Estate Financial evaluator appointed

June 16, 2008

San Luis Obispo Superior Court Judge Barry T. LaBarbera Monday initiated a complete evaluation of the books of Estate Financial Inc. (EFI) mortgage fund.

LaBarbera appointed Hanno Powell — an attorney from Fresno experienced in receiverships — to look into EFI’s records unencumbered for 30 days.

A group of investors, prompted by an UncoveredSLO.com article, hired attorney Roger Frederickson to help protect their investments. Frederickson filed a lawsuit and asked the courts to appoint a receiver.

EFI is one of a number of hard money lenders currently under fire in San Luis Obispo County. Investors have accused EFI of failing to provide required documentation; file deeds of trust as required by their agreements; and pay investors following property sales.

Last month, regulators from the California Department of Corporations revoked the firm’s license to sell mortgage fund securities and part interest in real estate investments. The Department of Real Estate is currently investigating numerous complaints filed against EFI.

While hundreds of investors waited in the court room, the judge and attorneys discussed issues for more than an hour behind closed doors. LaBarbera then announced that an evaluator would be appointed, and that the mortgage fund would be responsible for $10,000 towards the cost of Powell’s evaluation.

LaBarbera scheduled a hearing for July 22 and 23, in which Powell’s findings will be used to determine the management of Estate Financial’s $170 million mortgage fund.


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Stefan

By: Anonymous on 6/19/08

I do NOT want to compromise an on going investigation as we have been interviewed by officials looking into violations of many of the listed developers for Loan Fraud under title 18 section 1014 of the US Code. Apparently many of the signatures on the applications with banks committed Perjury and fraud, and at least three financial instutitions knew of it, my question for anyone who knows of any involvement with KENNEDY FUND, INC. Heritage Oaks Bank Paso office and EFI, Los Robles Del Mar Project, DOYA II or . Please post asap. We need the information by Next Tuesday and or information on interstate wire fraud in connection with West Atascadero Development Company ( WADCO )

By: Anonymous on 6/19/08

Mel McColloch was brought on board by Karen to visit job sites and report on what needed to be done to complete a project and estimate what it would cost. This is the job that Charlie (a licensed contractor) had performed before the divorce. Once Charlie bailed, there was no one qualified to oversee the building projects. Karen didn't replace Charlie with someone qualified to oversee projects. Josh, ostensibly, was supposed to check on properties but he clearly did not nor is he qualified to do so. Neither Josh or Mel is a licensed contractor. Mel reported back to Karen. He is still working for her. We, of course, don't know from where or how much he is currently being paid, though the payoff from the Mortgage Fund should raise a few eyebrows.

By: Anonymous on 6/19/08

Interesting the koolaid drinking EFI lovers were blogging all this crap about the ecconomy and subprime loans and stock brokers and how EFI was just a victim and why are people just after Estate. Then the news today that 400 or more mortgage and stock brokers are being rounded up by the feds. All of a sudden it all dried up. Where are you EFI hugging loud mouths now. If the government is going after those guys EFI should be like going after the low hanging fruit. So who's your mommy now.

By: Anonymous on 6/19/08

To Builder:


Could you write me? I'm interested in what you have to say. fullyfunded93401@yahoo.com Thanks!

By: Anonymous on 6/19/08

Builder


You have company

By: Anonymous on 6/19/08

To all concerned. I have not blogged on this site before, but I have read every blog posted.


I want to add something. I am pursuing my own Superior Court action against Estate Financial, Inc. Estate Financial Mortgage Fund, LLC, Karen Guth and Joshua Yaguda.


I have down a lot of discovery and I have proof positive that contrary to my executed loan documents, no "segregated account" was ever opened at Heritage Oaks Bank for the amount of my loan. Further, Estate Financial (nor the Fund) had liquid assets sufficient to fund any more than 50% of the loan they committed to me in 2005. It was a ponzi scheme, whereby builders would be funded from the sale of other builders property or new fund investors. Guess what, the pyramid fell – there was not enough money generated to fund my loan. And yet, though no money was being funded, so no trades would work for me, EFI kept charging interest. Thus my loan was fully funded, yet my project is only 50% built. Interest ate up the "invisible" money.


I've lost my equity and the investors do not have the collateral they were promise.


Wow, what a mess. I'll let the Judge sort out my situation. Jut thought you'd like to hear a new perspective.


Stefan

By: Anonymous on 6/19/08

You scratch my back, I'll scratch yours! says:


Mel McColloch, employee of Estate Financial


Who is he and what work did he do at EFI?

