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Agenda Item
ASR
Control 18-000005 |
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MEETING DATE: |
02/27/18 |
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legal entity taking action: |
Board of Supervisors |
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board of supervisors
district(s): |
All Districts |
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SUBMITTING
Agency/Department: |
District Attorney
(Approved) |
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Department contact
person(s): |
Jenny Qian
(714) 347-8443 |
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Margaret Roper
(714) 648-3601 |
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Subject: Extension of Recording Fee
for Real Estate Prosecution Fund
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ceo CONCUR |
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Clerk of the Board |
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Concur |
Approved Resolution to Form |
Discussion |
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3 Votes Board Majority |
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Budgeted: Yes |
Current Year Cost:
N/A |
Annual Cost:
N/A |
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Staffing Impact: |
No |
# of Positions:
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Sole Source:
N/A |
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Current Fiscal Year Revenue: $362,500
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Prior Board Action: 03/03/2015
#10, 3/20/2012 #12, 3/3/2009 #38 |
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RECOMMENDED ACTION(S):
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1. |
Approve the extension of the $3.00 recording fee on certain specified real estate instruments for a three-year period from April 1, 2018, to March 31, 2021, to provide a continued funding source to investigate, prosecute and deter real estate fraud crimes pursuant to Section 27388 of the California Government Code. |
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2. |
Adopt the attached resolution. |
SUMMARY:
Approval of the extension of the $3.00 recording fee on certain specified real estate instruments will allow the District Attorney to continue to investigate, prosecute, and deter real estate fraud crimes pursuant to Section 27388 of the California Government Code to protect the public.
BACKGROUND INFORMATION:
On March 3, 2009, by Resolution No. 09-020, the Board of Supervisors (Board) authorized: 1) the establishment of the Real Estate Fraud Prosecution Fund 12G to implement the provisions of California Government Code Section 27388 to collect the $3.00 recording fee on certain specified real estate instruments for the sole purpose of enhancing the capacity of local efforts to investigate, prosecute, and deter real estate fraud crimes, 2) the Orange County Clerk-Recorder to begin collection of the fee on April 13, 2009, and 3) the establishment of the Real Estate Fraud Prosecution Committee composed of the County Executive Officer, the Clerk-Recorder, and the District Attorney (OCDA) to distribute funds from the Real Estate Fraud Prosecution Fund 12G. Since the initial establishment of this fee, the Board has approved the extension of the recording fee on March 20, 2012, by Resolution No. 12-028 and on March 3, 2015, by Resolution No. 15-010. The current extension is expiring on March 31, 2018. At present, over 30 counties in the State of California have adopted the provisions of Government Code 27388 and implemented this recording fee.
Moreover, pursuant to Government Code section 27388, subsection (d), the OCDA is required to submit an annual report to the Board on or before September 1 of each year. The chart below details what the OCDA reported in its annual reports for the total recording fees collected each year since FY 2014-15, as well as the projected fee collections through FY 2017-18.
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Fiscal Year |
Amount |
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2014-15 |
$1,585,572 |
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2015-16 |
$1,559,557 |
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2016-17 |
$1,681,473 |
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2017-18 (Projected) |
$1,450,000 |
Real estate fraud has proven to be a significant problem in Orange County.
Common real estate fraud cases involve fraudulent transfers of title, real
estate investment fraud, foreclosure schemes, and rental fraud crimes involving
vacant and foreclosed property. These crimes harm large numbers of county residents including seniors who invest in
real estate or are targeted for fraudulent recordings on their homes,
individuals whose identities are unwittingly used by criminals to acquire real
estate, distressed homeowners who are targeted for tempting schemes to delay
foreclosure or refinance, and banks, construction workers and real estate
professionals who depend upon a stable real estate market for their incomes.
Other victims include investors who are promised high returns for “flipping”
foreclosed properties. Some victims of loan modification schemes lack strong
English language skills and are defrauded by members of their own communities.
As the housing market changes, the types of fraud schemes change and
evolve.
As authorized by the Board, in April 2009, the OCDA established a Real Estate Fraud Prosecution Unit comprised of prosecutors, investigators, and support staff with specialized training and expertise in real estate fraud to investigate and vertically prosecute criminal real estate fraud cases.
