Archive for the ‘Law’ Category

The Murrieta (CA) Real Estate Scam

The accused: James B. Duncan, Hendrix Montecastro (a real estate broker), Maurice E. McLeod

Offense: violated Federal Securities Laws – seeking restitution for “ill-gotten gains”

Also Named: Pacific Wealth Management, Stonewood Consulting Inc and Total Return Fund LLC

The opportunity: Investors in Southern California, Arizona and elsewhere were invited to participate (invest) in the California Real Estate Boom.

The recruits: Military Personal, Filipino families and church members

The Scheme: The investors (recruits) were directed to purchase more than $118 million worth of homes (many in Murrieta).

The Fraud: Falsified loan applications allowed the investors to purchase multiple properties; inflated appraisals allowed excess mortgage proceeds to go to Duncan, Montecastro and / or McLeod.  Those excess fees was more then $100,000 on some transactions.  Investors were told the excess fees would be invested – and those investments would cover the mortgage payments on the properties the investors purchased in their own names, not covered by the rental income.

“Stonewood typically paid $50,000 to $100,000 more than the listed sales price for a house.  Sellers received their asking price and the remaining money went to Stonewood agents in the form of commissions.  The prices investors paid for the houses were justified by appraisals that Stonewood ordered.”

The Harm Done: Because the investors (recruits) often borrowed money from lines of credit, credit cards and retirement funds – in the end the money was gone the properties foreclosed and their credit ruined.  Lenders who made the loans based on false income and appraisals ended up with loans exceeding value and eventual foreclosures (any deception to a Federal Lending Institution is a Federal Offence).  And the perpetrators pocketed tons of cash (Montecastro was estimated to have pocketed millions).

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 11323 of the Business and Professions Code is amended to read:

11323. No licensee shall engage in any appraisal activity in connection with the purchase, sale, transfer, financing, or development of real property if his or her compensation is dependent on or affected by the value conclusion generated by the appraisal.

SEC. 2. Article 7 (commencing with Section 1090.5) is added to Chapter 1 of Title 4 of Part 4 of the Division 2 of the Civil Code, to read:

Article 7. Unlawful Influence of Appraisers

1090.5 (a) No person with an interest in a real estate transaction involving an appraisal shall improperly influence or attempt to improperly influence, through coercion, extortion, or bribery, the development, reporting, result, or review of a real estate appraisal sought in connection with a mortgage loan.

(b) Subdivision

(a) does not prohibit a person with an interest in a real estate transaction from asking an appraiser to do any of the following:

(1) Consider additional, appropriate property information.

(2) Provided further detail, substantiation, or explanation for the appraiser’s value conclusion.

(3) Correct errors in the appraisal report.

(c) If a person who violated this section is licensed under any state licensing law and the violation occurs within the course and scope of the person’s duties as a licensee, the violation shall be deemed a violation of that state licensing law.

(d) Nothing in this section shall be constructed to authorize communications that are otherwise prohibited under existing law.

SEC. 3 No reimbursement is required by this act pursuant to Section 6 of Article XIII B o f the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime of infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

SEC. 4. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:

In order to take immediate steps to bring credibility to mortgage lending in California, and to protect consumers and other participants in mortgage transactions from fraudulent and deceitful practices, it is necessary that this act take effect immediately.