Comments on: The Pinnacle of Mortgage Fraud

By: Shawn

Shawn — Sat, 17 Nov 2007 01:08:52 +0000

Fraud became part of the norm because lenders & investors made the business decisons that volume and production was more profitable…the old quantity over quality.

I can tell you as a lender, that fraud is easy to find, lenders have so many tools available, with the most important being that if it smells like fraud, looks like fraud, and taste like fraud, it probably is. As long as the end investors quit checking and quit demanding quality they were willing to continue to throw more crap at the wall and hope that it sticks.

By: Ann

Ann — Fri, 16 Nov 2007 01:30:43 +0000

Problem in Florida is that the straw buyer is also the same guy who walks away with the loot. Here they don’t even use a straw buyer they just have a buyer who walks away with a sum of money..like I said usually a foreigner..and the seller doesn’t care…example have house listed on MLS that was at 1,000,000. Buyers took of and then placed back on at $1.5(like the property appreciated 500K in the 5 days they reposted it. Checked Zillow has it marked at $950K). Chances are there is a “buyer” lined up to purchase the property at the new inflated price(will keep checking)…There are properties in the area, not the same community to back up the appraisal(checked zip code)…so imagine now that this “buyer” can walk away with as much at $500K back at closing. Sounds crazy well if you don’t care and will leave the country how great to do that with a 1/2 mill in your pocket..back to South America or whereever you came from…many banks are complaining that they can’t even LOCATE these so called buyers..why? because they have fled…Do the banks check this kind of info..nope…and its right there…

By: Sniglet

Sniglet — Fri, 16 Nov 2007 00:43:29 +0000

The person who turns the criminal in is the “straw” buyer who is angry that they are having assets siezed, and getting a trashed credit score. These people most definitely let the lender, and everyone else, know that they have been had. All that is left is for someone to do forensic accounting and put all the pieces together to build a solid case against the criminals. Finding the criminals won’t be hard since the straw buyer knows who they are, and many of them had to leave some kind of trail during the transaction (e.g. appraisers address, etc).

By: Ann

Ann — Thu, 15 Nov 2007 23:37:54 +0000

Problem Sniglet is who turns the criminal in? Like I said too many people profiting from this or benefiting…one day someone who needs some political brownie points will make it their mission..until then justice is blind…

By: Sniglet

Sniglet — Thu, 15 Nov 2007 21:21:43 +0000

If there are severe penalties for fraud, as Morgan states, then why would anyone commit mortgage fraud? All the paper trails that are created with mortgages make it easy for the authorities to catch you. With such a certainty of being caught eventually I just don’t understand why anyone would commit mortgage fraud when there are other forms of crime with far less potential for being caught.

By: Morgan Brown

Morgan Brown — Thu, 15 Nov 2007 20:57:06 +0000

Sniglet – there are definitely major consequence for fraud. it’s a felony and they put people in jail for it. check out http://www.mortgagefraudblog.com for the latest in mortgage fraud convictions. it’s just that there are so many cases that much of it goes unpunished.

Russ – great point about the title/escrow company shell game. that is where a lot of this happens with forged notaries, altered security documents, etc.

By: Sniglet

Sniglet — Thu, 15 Nov 2007 19:52:48 +0000

Is the only consequence of this fraud that the lender is left with a loss and the straw purchaser gets trashed credit? I thought there were jail penalties for the people actually doing the fraud?

Even if the fraudster gets to keep the ill-gotten money, don’t they stand a big chance of going to jail if anyone ever digs into the transaction? That would seem like a pretty big risk to me.

By: Peter Parker

Peter Parker — Thu, 15 Nov 2007 19:51:46 +0000

Jack,
What dog do you have in this fight?? Unless you have personally suffered quantifiable economic damages or harm LE won’t give you the time of day.
You sound like Gomer Pyle shouting out “Citizen’s Arrest!, Citizen’s Arrest!”
Maybe a call to the Justice League is in order.

By: Ann

Ann — Thu, 15 Nov 2007 19:18:06 +0000

I find that alot of these purchases are being done by foreign buyers..not to say that all foreign buyers are bad in the least..it just makes me wonder how many are actually in on the scam from the realtor,mortgage broker, appraiser to the buyer..and how many of these happen and the buyers leave the country.

Problem Sniglet is that untimately only the lender is left holding the bag…The realtor keeps the comps up in the area, the buyers get a huge cash reward, the seller gets the house sold, the appraiser gets a job in these hard times and the brokers gets a purchase loan with commissions..so who is really hurt with this? What I can’t understand is how the lender doesn’t take the 1 min to look up the listing on the MLS/copy attached to contract to question why in these times of huge price reductions(especially in the community that the buyer is purchasing in) are the buyers purchasing at 50-200K over the purchase price??? I understand in the days of the housing boom, but today..doesn’t make sense unless the contract is bogus.. And to find out if the appraisers report is really using comps in the community or are they going out of their spectrum to “make the numbers”.

Another thing I see is the house being taken off the MLS and relisted at a ridiculous high price..I guess this is to try to avoid the obvious..

By: Russ

Russ — Thu, 15 Nov 2007 18:58:18 +0000

This is pretty common. In fact, here in Chicago, drug dealers gave up slinging rocks on the street corner to get into mortgage fraud since it paid a lot more and you don’t have rival gangs shooting at you.

I know an AE for WELLS FARGO that got sent to jail for about 15 years last year for doing the same thing in Indiana. He would get an appraiser to inflate the value of the property and sell it to dumbasses who wanted to invest in real estate (you know the type that buy the Carlton Sheets books) and pocket the difference. Sometimes they would pay the buyer as well the cashout as an incentive.

Real simple. We use your credit to buy the investment property that is worth say $100k. The faulty appraisal is $200k. Of course, “Rohit the underwriter” working in the call center in Calcutta has no clue the appraisal is fraudulent and approves a loan for $200k. We set up an affiliated title company to handle the closing too and provide a false chain of title.

Everything closes and the crook gets $200k. He pays the mark say $10k for using their credit, pays off the original $100k loan or whatever is remaining and pockets the difference. The guy I know that got caught got away with like $4 million in loans.

The scheme falls apart because the person who did the mortgage application obviously won’t find a renter or pay the mortgage and the banks start investigating the late payments and notice a commonality with others. Same brokerage office/title company/attorneys, etc.