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Category Archive: ‘Fraud’

Wire Transfers Now Scrutinized

In San Diego, this applies to cash sales over $2,000,000 to LLCs.

Wake up and smell the dirty money.

That’s the message federal regulators are sending to the real estate industry in Miami and other high-priced housing markets.

On Tuesday, the U.S. Treasury Department announced it would extend and expand a temporary initiative designed to uncover criminals laundering money through real estate. The decree targets secretive shell companies — corporations that don’t have to reveal their true owners — buying luxury homes. The feds have already renewed the rules twice since announcing them in January 2016.

But this time, there’s a big difference — and it’s putting Miami’s struggling condo market under even more scrutiny.

The rules, previously so limited in scope that they applied only to a few hundred deals, will now cover every big-ticket cash transaction by shell companies in seven major markets. They are the South Florida counties of Miami-Dade, Broward and Palm Beach; all five boroughs of New York City; San Antonio, Texas; Honolulu (included in the order for the first time); and Los Angeles, San Diego and San Francisco.

“This is going to gather much more information,” said Andrew Ittleman, a South Florida attorney who specializes in anti-money-laundering laws.

Critics dismissed Treasury’s original anti-money laundering rules — first deployed in Miami-Dade and Manhattan last year — as so narrow that they were practically toothless.

That’s because only less common methods of cash payments such as money orders, personal checks and hard currency had to be reported.

But the latest order includes wire transfers, which are electronic exchanges of money between banks. In most home sales that don’t involve bank loans, money is sent from buyers to sellers through wire transfers. Regulators were missing out on a huge swath of transactions.

“It exempted most people from disclosure,” said Alan Lips, a partner at Miami accounting firm Gerson Preston. “In today’s world, people wire money.”

Read more here: http://www.miamiherald.com/news/business/real-estate-news/article168915302.html

Posted by on Aug 24, 2017 in Fraud, Jim's Take on the Market, Tips, Advice & Links | 4 comments

Money Laundering Update

An earlier quote was that 50% of high-end sales were believed to be done with laundered money.  Below is the official quote from FinCEN – and they have extended their inquiry.

Note: In the last 12 months, there have been 774 closed sales over $2,000,000 in San Diego County – and 360 of those were all-cash.

Hat tip daytrip!

http://wolfstreet.com/2017/02/24/how-much-money-laundering-in-us-housing-market/

The US housing market has been a perfect platform to launder large amounts of money, no questions asked. Brokers, banks, and other industry professionals played along. There were no reporting requirements. Everyone in the world knew it. And they came to launder their cash by buying expensive homes.

But FinCEN, via its evocatively named Geographic Targeting Orders (GTO), wants to know who these opaque homebuyers are. To find out, the GTOs “temporarily require US title insurance companies to identify the natural persons behind shell companies used to pay ‘all cash’ [i.e. without bank financing] for high-end residential real estate in six major metropolitan areas.”

FinCEN is soliciting the help of title insurance companies “because title insurance is a common feature in the vast majority of real estate transactions,” and these companies can provide “valuable information about real estate transactions of concern.”

In its July announcement, when the program  was expanded from two metros – Manhattan and Miami Data – to six metros (including San Diego County), FinCEN Acting Director Jamal El-Hindi wouldn’t say to what extent money laundering was involved, but he did throw in a tantalizing tidbit: “The information we have obtained from our initial GTOs suggests that we are on the right track.”

This time around, FinCEN gave a number, a percentage of “suspicious activity”:

FinCEN has found that about 30% of the transactions covered by the GTOs involve a beneficial owner or purchaser representative that is also the subject of a previous suspicious activity report. This corroborates FinCEN’s concerns about the use of shell companies to buy luxury real estate in “all-cash” transactions.

Posted by on Mar 16, 2017 in Fraud, Jim's Take on the Market | 1 comment

Wire Fraud by Hackers

It happened to us – hackers got into somebody’s account.

They posed as the escrow officer and tried to divert my buyers’ down payment to the wrong bank account.  Their timing was impeccable too.

Six days before closing, an email was sent to the buyers that looked like a normal email from the escrow officer:

Good morning (buyers’ names),

We are getting close to closing. It is important that we get the Cash to Close to avoid delays in closing.

Please tell me when you would wire the Cash to Close.

Regards, (escrow officer’s name)

The buyer asked for the amount and for wire instructions by email – and the hacker responded three times by email and even sounded like the escrow officer.  This was the tip-off though:

Please find attached the wiring instructions. It is an account of one of our subsidiary company as our main account is currently undergoing compliance audit. As such, any funds entering the account would be held for review which would grossly affect the scheduled closing date.  The total closing cost is X.

