1/5/2011 Real estate, attorney scams rise amid f…

California Watch

DAILY REPORT (/dailyreport)

Real estate, attorney scams rise amid

foreclosures
August 9 , 2 01 0 | Joanna Lin (/user/joanna-lin)

Amid the downturn in California's real estate

market, the state has disciplined a record number
of real estate licensees and is inv estigating
thousands of attorney s inv olv ed in loan
modification and short-sale scams.

California's foreclosure rate remains among

Flick r ph ot o by Jeff T u r n er

(http://www.realty trac.com/trendcenter/default.aspx ?address=CA&parsed=1 &stc=ca) the nation's

highest, but it has been falling for sev en straight months, said Daren Blomquist, spokesman for
Realty Trac Inc., an Irv ine-based firm that tracks foreclosures nationwide. Still, officials say
fraudulent activ ity is on the rise.

"Y ou hav e a lot of financially stressed borrowers, a lot of potential v ictims," said Tom Pool, a
spokesman for the California Department of Real Estate.

The department rev oked, suspended or accepted the surrender

(http://www.dre.ca.gov /pdf_docs/pr/DRENewsRelease_enforcement_actions07 281 0.pdf) of 886
real estate licenses from July 2009 through June 30, 201 0. That's a 60 percent jump during the past
three y ears.

The department has nearly 5,400 open inv estigations, many for scams inv olv ing loan-modification
scams and, increasingly , short sales. It has also issued nearly 600 desist and refrain orders
(http://secure.dre.ca.gov /publicasp/unlicenseddnr.asp) to unlicensed firms and indiv iduals since
July 2006.

Similarly , the State Bar of California is inv estigating more than 2,000 of its members for
inv olv ement in foreclosure fraud. Twelv e attorney s hav e resigned, three hav e been disbarred, and
fiv e hav e trials pending, said Suzan Anderson, superv ising trial counsel of the bar's special team on
loan modification.

"I can't remember a time, not to this ex tent," when so many attorney s were being disciplined for
misconduct, A nderson said.

Records show fraud has occurred

(http://www.realty trac.com/contentmanagement/pressrelease.aspx ?channelid=9&itemid=97 66)
in ev ery region of the state, not just areas with the highest foreclosure rates. Downturns in both the
real estate and legal industries could be driv ing some of the misconduct.

"Basically y ou hav e 480,000 (real estate) licensees out there in the state and only a limited number
of transactions occurring," Pool said. "If y ou do the math, it's not a lot of business to be had per
licensee."

Real estate licensees inv olv ed in scams hav e been based all ov er the state, from San Jose to Bev erly

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1/5/2011 Real estate, attorney scams rise amid f…
Hills to Y ucca Valley . In loan modification cases, people "set up shop wherev er … but they would
canv as statewide," Pool said.

In the legal industry , all the lawy ers disciplined or under inv estigation hav e been practicing in
Southern California. Anderson said the bar does not know why the problem is prev alent only in that
region. The attorney s tend to join companies that want to purport being a law firm, she said.

"The attorney is pretty much renting and leasing his bar number to the loan modification company ,"
she said.

A nderson and Pool said it's difficult to find common threads among the scammers. Those inv olv ed
come from different professional backgrounds; some hav e had disciplinary problems in the past,
others hav e not. The number of complaints against indiv iduals or firms range from a couple to
dozens.

But there are some common practices among scammers. Many of the attorney s hav e adv ertised on
Craigslist, Anderson said. Ty pical mediums for real estate fraud are TV, radio or direct mail
adv ertisements, Pool said.

"Public records allow these folks to know when a notice of default's been filed, so it becomes
relativ ely easy to identify people who are financially stressed and may need the serv ice," Pool said.

Here's what consumers should watch out for:

Adv ance fees. California law prohibits the collection

(http://ethics.calbar.ca.gov /LinkClick.aspx ?fileticket=cB9TVIrLdWs%3d&tabid=455) of
adv ance or "retainer" fees, regardless of amount, in loan modifications.
No questions asked. If someone signs y ou up as a client before knowing y our financial
situation, "they don't really know if they can help y ou or not," Anderson said.
Guaranteed success. "Those things just aren't true," A nderson said.
License. Make sure the attorney or real estate firm or broker y ou're dealing with is licensed.
Y ou can look up attorney s (http://members.calbar.ca.gov /search/member.aspx ) at the state
bar website and check real estate licensees (http://www2.dre.ca.gov /PublicA SP/pplinfo.asp) at
the real estate department's website.

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