In an inventive, but highly illegal, plan to pay off a mortgage he couldn’t afford, former Sacramento real estate agent Lawrence Grzelak could face nearly five years in prison if convicted of securities fraud.

Authorities arrested Grzelak on Monday after discovering that he took more than $76,000 from a Martinez, CA family in an investment scheme.

Prosecutors said Grezelak had purchased a condominium in Maui in 2006 but had fallen behind in the payments by 2010. Seeking a way to pay down his mortgage, Grzelak’s convinced potential homebuyers to buy into a nonexistent securities fund. He managed to get $80,988 from the victims after promising them that their investment would double within a month. Instead, he sent a check for $76,000 to American Savings Bank to pay his mortgage.

Grzelak has been charged with one count of securities fraud and one count of grand theft by embezzlement, with one enhancement for an excessive loss, according to the Contra Costa District Attorney’s Office.

One of RE-Insider’s goals has always been to educate real estate agents about the possible pitfalls they negotiate daily.

Perhaps the biggest issue we’ve tackled has been RESPA compliance – especially for real estate agents.
RESPAnews recently came out with an in-depth story on how important it is for real estate agents to understand RESPA laws. Some highlights of the article are below:

With all the talk about new disclosure forms and servicing regulations, it may seem like RESPA is only an issue for lenders, closing agents and mortgage loan servicers. That is not the case. Real estate agents also need to be wary of RESPA.

“I would say the biggest concern is the huge changes to the closing documents and closing process,” Ken Trepeta, director of real estate services at NAR said. “We are very concerned that there will be much confusion and many delayed closings if the proposal is not fundamentally altered. In fact, we are advocating they drop the back end changes almost completely and focus on getting the upfront disclosure, [the Loan Estimate], right.”

The Consumer Financial Protection Bureau (CFPB) took over the regulation of RESPA in July 2011, and it appears the bureau is taking RESPA violations seriously. They’ve reopened a U.S. Department of Housing and Urban Development (HUD) investigation involving kickbacks and captive reinsurance. Recently, the bureau declined to set aside a civil investigative demand by one of the companies under investigation.

It’s clear that RESPA violations should not be taken lightly and that the CFPB is picking up right where HUD left off.
With all the talk about new disclosure forms and servicing regulations, it may seem like RESPA is only an issue for lenders, closing agents and mortgage loan servicers. That is not the case. Real estate agents also need to be wary of RESPA.

Remember, a RESPA violation carries significant consequences. A RESPA violation could mean receiving a fine of up to $10,000 for each offense and could include imprisonment for up to one year. In some cases, RESPA allows for a private cause of action, permitting the consumer to sue the violator for three times the amount the buyer paid for the settlement service.

To avoid a Consumer Financial Protection Bureau investigation, it’s best to review your interactions with other settlement services providers and make sure that you are RESPA compliant.

Sixty-five percent of U.S. housing markets studied by RealtyTrac are worse off than they were four years ago, according to the Irvine, Calif.-based real estate research firm. The results of the survey arrive the same day as the final presidential debate and just weeks before the general election.

RealtyTrac measured five key housing metrics in 919 U.S. counties and discovered the majority are still suffering from falling average home prices, unemployment, and higher foreclosure inventories, foreclosure starts and distressed sales.

Of those counties studied, 580, or 65%, showed results in three of the five metrics as being worse off when compared to 2008 levels. Only 315, or 35%, of the counties had three of five housing metrics with improved performance over four years time.

“The U.S. housing market has shown strong signs of life in recent months, but many local markets continue to struggle with high levels of negative equity as the result of home prices that are well off their peaks. In addition, persistently high unemployment rates are hobbling a robust real estate recovery in most areas,” said Daren Blomquist, vice president at RealtyTrac.

“While the worst of the foreclosure problem is in the rearview mirror for a narrow majority of counties, others are still working through rising levels of foreclosure activity, inventory and distressed sales as they continue to clear the wreckage left behind by a bursting housing bubble.”

