Monday, February 9, 2009

Real Estate Fraud -- Ten Individuals Indicted in San Diego Case Relating To Home Foreclosure Services

In a press release, the San Diego County District Attorney’s Office announced that on February 2, 2009, ten people were indicted by the Grand Jury in an alleged real estate fraud scheme. The defendants offered services to mostly non-English speaking, Hispanic homeowners who were in foreclosure, claiming to offer assistance through a land grant. The defendants acted as “foreclosure consultants.”

Two methods were used for inducing owners of residences in foreclosure to participate in a so-called land grant program. One method required homeowners to pay a one-time fee of up to $10,000 to put their property in a land grant. The second method was a lease back scheme. In both scenarios, the homeowner was typically evicted from their property at the completion of foreclosure proceedings and retained no legally recognized title to their property.

The defendants used the business names of Federal Land Grant Company; Land Grant Services; and KBS Resources. The individuals were charged with conspiracy, grand theft, and deceitful practices as foreclosure consultants. The District Attorneys Office also took action to freeze the bank accounts of the suspects to preserve assets for restitution for the victims.

For more see:

Commentary: California law regulates “foreclosure consultants” who are not otherwise licensed attorneys, real estate agents and other licensed professionals. California Civil Code Section 2945 and related sections set forth laws to protect consumers and govern unlicensed professionals relating to foreclosure services. If these rules are violated, there are fines, penalties and can be prosecuted as a crime. Thus, even unlicensed individuals must be mindful of the law. Unlicensed individuals must also be careful not to conduct real estate activity without a license or the Department of Real Estate can obtain a cease and desist order against them.

Licensed individuals such as mortgage brokers, attorneys, real estate agents and others will be governed by the rules of their own professional boards and other applicable law. Nevertheless, they should be aware of the rules governing foreclosure consultants.
This case is a reminder that the government is going to be aggressive in protecting consumers and prosecuting those who violate the law during economic times when people are financially vulnerable. Anyone who engages in providing services to those who have received notices of default or provide foreclosure services, need to comply fully with the law or risk future prosecution.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates in Los Angeles, California.  They focus their practice on the representation of professionals, including real estate brokers, real estate salespersons and agents (including those who provide mortgage broker services), attorneys and corporate businesses in civil, administrative and criminal cases.


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