USA v. Judy Yeung

Filing

FILED OPINION (SUSAN P. GRABER, SANDRA S. IKUTA and GORDON J. QUIST) AFFIRMED IN PART, VACATED AND REMANDED IN PART. Judge: SSI Authoring, FILED AND ENTERED JUDGMENT. [8065552]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
JUDY YEUNG, a/k/a Mui Wan
Yeung,
Defendant-Appellant.





No. 10-10381
D.C. No.
3:09-cr-00376-SI-1
OPINION

Appeal from the United States District Court
for the Northern District of California
Susan Illston, District Judge, Presiding
Argued and Submitted
October 25, 2011—San Francisco, California
Filed February 13, 2012
Before: Susan P. Graber and Sandra S. Ikuta, Circuit Judges,
and Gordon J. Quist,* Senior District Judge.
Opinion by Judge Ikuta

*The Honorable Gordon J. Quist, Senior United States District Judge
for the Western District of Michigan, sitting by designation.

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COUNSEL
Martha Boersch, Jones Day, San Francisco, California
(argued); Matthew J. Silveria, Jones Day, San Francisco, California, for defendant-appellant Judy Yeung.
Suzanne Miles, Assistant United States Attorney, Oakland,
California (argued); Merry Jean Chan, Assistant United States
Attorney, San Francisco, California, for the plaintiff-appellee.

OPINION
IKUTA, Circuit Judge:
Judy Yeung appeals from a restitution order imposed by the
district court after a jury convicted Yeung of various crimes
associated with her involvement in a fraudulent real estate
investment scheme.1 We have jurisdiction pursuant to 28
U.S.C. § 1291. We hold that the district court failed to provide an adequate explanation of its reasoning in calculating
the amount of restitution owed to two of the victims and,
therefore, vacate that portion of the restitution order. We
remand for recalculation and explanation of the award pursuant to the Mandatory Victims Restitution Act of 1996
(“MVRA”), 18 U.S.C. § 3663A.
1

We affirm Yeung’s conviction in a memorandum disposition filed concurrently with this opinion. In this opinion, we address only Yeung’s challenges to the restitution award.

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I
From 2005 until 2007, Judy Yeung and her co-conspirators
developed a scheme to make money in the then-booming
housing market and to pay off various debts. Yeung recruited
five individuals with good credit scores to act as straw buyers
to purchase and refinance residences in San Francisco and
Gilroy, California. Yeung and other members of the conspiracy falsified information on the straw buyers’ loan applications, for example by materially overstating the supposed
borrower’s income and assets and misstating their employment information and rental obligations. As part of the
scheme, the conspirators developed a false letter from an
accountant and a false “verification of deposit” letter from
Hang Seng Bank to support the fraudulent loan applications.
Despite her promises to the straw buyers, Yeung stopped
making mortgage payments and defaulted on the loans, which
triggered foreclosure of the properties held as collateral. After
she was convicted, the district court determined that the victims of two of the five fraudulent schemes (the “Ferrari loans”
and the “Lam loans”) were entitled to restitution in the
amount of $1,321,564. The relevant facts about the two
schemes at issue, drawn from the record, are as follows.
A
The scheme involving the Ferrari loans began in 2005. At
the suggestion of real estate broker Alex Yee (an alleged coconspirator), Yeung obtained loans in the name of Kenneth
Ferrari, Yee’s friend and former co-worker, in order to repurchase the property at 1351 Third Street from a previous straw
buyer who wanted out of the scheme. Yee and Yeung prepared a loan application for Ferrari that falsely stated that
1351 Third Street would be Ferrari’s primary residence and
falsely inflated Ferrari’s income and present rental obligations. Relying on this loan application, in December 2005,
Long Beach Mortgage Company made two separate loans to
Ferrari, the first for $664,000 and the second for $166,000.