In the majority of the counties studied, home prices are down and unemployment rates are up in more than 90% of the areas. More than half have smaller foreclosure inventories and fewer foreclosure starts than in 2008, while distressed properties make up a smaller share of overall residential sales when compared to four years ago.

Over the last year, the real estate industry has seen a ton of high-profile RESPA cases, both in circuit courts and the US Supreme Court. With all these settlements and decisions, settlement service providers must be aware of how these rulings will affect their businesses.

On November 1, RESPA News is hosting a webinar to educated title and settlement service professionals on the significance of cases including:

• Edwards v. First American
• Freeman v. Quicken Loans
• Carter v. Welles Bowen

Additionally, this webinar will discuss how recent activities from the Consumer Financial Protection Bureau (CFPB) match up with these recent court discussions.

Click here to register for the webinar

In another positive sign for the housing market, the nation’s so-called shadow inventory of properties in the foreclosure pipeline fell by more than 10 percent in July from the same period a year before reported CoreLogic.

The Irvine-based tracking firm said the number of housing units in jeopardy of foreclosure, or which have been repossessed by lenders but not yet listed for sale, dropped from 2.6 million in July 2011 to 2.3 million in July 2012.

“Broadly speaking, the shadow inventory continued to shrink in July,” said Anand Nallathambi, president and CEO of CoreLogic. “This is yet another hopeful sign that the housing market is slowly healing.”

The report should be welcome news for homeowners who are worried that the value of their homes could be further depressed by a wave of foreclosure sales.

The real estate market has generally been on a path toward recovery this year, with home prices pressed upward by the low inventory of homes on the market and record-low 30-year mortgage rates, which have fallen below 4 percent.

Experts have pointed to the shadow inventory as a potential threat to the fledgling upturn. Large numbers of foreclosed homes hitting the market could drive prices down.

Last year, a Bee analysis placed the region’s shadow inventory at 53,256 homes in Sacramento, Yolo, Placer and El Dorado counties. That included about 12,285 homes owned by lenders but not yet sold.

The improving economy and alternatives to foreclosure, including short sales and loan modifications, have helped prevent homes from becoming part of the shadow inventory.

All told, the shadow inventory in the United States was worth about $382 billion as of July, the firm estimated. That’s down from $397 billion a year ago, it said.

Forty-five percent of all distressed properties are in five states: California, Florida, Illinois, New York and New Jersey, CoreLogic reported.

California Attorney General Kamala Harris announced this week that 2 Southern California real estate professionals have been arrested and charged with more than 40 felony counts of fraud.

Joana Sosa, 54, and Zoila Ortega, 31, both of Gardena, California, have been charged with grand theft, burglary, unlawful collection of advance fees, tax evasion and conspiracy in a wide-ranging mortgage fraud scheme. Both suspects also face special enhancements for excessive taking and aggravated white-collar crime for losses to victims exceeding $350,000.

The defendants allegedly ran a criminal mortgage fraud enterprise mainly against Spanish-speaking victims and targeted members of their own Spanish-speaking community. Many of the victims were often referred by other family and friends.

Joana Sosa and Zoila Ortega are charged with 41 criminal felony counts. If convicted, they each face 36 years in prison, including fines and restitution. They were booked at the Los Angeles County Jail and remain in custody at this time.

From 2008 to 2010, Sosa and Ortega charged their victims thousands of dollars in up-front fees and monthly payments, promising to protect their victims from eviction by purchasing their property from their lender and becoming their new “lender.” Sosa and Ortega promised the victims a modified loan they could afford with the opportunity to buy back their home in the future. No services were rendered by Sosa and Ortega, resulting in consumers being evicted from their homes.

“As the mortgage crisis continues, we are seeing a troubling rise in fraud that targets struggling homeowners, including those with limited English language skills,” said Attorney General Harris. The predators targeting these victims are ruthless, and I am proud of our prosecutors and special agents for helping to bring them to justice.”

Another day, another arrest. California is cracking down and showing no tolerance for fraud. 36 years in federal prison is a big penalty for a mistake.