By: Anonymous on 6/19/08

Tell me Mel doesn't have the goods on them. Now he's one of them. Goodbye Mel.

By: Anonymous on 6/19/08

Mel McColloch, employee of Estate Financial, was paid off by the Mortgage Fund on 12/12/07. Three deeds were recorded assigning his interest (as well as his wife's and the family trust) back to the Mortgage Fund document #'s 2007079636, 2007079637, 2007079638). Check the County Recorders Records.

By: Anonymous on 6/19/08

From the Department of Justice website, posted today: "More Than 400 Defendants Charged for Roles in Mortgage Fraud Schemes as Part of Operation “Malicious Mortgage. Two Senior Managers of Failed Bear Stearns Hedge Funds Indicted Today in Separate Mortgage-Related Securities Fraud Case."


Within this announcement:


"Lending fraud frequently involves multiple loan transactions in which industry professionals construct mortgage transactions based on gross fraudulent misrepresentations about the borrower’s financial status, such as overstating the borrower’s income or assets, using false or fictitious employment records or inflating property values."


By: Anonymous on 6/19/08

ORDER FROM JUDGE LA BARBERA:


I posted my personal information yesterday on this blob for investor that would like to be added to my e-mail list.

I will do this one more time to give you the opportunity to read the order resulting from last mondays hearing.

If you would like this infor send me your name and e-mail address.

For those of you on my list you like be receiving a copy of the order shortly.


Barbera Engelhardt

bcqueen@charter.net

805-343-6060

By: Anonymous on 6/19/08

Go says:


Some investors had no knowledge their fractional TD when paid off was invested in the fund. I don't beleive they are in the same category. A judge will make a determination on those claims. Whata mess!!!


Stefan

By: Anonymous on 6/19/08

Yes, Applebuam will have to pay and so will everyone involved with the scheme whether knowing of fraud or not. From the Funds inception to today, fraud in my opinion, will be found. Share value will be re-evaluated and possible pay offs to investors will result in not only interest asked to be return but possible principle. It's almost hard to believe but if your shares were really worth 50 cents on the dollar last Sept and you were refunded 100 cents on the dollar last Sept, it's likely you will get a letter from a receiver, trustee or ???? in the future asking for the difference back. It won't be pretty. I can hardly believe Applebuam's payoff was from legitimate money but I would gather he knew it was this money or none. So he took it.

By: Anonymous on 6/19/08

insider says:


Now, you are getting the essence.

By: Anonymous on 6/19/08

to Anonymous

Anonymous says


but if it was folllowed exactly as set out in the circular


Was anything done in accordance with the circular? What about the several million dollars just paid to Applebaum where did that come from. Did he have reason to believe it was from investors. Should that money be returned?

By: Anonymous on 6/19/08

insider says


It all depends on the circumstances. Not all capital return is equal. Certainly, all suspicious, but if it was folllowed exactly as set out in the circular than there is no problem. Any sweet heart dealill have serious consequences. Remember, this is only if there was fraud involved and we are not sure yet. Lots of talk so far.

By: Anonymous on 6/19/08

Anyone who got thier principle out of that scam in the past year is certainly going to be under suspicion don't you think? You think she's your good buddy now wait till the hard questions start comming.

By: Anonymous on 6/19/08

insider says:


I seriously doubt anyone who got thier money back in the last year wasn't well aware of


The unfortunate fact for those who were able to cash outor profited (i.e. interest received) from an operation, if proven fraud, will have to pay the money back. Not knowing the law or being aware the operation was already illigal (possible PNZY SCHEME) makes no exception.


Good luck to all who still suck up to Karen and Co.

By: Anonymous on 6/19/08

To the Truth be Told


So what now smart guy? The justice department is all over the banks, lenders and stock brokers. They didn't do anything as grossly criminal as your girl. She's just a smaller fish. I'm sure by the time the DRE shuts her down someone will finally realize they landed the big one.


Stefan

By: Anonymous on 6/19/08

Check out this site. It has information about the latest arrests. It seems our girl might be going to the pokey.


http://www.usdoj.gov/opa/pr/2008/June/08-odag-551

By: Anonymous on 6/19/08

I expect to arrested as well, before the sun sets

By: Anonymous on 6/19/08

60 people have been arrested for Mortgage fraud in just the last 24 hours. CNN

By: Anonymous on 6/19/08

I seriously doubt anyone who got thier money back in the last year wasn't well aware of the situation and got preferential treatment or sensed the impending doom and demanded thier money at a time when Karen was afraid to let the cat out of the bag. Those in the second category could still be a part of those in the first however if you were just a part of the first group your in trouble. Your a part of the fraud. Karen wasn't returning money just because.

