Would you report a fellow agent to the DRE for a disciplinary action?
- Yes (91%, 21 Votes)
- No (4%, 1 Votes)
- Only when they are not employed at my office (4%, 1 Votes)
- Only when they are employed by my office (0%, 0 Votes)
Total Voters: 23
This article is part of an ongoing series covering violations of real estate law. Here, the California Department of Justice (DOJ) sentenced a broker to 5 years and 4 months in prison and ordered him to pay restitution for creating forged and fraudulent records to obtain more than $8 million in mortgages for his clients in order to earn fees for himself.
In September 2022, Alex Ashod Dadourian surrendered his license to the California Department of Real Estate (DRE) after the DRE filed an administrative accusation against him. Dadourian was a DRE broker since 2014 and a DFPI licensed mortgage loan broker operating out of Northridge, California.
Between 2017 and 2019, Dadourian, with his company Success Funding dba Pride Funding, took out 17 mortgage loans based on fraudulent applications and supporting documentation, such as employment verifications, inflated earnings statements and education records which lenders used to assess the borrowers’ creditworthiness.
The employers listed on the mortgage applications either didn’t exist or had no record of employing the mortgage applicants.
The California Attorney General convicted Dadourian on 91 felony counts of mortgage fraud, grand theft, identity theft and conspiracy. He was sentenced to 5 years and 4 months in prison and ordered to pay restitution.
The fraudulent mortgages Dadourian originated totaled more than $8 million. Dadourian received more than $254,000 in fees from them. California Attorney General Rob Bonta states, “We won’t stand idly by when bad actors take advantage of their professional position and break the law to enrich themselves.”
The joint case by the DRE and California Attorney General’s Office ended in December 2022.
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Fraud risk on the rise
Dadourian’s case occurred at a time when mortgage fraud was escalating in California.
Between 2021 and 2022, different types of mortgage fraud climbed, including:
- income fraud, when the homebuyer lies about their income, which increased 27%;
- identity fraud, when the homebuyer uses a stolen or altered identity to gain a mortgage, which increased 5%;
- transaction fraud, when there are undisclosed agreements between the homebuyer and seller or when down payments are misrepresented, which increased 2%; and
- occupancy fraud, when the homebuyer lies about their intent to occupy the property, which increased 1%, according to CoreLogic.
As falling home prices continue in the months ahead, mortgage loan originators (MLOs) and mortgage loan brokers (MLBs) need to be especially attentive to details of their transactions. Economic desperation will cause some participants in mortgage originations to fraudulently misrepresent property conditions and individual profiles.
During a declining market, mortgage defaults and foreclosures are more likely to occur as recently originated mortgages mostly fall underwater — no equity or, negative equity. Ensuring the property in a mortgage transaction is represented correctly on paper is more critical in a recession than ever.
To avoid clients misrepresenting material facts in property and mortgage transactions — even accidentally — real estate agents need to counsel their clients to read all mortgage documents thoroughly and respond fully and truthfully, even when it means a higher interest rate or less favorable terms.
Further, when MLOs suspect mortgage fraud, they are to file a suspicious activity report (SAR) with the U.S. Treasury Department. Also, licensees aware of suspiciously incorrect transaction conditions who step forward and report to government agencies are necessary for fraudulent behavior to be stopped before other members of the pubic are damaged.
When MLOs or lenders knowingly turn a blind eye to suspicious mortgage applications, they are at risk of:
- fines;
- loss of license or endorsement; and
- jail time for involvement in large-scale operations.
Minimize fraud risk by asking questions and double-checking the details.
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