-1 showed $26,321 as deposited by Perez toward closing. In fact, Maiz held only a “fake” check which, following instructions from Valdes, she did not attempt to deposit. Relying on phony documentation, JPMorgan Chase wired $246,646 to fund the closing. Unbeknownst to JPMorgan Chase, some $15,000 was diverted from loan proceeds to pay Perez for his cooperation as the “straw borrower.” This loan also defaulted, and JPMorgan Chase took a loss.

The Wilkie D. Ferguson, Jr., Federal Courthouse, Miami, Florida

Sentencing for all defendants is set for January 21, 2011. Each faces a maximum 30 years in federal prison.

Moral: As mortgage fraud goes, these are small cases. It appears the main motive was to create bad loans so Valdes, and others, could “earn” routine commissions and fees.

And this isn’t Valdes’s first brush with notoriety. In 2008, in a series titled “Borrowers Betrayed,” the Miami Herald named Yvette Valdes as a local mortgage broker who originated $22 million in loans approved by Orson Benn, a former executive with Argent Mortgage. According to the Herald, “nearly all of the (Valdes) mortgages contained false or misleading information.” Benn was charged with racketeering by Florida state prosecutors in 2008, and is serving an 18-year prison sentence.

Like counterfeit money, bad loans subvert the economy. Creating them is serious crime.

Postscript: In February 2011 each defendant was found guilty of one count of conspiracy to commit wire fraud. Valdes was sentenced to 33 months in prison, followed by three years’ supervised release, and ordered to pay restitution of $386,500; her daughter Valdes-Perez got 27 months, three years’ supervised release, and must pay restitution of $249,500; brother Gonzalez got 33 months, three years’ supervised release, and must pay restitution of $302,000; son-in-law Perez got 21 months, three years’ supervised release, and must pay restitution of $386,500; and, finally, escrow officer Maiz was credited for time served (nine months), plus five years’ supervised release, and must pay restitution of $337,000.

Posted in Real Estate Law, Real Property | No Responses »
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Foreclosure Rescue / Indictable Offenses

Saturday, November 6th, 2010

Suspicious dealings of a foreclosure rescue “expert.”

The first thing was to save her home.

It was 2008, and Karen Tappert was broke. Sometimes self-employed, but mainly unemployed, she couldn’t make the mortgage payment on her home in Bend, Oregon.

The Las Vegas property

Twice that year Tappert filed bankruptcy, but each case was dismissed when she failed to make court appearances and required payments.

In the meantime, Tappert studied debt elimination schemes being touted on the internet. She became convinced that debt, in particular mortgage debt, could legally be avoided using simple procedures and forms offered by the debt elimination “consultants.” The typical rationale behind these schemes was that the U.S. Federal Reserve system is unconstitutional, and loans funded with anything other than gold or silver can be avoided.

Soon Tappert began to offer her own services, and dubious legal forms, on the internet and by word of mouth. One blog boasted, “Karen has over 100 SUCCESSES around the country and WITHOUT having to use the courts!”

But last June the “Karen Tappert Method” came into question, when Tappert was indicted by a federal grand jury in Las Vegas and charged with multiple counts of mail and wire fraud. Here are some highlights from the criminal indictment.

The "rental" in Farmington, New Mexico

Count 3: The owner of property at 1601 Imperial Cup Dr., Las Vegas, NV, was behind in payments and faced foreclosure. Tappert offered to rescue the property for $1,800. The owner declined, but signed a quitclaim deed to an entity controlled by Tappert, known as “Amari Group.” Later, the property was foreclosed and acquired by Federal National Mortgage Association (a/k/a “Fannie Mae”). Tappert caused a fraudulent deed to be recorded, purportedly conveying the property from Fannie Mae to Amari Group. Tappert signed this deed on behalf of Fannie Mae.

Count 5: Property at 612 Diamond St., Farmington, NM, was foreclosed and acquired by Deutsche Bank National Trust Company, as trustee for investors in a mortgage-backed security that included the foreclosed mortgage. Tappert caused a fraudulent deed to be recorded, purportedly conveying the property from Deutsche Bank to an entity controlled by Tappert, known as “Saraland Investments.” Tappert notarized the bogus deed. Then Tappert rented out the property pocketing $4,050.

Corona, California: A million-dollar property "sold" for $490,000

Count 6: Property at 675 Gregory Circle, Corona, CA, was in the midst of non-judicial foreclosure. The foreclosure sale had been postponed, several times, when a fraudulent “Trustee’s Deed Upon Sale” was recorded. This trustee’s deed purportedly evidenced a foreclosure sale to an entity controlled by Tappert, known as “Northwest Properties Associates, Asset-Backed Certificates, Series 2006-FF1.” Days later, the property was sold by Northwest Property Associates for $490,000. The sale deed was signed by Tappert, on behalf of Northwest Property Associates.

Tappert has entered pleas of not guilty, and she awaits trial.

Moral: Karen Tappert is presumed innocent until proved otherwise. But if a defense to these charges will be that the Fed’s unconstitutional, and the money’s no good, she should know that others betting on this defense have gone to prison.

Postscript: In July 2011 Karen Tappert pleaded guilty to two counts of mail fraud and four counts of wire fraud. In January 2012 Tappert was sentenced to 97 months in prison, followed by three years supervised release, and ordered to pay restitution of $3,643,259.

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