CA Appraisers in Cahoots with Subprime 'Predator' Head to Court

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Who ever still thinks appraisers didn't work hand-in-hand with mortgage brokers to bring on the subprime mortgage crisis hasn't been following the news in Laguna Beach, CA. In this town, the law finally caught up with a family-operated appraisal firm that had its own desk in the office of a major subprime mortgage broker -- a broker dubbed "Predator Zero" on Vanity Fair's list of institutions and people most to blame for the nation's economic problems.

Allegedly, between June 2005 and August 2007, the father-son team of Landmark Equities Group secretly changed appraisal data on documents of others through the use of employees' passwords and electronic signatures, and secretly removed negative property comments to increase the appraised value, according to a statement from the Orange County district attorney's office.
In one instance, they allegedly used an office manager's electronic signature to overstate an appraisal without her knowledge or permission. The office manager was allegedly fired after she refused to supply to James Eaton passwords for herself and other employees.

In December, Laguna Beach, CA police arrested James Merritt Eaton, 60, his son Brian Chandler Eaton, 28, and real estate appraisal firm executive Michael John Bell, 32, of Corona del Mar, and charged them with one felony count of conspiracy to defraud another of property, 17 felony counts of grand theft by false pretense, two felony counts of identity theft, two felony counts of false impersonation, and sentencing enhancement allegations for aggravated white collar crime of more than $100,000 and property damage exceeding $50,000. Between April 17, 2006 and Dec. 30, 2006, the three men allegedly changed the appraisal values by $4,000 to $40,000, according to the D.A.

Landmark opened branch offices in Dublin, CA, Las Vegas, NV, and Scottsdale, AZ. But more interestingly, it also maintained an office space at Quick Loan Funding in Costa Mesa, supposedly to facilitate loan officer input in the appraisal process, according to prosecutors.

Quick Loan Funding, owned by Daniel Sadek (pictured), was founded in 2002 and wrote roughly $4 billion in subprime mortgage loans before collapsing five years later. In September, Vanity Fairranked Sadek No. 86 on a list of 100 institutions and people to blame for the "economic mess" in the U.S. The magazine called him "Predator Zero in the subprime-mortgage game," and quoted a competitor saying he "would have written a loan to 'an insolvent arsonist.'"

Boosted by high fees and interest rates - high even for the subprime industry - Quick Loan's after-tax profits averaged 29 percent of revenue. In 2005, Quick Loan's biggest year, profit topped $37 million, reported the Orange County Register.

Sadek used the earnings to live the high life, buying a fleet of Ferraris, Lamborghinis and Porsches, dating a soap opera starlet and producing movies. He cultivated a rebel image, wearing a beard and hair to his shoulders, dressing in T-shirts and flip-flops, eschewing the typical mortgage banker's pinstripes, the paper said.

This cozy arrangement was busted, but what's to stop other brokers and appraisal management companies from creating similarly unsavory relationships based on mutual benefit?

In the meantime, the Eaton's, will have their day in court later this month.

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