A man accused of stealing identities of children, the homeless and people in drug rehab as part of a massive mortgage scheme pleaded guilty to federal charges in three states Tuesday.
According to one research group, the Utah housing market is the worst in the country when it comes to mortgage fraud.
And, sadly, many people don’t realize they’re being scammed until it’s too late.
In fact, you may be wondering, what can people do to keep from becoming victims of Utah mortgage fraud?
The state says check out the people you do business with: check licenses, call the state ask if they’ve had complaints on this particular real estate agent or lender. However, there’s no real way to explain why so many have gotten away with mortgage loan fraud in this state. For example …
Sean Anderson was sold on a deal to build a house and earn fast equity.
“It sounded like a great deal,” says Sean. “They hooked us up with the mortgage company, hooked us up with the appraisal, which came in um at $464,000. And I built the house for $425,000.”
Sean was told he could use the equity to make the payments. What he didn’t know was the agent and lender used an inflated appraisal.
“I can’t make the payments,” says Sean. “There was no equity.”
Cases like Sean’s put Utah at the top for mortgage fraud.
“We’re disappointed, the numbers are unacceptable,” says Francine Giani with the Utah Department of Commerce.
The state says people need to make sure they work with licensed realtors and lenders. And beware of fake sales pitches.
“Telling you sign this application and we can inflate what you make and all those kinds of things. Those are all illegal activities and people need to question that,” Giani said.
Michael Blackburn tracks home loan fraud in Utah. He knows one reason it’s so common.
“A lot of times when you do find someone who’s convicted of mortgage fraud here in the state of Utah, the sentences are very, very lenient,” says Blackburn.
Francine Giani says the state is trying to change that with new laws: “We’re looking forward to working with county attorneys, as well as the Attorney General’s Office and even the U.S. Attorney to try to put some of these people in jail.”
But that won’t help Sean.
“Well, right now I’m into this over $100,000,” Sean said.
US authorities stepped up investigations on Tuesday into possible mortgage fraud by companies in the high-risk home loan market.
The Securities and Exchange Commission told Congress it had set up an enforcement unit to probe possible fraud involving subprime mortgage lenders.
The move comes as lawmakers increase political pressure on regulators to act over a growing crisis in the bad credit mortgage market. Lawmakers fear more than two million Americans could be vulnerable to foreclosure on their homes in the next two years following a loosening of lending standards and allegations of mis-selling by mortgage companies.
More than two dozen mortgage lenders have shut down or gone bankrupt in recent months after a sudden increase in defaults.
Christopher Cox, chairman of the SEC, told the Senate banking committee the regulator had created a 25-person enforcement unit to investigate whether proper disclosures were made to investors who bought home loan-backed securities.
“To the extent that these loans are securitised and to the extent that they become part of problems, fraud or accounting problems related to that, we want to be there as enforcers,” said Mr Cox.
The SEC is also conducting a preliminary investigation into New Century Financial after the lender advised investors it was in talks with creditors.
The stepping up of enforcement action came as shares in Beazer Homes plunged amid reports that the homebuilder’s lending practices and financial transactions were being scrutinised as part of a broader federal probe.
The stock dropped 14.6 per cent to $26.81 in after-market trading.
US stocks were also driven lower by signs that the crisis in the subprime home mortgage market could be affecting consumer sentiment.
Lynn Franco, director of the Conference Board, said: “Apprehension about the short-term future has suddenly cast a cloud over consumers’ confidence.”
The Conference Board’s consumer confidence index declined to a worse-than-expected level of 107.2 in March from 111.2 in February, prompting a fall in housing shares on the New York Stock Exchange.
Copyright The Financial Times Ltd. All rights reserved.
Beazer Homes, which has recently suffered hefty losses amid a downturn in the housing market, is now facing a federal investigation of home mortgage fraud and other allegations.
The FBI and the U.S. attorney’s office in Charlotte, N.C., along with the IRS and the U.S. Department of Housing and Urban Development, launched an investigation of Beazer Homes last week, FBI agent Ken Lucas said.
