SACRAMENTO, Calif. -- The alleged mortgage fraud exposed by KCRA 3 is having a direct effect on property values in Elk Grove.

All of the homes at the center of our investigation are now in foreclosure, and property values are plummeting.

Despite a cease-and-desist order issued by the state, it appears two of the targets of our investigation are now operating through a loophole in the law that's allowing them to continue processing loans.

The FBI and IRS raided their offices three weeks after our investigation aired.

Jim Martin and his business partners are accused of falsifying millions of dollars in loans.

Martin agreed to sit down and talk with KCRA and said he is aware that he is facing a multiple-count pending federal indictment, as well as an indictment on mortgage and bank fraud.

Martin and his business partners owned VFM Investment Group, a company that solicited investors like Pat Ramono.

Ramono and seven other investors bought more than 20 homes -- more than $9 million worth of real estate.

Martin said he wasn't trying to hurt the investors in any way, and he admits there was illegal activity.

He admits to falsifying loan applications by listing investors like Ramono as employees of VFM Investment Group. Martin and his partners also listed Tim McDaniel, a landscaper, as an employee of the company.

Martin claims those were stated loans, ones that the lender doesn't bother to verify as long as the borrower's credit is strong.

At the time, Martin and his partners were working under the license of Jospeh Gallo, who was the president of Freedom Capital Mortgage.

By lying on the loan applications and inflating the values of every house involved, Martin admits he and his partners made tens of thousands of dollars in just a matter of months.

According to the KCRA 3 investigation, that money was made off commissions alone.

Martin also admits he was receiving tens of thousands of dollars in kickbacks from every transaction involved.

Since our investigation aired, Martin's partner, Mario Fellini, has surrendered his license and the state has revoked Gallo's license.

Although the state issued a cease-and-desist order, Martin is still operating as a loan officer in Northern California.

KCRA 3 found Martin online solciting loans and working for Set To Go Inc.

Martin admits he never told that company he's under federal investigation.

Despite that cease-and-desist order issued by the state, Martin isn't breaking the law because he is operating through a loophole that allows him to work under another company's licence.

Martin's former business partner, Gabriel Viramontes, is also operating under that loophole and is working at Folsom Lake Mortgage.

Viramontes is also under a cease-and-desist order.

Jason Rhoads, the president of Folsom Lake Mortgage, admits he's aware of the federal investigation but claims he had no idea that the state had issued a cease-and-desist order against Viramontes as well.

Rhoads said Viramontes is being paid as a loan processor -- the same thing he was doing when KCRA caught him and his partner allegedly falsifying millions of dollars in loans while working for VFM.

In the meantime, all those homes -- more than $9 million in real estate -- are now in foreclosure and having a negative effect on property values in those neighborhoods as well.

KCRA spoke with Martin's current employer by phone, who confirmed his office had no idea about the federal investigation and the fact that Martin is under a cease-and-desist order.

He said his company has been contacted by the California Department of Real Estate and plans on terminating its relationship with Martin as well.