Since its inception, the program has been very effective. In the past three years, the OCDA received approximately 292 referrals directly from alleged victims seeking investigation/prosecution. These referrals involved a variety of allegations including foreclosure/loan modification schemes, fraudulent recordings, rental schemes, and real estate investment fraud. As financial predators continue to target distressed homeowners, loan modification allegations continued to account for the largest number of referrals. Each of these referrals was reviewed first by a paralegal and then by an attorney and referred to OCDA investigators for investigation, if appropriate. Referrals that could not be prosecuted criminally were often referred to other agencies for action. For example, complaints have been referred for action to licensing agencies such as the California Department of Real Estate and the State Bar of California. Both agencies are active in suspending or revoking licenses of individuals who engage in unethical practices. In addition to the cases originated and entirely investigated by OCDA investigators -- which comprise well over 70% of the cases filed in the unit -- cases are often referred to the Real Estate Fraud Prosecution Unit from local, state, and federal law enforcement agencies.
Currently, OCDA investigators are investigating approximately 100 real estate fraud cases. The attorneys are prosecuting approximately 40 filed felony real estate fraud cases in which 49 defendants are charged and approximately 940 victims are alleged to have been harmed. With the exception of loan modification cases, an average of 30 counts are alleged in each case. In loan modification cases, the average number of counts exceeds 100 per case. The size of the real estate fraud cases ranges from 10,000 to 250,000 pages, excluding audio and video. As one may deduce from these numbers, these cases are among the largest, most complex, and most serious cases the OCDA prosecutes, requiring extensive and sophisticated litigation.
The Real Estate Fraud Prosecution Unit continues to work hard to successfully respond to the changing landscape of real estate fraud crimes, e.g., from focusing on fraud mills that offer foreclosure relief and loan modification services, to investigating and prosecuting real estate investment fraud schemes and financial elder abuse committed via fraudulent recorded changes in title. The Real Estate Fraud Prosecution Unit remains committed to obtaining justice and restitution for the victims of these crimes and, to that end, obtained over $10 million in restitution orders to victims in the last three years. Summaries of some of the significant cases prosecuted by the OCDA’s Real Estate Fraud Prosecution Unit in the last three years are included in Attachment E.
The Orange County Clerk-Recorder has been one of the key partners of the OCDA’s Real Estate Fraud Prosecution Unit in fighting real estate fraud crimes. It is supportive of investigation and prosecution efforts and refers suspected fraudulent recordings to OCDA for review and action. Two notable areas are courtesy notices sent out in change of title recordings as well as strong staff efforts to refer suspicious recorded documents directly to the OCDA for review. These are important safeguards that have resulted in several cases of seniors discovering fraudulent changes in the title of their homes. The Clerk-Recorder also has a website providing educational materials to the public.
Other partners include the Franchise Tax Board, which the OCDA Real Estate Fraud Prosecution Unit involves when real estate frauds result in the filing of false tax returns, and other District Attorney offices, e.g., San Diego, Ventura, Riverside, Los Angeles, with whom the OCDA coordinates when a case involves Orange County suspects who are active in those regions as well; this is not uncommon as real estate crimes frequently cross county lines.
The District Attorney requests the Board's approval of the extension of the $3.00 recording fee on certain real estate instruments such as Quit Claim Deed, Deed of Trust, Grant Deed, Notice of Default, Notice of Trustee Sale, Inter-spousal Transfer, Trustee's Deed upon sale, Notice of Rescission, and Assignment of Rent for a three-year period from April 1, 2018, to March 31, 2021, to provide the OCDA’s specialized Real Estate Fraud Prosecution Unit with necessary on-going funding source to investigate, vertically prosecute, and deter real estate fraud crimes as referenced in the Recommended Actions.
FINANCIAL IMPACT:
Appropriation and revenue for Real Estate Prosecution Fund 12G are included in the District Attorney's FY 2017-18 Modified Budget and will be included in the budgeting process for future fiscal years upon Board approval of the extension of the $3.00 recording fee.
STAFFING IMPACT:
N/A
ATTACHMENT(S):
Attachment A - Government Code Section 27388
Attachment B - Corporations Code Section 25401
Attachment C - Penal Code Sections 368 and 487
Attachment D - Real Estate Recording Fee - Draft Board Resolution
Attachment E - Summary of Cases