Chemaly, the Premier representative, said the developers created disclosures in order to inform every party in the transaction that a significant portion of the purchase price was going to McConville’s company. They instructed the escrow company, Stewart Title of California, to have the disclosures signed by the buyers and the lenders before closing the sale, he said.

But the lenders and buyers interviewed for this story said they never saw the disclosures. Four buyers who reviewed the disclosures for voiceofsandiego.org said their signatures had been forged.

Donna Demello, escrow officer from Stewart Title for the transactions, said she never saw the instructions to disclose to the lenders and buyers that money was going to McConville’s company.

Mortgage Bills Go Unpaid

A few months after the sales, the mortgage payments stopped.

McConville’s team took care of the first month’s bills for Frances Greenspan’s three loans, she said. After that, none of them have been paid, she said. Now she receives phone calls and letters from lenders several times a week. All the buyers interviewed for this story said McConville made no more than three payments before letting the loans default. Default notices continue to pile up.

The defaulting loans forced Nazari’s All American Finance to lay off about 40 people last year, he said. He claimed his company survived the subprime turmoil without incident but the fines and other costs from these defaulting loans laid waste to the company.

“This McConville has put me out of business,” Nazari said.

Several other lenders for McConville’s buyers declined comment; the others didn’t return calls. Home Loan Network Corp. did 36 of the loans for a total of $9.1 million, lending up to four mortgages to single borrowers. The bank said in a statement that the loans met all applicable guidelines.

But Curt Novy, president of Corporate Mortgage Advisors, a San Diego-based mortgage fraud investigation firm, said the banks could have dodged the scheme if they had asked more questions. They could have more fully researched the condos’ values and better scrutinized the buyers, he said.

“The lender should’ve known a straw buyer in this market,” Novy said. “The lights should have been flashing. That it could happen now is a mind-blower.”

If banks have to foreclose on the condos and resell them, they could lose millions of dollars. The difference between McConville’s buyers’ prices for the condos and what they could sell for now is staggering.

The price for McConville’s buyers was $310,000 for two-bedroom units in Sommerset Villas last summer, for example. Since December, three similar units in the same complex have sold for less than $100,000.

Even more striking, McConville’s buyers were sold four 480-square-foot studios in the same complex for $265,000 each last summer, taking out loans for $212,000 on each one.

“Property values will have to quadruple before that condo is even worth the loan amount,” said Todd Lackner, a local real estate appraiser and mortgage fraud expert.

McConville’s straw buyers are already hurting.

Greenspan’s credit score, once the last shred of stability in her financial world, has been decimated. She’s seen the interest rate on her credit cards spike from 9 percent to 25 percent. She said she tries to stay positive, though she no longer realistically expects McConville will suddenly show up to pay off her loans. She doesn’t have a Plan B.

“If I have to, I guess I’ll walk away from my home, which is all I have,” Greenspan said. “I don’t know what I’d walk away with — I don’t have any family left.”

Vicki Jenkins told a similar story, as did Annemarie Miller-Jones, Norman Johnson, Mark Lassagne and Afsar Shamlou.

“I guess that’s what I get for being greedy,” Jenkins said.

‘You’ve Been Snookered, or You’re Complicit’

On July 3, 2008, Norman Johnson became the owner of two condos in Westlake Ranch for $375,000 each. Both were 931 square feet with two bedrooms. A resale condo the same size in the same project sold a few weeks earlier for less than half that price — $180,000.

It’s not unusual for a new unit to sell for more than a resale condo. But especially in last year’s market, there’s no logical explanation for a $200,000 difference, said Roger Lopez, a local real estate appraiser.

Banks rely on appraisers to give them a sense of a home’s value and trust the appraisers have fully analyzed a neighborhood before justifying a purchase price. If an appraisal is way off, the appraiser must be either blindly or willingly following the orders of the person arranging the sale, Lopez said.

“You either don’t have any common sense about the neighborhood and you’ve been snookered, or you’re complicit,” he said.

Lenders said the original appraisals for these deals supported the purchase prices. Now, they question those appraisals.

The identity of an appraiser on a particular transaction is not public record.

Worsening the Foreclosure Epidemic

Vicki Jenkins got her first glimpse of the condos she owns in Sommerset Woods last month. Wedged into the doorframe of one of her five units, flapping in the breeze, was a receipt from a local property management company that rents out the units for McConville.

“I’ll take that,” Jenkins said, grabbing the receipt for a $1,495 rent payment. “That could have helped pay my mortgage.”

Victor Goliac confirmed that his company, Concord Management, managed the properties for McConville. “After he bought the units, I managed the units,” he said.

Besides collecting rents, McConville’s complex machine of papers and signatures has had little to do with the physical condos themselves. But now that they’re in default, the impact of all of that paper-swapping could come crashing in on the people who lived in the neighboring homes before McConville ever found his first buyer.

In the arc of the local real estate market, the deals are relatively fresh; the fallout is just beginning. The impending flood of foreclosures probably won’t even show up in listings until 2010, worsening an epidemic that has already ravaged San Diego County.

Neighborhoods with high foreclosure rates often become magnets for squatters, crime or vandalism. Common areas fall into disrepair without homeowners to pay association dues. And the impact to surrounding property values could be devastating — the lenders will have to compete for buyers and likely slash their prices.

The defaulting loans also likely add to the toxic assets that American taxpayers have already begun to shoulder. The loans are likely now owned by Fannie Mae or Freddie Mac, experts said, because there were scant other investors willing to buy loans last year.

“If they were indeed resold to Fannie Mae or Freddie Mac or another government agency, what you have is a fraud against the public,” said William Markham, local real estate attorney. “The last thing we need are a bunch of con artists swindling the public at a time like this.”

Brad German, spokesman for Freddie Mac, said the company was investigating these transactions and could not comment on an ongoing investigation into a fraud or a potential fraud against the company. A spokeswoman for Fannie Mae declined to comment.

Some of the buyers and former employees have spoken to investigators from the Alameda County District Attorney’s Office, where McConville’s business was based. Others have taken their knowledge to the FBI.

For her part, in between corralling other straw buyers and contacting law enforcement, Vicki Jenkins has begun to reckon with her own involvement with McConville.

“It is an example of desperation overshadowing logic,” she wrote in an e-mail one year to the day after her first condo sale was recorded in San Diego County. She said the ordeal “is an example of confusion of values and how greed and power take advantage of vulnerability. None of us are immune.”

SUNDAY | Part II: How It Could Happen in 2008

Please contact Kelly Bennett or Will Carless directly at kelly.bennett@voiceofsandiego.org or will.carless@voiceofsandiego.org with your thoughts, ideas, personal stories or tips. Or set the tone of the debate with a letter to the editor.

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