Mortgage fraud has increased so dramatically in the San Joaquin Valley that a task force of federal, state and local agencies has been formed to fight back.
The FBI, IRS, Secret Service, Department of Housing and district attorneys in the Central Valley are among those involved. Their assignment: investigate mortgage fraud and foreclosure-rescue scams connected to the real estate boom and the bust that followed.
The FBI has helped set up 65 similar groups to combat a nationwide epidemic of mortgage fraud blamed for $4 billion to $6 billion in losses, according to estimates.
While the FBI helps organize such task forces fairly regularly, usually they’re set up in response to violent crimes. The fresh focus on mortgage fraud reflects how prevalent it has become, said Steve Dupre, an FBI spokesman in Sacramento.
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Last year, the number of suspected mortgage-fraud cases in the United States topped 63,000. In only the first two months of 2009, the FBI received 28,873 reports of suspected mortgage fraud and had more than 2,000 cases under investigation.
Last year, 734 cases were opened nationwide. That compares with 295 in 2003.
The Valley task force efforts are in addition to cases that other agencies, such as Fresno police and Fresno County District Attorney’s Office, are investigating.
“At this point we have no arrests, but we are working on cases from Stockton to Bakersfield,” said Harriet Dugal, supervisory special agent in Fresno’s FBI office.
The foreclosure crisis has created a fertile environment for opportunists to prey on unsuspecting or unsophisticated homeowners desperate to keep their houses, Dugal said.
Minorities are particularly susceptible. Toulu Thao, a member of a group that helps Southeast Asian homeowners in Fresno, said the group has identified nearly 90 suspected cases of mortgage or foreclosure fraud and turned them over to the Department of Housing.
Typically, the cases consist of families paying for help in modifying a mortgage or ending a foreclosure proceeding - and getting nothing in return. A typical payment is $5,000, but Thao said he’s aware of at least one payment of $12,000.
The scammers advertise their services through radio stations and word of mouth in Hmong and other communities, Thao said.
Fraud can assume many forms — unfulfilled promises to desperate homeowners to renegotiate home loans, fraudulent real estate investments, rental contracts on abandoned houses that the purported landlord doesn’t own.
A few years ago, investigators were more likely to encounter straw-man deals in which middle men — often unsuspecting — used their good credit to buy property for someone else in return for payment.
Today, with values falling, loan modification and foreclosure fraud are the preferred scams, said Sydney Ricks, a deputy district attorney in Fresno County’s real estate fraud unit.
“It is absolutely huge,” she said. Her unit has hired a second attorney to help with the caseload.
“We have a backlog of cases and actively have 30 to 40 criminal case that I have filed with the court,” she said. “We also have numerous active investigations that haven’t reached that stage.”
Added Dugal: “Unfortunately, crooks are very creative.”
Perhaps the most notable case that Ricks’ office is pursuing is a scam allegedly pulled by Samuel Alan Haley, who was arrested by Fresno police in December.
Poilce say Haley rented houses he didn’t own to unsuspecting families, collecting thousands of dollars before being tripped up when the owner of an investment property going through foreclosure discovered a family living in the home.
Haley, 66, is set to go to trial June 8 in Fresno County Superior Court.
More common is mortgage fraud similar to what sent Michael Chretien, 24, of Fresno to prison in February for three years. Chretien pleaded guilty to forging the signature of his grandfather and a notary public on documents intended to refinance a home loan.
The money from the loan was used to finance an investment in a restaurant.
The state Attorney General’s Office has arrested dozens of people in recent month in connection with scams throughout California. They included three people in Southern California whome authorities accuse of promising to renegotiate home loans but instead ripping off clients for thousands of dollars. The houses still went into foreclosure.
Even the Federal Trade Commission has gotten into the act, bringing 11 cases targeting mortgage-fraud foreclosure and loan-modification scams in less than a year, according to testimony before a U.S. House subcommittee.
The commission also has sent warning letters to 71 companies for marketing potentially deceptive programs.
In some cases, companies use copycat names or look-alike Web sites to appear to be affiliated with a non-profit or government agency, FTC associate director Peggy Twohig testified.
Many non-profits, such as ClearPoint Credit Counseling Solution in Fresno, perform consulting services for free. Often, they are helping families who already spent $2,500 to $6,000 on consultation services that went nowhere.
“We see clients on a daily basis who have been victims of different types of loan scams. Either services they don’t perform or can’t deliver on,” said Martha Lucey, Pacific region president of ClearPoint.