Cash back at closing sends investor and appraiser to prison gonzalez and westergom

Cash back at closing deal nets real estate investor

$6,000,000 bucks!

Appraiser Gary Westergom to prison!

Juan Carlos Gonzalez was a mover and shaker in Jacksonville real estate circles. He is a sophisticated real estate investor with a knack at what makes the mortgage man’s pen go click, click, click! His tactics were not overly inventive. Unfortunately for Juan, his real estate to riches plan got him free room and board for seven years!

"the investor walks out of closing with money in his pocket"

Gonzalez was an expert at 130% financing. Some people call it “cash back at closing”. The technique is simple. Find a property at a fire sale price, have it appraised for true market value, then ask the lender to fund based upon the appraised value. If it all works out the investor walks out of closing with money in his pocket and nothing down on a new investment to add to his portfolio.

The problem is, most lenders are not excited about handing money back to a guy who is speculating on real estate. Lenders figure real estate investing is a risky business. If it all goes right the investor makes a mint! The bank just gets it’s interest. If it all goes bad, the bank loses it’s shirt and the investor hires a bankruptcy attorney to get him out of the problems.  Most banks want the buyer to have a significant down payment.

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When is cash back at closing legal?

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Ralph Roberts, protect yourself against real estate and mortgage fraud

"I know of only a handful of situations in which receiving cash back at closing is legal:

1. You refinance your mortgage to cash out some or all of the equity in your home.

2. Your agent agrees to refund a portion of his or her commission at closing.

3. The buyer makes a deposit into the escrow fund, obtains a 100% loan, and then receives a credit back. This isn’t considered cash back at closing, because it is the buyer’s own money.

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Barry Cunningham, Real Estate Radio USA

"Let’s say I am selling my house for $300,000.00...I am offering 6% commission $18,000 is coming off of my net.  My house is taking a long time to sell.

What I need to do is lower the commission and offer the buyer an incentive

1. We’re going to keep the price at $300,000.00

2. We are going to offer a qualified Buyer a cash rebate of $7,500.00

3. My Agent and the Buyer’s Agent (if any) are going to split the remainder of the commission"

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Based upon the aggressive stance the government is taking in protecting the integrity of the institution of lending in the U.S., my suggestion is you consult legal counsel before entering into creative financing deals.  You know an attorney is being cautious when he advises you to seek advice.  Tim Paynter

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"An appraiser can sometimes be convinced to to puff his appraised values"

The solution? If you do enough business with anyone they are likely to favor you when it comes to bending the rules. According to court records, Juan Carlos got into bed with a real estate appraiser. Normally, appraisers are unbiased judges of property value. With a little wining and dining, an appraiser can sometimes be convinced to to puff his appraised values or over look details a lender should know, like maybe the purchase price and the appraised price are worlds apart!

Enter Barry C. Westergom, a 60 year old real estate appraiser in Jacksonville, Florida who owned or worked at JAX Appraisals, Inc.   Barry probably regrets the day he met Juan Carlos Gonzales. His association turned out to make him a fair amount of money and cost him a fair amount of time behind bars!  Here is the original indictment!

Eventually, the profit incentive went far beyond multiple $600 appraisal fees from a well healed client. Westergom eventually acted as a Juan Carlos bird dog. In one deal, he found a good investment prospect out of the area with a motivated seller according to the FBI.  The contract was negotiated for $490,000 on a house that purportedly was worth a lot more money.

"Most people who have $29,000,000 in mortgage loans have a large nest egg to back the debt"

At least Westergom said so. He negotiated the deal for the purchase and earned himself $12,250 bucks as the broker. Next, he got an appraisal fee for $550.00. 

An appraiser has the duty of impartiality, says Chet Boddy, Ethics and the Appraiser.  When the broker and the appraiser are the same person it is likely a violation of an appraiser's duty to remain impartial. The objectives of each party are usually opposed.  The broker wants to sell the house and get his commish, the appraiser is protecting the bank's interest to insure the buyer is not paying too much and the lender is not lending more than their guidelines permit. 

