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Archives October 2, 2005

 


 
September 30, 2005


An uptick in mortgage fraud cases may move Ohio to finally revamp its consumer protection laws to cover mortgage brokers.

Legislation has been filed in the Ohio General Assembly that if enacted would give the state attorney general the teeth to go after mortgage lenders "that engage in deceptive or unfair trade practices," The Cincinnati Enquirer is reporting.

The bill would allow the attorney general to take action in cases involving property flipping and inflated appraisals.

Ohio is reportedly one of only two states with consumer laws that don’t cover mortgage brokerages. Virginia is the other.

The feds have snared more than 24 people, including mortgage loan officers and brokers, in a two-year investigation that has centered on The Cincinnati area.

read story from the Cincinnati Enquirer


The operator of a Missouri mortgage firm has been arrested on federal charges of running a fraud scheme using standby letters of credit.

The charges were filed against Daryl Brown, 28, chairman of The Vertical Group, a firm that operates in home mortgages, insurance, securities and real estate investments, according to the Columbia Missourian.

Brown stands accused of raising money through standby letter of credit, which are often used in fraud schemes to attract investors with often unrealistic promises of huge double digit returns.

U.S. Attorney Todd Graves said in a statement that Graves was allegedly luring investors to give money in $50,000 increments and promising them 20 percent return in just 30 days.

Graves said Brown raised $3.1 million but only invested $220,000.

"The balance of the investors funds have been spent by Brown or at his direction and has not generated any return on the investment," Graves said.

Brown made "significant misrepresentations" to investors, Graves said, including telling people he was a former pro football player, that he had relationships with celebrities and that he has access to a $5 billion investment pool.

read story from the Missourian


September 28, 2005


A New Jersey mortgage broker is going to prison for five years after pleading guilty to stealing nearly $200,000 in clients' mortgage funds.

A judge in Summit County, N.J., also ordered broker Jason Goddard, 32, to pay $194,796 in restitution to banks and mortgage lenders. Also pleading guilty was co-defendant Isaac Briggs, who is scheduled to be sentenced Oct. 10.

According to Tri-statenews.com, in one instance Goddard and Briggs were given a $100,000 check written to the bank holding a seller's mortgage. But instead of paying off the mortgage Goddard and Briggs reportedly cashed the check and kept the money.

Another time they allegedly used the name of a potential buyer to secure a $154,405 mortgage for a bogus transaction, and once again kept some of the money.

read story from the Tri-State News


September 26, 2005


Three more people have been arrested in a big mortgage fraud scheme out of Massachusetts that has already netted 10 arrests.

One of those busted in the latest arrests is Lawrence V. Lynch, 53, president of Affordable Mortgage Co. The others were identified by Masslive.com were used car salesman Edgar Corona, 27, and Kathryn Zepka, 57. They were named in a 69-count indictment in federal court that accuses them of running a flipping scheme that involved recruiting first-time buyers to buy run down properties.

All three reportedly pleaded innocent.

Banks and other lenders lost more than $15 million in the fraud. The scheme reportedly included lawyers, lenders, real estate and mortgage brokers, appraisers and others. As usual with flipping schemes appraisals were inflated and phony documents were used to secure mortgage loans.

"They bought and sold homes in quickie transactions, making big profits and leaving the home owner to drown in debt and default on the mortgage," the indictment reportedly reads.

Lynch reportedly "assisted the scheme" by obtaining loans for buyers and partnering with the original 10 defendants.

read story from The Republican


The operators of the Dorean Group, a California company accused to running a nation wide mortgage elimination scam, have been indicted by a federal grand jury.

Dale Scott Heineman, 45, and Kurt Johnson, 42, have been charged with multiple fraud counts relating to transactions on 17 properties in nine states, KTVU is reporting.

But the investigation actually includes nearly 500 properties in 15 states that have a value of $88 million, a prosecutor said.

"This is a national problem," U.S. Attorney Kevin Ryan reportedly told the TV station.

The Dorean Group advertised that it had a "proven, legal and moral way" of eliminating mortgage debt. Home owners paid fees of $1,000 to $3,000 for the service, and then transferred their title to a trust formed by Dorean.

Dorean allegedly used fraud to indicate the loans on the homes were paid and would then take out new loans. Dorean would allegedly split the money with the home owner, but not pay off the mortgage as it had promised.

Dorean's principles also face several civil lawsuits and investigations in other states. Heineman and Johnson were actually arrested earlier this year on related fraud charges and are reportedly in jail in Utah.

read story from KTVU

read about scam at MortgageDaily.com


Loan assumption scans are, unfortunately, growing in popularity across the country and now the Better Business Bureau is concerned that the schemes will be used to prey on victims of Hurricane Katrina.

The BBB has issued a warning for owners of homes that were damaged by the storm. The scams typically work like this -- someone who is having difficulty paying a mortgage is approached by an "investor" who offers to help the owner stave off foreclosure by taking over the mortgage. But what often happens is the home owner is unaware that they actually turn over their home to the scammers.

"Be lerry of suspicious offers to 'assume' your mortgage or rescue you from foreclousure," the BBB reportedly told The Huntsvillle Times. "Check out the business with the BBB."

The BBB is also advising home owners that even if their home is damaged they are still responsible for making the mortgage payment. "Contact your lender immediately to request a grace period."

FEMA, the Federal Emergency Management Agency, is offering assistance programs for home owners facing foreclosure. The FEMA hotline can be reached at 800-621-FEMA (3362.)

read story from The Huntsville Times


The U.S. Attorney's office in Charlotte, N.C., is vowing a crackdown on mortgage fraud.

U. S. Attorney Gretchen Shappert has warned professionals in the mortgage and real estate industries thinking about fraud that her office is "gearing up to track you down," according to the Associated Press.

Shappert says mortgage fraud has cost lenders in the Charlotte area $64 million dollars in recent years. But state and federal authorities have successfully prosecuted 28 lenders, mortgage brokers, closing attorneys, appraisers, builders, sales promoters and others in the past three years, she said.

A partnership of state and federal authorities is targeting mortgage fraud, including the F-B-I, U.S. Secret Service, S-B-I and state regulatory boards, she said.

read story from the Associated 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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