The hacker asked for an amount that was within $2,000 of being accurate, and if the buyers had been in a big hurry, they might have just sent it.

Thankfully, Mr. Buyer called the escrow officer direct to verify. The escrow officer was stunned – she hadn’t sent any emails to the buyers that day!

Because no crime was actually committed, the escrow, title, and mortgage companies just shrugged it off.  We won’t ever know who the hackers were, or how they got in, but to call it unsettling is an under-statement.

From my buyer:

We felt very unnerved yet relieved. I couldn’t sleep that night, knowing how close we came to losing a substantial amount of money, by nearly anyone’s standards. I personally felt helpless, because I’m not sure what I could have done to recognize this fraud. We consider ourselves pretty plugged in and so we didn’t think twice about getting a wire request from escrow.

The bottom line is, escrow and bank request a lot of items and need responses ASAP so that escrow proceeds to a timely close. Therefore buyers are, in many cases, reading highly technical documents ‘on the fly’, often from smart phone screens. In my case, this meant that I was usually just skimming documents and electronically signing without really studying the material.

The escrow company did say in their instructions that buyers should call before wiring any funds. I didn’t notice this until after the attempted theft of our money. In the future, I would like to see escrow go back to speaking with buyers more often, instead of just emailing documents for signature. It sets a more personal tone and makes buyers more comfortable in picking up the phone to talk to the escrow agent with questions, rather than always relying on electronic communication.

Some escrow companies are now encrypting their wire instructions, but they are missing the point.  The hackers are way ahead of us!  All they need is a copy of the purchase contract (which agents, buyers, sellers, escrow and lenders email around unsecured), and the hackers can figure out the rest.

They just pose as the escrow officer a day early, and ask the buyers to wire the down payment and closing costs to them!

Posted by on Feb 23, 2017 in Fraud, Jim's Take on the Market, Mortgage News, Scams | 7 comments

Short-Sale Scam

From C.A.R.

While we all are concerned about cybercrime and identity theft, it appears taking someone’s money the old-fashioned way has reappeared in a short sale scam in Southern California.

The alleged scam appears to follow the same basic format.  A short sale agreement was entered into four to six months ago.  The buyer made an initial deposit in the $5,000 to $15,000 range into the listing broker’s non-independent broker escrow.  As with most short sales, the process takes several months and the selling agent is assured that the listing agent is working towards lender approval – it is just taking more time.  Then the communication slows down, the selling agent begins to get concerned and calls the listing broker’s escrow.  There is no answer, no return call, no other number to contact, and the earnest money deposit is gone.

Read More

Posted by on Jan 18, 2017 in Fraud, Jim's Take on the Market, Scams | 6 comments

Short-Sale Fraud Bust

The district attorney went back a few years here.  Hat tip to daytrip!

https://www.noozhawk.com/article/santa_maria_men_charged_real_estate_fraud_case

Two Santa Maria men have been charged with allegedly committing real estate fraud involving losses topping $500,000, the Santa Barbara County District Attorney’s Office said Thursday.

Angelo Gabriel Naemi, 36, was arrested for suspicion of five counts of grand theft by false pretenses, and one count of conspiracy to commit grand theft.

Steven Paul Gonzales, 61, was charged with one count of conspiracy to commit grand theft.

“The complaint alleges that Naemi, a real estate salesperson, and Gonzales, a real estate broker, conspired to falsify documents in association with numerous short sale transactions,” the District Attorney’s Office said. “Their actions allegedly resulted in a loss to Fannie Mae and Freddie Mac of over $500,000.”

The complaint also includes special allegations for aggravated white collar crime and excessive losses.

The District Attorney’s Office investigated this case in conjunction with the Federal Housing Finance Agency, Office of Inspector General, Los Angeles Field Office.

The allegations stem from deals spanning between 2012 and 2015 involving properties on the 1200 block of East Fesler Street and 1600 block of Chadwell Drive in Santa Maria, 800 block of West Fir Avenue in Lompoc, 300 block of Price Ranch Road in Los Alamos and the 500 block of Dawn Drive in Buellton.

Naemi’s bail is set at $395,000, and he is scheduled to appear for arraignment in a Santa Barbara County Superior Court in Santa Maria on Thursday while Gonzales is scheduled for Dec. 30.

Gonzales was never booked into the County Jail, according to the Santa Barbara County Sheriff’s Department, so no booking photo is available.