By: Anonymous on 6/19/08

insider says:


Without knowing much or claiming to know enough, whoever received preferntial payments benefitting from "criminal enterprice" if thats the case (again we don't knoe yet) will have to digourge their benefits. Thatsis all interest received even if they didn't know what was going on.

I feel sorry for some of the oldies who lived on the proceeds so long and now their principal will be gone too.

By: Anonymous on 6/19/08

Just another insider fishing expedition


V


By: Anonymous on 6/19/08

If The Shoe Fits


I'l bet many of these investors who are so supportive of Karens actions may have had the majority of thier moneys paid back over the last year through the refinace of projects. They probably have some money still invested so as to not look like insiders however the goverment while slow loves to look at these guys. I would be very sceptical of anyone who continues to support EFI as they have probably already taken care of themselves. Right guys?

By: Anonymous on 6/19/08

to Amazed


Sounds like somebody has thier hand in the cookie jar.

By: Anonymous on 6/19/08

TO THE TRUTH


I guess those guys at Bear Steans didn't get the memo of the reasoning you previously expressed about thier immunity to any charges of misdoings on thier part. The news today is charges are pending and the whole government from the DOC, SEC, and IRS is on them like white on rice. Charges are pending. How about that Mr. Truth. And thier crime is they should have known that thier clients were at risk. Imagine if they had committed a blatant fraud.


Stefan

By: Anonymous on 6/19/08

If all you folks are so smart and kmow so much about the shortcomings of "hard money" investments, then why were you so stupid in investing in the first place?

By: Anonymous on 6/19/08

First Pacific Bank


Adding to my previos post.

Most builders had equity in their projects unless partnered with one of Karen's LLC.

EFI's problem is not the current market. Market is everyone problem for sure to be clear. EFI's problem was and is its own involvements with projects they had no business being in. It afforded them to create values that was never there. Interest payments were paid from those over inflated project loans and new investors money. Their problem didn't surface with investors until the interest payments stopped. Builders had problems getting funding timely, but they couldn't do much as long some money was trickling in. Besides, if any of them were to complain to local news madia, Karen attacked them viciously. See previous post by an investor who placed an ad in the local paper last year after not geting answers from EFI.

Karen is fighting to keep control of a sinking ship. With the Judge's decesion,at least a third party (not Governmental agency) is looking at the records. When the "indepandent auditor finds irregularities he will have to make a report. His qualification makes him a viable person to do so.

For many of the investors it will be hard to swallow what will come out of this mess. Simply stated; huge losses.

Karen will try everything to forestall the inevitable.

Sooner reality is faced with better it is.

By: Anonymous on 6/19/08

Appraisals and LTV's are meaningless when you can tell an appraiser to "hit the number".


Developers use hard money lenders for one reason: they have poorer underwriting standards.

By: Anonymous on 6/19/08

First Pacific Bank


Amen to you sir.

By: Anonymous on 6/19/08

For anyone who is not on this person's email list here is more info that you might be interested in:


"I have been requested by an investor to send the following to my EF contacts:

Have each call Assemblyman Sam Blakesley's Sacrament Office @ (916) 319-2033; ask for Christine Roberson.

Ask if Sam's office is communicating with the Ca. Dept. of Real Estate (DRE) in regards to looking into the receivership of Estate Financial.


The purpose of each one calling is to show that a significant number of investors are concerned about their money.


And, another investor has furnished me with a rough ballpark estimate of the annual cost of the receivership: $150,000 to $300,000.

That investor states that Josh & Karen are charging a management fee of $1.5 to $2 million per year. You have all seen the value of your investments decline by the prorated amount of their fee."


Stefan

By: Anonymous on 6/19/08

TO THE TRUTH


I am a real estate loan officer at First Pacific Bank. I have a friend who borrowed from Estate Financial and so I have been following the blogs and giving him some advice. I disagree with your comments about bank lending practices and I am very familiar with my friend's loan documents as related to his Estate Financial loan.


I have been a bank lending officer for 23 years. SIr, with all do respect you are wrong about why developers go to hard money lenders vs. institutional lenders such as my bank.


Misstatements:


EF charges builders interest on the entire loan every month. That is false. That is not what their loan documents say.


2. My friend (developer) put up 35% equity to get Estate's loan. It is true that we would have asked for 50% equity. But to say that the EFI builders have no equity in their projects is untrue. Look at the fund offering circular. It tells you exactly the maximum EF was willing to lend (loan to value) against any one project.


