If you are a member of the so-called “Greatest Generation” or an older baby boomer, I have great news for… you are part of the most affluent group of Americans who have ever lived. The bad news is that everybody knows it, including con artists.

While you earned your comfortable lifestyle the old fashioned way, con artists are determined to take a shortcut to their lifestyle of the rich and famous by fleecing you out of your fortune. My advice? Keep one hand on your wallet, a close eye on your bank account, and a skeptical ear whenever you hear somebody offering you a great deal on a piece of property.

Americans who are affluent enough to afford a second home are particularly attractive targets for a con job I like to refer to as the second home scam. This particular type of scam always involves the purchase (or at least promise) of a second home, but it can take a variety of forms. Here are some of the warning signs:

• Guaranteed appreciation: In real estate, appreciation and profits are never guaranteed. Housing values rise and fall.
• Preconstruction specials: Any offer of special deals, especially cash back, if you BUY NOW raise red flags. When builders are financially strapped for cash, they may be tempted to scam buyers in order to save their business by way of a builder bailout.
• Glitzy advertising: Real estate con artists often try to dazzle their victims with fancy marketing materials so people will hand over their money without looking at the details, the property, or the documents.
• Offers to manage the property: Someone selling you a property, particularly an investment property, may offer to manage everything for you–find renters, collect the rent, pay the mortgage and property taxes, and so on–and then never do it. This type of scam is commonly known as chunking.
• Pressure to buy site unseen: Anyone who discourages you from visiting a property before buying it is probably crooked. They may tell you that the property has renters, and you certainly “don’t want to inconvenience your future tenants.” They don’t want you looking, because you will see the truth.

To defend yourself against these common second-home scammers, watch out for the warning signs and take the following precautions:

• Don’t buy on impulse. People often get excited about a vacation hot spot, buy there, and then learn that it’s not quite paradise in the off season.
• Spend your time checking out neighborhoods and homes in the area. A second home is not just a purchase decision… it is a lifestyle decision.
• If you are buying the second home as a vacation (seasonal) home, consider renting a place, perhaps in different neighborhoods in the area over an extended period of time. You may rent a different place for two to four weeks every year over the course of two or three years. This helps you determine if you really want to own property in the area and which neighborhood you would find most appealing.
• Wait at least one year after the death of a spouse before purchasing a property or moving. This gives you time to adjust and make more rational decisions.
• Hire a buyer’s agent to look for homes and represent you. Don’t simply contact a builder, talk to the representative in the model home, call the number on a For Sale sign, or contact someone who is selling real estate online. If you do that, you are dealing with the seller’s agent and have nobody representing your interests.
• Don’t trust what you see on the Internet. People can post photographs and online video tours of anything they want to dazzle the eyes and make you believe that they are offering an incredible deal. A con artist can build a million dollar virtual home on the Web in matter of minutes that simply does not exist in the real world.
• Don’t trust home values that you may see online. Some home valuation sites on the Internet are better than others, but they are all susceptible to fraud. Hire an independent appraiser to give you an honest, qualified opinion of a property’s value.
• Don’t buy anything site unseen. No matter what someone tells you, you have to inspect the property with your own two eyes and have it professionally inspected (by an independent home inspector), prior to closing. It’s like buying a car, you have to kick the tires.
• Hire your own people to check it out. Never rely on the seller’s agent, appraiser, inspector, loan officer, or title company to make sure everything is legitimate. If the seller is a con artist, these people are probably accomplices or at least willing to look the other way.
• Never close on a newly constructed property before construction is complete or before your inspector has given it his seal of approval.

A second home can be one of the best investment and lifestyle decisions you will ever make, as long as you do your homework and have the proper people in place to protect your interests. Let down your guard for even a moment, and you become a prime target for a greedy con artist.

In a follow up to Monday’s post about a Colorado Real Estate appraiser whose license was suspended over suspicion that she over valued properties, the appraiser in question, Julie O’Gorman, has hired an attorney and is denying claims that led the Colorado Division of Real Estate to pull her license. From the Northern Colorado Business Report:

O’Gorman denied the allegations in a statement issued Friday by her attorney, Daniel Foster. She is seeking a motion from the courts to stay the order until a hearing can be held. Foster’s statement indicates that many of the charges against O’Gorman date back to 2002 and that she has cooperated with the board during its investigation.

“It is unfortunate that the board has chosen this PR strategy in an attempt to damage Ms. O’Gorman’s professional reputation and to try and use her as a scapegoat for many industry-wide problems,” Foster wrote.

More on this story from the Greeley Tribune:

“It’s just been really hard on everybody here,” said Gloria Prim, a bookkeeper for Front Range Real Estate Consultants, of which O’Gorman is president and owner.

Prim said O’Gorman is not allowed to work nor is she allowed to visit her business during the suspension. A hearing has been scheduled for Aug. 2, but no hearing was held before the appraisers board issued a “summary suspension.”

