West Side women charged with fraud in loan scheme

A Newman loan agent and a friend have been charged with defrauding the friend's 81-year-old mother-in-law out of her home's equity and thousands of dollars in annuities, causing her home to go into foreclosure.

Susan Faustino, 49, and Diolinda M. Machado, 50, are scheduled to be arraigned April 11 in Stanislaus County Superior Court.

They face felony charges of grand theft, obtaining property under false pretenses, forgery and making false financial statements. There are 29 counts against Machado and 12 against Faustino.

Machado also has a single count of embezzlement from an elder adult, her husband's mother, Mary Machado of Newman.

A phone number for Diolinda Machado in Gustine was disconnected, and there was no listing for Faustino in Gustine or Newman. Faustino did not return a call left at her office in Newman. Mary Machado could not be reached for comment.

The Stanislaus County district attorney's office would not comment.

According to an affidavit filed with the criminal complaint, Diolinda Machado started taking out loans in January 2003 using her mother-in-law's home as collateral. The loans were in Mary Machado's name.

The home had been paid off since 1996, according to the affidavit, filed by Glenn Gulley, a criminal investigator with the district attorney's office.

Diolinda Machado refinanced the January 2003 loan in May 2004, March 2005 and February 2006, and then got a reverse mortgage for the home in April 2007. Every refinancing, according to the affidavit, involved a different lender and title company.

Mary Machado told Gulley that she approved the first loan to help her son Frank -- Diolinda's husband -- start a trucking business. She was unaware of the subsequent refinances, according to the affidavit, even though they had her signature.

"Mary Machado told me she had never made any mortgage payments to any of the listed mortgage companies," Gulley wrote in the affidavit. "After the reverse mortgage was obtained with Seattle Mortgage, Mary Machado no longer had any equity in her home."

After the reverse mortgage, Mary Machado owed $277,000 on her home, but Gulley determined it was worth less than $255,000. The home is in foreclosure.

The affidavit notes Mary Machado's signature on the loan documents with notarization by Susan Theresa Van Nieuwe, a name Faustino used.

Gulley wrote that Faustino and Diolinda Machado were friends at one time, and Faustino was familiar with Mary Machado's financial situation.

But the affidavit says Faustino acted as the loan officer for one of the refinances and allowed Diolinda Machado to list her mother-in-law's monthly income as $3,875.

Under the terms of that refinanced loan, Mary Machado would have had a monthly payment of $1,649.77, and after terms reset, eventually as much as $2,618.89 a month.

At the time, Mary Machado's income was $1,200 in monthly Social Security benefits.

"The terms of this loan seem predatory in nature," Gulley wrote in the affidavit. "There seems to be no possibility Mary Machado could make the monthly payments based on her monthly income."

Gulley noted in the affidavit that Faustino collected $6,000 in fees for that loan. She also acted as a loan officer and notary public in that case, a violation of state law, according to the affidavit.

The affidavit also states Diolinda Machado, without Mary Machado's knowledge:

The affidavit states that when interviewed, Diolinda Machado said her mother-in-law had approved all financial steps taken in her name.

Where did the money go?

It was unclear from the affidavit where Diolinda Machado spent the money from the refinances and the two annuities. Some of the refinanced loans appear to have been used to pay off the previous loans.

The affidavit said Diolinda Machado told a financial officer managing the annuities that they were being cashed in so she could install a swimming pool and buy a heifer for her daughter.

Frank Machado told Gulley he was unaware of his wife's activities involving his mother but suspected something wasn't right.

"Frank Machado stated the family seems to face financial difficulties at all times, and Diolinda cannot explain where their money goes," Gulley wrote in the affidavit.

Frank Machado does not face charges.

Mary Machado reported her daughter-in-law to the Newman Police Department last summer, prompting an investigation by the district attorney's office.

Arrest warrants for Faustino and Diolinda Machado were issued March 11. Both were arrested March 13 and posted bail of $20,000 each. On bail documents, Diolinda Machado's last name is listed as Garcia.

Faustino has an active real estate license with no disciplinary action taken, according to the California Department of Real Estate's Web site. She is listed as employed by Homeowners Equity Corp., based in Diamond Bar in Southern California.

Bee staff writer Ben van der Meer can be reached at bvandermeer@modbee.com or 578-2331.

This story was originally published March 22, 2008 at 5:08 AM with the headline "West Side women charged with fraud in loan scheme."