There are other misstatements in your posting, but I will let it go at this and let the readers draw their own conclusions. I do think, and this is a personal opinion, that if you are going to attack someone you should use your real name.


Good luck to all of you. Philip G

By: Anonymous on 6/19/08

to The Truth


There is no way your an investor thats out money. Your probably one of the insiders who got all or most of your money back. If you are and you knew what was going on your just as guilty as the Queen Bee.

By: Anonymous on 6/19/08

to The Truth


Well you point out another interesting fact. Estate charge borrowers for the full amount of thier loan you say? For money they didn't even have? Hmmmmmm,

By: Anonymous on 6/19/08

to Anonymous


Right On! I am there with you. Keep on digging.

By: Anonymous on 6/19/08

The bank alleged Bear Stearns managers "hatched a plan to make more money for themselves and further to use the Enhanced Fund as a repository for risky, poor-quality investments."


The complaint said Bear Stearns told Barclays that the enhanced fund was up almost 6 percent through June 2007 — when "in reality, the portfolio's asset values were plummeting."


Sounds so familiar

By: Anonymous on 6/19/08

K in Paso


Many on this site trying to find out what happened along the way.More we dig deeper it gets. Thats why we are so persistant. Some of us lost everything others were spared of the same. I always said and beleive that "losing money is not a crime". This operation was "robing Ptere to pay Paul" thats the main issue.


Stefan

By: Anonymous on 6/19/08

Ex-Bear Stearns managers, suspected of misleading investors, arrested at their homes


Boy the indictment sounds so familiar in here.

By: Anonymous on 6/19/08

to The Truth Be Told


I am, as I have said previously in many posts, an investor in the mortgage fund. I invested last summer, but have now come to believe that my investment was apparently accepted illegally by EFI. My investment is small and my resources are not sufficient to pursue legal action on my own.


I don't know why anybody would want to speak with me. There are bigger players here. I am interested in only the facts, there has been a lot of research done by many of the other investors here that has been helpful. Also, there seems to be a lot that may just be rumors. We will know more after the DRE and the auditor finish.


So, who is The Truth Be Told?

By: Anonymous on 6/19/08

I would really like to know who "K in Paso" is??? Can anyone help with making this connection? I would like to contact this person via telephone. Thanks for your help. A fellow investor

By: Anonymous on 6/19/08

the truth


BTW. The issuein here is aboutwhat happened to the money. Makes no difference of the interest rate etc. Investors borrowers were deceived.

By: Anonymous on 6/19/08

the truth


I stand by my statement.

If you had money in the bank than why bother borrowing against it. I can get .5% over what I gate for a CD in the sme bank. Makes good sense for the bank, not for me. I am pleased Karen has so amny ignorant investors still. She can go robbing some more.

By: Anonymous on 6/19/08

Is there really an investor out there that thinks:

a) This is really something to ride out;

b) The risk was acceptable; and,

c)Taking action will only enrich attorneys?

Because all three of those arguments sound much more like something that…perhaps….interested principals being scrutinized by an examiner might consider saying. Stock purchasers know that the SEC is a good watchdog……but, wasn't the fund somehow exempted from securities oversight by the D.O.C? I'm missing the connection between a stockbroker and the EFI operators…other than the fact that the D.O.C. FINALLY did something about the circumstances……perhaps if the S.E.C. had been involved, things wouldn't have taken so long.

Don't risk enriching attorneys with the fees that EFI has the right to keep collecting…? That concept totally evades me.

How's the construction going on San Luis Drive?

Last time I checked, riding something out didn't involve grabbing your ankles first.


Stefan

By: Anonymous on 6/18/08

To anonymous,

You are full of it, like I said I borrowed at those rates for developement. If you know any legitimate developer ask them. If you were a good bank client with money in the bank and put equity in your project that is that rate .5 to 1 over prime. Now when I say equity I mean cash, 20% – 25% of costs. This is why 90% of what is written on this blog is BS because of people like you.

By: Anonymous on 6/18/08

the truth


Not for construction loan. Besides, there are other expenses with banks that makes it expensive. No constrution loan was made for 1/2 point over prime. Bank specializing in such loans did it for the extra points. Construction loans had a much higher reserve requirenment and were much riskier. Besides it had to be on their own portfolio. Most other loans like mortgages were originated than sold off to FaniMe or Freddie Max or idiot investor around the world on wall street. Thats why many of those so called "smart" people got shafted there too.

