Monday, September 24, 2012

LA Feds Pinch Three, Seek Another In Alleged Sale Leaseback Equity Stripping Ripoff That Left Homeowners Broke & Straw Buyers Holding The Bag

From the Office of the U.S. Attorney (Los Angeles, California):

  • The top two managers at a Westwood-based mortgage brokerage company have been arrested on federal charges relating to a foreclosure avoidance and equity-skimming scheme that targeted distressed homeowners. According to an indictment in this case, the scheme led several mortgage lenders to disburse more than $15 million in loan proceeds – with nearly half of that being lost to the fraud conspiracy. Federal authorities on Tuesday arrested David Singui, 49, of Inglewood, and Aziz Meghji, 35, of Los Angeles, who were, respectively, the principal owner and the second-in-charge at Direct Money Source (DMS), a mortgage brokerage which allegedly operated as an equity-skimming operation that took possession of distressed homeowner’s equity under fraudulent pretenses and also defrauded mortgage lenders. A third defendant in the case – Kiet Truong, 27, of Hawthorne, who worked at DMS, [subsequently] surrendered to authorities [...]. The fourth defendant named in the 42-count indictment – Starr Smith, 31, whose last known address was in Long Beach, is a fugitive currently being sought by authorities. The federal grand jury indictment, which was returned on September 6, charges all four defendants with conspiracy, wire fraud, loan fraud and aggravated identity theft. Singui and Meghji are additionally charged with money laundering. DMS held itself out as a company with a “Fresh Start Program” that was devoted to assisting distressed homeowners avoid foreclosure by arranging to have their homes purchased by so-called “credit investors,” who would hold the properties for 12 months and then sell them back to the original homeowners after they restored their credit ratings. In fact, as alleged in the indictment, DMS was an equity-skimming operation that took possession of distressed homeowner’s equity under fraudulent pretenses. The scheme allegedly defrauded mortgage lenders in connection with loans on approximately 50 different properties.
  • The distressed homeowners were told that, because they had equity in their homes, DMS would be able to draw down on the equity and make monthly mortgage payments on behalf of the homeowners during the one-year period in which they were to repair their credit. In fact, according to the indictment, DMS took title to more than four dozen properties belonging to the distressed homeowners it targeted and simultaneously misappropriated the existing equity in their homes. Using “straw borrowers” as the “credit investors,” DMS orchestrated loan transactions that allowed DMS to obtain access to the distressed homeowners’ equity. As alleged in the indictment, DMS and its principals falsified the employment, bank account and income information of the straw borrowers on the loan applications. DMS also allegedly fabricated fictitious bank statements to support this false information on the loan applications in order to facilitate the approval of these fraudulent loans. At the conclusion of these transactions, DMS usually ended up with approximately $100,000 equity per transaction, plus around $35,000 in fees and commissions associated with each loan. In the meantime, each of the straw borrowers ended up owing approximately $300,000 or more on loans that went into default because DMS did not make the 12 months of mortgage payments as promised.(1)
(1) For more on this type of foreclosure rescue ripoff, see:

No comments: