California Mortgage Broker Target of Investigation

The California Department of Real Estate is trying to bar a local mortgage broker from the industry, accusing him and his company of arranging inflated appraisals in order to pocket huge commissions.
According to the North County Times, Hendrix Montecastro faces a number of lawsuits from investors who say that Montecastro made them pawns in a massive California mortgage scam.

Five sets of plaintiffs allege that Montecastro and other defendants led them to buy multiple houses and that Montecastro then squeezed tens of millions of dollars out of the resulting home equity.

Montecastro and his company, Stonewood Consulting, inflated home appraisals, failed to account for clients’ money and concealed mortgage broker fees, a Deputy Real Estate Commissioner wrote in an accusation filed Wednesday.

The accusation is not a criminal charge; it triggers a hearing at which an administrative judge could revoke or suspend Montecastro’s real estate license. Defendants can appeal penalties in state court system.

It isn’t clear whether Montecastro is still active in the California housing market.

Soon after the first lawsuit was filed against Stonewood on January 5, the home mortgage company abandoned and sold the house in northern Murrieta that it had used as an office.

Montecastro also canceled his affiliation with Ocean Ridge Equity, though that mortgage lender is nevertheless still registered at another Murrieta house owned by Montecastro’s wife.

Neither Hendrix Montecastro nor his attorney, Bill Sauls of San Diego, could be reached for comment Thursday.

The accusation filed this week cited more than two dozen alleged violations of California real estate laws.

Several allegations centering on Stonewood’s record-keeping were among the most serious, department spokesman Tom Pool said. Real estate brokers and mortgage brokers are required to keep detailed accounts of clients’ money as a check against theft and fraud.

Stonewood didn’t keep track of money in trust accounts separate from its own, as the law requires, according to the 16-page accusation.

In a series of lawsuits, plaintiffs allege that Montecastro, as well as Murrieta-area residents James Duncan and Maurice McLeod, Fullerton resident Charlie Choi and Palm Springs-area businessman Chris Oetting recruited clients into an investment group from 2004-06, saying they’d triple their money in as little as three years.

To round up cash for the investment pool, the men allegedly enticed the clients to cash out retirement accounts and borrow tens of thousands of dollars on credit cards that the men helped them obtain.

But investors who are now suing say the defendants simply pocketed the money and are using it to fund lavish lifestyles.

The biggest source of cash for the investments was a series of 200-plus California home loans that Duncan, Montecastro and McLeod allegedly pressured the clients into taking out.

Montecastro allegedly promised clients that he would put that money into investments that Duncan and McLeod would manage. In the meantime, the investment group would help the clients cover mortgage payments.

Continue reading in the North County Times …