Lucas, a spokesman for the FBI’s Charlotte field office, said the inquiry involves “fraud in general,” and more specifically is related to corporate, Georgia mortgage and investment issues.
Asked whether investigators would seek to question corporate officers and subpoena the home builder’s records, Lucas said he wasn’t sure.
“We just started this,” Lucas said.
Lucas declined to release more details about the ongoing home loan investigation. He also would not say what prompted the inquiry in the first place, or what the next step(s) would be.
In a statement regarding the mortgage fraud investigation, Beazer said it “cannot comment on or verify any investigation. However, we will fully cooperate with any government agency.”
“Beazer Homes has a long-established commitment to managing and conducting business in an honest, ethical and lawful manner,” the statement said.
Last week, Beazer Homes said that its CFO, James O’Leary, was stepping down after four years with the home builder to become president and CEO of Kaydon Corp.
Beazer has suffered from the housing downturn.
Weak demand for new construction, slow new home sales, properties at very steep discounts and the need for inventory writedowns have taken a toll on the company’s results.
This is the latest major company to face allegations of mortgage loan impropriety stemming from the housing market cooling. We’ll be monitoring this situation to bring you the latest.
SOURCE: SmartMoney.com
Gabriellee Cunningham fell behind on the mortgage on her modest suburban Miami home and was mired in debt by the time she was approached by a door-to-door “mortgage lender” who promised to help her.
Nine months later, her $89,000 Florida mortgage ballooned into a $234,000 home loan, her monthly payments have doubled, and she faces foreclosure on a property she no longer owns.
Housing officials call Cunningham the victim of one of the worst cases of predatory lending they’ve ever seen and believe, as the U.S. bad credit mortgage crisis grows, the rising tide of scams in which homeowners are being cheated is just beginning.
“I know I did something stupid but I am going to fight these people ’til my last breath because they are trying to rob me,” said Cunningham.
Consumer advocates have seen a surge in “foreclosure rescue” and “equity stripping” scams in recent months as the subprime lending crisis developed.
Lenders launched foreclosure actions against more than one in every 200 mortgage borrowers in the fourth quarter of 2006 as home equity markets continue to get hammered.
That figure was the highest recorded total in history.
Subprime adjustable-rate mortgage delinquencies jumped to nearly 14.5 percent in the quarter. Florida is among the states hardest hit by the crisis, which some advocates believe is in its infancy.
Florida ranks second to California in percentage of bad credit home loans, granted to people with poor credit histories, many of whom are finding they can’t make their payments.
By some estimates, up to 30 percent of loans in Miami, a metropolitan area with large poor and immigrant populations, are subprime.
The non-profit National Consumer Law Center said no one tracks the number of people trapped by mortgage scams but it agrees with the views of lawyers and consumer agencies that mortgage scams, which routinely target the poor and minorities, have proliferated with rising property values.
Continue reading this Reuters article here …
Whatever doors through which mortgage fraud is continually perpetrated need to be slammed shut in South Carolina.
That was the message of the state’s consumer protection agency Monday.
According to the Myrtle Beach Sun-News, the South Carolina Department of Consumer Affairs called Monday for tighter regulations on area mortgage brokers and other lenders and more state laws regulating the industry.
“The [South Carolina mortgage] lending industry essentially goes unregulated,” said Charles Knight, a staff attorney for the consumer affairs department.
The department wants lawmakers to create a bill that would license both brokers and providers of mortgages. However, no lawmaker has yet signed on as a sponsor, according to Brandolyn Thomas Pinkston, administrator for the consumer affairs department.
Pinkston and Knight spoke during a news conference with U.S. Attorney Reggie Lloyd and FBI and IRS officials.
The FBI lists South Carolina as a “hot spot” for mortgage fraud, and an independent research institute ranks the state 19th compared to rates of mortgage fraud in other states.
However, South Carolina’s standing in the independent research institute’s ranking has dropped since it was ranked highest in 2001.
Pinkston credited the improvement to increased prosecution of people who commit mortgage fraud.
In the last three years, Lloyd’s office has obtained convictions against 80 real estate agents, mortgage brokers, home appraisers, closing attorneys and others involved in real estate and lending.
