Fraud Files VI

I have noticed more and more people finding this site through their yahoo, google, msn searches for mortgage fraud. Many are looking for names of specific people associated with mortgage fraud, others are naming specific companies... looks like its time to check the Fraud Files.

The Fraud Scene...

Federal housing and financial authorities reached an agreement to share information about mortgage fraud, two U.S. regulators said Monday. The Office of Federal Housing Enterprise Oversight will share its findings about fraud with the Financial Crimes Enforcement Network, which will use them in a database, the two U.S. regulators announced. The database is accessible by law enforcement officials researching possible suspicious transactions at banks.

"Thieves skimmed at least $1 billion from America's mortgage market last year, law enforcement officials said Monday."

"Appalled at being named the top mortgage fraud hot spot in the nation for three straight years, Baker said that one year ago, his state passed the Georgia Residential Mortgage Fraud Act. The law makes it a felony, punishable by one to 10 years in prison, to misstate, misrepresent or omit facts in a real estate transaction, with intent to defraud, he said. The law also provides for fines of up to $100,000 an offense if a pattern of illegality is proved, he said."

'"It's getting people's attention," said Baker, whose office has more than 100 cases under way."

'"Most importantly, we don't have to wait until money is actually taken. We can intervene as soon as a proposal for fraud has been made. That's allowed us to get to the core - the deceit - before the lending institution has been bilked of millions, and a neighborhood has literally been destroyed."'

"Tough laws will put a dent in America's massive mortgage fraud problem. But no law alone will eradicate this scourge."

"Georgia's law won praise from conference speakers but not all audience members. One possible reason: It makes lenders criminally liable for fraudulent loans."

'"You could be a defendant. Please bear that in mind," said mortgage-law specialist Michael J.M. Brook, an attorney with Lanahan & Reilley LLP in Santa Rosa, Calif."

"Georgia's mortgage fraud law is serving as a national model, Brook said. Four states have similar laws pending, and California is considering following suit, too, he said."

"Lenders must stop hiding their insider scandals and report wrongdoing to law enforcement agencies and internal industry databanks, said John Arterberry, executive deputy chief of the U.S. Department of Justice's fraud section. That means filing a suspicious activity report."

"This year, officials warned, crooks will work overtime and exploit the panicky and overeager as the nation's housing sales slow."

'"We're arresting people left and right," David McLaughlin, assistant attorney general of Georgia, said at a Mortgage Bankers Association fraud conference. "But the problem is still growing off the charts - and it's morphing. As we chase them down, the fraudsters change."'

"Schemes vary widely, as do the participants, McLaughlin told a crowd of more than 300 at the meeting sponsored by the Washington D.C.-based trade group. He said he sees deceptive sellers, overtaxed buyers, builders desperate to unload inventory, greedy loan officers and other housing professionals pushing iffy sales deals to get their commission, plus an assortment of criminals seeking quick and easy profits."

"Mortgage fraud has grown more sophisticated and dangerous, the prosecutor said. "But its basis always is a fraudulent property appraisal," he said. By pegging values higher than warranted, he said, "the fraudsters pocket the extra cash."'

"The losers from the fraud include home buyers, mortgage lenders and financiers, plus neighborhoods skewed by inflated values and hurt from foreclosures, McLaughlin said."

"Karen Spangenberg, chief of the FBI's financial crimes section, called mortgage fraud "the fastest growing white-collar crime in the United States." Losses topped $1 billion last year, her agency's records show."

'"Dollar losses almost doubled from 2004 to 2005," she said. Bank allegations of fraud, known in the industry as suspicious activity reports, are running 33% higher this year than last year, she said."

"The attraction is enormous: a $2 trillion, fast-moving mortgage business, rife with consumers who don't fully understand the paperwork they sign, said John Robbins, chairman and chief executive officer of American Mortgage Network."

'"That provides opportunities for a few bad players to take advantage," Robbins said. "Our concern is, as residential mortgage debt grows from $8 trillion to $20 trillion over the next 15 years, many more opportunities will be available."'


In Northern California....

