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Like most other immigrants in her Columbia Heights neighborhood, Gloria was eager to get out of her cramped digs. So when a Silver Spring real estate agent approached the native Salvadoran last year with an opportunity to buy a town house on Irving Street NW, she was ready to talk terms.
On paper, Gloria is an improbable homeowner. She made just $10,850 last year as a janitor. She speaks no English and is illiterate in her native Spanish, according to her lawyer, Rosario Gingras. She has no savings.
But none of those handicaps mattered to the agent and the house’s owner, according to Gingras. The agent told Gloria that she could afford the house as long as she rented out a few rooms to her friends. And he told her not to worry about all the paperwork required to secure a loan for the house. He would take care of all that.
The loan application made Gloria seem like a textbook immigrant. It said she had 16 years of schooling and has worked for eight years as a physical therapist. The alterations to Gloria’s vitae were good enough to snare a $144,000 loan.
The bank learned quickly that its mortgagee was significantly less qualified than an erudite physical therapist to make her $1,400 monthly payment: Gloria never came through with a single payment.
Gingras says the bank foreclosed on the property last month, sending a confused Gloria into a relative’s home. The foreclosure diminishes Gloria’s already minimal prospects: With a foreclosure on her record, it’ll be seven years before her credit rebounds, and she’ll probably never own a house. She also faces tens of thousands in debt if the loan company ever comes after her for the difference between her loan and the foreclosure amount. “It’s a disaster from top to bottom,” says Gingras.
Gloria’s disaster, though, was a windfall for the agent and the owner, neither of whom has been charged with any wrongdoing. (Gingras has refused to identify the alleged culprits.) According to Gingras, they raked in the proceeds of a property overvalued by about $50,000. “It’s probably worth $90,000 at best,” says Gingras. “There’s no legitimate way she could qualify for a loan. Some of these folks have to know something crooked is going on.”
Gingras says thousands of Latino immigrants in the D.C. area are succumbing to real estate scammers specializing in hoodwinking financial institutions into bad loan decisions. Like Gloria, the victims are often deficient in English and always unschooled in the intricacies of real estate transactions. But their names are popping up on doctored loan applications from Fairfax to Columbia Heights. Depending on the circumstances, the scammers use the immigrants to sell houses at above-market ratesas in Gloria’s caseor to artificially inflate property values.
The FBI is currently following a paper trail detailing the scams and finding angry lenders and bamboozled immigrants at the either end of the same deal.
Thomas C. Hebert and Wei Tu Grandon, who ran an Annandale-based mortgage firm named Uni-Source Financial Corp., showed little restraint in swindling Latino immigrants and lenders. From 1992 until last year, the pair orchestrated a string of bogus transactions, from securing loans for unfit borrowers to making whirlwind deals that bought and sold properties under straw namesalways using millions in mortgage-lender funds to make money off the churn. Their clients were lured by the promise of no-hassle loans but now face foreclosures, lost homes, destroyed credit, and the threat of criminal charges.
Defrauded lenders also lost big. “It wasn’t pretty,” says Bryan Deyhoff of McLean-based Mortgage Edge Corp. “We never saw [a scheme] this sizeusually they’re onesies and twosies.” The company lost more than $200,000 in its dealings with Uni-Source. “We’ll have to write most of that off,” says Deyhoff.
Hebert and Grandon might still be honing their pitches today if not for former Mortgage Edge executive Susan Unuscavage, who became suspicious when deals through Uni-Source flooded her office and tipped off the FBI. “When you see a number of loans coming in that quickly, it kind of red-flags you,” Unuscavage told the federal court that sentenced Hebert and Grandon last May.
U.S. District Court Judge T.S. Ellis III sentenced them to matching 15-month prison terms for their creative deals. But Hebert and Grandon weren’t done making dealsthey volunteered to work with FBI agents to snag other scammers in exchange for reduced sentences. On Oct. 24, Ellis approved the plea, reducing the sentences by more than half. Instead of spending most of 1998 behind bars, the former business partners will taste freedom by February.
Why cut a deal with two prolific scam artists? Assistant U.S. Attorney Daniel L. Bell II told the judge that the FBI suspected that mortgage fraud was “very widespread behavior…that has spread really into many, many cases” in the area. One source familiar with the Hebert-Grandon investigation warns, “This is the tip of the iceberg.”
Hebert and Gordon’s scamming days were numbered after they engineered the October 1996 purchase of a house in a Fairfax subdivision. According to court documents, Hebert, Gordon, and Falls Church real estate agent Luis E. Gomez (who was also sentenced to 15 months) led Citizens Mortgage Corp. of Atlanta to believe that a purchaser had sufficient funds in a bank account at George Mason Bank to cover payments on the $144,000 mortgage.
The trio had a repertoire of gambits to bolster a borrower’s profile: In some cases, Gomez represented himself as the proposed buyer’s landlord; in others he would say the buyer was an employee at the Olivia Cafe in Arlington, of which he was part owner; he also set up answering services for phantom companies to provide false employment verifications. At one point, Gomez even used a fictitious nameMary Smithto notarize his own documents. Grandon, meanwhile, was adept at scanning bank statements into her
computer to alter the data.
The scammers paid up to $2,000 to use people’s names in fake property purchases. Gomez’s plea agreement described the schemesimultaneously applying for loans for several different properties under a single buyer’s name to prevent any one lender from knowing that the buyer had other loans pending. They would promptly resell the properties at a profit, without ever having risked their own capital.
Even though Hebert, Grandon, and Gomez had been handling legitimate transactions at the same time, FBI Special Agent Brian Due managed to uncover 29 fraudulently obtained mortgages, 11 of which had gone into default by this spring, resulting in losses to three different lenders. The investigation left it clear, meanwhile, that the three hadn’t acted aloneother professionals had been involved, including appraisers, accountants, and settlement representatives.
Attorneys for the defendants tried to dress up some transactions as goodwill ploys to secure loans for immigrants who didn’t have credit, but prosecutors kept those references out of the final plea agreements. “I know of no altruistic motives in any of these transactions,” says a source familiar with the case.
Due and Bell busted at least two similar scams a year ago, which also resulted in jail terms for some of the participants. One of the defendants, Juan Carlos Estrada, began a 12-month sentence this year for helping Fairfax real estate bigwig William Pacori arrange more than 50 fraudulent mortgage loans, according to court papers. Estrada, an accountant, pleaded guilty to one count of bank fraud for his part in the scheme: preparing false tax returns and other financial documents that misled lenders. Though the plea agreement cites Pacori as the person who brought Estrada into the scam, Pacori hasn’t been charged.
Nor have the guys who allegedly cheated Gloria. According to Gingras, they used the same tricks as Hebert, Grandon, and Gomez. They were incredibly shameless. “In one case, the broker said a woman who can’t speak English was an assistant principal at a high school in Virginia,” says Gingras.
Gingras represents 10 D.C. residents who fell victim to the scam. All of them are immigrants, and all lost their homes.
The FBI, says Gingras, is the only check against the scammers. Few mortgage companies, he says, will go after the scammers or the unqualified borrowers. “Does the lender care?” asks Gingras. “No, if he’s getting his payment.”
Not every one of the immigrants in the bogus deals has tipped over. Gingras says one client who got a mortgage through the scam was very anxious that his loan had been obtained under false pretenses. “I told the guy, ‘Keep your head down. Pay your taxes. Make your payments and hope for the best. And, no, you can’t get refinancing.’” CP