California Attorney General Rob Bonta announced the unsealing of a grand jury indictment against the owners of three mortgage brokerage firms and 11 affiliates in a mortgage fraud scheme that netted eight loans totaling $3.69 million. The fraudulent loans were used by unsuspecting borrowers to purchase properties in Los Angeles, Orange, Riverside, Sacramento, San Bernardino, and San Diego counties.
Ten of the defendants were arraigned Nov. 19 on charges including mortgage fraud, receiving proceeds of mortgage fraud and grand theft and pleaded not guilty. The remaining defendants will be arraigned at a later date.
“Those who try to scam, defraud, or cheat Californians will be brought to justice,” Bonta said. “Today, due to the hard work of our legal team and federal partners, we’re holding these scammers accountable for their crimes. Those who cheat the system and exploit the dream of homeownership to line their own pockets will be held responsible.”
The indictment charged the owners of First Republic Mortgage, 1st Fidelity Home Loans and Coastline Properties with allowing their associates to misuse their mortgage broker licenses to fraudulently secure home mortgage loans. Another defendant is accused of originating fraudulent loans by leveraging the licenses of owners for both First Republic Mortgage and Coastline Properties while managing the operation from an office in Riverside. An escrow agent for 1st Fidelity Escrow is alleged to have used the license of 1st Fidelity’s owner to facilitate fraudulent loans.
The indictment also included charges against associates of these companies, along with several real estate agents.
The California Attorney General’s Office joined the Federal Housing Finance Agency-Office of the Inspector General (FHFA-OIG), the U.S. Department of Housing and Urban Development-Office of the Inspector General (HUD-OIG), and the U.S. Postal Inspection Service in investigating the scheme.
The investigation began in 2020, when a Freddie Mac investigator informed the HUD-OIG that the owner of First Republic Mortgage may have originated FHA-backed loans by submitting false information, according to the indictment. Some of the defendants were alleged to have submitted loan applications that contained false information about clients’ income, employment details and divorce documentation. Additionally, the firms provided lenders with falsified documents, including pay stubs, W-2 forms, alimony checks and child support payments, to mislead them into approving the mortgage loans.
“Criminal acts of mail fraud, like those committed by First Republic Mortgage, not only taint the landscape of financial lending but it also put families at risk by potentially leaving them with unmanageable debt or financial hardship,” Los Angeles Division Inspector in Charge Matt Shields said. “The U.S. Postal Inspection Service, along with our state and federal law enforcement partners, will continue to protect consumers from these deceptive schemes used by those involved to profit from these mail fraud related crimes.”