by Dan Krell © 2008
You might think that since the real estate market has slumped, incidents of real estate related crimes (including mortgage fraud) would have decreased also. However, the Federal Bureau of Investigation (FBI.gov) reports that “mortgage fraud continues to be an escalating problem in the United States.” Real estate related scams are a common form of white collar crime that is constantly being investigated by the FBI and the office of the Maryland Attorney General (www.oag.state.md.us).
Maryland has been a hot spot for real estate related scams and mortgage fraud for years. In fact, the FBI included Maryland in the “top 10 mortgage fraud states” as reported by the 2007 mortgage fraud report, and rated within the top 5 states by the Mortgage Asset Research Institute’s Quarterly Fraud Report for the first quarter of 2008 (marisolutions.com). Among mortgage fraud types, Maryland ranked first in “tax return and/or financial statement misrepresentation.”
Additionally, Baltimore City seemed to be ground zero for mortgage fraud during the flipping scams of the 1990’s; but through coordinated efforts of many agencies, including HUD, FBI and the Maryland Attorney General, the incidences of real estate scams and mortgage fraud decreased significantly. However, law enforcement was not the only intervention; the Greater Baltimore Board of Realtors (GBBR) assisted in the reduction real estate related fraud activities due to a massive campaign to educate the public called, “Know Real Estate Fraud When You Hear It.”
Real estate related scams vary, but often include theft, fraud, and ponzi schemes. Earlier this year, the Washington Post (Wiggins, Ovetta. “Home Builders, Broker Charged With Theft” October 10, 2008; B02) reported on a local builder and mortgage broker who were charged in theft of $1 million for new homes that were never built in Prince Georges County. Along with mortgages, buyers allegedly lost large deposits for homes which were never built. Such complaints against home builders are common enough that the Maryland Attorney General office of Consumer Protection published a handbook called, “Buying a New Home; Consumer Rights and Remedies under Maryland Law.”
Another scheme to defraud consumers is illustrated by the demise of the Metropolitan Money Store. This local company promised to help home owners facing foreclosure along with credit repair and other mortgage related activities. In mortgage fraud schemes, defendants (presently being prosecuted) were accused of (among other things) stripping bulk equity of home owner’s proceeds, not making mortgage payments, and the use of straw buyers which resulted in charges to some of wire fraud, mail fraud and money laundering for their “foreclosure reversal scheme” (Baltimore.fbi.gov).
Ponzi schemes are more prevalent and local than you might think. Earlier this year, a Baltimore man was sentenced to 188 months in prison arising from a twenty-seven counts of wire and mail fraud. His scheme promised high returns to investors from short term purchase money loans to home buyers and refinance loans to home owners. New investments were alleged to pay previous investors.
As many home owners and home buyers become desperate for solutions, they become targets of schemers. The saying that “if it sounds too good to be true, it probably is” holds true. If you are approached by someone offering you a solution to your real estate problems, do your due diligence and don’t become a statistic!
This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of December 15, 2008. Copyright © 2008 Dan Krell.