Mortgage fraud comes in several forms, Knight said.
Some people report inflated incomes on loan documents so they qualify for larger home mortgage loans for bigger houses they cannot afford.
Others submit two separate mortgage applications for one piece of property and pocket the extra money when both are approved.
SOURCE: Myrtle Beach Sun-News
Glenn Puller and Cindy Ingram are on their way to federal prisons for mortgage fraud.
At a sentencing hearing last week, Puller received one year and Ingram received two years in prison for their separate roles as straw buyers in a massive Colorado mortgage fraud scheme in Aurora.
“I apologize to the lenders,” Ingram told the court. Puller said the same.
But what that even necessary? Lenders make money lending, even when borrowers never pay it back.
The industry runs on loan volume, not loan quality. A mortgage company sells the loans it makes to Wall Street investment banks, which sell them to investors. This is why Puller and Ingram were able to get loans to acquire multiple homes at inflated selling prices of around $600,000 apiece.
Puller and Ingram are among seven defendants accused of taking $2.1 million out of 17 phony home sales, mostly in the Villas at Cherry Creek, a gated community bordering Cherry Creek State Park.
The scheme began with Ronald Fontenot and Torrence James, who met in federal prison and became Colorado mortgage brokers once released. Puller and Ingram were among their dupes paid to pose as buyers and sign bogus documents.
Among the lenders they defrauded was New Century Financial, whose stock has been in a free fall. As the Irvine, Calif.-based company cranked out loans across the country, its stock hit $66 a share in December 2004. On Friday, New Century’s stock closed at $3.21. The previous Friday, New Century disclosed that federal prosecutors and securities regulators were investigating accounting errors and stock sales at the company.
Mortgage lenders still prosper
Last year, lenders made $600 billion in subprime mortgages, comprising 20 percent of all mortgages made. More than half of these loans have adjustable mortgage rates. That means borrowers with shoddy credit histories have increasingly received loans whose monthly payments are steadily rising with interest rates.
This is why foreclosures are on the rise in Colorado and across the nation.
“The market deals with this in a very merciless way,” said Guy Cecala, publisher of Inside Mortgage Finance, noting the plunging stocks of subprime lenders. “New Century is going to be put out of business. … Investors are talking with their feet.”
The founders, who sold millions worth of their stock, do not seem punished to me. Meanwhile, the real losers are shareholders who didn’t sell their stock, and homeowners, whose home values rise and fall in a mortgage market with lax underwriting standards.
Former federal prosecutor Anthony Accetta, now a Denver-based fraud investigator, has helped shut down several mortgage companies for fraud over the years.
“The guys at the top know exactly what’s going on,” Accetta said of his experience. “They want the lending standards reduced so they can make as many loans and collect as many fees as they can. … They are the ultimate beneficiaries of the crime. And the crime is making false statements to get a mortgage loan.”
Another subprime market leader, Countrywide Financial, recently reported that 19 percent of its bad credit home loans were more than 30 days delinquent. That’s nearly one out of five going bad. The company also said it made $41 billion worth of subprime mortgages last year and $46 billion in 2005.
Before news of Countrywide’s widening subprime delinquencies broke, its CEO, Angelo Mozilo, sold $140 million in stock over the past 14 months, The Wall Street Journal reported last week. Mozilo, who co-founded the company 38 years ago, defended a 19 percent delinquency rate.
“That means 81 percent of these subprime borrowers are making their payments on time,” he told the Journal. “That 81 percent never would have had the opportunity to own a home.”
Countrywide also was among lenders Puller and Ingram apologized to in court.
Al Lewis’ column appears Sundays, Tuesdays and Fridays in The Denver Post.
A group of former housing counselors, loan officers and an escrow agent has been indicted on fraud and conspiracy charges in one of the biggest real estate fraud cases in Arizona since the housing crash of the late 1980s.
The group is accused of defrauding the Department of Housing and Urban Development of $1.9 million through a pre-foreclosure scam that targeted dozens of first-time Arizona mortgage holders across the Valley from 2001 to 2003, according to a grand-jury indictment filed in federal court late Wednesday.
