More on 'Operation Malicious Mortgage'

A few updates on "Operation Malicious Mortgage,"
the Department of Justice name for today's announcement of various recent mortgage fraud prosecutions.

The DoJ's press release, which you can read here, says the initiative involves 144 cases and 406 defendants across the country. Many of the indictments have been previously announced, including four in Southern California. More on the California cases at the bottom of this post.

From the DoJ: "Operation Malicious Mortgage addresses primarily three types of mortgage fraud schemes:  lending fraud, foreclosure rescue scams and mortgage-related bankruptcy schemes. Lending fraud frequently involves multiple loan transactions in which industry professionals construct mortgage transactions based on gross fraudulent misrepresentations about the borrower’s financial status, such as overstating the borrower’s income or assets, using false or fictitious employment records or inflating property values."

You can read complete L.A. Times coverage here.

Analysis: These appear to be a collection of smallish and unrelated prosecutions, but if you bundle them together and give them a name, you can portray them as part of a "crackdown," or, as the Department of Justice likes to say, a "takedown."

Relatedly: What is with the need to make every effort into an "Operation"? Operation Malicious Mortgage? A recent California fraud prosecution was called "Operation Homewrecker." I'm quite certain the readers of this blog can do much better in the "Operation Name that Operation" game. Please send your nominations via the comment button.

You can find a summary of recent Southern California mortgage fraud cases below.

Recent mortgage fraud cases in Southern California, as described today by the U.S. attorney's office in Los Angeles:

-- In a “shotgun” scheme, a Los Angeles man was charged on Tuesday with bank fraud for submitting home equity line of credit applications to five different banks at the same time. Because they were not aware of the applications to the other banks, four of the five banks approved the applications, which allowed Roy Wankee Hong to obtain nearly $1.1 million. Hong, 43, is named in a criminal complaint that accuses him of bank fraud, a charge that carries a penalty of 30 years in federal prison if convicted. Hong is scheduled to appear in United States District Court on Friday.

-- In a second shotgun scheme, Sang Park, 35, of Koreatown, was charged with bank fraud in April for allegedly obtaining several loans simultaneously. As a result, authorities said, Park caused banks to lose more than $800,000. Park made her first court appearance Friday, at which time she was ordered held without bond. Park is scheduled to be arraigned on June 30 and faces up to 30 years in federal prison if she is convicted.

-- Seven out of 10 defendants have pleaded guilty to a scheme that sold overvalued homes from some of California’s most expensive neighborhoods to mostly straw borrowers, causing more than $40 million in losses to lenders. The three remaining defendants -– including two  Beverly Hills-based Prudential Realtors who were the firm’s top brokers nationwide in 2002 -– are scheduled to go to trial in October.

-- Five defendants have pleaded guilty, and the two lead defendants are scheduled to be sentenced on June 30, in connection with a $12-million scheme that targeted homeowners in default on their mortgages and falsely promised them help. Martha Rodriguez and Edward Seung Ok orchestrated a scheme that promised refinancing to distressed homeowners, but instead sold their properties to straw borrowers who went into default. Rodriguez faces up to 40 years in prison when she is sentenced.

-- (Filed in Orange County) Three people – two from Las Vegas, Nev., and one from Los Angeles -– were indicted Friday on mail fraud charges for allegedly making bogus bank statements that were submitted to lenders as part of mortgage applications. As a result, more than $50 million in loans were funded, with half of those currently in default or foreclosure. The Nevada residents -– Gilma Ruiz and her brother, Francisco Ruiz -– and Mario Hernandez have agreed to surrender to federal authorities on June 23. The charges in this case are part of an ongoing investigation.

Photo Credit: Associated Press

Comments

[sunsetbeachguy]

The FBI-DOJ better read the bubble blogs, since many of these crimes have been documented prolifically for the past 2+ years.

The stupid feds are going to have to do a lot more numbers to scare the incredibly dirty REIC industry straight.

Here are some google keywords.

Super-Jenae
Papa Guillermo on BMIT
Palladin's posts on the housing bubble blog tracking overt fraud in Sacramento.
Deb's posts at both Calculated Risk and the housing bubble blog on the same types of fraud in the SFV.

That is just off the top of my head.

We need at least 5,000 if not 10,000 arrests & prosecutions to get through to the REIC.