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The loans were secured by the 1351 Third Street property.
Ferrari paid the first mortgage payment himself, and Yee,
who felt responsible for involving Ferrari, made the second
payment. Yeung reimbursed Ferrari for the first month’s
mortgage payment and also made the third month’s payment.
She made no further payments.
According to the government’s expert witness, in March
2006, Long Beach Mortgage Company sold the two Ferrari
loans to Long Beach Mortgage Securities Corporation, which
then sold or transferred the loans, as part of a pool of loans,
to the Long Beach Mortgage Trust 2006-2 (“Long Beach
Trust”), a corporate entity. No evidence was submitted
regarding the price Long Beach Mortgage Securities Corporation or the Long Beach Trust paid for the loans; the government witness at the evidentiary hearing testified that she did
not know the amount. The Long Beach Trust sold interests in
the securitized pool of loans to investors.
On December 4, 2006, after Ferrari defaulted on the loans,
foreclosure proceedings commenced. The unpaid principal
balance of the two loans at the time of Ferrari’s default was
$829,382. Deutsche Bank National Trust Company
(“Deutsche Bank”), as trustee for the Long Beach Trust, took
title to the 1351 Third Street property at the foreclosure sale
for a credit bid of $707,388.2 In March 2008, Deutsche Bank
sold the real estate to a third party for $395,000, receiving net
proceeds (i.e., the sales price less the costs of the sale) of
$363,863.
2

A “credit bid” is “a bid that offers to cancel the outstanding principal,
interest, and related fees in return for title to the property.” United States
v. Green, 648 F.3d 569, 584 (7th Cir. 2011). Pursuant to California Civil
Code § 2924h(b), the present beneficiary of the deed of trust for the property under foreclosure can bid up to the full amount of the debt owed,
including the trustee’s fees and expenses.

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B
The scheme involving the Lam loans began in August
2006, when Yeung recruited straw buyer Dinh Lam to purchase Yeung’s home at 261 San Fernando Way, San Francisco, California. Lam’s loan application falsely listed 261
San Fernando Way as his primary residence and stated that
Lam was the actual borrower, instead of Yeung. The application also overstated Lam’s income and fraudulently stated that
Lam had a Hang Seng Bank account with $480,168 in assets.
In January 2007, J.P. Morgan Chase Bank, NA, loaned
Lam $1,732,500, secured by the residential property at 261
San Fernando Way. According to the government’s expert
witness, J.P. Morgan Chase Bank then sold the loan to J.P.
Morgan Alternative Loan Trust 2007-A1 (“J.P. Morgan
Trust”), where it was pooled with other loans, and interests in
the trust were sold to investors. Again, no evidence was submitted regarding the price the J.P. Morgan Trust paid for the
loans, and the government witness testified that she did not
know the details of the transaction, including the purchase
amount.
Lam defaulted on the J.P. Morgan Chase Bank loan in
April 2007. The government presented evidence that the
unpaid principal balance of the loan at the time of the default
was the full loan amount, $1,732,500. The 261 San Fernando
Way property was appraised in late 2007 and determined to
have a market value of $1,290,000 (per an August 2007
appraisal) and $1,855,500 (per a September 2007 appraisal).
On October 1, 2007, Chase Home Finance LLC took title to
the property at the foreclosure sale with a credit bid of
$1,710,771. According to the bidding instructions, Chase
Home Finance LLC foreclosed “in the name of HSBC Bank
USA, National Association, as Trustee of J.P. Morgan Alternative Loan Trust 2007-A1.” After taking title to the property,
Chase Home Finance LLC sold the property on February 27,

