more on murrieta scam

[mydogsarelazy]

High-ball offers raised flags in 2004; Unusual investment patterns cited in lawsuit reported to authorities

By: CHRIS BAGLEY — Staff Writer

MURRIETA —- An unusual pattern of investments raised concern long before it became the target of a lawsuit last week and the subject of an investigation by the Riverside County district attorney’s office, neighbors and real-estate agents said Monday.

The series of investments appeared to begin as early as 2004, when a mortgage brokerage began faxing out above-market offers on dozens of homes, agents said. The offers were typically for $80,000 to $100,000 above asking prices, targeted homes that had remained unsold for several months, and came primarily from Stonewood Consulting Inc., a mortgage brokerage that operated out of a house north of Clinton Keith Road in Murrieta, the agents said.

Stonewood and its president, Hendrix Montecastro, are not named as defendants in the suit, but they, family members and others appear to have worked closely with Jovane Investments LLC, Temecula attorney Richard Ackerman said. Ackerman filed the suit Friday in Riverside County Superior Court against Jovane on behalf of a Temecula woman who invested in the arrangement.

Montecastro and Stonewood attorney Bill Sauls didn’t return calls or e-mail messages seeking comment Friday and Monday. James Duncan, of Orange-based Jovane, declined to comment when reached by cell phone Monday.

Ackerman said Sauls had denied a connection between Jovane and Stonewood.

Earl Bonawitz, general manager of Century 21 Wright in Temecula, said he personally received six such offers and had talked to numerous other agents who also had.

Stonewood would fax out several shockingly high offers in the same neighborhood on the same day, said Gene Wunderlich, a director of the Southwest Riverside County Association of Realtors. The association reported the pattern of offers to the Riverside County District Attorney about two years ago, Bonawitz and Wunderlich said.

Unusually high offers are legal and not necessarily risky for the seller, but managers at several real-estate offices advised their agents to err on the side of caution, Bonawitz said.

Kevin and Janet Quigley said at least four such deals happened in their Copper Canyon neighborhood, where two- and three-car garages open up to boulder-flecked hillsides to the west and sweeping views of Murrieta to the east.

One neighbor was happy to receive her asking price of about $600,000 but peeved when she learned that the sale was officially recorded at about $700,000, Janet Quigley said.

“It’s overinflating the market,” Quigley said.

Wunderlich and Bonawitz acknowledged that such deals could inflate real-estate values in neighborhoods where they’re concentrated. Ackerman said he worries that the deals may have set up property values for a fall.

Both agents and Ackerman said they believe the deals may have relied on some sort of cooperation from appraisers who were involved. Quigley said several suspect deals appeared to have been handled by the same real-estate agent.

The deals were allegedly set up with an initial promise that Jovane and related companies would cover the monthly mortgage payments. The payments suddenly ceased in October and November, leaving the clients with defaulted loans, the lawsuit alleges.

Ackerman, another attorney and a San Diego financial adviser said their clients had defaulted on a total of perhaps two dozen loans. Ackerman said Montecastro told investors that they were among 412 people who were participating. Ackerman’s client bought five houses as part of the deal, the suit alleges. Other investors bought between two and eight houses, according to the lawsuit and another attorney whose clients allegedly took part.

Given the number of offers that Stonewood allegedly faxed out, 412 investors very well could have taken part, Bonawitz said.

In addition to the four sellers who took advantage of the unusually high offers, Quigley pointed up and down her street to another half-dozen houses that sold at around the same time and are now either being rented or are up for rent. In the front yard of one, the grass had grown long and brown, and several weeks worth of advertising fliers were strewn across the porch. In between two of them, Quigley said, the owner had gotten fed up and decided to move away. His house is now for sale.

In front windows of two houses on neighboring streets, lime-green signs read “Newly built single family house for rent or lease with option to buy. Low rent. Low deposit.”

“It’s ruining our neighborhood,” Quigley said. “There are a bunch of people on our street that aren’t happy.”

Ackerman said he filed the suit in part to keep lenders from foreclosing on his client, who now is on the hook for about $20,000 in monthly mortgage payments, far beyond her salary as a hospital nurse. He filed the lawsuit with his client listed as anonymous, because he said she has received threats over the telephone.

