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Insights from Patrick Crowley

Archives August 28, 2005

 


 
September 2, 2005


A Utah state lawmaker is calling for a crackdown of the state's growing mortgage fraud problem.

State Rep. Paul Ray will reportedly introduce a bill that calls for the state to hire a special prosecutor to take on mortgage fraud cases. The bill would be considered in the 2006 session of the Utah legislature.

Federal authorities have recently labeled Utah as having one of the worst mortgage fraud problems in the nation.

Ray told the Ogden Standard-Examiner that the state's hot real estate mortgage has created an environment ripe for fraud.

"It spurs a lot of this because Utah is a hot market," he reportedly told the paper. "It brings in people who want to make a quick buck."

Ray works as commercial loan officer for a Utah bank.

In 2004 Utah and 255 complaints of mortgage fraud that resulted in losses of $11.1 million for federally insured lenders. As of June, there were already 136 cases booked with losses of $5.8 million.

read story at the Standard-Examiner


August 31, 2005


Patrick Hulton won't be practicing law for a while.

The Connecticut real estate lawyer has been suspended for 18 months for reportedly misusing $325,000 of mortgage investors' money.

Hulton worked out an agreement with a superior court judge on the suspension and will have to reapply for his license, the Hartford Courant is reporting.

Hulton has been a lawyer for 20 years. For the past three years he handled real estate investor sales partnerships with Northeastern Properties Management of West Haven, Conn. Clients had claimed he was not investing their money in mortgages. When they wanted answers, he reportedly had little to say.

Hulton was ordered to pay clients' losses, pass a responsibility exam administered by the court and take out an annual $1 million legal malpractice insurance policy for at least three years.

read story from the Hartford Courant


Here's another case where the perps were busted for inflating the value of properties and then skimming money from the mortgage loans.

KWQC in Illinois has reported that Randolph McAfee and Darrin Shipley have pleaded guilty to federal fraud charges in a scheme that involved about 100 homes. Each will serve nearly two years in prison and pay combined $1.1 million in restitution.

The pair, prosecutors alleged, used fake documents to pump up the appraisals on properties. That allowed them to get mortgage loans for more than the properties were worth. They also aided borrowers in filing out false loan applications and lied that down payments had been made when no money was actually paid.

"These two defendants manipulated the financing system for the sale of homes," assistant U.S. attorney Joseph Hartzler, who prosecuted the case, reportedly told the State Journal-Register. "They benefited richly."

read story by the Associated Press

read story from The State Journal-Register


An appraiser has reached a settlement in a mortgage fraud case pursued by the Pennsylvania attorney general.

Reid A. Baker admitted no wrongdoing but permanently surrendered his appraisal license -- he'll be allowed to still sell real estate -- and paid $70,000 in damages and restitution, The Derrick & News Herald of western Pennsylvania is reporting.

State regulators claimed Baker and one of his employees inflated values of 91 homes on mortgage loans, resulting in mortgages that were too steep for many of the owners to pay.

The fraud scheme required an appraiser's participation, investigators told the paper.

Others involved in the alleged fraud have also settled their cases with state regulators.

read story from The Derrick & NewsHerald


August 29, 2005


North Carolina is joining the throng of states -- Georgia, Colorado, Kentucky and others -- tying to crack down on identity theft and mortgage fraud.

Attorney General Roy Cooper said his measure has been approved by the North Carolina House and is on its way to implementation.

Cooper, in a statement, said the law will make sure that businesses are disposing of customers' personal information "so that identity thieves can't retrieve information from discarded files."

The law will also require businesses to notify their customers if a security breach may have compromised their personal information "and placed them at risk of identity theft." And state and local governments would be prohibited from "unnecessarily" collecting Social Security numbers or from disclosing the information to the general public.

Cooper said about 300,000 North Carolina residents will be victims of ID theft this year. ID theft occurs "when a consumer's personal information is stolen and used to commit financial fraud," Cooper said.

read announcement from North Carolina Attorney General


A New York lawyer already facing mortgage fraud charges has been arrested for being an online sexual predator.