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2008, to a third party for $1.5 million. The net proceeds to
Chase Home Finance LLC were some $1,343,955.
Concurrently with J.P. Morgan Chase Bank making a $1.73
million loan to Lam secured by a first mortgage on 261 San
Fernando Way, Cal State 9 Credit Union (“Cal State 9”)
loaned Lam $467,500, secured by a second mortgage on the
same property. Cal State 9’s junior lien was extinguished by
the foreclosure in October 2007. Cal State 9 charged off the
full value of the loan and associated expenses on November
9, 2007. The state subsequently put Cal State 9 into a conservatorship, and National Credit Union Administration
(“NCUA”) took over Cal State 9’s operations.
C
Following Yeung’s conviction, the district court scheduled
an evidentiary hearing to determine the amount of loss for the
purposes of sentencing and restitution. In advance of the hearing, the probation office submitted a Presentence Investigation Report containing a chart of the victims’ losses, and the
government filed a sentencing memorandum that defined and
calculated loss pursuant to the U.S. Sentencing Guidelines.
Both the probation office and sentencing memorandum calculated the loss to the victims as the outstanding principal balance on the defaulted loans less any money recovered from a
sale of the properties used as collateral for the loans. The government stated that it did not include “any interest owed, or
any fees or costs associated with the foreclosures and short
sales” in the loss amount.
At the August 5, 2010 evidentiary hearing, the government
argued that it had proved a loss amount of $1,375,502, which
required a sixteen-level upward adjustment in Yeung’s
offense level under § 2B1.1(b)(1)(I) of the U.S. Sentencing
Guidelines (applying to losses that exceed $1 million but are
less than $2.5 million). While conceding that it had no direct
proof regarding how much the alleged victims (Long Beach

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Trust and J.P. Morgan Trust) paid to purchase the loans from
the original lenders, the government argued, consistent with
the Presentence Investigation Report and its own sentencing
memorandum, that the loss was equivalent to the outstanding
principal balance of the loan minus any proceeds recovered
from the eventual sale of the collateral.
Following the hearing, the district court determined that the
evidence was sufficient to allow it to estimate losses for purposes of the Sentencing Guidelines, even though—due to the
“structure of the financial industry” during the period in
which the fraudulent scheme was taking place—it was difficult to trace the money and it would be possible to get lost “in
the maze of the financial transactions that occurred after the
fraudulent loans were obtained and prior to the time that the
losses were realized by the various sales and foreclosure
sales.” The court adopted the government’s calculation of
loss, but ultimately made a downward departure from the sentencing range of 87 to 108 months established under the Sentencing Guidelines and sentenced Yeung to 24 months in
custody.
The court then calculated restitution. Using the same calculations developed to determine the amount of loss under
§ 2B1.1(b)(1)(I) of the Sentencing Guidelines, and with no
mention of the MVRA, the court ordered restitution for the
three fraudulent loans at issue here in the amount of
$1,321,564. Specifically, for the Ferrari loans, the court
ordered Yeung to pay $465,519 to Deutsche Bank, as trustee
for the Long Beach Trust, an amount equal to the difference
between the unpaid principal balance of the loans at the time
of default ($829,382) and the net proceeds from the sale of the
1351 Third Street property to a third-party purchaser
($363,863). With respect to the Lam loans, the district court
ordered Yeung to pay $388,544 to HSBC as trustee for the
J.P. Morgan Trust, an amount equal to the difference between
the unpaid principal of the J.P. Morgan Chase loan
($1,732,500) and the net proceeds from the sale of the 261

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San Fernando Way property to a third-party purchaser
($1,343,955), and to pay $467,500 to NCUA, an amount
equal to the full value of the Cal State 9 loan at the time of
charge-off.
On appeal, Yeung argues that the district court erred in all
three restitution orders. With respect to the Ferrari loans,
Yeung argues that the Long Beach Trust is not a victim under
MVRA and that the court erred in calculating both the amount
of the Long Beach Trust’s loss and the amount it received
from sale of the collateral. Yeung makes similar arguments
with respect to the Lam loan from J.P. Morgan Chase Bank.
Finally, with respect to the Lam loan from Cal State 9, Yeung
argues that there was insufficient evidence that Cal State 9
took a charge-off on the loan before going into conservatorship, or that the NCUA took over after Cal State 9 did so.
II
We review the legality of a restitution order, including the
district court’s valuation method, de novo. United States v.
Davoudi, 172 F.3d 1130, 1134 (9th Cir. 1999). “[I]f the order
is within the statutory bounds, we review the amount for
abuse of discretion.” United States v. Phillips, 367 F.3d 846,
854 (9th Cir. 2004). We review factual findings supporting an
order of restitution for clear error. United States v. Gordon,
393 F.3d 1044, 1051 (9th Cir. 2004).
[1] Under the MVRA, 18 U.S.C. § 3663A, a court must
order a defendant to make restitution to a victim of certain
specified offenses without considering the defendant’s economic circumstances.3 See §§ 3663A(a)(1), 3664(f)(1)(A).
3

The prior restitution statute, the Victim and Witness Protection Act of
1982 (“VWPA”), required courts to consider the economic circumstances
of the defendant prior to ordering restitution, and the granting of restitution was discretionary, not mandatory. See 18 U.S.C. § 3663. “With these
exceptions, the two statutes are identical in all important respects, and
courts interpreting the MVRA may look to and rely on cases interpreting
the VWPA as precedent.” See Gordon, 393 F.3d at 1048.