Division of Real Estate Director Erin Toll said Friday the suspension was a rare move because it does not involve a hearing.

Appraisers work with mortgage brokers, real estate agents and other entities to determine how much a piece of property is worth. They compare similar properties and use various factors to come up with fair market prices, or valuations.

Toll said O’Gorman’s suspension was necessary because O’Gorman had been overvaluing property in the area. That leads to high foreclosure rates, she added.

But O’Gorman’s attorney, Daniel Foster of Denver, said Monday the suspension was an “absolute abuse.”

“They want to make an example of someone in order to try and show that they’re getting tough on any of the ills in this industry,” Foster said. “It’s easy to pick out a person and point your finger, make unsubstantiated allegations, and the best part is, they don’t even have to give you a hearing.”

He filed for an injunction to delay O’Gorman’s suspension pending a hearing, but he has not yet been scheduled to appear in court on the matter.

O’Gorman was told not to comment about the case.

O’Gorman’s situation clearly illustrates that there are two sides to every story. Rachel Dollar, the co-author of my next book (”Protect Yourself from Real Estate and Mortgage Fraud: Preserving the American Dream of Homeownership,” which is being published in August by Kaplan Publishing), is correct when she tells the readers of her blog that the information and notices contained on the Flipping Frenzy blog are intended to summarize recent developments in real estate-related fraud cases nationwide. The posts on Flipping Frenzy are presented as general research and information and are not intended, and should not be regarded, as legal advice or official rulings. Much of the information on this site–including that pertaining to O’Gorman–concerns allegations. All persons mentioned in our postings are presumed innocent, including O’Gorman, unless convicted of a crime.

The Colorado Department of Regulatory Agencies announced last Friday that the state’s Division of Real Estate issued an emergency summary license suspension of Loveland, Colorado, appraiser Julie M. O’Gorman. Summary suspensions are rare and used only where the public’s safety or welfare requires immediate action.

The Board of Real Estate Appraisers, operating through the Division of Real Estate, claims that O’Gorman grossly overvalued eight properties, most of which were in the Greeley, CO, area. These eight properties are the subject of charges previously filed against O’Gorman. The emergency action was precipitated by O’Gorman’s appraisal of the Los Leones Ranches in Walsenburg, CO, for a conservation easement.

Conservation easement valuation requires specialized expertise that the Board says O’Gorman did not have. A conservation easement is a legal agreement that prevents the development of a parcel of land to protect natural resources. Conservation easements entitle a landowner to significant state and federal tax credits based upon the appraised value of the land. The greater the valuation, the greater the tax benefit to the property owners.

In a separate case, the Board assessed a $24,000 fine against Pueblo, CO, appraiser James Esters for overvaluing eight properties. Esters agreed to permanently surrender his appraiser license and pay $7,500, the balance of the fine becoming due should he attempt to reapply for licensure.

Overvaluing property contributes to rising foreclosure rates.

Last July, a survey found that only one percent (1%) of Florida’s homeowners indicated that becoming the victim of a real estate scam was their biggest concern. Thank goodness then that the Florida State Legislature did not set its 2007 legislative priorities according to what homeowners feared most. Yesterday, Florida’s governor signed into law legislation ensuring that all Floridians who participate in the American dream of home ownership receive more consumer protections, especially with regard to Real Estate and Mortgage Fraud.

The new law, which goes into effect later this year, creates a comprehensive consumer protection package relating to mortgages, and makes mortgage fraud a third-degree felony in the state of Florida. Bill provisions also provide that mortgage brokers and lenders supply to borrowers detailed disclosures for various loan products, and that in every mortgage loan transaction, mortgage brokers and lenders notify a borrower of any material changes in the terms of a mortgage loan that was previously offered to a borrower within three (3) business days after being made aware of such changes by the lender, but not less than three (3) business days before signing the settlement or closing statement.

SB 1824 also authorizes Florida’s Office of Financial Regulation to take enforcement action against any mortgage brokers or lenders who violate the federal Real Estate Settlement Procedures Act or the federal Truth-in-Lending Act.

As a part of a comprehensive plan to prevent predatory lending and protect families facing foreclosures, the Governor of Massachusetts has filed legislation to criminalize mortgage fraud. Governor Deval Patrick’s bill follows several regulatory changes already put in place to address the rising tide of foreclosures in Massachusetts. In April, the state established a hotline for consumers and began assisting homeowners in crisis.

The proposed legislation, “An Act Implementing the Division of Banks Mortgage Summit Recommendations,” implements recommendations from the the state’s Mortgage Summit Working Group (convened in response to rising foreclosure rates). The Working Group included nearly 50 participants from government agencies, non-profit organizations, and the mortgage lending industries who convened to develop a comprehensive foreclosure prevention strategy.

