Mortgage Fraud Archives - Page 3 of 4 - Real Estate News and Commentary

January 1, 2010June 27, 2019

Mortgage fraud: The makings of a crime novel

Mortgage fraud is a most despicable crime. Scammers attempts to get away these types of crimes not only eats away at home owners’ equity and/or depletes lenders’ funds (as well as their investors’ money), it forces the public to pay for extensive investigations, trials and prison expenses. Sometimes, however, some crimes appear to be intriguing, not because of the crime per se, but because you want to get inside the scammer’s mind to understand their motives as portrayed by their blatant behaviors and flamboyant lifestyles. From the case files (otherwise known as press releases) of Rod J. Rosenstein, United States Attorney for the District of Maryland, the Metropolitan Money Store Case would appear to make a great follow up to Oliver Stone’s “Wall Street.”

If not for the fact the events in the case actually occurred, you might think that you might be reading the latest crime novel about the mortgage meltdown. However, seeming to be one of the most intriguing cases prosecuted this year, the Metropolitan Money Store case defrauded home owners and mortgage lenders for over $37million by asserting to offer foreclosure assistance and credit repair to home owners. The story ends with the president and the CEO recent sentencing to prison time after an extensive investigation that netted ten defendants that included an attorney, real estate agent, mortgage broker, mortgage processor, among others.

According to the press release of the US Attorney’s Office, the president of the Money Store was “Personally responsible for over $16 Million in losses to mortgage Lenders…” Additionally, U.S. Attorney Rod J. Rosenstein was quoted to say, “Joy Jackson presided over a ‘money store’ that was in the business of ripping off homeowners and mortgage lenders by submitting fraudulent paperwork to support over $37 million of loans that were never intended to be repaid”…”Instead of helping financially distressed homeowners keep their homes as promised, she secretly used the home equity to buy luxuries for herself, including furs, jewelry and over $800,000 on her wedding.”

Something like a modern day “Tin Men,” home owners (who were behind in their mortgages or in foreclosure) were directed to sign title over to third parties who acted as straw buyers to strip the equity form the homes under the guise that the money taken would bring the home owners current on their mortgages and rebuild their credit. Additional financial and investment groups were also added to expand the the conspirator’s foreclosure “consulting and credit services.” The equity proceeds were used for goods and services for the president and CEO of the Metropolitan Money Store including art, cars, clothing, credit card bills, homes, fur coats, furniture, airline trips, gambling expenses, jewelry, limousine services, student tuition and a luxury wedding. The conspiracy described in the US Attorney’s press releases (for individual defendants) would make Mickey Spillane jealous of not conceiving such a plot.

The good news is that the conspirators in this case were brought to justice, like other mortgage fraud cases, with prison time. Unfortunately, the bad news is that consumers continue to be deceived and defrauded by con artists, even though government warnings and public service announcements alert the public to be cautious of foreclosure rescue scams.

Original published at https://dankrell.com/blog

By Dan Krell

July 24, 2009December 13, 2022

Feds to crack down on foreclosure relief scams

The 2008 Mortgage Fraud Report “Year in Review” published by the Federal Bureau of Investigation reports that mortgage fraud continues to increase (FBI.gov). Maryland, DC and Virginia are in the top ten states hardest hit by mortgage fraud. Due to a declining real estate market, the FBI states that incidents of mortgage relief scams will continue to rise through this year and is expected to increase in the future. Property flipping, short sales, and foreclosure rescues continue to be the main schemes perpetuated; however, new forms of the scams are appearing as reverse mortgage fraud, credit enhancements, condo conversions, pump and pay and loan modifications.

In an effort to cut down on mortgage relief scams, the Federal Trade Commission (FTC.gov) is launching an initiative to educate consumers and prosecute those allegedly involved in defrauding home owners. In a press release dated July 15th the FTC announced the launch of “Real People, Real Stories,” as well as four law suits involving foreclosure relief deception (there have been a total of fourteen such cases since April!).