When Westergom acted as the broker and appraiser it made it a lucrative deal for almost everyone, except the seller who caved on the price heavily, and the bank who unknowlingly took all of the risk!  You can read about another seller who took it in the shorts, cliek for a story about short sale fraud here!

Gonzalez submitted first and second mortgage loan applications for the house reflecting a sales price of $625,000. The sales price was really $490,000.00  Fraud!   Gonzalez also submitted altered bank account statements showing significantly larger cash balances in the account than actually existed.  Fraud!  Most people who have $29,000,000 in mortgage loans have a large nest egg to back the debt.  

"The numbers worked for some fast pocket change, if $134K is pocket change, so the agent proposed the deal for his buyer"

The contracts were signed, the lender approved the loans and, at the closing, Gonzalez received $134,000, which was listed on closing documents as an "Assignment of Contract Fee." Westergom received $12,250 as a broker’s fee and his $550 appraisal fee.

The broker who had the house listed must have thought the hand of God reached from the heavens to arrange this sale. In a tough real estate market where buyers are choosy and many properties remain unsold, neither the “realtor”, Westergom, nor the buyer, Gonzalez, ever looked at the house before purchasing it, according to sources. The numbers worked for some fast pocket change, if $134K is pocket change, so the agent proposed the deal for his buyer.

"This was one of the deals that would put each in prison"

It is not illegal for a lender to give a buyer cash back at closing. Buyers and Lenders can enter into any type of financing arrangement they wish. What cannot pass under the law is for the buyer to fool the lender by submitting false contracts, false bank statements and signing HUD-1 documents which misrepresent the true nature of the purchase price and financing. Nor can appraisers over-value a house or fail to disclose material information to the lender, like the true purchase price of the property when they know.

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Complaint Details with State of Florida for Barry C. Westergom

Displayed is a listing of public complaints regarding the person or entity selected. Any person may inspect the case file and may obtain copies of any of the materials in the file. The Division does not represent your private interests. Any action taken by the Division will be on behalf of the State of Florida.
Name: WESTERGOM, BARRY C

Number Class Incident Date Status Disposition Disposition Date Discipline Discipline Date
2006005474 Licensed Activity 01/20/2006 Final Order Final Order 01/03/2007 Revoke License 10/03/2006
2002004607 Licensed Activity 05/22/2002 Final Order Stipulation 06/07/2005 Fine 08/11/2005
2001500548 Licensed Activity 09/10/2001 Final Order Nolle Pros 03/05/2007

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As Gonzalez and Westergom congratulated themselvers on being sophisticated real estate investors who know how to get deals done, little did they know what the future held in store.  This was one of the deals that would put each in prison.

"He was able to pocket over $6.2 million buckaroos"

Before the walls came crashing down on these movers and shakers in the real estate business, Gonzalez acquired about 55 houses using the technique. He was able to pocket over $6.2 million buckaroos. Westergom made about $100,000 in commissions and fees. The conspirators’ fraudulent acts resulted in lenders extending more than $29,272,000 in first and second mortgage loans.

With the Florida real estate market crashing, likely any gains made were lost. The biggest loss of all was freedom. Gonzalez, who put $6 million in his pocket got 7 years in the pokey. Westergom, who put $100,000 in his pocket, got 4 years. Which man had the better attorney?

Get rich quick in real estate guys don’t get the point. First, the high flyers often never get rich. So, me catastrophic event, often a downward shift in the market, puts their investment portfolio under water. That is when their fraudulent activities are easy to detect because their mortgages go into default.  Various organizations are watching for mortgage fraud, including the Mortgage Fruad Blog, the Legal Corner, the National Mortgage News, Real Estate and Mortgage Fraud News and Information, Real Estate Fraud and Mortgage Fraud News and Information, and a varitey of governmental task forces like the Mortgage Fraud Task Force.  They rely on private consultants like Curt Novoy who has been there before and his company Corporate Mortgage Advisors.

