Real estate mogul lied to Quicken Loans, jury finds

A Bay Area real estate mogul with political ties has been convicted of two charges including fraud for lying about debt owed by a borrower in a $1.3 million refinance loan from Quicken Loans.

Victor Makras, 64, of San Francisco, was found guilty by a federal jury last week for falsely inflating a $915K debt he claimed a refi borrower owed him, according to the U.S. Attorney’s Office for the Northern District of California. 

The owner of real estate firm Makras Real Estate and Makras Investors was on numerous city commissions and had long-running ties to city leadership, according to local reports. His conviction is part of a larger federal probe into local corruption including real estate fraud that has already entangled other public officials. 

A jury was unable to reach a verdict on two conspiracy counts for Makras. The borrower, former San Francisco Public Utilities Commission general manager Harlan Kelly, faces the same four counts and has yet to go to trial. 

Kelly and his wife, a former San Francisco city administrator who wasn’t named in a superseding indictment last October, in 2012 borrowed $715K in an interest-only private loan from Makras, prosecutors wrote in the indictment. The loan was secured by the couple’s residence and two other pieces of property. 

In 2014, Kelly allegedly asked Makras for an additional $200K to cash out, and Makras submitted a purported $200K modification to the 2012 loan, with the same 8% interest rate. Kelly and his wife submitted a refi application to Quicken Loans falsely stating the unpaid balance on their loan from Makras was $915K, the indictment said. They allegedly omitted from Quicken another $70K personal loan from Makras and a $89K construction debt to a contractor. 

Makras faces up to 30 years in prison and a $1 million fine for each count he was convicted of. He’s out of custody until a sentencing date which is yet to be determined, prosecutors said. 

Fraud has skyrocketed in the mortgage industry in recent years. The rate of critical defects on mortgage applications hit a record last year, while real estate scams cost non-bank originators $4.66 per dollar of fraudulent transactions. The impact of fraud is even harsher on banks, which spend $5.34 for every dollar of fraud.