Cracking down on loan fraud

Times Staff Writers

State and local prosecutors said Tuesday that they had shut down a mortgage fraud ring that allegedly victimized thousands of seniors and others, some of whom lost their homes.

The San Bernardino County district attorney’s office arrested five people and were waiting for two more to surrender to face charges of conspiracy, grand theft and elder abuse as part of a crackdown on alleged sub-prime mortgage lending scams with the California Department of Justice.

A related lawsuit filed in Los Angeles County Superior Court accuses six companies of using predatory lending practices to trap homeowners in illegal and expensive loans.

“As the mortgage crisis worsens, a growing number of fly-by-night companies are employing utterly brazen tactics to push homeowners into illegal and unconscionable loans,” California Atty. Gen. Jerry Brown said. “The illegal sales practices of these companies . . . included psychological pressure, forgery and outright lies.”


The companies used bait-and-switch tactics to take advantage of thousands of consumers, Brown said. On Monday, he received a court order freezing the firms’ bank accounts and forbidding them from engaging in predatory lending practices.

The six companies -- Lifetime Financial Inc., Nations Mortgage Inc., Greenleaf Lending Inc., Virtual Escrow Inc., Olympic Escrow and Direct Credit Solutions Inc. -- were operated by Eric Michael Pony, 25, of Tarzana and family members, the lawsuit said.

In a coordinated action, San Bernardino Dist. Atty. Michael A. Ramos announced that Pony, a former real estate salesman, was expected to turn himself in to authorities Tuesday. Pony gave up his state license in September after an investigation by regulators. If convicted, Pony could face 24 years in prison, Ramos said.

Also expected to surrender was his sister, Paulette Pony, 23, of Tarzana, a notary public for Lifetime Financial. The California secretary of state’s office lifted her license in December in connection with felony conspiracy charges and for failing to disclose a forgery conviction.


Five other company employees were arrested and hit with criminal charges. Most were held in lieu of $2 million bail.

At a news conference Tuesday in San Bernardino, Ramos said he believed the Pony siblings to be the ringleaders of the operation, describing them as “the worst of the worst” among predatory lending abusers.

Ramos said his office had investigated the operation for nine months and accelerated its action because several of the alleged victims were elderly.

He said the siblings and their colleagues -- including Eric’s mother, Wilma Pony -- aggressively targeted victims through telemarketing scams. Wilma Pony, listed as chief executive of Nations Mortgage and Direct Credit Solutions, wasn’t charged.

Among the people the group “picked on,” Ramos said, were sub-prime borrowers and non-English speakers.

Brown’s statement described the plight of 75-year-old Luis Garcia, among 14 San Bernardino County residents hurt by the alleged fraud. Garcia agreed to a 50-year loan with $1,000-a-month payments but instead was hit with a monthly bill of $2,254. Garcia later found that Lifetime Financial had falsified his income and work history. He couldn’t afford the payments and lost his house.

Also named as victims were Tracylyn and Ronald Sharrit of San Bernardino, who said they were contacted in June 2006 by a Lifetime Financial representative who offered to refinance the couple’s loan.

A month later, Eric Pony came to their home with loan papers, which contained terms different from the ones they had originally been offered, Tracylyn said in an interview Tuesday.


“He pulled up and he had a nice car, a nice suit and talked like he knew his business,” she said.

Still, the couple declined to sign the papers. They later discovered their loan had been refinanced anyway -- using forged documents with signatures that weren’t theirs and that misspelled their last name.

“We feel financially raped,” said Tracylyn, 40. “Why did this happen to us?”

A statement issued by Brown accused Lifetime Financial, Nations Mortgage and Greenleaf Lending of promising borrowers unrealistically low interest rates of less than 6% a year and then having them sign contracts that carried higher rates. Lifetime Financial charged hidden loan fees of as much as $20,000 per transaction, the statement said.

Brown said he was seeking penalties and restitution of more than $20 million and had already identified a number of bank accounts and properties for possible seizure.

The criminal and civil actions against the Pony family members and associates and their companies are believed to be the most ambitious by law enforcement since California’s once-booming housing industry was hit last year by a crippling downturn that made it difficult for tens of thousands of borrowers to pay soaring sub-prime mortgages with adjustable interest rates. Brown said it was only the first of several legal actions planned to fight mortgage fraud.

The move, though limited, was welcome and would help “to rid the marketplace of the most egregious illegal practices,” said Paul Leonard, director of the California office of the Center for Responsible Lending, a consumer advocacy organization. “But the illegal practices are only the tip of the iceberg. The vast proportion of the problems in the sub-prime market were caused by perfectly legal but systematic failures.”

The investigation of the Pony companies also involved the Los Angeles Department of Consumer Affairs, the California Department of Real Estate and the state Department of Motor Vehicles.





Mortgage most foul

State prosecutors have launched a campaign against predatory lenders, shutting down six Los Angeles companies and accusing seven individuals of fraud. Here are some of the tactics the suspects are accused of using.

Bait and switch: Borrowers allegedly were offered fixed-rate loans but ultimately were refinanced into adjustable-rate loans with high interest rates.

Forgery: Homeowners said their names and signatures were forged on loan documents and sometimes were misspelled. Representatives also allegedly falsified income information on loan applications.

Language manipulation: The companies allegedly made loan offers to borrowers in their native language but gave them loan documents written in a different language with different terms.

Hidden fees: Borrowers allegedly were charged hidden fees of as much as $20,000 apiece.

Psychological intimidation: Company salespeople allegedly showed up at borrowers’ homes, sometimes as late as 11:45 p.m., with documents that were incomplete or different from those originally offered and pressured them to sign the documents anyway.


Source: California attorney general’s office,

San Bernardino County district attorney’s office