[amm]

How about "Operation Divert-attention-from-government-irresponsibility-in-
response-to-the-credit-crisis"?

[Housing Bull Chorus]

"Operation RTD...Busting Them by the Busload"

"Mortgage Broker Rodeo Roundup"

[tealeaf]

"No Option Strong ARM"

When this is all done, their sentence will be 15 years, fixed, with no grace period.

[yours truly, Johnny Dollar]

Do any of these people indicted advertise their mortgage
activities on local radio stations? Each day, on KNX,
KABC, KFI and other stations, I hear how these mortgage
companies can "solve all your problems."
Question: should the radio station management/owners
also be indicted? Tell me the difference between what
involvement the radio stations have in this fraud vs.
the driver of the get-a-way in a bank robbery.

[Hugh]

To Quote SFV Real Estate. "I will go out on a limb and state that there is no appraisal fraud".

[arcticblueice]

Stop using credit.
Make the choice not to be a slave to debt my friends.
The Holy Scriptures say "Owe no man anything" in Romans 13:8.
The Holy Bible says in
Jeremiah 17:9-11 The heart is deceitful above all things, and desperately wicked: who can know it? I the LORD search the heart, I try the reins, even to give every man according to his ways, and according to the fruit of his doings. As the partridge sitteth on eggs, and hatcheth them not; so he that getteth riches, and not by right, shall leave them in the midst of his days, and at his end shall be a fool.

[I Had a Dream]

Well this is special. According to the L.A. Times today, there doesn't seem to be ANY interest in bringing a formal complaint against Laura Richardson to the House Ethics committee. The watchdog CREW wrote a strongly worded letter to them, but this in no way requires them to investigate. They either have to decide to do it themselves or another house member has to sponsor a complaint from the public.

Is she a sacred cow?

We have what looks to be clear evidence of financial misconduct, ethical violations, mortgage fraud, and many things much much worse. That the committee itself and all the other house members refuse to take action on this... is... what... um... insane? Nah, just business as usual. Screw business as usual.

If congress doesn't do it's own housekeeping, how do WE do it? No... the answer is not voting... that doesn't work. How do we make sure that this person is fully investigated, forced out, and imprisoned if necessary?

Bloggerman, we don't seem to have any ideas on how to do this. Can you ask the various enforcement agencies why we haven't seen an indictment yet? State and Federal agencies? Attornies General?

There's still one more day left in the week. Maybe she's waiting for late late friday afternoon to announce her early retirement.

Anyone know if she's actually up in DC doing some kind of political looking activity?

[keith]

I'm concerned that "Operation It's a Great Time to Get Lefty" may have snared one of my favorite commenters.

[go]

This just goes to show, as expected, what kind of company the taxpayers helped out when $billions were allocated to help Bear Stearns:

A Bear Stearns fund manager (now arrested) saying, "[B]elieve it or not — I've been able to convince people to add more money."

And saying to coworkers, "the subprime market looks pretty damn ugly … I think we should close the funds now. The reason for this is that if [the CDO report] is correct then the entire subprime market is toast."

Then saying to investors, "we're very comfortable with exactly where we are … the structure of the Fund has performed exactly the way it was designed to perform."

And not telling investors that an investment bank asked to withdraw their $57 million.

[bigmatt]

As an appraiser, long-time reader & some-time contributor to this blog, I can say that I was regularly pressured by loan officers, mortgage brokers, real estate agents & BORROWERS to inflate valuations. I stayed true to my conscience and paid the price - losing clients regularly who could get the proposed value elsewhere. I am no longer appraising as banks have pulled their products from mortgage bankers in order to mitigate risk. In turn, appraisal management companies have found it opportune to lower fees...so the same appraisal I used to charge $350 for is now only $200.

The pricing structure for appraisals hasn't changed in 10-15 years. I am resolved that it is not a growth industry, particularly as the RE industry's reliance on technology grows. Services such as Redfin and, someday, Zillow will replace appraisers.

Mortgage brokers & loan officers made 10x-20x my fees on a single loan. Processors, escrow and title companies all charge more money than an appraiser on a per transaction basis. Sure, I made a decent living when the market was swinging - sometimes 40+ appraisals per month. Today, my colleagues might do 2-3 appraisals on a good week.