“Real People, Real Stories” is a video that will educate home owners on foreclosure relief scams and deceptive practices. Actual home owners who were deceived by scammers were interviewed for the video; they divulge and expose how the scammers approached them and operated. The video advises home owners to investigate anyone offering a foreclosure relief program. Home owners are also warned that many foreclosure relief programs have the words “federal,” “U.S.” or “government” in the name, but in reality may not be associated with a government entity.

The video is also a promotion for the Hope Now alliance (HopeNow.com). Hope Now is a partnership of lenders, non-profit organizations, and other mortgage industry participants who are dedicated to offering a coordinated plan to assist home owners.

Operation Loan Lies is a nationally coordinated law enforcement effort to put an end to mortgage relief scams. Actions taken by 25 federal and state agencies are directed toward those who “deceptively marketed foreclosure rescue and mortgage modification services.” FTC Chairman Jon Leibowitz was quoted in the press release as saying; “These con artists see the high foreclosure rates as an opportunity to prey on people in distress…”

Alleged actions by targeted foreclosure relief companies across the country include (but is not limited to) false claims of services, experience and success rates, violating (state) laws prohibiting collecting fees prior to providing services (some up to $5,500), “Do-Not-Call” violations, and misrepresentation.

If you or someone you know is facing financial challenges or foreclosure, Hope Now can connect you to HUD certified counseling agencies. Hope Now resources include instructions on contacting lenders as well as a lender contact list, local counseling agencies, and government agencies. Hope Now also offers a hotline so homeowners can call toll free, 1-888-995-HOPE.

Don’t become another statistic, investigate anyone that offers you foreclosure relief by calling Hope Now as well as local consumer protection agencies (such as the Maryland Attorney General Office Consumer Protection Division, and the Montgomery County Office of Consumer Protection). If you suspect a foreclosure relief scam, the FTC would like your help by reporting such activity by calling 1-877-FTC-HELP; complaints are collected and given to federal and local law enforcement agencies.

By Dan Krell
Copyright © 2009

This column is not intended to provide nor should it be relied upon for legal and financial advice.

July 21, 2009October 5, 2019

Is it a scam, fraud, or legitimate transaction?

Simultaneous Closings

Some say it’s illegal, some say it’s fraud, some say it’s a scam, and yet others say it’s legal if disclosed. This is the mixed response that a real estate investor gets when trying to conduct a simultaneous closing. The fact is that that a simultaneous real estate closing is a legally complex transaction and has many pitfalls as well as consumer protection issues.

This does not stop the real estate investor who is looking to make a quick buck with little or no money down. A simultaneous closing (also known as a double closing) occurs when a single home is sold twice in the same day. The real estate investor (sometimes referred to as the “middleman”) settles his purchase from the owner, and almost immediately settles on the sale of the home to the home buyer.

Because of the obvious questions raised by such a transaction, investors sometimes use a technique called an “assignment” to get around some of the problems they encounter with a simultaneous closing. Rather than closing both the purchase and sale the same day, the investor assigns their sales contract to the home buyer for a fee.

Home buyers and Realtors may come across such sales as real estate investors advertise to attract home buyers to complete these transactions. Real estate investors may list the home in the MLS or place and ad as a FSBO- appearing to be the owner of the home (although they do not actually own the home). When entering into a contract with a home buyer, they may or may not disclose the nature of the sale.

Many times, home buyers take for granted that the home is being sold by the actual owner. As mortgage fraud and real estate scams increase, home buyers are encountering more irregularities. However, it may become evident to you and your Realtor that an investor is attempting a simultaneous closing or an assignment when: 1) the name on the public record does not match with the name of the person who is selling the home; and 2) the home is difficult to show- there are confrontations with the occupant (often the actual owner).

