The Capistrano Insider

Attorney Generals Going After Mortgage Fraud

this just in:

Attorneys General of California and Nevada Announce Mortgage Investigation Alliance

LOS ANGELES -- Attorneys General Kamala D. Harris of California and Catherine Cortez Masto of Nevada today announced that their states have entered into a joint investigation alliance designed to assist homeowners who have been harmed by misconduct and fraud in the mortgage industry.

By forging this alliance, California and Nevada will combine investigative resources, including litigation strategies, information, and evidence gathered through their respective ongoing investigations, assisting each state as it pursues independent prosecutions.

This alliance will link the offices' civil and criminal enforcement teams, speeding along the full, fair and adequate investigation of wrongdoing in the two states, which have experienced similar foreclosure and mortgage fraud crises.

"The mortgage crisis is a man-made disaster that has taken a heavy toll on the country, but it saved its worst for California and Nevada," said California Attorney General Kamala D. Harris. "The mortgage crisis is a law enforcement matter, and we will prosecute to hold accountable those who are responsible and also protect the homeowners who are targeted for fraud. I am delighted that California and Nevada are entering into this alliance to leverage the best results for our investigations and look forward to forging similar collaboration with other states."

"I am pleased to join forces with General Harris to fight against fraudulent mortgage and foreclosure practices that continue to devastate lives, homes, and the economy in Nevada and California," said Nevada Attorney General Catherine Cortez Masto. "This strong partnership will allow our states to make an even more concerted effort to hold fraud perpetrators accountable and ensure law-abiding homeowners receive justice."

By most objective measures, California and Nevada have been the states hardest hit by the nation's foreclosure crisis. In October 2011, Nevada and California ranked first and second, respectively, for the percentage of their housing units that entered the foreclosure process, reflecting a parallel surge in foreclosures in the two states. One in every 180 Nevada properties entered the foreclosure process in October, and one in every 243 California homes received a filing that month. In 2010, California led the nation with a total of 546,669 foreclosure filings (4 percent of the state's housing units), while Nevada led the nation with 9.4 percent of its homes receiving a foreclosure filing (totaling 106,160 units).

The crisis in these Western states is similar because both states share a foreclosure system in which a bank can foreclose on a borrower's home without court oversight, also called "non-judicial foreclosure." The collective result has created a rich opportunity for predators, leading both states to make mortgage-related law enforcement action a top priority.

In May 2011, Attorney General Harris formed a Mortgage Fraud Strike Force, now composed of nearly 40 attorneys and investigators, that has launched a wide series of investigations and litigation. The Mortgage Fraud Strike Force has instigated legal actions in cases including a fraudulent multi-million dollar "mass joinder" lawsuit operated by the law firm Kramer and Kaslow, and the arrests earlier this month of three top officers of a Stockton real estate company who took thousands of dollars in up-front loan modification fees and made false promises to assist struggling Central Valley homeowners with lowering their mortgage payments.

In 2007, Attorney General Masto formed the Nevada Mortgage Fraud Strike Force that launched a wide series of investigations and litigation into areas including violations of the law related to mortgage lending, servicing, and foreclosure practices and the creation, rating, marketing, sale, and management of mortgage backed securities. The Nevada Mortgage Fraud Strike Force has taken action against predatory "mortgage rescue" companies and individuals claiming to offer services to stop foreclosures. Last month, the Strike Force announced the indictments of Gerri Sheppard and Gary Trafford, who led a massive robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents. Nevada is also suing Bank of America and its subsidiaries, including Countrywide, for violations of a Consent Judgment for mortgage servicing and mortgage origination irregularities.

The Mortgage Investigation Alliance is the product of weeks of discussion between Attorneys General Harris and Masto regarding the most effective and efficient means of achieving justice for their respective states. Today's announcement formalizes an agreement reached between the two officials last week.

Changes to the Gift-Receiving Rules

Just in time for the holidays, from the Fair Political Practices Commission:

The Commission recently approved simpler, easier to understand gift regulations that contain more stringent provisions than previous rules.

With the regulatory changes, the Commission sought to strike the proper balance between ensuring that public officials do not use their positions for personal gain while applying more sensible rules to gifts that must be disclosed and regulated.

“Gift regulations should apply only in situations when the public official receiving the gift makes governmental decisions that directly affect the person giving,” said Commission Chair Ann Ravel. “We also wanted to close loopholes to ensure that people with business before an official will not be able to influence that official.”

In addition to making the regulations easier to navigate, several of the adoptive changes are more restrictive than previous requirements.

Lobbyists, for example, will no longer be able to claim “a home hospitality” exemption from the gift limits and disclosure requirements unless they have a relationship that is unrelated to the public official’s position and the home hospitality is related to that purpose. Previously, there was no requirement for disclosure, meaning that lobbyists could entertain public officials at their homes and spend an unlimited amount of money without the public’s knowledge.

