Fraud Files V

By the way....

'"California has been called the fraud capital of the world. There are so many people here, and people are so mobile that identifying someone can be a real challenge."'

"According to a May 2005 FBI Financial Crimes report, the number of reported mortgage-fraud cases jumped from 4,225 in 2001 to 17,127 in 2004; false-statement cases more than doubled - from 2,976 in 2001 to 6,784 cases in 2004."

Trouble for Fannie...

"Still more errors have turned up in Fannie Mae's government-ordered review of its accounting, the mortgage giant disclosed Tuesday. It also said it doesn't expect the review to be finished before the second half of the year."

"The government-sponsored company, which finances one of every five home loans in the United States, said it had found accounting errors in addition to those it disclosed on March 13. Fannie Mae said it will miss a regulatory deadline Wednesday for filing its financial report for the first quarter."

"The company also has said that it expects an upcoming internal report to show that its financial controls remained insufficient as recently as the end of last year."

'"We have substantially completed a comprehensive review of our accounting policies and practices in order to determine whether these policies and practices are consistent" with standard accounting principles, Fannie Mae said in its filing Tuesday with the SEC. "Restating our financial statements is requiring a substantial amount of time and resources because the restatement entails significant complexities."'

"Washington-based Fannie Mae said the newly disclosed accounting errors involve transactions in its business of buying home mortgages from banks and other lenders and bundling them into securities, and the guaranty fees it charges the banks and other lenders. The company said it could not yet determine the effect of the errors on its financial situation."

"Similarly, Fannie Mae in March disclosed new accounting problems that had been uncovered in several areas, including loans, investment securities, houses acquired through foreclosures, interest on delinquent home loans, and reverse mortgages."

"They all are in addition to the accounting-rule violations that came to light in September 2004 involving derivatives, the financial instruments Fannie Mae uses to hedge against swings in interest rates, and its mortgage commitments."

"Federal regulators in 2004 accused Fannie Mae of serious accounting problems and earnings manipulation to meet Wall Street targets, and the Securities and Exchange Commission ordered the company to restate earnings back to 2001 — a correction expected to reach an estimated $11 billion. The Justice Department is pursuing a criminal investigation."

"Fannie Mae and Freddie Mac were created by Congress to pump money into the $8 trillion home-mortgage market to keep interest rates low. They buy and guarantee repayment of billions of dollars of home loans each year from banks and other lenders, then bunch them together into securities that are resold to investors worldwide."

"Freddie Mac, which had its own accounting scandal in 2003, has said that it will report its financial results for 2005 this month rather than in March, as previously planned, because it needed more time to institute a new method of valuing some assets. In March, Freddie Mac estimated its 2005 income at $2.5 billion, down from $2.9 billion in 2004."


THE NEWS lately about mortgage lending is not good. Consider these developments:

"The Fair Housing Center of Greater Boston reported this week that, in recent testing it conducted, discrimination against minorities by mortgage lenders occurred in nearly half of the test cases."

"The Massachusetts Community & Banking Council released a report earlier this year showing that blacks and Latinos are more than five times more likely than whites to get high cost mortgages."

"The Sunday Globe Magazine correlated the growing percentage of high cost loan rates in Boston's neighborhoods with the growing rate of foreclosures in those same neighborhoods."

"High cost loans and foreclosures mean a loss of wealth in the community and a downward spiral of destabilization that benefits no one."

"Because of the virtual absence of affordable housing in the Commonwealth, many families try to stretch beyond their means to buy homes. Lenders should not make this situation worse by preying on people desperate to own their own homes."

"No lender should take advantage of inexperienced borrowers who lack the ability or means to pay back debt."

"State legislation is pending that would require largely out-of-state mortgage companies to have Community Reinvestment Act-like responsibilities similar to local banks. Passage of the Homeownership Investment Act would extend responsible lending requirements to these mortgage companies, including those that engage in questionable lending practices. The legislation would encourage them to join area banks and credit unions in providing affordable and responsible mortgage lending options for all of the Commonwealth's homebuyers and homeowners."