There is blame to spare up & down the mortgage funding food chain. Why don't we start with the CA Dept of Corporations? After all, they made it possible for lenders to hire anyone (including convicted felons) without typical licensing requirement imposed by the DRE. Appraisers were pawns in this game - look elsewhere for blame.

[Bill]

Isn't it obvious why they need an "OPERATION" name?

It's cause they only have enough people to pursue 144 cases.

Heck, I could find 144 cases within a 10 minute walk of my house.

It's just a big "huff and puff" to make it seem like they are actually doing something. Cause actually doing something would requiring hiring about 10x as many agents for the next several years to pursue all the slime here.

Reality: They don't really care because a serious crackdown would include those who lied on their mortgage documents. They should be held accountable for any bank loses taken on by fraudulent representation of one's ability to pay back a loan.

[ice weasel]

Operation Lipstick on a Pig
Operation Apple Polisher
Operation "Hey! Look! It's Skylab!"
Operation Used Home Salesperson
Operation Surface Scratch
Operation We Need @$!% Agents
And finally...
Operation Looking For "Targets of Interest" Who Are Not High Profile Elected Officials

[Rob Dawg]

Casey Serin remains free meaning the FBI has no credibility. Worse because Casey remains uncharged they have reinforced a moral hazard tat has caused many more to commit similar crimes. Can't you just see the "Casey Defense?" "I saw this kid on DR. Phil who got away with $2.4m in fraud in 4 or more states on 7 properties and 16 mortgages so I thought my little multiple HELOC application was okay."

[mrincomestream]

What's really funny is that all the bagholders out there are just beginning to realize that they may have stepped in something foul...

All that so-called equity that one thought they had was a figment of some criminals imagination...there's going to be a lot of heartbreak in this town when it's all over...

Imagine this the house on Portola mentioned in the article was worth 310k in 2001 if you apply historical rates of appreciation that house today might be worth 500k today without the fraud and people are on the hook for 1.5 million plus...yea...a lot of heartbreak is coming down the pipe...

[Rich]

Wow, I hadn't thought about how easy it apparently is to file multiple loan applications. I guess the credit reporting agencies need some kind of data set that indicates when a loan is approved so lenders can know who's about to take them for a ride. A handful of these cases in a single locality could create a lot of problems for local banks and shut down credit to everyone in that area...

[Laker]

Funny, you don't need FBI investigators spending months reseaching look no further, just check sales of houses in 2006, 2007 that got foreclosed within 12 months.
Here is a fresh one courtesy of JP Morgan generosity:
4744 Viviana Dr Tarzana 91356
http://www.redfin.com/CA/Tarzana/4
744-Viviana-Dr-91356/home/4268072

Sold Oct 28, 2004 $800,000
Sold Aug 04, 2006 $1,800,000

For sale now by bank $1,099,000....................
$1,000,000 appreciation in less than two years....or better $700,000 depreciation over two years....
That is 38% off. And this is not price sold but wishing price...
Anyhow, check the seller and buyer of the Aug 2006 transaction....There is probably close to MILLION dollars split somewhere between them....
Hey FBI, GET THAT MONEY BACK!

[ice weasel]

I agree completely rob dawg here. Not that at least busting some scammers isn't a good thing, it is. But when high the serins and the super-jenaes of the world run around continuing their game, it's tough to see anything as a serious crackdown.

[ladybug]

Operation:
Mortgage Money Mess Meltdown - caught with our pants down!

[wanderer]

