South Florida Mortgage Scam Uncovered; 11 People Indicted

Using stolen identities and straw buyers to apply for bogus home loans, 11 people from South Florida ran a multimillion-dollar mortgage fraud and property flipping scheme in Broward County, the Miami Herald reports.

An investigation by local, state and federal law enforcement agencies uncovered the criminal ring, which allegedly conned banks into issuing roughly $12 million in bogus home purchase loan funds starting in 2002.

Yvette Scott Patterson is accused of masterminding a scheme to submit fraudulent mortgage applications using the false information through her mortgage company, Khadmilroy Inc.

Patterson, her husband Delroy Patterson, 45, and nine other co-conspirators were charged with multiple counts of conspiracy to commit mail, wire and identity fraud. The Pattersons are currently in Jamaica, where the U.S. government is seeking their extradition.

The group is believed to have profited from the sales of the fraudulently purchased property as well as more than $300,000 earned in broker’s fees through Patterson’s mortgage lender.

Nine others were indicted along with the couple. Some of the accused were in jail on other charges, two were arrested Tuesday and bailed out, and others were still at large.

The case underscores the growing problem of real estate crime in Florida. The state ranked first in mortgage fraud in a 2006 study, and fraud involving home loans is among the fastest-growing white-collar crimes in the country. It is particularly prevalent in heated markets such as South Florida.

Officials say mortgage fraud is a substantial issue and are urging lenders to closely scrutinize all mortgage applications to protect themselves and consumers from criminals. Mortgage fraud typically involves more than one professional insider colluding with others to pull off the heist. And the schemes can be complex.

Here’s how the Patterson ring allegedly operated to finance the purchase a home in Sunrise: According to the indictment, the defendants allegedly filled out a loan application, with phony wage stubs, W-2 forms and other documents, using a stolen identity. Using the same method, the gang resold the property a year later, to a victim whose identity was also stolen, to get a $190,000 Florida mortgage.

Finally, in November of 2004, the defendants sold the property a third time to another victim by taking out a home mortgage loan in the victim’s name for roughly $239,000.

In Broward County’s surging market, Patterson & Co. were able to up the value of the property by 40 percent in a little over two years. At the same time, they profited from high transfer of ownership fees, which in some transactions reached $20,000.