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Mortgage scams persist despite state crackdown

California WatchGeorge Bolanos

The state Department of Real Estate issued a desist-and-refrain order against a Los Angeles man accused of running an illegal loan modification business, as boom times continue for mortgage scams.

Last year, California Watch reported that George Bolanos was targeting Latino homeowners in Southern California with offers to help avoid foreclosure for an illegal advance fee. Bolanos advertised on Spanish-language radio and sometimes refused to give his last name to clients.

A state investigation prompted by the story documented six cases in which Bolanos charged money up front for loan modifications, which is banned in California to protect consumers. The desist-and-refrain order bars Bolanos from running any kind of real estate business because he is not licensed.

The state has issued an increasing number of such orders, as the wave of mortgage scams that came with the subprime mortgage crisis has not subsided. The Department of Real Estate issued 201 desist-and-refrain orders in the last fiscal year, a 25 percent increase from the previous year.

Whether they stop wrongdoing is another matter.

"Generally speaking, the (orders) are effective for those that care about the law," said department spokesman Tom Pool. "Those that didn’t care about getting licensed in the first place certainly may not pay attention to the desist-and-refrain order and may continue to operate."

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It's unclear what Bolanos, who has a pattern of changing his company name and using variations of his own name, is doing now.

California Watch investigated Bolanos after Lydia Prado, an Orange County house cleaner facing foreclosure, said he charged her an upfront fee for a loan modification.

Prado said she also was charged an illegal advance fee last year by another company, run by Juan Carlos Ruiz. In 2009, the Department of Real Estate had accused Ruiz's company, JC Ruiz Capital Group – also known as Maxima Home Loans – of fraud and issued a desist-and-refrain order [PDF].

Interviewed for an earlier story, Ruiz said: “They couldn't prove anything. We're still doing business, so nothing happened.”

More than two years after the desist-and-refrain order, the department is still working to revoke Ruiz's license. A hearing is scheduled for November.

Prado said Ruiz never paid her back. Prado is working with yet another company to try to get a loan modification. She said she keeps many of her belongings in boxes in case the bank sells her house instead.

Meanwhile, mortgage scams continue apace. The Loan Modification Scam Prevention Network tracks complaints across the country and reports an average of more than 1,000 per month. California leads the pack with an average of 200 scam complaints every month. A disproportionate number of people reporting scams are Latino, African American or Asian, according to the network.

Non-English-speaking communities are getting hit particularly hard, said real estate department spokesman Pool.

"There’s a lot of affinity fraud where these scammers will speak the same language, they might go to the same church, they might have some other affinity," Pool said. "There's a comfort level there."

Some homeowners are so desperate that they'll pay money up front to a scam artist even after being warned to stay away, said Lorrina Duffy, staff attorney with the Legal Aid Foundation of Los Angeles.

Those facing foreclosure often don't want to be told that they simply can't afford the mortgage, Duffy said. The temptation to pay someone who promises a guaranteed loan modification is too strong.

"If anyone says, 'I guarantee you,' you know right away they're going to take your money and not help you. Because there's no guarantee," Duffy said. "They’re just preying on these people who are desperate to save their homes."

Earlier this year, state Attorney General Kamala Harris announced a new "strike force" to crack down on various kinds of mortgage fraud, including consumer scams. The team has 30 people on staff and is designed "to protect the homeowners who are being targeted with these scams," said Shum Preston, a spokesman for the state Department of Justice. 

But small operations can slip through the cracks. And often, there's no recourse.

"These scammers, they took the money, and now they’re gone," Duffy said. "They’ve moved offices, they've moved to a new community, and more likely than not, there's no remedy in getting them their money back."

 

California Department of Real Estate enforcement actions

  FY 04/05 FY 05/06 FY 06/07 FY 07/08 FY 08/09 FY 09/10 FY 10/11
Licenses revoked 236 227 247 375 528 484 564
Desist-and-refrain orders 54 30 79 74 145 161 201

 

Scam complaints reported to the Loan Modification Scam Prevention Network

Mortgage scam complaints United States California
August 2011 1,048 258
July 2011 1,076 172
June 2011 900 169
May 2011 1,137 227
April 2011 1,585 292
March 2011 1,531 275
February 2011 734 187
January 2011 837 212
December 2010 1,572 106
November 2010 749 189
October 2010 897 231
September 2010 734 163

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