Jan Kabas, 54, a real estate lawyer from Jericho, N.Y. on Long Island, is accused by Nassau County prosecutors of having "sexual explicit conversations" with a 13-year-old girl over the Internet. He agreed to meet the girl to have sex with her.

Or so he thought. The girl was actually created by investigators and when Kabas showed up in his Jaguar for the rendezvous, the cops were waiting.

"During July and August of this year Kabas engaged in multiple sexually explicit conversations with (an) undercover investigator," prosecutors said in a statement. "He...spoke about sexual acts he wanted to perform."

Kabas is scheduled to go on trial next month on charges he was involved with Mortgage Plus, a mortgage lender, in a scheme to get money from investors and others it wasn't actually owed. He has denied the charges.

read announcement from Nassau County DA

read story at Newsday


Jennifer Grant reportedly became a millionaire in the mortgage business.

But allegedly, she used fraud to make her money.

Grant has pleaded guilty in a federal court in Georgia to fraud and other charges, according to news reports and a statement from federal prosecutors.

Grant attracted about $1 million from investors with a promise that she could purchase property at low prices because she had a "source at the bank," prosecutors said. But Grant, 47, was using fraud to acquire deeds to properties by telling the owners that their second mortgages and refinancings were being obtained for them, or that she was purchasing the property.

Instead, prosecutors said she sold the houses, pledged them as collateral so she could get loans, lived in them or arranged for straw buyers to get phony loans for the properties. She did all of that but did nothing to pay off the mortgage loans on the houses.

Several of the actual owners lost their homes or had to declare bankruptcy because of her actions, prosecutors said. When Grant is sentenced later this year she faces up to five years in prison and a fine of up to $250,000.

read announcement from the Department of Justice

read story from Biz Journals


A former mortgage broker already facing state charges in Colorado has not caught the eye of the feds.

The FBI is reportedly looking into the case of Jennifer Riley, 40, who was arrested by Longmont Police in May on charges she used a client's Social Security number of open four credit card accounts, according to the Longmont Daily Times-Call. On one card alone she owed more than $19,000 and was three months behind on payments.

An FBI special agent reportedly told the paper that the feds want to know if any of the institutions allegedly scammed by Riley were insured by the federal government. If so, the FBI could open a federal mortgage fraud investigation.

MBNA, Wells Fargo and Citigroup had all reportedly issued credit cards to Riley.

read story from the Longmont Daily Times-Call


August 29, 2005


Elaine C. Zdrale had a $202,500 mortgage and didn't even know it.

So the Pittsburgh-area woman is using her former lawyer for $400,000 for allegedly forging her name to the mortgage without telling here. Charles Alberts, who is named as a defendant in the suit, has not commented.

The suit, according to the Pittsburgh Tribune-Review, claims that Zdrale hired Alberts in 1999 to handle the sale of a piece of property. Reportedly he was instructed to sell the property for $400,000 and then use the money to pay off a mortgage and $132,000 in credit card bills for Zdrale.

According to the suit Alberts negotiated a $202,500 mortgage on the property without Zdrale's knowledge. Zdrale said she only found out about the mortgage when Household Finance Consumer Discount Co. filed a lawsuit against her for non-payment of the mortgage.

read story from the Pittsburgh Tribune-Review


A Nevada loan broker has allegedly been operating a $1.5 million Ponzi scheme instead of providing mortgage and construction loans to consumers.

Keith Hysom used his Ponderosa Home Loans, which is now out of business, as a pyramid scheme that defrauded 33 people out of $1.5 million between 1997 and 2004, according to court filings made by Nevada County Deputy District Attorney Jim Phillips. The filing was reported by TheUnion.com, which covers western Nevada.

Hysom reportedly took money from investors and claimed he was using the cash to make mortgage and construction loans. Interest paid on the loans would be returned to investors, he said.

Instead, prosecutors allege, he was taking some of the money for himself and using the rest of the cash to pay interest to earlier investors -- a classic pyramid, or Ponzi, scheme.

Hysom's lawyer reportedly told the paper that his client had gotten into financial problems and has cooperated with investigators.

Hysom is facing theft, identity theft and fraud charges.

read complaint at TheUnion.com

read story from TheUnion.com


A persistent fraud offender couldn't stay away from deals, so now he may be going to jail.

