'Mortgage Fraud Factory' Whirs Down With 10 Arrests

Federal authorities called Crisp & Cole Real Estate a "full-service mortgage fraud factory" at a press conference on Friday when the 56-count indictment was unsealed. Indeed, people will spend years recovering from the financial damage caused by Crisp & Cole Real Estate, whose owners were arrested Thursday on charges of fraud, money-laundering and conspiracy.

The indictment alleges conspiracy to commit bank, mail and wire fraud and to launder money from about 2004 to roughly 2007.

Charges vary for each of the ten people named including principals David Crisp (pictured left) and Carl Cole. Also arrested on Thursday were former employees Jayson Costa, Julie Farmer, Sneha Mohammadi, Mike Munoz, Robinson Nguyen and Jeriel Salinas. Cole's son Caleb Cole and Crisp's wife, Jennifer, were also indicted.

"Many people in Bakersfield [California] have lost their home as a result of this fraud, and many of them will spend years trying to repair the damage that has been done to their credit, as well as their personal lives," FBI assistant special agent Manuel Alvarez said in a press conference on Friday.

The case started when the FBI raided 13 sites related to Crisp & Cole in September 2007. The firm allegedly helped falsify documents for mortgage loan applications. Houses were bought and
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sold at inflated prices, sometimes multiple times over just a few weeks, according to the indictment. The scheme involved straw buyers and borrowers who lied about income, jobs and intended use of the property. In some cases loans defaulted immediately. In other cases payments were made just long enough for the property to be flipped again.

Prosecutors estimate these crimes cost the mortgage industry $20 million, but other real estate professionals in the area think the number is closer to $39.5 million. Property appraiser Gary Crabtree told the Bakersfield Californian, "I feel bad for the people in North Country Meadows who bought on a rent to own basis only to lose the house." He added that "innocent homebuyers who purchased properties based on these inflated valuations" were also victims. "People vastly overpaid for their homes, and then lost tremendous equity after those fraudulent buys were foreclosed on."

Five Crisp & Cole employees already pleaded guilty, with the most recent plea deal announced in July 2010 when Christopher Stovall admitted that from July 2005 to August 2006 he and others at Crisp & Cole and Tower Lending (mortgage broker affiliated with Crisp & Cole) defrauded mortgage lenders including Long Beach Mortgage Company, Kirkwood Financial Corporation, Wells Fargo Home Mortgage, SunTrust Mortgage and Fremont Investment and Loan. He admitted they had submitted materially false and fraudulent statements in mortgage loan applications and related documents to get loans for straw buyers and others purchasing real estate. Four others who accepted plea deals include Kevin and Leslie Sluga, Megan Balod and Jerald Teixeira.

Sentencing for those who accepted plea deals has not been set. The sentencing had been delayed until April so the judge could factor in their cooperation in the investigation. Sentencing could be delayed again depending on the resolution of these latest indictments. Under federal sentencing guideline the penalty can be as high as 30 years in prison and a $1 million fine for some conspiracy charges. The maximum is 10 years and a $500,000 fine for money laundering.

Lita Epstein has written more than 25 books including The Complete Idiot's Guide to Personal Bankruptcy and The Complete Idiot's Guide to Improving Your Credit Score.

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