California Man Sentenced for Operating Foreclosure Rescue Scheme
When California homeowners couldn’t make their mortgage payments and faced foreclosures during the Great Recession in 2008, some turned to a Long Beach church pastor for help.
For almost six years, Karl Robinson offered mortgage rescue services under his name and through companies such as Stay in Your Home Today, 21st Century Development, and Genesis Ventures Corporation. Now he’s serving four years in federal prison for his role in a scheme that brought in nearly $3 million in fees from unknowing clients.
Robinson and a group of co-conspirators attracted distressed homeowners with the promise of delaying foreclosures and evictions. They claimed to offer services that connected clients to experienced consultants who could keep them in their homes for an affordable fee.
It was all too good to be true—until an FBI-led investigation in 2013 determined that the mortgage rescue programs were far from legitimate.
“Robinson joined a growing number of con artists surfacing throughout the country during the subprime mortgage crisis focused on lining their own pockets instead of actually helping clients,” said FBI Special Agent Kevin Danford, who investigated the case out of the Bureau’s Los Angeles Field Office.
During the housing crisis, opportunistic groups like Robinson’s preyed on vulnerable and desperate homeowners through common scams such as offering affordable refinancing with lower monthly payments, low-interest deals, and delinquent mortgage pay-offs.
In 2008, Robinson began offering fraudulent foreclosure delay solutions by taking part in what were known as partial-interest bankruptcy scams (see sidebar). The process went on for months, providing Robinson with a steady flow of income as long as his clients were willing to pay.
Another scam delayed evictions for Robinson’s clients whose homes had been sold in foreclosure proceedings. Robinson falsely claimed in state court eviction actions that his clients still had tenants in those homes. Robinson would then file bankruptcies for the fictional tenants, postponing the evictions.
By 2011, clients and lenders were starting to catch on to Robinson’s scams. They turned to their local police, who confirmed the suspected fraud and alerted the FBI.
“Robinson joined a growing number of con artists surfacing throughout the country during the subprime mortgage crisis focused on lining their own pockets instead of actually helping clients.”
Kevin Danford, special agent, FBI Los Angeles
The Bureau opened an investigation on Robinson in August 2013 and subsequently obtained an external hard drive from his home that contained documents such as fake driver’s licenses, false identities, and incomplete bankruptcy petition drafts—which revealed the steps he was using to carry out his fraud scheme.
Following his arrest, Robinson confessed to knowingly defrauding his clients and the state and federal courts. Robinson pleaded guilty in August 2016 to the role he played in running the multi-year foreclosure rescue scheme.
“Robinson was able to delay foreclosure sales for more than 100 properties, and he filed at least 200 bankruptcy petitions,” said Danford. “His scheme not only impacted more than 60 lenders and clogged both federal bankruptcy court and state and local eviction court systems but also caused undue stress to numerous purchasers.”
Partial-Interest Bankruptcy Scams
The scam operator asks you to give a partial interest in your home to one or more persons. You then make mortgage payments to the scam operator in lieu of paying the delinquent mortgage. However, the scam operator does not pay the existing mortgage or seek new financing. Each holder of a partial interest then files bankruptcy, one after another, without your knowledge. The bankruptcy court will issue a “stay” order each time to stop foreclosure temporarily. However, the stay does not excuse you from making payments or from repaying the full amount of your loan. This complicates and delays foreclosure, while allowing the scam operator to maintain a stream of income by collecting payments from you, the victim. (Source: FDIC)