Two Milpitas Mortgage Brokers Convicted in $10 Million Fraud Case

It never stops to amaze me how many of the alleged fraud cases here in the Bay Area seem to be connected in one way or another. You will see how at the end of this post.

On October 14 2008, the Santa Clara County District Attorney’s Office announced that a jury had convicted two mortgage loan brokers in a case that involves over $10 million in fraudulent sub-prime loans with 23 different borrowers and five lenders.

After a three-month trial, Esperanza Valverde (license record) and Herman Michael Covarrubias (license record) were convicted of multiple felony counts of grand theft and forgery in connection with their mortgage business, Summit Mortgage One (license record).

Valverde faces a maximum term of 36 years in prison. Covarrubias faces up to 24 years in prison. They are both waiting to be sentenced on December 4th.

However, not everyone accused was found guilty. Two other defendants in the case, Cesar Ponte Valverde (license record – possibly related to Esperanza Valverde) and Cayetano Alberto De La Rosa were acquitted of aiding in the fraud according to Santa Clara County Deputy District Attorney Yen Dang. Apparently the jurors could not decide if the two men knew of the fraud schemes, or were unknowing participants in the fraud.

According to the DRE records, Covarrubias is listed as the broker of record for Summit Mortgage Realty Inc (doing business as Gibralter Realty, Summit Mortgage One, Summit Realty and WorldWide Lending Mortgage) in Milpitas.

Esperanza Valverde, licensed as a broker since 2005, is listed as the broker for Gibralter Realty 1 and WorldWide Lending Mortgage 1.

On March 23rd 2005, just two months after receiving her broker’s license, Valverde was arrested along with Covarrubias .

Although Valverde only got her brokers licensed in January 2005, some of the allegations stem from work she did with a previous employing broker. The Consumer Fraud Unit of the district attorney’s office received multiple complaints from Summit Mortgage One customers.

According to Dang, both brokers utilized telemarketers to prey on Latino homeowners. Once the homeowners were baited into calling Summit Mortgage One, the victims were told they qualified for low-interest refinance loans. However, Covarrubias and Valverde did not tell them that the loans were short term adjustable loans.

In addition, the homeowners were also charged outrageous commission fees ranging from 3 to 5 percent on every loan according to Dang.

In order to prevent any objection or suspicion from the victims regarding the loans or the high fees, the loan documents were not provided to the victims until after the loans had closed.

Herman Covarrubias and Esperanza Valverde arranged loans from 2002 to 2005 by falsifying loan applications, and inflating the borrower’s income on the applications. The two brokers also submitted to the lenders false income tax returns, W-2 statements, pay stubs, and employment verification letters.

Covarrubias and Valverde were engaged to be married prior to their arrest according to the Milpitas Post. Both may now have to say their wedding vows behind bars.

As mentioned at the beginning of this post, there seems to be a connection between some of the alleged fraud cases in the Bay Area.

According to the DRE records, Paul Curiel (license record) is currently listed as a real estate agent for Summit Mortgage Realty Inc. In addition, according to MLS records, Paul Curiel (listed as Pablo Curiel and ex-Farmers Insurance agent) also worked for Su Casa Realty.

As you may recall from a previous post, Paul Curiel is named in the alleged fraud cases against Norma Valdovinos and Linda Tran.

Paul Curiel is not named as a defendant in the cases against Covarrubias, Valverde, and their company Summit Mortgage One. However, I thought it was interesting to see a possible connection between Bic Pho, Su Casa, Norma Valdovinos, Linda Tran, Paul Curiel, Herman Covarrubias, Esperanza Valverde and Summit Mortgage One.

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