Before dawn one hazy March day in L.A., Armando Granillo pulled his SUV into a Starbucks near MacArthur Park, where he planned to pick up an envelope full of cash from an Arizona real estate broker, federal investigators say.
Granillo, a foreclosure specialist at mortgage giant Fannie Mae, expected to drive off with $11,200 – an illegal kickback for steering foreclosure listings to brokers, authorities allege in court records.
Granillo would leave in handcuffs. And investigators are now looking into assertions by Granillo and another former Fannie Mae foreclosure specialist that such kickbacks were “a natural part of business” at the government-sponsored housing finance company, as Granillo allegedly told the broker in a wiretapped conversation.
Investigators are examining whether other workers in Fannie Mae’s Irvine, Calif. office solicited illegal payments, according to three people with knowledge of the probe, who asked for anonymity because they were not authorized to speak publicly. At first, Granillo offered to cooperate with investigators, but he later declined to talk, two of the people said.
Another former foreclosure specialist in Irvine, Cecelia Carter, contends in an Orange County Superior Court lawsuit that Fannie Mae fired her in 2011 for trying to expose the kickbacks.
Fannie Mae is the nation’s biggest buyer of home loans and guarantor of mortgages bundled for sale to investors. Granillo was among more than 50 workers in Fannie Mae’s Irvine office, which opened in late 2008 after Fannie buckled under the weight of mass defaults on the home loans it had guaranteed. Taxpayers spent $116 billion bailing out the company, which remains under U.S. government control.
The workers’ jobs were to move thousands of homes in Western states off Fannie’s books through foreclosure sales, giving Granillo the power to select the brokers, who make commissions on each sale. In exchange, investigators allege, he demanded a 20 percent cut of the Arizona broker’s commissions.
In the sting in Los Angeles, federal investigators had wired the broker, identified in court records only as A.M., for sound and video. “As Granillo raised his hands … I saw him holding the manila envelope containing the cash,” special agent James Shields wrote in an affidavit filed in federal court to support three fraud charges.
The 44-year-old Huntington Beach, Calif. resident has pleaded not guilty and remains free on bond pending trial, scheduled for Aug. 6 in U.S. District Court in Santa Ana, Calif. Granillo could not be reached, and his public defender, David Israel Wasserman, declined to comment.
In a post-crisis era, foreclosure listings are a premium commodity for brokers, as buyers and investors swarm for bargains in beaten-down housing markets such as Arizona and California. Fannie Mae is a trove of listings, having sold about 740,000 repossessed properties since 2009.
Regulators are keeping a close watch for kickback deals as the housing market heats up and new regulations take hold after the mortgage meltdown, which exposed widespread corruption in the housing and lending markets.
Consumer Financial Protection Bureau Director Richard Cordray said his 2-year-old agency has moved to shut down kickback operations not only because they’re illegal but also because they reduce competition and increase costs to the public.
“The CFPB will continue to take action against schemes designed to let service providers profit through unscrupulous and illegal business practices,” Cordray said in May, in announcing a settlement with a home builder accused in a kickback scheme. The consumer bureau also fined four mortgage insurers $15.4 million in April over alleged kickbacks.
A Fannie Mae spokesman declined to comment on allegations involving the Irvine office, but released a statement saying the company has warned its staff repeatedly against seeking payments from real estate agents.
“While wrongdoing by Fannie Mae’s (foreclosure) employees is rare, we take all allegations seriously,” the company said in the statement.