STANISLAUS COUNTY -- Authorities' patience with people facing foreclosure — normally a sympathetic bunch, especially in the Central Valley where rates are sky high — wears thin when owners might be using illegal means to keep their homes.
Fraud investigators say they are seeing an emerging foreclosure rescue scheme in which desperate homeowners record phony documents — a felony — simply to stall losing property at public auction.
The cost of buying time can be steep: The homeowner typically pays a bundle of money for bogus forms and learning how to use them, often loses the property anyway and then faces criminal charges.
In the past couple of weeks, authorities have launched prosecutions against four Stanislaus County property owners. All were warned when investigators got wind that the owners might be up to something, but each returned later or sent someone else to try to file fake papers again.
"It comes to a point where enough is enough," said Jeff Mangar, a prosecutor with the district attorney's real estate fraud unit. "How many breaks can we give these people?"
They include a mortgage company owner, a gas station cashier who obtained a $648,000 loan and a woman who said her lender should pay her $2.5 million.
Two told The Bee they are innocent; the others could not be reached.
Some fell into schemes pushed on the Internet, they told authorities.
A website reviewed by The Bee encourages owners to fight back against greedy banks engaging in unscrupulous robo-signing and refusing to renegotiate loans. The site brags that none of its 2,600 customers has made a mortgage payment in the past two years.
"We essentially tie the banks up in administrative proceedings," the site says. When lenders catch on to delay tactics, "our team is counter-maneuvering to tie the bank's legal team up in administrative red tape" with more filings, the site says.
Clerks at the recorder's office in Stanislaus County are getting wise to suspicious documents and tip off investigators, who rush over from a couple blocks away and sometimes arrive before people leave the recorder's office.
"We are the government (too)," said county Clerk- Recorder Lee Lundrigan. "If the purpose of making a document public may be criminal, we communicate that information to the DA's fraud team and they can make the final determination."
Lenders ignore demands
People in Bakersfield persuaded Argelia Leiva that she no longer owes $576,000 for her rural Oakdale home, she told authorities, because lenders don't answer demands to produce original loan documents.
She paid the advisers $5,000 and followed instructions to record a fictitious $75,000 loan, supposedly from her brother and secured by the property, court papers say. At other times, she filed documents changing trustees and falsely claiming that hundreds of thousands of dollars had been repaid, according to an arrest warrant affidavit.
Some documents were notarized by a friend, and two were recorded after an investigator warned her in 2010 that filing phony documents is against the law, court papers say.
The documents were intended to stall foreclosure, says the affidavit, signed by district attorney investigator Glenn Gulley. Leiva told him she bought the property in 2006 for $720,000 on the strength of her $10-an-hour cashier job that she subsequently lost.
She hasn't made a payment since 2008, Gulley wrote.
No balance due?
A website reviewed by The Bee claims that "lenders broke a lot of laws when they were processing these mortgages," including altering notes when packaging them for resell to Wall Street investors. "Once they did this, the notes were no longer valid," the site says, suggesting that mortgages should be "greatly reduced or forgiven completely."
Shelly Max-Lutterman told The Bee, "No balance is due to anyone" for the $231,500 loan she and her husband obtained for their Salida home. "If they can't give me back the original note, there's a problem," she said. "This is a security issue for every single person in the United States."
They stopped making mortgage payments in February with $206,800 still owed, and Shelly Max- Lutterman tried to stall foreclosure by recording documents in July, according to an affidavit. She ignored Gulley's warnings, the paper says, and approached the recorder's office twice more in August, once with an attachment claiming the Federal National Mortgage Association, or Fannie Mae, should pay her $2.5 million, apparently for caring for the property.
"I command $250 an hour for my time," Gulley quoted her as saying when he asked about it.
In September, she sued a company processing the foreclosure on behalf of Fannie Mae, noting that her lender had been prosecuted for robo-signing in two other states. Fannie Mae has not produced "valid documentation that would verify that FNMA ever consummated closing of a loan instrument," the claim states, and she seeks more than $1 million in damages.
Mangar said, "A perception of fraud on Wall Street doesn't give you the right to commit blatant fraud on Main Street."
Gulley said federal enterprises have taken control of most home loans, which typically are processed but not owned by banks.
"In essence, we own the loans" because everyone owns the government, he said. "Taxpayers don't owe anybody a free home or free rent and when you file a false document to stall foreclosure, you've committed a crime."
Investigators determine the breadth of a homeowner's sophistication in real estate and issue warnings before taking steps to prosecute, Gulley and Mangar said.
Trying to avoid auction
Last month, Lundrigan's office tipped off Gulley that a man facing foreclosure on a Riverbank home was trying to record a suspicious document. Gulley confronted him and later learned the man, Gabriel Albor, had owned Fidelity First Mortgage with an office in Escalon. Telephone numbers associated with him or the business have been disconnected.
Albor told Gulley he didn't really owe $75,000 for a loan and simply hoped to postpone losing his wife's home at an auction scheduled for the next day, Gulley said in an affidavit. Gulley subsequently determined that Albor had been involved in foreclosures of 13 other properties.
Another investigator, Gerard Hilgart, on Nov. 9 confronted Abdul Kassim as he tried to record a $65,000 loan secured by Kassim's Butte Avenue store, South Modesto Market. Four days later, another man made another try at the recorder's office; authorities believe Kassim put him up to it and filed a felony charge.
"I do owe that money," Kassim told The Bee. He had not recorded the debt earlier and finally did so under the lender's direction, with additional advice from Kassim's bookkeeper, to preserve the lender's stake in the property, he said.
"What would I stop (foreclosure) for?" Kassim said. "I know I'm going to lose it because the next month it'll just go into foreclosure anyway. I just did it so he would have proof (of the loan)."
The Stanislaus County district attorney's office can be reached at (209) 525-5550.
Bee staff writer Garth Stapley can be reached at gstapley@modbee.com or (209) 578-2390.
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