April 23, 2005
The more I write about mortgage fraud the more I see how criminals use inflated appraisals to run their scams.
The latest is out of North Carolina, where James Mann, sales manager for a home building company in Mecklenburg County, has been popped by the feds and pleaded guilty to two counts of fraud.
Court documents show that between April of 2002 and June 2003 Mann agreed to make homes available for sale to promoters working with real estate investment groups.
But Mann knew inflated appraisals were being used by the promoters to get more money that the properties were worth. Mann even helped out, telling appraisers to use comparables on houses that had inflated values and had already sold as part of the fraud scheme.
Many of the lenders buying the houses eventually defaulted, causing lenders to lose $784,248 on the $2.7 million in loans made that relied on the phony appraisals.
read court documents faxed to FraudBlogger.com (efax viewer required)
Federal prosecutors in Denver have broken a mortgage fraud ring that preyed on illegal immigrants.
The Rocky Mountain News is reporting that a federal grand jury has indicted Arvin Weiss, 55, and Jesus Geuvara, 52, on charges of mail and wire fraud along with witness tampering.
They were doing business as Fairfax Homes and Reserve Capital Funds. First-time homebuyers in Hispanic neighborhoods were duped into buying homes they couldn't afford by applying for mortgages with phony credit histories, employment information and income statements.
Weiss was bribing mortgage company employees to speed up and approve loans, the feds have charged. He was also buying cheap homes, making minor improvements and the jacking up the price before selling them to "unsophisticated low-income buyers."
Guevara, who speaks Spanish, handled the paperwork and worked closely with the buyers.
About 20 properties changed hands as part of the scheme. The pair was also supplying money for down payments but not revealing that to lenders.
read story at Rocky Mountain News
April 22, 2005
The family that allegedly steals together goes down together.
Franz V. Hurtado, 61, and his son, Ludwig F. Hurtado, 28, are facing charges in California of trying to steal the home of a widow. And here's the kicker -- the son was acting as the administrator late husband's estate, according to prosecutors in Santa Clara, Calif.
The Hurtado's are charged with using a phony appraisal to convince the woman to hold an estate sale. Then, the son sold the house to the father.
The son is charged with misappropriating over $260,000 from the estate and illegally using the estate funds for his own personal use. So while after allegedly cheating the widow out of her home he used some of the dough to buy a $45,000 Hummer.
The dad is charged with submitting a bogus loan application to a mortgage lender.
Daddy faces four years in prison; junior is looking at 12 years behind bars.
Prosecutors believe there may be other victims of the fraud scheme.
read article at The Mercury News
read Santa Clara County District Attorney's announcement
The players in an alleged mortgage flipping scheme out of Baltimore used a title company to run the scam.
Lawyer Nicholas J. Pistolas, 64, a co-owner of All County Title in Bel Air, MD, has been sentenced in U.S. District Court to one-year and one-day in prison for "crimes committed in connection with a scheme to defraud mortgage lenders on property flipping in Baltimore," federal prosecutors said in a statement.
Pistolas and Barbara Richard, 59, owned All County Title. A third defendant, Reginald Anderson, 34, was an investor in the scheme who allegedly submitted fake documents to mortgage lenders.
And Steven Jernigan, 42, was also involved. He was previously sentenced to a year and a day in jail. Anderson has received probation.
Pistolas was also ordered to pay $62,250 restitution.
Prosecutors said settlements based on phony information were conducted at All County Title.
read WBAL-TV 11 News article
read Department of Justice announcement
Troy Lee Keith seemed like he had a good deal for people who were losing their homes through foreclosures.
For a fee that ranged from $1,000 to $4,000 the southwest Ohio man offered to take over their mortgages, allowing them to live in the homes while paying him rent. He promised that the homes would not go into foreclosure and that the homeowners could eventually repurchase their homes from him.
But according to Ohio Attorney General Jim Petro Keith allegedly kept the money and never followed through on his promised. A total of 29 people fell for the scam, Petro said.
"Many of the victims gave their last dollar in hopes of saving their homes, only to lose everything,” Petro said in a statement. "This man committed intolerable acts of deception."
