Friday, July 24, 2009

“We Want To Send People To Jail!” Says Prosecutor Referring To Loan Modification Scams; Cites "Lawyer Renting" As Attempt By Some To Avoid State Law

In Southern California, the Orange County Register reports:
  • The Orange County District Attorney has expanded efforts to combat foreclosure rescue scams and other real estate fraud cases, as the worst housing downturn in decades results in thousands of potential victims. Elizabeth Henderson, assistant DA, said 30% of the cases handled by the office’s major fraud unit are tied to real estate, up from an average 10% in past years. The DA has two prosecutors, two investigators and a paralegal focused just on real estate fraud, she said.

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  • We want to send people to jail,” she said. The issue is not just that someone might lose $2,000 or more [for a purported loan modification], but that his or her house proceeds to foreclosure while waiting for help that never comes, Henderson said. Defrauding just one person could translate to a maximum penalty of three years in prison for grand theft, she said. Subsequent victims could add eight months to a sentence per person. Loan mod scammers could be committing other crimes, such as fraud, practicing without a license, and breaking rules tied to call centers.

  • Henderson said former subprime salespeople are now selling loan modifications — or promises to help a homeowner avoid foreclosure by getting a bank to lower his monthly payments. Such companies sometimes have no intention of helping anyone, she said.

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  • To avoid having to get a real estate license to do loan mods, some companies are “renting” lawyers, she said. Attorneys can negotiate loan mods without a real estate license or a pre-approval from the Department of Real Estate. But the lawyer may just be a front who never touches a loan file, she said.(1)

For more, see District Attorney steps up real-estate fraud investigations.

(1) For those attorneys who have yet to "receive the memo", see ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications, an advisory of the Committee on Professional Responsibility and Conduct of the State Bar of California setting forth prohibited activities by attorneys when associating with loan modification firms.