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Mortgage Fraud Rampant
Old 09-20-2008, 10:36 PM   #1
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Mortgage Fraud Rampant

Looks like the crooks were busy over the last several years with the easy mortgage money.

North Country Gazette » Florida AG Cracks Mortgage Fraud Scheme
12 indicted in West End mortgage fraud scheme | ajc.com
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Old 09-21-2008, 09:08 AM   #2
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chinaco, just to make sure I read those right - these were cases where the bad guys were conning the banks, conspiring to get a large mortgage on an fraudulently inflated home price. They also faked their credit and employment docs. And then they stop making payments, and then... actually, I guess I don't understand how they benefit from having a big mortgage on a cheap house - what's the point? I understand the bank is left with a shortfall, but how do the bad guys cash in on that?

It says they 'siphoned off' money from the mortgages, it's not clear to me how they would be able to do that.

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“So, banks are holding a paper note for $320,000, and the homes are only worth $150,000, but the banks are saying, ‘Where’s the rest of my money?’” Howard said.
It's not like you walk away from closing with that $170K difference in your pocket. You own a $150K house with a $320K mortgage, and a big payment. I mean, if you are going to try to live in the house and skip the payments, how do you benefit by inflating the price?

Hopefully, if found guilty they do jail time. They defrauded the banks, falsified docs. But it does appear to be banks that were conned, not some 'little guy' (at least not directly), right?

-ERD50
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Old 09-21-2008, 09:22 AM   #3
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Criminals seem to figure out ways to commit fraud. It looks like some of the crooks were involved in closing the loans or somehow involved in the closing process.

In one of the cases, it sounds like the values of the homes were inflated and shill buyers used.

If one is involved in the process (an trusted), it is probably easy to falsify records.

I think there was easy money available because some banks were not intending to hold the loan, and were not thoroughly checking people and the property out.

This type of fraud did not cause the Fannie, Freddie and the investment bank failures... but it is an indication of the ease of committing the act and how sloppy the mortgage originator or bank was in processing the loan with other peoples' money.

In some cases, individuals misrepresented their earnings to qualify for the loan.

IMO - They should be sought out and vigorously prosecuted.
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Old 09-21-2008, 09:30 AM   #4
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You don't care about living in the home only spending the money.
Say Adam, Bill, and Clif are partners.
Adam buys a house for $150,000 putting 10% down. He then sells it to Bill for $250,000 a few month latter (using phony docs) getting a $225,000 mortgage. Bill sells it to Clif for $350,000 and gets $335,000 mortgage. I think if you work the escrow angles correctly you can end up with 335,000 in cash less the initial cost of $150,000 and you then skip town.
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Old 09-21-2008, 09:36 AM   #5
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Quote:
Originally Posted by chinaco View Post
....
IMO - They should be sought out and vigorously prosecuted.
Good luck with that extradition if any were from Mexico, Middle East, Nigeria, etc (assuming they were indicted in their real identities in the first place)
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Old 09-21-2008, 10:18 AM   #6
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Originally Posted by clifp View Post
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Bill sells it to Clif for $350,000 and gets $335,000 mortgage. I think if you work the escrow angles correctly you can end up with 335,000 in cash less the initial cost of $150,000 and you then skip town.
That's the step I don't get. Inflating the price also inflated the 10% that was put down - no advantage to that. How does one 'cash in' on that inflated $335K in the mortgage? I don't see how escrows work into it.

The only way I see is to turn around and take out a HELOC on that inflated price, maybe there is a way to make that work, but I didn't see that mentioned.

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Old 09-21-2008, 10:30 AM   #7
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I made an error the last mortgage is 315,000 90% of 350,000
Well the $315,000 mortgage gets deposited into an Escrow account with Bill's name on it. Worse case Bill has to pay off the 225,000 mortgage he took out leaving him with $90,000 in profit. I am speculating they may have been able to figure out a way of not even paying off the $225,000 I'm not sure. In any case the make a profit just like a legitimate transaction
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Old 09-21-2008, 11:20 AM   #8
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A buys a cheap house. To make the example easy say he pays $100,000. Then A, B, C, D and however many else are in the gang "sell" the house among themselves at progressively higher prices - but no money actually changes hands. Finally E takes a huge mortgage, say $400,000, and at closing gives that money to D (or whoever is last to hold the house). D pays $100,000 to A and the crooks split the remaining cash ($300,000 in this example) from the large mortgage.

Since there were many investors buying rental houses, flipping and doing other real estate deals at the time, the fact that the gang was doing something similar with large numbers of houses didn't see to throw any red flags either, so multiply the "take" from the one deal by however many deals they were able to keep going at one time. Ten or hundreds of scores of 200,000 to 500,000 each is enough to attract sophisticated criminals.
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I saw this happen in closings in Detroit
Old 09-21-2008, 11:40 AM   #9
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I saw this happen in closings in Detroit

I worked at a company inside Detroit where the co. owner owned and rented a number of lower scale houses in the city. He never could make any $ doing it, so he decided to sell them. I, as Controller, got stuck working with a Detroit realtor that my owner knew. The realtor actually sold the homes (maybe 7 or 8 of them) really quickly, considering that they were in generally bad shape after renters left them torn up. We got what I beleived was a good price at the time, based on real estate transaction history.

After the first couple of closings, I learned that the homes were being closed again that day! We might get $40,000, but the house would close again that day for $80,000. I wasn't involved in the second closing, but I saw some paperwork several times. The lenders, whoever they were, seemed clueless, and the realtor, appraiser, and closing agent, along with sham owners, were all in cahoots.

So, that's how it works!
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Old 09-21-2008, 11:51 AM   #10
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clifp, and growing_older - OK, I think I get it now (I'd make a lousy crook).

