California Foreclosure Scandal - Tip of the Iceberg

As California Attorney General Kamala Harris debates her next move on the 50 State settlement proposal surrounding the nation-wide foreclosure scandal, we want to impart information from a recent court case that sheds further light on the problem facing Kamala Harris. We imagine this particular court case is just the tip of the Iceberg as it relates to the foreclosure scandal as a whole within California.

As referenced in prior installments, Ms. Knox and a co-tenant investor procured a residential investment property located in Alameda County. Court records specify Ms. Knox’s co-tenant investor demanded termination of their business relationship and the prompt sale of the co-owned property. The co-investors demands were based on the uncovering of unauthorized use by Ms. Knox of the property in question as collateral for a loan. (See prior installment)

In spite of Ms. Knox agreeing to sell the co-tenant property as requested by her co-investor, Ms. Knox concealed the fact she had no intention of signing a listing agreement therefore rendering a sale impossible. Court records and an independent source confirmed this. Both co-tenants must sign a listing agreement per California Law to allow for active marketing and sale of a property.

Court records and Ms. Knox’s own testimony reflect that while concealing her intentions not to sell the property, Ms. Knox sold a real estate option and non-compete agreement to a neighboring property owner. This option and agreement were sold without the approval or knowledge of the co-tenant investor or Bank of America, the Bank holding the mortgage on the property. The option was a right of first refusal. Ms. Knox was paid a substantial amount of money for the option and non-compete agreement.

A non-compete agreement is such that a property can no longer be operated for its intended purpose for a certain period of time. The right of first refusal option makes listing and marketing a property nearly impossible. Such an option must be disclosed, therefore telling any prospective buyer a third party holds a right to match your offer. Therefore, no interested party would waste their time or money with due diligence, knowing a third party would have the contracted right to match his offer.

As a result of the above events, the co-tenant property was foreclosed on by Bank of America without any attempt on their part to seek an understanding of the problems that lead to foreclosure. There is no evidence Bank of America was aware of Ms. Knox’s activities. However, in light of the fact, Bank of America was aware of Ms, Knox’s unauthorized use of the property to collateralize a loan, Bank of America was on notice.

The co-investor’s entire investment was lost, and no funds from either the non-compete agreement or option for right of first refusal were distributed by Ms. Knox to her co-investor.

The Back Story has been informed the Alameda County District Attorney, the State Attorney General, Bank of America and the FTC have been notified of this matter.

Rosegate Assisted Living - KMJ Associates

In an earlier installment it was noted that Ms. Knox (Kati L Knox) and her San Leandro based business were the subject of a civil court proceeding in Alameda County. Though court records reflect alleged claims of real estate fraud, two specific mortgage related loan claims caught our attention.  In light of the mortgage crisis and on-going nation-wide investigations by local District Attorneys and State Attorney Generals, we felt reporting on this matter was in the public's best interest.

Here’s what we know: Court records reflect that Ms. Knox personally acquired a $100,000 Equity Line of Credit (ELOC) using a co-tenant (two or more owners of a property) investment property as collateral, for a down payment on her (new) personal residence in Danville. Court and public records reflect Ms. Knox neither asked nor received approval from her co-tenant investor to use the co-tenant property as collateral. Furthermore, as supported by public records, Ms. Knox did not inform Bank of America (the source of the ELOC) when acquiring the loan that there was a co-tenant on the collateralized property. Moreover, court records indicate Ms. Knox does not recall filling out a loan application. We asked Bank of America about Ms. Knox’s claims. They made it clear every loan of any amount requires a loan application, and co-tenant (co-owner) disclosure is a key part of any real estate loan application. Most, if not all, loan applications do have truth in fact clauses (aka perjury clauses).

Sources and records indicate that when Ms. Knox’s co-tenant investor uncovered the unauthorized loan, Bank of America was contacted via the co-tenants attorney seeking an explanation. Bank of America replied almost immediately indicating the loan would be promptly repaid and closed, which it was. 

The second matter relates to a loan from a current employee of Rosegate Assisted Living. After reviewing court records and determining this employee testified under oath and is currently listed on Rosegate’s website, we will refer to him by name; Darryl Chin (Mr. Chin).

Both Mr. Chin and Ms. Knox admitted Mr. Chin contributed money towards the “project”, in the amount of $30,000. Mr. Chin also admitted under oath that he and Ms. Knox were dating at some point.

Now where this transaction seemingly goes wrong is in who or how it was repaid. While under oath Mr. Chin and Ms. Knox had completely different answers on how the funds were repaid. Ms. Knox indicated that Mr. Chin’s employer; KMJ Associates (Rosegate Assisted Living) repaid the $30,000 in funds. However, Mr. Chin stated the funds were repaid via “Kati Knox’s personal check”. Clearly one of these parties is misleading the courts for reasons that are yet not clear.

According to court records Ms. Knox also admitted concealing from Mr. Chin the $100,000 ELOC she acquired.  Ms. Knox stated, “It wasn’t something I talked about”. It appears Ms. Knox intentionally concealed the $100,000 ELOC from both her co-tenant investor and Mr. Chin, as well apparently concealed from Bank of America the fact she had investors other then herself.  Ms. Knox also admitted she did not notify Bank of America she was using the funds from the ELOC as a down payment on a personal residence. Such information is required on loan applications, per Bank of America policy.

We found no evidence to indicate how Mr. Chin’s $30,000 contribution was used, or if it was even used towards the real estate transaction, as there is a key disagreement on an important part of that arrangement…the repayment of the funds. However, such a transaction between an employer and employee whereby a personal relationship has or does exist between a superior and subordinate has the potential for a very interesting sexual harassment claim.

We attempted to reach Mr. Chin regarding this matter. He failed to respond.