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Mortgage Industry Fraud Insights from Patrick Crowley

Archives May 29, 2005

 


 

May 27, 2005


Consumers in Wisconsin are being warned about a company that has been accused of running a "mortgage elimination scheme."

In a consumer alert the Wisconsin Better Business Bureau is "warning businesses and consumers of a mortgage elimination scheme victimizing area lenders while leaving homeowners facing dire consequences."

The Milwaukee Journal Sentinel is reporting that the Dorean Group has showed up in Wisconsin. The FBI is reportedly being investigated by the FBI and has run into problems with regulators, law enforcement and consumer advocates in Ohio, Florida, North Carolina, South Carolina, Colorado and California, where the company is apparently based.

An alert has also been issued by the national Better Business Bureau.

The Wisconsin BBB said Dorean is run by D. Scott Heineman and Kurt F. Johnson. They tell homeowners that for $3,000 they can eliminate the mortgage on their home. What the pair actually does is get control of the property by filing a quit claim, which turns the home over to a trust controlled by Heineman and Johnson.

Dorean then refinances the mortgage, gets the money and leaves the homeowner saddled with two mortgages. That's because despite their claims, they aren't eliminating the mortgages.

Some owners who have fallen for the scheme have ended up in foreclosure.

read story at The Aspen Times

read BBB of Milwaukee Consumer Alerts

read MortgageDaily.com's coverage of the Dorean Group
(subscription required)


A mortgage broker tied to the federal government's fraud investigation of a South Florida elected official has pleaded guilty for her alleged role in the scheme.

Mary Jo Bellavia-Sabag is the third person to plead guilty as part of the $3 million fraud that involved the defendants using phony documents and aliases to deed properties to themselves and others. She could go away for 20 years to a federal prison.

Seven people have been indicted including mortgage broker Samantha Johnson and her husband, Scott Warren Johnson. They are the brother and sister-in-law of Lori Milano, the top code enforcement officer for the city of Fort Lauderdale.

Milano has been suspended from her job and has been informed she is a target of the investigation, but she has not been charged.

The Johnson's have already turned over $500,000 in money they made on the scheme to the feds and are cooperating with the investigation.

In a statement prosecutors said that much of the money allegedly made on the scheme was never reported to the IRS, meaning the defendants are also charges for not paying taxes.

read story from the South Florida Sun-Sentinel

read announcement from Department of Justice

read story by Patrick at MortgageDaily.com
(suscription required)


A mortgage company owner who also operated a nursing home is facing allegations of fraud from the U.S. Department of Justice.

Antonio L. Giordano, a Providence, R.I., developer and the co-owner of Suburban Mortgage Associates in Bethesda, M.D., opened a Providence nursing home called Hillside Health Center in 1999. The Providence Journal is reporting that Giordano opened Hillside with a $12.9 million government-backed loan.

The government contends that he let the health center deteriorate while funneling nearly $1 million a year to other companies he and his family operate.

In documents filed in U.S. District court in Washington D.C. the feds called Hillside a "fraud from the start," the paper is reporting.

Suburban, a subprime lender, is suing the government in federal court claiming it backed out of commitments to cover the Hillside loan in the event it went into default.

HUD has previously rejected Suburban's claims for relief under a nursing home loan program operated by the federal government. The loans are "non-recourse," meaning that the agency repays the loan if the home fails.

But HUD refused to pay "on the grounds of fraud or material representation" by Suburban.

HUD's actions prompted Suburban's suit.

read story from Eyewitness News 12 WPRI

read story from the Providence Journal


May 26, 2005


St. Louis home builder Jeffrey Thomas is reportedly going to prison for putting customers' money in his pocket instead of building them homes.

Several media outlets, including the Associated Press and St. Louis Business Journal, are reporting that Thomas has been convicted of money laundering along with bank, wire and mail fraud. He faces more than 100 years in prison and fines of more than $1 million.

Federal prosecutor James G. Martin reportedly told the press that Thomas, 37, took $500,000 from buyers but did not build their houses. He used the dough to pay his mortgage, which was in default, buy luxury vehicles and put cash in his pocket.

Thomas also took money from mortgage lenders and put it to his own personal use.

In one instance Thomas took payments on the same lot from three buyers.

Thomas has even more troubles. He is bankrupt and was also convicted for trying to defraud a California bank out of money, Martin said.

read story from the St. Louis Business Journal

read AP story at kctv.com

read AP story at KansasCity.com

read story from Chesterfield Journal

read AP story at the Southeast Missourian


May 25, 2005


It's called equity skimming, and a Rochester, N.Y., mortgage broker is going to jail for doing it.

Edwin "Andy" Kane, 68, has pleaded guilty to the federal charges and will spend two years in prison, federal prosecutors said.

