Mortgage fraud rampant across the country

40 people indicted in 

Texas-Florida mortgage fraud scheme

Forty people have been arrested and charged in connection with a major mortgage fraud scheme in the Eastern District of Texas.  On March 10th, 2010, a 16-count indictment was returned by a federal grand jury.  The charges include one count of conspiracy to commit mail and wire fraud, 12 counts of mail fraud, and three counts of money laundering. 

The 40 defendants are from Texas, Florida, Massachusetts, Tennessee, and Georgia, are charged with one count of conspiracy to commit mail and wire fraud. Many of the defendants are also charged with various counts of mail fraud and money laundering.

Texas Mortgage Fraud Scheme Continued

John Barry, 41, of Windemere, Fla., owned and operated, TKI Group, Inc. and JAB Consulting, based in Florida.  Barry solicited real estate agents, property finders, mortgage brokers, title company attorneys or escrow officers, property appraisers, and straw buyers to facilitate his scheme. 

According to the indictment, Barry was able to convince lenders to approve mortgage loans for which the property values were inflated.  There were at least 114 properties, all residential.  The properties were located in the Texas cities of Allen, Arlington, Cedar Hill, Coppell, Corinth, Cypress, Dallas, Flower Mound, Fort Worth, Frisco, Granbury, Heath, Highland Village, Houston, Keller, Lantana, Lewisville, Little Elm, Lubbock, Magnolia, McKinney, Plano, Roanoke, Southlake, Spring, The Woodlands, and Willis.

U.S. Attorney Bales specifically noted the breadth of the financial scheme, 

“This indictment brings to light a criminal scheme that is quite breathtaking in its scope and beyond disturbing as far as the boldness of the fraud. The agents have done a remarkable job putting together this investigation and we look forward to presenting all of the evidence in court. Hopefully, others involved in mortgage fraud will be taking notice—we will be relentless in discovering, exposing and holding accountable those who have committed similar crimes.”

If convicted, the defendants face up to 20 years in federal prison for the conspiracy charge, up to 20 years in federal prison for each count of mail fraud charge, and up to 10 years in federal prison for each count of money laundering.

How to stay out of mortgage loan fraud -- Hud 1, Mortgage fraud check list, loan closing information

Mortgage Loan Check List

Including the HUD-1, closing tips, mortgage fraud links, real estate closing trouble spots!

Stay out of trouble!  Spot loan fraud snakes!

The Federal Loan Fraud Task Force is hard at work looking for buyers, investors, real estate and loan brokers and others who have broken lending laws.  The indictments include federal judges, doctors and lots of buyers, sellers and real estate investors.

The following check list, while not all inclusive, will help you stay out of trouble!

Application process:

Are you self employed?  If so, have there been income changes which are not reflected on your tax return?

Have you had a job change since making your application?  If so you must report it, including changing employers, change in income, and loss of job.

Have you had any changes in debt?  If you have incurred more debt or paid off substantial debt you must report it.  The lender will obviously want to know if you owe more money.  But it is also your obligation to report a major shifting of assets.  If you have less debt but less cash on hand, for example, the integrity of the loan might be deemed to be compromised.

Are you making more money than you did before?  Some loans are based upon income as a percent of the poverty level.  Some bond loans, for example.  If you end up making too much money then you will be committing loan fraud if you fail to disclose your new income.

Down Payment:

Did you borrow it?  You must disclose all sources of down payment. 

Was it a gift?  A gift from your father in-law is one thing.  A gift from the office manager from the mortgage company whom you just met is another.

Did you sell assets to get it after you made your loan application?  Trading assets that the lender thinks you need to work, for example your work truck, is may make a difference in qualifying.  

Is the seller or broker or anyone involved in the transaction helping you? Disclose.  As long as the lender knows about the deal and it is disclosed in writing to the loan agent, you have a deal.

Are you doing repairs on the property to get it?  Some loan programs allow you to take part of your down payment in the form of the value of repairs to the property, others don't.  Don't fudge on this one!

Are you getting a credit back at closing?