Great Financial Mortgage President weighs in on why more and more consumers fall victim to veiled promises offered by unscrupulous agents.

(PRWEB) -- "When shopping for a new loan or simply needing to refinance, then be aware – be very aware of whom you do business with, warns Gavin Fenske, president Great Financial Mortgage, Inc.", http://www.greatfinancialmortgage.com/.

"What is promised to save you hundreds of dollars can end up costing thousands."

"Predatory lenders are finding easy prey on innocent consumers looking for the best rate either on a new home loan or to refinance. Fenske describes how one client who came to him after a horrifying ordeal with a nationally known lender thought she was getting a good deal, but when it came time to sign the loan documents she got a real shock; the paperwork came, the fees were a lot different and the payment was no where near what had been discussed initially ... It was about $1,000 more a month."

"Not only that, the fees skyrocketed to nearly 10,000 dollars more. Fenske explains she was a victim of bait and switch and -- it’s happening all too often."

"Here’s an example of how it works: the lender baits by saying you’re getting a 30 year fixed-rate loan at 6.5% with no points, no pre-pay penalty, and no fees. Then somewhere in the process, either at the very end or right before the end when you're ready to sign paperwork, the loan is switched for something else."

"You’re now faced with an 8% loan and you're paying 1 point, along with other "administrative" costs, which makes the monthly payment more expensive than what was originally quoted. In many cases, this precludes homebuyers from qualifying or for those refinancing, to think twice. But with unscrupulous agents, it doesn’t end there."

"To make it worse, should you decide to proceed, you are most likely unaware that you will have to pay five thousand or more just to get the loan. And since there is a pre-payment penalty, you cannot re-finance until the pre-determined time, without paying a hefty penalty. This could cost you thousand and thousands of dollars."

"There are no hidden cameras to catch these predators in action. So how do you protect yourself from such lenders? Fenske says it’s imperative that everyone get a good faith estimate - in writing - from the lender right at the beginning of the process."

"He notes that a good faith estimate is going to show how many points you're paying for the loan, how much the escrow fees are and how much the title fees are. “It's basically a summary of all the fees and it should within plus or minus $500 of what the final figures are,” he explains."

'“But even before the estimate be sure and research the different types of loans, be wary of low rate deals, shop around and always know whom you are doing business with. It doesn’t hurt to check up on companies through the Better Business Bureau.”'

Meanwhile in Mississippi...

"Eleven people have been arrested on criminal complaints charging them in a multi-million dollar mortgage fraud scheme. A Madison woman living in the Adderley Gardens subdivision says she was a victim."

"Angel Mangum, 30, says she bought a home from Leroy Garrett through Premier Mortgage in Ridgeland to later find the house was over-appraised, had less square footage and was unfinished."

"Garrett has been charged along with ten others in a mortgage loan fraud scheme. He is also charged with mail fraud."

'"I tried to sell this house back in February, and I found out the house was over appraised," Mangum told WLBT. "Fransene Berry [who was also arrested] did the appraisal. It's like $150,000 missing right now that I would have had to pay out of my pocket if the house did sell." '
"The U.S. Attorney's Office says this group practiced "flipping" -- buying and selling the same property at an inflated price on the same day."

"Homes were sold to either unsuspecting buyers or to one of the co-conspirators participating in the scheme."

"Mangum, a bail bondsman, says her previous Madison home was in foreclosure when Garrett convinced her that she qualified for a program that would allow her to move to a home on Selby Drive. She grew suspicious when Garrett refused to talk with her about the over-appraisal. She said she then filed a complaint with the appraisal board."

"The U.S. Attorney's Office says check out your real estate agent. You should be suspicious if the mortgage broker wants to put money into your bank account to prove to the lender you have money in the bank."

"Also beware if your paperwork shows that you are bringing cash to the settlement for a down payment when you did not."