A Butler County, Ohio, grand jury has indicted Keith on 46 charges, including 29 counts of felony theft, 16 counts of tampering with records and single counts of theft and corruption.
Keith is already in jail in neighboring Hamilton County on earlier charges of identity theft.
read Cincinnati Post article
read News 5 article
read Ohio Attorney General announcement
April 20, 2005
Kristy Lynne Hess probably thought she had the perfect scheme.
As an employee of Interfirst Wholesale Mortgage Lending in Michigan, a division of subprime lending giant ABN Amro, Hess had access to the company's computerized application tracking system.
That's not all the unusual since she worked as a correspondent service representative and it was her job to screen loan applications, according to article in the Ann Arbor News.
With a few well-placed key strokes Hess changed 11 mortgage loans, resulting in the borrowers receiving more money than they were approved to receive.
But then the loans defaulted, an anonymous phone call to the company in October of 2002 help federal investigators nail Hess.
The paper reported that Hess called the scheme "bankruptcy for profit" and said she was receiving kick backs from mortgage brokers to approve the loans.
So far no one else has been charged but federal prosecutors are still investigating.
Hess, 24, was sentenced to two years in prison and ordered to pay nearly $1 million in restitution to ABM Amro.
read Justice Department announcement
It's bad enough when criminal property flippers victimize mortgage lenders through their illicit and illegal schemes.
But a convicted flipper in Washington D.C. has cost a federal program designed to help low income buyers more than $1 million.
Real estate speculator Modou Camara will spend five years in prison masterminding a classic flipping scheme - using bogus information and unqualified phony buyers to purchase houses and then later that same day sell the properties for a big profit.
What make this case even worse is that Camara exploited a low income housing program operated by HUD and the FHA. Because Camara's buyers weren't qualified to borrow money in the first place, and only received loans because they submitted fraudulent applications, they defaulted on most of the loans. That cost the federal government more than $1 million.
A federal grand jury found Camara guilty of conspiracy, transportation of stolen property, five counts of wire fraud and two counts of money laundering.
By the way, all of the buyers were Camara's family and friends.
read Department of Justice announcement
April 19, 2005
Federal prosecutors have busted up a big mortgage fraud ring in Denver, with 28 people indicted and two going to prison so far.
Roderick Wesson, 42, is going to jail for 14 months and must pay restitution of $142,434 "for his role in implementing a scheme in which certain mortgage lenders, real estate agents and borrowers lied to the government in order to finance the purchase of homes," federal prosecutors in Colorado said.
Warren Williams will spend 18 months in the federal pen and must pay back the same amount as Wesson in restitution.
Four real estate agents have pleaded guilty to felony conspiracy charges and 19 borrowers have all admitted making false statements on federal loan documents.
Wesson and Williams were using phony information – including Social Security numbers and W2 forms – to get loans. They then received kickbacks of $500 to $1,000. The applications made it look like the borrowers were qualified, when in fact many weren't and eventually defaulted on their mortgage.
read Department of Justice announcement
The convictions continue to pile up out of Cincinnati in a $15 million property flipping scheme busted by the feds.
The Cincinnati Enquirer is reporting that Donald M. Powers, who ran a title company and was a major player in the scam, and real estate investor David Green have pleaded guilty to bank fraud, tax evasion and conspiracy charges in U.S. District Court in Cincinnati.
So far 16 people have pleaded guilty to charges in the case.
Federal court documents shows that Powers ran Premier Land Title, which caused nearly $4 million in losses after flipping a number of properties. He also failed to claim about $35,000 in income.
Green is responsible for losses of $2.2 million and to avoid taxes didn't claim nearly $83,000 in made in the scam, prosecutors said.
More convictions could come, as the feds say the investigation is continuing.
read story at the Cincinnati Enquirer
Federal prosecutors in New Jersey are honing in on mortgage brokers, appraisers and closing attorneys as part of a flipping scam involving more than 40 pieces of property in Essex and Union counties.
The two "ringleaders" in the scheme -- Gilbert Hart, 46, of West Orange, N.J. and Joyce Kirkland of Hillside, N.J. -- have each pleaded guilty and face up to 35 years in prison and fines of $1.25 million.