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The MVRA defines the word “victim” as “a person directly
and proximately harmed as a result of the commission of an
offense for which restitution may be ordered.” § 3663A(a)(2).
Although a defendant’s conduct need not be the sole cause of
the loss, “ ‘any subsequent action that contributes to the loss,
such as an intervening cause, must be directly related to the
defendant’s conduct. The causal chain may not extend so far,
in terms of the facts or the time span, as to become unreasonable.’ ” United States v. Peterson, 538 F.3d 1064, 1074 (9th
Cir. 2008) (quoting United States v. Gamma Tech Indus., Inc.,
265 F.3d 917, 928 (9th Cir. 2001)).
[2] The MVRA also provides guidance regarding the calculation of the restitution amount. 18 U.S.C. § 3663A(b).4 The
basic rule is that the victim is entitled to be made whole. See
Gordon, 393 F.3d at 1053 (“’[T]he primary and overarching
goal of [the MVRA] is to make victims of crime whole, to
fully compensate these victims for their losses and to restore
these victims to their original state of well-being.’ ” (emphasis
4

The relevant portion of the MVRA reads a follows:
(b) The order of restitution shall require that such defendant—
(1) in the case of an offense resulting in damage to or loss or
destruction of property of a victim of the offense—
(A) return the property to the owner of the property or someone designated by the owner; or
(B) if return of the property under subparagraph (A) is
impossible, impracticable, or inadequate, pay an amount
equal to—
(i) the greater of—
(I) the value of the property on the date of the damage,
loss, or destruction; or
(II) the value of the property on the date of sentencing,
less
(ii) the value (as of the date the property is returned) of
any part of the property that is returned[.]

§ 3663A(b)(1).

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in original) (quoting United States v. Simmonds, 235 F.3d
826, 831 (3d Cir. 2000)); see also Hughey v. United States,
495 U.S. 411, 416 (1990) (observing that the “meaning of
‘restitution’ is restoring someone to a position he occupied
before a particular event”). Accordingly, in the case of an
offense resulting in damage to or loss of a victim’s property,
the victim is entitled to return of the property,
§ 3663A(b)(1)(A), or if the return of the property is “impossible, impracticable, or inadequate,” the victim is entitled to the
value of the property less “the value (as of the date the property is returned) of any part of the property that is returned,”
§ 3663A(b)(1)(B). The government has the burden of proving
these values by a preponderance of the evidence. § 3664(e).
Using the framework set forth in § 3663A(b), we have
developed some guidelines for calculating the restitution
amount in a case involving a defendant’s fraudulent scheme
to obtain secured real estate loans from lenders. Generally,
district courts calculating a direct lender’s loss in this context
begin by determining the amount of the unpaid principal balance due on the fraudulent loan, less the value of the real
property collateral as of the date the direct lender took control
of the property. United States v. Hutchison, 22 F.3d 846, 856
(9th Cir. 1993), abrogated on other grounds by United States
v. Wells, 519 U.S. 482 (1997) (construing the VWPA); United
States v. Smith, 944 F.2d 618, 625-26 (9th Cir. 1991) (construing the VWPA). Because restitution should address a victim’s “actual losses,” see Smith, 944 F.2d at 626, we have
approved restitution awards that included other amounts in the
calculation of loss, such as prejudgment interest (using the
governmental loan rate), id., interest still due on the loan,
Davoudi, 172 F.3d at 1136, and expenses associated with
holding the real estate collateral that were incurred by the
lender before it took title to the property, Hutchison, 22 F.3d
at 856. To calculate the value of the real property collateral
“as of the date the property is returned,” § 3663A(b)(1)(B)(ii),
courts use the value of the collateral “as of the date the victim
took control of the property,” Davoudi, 172 F.3d at 1134. The