Kane had admitted to using to buying at least 20 homes by fraudulently assuming mortgages guaranteed by FHA and HUD.

Kane then rented out the homes and collected rent for himself and the companies he operated - Hacienda Holding Corp., Allstate Rental Corp. and Kane Realty.

A few months after buying the homes Kane then transferred them to people "he knew would not or could not pay the mortgages without the benefit of the rental income from the homes," prosecutors said in a statement.

Kane would then continue to collect rent, keeping the dough for himself and his businesses.

The mortgages then fell into default. Kane's scheme cost the federal government -- which means it cost the taxpayers -- more than $700,000.

At the sentencing U.S. District Judge Charles Siragusa said some jail time was important "to send a strong message that, guess what, white-collar crime is crime," according to a story in the Rochester Democrat and Chronicle.

read story from the Rochester Democrat and Chronicle

read Department of Justice announcement
(free PDF viewer required)


The high-profile federal trial of one of the players in a nationwide $14 million mortgage fraud ring has ended in a mistrial.

U.S. District Judge Henry Lee Adams Jr. ended the trial of Russell Lee Parker after the jury deadlocked, according to reports in the Florida Times -Union.

Adams was quoted as saying another trial would be held but he did not set a date.

Parker, a mortgage broker, a closing attorney and another mortgage broker were all arrested in December 2003 as part of REO Flipwagon, an undercover FBI investigation into mortgage fraud.

The three were charged with bank fraud for allegedly issuing more than $14 million in phony mortgages over a three-year period.

Closing attorney Dale Beardsley has signed a plea agreement with federal prosecutors and testified during the trial that buyers, sellers and mortgage companies were given false information about the mortgage loans.

But the defense claimed that the buyers and sellers agreed to purchase prices and that lenders understood what they were doing.

The jury deliberated for three days before Judge Adams reportedly said that "this jury is not going to reach a judgment on anything."

Parker and the others are accused of pulling off about 250 phony deals.

read story at The Florida Times-Union

read 2nd story at The Florida Times-Union

read announcement from FBI


So far the only people getting paid in the southeast Florida Brasota mortgage scandal are the lawyers and court-appointed receivers.

The Bradenton Herald has detailed where money has been spent since the bankrupt firm was placed in receivership in a U.S. bankruptcy court in Florida.

More than 1,700 investors claim they are owed $138 million. Brasota has about $100 million in assets but investors have been told it will take more than a year to get back any of their money.

Brasota was a high-risk mortgage lender that lawyers have described as a Ponzi scheme. It is unclear how much if any money investors will get back because at this point they are considered unsecured creditors.

But at least some people are getting money from the company.

A report issued by the bankruptcy court shows that about $800,000 has been paid out.

Avidity Partners, the receivership firm, has been paid $389,000.

Receiver John Ray has racked up $286,000 in legal fees that was paid to attorneys who have been representing him.

And Broad and Cassel, a Tampa law firm, has been paid $124,000 for work it has done on the receivership.

"With the legal fees we'll be lucky if we get anything a year from now," investor Richard Wilson told The Herald.

read story at the The Bradenton Herald

read about defense lawyer payments at The Bradenton Herald

read STATEMENT OF FINANCIAL AFFAIRS bankruptcy document
(free PDF viewer required)

read list of creditors bankruptcy document
(free PDF viewer required)

read Patrick's story at MortgageDaily.com


May 24, 2005


So much for freedom for Brent Michael Barber, a Kansas City real estate investor who faces more than 130 counts of money laundering and real estate and mortgage fraud.

A federal judge has allowed Barber to remain free on bond until his June trial date as long as he disclosed any business transactions to a court-appointed monitor, the Kansas City Star is reporting.

But after hearing that Barber allegedly persuaded a home owner to sign over about $20,000 from the sale of a house the judge ordered him back to jail.

Barber has some tax problems as well. An IRS agent has testified that Barber has not filed an income tax return since 1996. The agency has opened a criminal investigation, according to the paper.

The FBI said Barber, who did business as Midtowne Restoration, was arrested along with three other people in August of last year. They were allegedly using straw buyers to purchase houses that quickly fell into foreclosure.

The ring pulled off more than 300 bogus sales totaling $15 million, the feds said.

read FBI announcement

read story from The Kansas City Star


The number of people busted in that a big Cincinnati-area mortgage ring has now grown to 21.

Federal prosecutors say five more people will plead guilty to the large flipping ring, according to The Cincinnati Enquirer.

Most of those charged and convicted were artificially pumping up the appraised values of homes and then making money on the spread between the fake value and the actual value.

More than $10 million was involved in the fraud scheme, prosecutors say.

