Four men were convicted Wednesday for their roles in a real estate scam that stung hundreds of victims through the fraudulent collection of more than $130,000 in upfront fees for loan-modification services via fake letters with the CitiFinancial or CitiMortgage logos. Jacob John Cunningham, 26, of Irvine, Justin Dennis Koelle, 23, of Costa Mesa, Andrew Michael Phalen, 26, of Mission Viejo, Dominic Adam Nolan, 32, and John D. Silva, 28, both of Irvine, created several phony loan-modification businesses between January 2009 and March 2012.
These went by such names as CSFA Home Solutions, Mortgage Solution Specialists, Inc., CS & Associates, National Mortgage Relief Center, NMRC, NMRC Inc., N.M.R.C. Inc., Allied Home Servicing, Allied Loan Servicing, U.S. Consulting Corp. and Accredited Processing Solutions.
During those desperate times for upside-down homeowners, these fake companies sent out promotional letters to people throughout the United States offering to restructure their home loans. The letters included individual homeowner's principal balance and actual lender, which appeared to have authorized the loan-mod services. And, in violation of the law of the state since Oct. 11, 2009, the letters asked for upfront fees.
The fivesome boasted that the company had a 95 percent positive rating when it came to getting loan-modification approvals and offered to refund upfront fees if they were not successful. But then the companies kept the money without doing any loan-mod work or refunding the fees.
Cunningham, Koelle, Phalen, Nolan and Silva regularly changed the names, phone numbers and addresses of the companies to avoid getting caught. After more than 100 victims in California complained to the Better Business Bureau in late December 2011, Cunningham, Nolan and Silva started a new scam that had them sending out forged “Conditional Approval” letters to homeowners with a CitiFinancial or CitiMortgage logo in the letterhead, even though the trio had no affiliation with those financial institutions.
The letters promised low interest rates of 2.8 percent or less to refinance a home loan and included “escrow Instructions” directing applicants to deposit between $3,500 and $4,600 directly into the fraudsters' bank accounts.
The $130,000 figure mentioned at the top seems relatively low, but that's only because that's the amount authorities have discovered was stolen. They estimate there are hundreds of other victims in California and out of state. The Orange County District Attorney's office, the United States Secret Service, the Office of the Special Inspector General for the Troubled Asset Relief Program, the Department of Real Estate, the Orange County Probation Department, the Orange County Sherriff's Department and the police departments of Costa Mesa, Irvine, Santa Ana and Huntington Beach are among the agencies trying to unravel all of this.
Phalen already pleaded guilty on June 4, 2012, to a felony count each of conspiracy to collect illegal upfront fees and conspiracy to commit fraud. He was sentenced to a year in jail, five years formal probation, during which he is prohibited from engaging in loan modification or loan consulting practices, and ordered to pay restitution in an amount to be determined at a later hearing.
Cunningham, Silva and Koelle pleaded guilty Wednesday to a felony count each of conspiracy to collect illegal upfront fees and conspiracy to commit theft by false pretenses, while Nolan copped only to felony conspiracy to collect illegal upfront fees.
Sentencing is scheduled for July 29 in Santa Ana. Cunningham and Silva are each expected to get six months in jail and five years probation (during which they will be prohibited from engaging in loan modification or loan consulting practices). They are ordered to jointly pay $60,000 toward restitution by their sentencing date and the rest by a later date to be determined.
Koelle is expected to get nine months in jail and five years probation with the same restrictions against engaging in loan modification or loan consulting practices. The restitution he must pay is to be determined.
It is expected Nolan will be sentenced to six months in jail and five years probation with the loan-mod restrictions and a restitution amount to be determined.