Another 2cents from another appraiser. It is a bit ironic that as government seeks to assure or insure that this type of fiasco does not repeat, that New York State legislators believe that what is needed is a code of conduct for appraisers: probably the most regulated, threatened, independent, least rewarded and honest of all parties involved in a loan transaction. While it is true that there are some incompetent appraisers, and no doubt, some crooked ones, appraisers for the most part are honest, diligent, thoughtful and forthright. Most arguments over value (and there really should be no argument) generally revolve around a couple of thousand dollars. This in a market that has seen double digit appreciation and now, regression all within an historic short time period. But this is allowed by our free enterprise system, a free market system, not much different than caused the dot.com stock meltdown of not too long ago. I wouldn't mind a little government control (even though I'm really against government butting in but if government is going to pick up the tab with our tax dollars then maybe it should be considered), or at least seeing the industry self-regulate with some kind of runaway train controls like "no lending on more than 10% per year annual appreciation" period. And lets think about how this started in this free enterprise system of supply and demand. When lenders started turning a blind eye to loan qualification criteria (stated income, no money down, 100+% loans) they created a situation in which, all of a sudden, every Joe American and any other foreigner could become a player in a market that traditionally was exclusive to members who could show ability to earn, save, budget and sustain income. What does that do to supply and demand? Suddenly there are a lot of demanders (very few as it turns out that were legitimate in that they could afford homes at normal prices let alone inflated prices) and not enough houses and the price goes up. And how does it go up so fast? Not by the re-sale market. The re-sale market cannot react fast enough. The re-sale market follows new home prices and the builders are very organized, having weekly meetings, analyzing and plotting. How many people signed up at the models last weekend mr local sales rep? 1200? Wow, raise the model prices $10,000 and keep doing it every week until the line out the door disappears. And qualify everyone with our own bogus lending company set up to sell only our own new homes and then dumping the loans on greedy and foolish Wall Street money managers and government backed lenders of all sorts, shapes and desires. And a slew of "Here today, go bankrupt this afternoon and open with a new name tomorrow" mortgage companies re-fiing good affordable loans. All the appraiser does is report on where the market is on any given day. Appraisers do not drive the market, explain how the market can do what it does, have an opinion on whether or not they think the market is doing what it should. They only report on what other homes similar to "property A" have sold for in the recent past. For all the Ponzi gamblers, speculators and dream-come-true home buyers that thought that home appreciation would go on forever and you could make the $3,000 or $4,000 a month payments because your property was going up by $5,000 per month, the inevitable reality has come home, even though you no longer can. And lets look at why the government hasn't done much. For the State property tax (your county doesn't get to keep much) rakers and the IRS gleaners of real estate profit income, the good times were good for them too. And it was good for Chevrolet and Ford and even better for Toyota, Honda and BMW and Sony and LG. All of the dominoes have not yet toppled. There is more hurt to come. So if the solution is to require a code of ethics of appraisers (We already have one called USPAP), then we will have applied a meaningless band-aid to a mosquito bite while the gushing wound at the femoral artery remains unbound, then we can all watch "Operation Business as Usual" fade into the dust until the next Ponzi scheme of our free enterprise system comes back around to kick us in the collective public gonads.

[Debra]

My loan was SOLD to INVESTORS while in default!! I never would have known this if I did not do the proper research and acting as pro se in my foreclosure. I have the paperwork to prove it too. Needless to say, their attorneys have backed off me thus far. This is big fraud put upon the investors.

[Laker]

Debra,
Don't be so sure about it. You should continue your research on this. My guess is that you will find that your defaulted loan was sold to investors for 50 cents on the dollar...or something similar.
You see, the idea behind it is for the bank to remove your bad loan from their books at a price that is better for them at the moment. The investors on the other side, would foreclose on you, handle all the cost, evict you in case you don't move out, then put it on the market for 60-80 cents on the dollar of the loan - trying to make some profit. Depends on the condition of the house, they actually might make it...or break it.
I have personally seen a house that got investors buying it from the bank before foreclosure for 52 cents on the dollar. Right now, it is listed for sale for about 80 cents on the dollar.
5612 Rawlings Ave 91367
Sold Mar 02, 2007 $745,000
Investor bought Apr 24, 2008 $390,150
Now asking: $592,000

[Jaime Gomez]

$695 DUPLEX IN SOUTH L.A.
Over 200 duplexs were sold for this much by Remax Online Downey and Vivanco Partners. All were constructed with stolen materials and illegal aliens working for them. All loans and appraisers were done through Countrywide. these duplexs are still available.

[Spencer]

LenderPolice.com seems to have taken care of the mortgage lender loan fraud problem for Borrowers, Closing Agents, Mortgage Lenders, and Real Estate Agents.

Always use Lender Police after you apply for a mortgage loan. They’ll tell you if your lender is giving you a good deal or not in one of two ways. You can purchase a good faith estimate review for $99 that will tell you if the interest rate, points, fees, and rebates you’re being charged is appropriate for your situation. The loan document review for $199 verifies that the loan documents that you’re signing are for the same loan that you were quoted and your lender didn’t slip in any extra points, fees, pre-payment penalties, or is receiving a lender rebate for selling you a higher interest rate than you qualify for.

A mortgage loan evaluation from Lender Police is the only way to guarantee you lender isn’t trying to rip you off.