The plaintiff’s name is known to the judge in the case and to investigators for the Riverside County District Attorney, who began to investigate the matter late last year, Kelly Hansen, a senior supervisor in the office, said Friday.

Four lenders are named as defendants in the suit, which seeks to delay foreclosure and collection attempts. It also demands monetary damages from Jovane and Duncan.

Contact staff writer Chris Bagley at (951) 676-4315, Ext. 2615, or [email protected].

[ocrenter]

this thing is huge, 412 investors? assuming an average of 5 properties each, that’s 2000 homes. The newest update from nctimes reports $1.2 billion dollars worth of mortgage fraud. $1.2 billion/2000 homes = average price of $600,000 per home, that makes sense. 2000 homes and each overappraised for a $80,000 profit, that’s $160 million dollar of profit from this fraud case alone.

you would think UT or LA Times would be breaking this, but instead is a little regional paper?

it is just mortgage fraud… if FBI doesn’t care, why should we…

can you publish the link to the story, btw?

[mydogsarelazy]

Hi OCRenter,

I agree this is just huge, and I don’t understand either why it is not getting more coverage in other papers.

Just one aspect of it that blows my mind is the way that this caused price statistics to balloon upwards.

I don’t know how to properly post a link, but I found the story by search google news for “Murrieta.” It was in the Californian, part of the NCTimes on Jan. 10th.

JS

[blackbox]

Yep, poor defenseless nurses who just wanted to get into the game! These people (victims) helped keep the bubble going because of their greed, envy, and stupidity. You had no business buying multiple homes, and if you did, in fact, have a business buying bunches of homes during the greatest real estate market bubble in recent history, well….
That’s why most businesses fail; they are a huge risk. Of course, this was like buying a donut shop in a mini-mall that already had 2 donut shops opened and operating. You idiots!

[mydogsarelazy]

Details emerge in alleged scam

MORTGAGE: A Temecula woman says hundreds of property investors faced foreclosures and more.

10:00 PM PST on Friday, January 12, 2007

By LESLIE BERKMAN
The Press-Enterprise

At least 400 investors, many of them part of Southwest Riverside County’s Filipino community, are said to be victims of a mortgage-fraud scheme detailed in a lawsuit amendment filed Friday in Riverside Superior Court

The anonymous plaintiff in the original Jan. 5 filing was identified Friday as Vicky Reiss, a 40-year-old nurse from Temecula. The complaint also extended the list of defendants to include, among others, Stonewood Consulting Inc., Pacific Wealth Management and its operators, James Duncan and Maurice McLeod.

Pacific Wealth Management, a Nevada company named as a defendant, is not affiliated with the San Diego investment company of the same name, according to the suit.

In addition, the Riverside County district attorney is investigating the same investment group for possible violations of the law, said Deputy District Attorney Raymond Ramirez.

Friday afternoon, William H. Sauls, attorney for Stonewood Consulting, and Stonewood President Hendrix Montecastro, were not available for comment. Montecastro is named in the lawsuit as “the principal operator of the entire scheme,” and the contact between the investors and the other defendants.

James Duncan, who is an Orange County resident associated with Jovane Investments, named as a defendant in the original lawsuit, declined comment.

The amended lawsuit said starting about November 2004, the defendants held investor meetings to encourage Temecula and Murrieta residents to purchase houses in the area as investments.

The suit says the defendants falsified loan applications, charged excessive fees and opened lines of credit in the names of the investors.

According to the suit, the properties were appraised above the market value and surplus proceeds from mortgages were routed directly to the investment group rather than the buyers. The lawsuit said the defendants promised to rent out and manage the properties and pay the difference between the rent and the mortgages, an amount that for Reiss totaled $20,000 monthly on five houses.

In late 2006, the lawsuit said, the defendants demanded that the investors, including Reiss, cash out all of their open lines of credit and pay the proceeds to the defendants or face foreclosure. Other investors were told to cash out retirement and other accounts or be financially ruined, the lawsuit said.

Reiss said in an interview that because she depended on the defendants to pay the mortgages, she had difficulty saying no to their demands.

“I felt these people had a noose around my neck,” she said.

Richard Ackerman, Reiss’ lawyer, said in November that Reiss and other investors stopped receiving money from the defendants to pay their mortgages.

