A San Jose mortgage broker who defrauded East Palo Alto and South Bay residents out of hundreds of thousands of dollars and caused them to lose their homes will serve time in federal prison, according to the U.S. Attorney General's office.
Linda Dung Tran, 36, was sentenced to three 16-month terms for conspiracy to make false statements to banks, making false statements to a bank and conspiracy to commit money laundering as part of a plea deal with prosecutors. She will serve the three terms concurrently and must pay a $10,000 fine. The court did not impose a restitution order to her victims, according to sentencing documents.
A federal grand jury indicted Tran and five others in May 2011 for giving false information to banks that inflated potential borrowers' incomes, assets and employment in order to qualify them for upwards of $40 million in loans, according to court papers. The group targeted largely Latino immigrants who were not provided with mortgage papers in Spanish, as is required by law. Many of the victims lost their homes to foreclosure.
Among Tran's victims were two East Palo Alto homeowners who lost their homes after Tran and the others falsely inflated the victim's incomes to obtain loans from banks for which the borrowers could never qualify. Tran, who owned and operated Palacio Mortgage and Absolute Investments Group, Inc. in San Jose, allegedly paid kickbacks to two real estate agents, Norma Valdovinos and Jesus Chavez, at Century 21 Golden Hills Realtors, another San Jose company. Tran did not have a license to operate a mortgage broker, so she paid others who were licensed to use their broker's licenses, according to the federal indictment.
Valdovinos and Chavez allegedly solicited low-income home buyers to purchase homes prices in excess of $500,000 and referred the prospective buyers to Tran for loans. Tran and other co-conspirators inflated the victims' incomes, assets and employment information to buy the properties. Documents were often presented to the Spanish-speaking victims in English and "translated," providing false information so that the victims did not know their income and employment information was misrepresented.
Tran paid Valdovinos kickbacks to overlook fraudulent stated-income information on the borrowers' applications. Tran also arranged for another co-conspirator, Pablo Curiel, to provide down payments for the stated-income loans, the indictment stated.
But the down payments to the banks were made in secret through escrow companies with notes from the borrowers, according to the indictment. Curiel secured the loans through a deed of trust, which he filed after the close of escrow so the banks that were providing first and second loans did not learn about the third deed of trust.
Curiel and Tran made sure the down payment was funded in a way that disguised that the down payment was borrowed, according to the indictment. Curiel allegedly charged borrowers, including an East Palo Alto family, interest-only payments for two years at 10 percent, plus a balloon payment of 110 to 125 percent at the end of the 2-year term.
Miguel Cacho Vega, a tile setter, was referred by Century 21 Golden Hills Realtors to Tran in 2006 to secure a $20,000 loan to pay off credit-card debts.
Tran told him that she needed his brother Rafael to co-sign the loan. But instead of obtaining a $20,000 loan, Tran "sold" Miguel Cacho Vega's home to Rafael without either man's knowledge, according to the lawsuit filed by the nonprofit Community Legal Services in East Palo Alto. She did so by taking out a $675,000 loan from Downey Savings & Loan Association to pay off Cacho Vega's original home loan, allegedly without his knowledge.
She obtained a down payment for the Downey loan from Curiel for $75,000. Curiel received a deed of trust after the fact without the bank knowing, then charged exorbitant balloon payments to the Cacho Vegas, the indictment states.
Tran gave Cacho Vega the $20,000 he wanted, but took his name off the title without telling him and pocketed $190,000, according to court papers.
Cacho Vega lost the home to foreclosure in 2008. (The Weekly published a story about the Cacho Vega case on June 26, 2009.)
Miguel and Rafael Cacho Vega sued Tran and Curiel in December 2007 for fraud. A federal judge in February 2010 awarded Miguel Cacho Vega $136,942 and Rafael $30,000, plus $22,385 to both brothers after Tran defaulted in their cases.
The Cacho Vegas were not mentioned as victims in the criminal case against Tran. But another East Palo Alto man, identified as Miguel M. in the indictment, lost his home after Tran, co-conspirators Elaine Quyen "Queenie" Ly, John Nguyen and Curiel, inflated his monthly income, stating he made $13,863 instead of the actual $3,100 and stated that he had $111,000 in assets at two banks, according to the indictment. They provided Washington Mutual Bank with a false job title, misidentified the source of his down payment and provided a false verification letter, according to court documents.
Upwards of $40 million was provided to buyers who would not have received loans if not for the defendants' fraud, according to the U.S. Department of Justice.
Tran faced 19 felony counts and decades in prison. A sentencing memorandum by prosecutors, noted she had cooperated with the government. Her cooperating led to the indictment of three tax preparers who were not originally named in the indictment. Those three, Ly and Curiel, pleaded guilty after Tran cooperated with authorities.
Ly was sentenced to three 10-month prison terms to be served concurrently in August. She will begin serving her term on Dec. 2; Curiel received three years of probation on Sept. 4. Valdovinos was sentenced on Oct. 16 to five 24-month prison terms to be served concurrently, according to sentencing documents.