Brokers Convicted of Theft for Subprime Mortgages - NBC Bay Area

Brokers Convicted of Theft for Subprime Mortgages

Scammers get prison but victims lose homes.



    Brokers Convicted of Theft for Subprime Mortgages
    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