home mortgage fraud newsletter full stories advertise mortgage industry newsletter RSS about us
HOT Topics Fraud Resources Fraud Prevention Mortgage Litigation News Appraisal News

Sign Up for Free Mortgage Fraud Newsletter

twitter linkedin
facebook google+
Mortgage News

Search mortgage fraud news by keyword.

Mortgage Fraud News
News, analysis and statistics about mortgage fraud.

Local Mortgage Fraud
Stories about individual mortgage crime cases.

Mortgage Fraud Statistics
Statics by year about real estate fraud.

Mortgage Fraud Index
Quarterly index based on case activity.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Consumer Mortgage News
Free mortgage news for prospective borrowers.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from MortgageDaily.com.

Mortgage Fraud Feedget RSS code
The latest case activity tracked by FraudBlogger.com for your Web site or for your RSS reader.

Mortgage Fraud Archives
Archive of FraudBlogger.com entries going back to 2005.



Legal Action Sought by State for Predatory Lending Practices

Blumenthal Sues Brokers, Realtors And Others For Vast Predatory Lending Scheme.

Hartford, Conn. -- (September 5, 2007) -- Attorney General Richard Blumenthal today announced a lawsuit against several defendants alleging an extensive statewide predatory lending scheme that devastated dozens of consumers.

The defendants are Royal Financial Services, LLC, of Trumbull; First Source Mortgage Solutions, Inc. of Branford; Elizabeth Athan Real Estate, LLC, of Shelton; J.G. Property Management & Investment, LLC, of New London; Brian Guimond, d/b/a Cutting Edge Contracting of Norwich; and Jose Guzman and Mauricio Lancia for allegedly managing the schemes on behalf of the defendant companies.

Blumenthal sued on behalf of Department of Banking Commissioner Howard F. Pitkin and the state in coordination with Department of Consumer Protection Commissioner Jerry Farrell, Jr.

Blumenthal alleges that through a multi-layered scheme, the defendants mislead consumers and mortgage lenders into property purchases that financially destroyed dozens of homebuyers, while benefiting only the defendants, their associates and family members.

“This pervasive predatory lending scheme left a trail of shattered lives and lies – false promises to first-time homebuyers about property values, loan terms, and income levels,” Blumenthal said. “Our investigation has uncovered consumers who sought the American Dream – but bought a financial nightmare. Our lawsuit charges that homebuyers were victimized by a vast scheme with multiple layers of lies and co-conspirators. We allege that this predatory lending scheme enticed consumers with false promises of profits from investment rental properties and nonexistent management services for tax and mortgage payments and other expenses. Homebuyers were purposefully lured to buy properties whose values were inflated, using mortgages with concealed costs that they could never realistically afford, because their incomes and assets were falsified with bogus bank and employer records. They were discouraged from seeking outside assistance from outside home inspectors and lawyers. These practices preyed on the most vulnerable citizens – many of them first-time unsophisticated low-income homebuyers who spoke little or no English. The conspirators were illegally enriched by profits from inflated prices for properties, and fees and commissions.

“Financially battered and blindsided, some consumers face foreclosure and years of damaging credit ratings. They deserve relief immediately.

“Our legal action seeks money back to consumers and severe penalties for practices that undermine an entire industry, endangering not only consumers directly involved, but the economic welfare of the region. This case is only the beginning of a challenging time in the real estate and lending industry. This turmoil and calamity, only one in numerous emerging cases, has revealed the worst of the lending industry.”

Blumenthal’s lawsuit seeks restitution for every consumer harmed; an order preventing further violations; and civil penalties to the state.

“These defendants were conducting illegal business in this state and they misled Connecticut consumers by implementing a predatory lending scheme,” Commissioner Pitkin said. “Through our joint effort with the attorney general and the commissioner of consumer protection, we can ensure that Connecticut consumers are safe once and for all from the illegal conduct of these individuals.”

Commissioner Farrell said, “This lawsuit will serve as a message to the real estate and financial communities that the State of Connecticut considers real estate fraud and predatory lending egregious acts that will not be tolerated. State and federal agencies, working together, are directing their efforts to limit the losses that consumers suffer.”

Blumenthal described how the alleged scheme worked:

· J.G. Management and Guzman, who were not licensed by the state to engage in real estate transactions, and Elizabeth Athan Real Estate, solicited low-income consumers, including renters receiving federal housing assistance, to buy through them multiple or multi-unit residential properties. They promised consumers, among other things, favorable mortgage terms, cash back at closing, and diminished monthly housing expenses.

· J. G. Management and/or Guzman also pledged to provide property management services for rental properties that the consumers purchased through them – services including maintenance, finding renters, collecting rent and making mortgage and tax payments.

· Once a consumer agreed to work with the defendants to purchase properties, the defendants referred consumers to Royal Financial or First Source to act as the mortgage broker.

· J.G. Management, Guzman and the Elizabeth Athan agency would then select the property or properties for purchase from a stock of properties owned by the defendants, their family members or associates. The properties were sold to consumers at inflated prices – often tens of thousands of dollars more than what they were purchased for months earlier. The defendants substantiated the inflated prices to consumers and lenders through bogus and artificially inflated appraisals.

· When consumers inquired about hiring a home inspector, the defendants often convinced them it was unnecessary or potentially adverse to the consumer.

· In order to qualify consumers for mortgages, Royal Financial and First Source falsified information on consumers’ mortgage loan applications, including details about their income and assets. Cutting Edge or another home improvement company involved in the scheme would falsify consumer employment and wage records, indicating the consumers earned money from Cutting Edge and others as employees.

· Royal Financial and First Source also submitted bogus forms to lenders “verifying” bank account balances and rental income to artificially inflate consumer income and assets.

· Once consumers were approved for mortgages, the defendants arranged closings presided over by attorneys who the defendants knew would not alert consumers or lenders to the significance or irregularities of the transactions.

· Many consumers were non-English speaking and first-time buyers so Guzman “translated” and “guided” them through closings. In reality, he misled consumers about the details and nature of the documents that they signed. Royal Financial and First Source blindsided consumers on closing day with previously undisclosed closing costs.

· Because of these practices, consumers misunderstood their financing terms and, in some cases, did not even realize they had purchased more than one property until after the closings.

View The Entire Complaint

SOURCE: Connecticut Attorney General's Office
Mortgage Fraud Litigation

Q4-2012 | Q3-2012
Q2-2012 | Q1-2012

Q4-2011 | Q3-2011
Q2-2011 | Q1-2011

Q4-2010 | Q3-2010
Q2-2010 | Q1-2010

Q4-2009 | Q3-2009
Q2-2009 | Q1-2009

Q4-2008 | Q3-2008
Q2-2008 | Q1-2008

full-year 2007
Red Flags Rule
News about the Fair and Accurate Credit Transaction Act.
Analysis of Fraud Enforcement and Recovery Act
The Mortgage Graveyard
Reverse Mortgage Blog
Mortgage Compliance Newsletter
Free compliance newsletter from MortgageDaily.com.

Copyright © 2014 MortgageDaily.com
MortgageDaily.com Subscribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

pricing engine directory

wholesale lender directory

More Mortgage News Resources (MortgageDaily.com full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

free mortgage news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan officer compensation rule

loan originator compensation rule


mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

sales blog

reverse mortgage news

secondary marketing

servicing news

subprime news

wholesale lenders

wireless mortgage news