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lender does not take control of the collateral merely by triggering the foreclosure process. See United States v. Gossi, 608
F.3d 574, 578 (9th Cir. 2010). Rather, the lender generally
takes control on the date the lender either (1) receives the net
proceeds from the sale of the collateral to a third party at the
foreclosure sale, see United States v. James, 564 F.3d 1237,
1246 (10th Cir. 2009), or (2) takes title to the real estate collateral at the foreclosure sale, at which time “the new owner
had the power to dispose of the property and receive compensation,” see Smith, 944 F.2d at 625. The direct lender’s losses
may also be reduced by amounts recouped from resale of the
loan or from other types of “return” of property. See, e.g.,
Hutchison, 22 F.3d at 856.
[3] These guidelines require some adjustment when a victim purchased a loan in the secondary market, that is, where
the victim is the loan purchaser as opposed to the loan originator. In the language of § 3663A, the loan itself is the “property” that has lost value due to the fraudulent conduct of the
defendant. Because the value of that loan is not necessarily its
unpaid principal balance, but may vary with the value of the
collateral, the credit rating of the borrower, market conditions,
or other factors, the loan purchaser may have purchased the
loan for less than its unpaid principal balance. See United
States v. Winstar Corp., 518 U.S. 839, 851-52 (1996) (discussing factors causing loans to be worth less than their face
value); Huffington v. T.C. Grp., LLC, 637 F.3d 18, 20 (1st
Cir. 2011) (noting the value of mortgage-backed securities
depends “on the cash flow generated by the mortgages and the
prospects that the principal and interest will be paid”); Blueberry Land Co. v. Comm’r, 361 F.2d 93, 95 n.7 (5th Cir.
1966) (considering mortgage loans sold at a discount of 15%
of the principal unpaid balance). To calculate a victim’s restitution award using the outstanding principal balance of the
loan, if the victim only paid a fraction of that amount to
obtain the loan on the secondary market, would cause the victim to receive an amount exceeding its actual losses. See, e.g.,
United States v. Caputo, 517 F.3d 935, 943 (7th Cir. 2008)

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(explaining that restitution for a machine with a list price of
$100,000, but sold at a $20,000 discount, is $80,000, not the
listed $100,000; and restitution for a machine that was billed
at $100,000 but never actually paid for is zero). Awarding
such an amount would constitute plain error. See United
States v. Rizk, 660 F.3d 1125, 1137 (9th Cir. 2011) (“A district court may not order restitution such that victims will
receive an amount greater than their actual losses; to do so is
plain error.”); see also United States v. Boccagna, 450 F.3d
107, 117 (2d Cir. 2006) (“[The court] cannot award the victim
‘a windfall,’ i.e., more in restitution than he actually lost.”).
Therefore, a district court calculating the loss suffered by a
victim who purchased a fraudulent loan may begin by determining how much the victim paid for the fraudulent loan (or
the value of the loan when the victim acquired it), less the
value of the real property collateral as of the date the victim
took control of the collateral property. As in a case with an
original lender, the district court may consider other relevant
factors that may increase or decrease the amount of the loan
purchaser’s loss. See, e.g., Davoudi, 172 F.3d at 1136;
Hutchison, 22 F.3d at 856; Smith, 944 F.2d at 626.
[4] Although district courts possess a “ ‘degree of flexibility in accounting for a victim’s complete losses,’ ” remand is
appropriate where the restitution award lacks an adequate evidentiary basis and the district court failed to explain its reasoning. United States v. Waknine, 543 F.3d 546, 557 (9th Cir.
2008) (quoting Gordon, 393 F.3d at 1053); see also United
States v. Tsosie, 639 F.3d 1213, 1223 (9th Cir. 2011); Peterson, 538 F.3d at 1077-78 (affirming restitution order notwithstanding lack of factual findings by the district court where it
was clear the district court relied on expert’s declaration
reporting specific loss to victims on each property).
A
We begin by considering Yeung’s arguments with respect
to the two loans issued by Long Beach Mortgage Company to