Buying a home through such a transaction poses some problems for the home buyer, including securing financing. A mortgage lender will not lend money to purchase a home from someone who does not actually own the home, an obvious stumbling block for the real estate investor. Although most title agents stay away from simultaneous closings, savvy investors will pressure the home buyer to use their title agent; the investor’s title agent may issue a title binder for the transaction making it appear that the investor owns the home to meet the buyer’s lender’s requirements.

Putting aside the obvious questions of meeting your lenders underwriting guidelines and possible fraud, it’s prudent to exercise your right as a home buyer to choose your own title agent for your purchase; a title agent uses due diligence to ensure there are no irregularities with the deed and title to the home to issue a title binder and title insurance.

The simultaneous closing or assignment transaction is legally complex for the home owner, real estate investor and the home buyer. If you find yourself in a simultaneous closing or assignment transaction, consult an attorney for legal advice.

Original published at https://dankrell.com

By Dan Krell

May 27, 2009October 5, 2019

Protecting the public from inflated appraisals and mortgage fraud

by Dan Krell (c) 2009.
www.DanKrell.com

In the fallout of the real estate market bust, past practices to pressure appraisers to inflate home valuations have been the focus of recent criminal and civil investigations. As a result, two important recent developments will affect the mortgage industry, and more directly the appraisal industry: the adoption of the new appraisal standards of practice and an Arizona Court of Appeals ruling.

On May 1st, new appraisal standards of practice went into effect for mortgages that are bought by Fannie Mae and Freddie Mac. These new standards were the result of the 2007 industry wide investigation conducted by the NY State Attorney General (AG), Andrew Cuomo, and the subsequent agreement between Fannie Mae and Freddie Mac. The investigation revealed some of the short comings of the mortgage industry, including appraisal manipulation and fraud. The AG’s statement dated March 3, 2008 (www.oag.state.ny.us) named Washington Mutual specifically for pressuring First American and eAppraiseIT to use appraisers who provided inflated appraisals.

The purpose of the new standards of practice, also known as the Home Valuation Code of Conduct, is primarily to establish independence and accountability in the appraisal industry. To minimize any attempt to influence the appraisal process, the new code prohibits communication between the lender and the appraiser.

An important development of the AG’s agreement with Fannie Mae and Freddie Mac is the formation of the Independent Valuation Protection Institute (independent-valuation-protection-institute.org). The purpose of the Institute is to maintain the integrity of the Home Valuation Code of Conduct and to monitor state and federal law. The Institute also will intercede on complaints brought by regulators and law enforcement agencies as well as consumers who feel that the appraisal process has been compromised. Additionally, the institute provides an outlet for appraisers to report attempts to pressure or manipulate appraisals by outside sources.

The other important development is the recent ruling by an Arizona Court of Appeals on April 30, 2009 that an appraiser has a duty to the home buyer or borrower (even if hired by the lender) (mortgagefraud.org). The ruling came after a home buyer sued the appraiser for overvaluing her home when it was purchased. The appraiser was accused of using incorrect living area, and other discrepant data. The original ruling by the trial court was that the appraiser did not have any duty to the home buyer because the appraiser was hired by the lender. However, the Court of Appeals disagreed ruling that “that an appraiser retained by a lender to appraise a home in connection with the granting of a purchase-money mortgage may be liable to the prospective buyer for failure to exercise reasonable care in performing the appraisal.”

Combined with the AG’s investigation, this recent ruling may open the door for home buyers to pursue appraisers who may have participated in mortgage fraud by artificially inflating home prices. The implication is that those who participated in mortgage fraud are accountable not only to government agencies, but also to the home buyers and borrowers who were affected by their actions.

Appraisers are under a lot of pressure to produce and deliver an accurate and quality product. To safeguard against future appraisal manipulation, the implementation of the Home Valuation Code of Conduct and the creation of the Independent Valuation Protection Institute will be helpful.

This column 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 May 11, 2009. Copyright (c) 2009 Dan Krell.

December 30, 2008October 5, 2019

Don’t become a victim of a real estate crime

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.