3 accused of mortgage fraud

DA charges more than $2M stolen from lenders using false documents

By SUSAN HERENDEEN
sherendeen@modbee.com

E-Mail

Comments (0)

Text Size:

tool goes here

A Web site maintained by one of the key players in a Modesto-based mortgage elimination scheme sug- gested that homeowners could legally write off their loans by filing some simple paperwork with government agencies.

Real estate agents who face a host of fraud and theft charges must have known they were engaged in a risky venture, an investigator said in court records, because they created a fictitious fall guy.

The men rented an office in Menlo Park for "Seth Davis," who had a desk and computer as well as a cell phone that could not be traced by law enforcement. According to authorities, the men intended to blame everything on that imaginary financier when the scheme inevitably failed.

FRAUD GUIDE

Nationwide, lenders lose more than $1 billion a year from mortgage fraud, according to the FBI. Lenders typically absorb their losses, passing on the cost to consumers and the Federal Deposit Insurance Corp. Here are some common types of mortgage fraud:

• Backward applications: A borrower customizes his or her answers to meet loan criteria.
• Air loans: A broker invents borrowers and properties, or inflates the value of existing properties, to obtain loans.
• Silent seconds: A property buyer conceals a second mortgage from his or her primary lender.
• Nominee loans: The identity of a buyer is concealed by using another person's name and credit history.
• Property flipping: A buyer has a newly purchased property falsely appraised at a higher value, then sells quickly.
• Foreclosure schemes: A property owner who faces foreclosure transfers his or her deed and pays fees to a lender who promises to help save the homes. The lender pockets the fees and sometimes remortgages the property.
• Equity skimming: An investor uses a straw buyer to purchase a home, then the straw buyer turns over the home to the investor through a quitclaim deed. The investor doesn't make any mortgage payments and the home ends up in foreclosure.
• Straw buyer: A loan applicant who is used by someone intending fraud to obtain a home loan. The person usually doesn't intend to occupy the property he or she is buying.

A tip from a suspicious lender may have foiled that plan.

"If they wouldn't have been so greedy, they might still be in business," said Richard Morris, a partner with Capital Finance Mortgage Brokers in South Lake Tahoe.

The Stanislaus County district attorney's office last month filed a 68-count criminal complaint against three real estate agents and seven alleged accomplices from Modesto, Ceres, Waterford, Turlock and Stockton.

They are accused of stealing more than $2 million from lenders by filing false documents with the county clerk-recorder's office, indicating that loans to three properties had been paid so straw buyers could get new loans, then cash out the proceeds.

In the past, sophisticated fraud cases of this type might have gone undetected or been passed off to federal authorities. Such cases now are handled locally by a 2-year-old real estate fraud unit that is funded by a $2 surcharge on every real estate transaction recorded by the county.

Deputy District Attorney Mar-lisa Ferreira declined to discuss the allegations in detail, but the government's case is laid out in a 38-page affidavit filed in support of an arrest warrant.

Authorities think Eric Charles Braun, 29, of Modesto did most of the legwork by meeting with lenders and managing the paperwork. His attorney, Bruce Perry, said Braun cooperated with authorities once they had a paper trail in hand, something that could help limit his culpability.

"There's more to the story that I can't get into at this point," Perry said.

Suspects had worked together

Authorities suspect that Noah Adam Yates, 29, of Modesto masterminded the scheme. His attorney, Jakrun Sodhi, could not be reached for comment.

Doug Eugene Wallick, 32, of Waterford told authorities that he got involved after he lost money in a restaurant business and fell behind on his mortgage payments. His attorney, Robert Forkner, said Wallick believed he was involved in a legitimate investment opportunity when he purchased a home he later turned over to Braun.

"The only reason my client is being charged in this case is because he had perfect credit, a consistent work history and thought he was investing in this property with legitimate business people," Forkner said.

At one point, Braun, Yates and Wallick worked together at Franklin Financial in Modesto. Later, they worked for Affluent Realty, which became Braun Investments, according to records filed with the California secretary of state.

Only Wallick remains fully licensed, according to the California Department of Real Estate. Braun's license is suspended because he has not completed ongoing education as required, and Yates' status is listed as nonworking.

Much of the story line found in the affidavit comes from Braun, who initially told authorities that "Seth Davis" was in charge of the scheme, but later said "Seth Davis" doesn't exist.