Two Bay Area realtors have been convicted of fraud and theft for running a subprime mortgage scam.
After a three-month trial, two mortgage brokers have been convicted of multiple counts of grand theft and forgery in connection with subprime mortgages loaned out of their Milpitas business, Summit Mortgage One.
Esperanza Valverde, 41, and Herman Covarrubias, 40 were convicted Friday in a case that involves over $10 million in fraudulent sub-prime loans with 23 different borrowers, according to the Santa Clara County District Attorney's Office.
The couple, who were engaged before being arrested for the crimes, are scheduled to be sentenced Dec. 4.
Valverde was convicted of 40 felony counts and faces 36 years in prison while Covarrubias was convicted of 22 felony counts and faces 24 years in prison, Deputy District Attorney Yen Dang said.
Two other defendants, Cesar Valverde Ponte and Cayetano Alberto De La Rosa were acquitted of aiding in the fraud, Dang said.
It appears that jurors were undecided on whether the two knew of the scheme to defraud investors, or were unknowing participants in the fraud.
"Sub-prime mortgage loans have been the subject of a lot of news coverage lately, because of the economic crisis, and this is just one example of that trend," Dang said.
Three of the borrowers lost their homes to foreclosure and another one may potentially lose a home. Other borrowers have had to sell off their property to get out of the bad loans.
Valverde and Covarrubias falsified loan applications, and misrepresented borrowers' ability to repay loans by inflating income amounts on applications, according to the district attorney's office.
The two submitted false income tax returns, W-2 statements, pay stubs and employment verification letters to lenders as part of the fraud.
The defendants are believed to have misled borrowers, primarily Spanish-speakers, by having them sign up for adjustable rate loans instead of the fixed rate loans they were promised, by concealing the brokers' fees that borrowers were charged.
The jury found that Valverde and Covarrubias caused losses in excess of $2.5 million, Dang said.
Bay City News Service