Con Artists Bilk Houses Out From Under Home Owners
Making money in real estate hasn’t been easy in the last few years. However, a sizable group of brash con artists has seemed to find all sorts of ways to make a buck these days. The number of scams out there is almost mind-numbing.
Swindles involving some sort of title fraud are particularly popular, say title companies, lawyers and law enforcement officials.
All an enterprising criminal has to do is forge your signature, pretend to be you and get a fake notary seal. If you own a rental property, your tenant can easily call a real estate broker and list the property for sale. Pretending to be you, the tenant can sign over the deed to an innocent buyer and walk away with proceeds of the sale. Con artists can also pretend to be you and take a loan on your house. Chances are you won’t know this has happened until an eviction notice appears at your door. By then, the con artist has defaulted on the loan and your house has just been sold by a lender you have never met.
Although this happens regularly in the San Fernando Valley and Ventura County, owners who can prove they are indeed the true owners, generally won’t lose their properties. It can take months, however, and $5,000 to $10,000 to hire a lawyer to do what’s known as quiet title.
“The ability to manipulate property and borrow money against it is a playground for knowledgeable criminals,” said Robert A. Weissman, senior partner at Encino-based law firm Weissman & Weissman. “There are people very well-versed in doing this.”
Weissman was recently hired to clear the title of an Encino home owned by a couple approaching their 80s. They said someone they knew broke into their house along with a companion and obtained documents used to commit a series of forgeries. The perpetrators applied for several loans and credit cards using equity in the house as collateral. One lender, however, realized something was fishy and stopped payment on its loan. The good news is that the owners and their son got wind of the fraud and they managed to clear the mess up before it got out of hand.
Another cases involved the nephew of an elderly woman who took a second mortgage on her Burbank home, recalled Weissman, who is president-elect of the San Fernando Valley Bar Assn. The nephew used an impostor and had the documents notarized in Palm Springs. The lender was the major victim of this fraud, but title insurance covered its losses.
“The ownership to your home is exposed constantly,” warned Jim Peters, senior vice president and chief advisory title officer at Stewart Title Co. in Glendale. “Anyone can go in and forge another deed and record it.”
Another popular scam is perpetrated by people who somehow acquire title to a property and then get it financed many times over, Peters said. “The system is so easy to beat,” he said. “In one month I could walk away with $50 million because of my knowledge of the system. The chances of someone finding out it was done would be 30 to 90 days after I’d have left town.”
Law enforcement officials don’t know how to do investigations because they don’t understand the documents, Peters said. Even when the crooks are caught, he said, law enforcement authorities can rarely pin down where the fraud and forgeries actually took place--creating a jurisdictional problem. “Unfortunately, practically none of this stuff is ever prosecuted,” Peters said. “It breaks your heart that people are being defrauded every day and there’s no way to stop it.”
The most frequent objects of title forgeries include various deeds, including deeds of trust, deeds of reconveyance (a note given when a loan is paid up) quitclaim deeds and substitution of trustee forms, said Peters. These forgeries place title in the name of the forger, clear away encumbrances or name a new trustee who’s somehow involved in the scam. With forged documents, a con artist can sell a property, refinance it or rent it out.
There are also widespread reports of loan fraud by unscrupulous borrowers who cadge money out of banks. However, because banks and savings and loans are institutions that operate under federal guidelines, bank fraud cases are handled by the U.S. attorney’s office and the FBI, who have more clout to investigate these cases.
In some cases, the fraud is as simple as loan applicants who overstate their income by a few thousand dollars. At the other end of the spectrum are loan brokers, borrowers and real estate agents conspiring to borrow money for properties that don’t even exist.
Borrowers, brokers and agents who try to perpetrate a loan fraud today, however, risk hefty civil penalties and even jail time. Loans obtained as a result of misstatements are being foreclosed on by lenders. And, lenders are starting to get serious about curtailing fraud. But, the problem is still prevalent.
Another problem that keeps popping up relates to scams spawned by the year-ago Northridge earthquake. Many unlicensed building contractors have been combing the Valley looking for victims, said attorney Weissman.
He is currently representing an 82-year-old rabbi and his wife who were talked out of $130,000 by an unlicensed contractor who allegedly did only $40,000 of the work and kept the rest. The contractor gave the couple a fake contractor’s license number and brought in workers who stole the rabbi’s furniture and clothing. “We’re trying to get this case prosecuted,” Weissman said. “Everybody’s lends a nice ear but nobody does very much,” he lamented.
While some owners are being further victimized by last year’s quake, others are taking unfair advantage of it say government officials. Some individuals and businesses have taken advantage of all the aid that was made available by either asking more than they are entitled to or making outright false statements in applications for aid from the Federal Emergency Management Agency, Department of Housing and Urban Development, Small Business Administration and others.
“The phone rings all the time with calls about real estate fraud,” said Mike Carroll, a deputy district attorney in Los Angeles.
Some recent cases in various stages of investigation and or prosecution handled by the district attorney’s office include:
* The case of a local company that allegedly built up a $100-million Ponzi scheme. According to prosecutors, this company sold investors fractionalized interests of money-losing deeds of trust. The old investors just got paid with money from new investors until the pyramid collapsed. Now, the company principals face an array of charges, including grand theft, money laundering and various securities violations.
* A local attorney is being prosecuted for allegedly using forgeries and altered escrow documents to allegedly bilk several unsuspecting victims. Charges include theft, false pretenses and money laundering.
Carroll conceded that the D.A.'s office doesn’t have enough resources to go after all the real estate scams being perpetrated. “We have a finite amount of resources available. We look to the amount of loss or the impact on the community and then decide whether to go ahead with an investigation or a case,” he said.
It’s impossible to ensure you won’t become a victim, but it helps to be suspicious whenever people start asking you questions about your property ownership.