The document discusses real estate fraud in Stanislaus County, highlighting the roles of district attorneys and investigators in investigating and prosecuting fraudulent activities that exploit vulnerable victims, such as the elderly and those in foreclosure. Various types of fraud, including foreclosure fraud, mortgage fraud, and predatory lending practices, are outlined, along with the legal framework and recent laws aimed at combating these crimes. The document also provides tips for the public on how to recognize and avoid fraud in real estate transactions.

3. REAL ESTATE FRAUDStanislaus County District AttorneyW.R. McKenzie, Deputy District AttorneyGlenn Gulley, Criminal InvestigatorMark Smith, Criminal Investigator

4. A LITTLE ABOUT US:June 2005…SB 537 passed (Govt. Code 27388)$3.00 every Recorded Real Estate Document to go to Trust Fund for FraudStanislaus County began January 2006Full Time DDATwo Criminal Investigators

5. What do we Do:Focus on investigation and prosecution of Real Estate FraudEmphasis on Crimes that impact Vulnerable Victims:Elderly, Disabled, Unsophisticated, Foreclosure victimsEducational programs in the CommunityTo help reduce the number of victims

6. More Specifically,What do we Do:Investigate Frauds and ForgeriesForeclosure FraudTitle FraudFiling False Financial Statements in relation to Mortgage FraudEmbezzlement & Misappropriation of FundsConstruction Fraud

7. What is fraud?Theft…Stealing someone’s money or propertyFalse pretenses…criminal lies and induces someone to part with their money or property

8. Who are Perpetrators?IndividualsNotariesLendersBrokers/AgentsConstruction ContractorsFamily

9. Common crimes:Forged Title TransfersForeclosure FraudEmbezzlementsMortgage FraudPredatory LendingRental Schemes/Rent SkimmingReal Estate Investment SchemesIdentity Theft

10. Forged Documents/Fraudulent Conveyances:Steal the Equity in the HomeLoan taken on Property or sell PropertyVictim/Homeowner has no knowledgeAchieved by forged Grant Deed and Recording Title Transfer Sometimes Accomplished through forged Power of AttorneyResult: Conversion of Victim’s property to cash

11. What kind of fraud do we see in your industry?

12. Foreclosure Fraud:Desperate Homeowner in ForeclosureMay offer to take title to cure defaultMay offer to rent back houseOften tells homeowner saving their creditSteals Equity…Sells House…Evicts VictimOften Foreclosure sale will give distressed homeowner the equity after debt is paid!!

13. EQUITY SKIMMINGStraw Buyer UsedForged or False Loan Documents submitted to the LenderFalse Credit ReportsStraw Buyer Quit Claims to InvestorInvestor Fails to make Mortgage PaymentsRents Property Until Foreclosure

14. Mortgage Elimination Scams:Dorian GroupSeminars all over the countryOver-inflated appraisalsMultiple Loans on property w/Gift-back programsLender never sees last minute addendumsMillions of dollars on a single piece of property

15. Predatory Lending:Loans with Exorbitant Fees and PointsNever explained to VictimElderly and Disabled are targeted by unscrupulous LendersVictim is unable to make monthly payments and Lender makes the loan anyway

16. Reverse Mortgages:Targets ElderlySB 1609/Civil Code 1923.2Prohibits lender from Requiring Victim to Purchase or offer an Annuity to the victimRequires Lender to refer borrower to counseling… 5 approved by HUDBorrower must have a certificate of completion of counseling services before completion of loan

17. How does this crisis affect us? Hundreds of Subprime lenders have gone out of business.Billions of dollars were lost in city taxes from foreclosed/abandoned propertiesConfidence in the American Marketplace is at an all time lowConfidence in the government and the industry is at an all time low.

18. What is happening now?

19. Buy and BailBorrower purchases a new home and then allows their previously owner-occupied home to go into foreclosure.Borrower tells new lender that they intend to sell or rent out the old house. Old home upside down

20. Inflated rental income

21. No intent to sell or rent but states otherwise to new lender

22. Falsified rental agreements

23. Other false statements regarding the old homeShort Sale FraudProperty appraised below FMV. Sold to “new purchaser” who then re-sells it for FMV

24. Pockets the money or

25. Resells to original owner for far less than they originally owed.

26. Both the current and new lender are victims in this crime.Equity StrippingForeclosure specialist assists homeownerHomeowner told to make payments to rescuerDeed transfer may be hidden in the paperworkRescuer pockets the money

27. Fraud Enforcement and Recovery Act (FERA)May 20, 2009Expands federal jurisdictionFederally related mortgage loanSecured by residential propertyOccupied by 1 to 4 familiesProceeds used to pay of an existing loan secured by propertyAnd whichInvolves FDIC or HUD or Fannie, Ginnie etc…Or creditor invests more than $1m per year in residential