A Hillsborough man is accused of bilking millions from people in a real estate scam. Prosecutors say he stole the life savings of his elderly victims.

Michael Schneider of Hillsborough now faces 27 felony counts involving grand theft, fraud and embezzlement. The charges are based on just a handful of victims right now, but the prosecutor expects as many as 80 people could be involved, many of them elderly.

Dale Lohman, Deputy D.A., Major Fraud Unit: "The defendant in this case was getting investors, mostly older people, to invest in loans to be secured by deeds of trust on real property on houses in the Bay Area."

The prosecution says Michael Schneider ran his scheme through his Santa Clara based real estate loan company called California Plan. His clients acted as private lenders, thinking they were making a financial investment secured by real property. However, Deputy District Attorney Dale Lohman says their investments were far from secure.

Dale Lohman: "In some cases, Mr. Schneider provided them with a forged deed of trust. It appeared to be a document recorded stamp actually belonged to a different loan."

This is an example of a real deed of trust for a property on Eagles Lane in San Jose. But you'll see the recorded stamp at the top actually matches that of another deed of trust -- same number, but this one for a property on Oakberry Way in San Jose. The prosecution says Schneider cut and pasted the documents -- the forged one is worthless. This is just one example of the elaborate scheme prosecutors say Schneider was working.

Dale Lohman: "We're talking potentially in excess of $50 million dollars."

Michael Schneider lives with his family in a multi-million dollar Hillsborough estate. He's already declared bankruptcy for his business, Callifornia Plan.


In NY

"The fugitive mastermind of an elaborate $12 million mortgage fraud scheme was captured in Brooklyn yesterday by detectives acting on information provided by the Daily News, police said.
Owen Larman, 33, indicted in August for allegedly orchestrating 33 fraudulent mortgages, was stunned when he was grabbed by detectives from the NYPD-U.S. Marshals Regional Fugitive Task Force."

"Larman is charged with defrauding seven banks and mortgage companies in the past six years by falsifying documents to pump up the values of Brooklyn buildings he was buying and selling.
Working with six accomplices, including a phony building appraiser, Larman inflated the value of buildings through a series of paper sales, according to Brooklyn District Attorney Charles Hynes."

"Larman is a fast talker who flashed cash and drove a Mercedes-Benz and a Range Rover. He romanced several women he used as "straw buyers," who allegedly rented out their names for mortgage applications, deeds and other paperwork, according to the indictment."

"He allegedly pocketed the difference between the actual sales price of each home and the inflated mortgage with each illicit purchase flip, targeting buildings in Crown Heights, Bedford-Stuyvesant and Bushwick."

"For example, using several straw buyers, Larman bought and sold a building at 510 Lafayette St. five times in four years, netting $743,790. He didn't make mortgage payments and finally walked away from the building."

In Georgia...

"Rebecca Marie Hauck pleaded guilty May 15 in federal district court to being part of a mortgage fraud and bank fraud scheme that left a trail victims in Georgia and other parts of the Southeast."

"Hauck and co-defendant Matthew Bevan Cox, who remains at large, rented properties from true owners and fraudulently erased mortgage liens on the properties. The defendants then stole the identities of the owners and fraudulently obtained multiple new mortgage loans on the properties. After they executed the scheme in one location, they changed locations and perpetrated the same fraudulent scheme."

"Hauck was indicted in September 2005 on 42 counts of bank fraud, wire fraud, interstate transportation of fraud proceeds, identity theft, money laundering and conspiracy. The indictment was unsealed on March 21, when she was arrested in Houston by the U.S. Secret Service. Hauck pleaded guilty to conspiracy and bank fraud. She could receive a maximum sentence of 35 years in prison and a fine of up to $1.25 million."

Sentencing is scheduled for July 31 before U.S. District Judge Timothy C. Batten Sr.

'"This case involves significant losses to victim lenders in several states," said U.S. Attorney David E. Nahmias. "Even worse, the scheme clouded property titles on numerous residences when the defendants stole homeowners' identities and placed multiple loans on the houses. We hope the public can help us locate Matthew Cox so that he too can be brought to justice."'

In Texas....

