Bad investment, fraud, or what?!?!

Thanks to a tip from ocjohn, I’ve come across what looks like just an investment gone wrong at first glance. Upon further research I’ve found an even more interesting situation. Any personal names in this post have been jumbled for obvious reasons.

The property we’ll start with is 39 Modesto which is a detached condo in the San Simeon tract in Northpark. It was purchased using 100% financing on 7/31/2006 for $720,000 and rented out for $2850/month on 8/23/2006.

Let’s pause and take a look at what a great investment this is. 😉 Assuming a 6% Interest Only loan for the whole amount, the payments are $3600/month. After adding in HOA fees of $206/month and Property Tax (including Mello Roos) of $800/month, this ‘investor’ is going to be negative at LEAST $1750/month. This by itself is post worthy but read on to see how crazy this gets.

I became curious and wondered if this ‘investor’ (let’s call him ‘Shagi Indud’) made any other great moves. I was surprised to find out that Shagi owns FOUR properties in Orange County *AND* THREE properties in Los Angeles County:

  1. 7/10/2006 – $854,000 – 444 Ponce Ave. Placentia, CA 92870

    • Lender: BNC Mortgage $854k
    • Seller: Alalanaa Bizza

      • Purchased 11/30/2005 – $677,000
      • Lender: DBA Westworks Mortgage $541,580 / Hic Star Corp $135,395

  2. 7/20/2006 – $600,000 – 12301 Rives Ave. Downey, CA 90242

    • Lender: Encore Credit Corp. $480k/$120k
    • Seller: Leda and Racal Bizza

      • Purchased 2/22/2005 – $460,000
      • Lender: BNC Mortgage $459,900
      • Refinanced: Southcoast Loans & Mortgage $440k and $110k

  3. 7/20/2006 – $735,000 – 1885 Gladys Ave. Signal Hill, CA 90755

    • Lender: First Franklin $588k/$147k
    • Seller: Drianna Bizza

      • Purchased 4/1/1997 by Barache Daafy (I couldn’t locate the transfer to Drianna Bizza)

  4. 7/31/2006 – $720,000 – 39 Modesto Irvine, CA 92602

    • Lender: Resmae Mortgage Corp $576k/$144k
    • Seller: Red Abo Henc and Hunshiy Gnaw

      • Can’t locate prior purchase information

  5. 8/7/2006 – $685,000 – 860 Buttonwood Dr. Brea, CA 92821

    • Lender: Aegis Funding Corp $548k/$137k
    • Seller: Nanda Bizza

      • Purchased 3/23/2006 – $635,000
      • Lender: Encore Credit Corp $508k/$127k

  6. 8/14/2006 – $1,250,000 – 10258 Hasty Ave. Downey, CA 90241

    • Lenders: 1st Choice Mortgage $1000k / Cameron Financial Group $250k
    • Seller: Leda and Racal Bizza

      • Purchased 10/31/2003 – $485,000
      • Lender: BNC Mortgage $485k
      • Refinanced 11/4/2004 – $593,750 – New Century Mortgage Corp
      • Refinanced 3/15/2006 – $998,750 – BNC Mortgage
      • Refinanced 7/11/2006 – $126,250 – Secured Funding Corp

  7. 8/21/2006 – $850,000 – 920 E. Bastanchury Rd. Placentia, CA 92870

    • Lender: Axiom Financial Services $680k/$170k
    • Seller: Alalanaa Bizza

      • Purchased 12/7/2005 – $666,000
      • Lender: BNC Mortgage $532,720 / $133,180

Now there are several things that scream out as being suspicious:
– ALL 7 properties were purchased with 100% financing
– ALL 7 properties closed within about 40 days
– ALL 7 properties were funded by different lenders
– 6 of the 7 properties were purchased from the Bizza family

I haven’t yet researched all the purchases by the Bizza family but I noticed that some of them were bought less than a year ago and then flipped to Shagi. Is there any way this could be legit? Is Shagi Indud even real? If so, Shagi Indud is in deep doo-doo with his 100% financed debt of $5,694,000!

UPDATE: I’ve updated this post with any purchase/refinance information by the Bizza family I was able to find on the homes that were flipped to Shagi. The Bizza family also bought everything on 100% financing. There is definitely something fishy going on here. Take a look at how quickly some of these properties (1,2,5 and 7) were flipped. I wonder who the loan broker for Shagi was? That person must have made a ton of shady money as well.

22 thoughts on “Bad investment, fraud, or what?!?!

  1. nostradamus

    reeks of fraud. i would bet that “shagi indud” is a fake ID in cahoots with the Bizza’s. watch these properties, they are just collecting the rent while they slip into foreclosure.

  2. ocjohn

    Wow that is crazy … I thought the $720K was a litte high and just a GF who bought at the peak. The same floor plan in non gated West Irvine was on the market for about $670K during the same time. I didn’t realize it was not a GF, but now a flipper/speculator or worse.

  3. NanoWest

    Lets see…..if you can rent them for an average of $2,500 per month during the 6 month forclosure process…..thats $105,000 in profit……..almost enough for a downpayment on a small condo in Irvine.

  4. corea

    Likely to be REO property in the future. What are the odds that Shagi will pay the property taxes due this December? Don’t lenders have some sort of database to flag things like this? The person seems to be purchasing property every other week. Good luck to the MBS holders buying this paper.

