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Mortgage Industry Fraud
Insights from Patrick Crowley

Archives August 28, 2005


August 26, 2005

Chalana McFarland is going to jail for a long time -- longer, in fact, than anyone ever for committing mortgage fraud.

McFarland, 37, a disbarred attorney, has been sentenced to 30 years in federal prison. The Atlanta Journal-Constitution reported her's is the longest sentence in the nation's history for mortgage fraud. And it comes in a state that the FBI has said is the worst in America for mortgage fraud.

Assistant U.S. Attorney Barbara Nelan reportedly called McFarland the "queen of fraudsters" and the operator of a "fraud factory" that skimmed more than $20 million in inflated mortgage loans on more than 100 homes in and around Atlanta.

McFarland operated a mortgage fraud ring that used stolen identities and phony documents to qualify for loans, prosecutors alleged. She has denied all the charges and said she was duped by more experienced lawyers.

But the judge who sentenced McFarland said she showed a lack of remorse.

read story from the Atlanta Journal Constitution

Florida Gov. Jeb Bush has ordered state regulators to check out the mortgage deal granted to a city commissioner in Fort Lauderdale.

The South Florida Sun-Sentinel reports that Bush has asked the Florida Department of Law Enforcement to check out the home that Commissioner Carlton Moore bought for just $34,000.

Property records reportedly show that the land where the house is located was assessed at $39,720 and the land and the house together were assessed at $91,020.

Moore reportedly told the paper he welcomes the review but wishes Bush would investigate mortgage fraud in the Fort Lauderdale area.

"I wish they would be going after people who would truly be taking people's property," Moore told the paper.

Moore reportedly bought the house after it was seized by the city for building code violations. Repairs were ordered on the house but never made.

read story from the Sun Sentinel

A rash of foreclosures has prompted Cuyahoga County Commissioners in Cleveland to beef up its legal department to fight mortgage fraud.

The commissioners are hiring a lawyer to help cities, law-enforcement and community groups fight mortgage fraud and other illegal practices, the Cleveland Plain Dealer is reporting.

The commissioners also want to try to find ways to prevent foreclosures, and move foreclosure actions more quickly through the courts. They've given priority to foreclosures involving abandoned homes -- often ripe for mortgage fraud schemes -- and are using computers to track and compile foreclosure information.

Consumer education will also be used to help people deal with problems paying a mortgage. And more money will be spent on the courthouse staff that deals with foreclosures.

read story from the Plain Dealer

If credit history wasn't an issue what mortgage broker couldn't close a loan?

When Texas mortgage broker Dunyell LaSalle Wright came across a customer with bad credit, he simply didn't tell the lender. And now he's going to jail for his actions.

Wright, who founded MFG Financial in Dallas, has been convicted of mortgage fraud in a Texas federal court, prosecutors have announced. He will do 57 months in prison and must pay $270,000 in restitution.

According to a statement form the United States Attorney's office in Dallas Wright "often helped borrowers gain loan approval on residential loans by concealing the true credit worthiness of the borrower."

Prosecutors also said Wright used his own money to pay borrowers' closing costs, a violation of mortgage law.

"Wright did this to deceive the lender that the prospective borrower had adequate cash assets when he did not," prosecutors said.

read announcement from U.S. Attorney

August 24, 2005

Police in Wheat Ridge, Colo., believe a mortgage broker arrested for allegedly ripping of a couple in their 80s may have defrauded other victims.

Keith Alan Lawson of Erie Land Funding has been charged with felony counts of crimes against an at-risk adult, theft and forgery. Police say he cheated the couple -- the man is 81, the woman is 80 -- out of more than $90,000 while doing a refi for them.

In a statement police say the couple contacted Lawson looking for a lower interest rate for their $60,000 mortgage. He is then accused of forging their signatures on at least two mortgage loans, leaving the couple more than $200,000 in debt.

"This is an ongoing investigation. It is possible that more people may have been defrauded as a result of conducting business with Mr. Lawson," police said in the statement.

read story at TheDenverChannel.com

read announcement from city of Wheat Ridge

August 22, 2005

A Connecticut couple in a mortgage dispute is now facing charges of being high-profile drug dealers.

Alejandro Gonzalez, 38, and Germania Gonzalez, 24, are facing criminal charges after police raised their Waterbury, Conn., home and allegedly found 35 pounds of cocaine that has an estimated street value of $3 million.

The Waterbury Republican-American is reporting that the couple has been buying property. There is no indication that alleged drug money was used for the purchases.

But the Gonzalez's lawyer, William Conti, told the paper that the couple is suing the owner of two of the properties they purchased -- a three-family that sold for $175,000 and a two family that went for $185,000.

