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A grand jury in Los Angeles has indicted 14 people accused of perpetrating a more than $3 million mortgage fraud scheme in five Southern California counties and the Sacramento area, state Attorney General Rob Bonta announced Friday.
The unsealed grand jury indictment is against the owners of three mortgage brokerage firms and 11 affiliates allegedly involved in using fraudulent applications and financial documentation to obtain eight loans totaling $3.69 million. Unsuspecting borrowers then used fraudulent loans to buy properties in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Sacramento counties.
Thirteen of the 14 defendants appeared in LA County Superior Court, and 10 pleaded not guilty to charges that include mortgage fraud, receiving proceeds of mortgage fraud and grand theft, according to the AG’s office. The remaining defendants will be arraigned on an unspecified date.
“Those who try to scam, defraud, or cheat Californians will be brought to justice,” Bonta said in a statement. “Due to the hard work of our legal team and federal partners we’re holding these scammers accountable for their crimes. Those who cheat the system and exploit the dream of homeownership to line their own pockets will be held responsible.”
State prosecutors allege the brokers submitted loan applications that contained inaccurate information about their clients’ income, employment details and in some cases divorce documentation. The firms provided lenders with falsified documents, including pay stubs, W-2 forms, alimony checks and child support payments, “in an effort to mislead lending institutions into approving and issuing mortgage loans,” according to Bonta’s office.
Some of the defendants allegedly profited from loan origination fees and other commissions from the fraudulent real estate loans, which would have been denied approval if accurate information was shared.
“Clients placed their trust in the defendants to secure a home loan, only to find themselves burdened with unexpectedly high mortgage payments and inaccurate documentation,” according to the AG’s office.
The indictment accuses the owners of owners of First Republic Mortgage Inc., 1st Fidelity Home Loans and Coastline Properties Inc. of allowing their associates to misuse their mortgage broker licenses to fraudulently secure home loans.
One of the defendants allegedly originated fraudulent loans by using the licenses of owners for Sacramento-based First Republic Mortgage and Upland-based Coastline Properties, while managing the operation from an office in Riverside, according to Bonta’s office. Additionally, an escrow agent for 1st Fidelity Escrow allegedly used the license of 1st Fidelity Home Loans’ owner to set up fraudulent loans.
The indictment also includes charges against associates of the companies and several real estate agents.
“Criminal acts of mail fraud, like those committed by First Republic Mortgage, not only taint the landscape of financial lending but it also put families at risk by potentially leaving them with unmanageable debt or financial hardship,” Matt Shields, the state Department of Justice’s LA Division inspector in charge, said in a statement. “The US Postal Inspection Service, along with our state and federal law enforcement partners, will continue to protect consumers from these deceptive schemes used by those involved to profit from these mail fraud related crimes.”
The Attorney General’s Office was joined by the Federal Housing Finance Agency-Office of the Inspector General, the U.S. Department of Housing and Urban Development’s OIG and the U.S. Postal Inspection Service to investigate a large number of mortgages originated by First Republic, 1st Fidelity and Coastline.
The indictment’s court document is available online.
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