Va. Family Targeted in 'McMansion' Mortgage Fraud Scam
Friday, September 25, 2009
Five years ago, when real estate in Northern Virginia was booming, it didn't surprise longtime residents in the Springfield and Falls Church areas to see small homes demolished and large "McMansions" built in their place. But they were surprised when a dozen or more people would then move into the new house, living in tight spaces and parking numerous cars up and down the street.
The safety hazards of these new boardinghouses prompted Fairfax County to launch a Code Enforcement Strike Team in 2007. Deeper investigation uncovered the biggest mortgage fraud scheme in Fairfax history, officials said Thursday, and squads of officers arrested 20 people involved in allegedly cheating local banks out of more than $9 million.
Authorities said they think that two real estate agents and a loan officer were at the heart of the scheme, in which "straw buyers" with incomes of less than $25,000 were recruited and then approved for loans of $800,000 or more with little or no down payments. Sometimes new houses were built, and their rooms were cut into additional smaller rooms. Other times, houses were bought and renovated to hold as many as eight bedrooms. Officials said they occasionally saw families living in furnace rooms or closets, frequently with many of the doors and windows locked.
"I've seen extension cords running out of houses to sheds," said Supervisor Jeff McKay (D-Lee), who began touring the packed houses several years ago. "I've seen the doors at the top of basement stairwells padlocked. It's single-family homes being operated as apartment buildings. People's lives were in danger, and they didn't even know it."
Investigators weren't sure whether the renters were aware they were part of the fraud scheme. But authorities think that the straw buyers were knowing participants, with many of them buying at least three properties, receiving payments for the use of their credit and then living in one of the houses and serving as a landlord to collect rent and pay the mortgage until the house was sold or went into foreclosure.
"Instead of identity theft," said Fairfax Maj. Shawn Barrett, "they're buying someone's identity, and it's a way for that person to derive income, too."
The family of Ruben Rojas, 30, of Vienna, a real estate agent who in recent years worked for Fairfax Realty and Proplocate Realty, is alleged to be at the heart of many of the transactions, according to a 37-page federal indictment unsealed Thursday. Rojas is charged with conspiracy and nine counts of fraud.
Rojas's sister, Lourdes Rojas Almanza, 28, of Falls Church, who worked as a loan officer for Alda Mortgage, Washington Mortgage and others, faces six federal counts. Litcia Linares, 32, of Falls Church, Rojas's sister-in-law and an agent for Fairfax Realty, and Jaime N. Rojas, 28, of Falls Church, Ruben Rojas's brother, both face two federal charges.
The indictment alleges that the Rojases would recruit the straw buyers, helped them file false loan applications and execute phony "HUD-1" settlement statements on down payments and closing costs. The Rojases would allegedly pay the straw buyers and reap the benefits of quick "flip" sales along with real estate commissions in some cases, the indictment claims.
Fairfax police began investigating the scheme in November 2007, not long after the formation of the code strike team. By the fall of 2008, as financial crimes detectives began seeing the same names popping up in the sales of the properties, and the number of properties expanding, the FBI was brought in, Fairfax Chief David M. Rohrer said at a news conference.
Investigators have identified 34 houses bought using unqualified buyers and turned into illegal boardinghouses. The total value of those properties is about $20 million, police said. Investigators expect that the scheme might ultimately involve more than 200 houses in Fairfax.
If the Rojases and their alleged co-conspirators had merely used the straw buyers and siphoned their profits from the sales commissions and reselling of the properties, the scheme might have lasted much longer, investigators said. But they inevitably converted each property into a packed boardinghouse, attracting the attention of neighbors who complained to elected officials.
"The real heroes in this story are the citizens of Fairfax County," said U.S. Rep. Gerald E. Connolly (D-Va.), who helped launch the code strike force in 2007 when he was chairman of the Fairfax Board of Supervisors. Connolly cited "neighborhood leaders like Tawny Hammond, president of the Springfield Civic Association, who brought the problem of overcrowded homes to our attention."
Connolly said the strike team had investigated more than 400 homes, with 140 referred for criminal prosecution and 143 more for civil court action. Fairfax Sheriff's Capt. Karen McClellan, a member of the code strike team, entered many of those houses.
"A lot of these multiple dwellings are like what you'd see in a Third World dwelling," McClellan said. "I've seen Styrofoam ceilings. Portable walls. Stairways bolted shut. Windows with no egress." She said she once visited a 1,100-square-foot house that had 17 people living inside.