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Ferrari. As noted above, the district court awarded Deutsche
Bank, as trustee for the Long Beach Trust, an amount equal
to the difference between the unpaid principal balance of the
loans at the time of Ferrari’s default and the net proceeds
from the sale of the collateral to a third party, approximately
sixteen months after Deutsche Bank obtained title to it in the
foreclosure.
[5] Yeung argues that the district court erred in awarding
restitution to the Long Beach Trust because it is not the “victim” for purposes of the MVRA. We disagree. Here, the evidence showed that the Long Beach Trust purchased the two
loans originally issued by Long Beach Mortgage Company
before Yeung’s fraud had come to light. Further, the evidence
showed that, due to Yeung’s conduct, the borrower for each
loan had misrepresented his financial ability to repay the loan.
Because the Long Beach Trust purchased the loan without an
awareness of its true value due to Yeung’s fraud, the district
court could reasonably conclude that Yeung’s fraudulent conduct proximately harmed the Long Beach Trust. See, e.g.,
James, 564 F.3d at 1243 (approving a restitutionary award to
loan purchaser). Therefore, the district court did not abuse its
discretion in deeming the Long Beach Trust to be a victim for
purposes of the MVRA and in making an award to Deutsche
Bank as the trustee for the Long Beach Trust.5
5

In her reply brief, Yeung argues for the first time that the district court
erred in concluding that the Long Beach Trust was a victim because any
losses it suffered were the result of the general collapse of the housing
market, rather than Yeung’s fraud. Arguments raised for the first time in
a reply brief are waived. United States v. King, 257 F.3d 1013, 1029 n.5
(9th Cir. 2001). In any event, this argument fails. Although an intervening
cause unrelated to the offense conduct may cut off the causal chain
between the defendant’s conduct and the victim’s loss, see United States
v. Brock-Davis, 504 F.3d 991, 1000-01 (9th Cir. 2007), here Yeung created the circumstances under which the harm or loss occurred through her
use of false information that induced the Long Beach Trust to purchase the
loan. Because the Long Beach Trust’s loss is directly related to Yeung’s
offense, the declining value of the real estate collateral, even if attributable
to general financial conditions, does not disrupt the causal chain, see
Peterson, 538 F.3d at 1077, and the victims of the fraud are entitled to restitution.

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Yeung next argues that the district court erred in calculating the amount of restitution owed with respect to these loans.
The district court did not explain its reasons for calculating
that Deutsche Bank was entitled to the difference between the
$829,382 unpaid principal balance of the loan and $363,863,
the net proceeds that Deutsche Bank (as trustee for the Long
Beach Trust) received from its sale of the collateral to a third
party in 2008, more than sixteen months after it acquired title.
The district court’s calculation raises two concerns.
[6] First, the district court did not make a finding that the
Long Beach Trust paid an amount equal to the unpaid principal balance of the loans when purchasing the loans, and the
government witness acknowledged that she did not have any
information on that point. In fact, there is no evidence in the
record establishing the value of the loans at the time they
were acquired by the Long Beach Trust. We disagree with the
government’s assertion that documents filed with the Securities and Exchange Commission show that the loans were purchased for the amount of unpaid principal. The government
concedes that these documents were never entered into evidence; accordingly, they cannot be used to support the government’s claims on appeal. See, e.g., Barcamerica Int’l USA
Trust v. Tyfield Imps., Inc., 289 F.3d 589, 593 n.4 (9th Cir.
2002). In the absence of any evidence as to value of the loans
at the time the victim acquired them, we cannot conclude that
the district court’s restitutionary award was free from error.
As explained above, if the Long Beach Trust purchased the
loans for less than the unpaid principal balance of the loan, it
is not entitled to receive a windfall by receiving an award of
the loans’ full amount. See Rizk, 660 F.3d at 1137.
[7] Second, Yeung argues that the district court erred in
determining that the value of the collateral was $363,863, the
net proceeds that Deutsche Bank (as trustee for the Long
Beach Trust) received from its sale of the collateral to a third
party in 2008, more than sixteen months after it acquired title.
We agree. The property returned must be valued “as of the