You must disclose where the down payment came from.  Side deals are not allowed.  Be honest, tell the lender where the dough is coming from!

Closing costs: All of the above apply to closing costs.

Contract:  General principle:  If it is in the contract you have the right.  If it is not in the contract you may or may not have the right.

Put it in the contract!  What is it?

a.  Adequate time to inspect the property.

b.  Adequate time to review the appraisal, the title documents, matters which may not be of public record and other factors.

c.  Your earnest money comes back under what circimstances?

d.  Make sure any agreements you make with the seller, the Realtor the loan agent and all others in the process are specified.  For example, the seller is going to credit money to you at closing.

e.  Make sure you disclose special relationships, that you are an attorney, you are a Realtor, you have an interest in the property perhaps as a partner or the owner of the company that owns the property.

f.  Will you have a right to a walk through of the property on the day of closing or are you taking the seller's word he will leave it in good shape?

g.  If you are buying a rental property, be sure you have an agreement from the tenants about how much rent has been paid and how much the deposits are.  They call this an estoppel agreement because once signed, it usually 'stops' the tenant from making claims he paid the rent or deposits are due.  Don't rely on just the leases, as agreements may have been made between the time of leasing and the time of your buying the property. 

h.  If you are going to occupy the property have in writing the date certain the tenant is going to move out.

Day of closing: Insist you get a copy of the closing documents at least two days prior to the date of closing.  Put it in the contract.  If you are not sure about a figure, don't be afraid to stop the entire process to check things out.

HUD-1

Are there any credits, charges, loans, gifts or other not disclosed on the HUD-1 settlement statement?  Make them fix it or get an attorney.

Settlement documents:  Most come right off of the HUD-1, but check a few lines to be sure.

Promissory notes: 

a.  Make sure the note agrees with the rate you you were quoted.  

b.  Are there any balloon payments?

c.  Is this an adjustable rate mortgage?  If it is, be sure you understand how the adjustment will be made, when the adjustment will be made, and that you are prepared to make the payment when the adjustment is made.  If the note adjusts in less than a year walk away from the deal.

Special points:

It is time to get an attorney when:

• The seller, the buyer, the broker, the loan agent, the lender or the attorney start talking about side agreements, essentially agreements the lender does not know about;
• You have a problem with the deal and the seller or broker is hedging on your down payment;
• A big problem is brought to your attention at the time of closing.  Usually, you can tell it is a BIG problem when someone comes to you and says, "By the way, we just have this little problem to figure out."  Big problems usually come in the form of interest rate changes, extra closing fees, unknown or undisclosed conditions of the property, and title issues.
• There are charges on the settlement sheet which you did not agree to.  Be sure to compare the lender's good faith estimate to the charges on the HUD-1.  Watch for those hidden charges like doc prep fees, courier fees, special loan review fees, and extra points or origination fees.

     Are you involved in a real estate "fix and flip"?  Flipping Frenzy
will clue you into some of the illegal practices.  

     Have you been the victim of discrimination?  Discriminatory practices are illegal.


     The Federal Mortgage Fraud Task Force  will give you plenty of ideas about how to get into trouble fast, hence how to stay away from mortgage fraud problems!

     This list is hardly all inclusive.  It provides some of the known trouble spots in your loan closing.  However, nothing can take the place of a professional opinion.  Don't be afraid to bring your attorney to closing!


    Best of luck,


    Uncle Tim

Real estate short sale costs Realtor long years in jail - Be careful what you do!

How to do short sales

......

and go to prison

Sergio Natera guilty of mortgage fraud

Real estate is a hot commodity today.  If you know what you are doing you can find great deals in the market place.  The problem is, you have to work very hard to do it.  Some people take short cuts when their greed gets in front of their common sense.  Short sales can make you good money, but you have to follow the rules.

A short sale transaction involves a mortgage holder or lender entering into an agreement to release its mortgage or lien on real property in exchange for payment of less than the total amount owed on the underlying debt. Many short sale transactions are legitimate.

