Six Charged in Alleged Mortgage Fraud Ring
Published: Thursday, June 19, 2008 4:26 PM PDT
Six individuals were charged in an alleged mortgage fraud scheme with potential losses to mortgage lenders of $5.1 million, the U.S. Attorney's Office announced this afternoon.
The alleged scheme involved 21 properties sold between 2005 and 2006, with at least five in San Diego County and at least three of them condo units in downtown San Diego. The group, operating under the name Creative Financial Solutions Inc., allegedly obtained mortgages for unqualified or unknowing borrowers.
The alleged scheme fits the profile of a common variety of mortgage fraud against lending institutions in San Diego County, often called "cash back at closing." Under the alleged scheme, one of the defendants would contact a listing agent for a property, and offer to buy it for an amount higher than the property's asking price.
The listing agent would raise the asking price and a fraudulently inflated appraisal for the new amount. The lender would approve a loan for the new amount, and the buyer would purchase the house, using a mortgage for 100 percent of the home price or close to it.
The sellers would get their full asking price, and the difference between the original asking price and the new amount would be split in cash between some of the defendants, who acted as agents or loan officers for the purchase. Plus, the defendants allegedly netted commissions on the sales, too.
After the home has been abandoned and foreclosed on, the bank is left with a repossessed property that was never worth the amount the bank had lent.
Of the 21 loans analyzed by the FBI as examples of the alleged scheme, 18 loans have been foreclosed or are in the foreclosure process, according to court documents.
The U.S. attorney alleges that the individuals:
Submitted false purchase contracts to conceal the true purchase price of the homes
Submitted false loan applications
Intentionally concealed the fair market value of the home
Used misleading appraisals
Submitted false bank statements and income documentation.
Defendants Abner Betech, Said Betech and Aviva Betech, San Diego residents, were arraigned on felony charges of wire fraud and aiding and abetting on Tuesday. Three named individuals -- Rafael Santiago of Riverside, and Angel Armendariz and Lucette Montane of Chula Vista -- have not yet been arrested. The defendants range in age from 25 to 39.
The case arose from an FBI nationwide investigation dubbed "Operation Malicious Mortgage," with additional investigation by the IRS.
Check back for more on this story later.
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