  5. cb

    Good research! Are you turning this information over to an authority who can do something about it (like put these people in jail)?

  6. miguel

    excellent research. Not only are they making out like bandits on the rent side, but remember the Bidda family is getting a premium on every single one of these properties. Obviously, they are all in cahoots– it would be interesting to know when these properties were bought by the Bidda’s and for how much to figure out what kind of profit they made on those.

  7. oc_fliptrack

    Does all this info come from the MLS? I been wondering where I could find this kind of info.

    The County Recorder has names and doc numbers on their site, but you can’t actually view the docs online.

  8. MC

    I would not be surprised to learn if the “buyers” don’t know they own these properties. I have a friend at First Franklin to whom I’ll send a copy of this post.

  9. anonymouse

    This looks really suspicious. Great find zovall! I’ll be really curious how this turns out. My money’s on a fraud play.

    In addition to the points already mentioned, it seems like the recent purchase prices were too high relative to the current (or even July/August) state of the residential real estate market. Reeks to high heaven!

    I wonder even if most of the lenders would care. I mean, they’ve probably already sold the mortgages to Chinese/Arabs/hedge fund managers. I wonder about the significance of Encore and BNC lenders, as they were part of the funding for some of the properties for the Bizza family members.

    I wonder if one appraiser (or a very small number) did all of these homes. Is there a way to check the records for who appraised the property?

  10. corea

    Looks like all these questionable sales artificially inflate local “comps.” I wonder if any journalists would be interested in pursuing this further to find out what is really going on here.

  11. Anonymous

    Great work! I agree with everyone that it looks like fraud. CB is right, you should turn the info into the authorities.

  12. zovall

    Thanks for all the feedback. Getting some more attention to this story would be great and I’m sure a journalist would be able to dig up more dirt. I’ll send Lansner a link. I’m not sure who else to contact but he might be able to point me in the right direction.

    One resource for reporting fraud is the Real Estate Fraud Hotline at the Department of Consumer Affairs: 1-800-973-3370. I called but gave up after spending 20 minutes on hold to talk to someone. I’ll try again later. I also came across California Fraud Resources and called the first link (FBI) on there. They didn’t show much interest but at least they took the info down. I was sure to let them know that I didn’t actually know if fraud was committed and that I was asking that they look into the situation themselves for evidence of possible fraud or suspicious activity. I wouldn’t want to scream ‘fraud’ and then find out there is a legitimate explanation to all this. Instead, I’ll scream ‘possible fraud’ haha 🙂

    If anyone has any other ideas, let me know and if you know someone that can dig a little deeper, please forward this page onto them.

    anonymouse, I also noticed the prevalence of the BNC Mortgage lender. The home page pretty much sums up their business: “Approvals are what we do.” And I think you’re right about looking into the appraisers for these properties. There’s definitely a bunch of collusion going on here.

    I’m not sure how to find out who the loan broker or appraiser for these properties are.

    oc_fliptrack, The information I’ve gathered has been from the database of a title company and contains things such as mortgages and ownership changes.

  13. DC

    Great detective work. Reeks of a huge fraud.
    Note that they all closed in about a month, that is the big tip off. The lenders could not clearly see the other loans being made at the sametime when they ran the credit checks. They might have seen the credit inquiries, but that is normal for someone shopping for a loan. In September ’06, the buyer’s credit reports at TransUnision, Eqiufax, and Experian would now reflect 7 mortgages! The beacon score must be about 300 now.

    The Bizza party cleaned up and took all the equity out and more. No buyer with that kind of credit would be so reckless to pay so much. There is not a $1 of down payment in any of this. Wow.

    I’ve seen the same scam in autos where they go out and lease five cars in one weekend from five different dealerships. Usually in a stolen identity. Then they sell or rent them out. They actully make the first two ot three lease payments. Eventually the monthly statements start showing up after 60 days and the fraud is detected by the person on the leases. By then the cars have disappeared.

  14. Casey Serin

    Hey that one is right there in Modesto (80 miles away from me in Sacramento). I will be working on my Muncy Drive property tomorrow to get it finished and sold. Maybe I can swing by there and take a look.

    Compared to his guy my deals aren’t so bad.

  15. Andre

    Its easier to get 100% financing for a purchase than to refi. This is a trick in the book. When you want maximum cash out, just sell to somebody you know or work something out.

  16. workin

    Hi everyone –
    De lurking to give my .02…I work for a lender here in the OC in sort of a QC capacity. I investigate these types of transactions on a daily basis.

    So let’s break it down:
    ALL 7 properties were purchased with 100% financing
    Occupancy misrep to avoid any down payment. Most likely the VOE and VOR/VOM are fabricated to help the deal.
    – ALL 7 properties closed within about 40 days
    Huge tipoff they intend to do more (and fast) before they all start to report, as someone else said
    – ALL 7 properties were funded by different lenders
    Not uncommon, but I’ll bet you the same BROKER and TITLE COMPANY are involved in every deal.
    – 6 of the 7 properties were purchased from the Bizza family
    Communication between buyer/seller/broker/agent is essential for the flips to go off without a hitch. Everyone needs to be a pro and know what they’re doing, otherwise these go sideways real fast.

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