The house was originally bought at fair market value. The fraudulent intermediaries walked away with a false/fraudulent profit (but very real to them) from selling at a falsely inflated price. The last person in the scheme walks away from the house, leaving the bank stuck with the house, and prices have gone back to reality.

I was just looking at the last guy in the chain, and he can't really profit from it w/o sharing in the profits from the intermediate sale(s). That is what I was missing.

Really no different from buying a small stock on margin, riding it up on false PR, but then somehow managing to just walk away from the ownership when the stock price collapses.

Got it - thanks.

I'm sure the money is gone. And unfortunately, it costs us taxpayers to put these guys in jail (even though it is a punishment and deterrent). I'd love to see some kind of community service program that could actually turn around and at least make these guys pay their way through their incarceration period. Treadmill and a generator - solve the energy crisis? Nah, I've done the math on that, that won't work. Must be something. Does the govt garnish a % of future earnings in cases like these? Assuming they are found guilty, of course.

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Old 09-30-2008, 08:08 PM   #11
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People from all walks of life were working the free money mortgage fraud angle.

Quote:
A Jensen Beach pastor and his wife are accused of duping real estate buyers out of more than $1 million in equity.
Video
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Old 09-30-2008, 09:42 PM   #12
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Originally Posted by ERD50 View Post
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I'm sure the money is gone. And unfortunately, it costs us taxpayers to put these guys in jail (even though it is a punishment and deterrent). I'd love to see some kind of community service program that could actually turn around and at least make these guys pay their way through their incarceration period. ....

- ERD50
Add identity theft into the mix & the inability for law enforcement to even know who the perpetrators really were & you begin to see the problem with low documentation loans.
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Old 09-30-2008, 09:58 PM   #13
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Quote:
Originally Posted by ERD50 View Post
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I'm sure the money is gone. And unfortunately, it costs us taxpayers to put these guys in jail (even though it is a punishment and deterrent). I'd love to see some kind of community service program that could actually turn around and at least make these guys pay their way through their incarceration period. ....

- ERD50
Add identity theft into the mix & the inability for law enforcement to even know who the buyers/perpetrators really were & you begin to see the problem with low documentation loans.

Mortgage Fraud - Mortgage Fraud News - Four indicted in ID Theft scheme - used deceased womans ID to obtain*mortgage

'House Stealing' Scam Combines Identity Theft, Mortgage Fraud

Federal Bureau of Investigation - Kansas City Field Division - Press Release - Department of Justice

And then for another twist on the schemes you can add theft of licensed appraisers identities into the mix to submit false appraisals!

Who knows? You may have bought a house in New Jersey today & don't even know it yet!
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Old 09-30-2008, 11:45 PM   #14
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This is another way the scheme worked:

A realtor lists a house with a value range - $500K - $570K. This was a common practice in some areas of the country - listing with a value range instead of a set price.

An offer comes in from the a realty company. The real estate broker is the realtor as well as the mortgage broker, and the appraiser works in her office. Here are the terms of the offer:

Purchase price is $570K - with 0 down and seller is to pay all closing costs. BUT, the buyer is to receive $70K at closing - for "improvements".

Shortly after, the buyer, who has probably bought the property with no income documentation and maybe with a stolen identity, defaults, and the bank is left holding the bag with a house which is worth much less than the $570K they lent.

I sold a house in March 2006 and received 3 of these offers - I was advised by my realtor that they were fraud and to ignore them. So....it seems realtors were aware this was happening way back then. They probably had no idea of how widespread this was.
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Old 10-01-2008, 07:14 AM   #15
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This is a familiar scheme. Mortgage Fraud - Home Page Look at this site and you will it is all over. A guy down the street went to prison for it.

You can read all facts below accept one.... THE FAMILY GOT TO STAY IN THE HOUSE.

According to the superseding indictment, from January 1, 1999 through June 30, 2005, Haque and several of his employees, including his brother, Akram Haque, and Abdur Rashid, both named with Abrar Haque in the Racketeer Influenced and Corrupt Organizations (RICO) conspiracy charge in Count One, conspired between themselves and with certain other employees, clients and customers of the accounting business to conduct the affairs of the enterprise, Abrar CPA, Inc., through a pattern of racketeering activity. Such activity allegedly included mail fraud, wire fraud, bank fraud, immigration fraud, money laundering and the interstate transportation of money obtained by fraud.
Among the practices engaged in by the enterprise, as described in the superseding indictment, were the following:
1. The preparation of false payroll records;
2. The preparation and filing of false payroll reports and tax returns;
3. The preparation of false income and wage documents in support of loan and credit applications;
4. The provision of false information and documentation for immigration purposes, and to obtain various government benefits;
5. The laundering of currency for a fee; and
6. The filing of false employment tax reports for Abrar CPA, Inc., and for the Al Ihsan School of Excellence, an Islamic elementary school, located at 4600 Rocky River Drive in Cleveland, which Abrar Haque founded and managed.
The remaining defendants, not charged in the RICO conspiracy count, are charged in a variety of substantive fraud and tax offenses, as shown on the chart. There is also a provision in the superseding indictment seeking the forfeiture to the government of the Haque residence in Berea, Ohio, and $59,233.00 in currency seized during a search of that home last year.
If convicted, each defendant’s sentence will be determined by the Court after review of factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense and the characteristics of the violation. In all cases the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.
This case is being prosecuted by Assistant United States Attorney James V. Moroney, following an investigation by the Federal Bureau of Investigation; the Internal Revenue Service, Criminal Investigation Division; the U.S. Department of Labor, Office of Inspector General; and the U.S. Social Security Administration, Office of Inspector General.
A superseding indictment is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
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