Flipping is actually a legal method where investors buy real estate and then sell the property quickly. But because the transactions move so swiftly flipping is ripe for fraud.
In this case the defendants admitted the recruited unqualified "straw" buyers to purchase the homes. They then use phony information to obtain loans for the buyers from Flagstar of Troy, Mich., and other lenders, according to prosecutors.
Closing attorney Brian Daly of Holmdel, N.J., has pleaded guilty to conspiracy charges in making false statements to lenders. And a federal grand jury in Newark has indicted closing attorney Chris Olewuenyi of Orange, N.J., on charges that he, too, submitted bogus loan applications. His trial is set to start June 21.
read announcement about Gilbert Hart from Department of Justice
An Atlanta-area mortgage broker will serve the next five years in prison after being convicted on a federal charge of conspiracy to mortgage fraud.
Mark G. Davis, 41, of Liburn, Ga., was also ordered by a federal judge in Atlanta to pay nearly $2.9 million in restitution to the 14 lenders victimized by the scheme, David E. Nahmias, U.S. Attorney for the Northern District of Georgia, said in a statement.
"This office...will continue to investigate and vigorously prosecute mortgage fraud, which has damaged Atlanta-area neighborhoods due to vacant housing stock as well as access to credit by citizens of this district who need to obtain mortgage financing for the purchase of a home," Nahmias said in the statement. "We will focus on fraudulent mortgage professionals such as Mark Davis, who as a licensed mortgage broker was responsible for ensuring the accuracy and integrity of the loan applications and loan documentation he submitted to the lending institutions."
Davis, 44, pleaded guilty in August of last year to conspiring with other co-defendants to submit false and fraudulent mortgage loan applications to several Atlanta-area lenders.
Also sentenced in the case were Lisa Lee, 44, of Atlanta, who will serve 18 months in prison; and Cornelius J. Solomon, 42, of Conyers, who was sentenced to 27 months.
Both were also ordered to pay restitution.
According to prosecutors Davis would submit false loan applications in the name of phony, or "straw", buyers.
"The loan documents submitted to the victim lenders were false in that they misrepresented the borrowers' financial standing and also inflated the fair market value of the subject properties," Nahmias said in the statement. "As a result, Davis and his co-conspirators were able to realize hundreds of thousands of dollars of criminal profits out of the spread between the falsely inflated value of the properties... and their actual fair market value."
link to U.S. Department of Justice announcement
In a typical real estate contract in the St. Louis area the commission is six to seven percent.
Robert Schulte, who sold real estate through Buyers Rep Realty and was affiliated with Green Valley Mortgage, was knocking down commissions of 15 to 25 percent.
Sound too good to be true? It was. And not only was it not true, it was also illegal.
Schulte will spend 19 months in prison and have to pay nearly $1.2 million in restitution after pleading guilty to one felony county of wire fraud in U.S. District Court for the Eastern District if Missouri in St. Louis.
"Schulte and other persons affiliated with Buyers Rep Realty and Green Valley Mortgage submitted loan applications to mortgage lending institutions which contained false information as to the monthly income and assets of the purchasers and that the source of the down payments," U.S. Attorney James G. Martin said in a statement.
According to Martin Schulte, 57, worked for Buyers Rep Realty and Green Valley Mortgage. Both companies were in St. Louis County.
Martin said Schulte and others bought houses for their fair market value but then quickly sold the properties at significantly higher prices "to persons who were unable to purchase these properties at these inflated prices."
Schulte acted as the buyer's real estate agent in most of the sales, collecting commissions as high as 25 percent, Martin said.
"The ultimate effect of these payments to Buyers Rep Realty was that the money which was used for the purchasers' down payment came from the mortgage lending institutions which provided financing ... and not from the purchasers' assets," he said.
Loan documents filed by Schulte and others from Buyers Rep and Green Valley Mortgage contained false information about buyers finances.
"They also submitted false lease agreements, settlement statements and alerted bank statements," Martin said.
Because the buyers could not afford the homes and make the payments mortgage lenders lost more than $1.1 million in the scheme, Martin said.
"The amounts that these mortgage lending institutions were substantially less than the amounts which they had lent to the purchasers," he said.
U.S. Attorney announcement about Robert Schulte