"A 31-year-old man was arrested on a charge of theft, accused of bilking a Houston Texans football player out of more than $400,000 in a mortgage fraud scheme."

"At least one other Texans player could be a possible victim in a case with accusations of fraud involving real estate, luxury cars and hundreds of thousands of dollars."

"According to court documents, Simmons, on June 17, 2005, gave Moore a check for $235,000 as an investment in Moore's business, DMO Investments."

"Six months later, Simmons handed over another check for $200,000 and $15,000 in cash.
Simmons told investigators he thought the money was to be used to purchase foreclosed properties that would be renovated and then sold."

"In return for Simmons' investment, Moore gave him deeds to two properties. According to the 14-page arrest warrant affidavit, the two properties Moore handed over to Simmons were not owned by Moore."

"In the affidavit, investigators described several instances in which Moore used a second party called a "straw buyer" to purchase luxury vehicles such as Hummers and Land Rovers.
The straw buyer admitted making false statements to obtain the credit necessary to buy two BMWs, a Bentley, a Land Rover and two Mercedes for a total of more than $475,000."

"Police think the vehicles were handed over to Moore, who resold them or kept them for his own use."

"Moore told the straw buyer that "those cars would then be sold to professional athletes who have the cash flow to pay the full price for the cars," the affidavit said."

"At least one other Texan, Vernand Morency, was named as a possible victim in the various schemes described in the affidavit."

In Colorado...

"Colorado and Alaska are the only two states in the country not requiring regulation of mortgage brokers. That means anyone can call themselves a mortgage broker and gain access to your most critical financial information, including a four-time felon."

"In a hidden camera investigation, 7NEWS caught mortgage broker Wayne Martin giving our undercover producer a sales pitch."

'"I've got a good standing with the state ... A lot of the brokers who were kicked out of places out east like Florida are migrating and landing here, and there's nothing to stop them," Martin said.
Martin believes he's talking to a prospective customer but he doesn't realize he's also talking in front of two hidden cameras."

"When a 7NEWS producer asked, "They don't do background checks or anything, so how do you know you're not dealing with a crook?"'

"Martin responded, "You don't. Unfortunately, today, you don't."'

'"How many loans have you done in the past year?" the undercover producer asked.
"Four hundred," Martin said."

'"You've done 400 loans in the past year? Firemark?" the producer asked."

'"Firemark, yes. I've personally done about 225," Martin said."

'"Do you have a criminal record?" the producer asked."

'"No ... No criminal record," Martin said."

"This moment crystallizes the risk Colorado residents must navigate in the uncharted world of mortgage brokers. During the past several years, 7NEWS investigators have exposed unethical and illegal practices of several mortgage brokers, the financial struggles of their victims and the unsuccessful plans, proposals and promises of state lawmakers."

"Lending experts believe the additional risk inside Colorado's mortgage industry costs everyone in the state higher lending rates. The FBI's most recent figures rank the state eighth in mortgage fraud."

'"It's incumbent upon anybody that's getting a home loan to be sure who it is they're dealing with," said Scott Meiklejohn, the executive director of the Colorado Association of Mortgage Brokers, a trade organization with no regulatory authority."

'"If we asked a mortgage broker if he had a criminal history and he lied to us, what would that say to you?" 7NEWS Investigator Tony Kovaleski asked."

'"Don't use that mortgage broker, that's for sure," Meiklejohn said."

"A few days after that morning meeting in front of our hidden cameras, 7NEWS returned to talk to Martin with the cameras rolling."

"Criminal records uncovered by 7NEWS showed that the legal system convicted Martin of four financial felonies in three states. He served prison time in Arizona and Colorado."

'"A criminal history in Arapahoe County -- a felony charge. And you lied to us about it?" Kovaleski asked. "Why lie about it?"'

'"It's no one's business but mine, sir," Martin said."

'"I think there's many convicted felons operating in Colorado," Meiklejohn said."

"All of Martin's felony convictions came before he was a mortgage broker in Colorado."

"Legislation on its way to Gov. Bill Owens will require regulation for mortgage brokers and will likely prevent individuals such as Martin from working in Colorado and accessing your critical financial information."