The charges are all over the board -- filing false tax returns, bank fraud, money laundering, conspiracy -- and prison terms may reach as long as 55 years.

Steven J. Minger owned Preferred Funding LLC and DS Property Holdings LLC. The feds say he was the ring leader who organized the scheme and recruited buyers, loan officers, title agents and appraisers, the paper reported.

Mortgage brokers were also involved. As many as 10 lenders were victimized.

read story from The Enquirer


It's been awhile since we've seen a politician involved in a mortgage fraud.

Zachary V. Turner, a councilman in East Orange, N.J., has pleaded to guilty to conspiracy, extortion and mail fraud after confessing that he took $22,000 in bribes while serving on council. He was also popped on charges of filing a fake mortgage application.

Federal prosecutors say Taylor, who as of Monday was still on council, blackmailed a property owner by demanding he pay $20,000 or Taylor would see to it that the city took over his property.

In another incident Taylor admitted to giving an investor information about properties owned or controlled by the city. According to prosecutors Taylor referred to the payment as an "application fee".

But East Orange has no application fees for such information.

Turner's co-defendant, Barry Turner, has also been charged but not yet sentenced. The two are not related.

But Turner has also admitted to filing a phony mortgage application for $104,000. Turner pretended to be his brother and overstated his brother's financial and employment history, prosecutors said.

Turner must fork over $84,000 in restitution as part of his plea agreement. He faces up to 20 years in prison when sentenced Sept. 7.

read announcement from Department of Justice

read story from Newsday


Six people have been convicted in what investigators are calling the largest mortgage fraud case in the history of Georgia's Bibb County.

The $1.23 million case is "the largest to date" assistant district attorney Sharell Lewis reportedly told The Macon Telegraph.

Sentences could range from 20 years to probation. Four more people are yet to be sentenced in the scheme that prosecutors said involved over-inflating property values. The defendants then skimmed off and then pocketed the difference between the loans they received and the properties actual value.

Among those convicted were the owners of two mortgage companies, loan originators, lawyers, real estate investors and business owners.

Loan companies lost money and several people lost their homes because of the fraud, the paper reported.

Solomon Williams, 56, who sold real estate, was described as the "kingpin" of the ring. He made about $215,000 on the scheme and has been sentenced to five years behind bars.

Also involved was Marcus Malcolm, the owner of a property company.

Those involved "were some of the most talented that I've seen come through the mortgage business, who were some of the community's leaders," Houston County Superior Court Judge L.A. "Buster" McConnell said at the sentencing.

"What a waste of talent."

read story from The Macon Telegraph

read 2nd story from The Macon Telegraph


May 22, 2005


In 2000 the U.S. Attorney's office in Baltimore started a crackdown on illegal mortgage flipping. Well, the 99th person has just been convicted as part of the effort.

Closing agent Kim M. Blackwell, 46, pleaded guilty to federal charges of conspiring to defraud mortgage lenders and the U.S. Department of Housing and Urban Development, or HUD.

Prosecutors allege that between November 1996 and April of 2000 Blackwell, while working for various title companies, was not collecting the funds she was supposed to during real estate transactions. She was working with the co-defendant in the case, a real estate investor and speculator named Mazie Jennings, who was allegedly selling newly purchased houses at inflated prices -- the illegal process known as flipping.

Most of the government guaranteed loans went into default, costing taxpayers nearly $250,000. Blackwell was accused of pushing 20 phony real estate settlements through the system.

She could serve up to five years in prison and have to pay a $250,000 fine.

read announcement from Department of Justice
(pdf viewer required)


Two more women have been convicted in what federal prosecutors in Arkansas have called a "multimillion-dollar real estate and mortgage scheme".

Tina Leigh Brown, 33, of Sheridan, Ark., and Shanna Moore Allen, 33, of Maumelle, Ark., face up to 35 years in prison and $1.25 million in fines, according to a report on Arkansas Business.com.

The women worked under the business name Guaranty Lending in Bryant, Ark. Each were convicted of conspiracy and wire fraud charges for what prosecutors described as a scheme to sell low-cost housing at inflated prices.

U.S. Attorney Bud Cummins reportedly told the paper that the conspiracy "involved submitting false documentation to mortgage lenders and banks to induce over financing of questionable mortgages."

The scheme involved more than 30 properties in central Arkansas. Previously convicted were Kenneth Dwayne Kelly, Paul Robertson and Kesha Miller McIntosh. Robertson has already been sentenced to 57 months in prison. The others are awaiting sentencing.

read story at Arkansas Business Publishing Group

 
Patrick Crowley is fraud journalist for MortgageDaily.com and a reporter and columnist for The Cincinnati Enquirer.

Email Patrick at: PatCrowley@FraudBlogger.com
 
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