Areas where the Commission has approved or is considering stricter gift rules include:

• Ceremonial Role: The Commission in its December meeting is considering restrictions on what qualifies as a ceremonial role and has provided specific examples such as ribbon-cutting ceremonies, making a proclamation, or giving out an award. The regulation was adopted to address past abuses that included officials receiving free tickets to attend sporting events, concerts and other entertainment venues, claiming they had a “ceremonial role” while not having any active participation in the events. The value of the tickets to events where an official performs a “ceremonial role” is not required to be reported, nor is it subject to gift limits.
• Gifts To An Official Through Family Members: The new rules treat gifts to family members of public officials as gifts to the official unless there is an established social or work relationship with the family member and the donor does not have business before the official. The regulation covers gifts to family members from anyone seeking to influence the public official, such as individuals registered to lobby the official’s agency, a person who contracts with that agency, or someone who is regulated by the agency. Previously, the family gift regulations applied only to the highest ranking public officials and did not cover such a wide range of persons with business before the agency.
• Home Hospitality: Lobbyists will no longer be able to claim the “home hospitality” exception for gifts of home entertainment to an official unless there is a existing relationship between the parties that is unrelated to the official’s position and the hospitality is provided in connection with that relationship, such as a backyard barbeque between neighbors.
• Valuation of Tickets: A loophole was closed in the valuation of tickets that previously allowed gifts of unused collectible tickets (some with values approaching $1,000) because they were deemed to have no value if they were not “ultimately used.”
• Bona Fide Dating: The proposed revisions would prohibit officials from participating in certain decisions involving their dating partner if the partner lobbies the official’s agency, has a contract pending before the official’s agency, or is regulated by the official’s agency and the official received gifts from his or her significant other of $420 or more. Current rules do not bar officials from participating in decisions involving their dating partner.

More gift regulations will be presented for consideration at the Commission’s December 8, 2011 meeting. They include proposals to codify Commission opinions and staff advice letters for “acts of neighborliness,” and “bona-fide dating relationships.” New exceptions for “acts of human compassion” and “long term friendships” are also scheduled to be proposed.

About that Private Water Company ...

Capistrano leaders a few years back investigated merging with other water agencies, and a bit of work was done in consideration of a possible deal with South Coast Water (which serves Dana Point). That deal, by the way, went south when it became clear Capistrano residents would pay much more for water because of SCWD concerns over infrastructure, among other issues.

At that time, however, a few criticized City Hall for not considering a private water supplier.

Here's a story today that highlights some of the reasons I'd heard why the council chose not to. (In a word, profit.)

According to the OC Register, the parent company of some private water suppliers reports double its profit this year -- and is asking for water-rate increases.

Here's the piece.

Careful What You Read -- and What You Believe -- About Water

The Common Sense folks continue to rant about the water rates and San Juan Capistrano's groundwater recovery plant.

Take what they say with a grain of salty water from the sea, at least.

First off, the city does not lose the rights to the groundwater recovery plant. Everybody at every meeting I've sat through, from those at our own City Hall to those at the San Juan Basin Authority, say the contracts clearly call out for the city controlling the plant for generations.

There's also no evidence the GWRP was built for Rancho Mission Viejo, other than the suspicions of a cadre of folks who seem to think the Ranch is some sort of bogeyman and want to blame the Moiso family for everything from traffic to water rates.

Next, water rates are high. Everywhere. Has our Utilities Department run as efficently as it could have? Maybe. Maybe not. We'll see what the $55,000 audit finds.

But what frustrates me about the leaflets left on some of the homes in Capistrano is the complete lack of (accurate context). Water rates are high in Capistrano, but no more so than in our surrounding cities, despite what you might have read in the leaflet.

The reason? Water users in neighboring cities pay a monthly water bill, just like we in Capistrano do. But, unlike us, customers of South Coast Water District (Dana Point) and Moulton-Niguel Water District (Laguna Niguel) pay an additional usage fee on their property tax. That's not for bond repayments, that's just part of the water bill added onto the property taxes.

San Clemente in June raised its water rates 12.7 percent. In a survey of nine South County water agencies, the average water bill was $99 a month. Capistrano's was $102. We're more expensive than San Clemente, cheaper than South Coast.

Water's expensive, and getting more expensive everywhere. All of that said, the Los Angeles Times today has a pretty good piece about (more) anticipated cost increases from the Metropolitian Water District (MWD) which pretty much provides water in Southern California to anyone who doesn't have their own supply.

Here's a couple of paragraphs:

Agency officials predict that the double whammy will boost the aqueduct's energy costs, which amounted to nearly $49 million last year, by 80% over the next decade.

...

The MWD imports 40% to 60% of the Southland's water supply. Rising energy costs are one of the reasons the district has increased its wholesale rates to Southern California water agencies 75% in the last six years and will continue to raise them, executives say.

You can see the entire story here.

Bottom line: On top of uncertainities in the water supply -- smelt in the Delta, Colorado River water going elsewhere -- MWD has been buying electricity at cut-rate prices (unlike the city of SJC) and will have to start paying more.

Capistrano's GWRP operations have certainly been spotty over the past few years, but officials have been saying it's working now. They've got a handle, they say, on the technical challenges.

But one challenge not met by the city that we must face: Resisiting the urge to judge a long-term investment against today's standard. It's difficult to accept in this "make me happy now" world, but the real value of the GWRP may not be known for decades, if not generations.

Download GWRP Lease agreement 2002

Capistrano Historic Preservation Manager Leaving

Teri Delcamp, San Juan Capistrano's Historic Preservation Manager, has given notice. She's taking another job elsewhere.

I have a call in for details.

Delcamp's position was one that was looked at for possible outsourcing, however, and no public decision was reached. The timing of her departure has some concerned with historic preservation in town concerned, as the city ramps up the discussions of the downtown master plan -- which has some impacts on cutural resources.

Stay tuned.