This article is part of an ongoing series covering violations of real estate law. Here, brokerages engaged in MLO activities to defraud homeowners looking to refinance their mortgages.

In December 2019, the California Department of Real Estate (DRE) accepted the voluntary surrender of licenses from corporate brokerages Adenheim, Inc. and Unicitizens Financial, Inc., as well as the broker officers of both corporations.

Since at least 2017, the brokerages, operating in the Los Angeles area, engaged in a series of schemes preying primarily on elderly homeowners interested in refinancing their mortgages.

While the brokerages and broker officers were licensed by the DRE, none of the licensees involved were licensed to perform mortgage loan origination (MLO) activities.

The brokerages advertised by way of infomercials that claimed the brokerages would help homeowners attain lower mortgage rates, representing themselves as “UniCitizens Mortgage.”

Shobert Vartan, a salesperson licensed by the DRE who was employed by Unicitizens Financial, acted as point person, including running the company’s website. On seeing the advertisement, many homeowners reached out to Unicitizens, whereupon Vartan promised them specific terms for the renegotiation of their mortgages. He then induced them to sign documents, in many cases preventing homeowners from reading them before signing.

According to the DRE’s filing, Vartan “either covered the documents with his hands or another sheet of paper” to prevent clients from being able to accurately understand the terms of the agreement they were entering into. The clients relied solely on his verbal explanations.

Invariably, homeowners left without copies of loan documents, having negotiated mortgage agreements with far higher interest rates over a far shorter period of time, unbeknownst to them.

The DRE recommended revoking the licenses of all licensed participants in the scheme.

Rather than pay investigative costs and risk revocation of their licenses, the licensees elected to surrender their licenses voluntarily.

The deal with California mortgage fraud

Typically, purchasers are more likely to commit mortgage fraud than refinancers, as in occupancy misrepresentation. This occurs when the buyer of a property to be funded by a mortgage lies about whether the property they’re purchasing will be used as their primary residence. In these cases, mortgage lenders often turn a blind eye, even encouraging the fraud through their MLOs or NMLS registered employees, electing to originate the present mortgage rather than maintain long-term business integrity.

However, organized, deceitful, lender-originating mortgage fraud does happen. It’s worth noting these schemes seldom work out or pay off. In this case, for example, the participants were also taken to court in a civil suit in 2017 that cost them $50,000 in money losses. [Rosemary Marshall v. Schobert Vartan, et al. (February 27, 2017)]

While any conspirator in this case may petition for the reinstatement of their real estate license, it’s unlikely, given the severity of their actions, any one of them will have their license reinstated.

Lenders and MLOs, as well as DRE licensees, need to be on the lookout for organizations like this that prey on vulnerable homeowners and borrowers. Advise your clients to read all paperwork they sign. Encourage your clients to ask questions so they understand the full breadth of any real estate transaction, mortgage-related or otherwise.

MLOs who suspect mortgage fraud, either purchaser- or lender-originated, may file a suspicious activity report (SAR) with the U.S. Treasury Department.

Related article:

Mortgage fraud potential rises