The indictment comes a year and a half after Eddie Carrillo Jr. of Scottsdale-based Sahara Investments was convicted of fraudulent schemes in a case relating to the pre-foreclosure scam. Carrillo is named as a co-conspirator in the indictment but not one of the five defendants.
According to the indictment, Carrillo and the defendants sought out homeowners who had defaulted on FHA loans - and offered to buy their homes.
The group is accused of submitting documents to HUD making it appear the houses were worth less than they were, then turning around and selling the homes for much more. Because HUD insures the mortgages, the federal agency was left to satisfy the debt with the lender.
HUD’s pre-foreclosure program was set up to help struggling homeowners avoid foreclosure by working out a structured deal to get their properties appraised, then sell them to pay off as much of their mortgage as the market would allow.
At least 65 homes throughout the Valley were purchased in the scam. Homeowners who sold their homes lost out on any potential equity they could have gotten on a sale.
The investigation into the pre-foreclosure scam began before a recent wave of mortgage and real estate fraud in metropolitan Phoenix housing market. Several other fraud investigations are under way.
Mortgage fraud is often hard to prosecute because it typically involves long paper trails, and the people in question can be hard to find because many are not licensed and they tend to move from firm to firm.
Legislation has been introduced to make mortgage fraud a felony and, therefore, easier to prosecute.
According to the indictment, the pre-foreclosure scheme linked to Carrillo and the five defendants involved the following fraudulent acts:
• The Wells Fargo loan officers gave Carrillo the names and addresses of borrowers who had defaulted on their FHA home loans.
• The escrow agent supplied Carrillo with information on the Federal Housing Administration properties with equity left. Carrillo and the other defendants then contacted the homeowners and offered to purchase their properties through the FHA’s pre-foreclosure program. The homeowners sold their homes for less than what they were worth.
• Carrillo and the two housing counselors signed false counseling certification showing the homeowners received the required guidance from a HUD-approved counselor. Vasquez and Felix were HUD-approved counselors.
• Vasquez negotiated with mortgage firms to purchase the properties and misrepresented himself as a HUD employee. He received $70,000 from Carrillo as part of the scheme. Vasquez left Chicanos Por La Causa in August 2004.
• Felix signed documents listing her as the buyer and seller of the homes to hide that it was really Carrillo. Felix received $102,000 for her part in the conspiracy.
• False appraisals showing inflated values were sent to the Wells Fargo loan officers. Soto accepted $41,000 for his part. Smith got $30,000.
• Peters falsified loan documents so second mortgages and third mortgages on the homes weren’t disclosed. The properties wouldn’t have been eligible for HUD pre-foreclosure program with the additional loans. Peters accepted $23,000 from Carrillo for her part.
SOURCE: The Arizona Republic
According to the Kansas City Star, Missouri officials on Tuesday announced the formation of a task force to better coordinate efforts to root out and punish mortgage fraud in the state.
A key intent of this Missouri mortgage task force is to improve sharing of information between regulators - the Insurance Consumer Affairs Division, the Real Estate Commission and the Real Estate Appraisers Commission.
“Mortgage fraud affects lenders, mortgage brokers, Realtors, appraisers and, most importantly, consumers,” stated Doug Ommen, director of the Missouri Department of Insurance, Financial Institutions & Professional Registration.
Ommen said the task force was one outcome of a major reorganization last fall that allowed for improved sharing of information.
“[Regulators] were working on the issue, but they were working on it from their own particular perspective. There was little communication. It became clear we need a group to meet frequently to look at complaints coming in,” he said.
The task force will be led by Richard Weaver, deputy director for the Division of Finance.
The effort takes place against a backdrop of growing concern nationally. Many bad credit mortgage loan providers, who were all-too willing to make risky loans at high interest rates in boom times, are now facing rising defaults threatening their very existence.
Recent estimates place the annual losses caused by Missouri mortgage fraud at more than $4 billion, more than triple the estimates of a year ago.
Investigators have rated Missouri sixth nationally in the number of cases involving fraudulent home mortgage lending.
Indictments have been returned in the Kansas City housing market, as well as in St. Louis and Springfield. Search warrants were recently served in Columbia related to a mortgage fraud investigation.
