Spitzer Breaks Up New York Mortgage Fraud Ring
An elaborate New York mortgage fraud ring duped homebuyers and lenders by falsifying documents and overstating property values, causing credit problems and fiscal distress for many people who bought homes in minority neighborhoods, Eliot Spitzer said Wednesday.
The New York Attorney General and Governor-Elect (pictured) sued 11 people over the scheme, which took place in Brooklyn and lasted from 2002 until early this year. The mortgage fraud hurt dozens of borrowers and lenders alike, the lawsuit filed with the state supreme court in Manhattan asserts.
Four defendants agreed to settle out of court paying nearly $1.8 million to help compensate the victims, and by accepting increased oversight of, or restrictions on, their activities by state financial regulators. Spitzer is seeking fines, restitution and other penalties from the other defendants, Reuters reports.
“The perpetrators of this scam promised minority home buyers an opportunity to climb the economic ladder. In reality, the defendants profited handsomely while their victims saw their financial security impaired or even ruined,” Spitzer said.
Steve Cohn, a lawyer representing Isaac Katz, one of the defendants who settled, declined to comment. According to the complaint, Katz and Yoel Silberstein, a co-defendant, bought properties at foreclosure sales or “distressed” prices in Brooklyn’s Bedford-Stuyvesant, Bushwick, Crown Heights, East Flatbush and East New York neighborhoods, hoping to “flip” them for quick profits.
Spitzer said defendant Amenophis Alleyne of Plainfield, N.J., would receive finder’s fees for encouraging African-American buyers with good credit, including some friends and family, to buy the properties.
Alleyne, who is black, assured them that they could buy a home with no down payment, and that rental income from tenants would cover their mortgage payments.
Thereafter, mortgage brokers Saks and Welz would induce banks to make loans by exaggerating borrowers’ assets, while real estate appraisers Erik Johnson of Ronkonkoma, N.Y., and Jeffery Richardson of Brooklyn would exaggerate property values by at least $50,000, Spitzer said.
Finally, Brooklyn lawyers Devon Clarke, Benzion Frankel, Joseph Treff and Rephoel Weitzner, who handled the closings, would misrepresent the actual sales prices on deeds, tax records and other New York mortgage documents, Spitzer said.
Spitzer said that as a result of the scheme, many buyers ended up with bad credit home loans carrying rates they could not afford and soon ended up in default or foreclosure.
Moreover, Spitzer said the scheme artificially raised home prices in the area, making it harder to buy and sell, and defrauded lenders who made the bad loans.