In late spring of this year Anna Hazel, an investigator with the Merced County District Attorney's Office real estate fraud unit, walked into a room full of people who'd either lost their homes or were on the road to ruin.
More than 100 people in Atwater's Community Center told stories that Hazel has heard many times since 2008 when the D.A. joined with the San Joaquin Real Estate Fraud Task Force, headed by the Federal Bureau of Investigation.
The stories she heard went like this: A homeowner is in over his head and foreclosure looms. He's been trying to find a way out, to no avail. Finally, at wit's end, he's approached by a smiling face that tells him for a few thousand dollars -- up front -- his problems can be solved.
Many of the cases that Hazel has seen are perpetrated by people who say just that. In one such case -- successfully prosecuted because of her unit's investigation -- the defendant promised 30 victims that he'd bail them out of their foreclosures. But after he got paid, he took the money and ran. He now owes restitution of more than $500,000.
"We are seeing a variety of different fraud schemes," said Hazel. "Most are advanced fee loan modifications and advanced fee home foreclosure rescues."
Merced County, at the epicenter of the still unfolding foreclosure crisis, has been ranked by the FBI as one of the top five places in the country with a high potential for real estate fraud. The rate of foreclosures here and the number of homeowners on the verge of foreclosure have fostered an environment where people aiming to take advantage of others can proliferate, said Hazel.
Now those trends are accelerating as Merced County and the nation continue to reel from the mortgage meltdown.
The FBI said in its 2009 real estate fraud report that Merced County was ranked the fifth-highest in the agency's ratings of metro statistical areas for mortgage fraud potential, which was no surprise, since it recorded the third-highest mortgage foreclosure rate that same year -- more than 10 percent. The report went on to say that real estate fraud increased across the nation in 2009. For example, FBI mortgage fraud investigations alone jumped by 71 percent from 2008 to 2009. While the total dollar amount from mortgage fraud is unknown, the FBI said that $14 billion in fraudulent loans were issued in 2009.
Mostly through referrals, Hazel's unit has been trying to stop the fraud in its tracks. In the last fiscal year, Hazel's unit opened 33 investigations with an aggregate of $1,504,462 in lost cash, according to the report issued to the Merced County Board of Supervisors this week. The unit is paid for through real estate fees collected by the county recorder.
Hazel said there are probably many more people who've been defrauded than what's reported. While many people realize they've been wronged, many don't realize it may have been a criminal act, she said.
The state recently passed a law prohibiting prepayment of mortgage or home repayment schemes, she said, but that hasn't stopped predators. It may now be illegal, said Hazel, but that doesn't mean the crooks have ceased and desisted. "They pay the individual up front and you don't see them any longer," she said.
The difficulty of investigating such cases, said Hazel, has been a roadblock. "These cases are incredibly complex," she said. The D.A.'s unit not only interviews victims but also collects a pile of documents from, in some cases, defunct lenders in other states. "The collection of documents is daunting in and of itself," said Hazel.
While some of the perpetrators are from Merced or nearby, others have been from as far away as Los Angeles. That distance has only made catching the bad guys a little tougher, said Hazel.
While the government has made efforts to aid distressed homeowners, said Hazel, many often fail or take too much time. Some people jump through all the documentation hoops only to find out they won't qualify for refinancing or aid. So when someone walks up to them with easy answers for a quick cash payment, it's hard to resist.
While it's hard to measure the exact outcome of her unit's efforts, Hazel said she's sure it's making a difference. She said the three convictions this year aren't the only metric of success. For instance, she said, outreach can also help prevent fraud.
Hazel said she tells homeowners to watch out for several "tells" when it comes to fraud schemes. Look out for people who want to be paid up front before providing any service. Also, watch out for those without credentials from the real estate industry. Watch for those who won't give you documentation of what they are doing, or who ask you to isolate yourself by not talking to the government or your bank.
Reporter Jonah Owen Lamb can be reached at firstname.lastname@example.org.