Linda Vista Condos Tied to Alleged Scheme

Friday, April 24, 2009
Mike Freeman and Lori Weisberg
San Diego Union Tribune

A wave of loan defaults that has swamped a 42-unit Linda Vista
condo-conversion project makes it the fourth complex in the county
linked to a Bay Area man to be overwhelmed by pending foreclosures.

Kearny Mesa Townhomes, at 7555 Linda Vista Road, was
converted from apartments by Diamond House Development, a company
linked to James McConville of Fremont. About 35 units in the complex
are in the process of being taken back by lenders.

Investors who bought into the Linda Vista complex and
have now seen their credit badly damaged described an arrangement
similar to the one McConville allegedly used in three condo conversions
in North County. The San Diego Union-Tribune  reported on those deals
earlier this month.

At all four properties, investors with good credit were
recruited to take out mortgages to buy units owned or found by
McConville. They were to receive a fee, usually $5,000 to $10,000 per
unit.

McConville would rent out the units and make mortgage
payments. In some cases, investors said they were promised that the
units would be transferred out of their names within a few months. In
other instances, investors expected to share a percentage of the
profits when the units sold.

Instead, the units remained in the investors' names.
Since this winter, mortgages have not been paid for many of the Kearny
Mesa Townhomes units or about 80 units that investors purchased through
McConville in three other conversion projects in North County –
Sommerset Woods, Sommerset Villas and Westlake Ranch.

“I had some doubts in the beginning,” said Cristy Voss, a
tax preparer from San Jose who invested in the Linda Vista project.
“And I asked him, 'Don't you think we should have a contract because
what if you default on the loans,' and he said, 'Oh no, that'll never
happen. I've been doing this for 30 years. This is completely legal.' ”

In the North County cases, documents showed that a
McConville company received a hefty fee on each unit sold to investors
he brought to the complex. In Linda Vista, McConville's company owned
the building and thus received the full sale price.

Now investors can't get ahold of McConville. Lenders are
foreclosing on the units, leaving the investor buyers with shattered
credit.

Efforts to reach McConville were unsuccessful.
Prosecutors in San Diego and Alameda counties declined to say whether
they are investigating.

It's the latest chapter in a complex scheme that appears
to be collapsing in San Diego and elsewhere in the state. In Kern
County, a lender has filed a lawsuit against McConville, as well as
some investors.

Investors also say they purchased units in a Fresno project that are now tumbling into default.

The Linda Vista scheme differed somewhat from the later North County
deals, in that McConville made mortgage payments for nearly two years
on some Linda Vista units, purchased at a time when the housing market
was much stronger. Investors in the North County complexes say very few
payments were made on their mortgages, forcing their units into default
faster.

Voss, the tax preparer, said she met McConville through a
friend who recruited investors for his real estate deals. She was told
her good credit would be used to secure loans for two San Diego condos,
she would be paid a $10,000 fee for each and the properties would be
flipped in six months to two years, Voss said.

She was also assured that shortly after loans totaling
more than $630,000 were taken out in her name, the title on the condos
would be transferred out of her name. That never happened.

More than a year later, she learned her name was still on
the deeds for the two condos, purchased in December 2006 for $355,000
each. She also learned that rent on one of her two units was being
collected by Concord Management, the same San Diego firm that was
collecting rent payments at the North County complexes.

Voss said McConville paid her the promised $20,000 fee
and continued making payments on the two condos until last August. Both
are heading toward foreclosure.

A McConville company bought Kearny Mesa Townhomes in
November 2006 for $7.4 million, or about $176,000 per unit, according
to deed records and the previous owner. At least some units were
improved with granite countertops, said Stephen Norton, who rents a
unit.

Many of the sales to investors occurred in late 2006 and
2007. The prices were unusually high even at that time. For example, a
one-bedroom, one-bath unit sold in fall 2007 for $305,000. About the
same time, a larger unit down the street on Linda Vista Road sold for
$139,000.

“Especially in late 2007, well after the subprime
meltdown, these lenders should have known a 554-square-foot unit in
Linda Vista was not worth $305,000,” said Todd Lackner, a San Diego
appraiser who has tracked thousands of unusual sales.

Vazgen Davoudi, a Northern California investor, said his
credit was used to purchase five condos in the Linda Vista complex, and
the mortgage payments were made consistently until late last year. Now
the loans are in default, he said. Each of the condos in his name were
purchased in the $300,000 range, and nearly all of the sales closed in
December 2006.

Davoudi said he recalled being paid a fee of about $4,000 per unit.

“One (McConville) employee called in December and said, 'We're almost
ready to pay the loans and clear up your names,' ” Davoudi said. “Then
we couldn't reach him anymore. I'm so mad. He's ruined everybody's
credit.”

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