Ommen said he has asked the task force to develop “common-sense solutions” to stop the fraud that is contributing to rising foreclosures.
He said the effort might look at tighter regulation, stricter underwriting, broader licensing requirements and improved education programs.
Sen. Charles Shields, a St. Joseph Republican, has introduced a bill that would criminalize the act of participating in mortgage scams.
The Mortgage Bankers Association Tuesday said it had jointly approved with the FBI a mortgage fraud warning notice to be used by its members.
Ommen said a big challenge to stopping fraud is that it usually involves a clandestine web of conspirators that include an unethical mortgage broker, appraiser, investor, real estate agent and lender.
“What this group is looking for are ways to identity the problems at an earlier stage,” he said.
SOURCE: Kansas City Star
Dozens of lawsuits alleging the gamut of home loan fraud, from cash-back deals to lying about income on loan documents, have been filed against Arizona mortgage firms and individuals during the past few months, the Arizona Republic reports.
Fraud experts and regulators say the lawsuits are only the beginning as the fallout from mortgage fraud starts to hit the Valley. Cash-back scams may involve getting a Phoenix home loan for more than a home is worth and pocketing the extra money.
The deals inflate home values and leave the mortgage lender with losses from loans worth far more than the house itself.
“Banks are going to start forcing mortgage brokers to buy back these bad loans, and mortgage brokers don’t have the money so they are going to go under,” said Richard Hagar, a national mortgage and real estate fraud expert with American Home Appraisals based in the Seattle area.
“This is the beginning of the wave of lawsuits, lost licenses and criminal indictments in Arizona.”
Among the lawsuits:
• Phoenix-based Biltmore Bank is suing Security Title of Arizona and a group of others over a cash-back deal. The suit alleges the group worked together to get Biltmore to fund a $1.3 million loan for a home valued at $800,000 and then pocketed the extra cash.
Also named in the suit are Valley appraiser Kittelmann & Associates and Tucson resident Frank Padilla, who was indicted and pleaded guilty last year to fraud and money laundering as part of a $13 million property-flipping scheme.
“It was a creative and imaginative scheme these guys engaged in, but how anyone could figure the title firm was at fault as opposed to the lender or the appraisal company picked by the lender doesn’t make sense,” Security Title’s attorney Michael Rusing said.
• A Lehman Brothers investment trust in New York and Aurora Loan Services in Denver are suing the parent company of First National Bank of Arizona over 38 home loans.
They say the bank misrepresented the values of properties, and the income, debt and employment of some of the borrowers. Lehman and Aurora bought the loans as investments and want the bank to buy them back.
• San Francisco-based Transnational Financial Network is suing Phoenix-based Lending House Financial and a Scottsdale investor who purchased 22 Valley homes within days of each other last spring.
Transnational funded loans worth nearly $2 million on seven of the homes but says it wasn’t notified the investor was buying multiple homes and his real debt level wasn’t disclosed on mortgage documents.
The investor never made a payment on the houses, which were foreclosed on last year. Most of the homes then sold at foreclosure auctions for tens of thousands of dollars less than the mortgages the investor took out on them. The suit was filed last year in San Francisco.
Jeff Matura, the attorney for Lending House Financial, said his client is regulated by Arizona’s Department of Financial Institutions and complies with its guidelines and met all those rules when it handled the Arizona mortgage loans involved in the Transnational suit.
• Tucson-based mortgage lender First Magnus is suing its former Valley loan officer, Tyson Rondeau, for fraud and negligence. First Magnus claims bad loans are costing it nearly $1 million.
Separately, the lender agreed last fall to pay a $200,000 fine after the Arizona Department of Financial Institutions found a number of violations, including a branch manager making false promises or concealing facts in 10 fraudulent loan transactions.
“This mortgage fraud, particularly cash-back deals, is a big problem,” said Felecia Rotellini of the Department of Financial Institutions, which regulates mortgage lenders, brokers and escrow firms.
“Civil actions are a great source of information for us and often confirm something we are already looking into.”
Follow the link to continue reading this article in the Arizona Republic …