Once they convince a delinquent borrower to transfer title in order to stop foreclosure, some rescue firms then use mortgage fraud to obtain a loan and strip out all of the equity.
Edward Seung Ok was given a stiffer sentence by a federal judge in a foreclosure fraud case than his co-defendants because he didn’t return money as promised in his plea agreement, the U.S. Department of Justice announced in February. Ok received a 15 sentence while ringleader Martha Rodriguez was sentenced to 10 years. Three other defendants — Cynthia Valenzuela, Vladimir Stefanovic and Maria G. Juarez — each were sentence to less than four years in prison.
The government claims the defendants promised to help delinquent borrowers avoid foreclosure in a California scheme operated from 2003 to 2005. Prospects were found using computerized databases of foreclosure filings. But instead of helping the borrowers as promised, the defendants used straw buyers to fraudulently extract any remaining equity — causing nearly $13 million in losses on more than $40 million in mortgages.
Ok had agreed in his plea agreement to return $1.6 million he had transferred to the Bank of Nevis located on the Caribbean island of St. Kitts, but he subsequently claimed to have previously blown through the money. Rodriguez was free on bond for another crime when she committed the foreclosure crimes.
One state over, in Las Vegas, Nev., Jeffery Tye Brown was indicted on charges of four felony counts of theft and one felony count of forgery, Nevada Attorney General Catherine Cortez Masto announced last month. Through his company, DB Financial Services, Brown allegedly deceived borrowers into believing their foreclosures would be resolved in exchange for a $999 fee. The scheme was operated between December 2007 and February 2008.
Once an indictment was issued, Brown fled the country to the Philippines. But he has since been extradited back to the United States and recently faced arraignment.
It’s the second extradition from the Philippines to Las Vegas that was tied to a foreclosure scam. Michael Sinclair fled to the Philippines from Las Vegas after he was indicted in a modification scheme. Sinclair was later extradited back to Nevada.
On the other side of the country, the former owner of Home Savers Consulting Corp., Garth Celestine, pled guilty today to conspiracy to commit wire fraud, the U.S. Attorney’s Office for the District of New Jersey announced. He was originally arrested with co-owner Phil A. Simon in August 2009.
According to the government, Home Savers advertised services to help delinquent borrowers avoid foreclosure and repair their credit. The two allegedly told customers that straw buyers would take title to their properties while Home Savers worked on repairing their credit and after which title would be returned. Borrowers were told that extracted equity would be kept in separate accounts that were used to make the payment and pay home expenses. The whole process was supposed to take six months to a year.
But the funds weren’t kept separate and instead were poured back into Home Savers and a related company, Keep What’s Yours Inc. A total of $10 million in fraudulent loans were obtained in the scheme, and the two generated $1 million in illegal profits for themselves.
Celestine’s sentencing is scheduled for July 12. He faces up to 20 years in prison and a $250,000 fine.
U.S. Foreclosure Relief Corp. and the executives who operated it have agreed to an $8.6 million settlement with the Federal Trade Commission, the agency announced last week. The company allegedly claimed that it helped 85 percent of its clients obtain loan modifications, though this was not true. It is also accused of charging advance fees for foreclosure consulting services.
The judgment will be suspended except for $980,000 in cash, jewelry and vehicles surrendered by the company’s owner, George Escalante.
FTC, The People of the State of California, and the State of Missouri v. US Foreclosure Relief Corp., a corporation, also d/b/a U.S. Foreclosure Relief, Inc., Lighthouse Services, and California Foreclosure Specialists, George Escalante, individually and as an officer of US Foreclosure Relief Corp., Cesar Lopez, individually and also trading as and doing business as H.E. Service Company, and Adrian Pomery, Esq., individually and also trading and doing business as Pomery & Associates.
Civil Action No. 09-CV-768, FTC File No. 092 3120 (U.S. District Court Central District of California).