"The price was represented to (Alejandro Gonzalez) as accurate by the owner and the owner's real estate representative," Conti reportedly said. "It wasn't accurate and he overpaid for the properties. It was negligence or intentional."

read story from WTNH News Channel 8

read story from the Associated Press

read story from the Republican American

Here's another sobering example of how fraud can destroy lives.

Timmy and Gloria Campbell of Springfield, Ill., have lost their home because of a contract-for-deed scam, according to the State Journal in Springfield.

The Campbell's were buying their house in a contract-for-deed arrangement. They were making payments, with some of the money going toward purchasing the house.

Their first landlord sold the property and the new owner defaulted on the mortgage. The Campbells reportedly lost all of the money they paid on the house.

That new owner was Gary Knox, who has been arrested and is facing federal fraud charges.

I've previously written here that Knox and an accomplice are accused in a federal indictment of running a property flipping scheme from 1999 to 2005 that totaled $8 million in sales and more than 150 properties. Prosecutors say Knox made $3 million while the accomplice, businessman Dennis Wiese, who allegedly prepared false and inflated property appraisals, was paid $350 to $450 for each phony appraisal.

The Campbells are now renting but have fallen behind on their payments and are facing eviction. "We're in a situation now where we could be in a cardboard box," Timmy Campbell told the paper.

read story from the State Journal

The Asbury Park Press in New Jersey has written a story that graphically illustrates how corporate fraud can derail individual plans and disrupt lives.

WorldCom employee Alex Sikorski was on his way to retiring at age 55. He had $200,000 in his WorldCom 401(k) retirement account and another $200,000 in stock options.

Then WorldCom, now known as MCI, lost much of its value in an $11 billion fraud and the company went bankrupt in 2002. The stock options held by Sikorski and other employees became worthless while his retirement account dropped to $10,000.

"I was a little disgruntled, but considering the telecom sector the last couple of years I was just happy to have a job," Sikorski, who still works at MCI, reportedly told the paper.

But credit card debt and cash-flow problems left Sikorski struggling to make ends meet. He's trying to put his financial life back together. His 401(k) is up to $30,000 and he actually has another $10,000 in stock options from MCI.

read story from The Asbury Park Press

Here's another bust out of the mortgage fraud hot spot of Georgia.

David Glenn Helton, 57, of Cartersville, Ga., is head to four years behind bars after pleading guilty in Cobb County to 24 counts of mortgage fraud.

The Atlanta Journal Constitution has reported that Helton used an "elaborate scheme" that involved forgeries of legal documents. The ruse enabled him to pose as the owner of property he did not own, and then make money on selling the property.

Helton was convicted in Cobb County, an Atlanta suburb that has seen more than its share of mortgage fraud.

The FBI has said Georgia has the worst mortgage fraud problem in the nation.

read story from the Atlanta Journal Constitution

A Florida man is facing up to 30 years in prison after admitting to using phantom homes for collateral in a scheme to bilk $3.5 million from lenders and investors.

Builder Thomas E. Coghill Jr., 45, pleaded guilty to federal fraud charges in Virginia. According to a statement from U.S. Attorney John Brownlee Coghill was charged with obtaining financing with homes that did not exist. In other instances the homes belonged to someone else.

Victims included a Richmond, Va., bank, a Maryland mortgage company and a businessman from Charlottesville, Va.

Coghill was accused of using false documents to show that houses had been completed when in fact he had nothing but vacant lots, Brownlee said.

"Mr. Coghill kept his business going with lies and false documents, resulting in major losses to the people who loaned him money," Brownlee said in the statement.

read announcement from the Department of Justice

Officials in Detroit believe they have stumbled on a scheme that preys on people who back taxes on their home.

According to the Detroit Free Press, Wayne County has filed suit against Prime One Financial Inc. and the Senpaul Group along with three individuals -- Darryl Clement, Bryan Daniel and Henry Goldberg. All live and work in Detroit.

The county wants the companies and the people to discontinue running their operations, which reportedly involves them paying off the delinquent taxes of people they don't even know.

But, according to the paper, once the taxes are paid the owners are hit with a $300 fee along with a demand that the taxes be repaid. The amount of taxes owed range from a few hundred to a few thousand dollars.

In its lawsuit the county accuses the defendants of racketeering, extortion and fraud. More than 200 properties are allegedly involved and four houses have already been seized in foreclosures.

A lawyer representing the defendants told the paper his clients are not breaking the law and added the county is upset because it wants to seize the properties and make a profit by selling them off.

"Wayne County is essentially accusing them of being crooks," lawyer Richard Taubman reportedly said. "When this sorts out, Wayne County is going to do some backpedaling on some of the assertions that are being made."

read story from the Detroit Free Press

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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