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date the victim took control of the property,” Davoudi, 172
F.3d at 1134, which generally occurs when the victim “received title to the property and the corresponding ability to
sell it for cash,” Smith, 944 F.2d at 625. In this case, Deutsche
Bank took control of the real property collateral at the foreclosure sale in 2006, when it acquired title to the real property
via a credit bid. Therefore, the court cannot rely on the subsequent sales price of the real property unless it provides reasons why that sales price reflects the value of the real property
on the date Deutsche Bank took control of the property. See
Waknine, 543 F.3d at 556-57. We reject Yeung’s further argument that Deutsche Bank’s credit bid of $707,388 dispositively determines the value of the collateral at the time of the
foreclosure sale. A lender’s credit bid may not reflect the
value of the collateral in all circumstances. See Green, 648
F.3d at 584 (holding that where the fraud involved obtaining
a loan worth “far more than the market value of the property,
. . . . [u]sing a credit bid based on the fraudulently inflated
loan amount would surely understate the actual loss”); cf.
Boccagna, 450 F.3d at 109 (holding that “the nominal sale
price of property with a higher fair market value cannot be
used to calculate offset value because such a calculation
impermissibly awards a victim restitution in excess of its
compensable loss”). Therefore, the court would have to provide some explanation as to why the value of the real property
collateral in a particular case was equal to the victim’s credit
bid at the foreclosure sale. The district court did not do so
here.
[8] Even where the district court fails to make pertinent
factual findings, we may uphold a restitution order when the
basis of the district court’s calculations is clear. Cf. Peterson,
538 F.3d at 1077-78. But the district court’s determinations of
loss for Sentencing Guidelines purposes here are insufficient
to support a restitutionary award under the MVRA. We have
previously held that a loss determination used for Sentencing
Guidelines purposes could not be used to determine the
amount of restitution, given the different methods of calcula-

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tion and different purposes of the calculation. See Gossi, 608
F.3d at 581-82; Gordon, 393 F.3d at 1052 n.6; United States
v. Catherine, 55 F.3d 1462, 1464-65 (9th Cir. 1995). Nor can
it be used in this case. As noted above, the government and
probation office calculated loss to the victims as the outstanding principal balance on the defaulted loans less any money
recovered from a sale of the real property collateral. This is
an appropriate approach for making an estimate of loss under
the Guidelines, where the district court need not consider a
victim’s actual loss but may use evidence of the defendant’s
intended loss, or even the gain realized by the defendant,
U.S.S.G. § 2B1.1 cmt. n.3(A), (B), but for the reasons
explained above, it does not provide a sufficient basis to
establish the actual loss suffered by the victims here.
[9] Because the district court did not provide reasoning to
explain its determination of loss for purposes of
§ 3663A(b)(1)(B), and because the district court did not determine the value of the collateral at the time Deutsche Bank
took title, we must remand for the district court to recalculate
and provide its reasoning for this award. See Waknine, 543
F.3d at 557.
B
[10] We apply similar reasoning to Yeung’s argument that
the district court erred in determining that the J.P. Morgan
Trust was a victim, and in calculating the amount of restitution. As noted above, the district court awarded $388,544 to
HSBC, as trustee for the J.P. Morgan Trust, an amount equal
to the difference between the unpaid principal balance of the
J.P. Morgan Chase loan at the time of Lam’s default and the
net proceeds from the sale of the collateral to a third party
approximately five months after the foreclosure. For the reasons explained above, we reject Yeung’s argument that the
J.P. Morgan Trust was not a victim for purposes of the
MVRA. See 18 U.S.C. § 3663A(a)(2). The evidence showed
that the J.P. Morgan Trust purchased the loan originally

