CA renter asked about the story told where the homeowner claimed that he used a down payment of $120,000, but records show that his purchase was financed 100%. How can that happen? There has to be a conspiracy to commit fraud, where the $120,000 gets laundered through escrow and sent to the bad guys. Kelly Bennett just outlined in detail how it happened in the McConville case:
from the voiceofsandiego.org
Jim McConville needed help to pull off a massive mortgage swindle. He couldn’t let the banks making the mortgages know that he was sucking at least $120,000 each out of more than 80 condo sales in Escondido and San Marcos in 2008.
He got the help he needed, federal prosecutors say, from Bay Area escrow officer Donna Demello of Stewart Title of California.
Demello cloaked the payments to McConville by creating two versions of the official receipts from the real estate deals, according to prosecutors. One version included the payout to McConville’s company. The other version, the one that went to the banks, didn’t.
The payout would’ve been of special interest to the lenders because it could have signified that the price they were making a loan for was inflated.
For the full story, click here:
http://www.voiceofsandiego.org/housing/article_7db297a8-6233-11df-b2a8-001cc4c03286.html
That is why people should use an Independent Escrow Company, not Title or Broker. Independents’ files are audited at least once a year by the State’s Department of Corporations.
Just a guess but I bet if banks lent out their own money instead of reselling mortgages to investors or the gov scams like this wouldn’t happen. It’s amazing how conservative people/businesses become when asked to put their own money on the line.
shadash – on that point we are 100% in agreement.
To expand, I would propose a loss sharing agreement that kicks in if the banks sell off the loans.
I would suggest that the bank’s capital (say 5%-10% of the loan) is set disproportionately high in the capital stack of the loans so they take a high percentage of the initial losses (say 60% of the loss against their 5%-10% pro-rata share of capital) then tapering off as the loss increases.
Without being able to sell notes the entire system will remain contracted and capital scarce. This allows them to sell, but get smacked real hard in the face if the loans go bad before 3rd parties get hit.
Interesting how real estate fraud became a national pastime during the bubble years.
“Interesting how real estate fraud became a national pastime” – it’s more than interesting, it’s disturbing, and the beat goes on…
Without being able to sell notes the entire system will remain contracted and capital scarce. This allows them to sell, but get smacked real hard in the face if the loans go bad before 3rd parties get hit.
clearfund | September 4th, 2010 at 1:16 pm
—————–
Philosophically speaking, wouldn’t this just make housing more affordable (via lower prices, not cheaper loans), since buyers wouldn’t be able to bid prices up with EZ credit? There’s something to be said for shorter-duration mortgages, higher interest rates, and much higher down payments…at least from a buyer’s perspective. 😉
I bet she’ll look cute in Orange. Hell, maybe she will begin a pen-pal relationship with another Orange lover – Ange M. Where are you?
* Donna Demello former escrow officer at Stewart Title in Milpitas pleads guilty in fraud scheme
Published by Staff Writer on August 28, 2010
A former escrow officer at a Milpitas title company pleaded guilty in federal court in Oakland Friday to conspiring in a multimillion-dollar mortgage fraud scheme.Donna Demello, 44, of San Jose, pleaded guilty before U.S. Magistrate Donna Ryu to one count of conspiracy to commit wire and mail fraud. She will be sentenced Dec. 8 by U.S. District Judge Phyllis Hamilton in Oakland.Demello, a former escrow officer at Stewart Title in Milpitas, was indicted by a federal grand jury in May along with five other people, including James Delbert McConville, the alleged leader of the scheme.The indictment alleged that McConville used the names of phony buyers, known as straw buyers, to obtain mortgages on condominiums in Southern California. The straw buyers were promised $5,000 to $10,000 for the use of their names.Prosecutors alleged that McConville would then take from the mortgage proceeds a so-called “marketing fee” averaging $150,000, which sometime amounted to half of the amount of the mortgage.U.S. Attorney Melinda Haag said Demello admitted in her guilty plea to aiding the scheme by concealing the marketing fees on settlement documents given to the mortgage lending institutions. Haag said Demello admitted to participating in the fraudulent approval of approximately 80 loans for condominiums in Escondido and San Marcos in the San Diego area. Prosecutors said in court filings that the loans for those 80 condominiums amounted to $20 million and about $11 million of that amount was paid directly out of escrow in fees to McConville or companies he controlled. McConville was arrested near Bakersfield on June 18 and is awaiting trial. Three other associates have pleaded guilty to various charges.The conspiracy count to which Demello pleaded guilty carries a possible maximum sentence of 30 years in prison, but the actual sentence will be determined after consideration of federal sentencing guidelines.
2 crooks down, how many to go?
How come Donna De Mello has not been sentenced yet? Do you have any updates?