Totten/Lunn: Fighting Back Against Real Estate and Equity Scams

Real estate fraud is a nationwide problem that harms homeowners, property values, real estate professionals and the community as a whole. From 2005 through 2008, private equity theft was the prevalent crime as the real estate market boomed. While home values nationwide and in Ventura County dramatically increased, scammers stole homeowners’ equity through a variety of schemes.

When the real estate market began to slow, real estate fraud evolved from private equity theft to loan modification scams.

During the real estate bubble, countless homeowners obtained subprime mortgage loans with adjustable interest rates. When these interest rates began adjusting in 2009, homeowners were left with higher monthly payments and unable to pay their mortgages.

Thousands of county residents suddenly needed a loan modification, and real estate fraud scammers stood ready to “guarantee” mortgage relief “for a fee.” Unscrupulous criminals targeted predominantly the elderly and Spanish-speakers promising to save their home from foreclosure while collecting thousands of dollars in illegal upfront fees.

Sadly, foreclosure rescue scams are as rampant today as they were when law enforcement began seeing their first victims.

In 2005, the District Attorney’s Office, with support from the Board of Supervisors, cobbled resources together to form a Real Estate Fraud Prosecution Unit. Since then, the number of real estate fraud complaints received by the unit has grown from 18 in 2005 to 160 complaints in 2011.

The unit has achieved solid results. More than 40 cases have been filed since 2007 and prosecutors secured more than $12 million in court-ordered restitution for victims of real estate fraud.

Criminals who orchestrated equity theft scams have been successfully prosecuted by the unit. For example, Kenneth Powell and Katie Rose advertised worthless real estate investments on a local radio station from 2005 through 2007. Powell and Rose were recently convicted of multiple felonies and are now serving lengthy prison sentences.

Criminals running illegal foreclosure rescue scams have also been successfully prosecuted. Maria Victoria Santos targeted Spanish-speakers in Oxnard and collected thousands of dollars in illegal upfront fees. She was convicted of multiple felony charges, served one year in custody and was placed on a five-year grant of formal probation.

To maximize our response to real estate fraud, we have collaborated with federal law enforcement partners, including United States Attorney André Birotte Jr. for the Central District of California, who joined us in 2010 to announce the arrests of 14 suspects from a joint state-federal investigation into bank and mortgage fraud.

This investigative collaboration with our federal law enforcement partners continues today and includes the FBI, IRS, Immigration and Customs Enforcement, U.S. Secret Service and HUD’s Office of Inspector General.

We have also joined with local real estate professionals to form a Real Estate Fraud Advisory Team. The team is a unique collaboration of realtors and law enforcement professionals working together to warn the public about current fraud schemes and ways to avoid becoming a victim.

Recently, the Board of Supervisors unanimously approved a modest $7 increase to the recording fees charged on specific real estate documents. These revenues will be used exclusively to fund the deterrence, investigation and prosecution of real estate fraud.

The County Clerk and Recorder’s Office will receive a portion of the fees to boost fraud prevention efforts. We wish to acknowledge both state Sen. Bill Emmerson and our own Assemblyman Jeff Gorell for co-authoring this important legislation.

While aggressive investigation and prosecution are making a difference, being an informed homeowner and borrower is still the best way to avoid becoming a victim.

In this regard, we encourage homeowners to:

Never pay an upfront fee for loan modification services; never hire a third party to represent you in an attempt to secure a loan modification from your lender — instead, work directly with your lender; and work only with licensed real estate professionals and check a licensee’s status at before doing business with an agent or broker.

With your help, we can reduce the impact of this destructive fraud that threatens the American dream of homeownership.