Gonzales became sole owner of CornerStone Real Estate in Santa Maria in 2012 while Naemi is listed as a sales associate with the firm.

In his biography on the business website, Gonzales is listed as “experienced in residential sales, short sales, income/commercial property sales, 1031 IRS tax deferred exchanges, business opportunities, commercial leases as well as new home construction.”

After working as an engineer for Hughes Aircraft, Gonzales has been involved in real estate since 1988, the website says.

On his own website, Naemi states he moved to the Central Coast in 2004 from San Diego and previously worked in the Wells Fargo mortgage department before becoming a licensed real estate agent.

Posted by on Dec 27, 2016 in Fraud, Jim's Take on the Market, Short Sales, Short Selling | 2 comments

Wells Fargo Fraud

wells

Talk about unintended consequences.

Every big-time banker saw Angelo Mozilo sell off stock and pocket $17 million per week during the final sunset of Countrywide, and then he walked with immunity.  Who doesn’t want that package?

These people think they are above the law, and the way the feds ended this chapter will only make other bankers want to hatch their own scheme.

P.S. The long-time Wells Fargo employee who ran the scam was not prosecuted.  On no, instead she walked with $125 million in stock options.

Here’s the story:

Posted by on Sep 15, 2016 in Fraud, Jim's Take on the Market, Scams | 7 comments

Mortgage Fraud Could Get 90 Years

According to this Ripoff Report, it looks like they were promising to set up the victims with new corporations, and get them credit in the corporate name too, for just an extra $20,000 – $30,000:

Jacob Orona, Aide Orona, John Contreras, Prakashumar (“Kash”) Bhakta, Marcus Robinson, and David Boyd were indicted by a grand jury on 135 felony charges for operating a mortgage fraud scheme throughout Southern California and the Inland Empire, preying on homeowners facing foreclosure.  Charges include conspiracy, grand theft, filing false or forged documents, and identity theft.

The scam artists promised homeowners who were underwater on their mortgages that they could provide legal remedies to avoid foreclosure, convincing homeowners to stop making mortgage payments and instead pay them $3,500 to start with an “administrative process,” plus $1,000 every month and separate amounts to allegedly file legal documents.  The defendants filed bogus petitions and court pleadings and recorded false deeds in county recorders’ offices, causing over $4 million in loses while failing to halt any foreclosures.  The fraud stretched through San Diego, Riverside, San Bernardino, and Los Angeles counties of California.

The indictment was delivered following a two-week special statewide grand jury convened in San Diego County.  If convicted, Jacob and Aide Orona face over 90 years in prison; Contreras and Prakashkumar face over 70 years in prison; Robinson faces over 28 years in prison, and Boyd faces over 18 years in prison.

The indictment was announced by Attorney General Kamala D. Harris.  The arrests and arraignments are the culmination of a joint investigation by the Federal Housing Finance Agency Office of the Inspector General (FHFAOIG), the Attorney General’s Financial Fraud and Special Prosecutions Section (FFSPS), the California Department of Justice Bureau of Investigation, and the Stanislaus County District Attorney’s Office, Real Estate Fraud Unit.

http://mortgagefraudblog.com/six-indicted-in-san-diego-for-modification-fraud/

How they compare to Angelo Mozilo, who never spent a day in jail:

Mister Mozilo, a mortgage industry maverick who co-founded Countrywide in 1969, and nearly 30 years later co-founded the dramatically collapsed IndyMac Bank (now OneWest Bank), is widely regarded as one of the more Machiavellian sub-mortgage-men who helped march the U.S. (and global) economy straight off the cliff in the mid-Noughts. While Mister Mozilo and his mortgage-making army pushed and pedaled sub-prime home loans, he talked up the then-flourishing company’s stock price, earned hundreds of millions in compensation, and cashed out more than $400,000,000 worth of Countrywide stock, a large portion of it during the last couple of years of his tattered tenure as the king of Countrywide.