By: Anonymous on 6/18/08

Banks offered rates at .5 to 1 over prime when prime was at 4.5 and 5. This equals a rate of 5-6%. I know this because I borrowed money at these rates. EF was lending at 12%. As far as speed in processing if you expect EF to follow the same due diligence as banks there should be no time difference. I do know what I am talking about. I was one who wondered how bad the crash for these developers who borrowed at high interest rates with no equity would be when the market tanked. Now I know. One more piece of info on borrowing. When you borrow from a bank you only pay interest on the money you use or draw, when you borrow hard money you pay on the whole amount from day one. Really cuts into the profit. I would say maybe you should take a lesson in finance. This is not rocket science.

By: Anonymous on 6/18/08

the truth says:


To Ron Cooper,

If you had bank offering to lend you money at bank rates which were 6-7 points below EF


For a long time I used to feel sorry for many investors. Reading yours and some other comments, you are justified to loose your money. Ignorance come out of your mouth all over.

Many developers elect to go to hard money lenders for different reasons. Mostly for expidiency. In a world where speed is more vauable than the extra point it makes sense. BTW there is no 6 – 7 points difference. Usually banks lend at prime plus two more or less.

You have no knowledge of how construction loans operate.

By: Anonymous on 6/18/08

To Ron Cooper,

If you had bank offering to lend you money at bank rates which were 6-7 points below EF why did you not take it? Maybe the reason was you did not have the equity to put into your project. I know many developer who borrowed from real banks. The only reason to borrow hard money is that you do not want to put in the equity that the banks require or your credit is terrible. Ron Cooper which is it.


Stefan

By: Anonymous on 6/18/08

I can't for the life of me understand how anybody that has been around the block even once doesn't see that the investors that put the last 25 million in were just being robbed. Estate knew that there was NO chance that they would recieve a return on thier investment. Why did they continue to take money. Answer that with a possitive spin if you can EFI lovers. Forget that the world is crap and everyone is losing money tell me when poor managment steps over the line. In EFI case I'll bet over a year ago.

By: Anonymous on 6/18/08

TO THE TRUTH:


I am one of those people "banks would not touch" otherwise known as a developer. To bad you're sooooooo ignorant about the truth. When I borrowed money from Estate Financial I had three other loan offers from three other lenders who are currently having their troubles in this seriously declining real estate market – but are still in business and have not had their DOC licenses revoked.


The reason developers borrowed from Estate varied, but if it was because banks "would not touch them" then Estate should not have touched them either.


Before you enter the public forum and criticize people who you don't even know try understanding what you are talking about. You are not telling "THE TRUTH."

By: Anonymous on 6/18/08

I can barely read any of these last few blogs. Ignorant folks who refuse to dig into the 'real' problem with EFI. Jim Scott said it well at the meeting. \\


Alone, withholding pertinent information to existing and potential investors is FRAUD! Taking investors off deeds (or never puttin them on) and refinancing without their permission or payback is fraud. There is too much fraud to list. Anyone who is supporting Karen is either too lazy to read and get educated or is too stubborn to think open mindedly. Do you really think the DOC took their permit because of EFI's good management? No, they found justifiable cause! Even though the verbal battle continues on this blog. Real action is happening to prove Karen and Joshua's actions NOW. Don't laugh Karen Guth, your lawyer hasn't completely informed you! You'll see……

By: Anonymous on 6/18/08

to insider,

I do not know if Karen did anything illegal. She made many bad decisions. I am tired of people not taking responsibility for their own actions. Karen took peoples money, those people made a decsion to invest with her. If EF was the only hard money lender in trouble I would say this is all Karen, however, every hard money lender is in the same position. Major investment banks with some of the smartest people running them are writing down billions of dollars, todays headline were that the housing decline is the largest in 25 years. Everybody had to understand the reason somebody borrows at 12-14% is that they are a risky borrower. Somebody who banks would not touch. If the real estate market had continued to increase I dought there would have been a problem. If Karen and company have commited fraud they should be punished and that will come to light through this audit. If bad business decisions is what she is guilty of than who are we to throw stones.

By: Anonymous on 6/18/08

To: needs to know,


I am sorry I have such a crazy e-mail address but It was a nick name from my former employment and it stuck

It may sound crazy or prtentious or even something more discriptive but I was the manager of a large resort in Hawaii and as the problem solver it became a pet name.

So other than my address I am an investor in the fund who has been very proactive for about a year. I new Karen was lying and I wanted answers.

In the end I became a plaintiff in the present legal action. I have taken legal action for my family and all fund members becaues we are in this sinking boat together and some one must start rowing.

If you would like to contact me for information I am happy to try to help.

barbera

bcqueen@charter.net