According to the lawsuit, at recent meetings with investors, including one on Wednesday, the defendants promised to continue making mortgage payments only on the investors’ primary residences, with the rest of the houses likely going to foreclosure because of the defendants’ alleged inability to release investment funds.
.com

[FormerOwner]

This thing involves about 2,400 houses! Most likely, all or most of the 2,400 will foreclose or become short sales. Another nail in the housing market’s coffin. I wonder how long it will take before these things really start foreclosing en-masse.

[Steve Beebo]

FormerOwner –

Do you know for sure that there were 2400 houses involved? Has that figure ever been in print? If not, I have a hard time believing that 2400 houses were involved. I have seen the figure of 400+ investors in the news. Are a husband and wife couple counted as two investors?

I don’t think the Temecula / Murrietta population is much more than 200,000. Even if there are 1000 short sales and/or future REOs created out of this scam, the negative effect on the market in that area would be devastating. The market already blows up there. Every street I drive down in that area seems to have a lot of active listings.

[lendingbubblecontinues]

blackbox…

I like your style. You seem to say what you really feel and I appreciate and respect that. There truly are too many idiots to count…f’em all!

LBC

[FormerOwner]

One of the articles indicated there were around 400 “investors” who bought from 2 to 8 houses each, indicating there were anywhere from 800 – 3,200 houses involved.

Also, $1.2 billion worth of property / average value of $525K per property = 2,286 houses – not quite 2,400 as I stated above but close. Even if they bought 3 houses each, on average, that’s still 1,200 houses! I agree, that it’s a significant percentage of the housing stock – around 3.5% if my 2,286 is right. Hopefully, more details will emerge to clear up the #’s.

[Steve Beebo]

$1.2 Billion lawsuit filed:

http://www.emediawire.com/releases/2007/1/emw497285.htm

[TheBreeze]

Wow! 5000 residential home loans may go into foreclosure within the next several months. Unreal.

Look out below!

[davelj]

Whoa Daddy. If even half of the 5,000 homes in question end up going into foreclosure by the end of this year (as opposed to “the next several months”) that will be an unmitigated disaster for SD/Riverside home prices, as it appears that the majority of the homes involved in this fraud are in SD and Riverside Counties. I’ll say it again, Whoa Daddy.

[davelj]

Also, we must not forget that this is probably the tip of the iceberg. While this may be one of the larger scams of its kind perpetrated by one group, there are many other similar scams that have been perpetrated on a smaller scale by plenty of fraudsters. And they’re all going to unravel over the next couple of years. To quote Borat, ” Niiiice.”

[Anonymous]

Go to the Riverside County Clerk of Courts website, http://75.28.114.12/OpenAccess/CIVIL/default.asp do a case number search and look up case #RIC463483. RIC is the case code for Riverside Civil courts and 463483 is the case number. Read the declarations filed for a little more info. You will see default notices from lenders including: EMC Mortgage, SLS, Aurora, GMAC and Wells Fargo. I am an employee of the legitimate financial planning company in San Diego which was victimized by the unlawful use of our name. Oh and I happen to own a home in Southwest Riverside County. I am so excited for this to unfold. One of the defendants has been the subject of investigations and injunctions in Iowa and Washington state in the past few years as well.
Don’t you just love people.

The entire legal profession…has become so mesmerized with the stimulation of the courtroom contest, that we tend to forget that we ought to be healers of conflict…Trial by adversarial contest must in time go the way of the ancient trial by battle and blood…Our system has become too costly, too painful, too destructive, too inefficient for truly civilized people.”
–Chief Justice Warren Burger, 1984

I sincerely hope that this courtroom contest does got he way of blood. I am not a direct victim of these bastards but I am confident that I will be profoundly affected by them for years to come.
JRex

[recordsclerk]

It’s seem to me that we are the true victim’s here. Houses are more expensive and loans will cost more for the consumer. These idiots that supposedly fell for the scam (more like willing participants)are crying all the way to the bank. It’s always someone else’s fault. What about the greed. People you bought at the wrong time. Whose fault is that. Please look in the mirror and start pointing that finger. Greed + bad timing + stupid loans = foreclosure.

[Author]

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