Sergio Natera is a licensed real estate agent in Bridgeport, Connecticut.  He had a listing on a residential property representing the seller, Regions Bank.  Real estate agents have a fiduciary duty to their clients to get them the best price possible.

"There is no 'get out of jail free' card in mortgage fraud'

On December 5, 2007, another real estate agent presented an offer on Sergio's listing at $132,500.  Sergio saw an opportunity to make a healthy buck.  He told Regions Bank the best price they were going to get after tough negotiations was $102,375.  The bank trusted Natera and sold the property.

"One thing is clear, real estate brokers should not buy

their own listings"

Who was the buyer?  Sergio is no dummy, he arranged the sale to a shell company, Boss Asset Management, LLC which he owned or controlled.  Boss Asset Management limited liability company bought the property in July of 2009.  That puts a year and a half between the purchase and the sale.  Normally that is enough time to claim the property went up in value after the purchase.  Unfortunately, the guy who was no dummy accepted the offer of $132,500 and laughed all the way to the bank.  At least for awhile.

Article continued below

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The Selling Agent's Duty

by The Voss Group, San Antonio, Texas Hit this Button 

"Assume that any real estate agent is a seller's agent until you know otherwise. In most states, a real estate agent is required to disclose which party he or she represents at the first substantial contact with a home buyer whether it's in person, by telephone, by mail, or in an email.

• A seller's agent can help you find and purchase a property and may provide some of the same services as a buyer's agent, such as setting up your pest and home inspections and monitoring your progress from contract to closing.
• A seller's agent must disclose material facts about a property. Material facts include things such as a leaky foundation or roof and other known structural problems.
• A seller's agent cannot disclose personal information about the sellers or the seller's property, such as an impending divorce, foreclosure, or job change.
• A seller's agent has a duty to get the best possible deal for the seller, so always assume that any information you give a seller's agent will be passed on to the seller. Never disclose your "top dollar" or any other confidential information to a seller's agent.
• Working with a seller's agent may be a good choice if you do not wish to be tied to one agent. Seller's agents are compensated at closing from the seller's commission."

    While agency law differs by state, and therefore the obligations of the broker to the client may also vary based upon workng relationships and disclosure, in no case may a broker be dishonest with the parties he deals with.  When I seek the assistance of a professional Realtor it is a good start when the agency puts their obligations in writing as the Voss group has done so here.  Tim Paynter

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Continuation of article
What Sergio and many others forget is real estate sales are cut and dry.  It is almost impossible to cover your tracks because of all the paperwork that follows the sale.  At least a bank robber, if that is what one wants to be, can make a run for it.  You can't 'steal' real estate because it isn't going anywhere, no matter how much you try.  So there it is, all of the evidence.  The rocket scientist ends up not being so bright after all.

Connecticut has one of those thar Mortgage task forces.  That is a fancy word for mortgage police.  These guys investigate funny looking transactions.  When they find crooks like Sergio Natera they go at them like a piranha.  There is no 'get out of jail free' card in mortgage fraud.

"United States Magistrate Judge Holly B. Fitzsimmons will hand down justice for mortgage fraud"

The FBI has a message for dreamers who listen to the real estate seminar guys selling how to get rich quick in real estate bunko:

"In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes."

If you have been the victim of mortgage fraud the task force wants to know.  You can call  203-333-3512 and ask for the Connecticut Mortgage Fraud Task Force.  Trust me, you will get their attention.  You can also send an email to justice for fraudulent short sales.

"You can make millions in real estate"

Sergio didn't get very far in his plea bargain.  According to Nora R. Dannehy, United States Attorney for the District of Connecticut, Sergio pled guilty to bank fraud.  United States Magistrate Judge Holly B. Fitzsimmons will hand down justice for mortgage fraud relating to a short sale.  The 35 year old real estate broker may have a lot of time on his hands to think about how to get rich quick in real estate, how to do a short sale, and how to do a real estate short sale legally.  You can make millions in real estate but it takes a lot of work.  One thing is clear, real estate brokers should not buy their own listings. 

If you live in Colorado and have been involved in one of these deals you might want to give us a call for a consult.  720-951-1700. 

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