Alas, the sub-primed fueled real estate bubble burst sometime around 2007 and Mister Mozilo left Countrywide in 2008 after the crippled company was sold for $4.1 billion to Bank of America. In June 2009 the Securities and Exchange Commission (SEC) charged Mister Mozilo with insider trading and securities fraud and in September 2010 Mister Mozilo settled with the SEC and agreed to pay $67,500,000 in fines, $45,000,000 of which was paid by Bank of America. Despite the sizable payout, settlement terms allow Mister Mozilo to circumvent acknowledgement of any misconduct. We can’t vouch for or confirm it but online idle chatter says he has a net worth well in excess of half a billion dollars.

http://variety.com/2011/dirt/real-estalker/angelo-mozilo-shakes-up-real-estate-portfolio-1201232606/

Posted by on Aug 6, 2016 in Fraud, Jim's Take on the Market, Mortgage Lawsuits, Scams | 3 comments

Money Laundering and San Diego County

fincen

They will probably pursue these transactions just like they went after Angelo Mozilo or the thousands of short-sale fraud cases…..from HW:

http://www.housingwire.com/articles/37637-us-expands-investigation-into-money-laundering-by-foreign-cash-buyers

The federal government revealed Wednesday that its investigation into foreign buyers using high-end U.S. real estate as a means to launder money found that potentially illicit activity is behind a “significant” portion of the cash transactions in Manhattan and Miami, and plans to expand the investigation into several other areas.

Earlier this year, the Treasury Department’s Financial Crimes Enforcement Network stated that it was “concerned about illicit money” being used to buy luxury real estate, and planned to begin identifying and tracking the previously unknown buyers who used shell companies to hide their identities.

At the time, FinCEN issued a “Geographic Targeting Order” that required title insurance companies in Manhattan and Miami-Dade County to identify the actual person behind shell companies used to pay all cash for high-end residential real estate in those two areas.

In a call with reporters on Wednesday, a FinCEN official stated that more than 25% of transactions covered in the initial inquiry involved a “beneficial owner” that is also subject of a “suspicious activity report,” which is an indication of possible criminal activity.

“In particular, a significant portion of covered transactions have indicated possible criminal activity associated with the individuals reported to be the beneficial owners behind shell company purchasers,” FinCEN said in an associated release.

FinCEN said that the findings of the initial investigation corroborate its concerns that all-cash transactions are “highly vulnerable to abuse for money laundering.”

According to FinCEN, it will soon require all U.S. title insurance companies to reveal the individual behind all-cash, high-end real estate transactions in the following areas:

  • All boroughs of New York City
  • Miami-Dade County and the two counties immediately north – Broward and Palm Beach
  • Los Angeles County, California
  • The three counties comprising part of the San Francisco area – San Francisco, San Mateo, and Santa Clara counties
  • San Diego County, California
  • Bexar County, Texas, which includes San Antonio

“By expanding the GTOs to other major cities, we will learn even more about the money laundering risks in the national real estate markets, helping us determine our future regulatory course,” El-Hindi said.

The monetary thresholds for each area are different, and reflective of the real estate market in the area.

In Manhattan, for instance, title insurance companies will be required to reveal the individual behind a cash transaction on all sales of $3 million and above, while in the San Antonio area, the threshold for reporting is $500,000.

Click the image below for a look at the dollar threshold for all of the metro areas that are a part of the expanded investigation.

FinCEN cash buyer threshold

On the call with reporters, a FinCEN official stated that there are various reasons why those six areas were selected, including: the prevalence of shell companies used in all cash transactions in each area; whether the luxury market in that metro area is attractive to foreign buyers; and information provided by law enforcement.

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Posted by on Jul 27, 2016 in Fraud, Jim's Take on the Market | 3 comments

FSBO Fraud

cash

SAN ANTONIO — The San Antonio Police Department has issued multiple arrest warrants for a man accused of stealing tens of thousands of dollars from a would-be homebuyer.

Chris Hinojosa, 29, remained on the loose Thursday, two days after SAPD issued warrants accusing him of acting as a broker without a license and securing execution of a document by deception.

According to SAPD, a woman told investigators in January that she responded to an “owner to owner” real estate sign at the corner of SW Military Drive and Zarzamora Street, and after meeting with Hinojosa, agreed to buy a home in the 3600 block of Candlehead, near Kirby.

The woman made two separate payments to Hinojosa totaling close to $20,000, only to later discover he was neither a real estate agent nor owned the property in question.

An arrest warrant for Hinojosa states “at no time did the victim sign a real estate title or any document recognized by the Texas Real Estate Commission”.

The TREC confirmed to SAPD investigators that Hinojosa does not have a Texas real estate license.

“He fleeced this person,” SAPD Sgt. Jesse Salame said Thursday. “It’s probably best not to respond to a sign on the side of the road. Look up licensed realtors.”

Salame added that this is among the many dangers of trying to purchase real estate without involving a licensed agent.

http://www.kens5.com/news/investigations/i-team/sapd-seeks-man-accused-of-posing-as-real-estate-agent/246159954

Posted by on Jun 17, 2016 in Fraud, Jim's Take on the Market | 1 comment