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issued by J.P. Morgan Chase Bank before Yeung’s fraud had
come to light. Further, the evidence showed that, due to
Yeung’s conduct, Lam (the borrower for the loan) had misrepresented his financial ability to repay the loan. Therefore,
Yeung’s fraudulent conduct proximately harmed the J.P. Morgan Trust, and it was a “victim” for purposes of the MVRA.
[11] However, as with the Ferrari loans, the district court
did not explain its reasoning or point to any evidence establishing that the value of the loans held by the J.P. Morgan
Trust was equal to the unpaid principal balance of the loan.
Accordingly, we must remand to the district court to recalculate this value or explain its reasoning. See Waknine, 543 F.3d
at 557.6
[12] We also agree with Yeung that the value of the real
property collateral returned to the victim must be measured as
of the date that Chase Home Finance LLC (in the name of
HSBC, as trustee for the J.P. Morgan Trust) took title to the
collateral at the foreclosure sale. Therefore, the district court
erred in relying on the value of the collateral when it was sold
to a third party several months later. See Gossi, 608 F.3d at
578; Davoudi, 172 F.3d at 1134-35. The record does not
establish the value of the collateral at the time Chase Home
Finance LLC took title (and the amount of the credit bid is not
dispositive), so we must remand for a redetermination of this
issue as well.
6

We reject the government’s argument that the loan’s originator, J.P.
Morgan Chase Bank, transferred the loan to its own subdivision rather
than selling it to a separate entity, because it is contrary to the evidence
presented at sentencing, where the government’s expert testified that J.P.
Morgan Chase Bank sold the Lam loan to the J.P. Morgan Trust, and that
Chase Home Finance LLC handled the foreclosure proceedings on behalf
of the trustee, HSBC Bank, for the J.P. Morgan Trust.

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C
[13] Finally, we turn to the Cal State 9 loan to Lam. The
district court did not abuse its discretion in holding that
NCUA was a “victim” for purposes of the MVRA. The evidence presented at sentencing established that the initial
lender, Cal State 9, lost the full amount of the loan and that
its insurer, NCUA, took over the loss when Cal State 9 subsequently went into conservatorship. To the extent NCUA
acquired all of Cal State 9’s loss, NCUA would qualify as a
victim. See Smith, 944 F.2d at 622 (holding that the insurance
company, which had insured the loan institution’s accounts,
although not directly victimized by the defendant’s actions,
could receive restitution under the MVRA because it had “acquired the claims of a defunct savings and loan”); cf.
O’Melveny & Myers v. FDIC, 512 U.S. 79, 86 (1994) (“[T]he
FDIC as receiver ‘steps into the shoes’ of the failed S & L.”).
[14] Yeung also argues that the district court erred by relying on hearsay evidence that Cal State 9 wrote off the loan as
uncollectible before going into conservatorship. This argument fails. The Federal Rules of Evidence, including the rule
against hearsay, do not apply to sentencing hearings, see
United States v. Littlesun, 444 F.3d 1196, 1199 (9th Cir.
2006); see also 18 U.S.C. § 3661, and therefore the district
court did not err in relying on hearsay in ordering restitution
payable to NCUA. We hold that the district court properly
ordered Yeung to pay restitution to NCUA for $467,500
based on losses proximately resulting from her criminal conduct.
III
[15] District courts possess a great deal of flexibility in
applying the MVRA to unique factual circumstances and conducting the calculation required by § 3663A(b)(1)(B). See
Gordon, 393 F.3d at 1053-54. But where we cannot discern
from the record the district court’s reasoning regarding the

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key determinations required by the MVRA, we cannot uphold
the award. Waknine, 543 F.3d at 557. Here, there was no evidence regarding what the victims (the J.P. Morgan Trust and
Long Beach Trust) had paid for the loan, and the district court
did not explain its reasoning as to why the unpaid principal
balance of the loan could be used to establish the amount of
the victims’ losses. Nor was there any evidence regarding the
value of the collateral when the victims asserted control (i.e.,
the date the trustees for the trusts took title to the property),
and the district court did not explain its reasoning as to why
the sales price of the property months or years later established that value. Under these circumstances, we must vacate
the restitution order with respect to the Long Beach Trust and
the J.P. Morgan Trust awards and remand to the district court
for a new determination of loss.
AFFIRMED IN PART, VACATED AND REMANDED
IN PART.