From classic land swindles to rings of straw buyers, an endless variety of real estate scams are being perpetrated every day in Los Angeles.
“It’s the perfect environment for that fraud,” said Ralph Plummer, a deputy district attorney in the three-lawyer real estate fraud unit. “We’re dealing with large numbers houses worth $100,000 or higher. There’s big money to be made and it’s simple to record a deed.”
The county recently reinstated an early-warning program that generates 5,000 calls a month. Under the program, any time a deed is filed, the homeowner is notified and provided a number to call if he or she did not sign the document.
“We’re up to our ears in it,” said Sgt. Paul Harvey of the Inglewood Police Department, who has handled real estate fraud cases for 20 years.
Adding to the problem is the market’s rebound from a prolonged recession. “It’s more lucrative now that real estate is up,” said Sgt. Maurice Arand, superintendent for the county sheriff’s real estate fraud team, which has six members up from three as of July 1997.
Land scams are not as common as the myriad forms of equity fraud, experts said. Such fraud encompasses everything from straw buyers to phony trust deeds to high-pressure sales tactics for home improvement work and stolen loan proceeds.
Often, the victims are elderly. Sometimes, the scammer will fake a trust deed from an unwitting homeowner. In other cases, the scammer will induce a homeowner to take out a loan and invest the proceeds, with the promise of a high return. But in both cases, the scammer gets the loan proceeds. Then there are caretakers who trick an elderly homeowner into signing over his home, Plummer said.
Unless those misdeeds are caught early, the perpetrator often gets away with it. “The senior will be put in a convalescent home or die and they have no way of assisting us,” said Plummer. “We sometimes have a devil of a time proving it.”
Another common fraud is the falsification of loan documents from borrowers who inflate their income to qualify for a loan to a complete falsification of everything, from the name to the Social Security number to the address.
“Because there’s so much lending going on in Southern California, that has to be the most common,” Plummer said.
Yet another common scam involves so-called “straw buyers.” In that scheme, a scammer purchases a property and then immediately resells it, using a phony appraisal, to another straw either an accomplice, an entirely fictitious individual or an unsuspecting victim. In any case, the scam artist pockets the loan proceeds and fails to make the loan payments. The bank, in turn, forecloses on the “buyer.”
A ring of at least 20 people has been doing just that around L.A. County, having so far made about $7 million of trust deeds that are believed to be fraudulent, said Harvey. The case is still being investigated.
Homeowners who suddenly face foreclosure have fallen victim to supposed foreclosure experts, who promise that for a fee, they will take over payments, thereby rescuing the homeowners’ credit. Instead, the “experts” take the money and are never heard from again, or they get the owner to deed over the property until the foreclosure is forestalled, and then the scammers take out further loans on the property.
“I have never yet found a mortgage foreclosure assistant that’s legitimate,” Harvey said.
Manuel Duran, a staff attorney with Bet Tzedek Legal Service’s Home Equity Fraud Task Force, said 80 percent of real estate fraud cases start with some form of home-improvement chicanery. Often, a contractor sells the homeowner again, usually an elderly person a paint job, say, and then convinces him to contract for all sorts of other work he didn’t know about. In some cases, there are multiple contracts drawn for the same work, so the owner is double-billed.
“Right now, we’re dealing with folks in their late 70s and 80s,” Duran said. “They think they’re signing up for home improvements and they don’t realize the cost and they’re getting slammed with a loan.”
Common scam: Home equity fraud
How it works: The scammer identifies a piece of property that the owner, often an elderly person, owns free and clear. The scammer, using a false identity, forges a grant deed, along with a forged notary stamp, that transfers ownership to him. The scammer then uses the documents to borrow against the property. Or, a scammer poses as a loan broker and calls an older homeowner and asks if he would like to borrow against his property. Having obtained such information as his Social Security number and date of birth, the scammer forges a loan application in the victim’s name. In either case, the scammer takes the money and flees, failing to repay the loan.
How it’s detected: The lender receives no payments and forecloses on the real property owner.