28. 18 U.S.C. 1014Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security for the purpose of influencing in any way any business or person that makes federally related mortgage loan.Statute of Limitation is 10 years.Maximum punishment $1m fine and 30 years

29. Signed by Governor in 2009

30. SB 36Requires a license endorsement for real estate brokers who solicit or negotiate mortgagesBusiness and Professions Code §10166Fines, License consequences

31. SB 94Loan Modification NO ADVANCE FEES … PERIODMisdemeanor $10,000 or $50,000 fine. Also Requires translation

32. SB 237Appraisal ChangesB&P 11302Creates registration program for appraisal management companiesRequires licensing and background for all

33. SB 239Real Estate Fraud PC 532f – FelonyLies or omits on a mortgage applicationAllows the above lie to take placeReceives ANY compensation knowing either of the aboveRecords any documents knowing any of the above

34. AB 260Predatory Lending Civil Code 4995Defines “higher priced mortgage loan”Limits prepayment penalties to 2% 1st year 1% second yearProhibits negative amortizationLimits total amount of compensationRequires a Fiduciary duty on part of brokerRestricts “steering”$10,000 fine plus loss of license

35. AB 329Reverse Mortgage Civil Code section 1932.2Seller cannot be associated with other financial or insurance entitiesNo referals to other productsGive list of at least 10 HUD approved counsellorsMust give Checklist of questions for counsellorLoan Cannot be approved until signed checklist returned to lender

36. AB 957Seller CANNOT require a specific escrow agent or title insurance3 times total costCivil Code Section 1103.20

37. AB 1160Mortgages must now include a summary of terms in whatever language is used to negotiate itPrior to execution and no less than 3 days after release of applicationSpanish, Chinese, Tagalog, Vietnamese or Korean.$10,000 fine.

38. Other CrimesFiling False Statements (PC 115.5)Forgery (PC 470)Obtaining $ or Property by False Pretenses (PC 532)False Financial Statements Credit/Loan Applications (PC 532a)Unlawful Notarial Acts (GC 8227.2)Elder Financial Abuse (PC 368)

39. REAL ESTATE AGENTS Business & Professions 10176Applies to AgentsCovers Misrepresentations & False Loan DocumentsCan subject you to investigation by the DRE; which may then be referred to us.

40. REPORTING A CRIME:Immigration status of the victim is not relevantContracts for the sale of real property should be in your first languageDon’t be embarrassed to report the crimeFraudsters prey on people who will trust them…Don’t trust them!!!!!

41. HOW ARE YOU A PERPETRATOR…?“BY AIDING & ABETTING…”

42. PRINCIPALSDIRECTLY & ACTIVELY COMMIT THE ACT CONSTITUTING THE CRIME; (E.G. “THE FORGER”)AIDERS/ABETTERSEQUALLY GUILTY

43. AIDERS & ABETTERSA Person Person aids and abets when:(1) with knowledge of the unlawful purpose of the perpetrator and; (2) with the intent or purpose of committing/encouraging or facilitating the commission of a crime(3) by act or advice aids, promotes, encourages, or instigates the commission of a crime You know a statement is false and submit the loan anyway…

44. WHAT ABOUT DUTY OF CONFIDENTIALITY…?Government Code Section 7470 provides in relevant part:“This section shall not preclude a financial institution , in its discretion from initiating contact with, and disclosing customer financial records to, appropriate state agencies concerning suspect violations of any law…”

45. Red Flags in Real Estate Transactions:Power of Attorney used without ExplanationNo property inspection Seller procures AppraiserRequest to Avoid EscrowRequest to Avoid Title InsuranceCash Payments made outside Escrow

46. More Red Flags…Disparity in Document DatesRecent LiensPost Office Box Listed for Borrower or EmployerSudden Changes to EscrowEscrow Instructions & Addendums not sent to Lender

47. WHAT CAN YOU DO…?Pay attention to the Red FlagsIf you see a Red Flag ask questionsConduct a limited inquiry and /or investigationContact you attorney ask for adviceIf it doesn’t sound right it probably isn’tIf you suspect FRAUD...Call our office!

48. WHAT TO REMEMBER?DISCLOSURE!DISCLOSURE!DISCLOSURE!

49. OFFICE OF THE DISTRICT ATTORNEY(209) 525-5550

51. 10 tips for Avoiding Fraud:What are you signing…Get an attorneyCheck References of Industry ProfessionalsBeware of Promises of Outrageous Profits Always conduct business in Office or BankBeware of Telephone solicitations Check Comparable sales in areaCheck Documents carefully…Avoid pressure to sign

52. 10 Tips to Avoid Fraud (cont.)Review History of propertyMake sure you understand the terms of your mortgage then check against actual documentsBeware of Alleged Business people who are “Mobile”…Never sign Blank DocumentsIf it sounds to good to be true…. IT IS!!!!!