"All he did was propose creative financing concepts to greedy real estate investors"

The sum of $29,000,000 in mortgage money is a fair chunk of change to go into default. It didn’t take long to spot a rat in Juan Carlos Gonzalez. As investigators reviewed the files, a prominent document stuck out in most of them.  The appraisal supporting the loans on the 55 houses was completed in most cases by Barry C. Westergom!  The Hud-1 settlement statements testified to the rest of the story about how an illegal cash back at closing scheme works. 

Real estate is an excellent investment tool if you know how to use it right.  Cut corners and you could have a lot of time on your hands.  For a comprehensive look into conservative real estate investing check out my blog, Real estate millionaire!

Meanwhile, some real estate seminar guy was sitting on his yacht sipping margaritas. He wasn’t the guy who borrowed the money and defrauded the lender. All he did was propose creative financing concepts to greedy real estate investors! Maybe you better buy a yacht!

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. 

The images you see are from Google Images, be sure to give them a try when you do your next blog!

attorney guilty of mortgage fraud, real estate no down payment scheme

Cash back at closing cost attorney 20 years, Guilty of mortgage fraud

Attorney fudges loan financials

How to buy real estate and get cash back. How to buy real estate with no down payment. "Nothing down".  How many times have you heard that real estate investment pitch? A Pittsburgh, Pennsylvania, attorney, Robert Danenberg, played the mortgage fraud game and now faces 20 years or more in prison. The official charges are wire fraud but it all works out about the same.

"How to buy real estate with nothing down"

How did the cash back at closing scheme work? A "co-conspirator", likely a real estate broker or loan broker, convinced buyers and sellers to write real estate contracts for inflated prices. The seller got the price he wanted and the buyer got in with nothing down and sometimes cash back at closing.   What's the beef?


Since the lender required a down payment, the cash at closing had to be covered up.  The cover-up was done by paying contractors twice.  Their bid was likely inflated and the buyer got a kick back.  In other cases, there may have been no contractor at all.  The "contractor" was really the buyer.  In still other cases the loan agent and even the attorney gave the buyer his down payment money from large fees they were making.

In order to keep things clean with the buyer and seller a side agreement was likely used. 

“A side agreement is a side contract between the buyer and the seller which is not included in the closing documens"

A side agreement is a side contract between buyer and seller which is not included in the selling documents.  The mortgage company does not know anything about a zero down payment loan because none of the paperwork sent to the lender mentions it.


Buyers and sellers and many mortgage and real estate brokers insist no money down financing is harmless. The buyer gets the property, the seller gets his sale. Real estate brokers and loan agents get their fees.  

"The one who gets stuck holding the bag in zero down finance deals is the lender"

The one who gets stuck holding the bag in zero down finance deals is the lender. He thought he had a lower risk loan because the buyer had a stake in the purchase. History has shown a buyer who makes a down payment is less likely to default on his loan. When the buyer invests nothing the loan becomes more risky. Of course, the less owed, and the more equity a property has, the less risk, too. Since many loans are sold to third party investment funds, the investment fund is defrauded, as well. They purchased the mortgage loan based upon the buyer having a stake in the purchase of the property.

"There is nothing illegal about no downpayment financing"

While thousands of buyers and sellers have participated in these kinds of fraudulent mortgage loans, and gotten away with it, the government is getting tough on fake closing documents. It usually begins when an unusually large number of loans start going bad. The United States Department of Housing and Urban Development (HUD) sends an investigator and things start rolling down hill from there. There is now a Mortgage Fraud Task Force which is comprised of a variety of investigative agencies.

There is nothing illegal about no downpayment financing. Buyers and sellers can still sell property with zero down financing if they wish. The crime happens when a no down payment or cash back at closing deal is done and false statements are made at the closing. If a lender, closing agent, attorney or real estate broker ask you to sign a document which is false, get up and leave. No property, no real estate investment, is worth spending 20 years in prison.

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