A federal judge in Oregon banned Cleburne Brigham from operating as a mortgage broker while appealing a three-year prison sentence for mortgage fraud. But OregonLive.com is reporting that prosecutors allege Brigham has run an illegal mortgage brokerage, falsified documents and swindled borrower out of hundreds of thousands of dollars.

Prosecutors reportedly submitted voice-mail transcripts to the court that exposed Brigham's actions. A judge could put Brigham in jail until his appeal is heard.

Brigham, 57, was arrested at his $1 million home in Washougal, Wash. He has been convicted once in federal court and twice in state court of fraud. State investigators are also looking at accusations that he sold securities and real estate without the proper licenses and authority.x

read story from the Associated Press


In the end Rene Abreu's millions of dollars and political contacts couldn't keep him out of jail or protect his wallet.

Abreu, a New Jersey developer described by reporters as a "political insider" has been ordered to forfeit $300,000, pay $200,000 in fines and $499,000 in restitution -- roughly $1 million -- as part of his 87-month prison term for mortgage and tax fraud, according to The Jersey Journal.

Abreu was convicted last year on 20 of 28 counts on charges reportedly related to schemes he operated through three businesses he owned, including Mortgage Pros Inc. and RLA Homes.

Abreu tried to stay out of prison, but was ordered by a federal judge to report by Sept. 27.

Four other co-defendants were also convicted on charges that also included check kiting and tax evasion.

read story from the Jersey Journal


The owner of a St. Louis-area title company has admitted to secretly raiding his customers' escrow accounts of $1.6 million.

James Andrew Thurman, 41, the owner of Phoenix Title Co. in St. Charles, Missouri, has pleaded guilty to federal charges of wire fraud and faces up to 20 years in prison and a fine of $250,000 when he is sentenced Nov. 18, according to the U.S. Attorney's office in St. Louis.

Prosecutors said Thurman actually tapped the escrow accounts for $3.4 million, but repaid $1.9 million with money he borrowed from his parents. He also borrowed $225,000 from a friend to pay back some of the money.

Thurman also allegedly defrauded First Bank of $100,000 by double-pledging a piece of property in St. Charles.

Prosecutors described a sort of Ponzi scheme Thurman operated. He allegedly used new customers' escrow money to cover the cash he raided from earlier customers.

"These borrowers were not told that their escrow deposits were actually going to be used to cover earlier customers loans, and that they were betting their nest egg on Phoenix Title's ability to find new customers to cover their loans," U.S. Attorney Catherine Hanaway said in the statement. "And that's criminal."

read story fromt the Post-Dispatch


How's this for a restitution amount -- $125 million

!

That's how much Robert W. Boyd, a former executive with the failed Evergreen Security in Orlando, Fla., was ordered to pay by a federal judge. Boyd, identified in the Orlando Sentinel as one of the "masterminds of the biggest consumer fraud in Florida history", was also sentenced to 37 months in a federal prison.

But I don't get how he is supposed to make restitution when the judge only ordered him to pay at least $25 a month toward his restitution while in prison and $200 a month when he gets out.

Boyd pleaded guilty three years ago to securities fraud in what became known as the Evergreen Scam, which cost almost 2,000 investors an estimated $214 million. It was reportedly a Ponzi scheme that promised high returns on mortgage-backed securities.

Others involved have also been convicted in the case.

read story from the Orlando Sentinel


Will people ever learn -- lying on a mortgage application to get loans is going to lead to trouble.

Darrell Walker Holloway found that out the hard way.

Holloway, 32, has pleaded guilty to being part of a mortgage fraud ring in the Pittsburgh area that, according to the Pittsburgh Post-Gazette, scammed more than $2 million in a property-flipping scheme that went on from 1998 to 2001. Four other men have also been indicted by a federal grand jury.

Holloway reportedly admitted he was involved in submitting phony loan applications on properties in his and others' names. For a fee he and the others in his ring would place the houses in their names and then submit loan applications with false information about their employment, income and assets. The loans were submitted to American Business Mortgage and other lenders, the paper reported.

Holloway has not yet been sentenced.

read story from the Post-Gazette

 
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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