The bill as proposed includes the following provisions:

• Criminalizing mortgage fraud. In response to rising instances of mortgage fraud, the bill defines mortgage fraud in statute and create criminal penalties for violations.
• Prohibiting abusive foreclosure rescue schemes. With many people facing the threat of foreclosures, unscrupulous individuals and groups have preyed upon consumers’ fears of losing their homes by promising to allow homeowners to stay in their home in exchange for signing over the property. Many people who fall victim to this scheme think that they are making mortgage payments when in fact they are paying rent. This bill would prohibit such agreements unless the purchaser is a direct relative.
• Requiring a Notice of Intent to Foreclose and Right to Cure. The bill sets out a right to cure for a consumer that is in default and requires the holder of a mortgage to inform the consumer of this right in addition to the intent to foreclose if the consumer does not cure the default.
• Prohibiting a lender from making an adjustable rate subprime loan unless the borrower opts-out. In reviewing default rates and foreclosure information, subprime fixed rate loans have performed well and allowed consumers with impaired credit to reestablish their credit history. Subprime adjustable rate mortgages (ARMs), on the other hand, have very high default rates and higher foreclosure rates. The Massachusetts bill would prohibit any lender from making a subprime ARM unless the consumer affirmatively opts-out of the fixed rate product and presents a certificate indicating that they have received homebuyer counseling.
• Establishing a central repository of foreclosure information at the Massachusetts Division of Banks. The bill would require lenders and servicers to send a copy of the Notice of Intent to Foreclose and Right to Cure to the Division of Banks as well as the details of any final foreclosure. In addition, the bill requires the Division of banks to establish a database of foreclosure information to track geographic and industry trends relative to foreclosures.

Since April, when Governor Patrick first instructed the Division of Banks to seek case-by-case foreclosure delays for homeowners who filed complaints, more than 400 people have reached out to the Division. Just under half of those individuals were already in foreclosure and needed immediate relief. The Division was able to secure 30- to 60-day stays in the foreclosure process in most of those cases. Due to these stays, many individuals and families were able to refinance or are in the process of refinancing their loans, were able to modify their loan terms, have received credit counseling, or were able to sell their homes. In addition, homeowners who contacted the Division and were in financial distress but not yet in foreclosure were partnered with counseling agencies that offer comprehensive services that can help them change direction and hopefully prevent foreclosure from occurring.

In addition, Massachusetts’ Division of Banks is also continuing work on the other Working Group recommendations. These include implementing regulatory changes that increase licensing and education requirements for mortgage lenders and brokers to eliminate disreputable firms and practices, and building on the partnerships between government, non-profit organizations, and the mortgage industry to improve the support for homeowners and monitoring of the industry.

In yet another sign that the national spotlight is shining bright on the cancer in our floorboards, Marketplace, a business program that airs on U.S. public radio stations affiliated with American Public Media, recently spotlighted the widespread problems associated with Real Estate and Mortgage Fraud. Following is the text version of the radio spot that aired late last week:

Kai Ryssdal: Even as the housing market gropes for the end of its slide, those rising interest rates aren’t making mortgages any cheaper. Unless you cheat.

A new study from the Mortgage Asset Research Institute says mortgage fraud in 2006 was up 30 percent from the year before. The head of the Mortgage Bankers Association figures that’s just the tip of the iceberg, because the number included only included banks — not private lenders that aren’t federally insured.

From WCPN in Cleveland, Mhari Saito reports that in some neighborhoods, fraud has completely skewed home prices and raised questions about the late days of the housing boom.

Mhari Saito: When contractor Chris Mansour bought his $340,000 home in the Cleveland suburb of Solon four years ago, he was moving up. His daughters could go to one of the region’s best public schools. They could do their homework in their roomy, eat-in kitchen, or play in the living room with vaulted ceilings.

But it wasn’t long before police started to regularly visit homes on the street and neighbors started to move in the middle of the night.

Chris Mansour: Well, like one particular house two doors down from me at this point has had six different residents in four years. And that’s not an exaggeration. And actually seeing people on the street move from one residence to another residence on this same street . . . I mean, just something didn’t make sense.

Over half of the homes on his street are being investigated for mortgage fraud.

Solon police say everyone — from the builder to the mortgage broker to the title company — were in on taking out loans and splitting the cash, with no intention of repaying them. Often, fraudulent owners had the cheek to rent the homes out for more cash. Some scammers did make mortgage payments as they borrowed still more by refinancing or taking out equity lines.

Solon detective Christopher Viland:

Christopher Viland: While the housing market was good and they could keep transactions going to keep themselves afloat, it didn’t come to anybody’s attention. So it wasn’t until the market went into a slump and people couldn’t make the notes anymore that a lot of these things came to light.

One of the homes under investigation was bought with a loan from Argent, one of the country’s 10 largest subprime lenders. A spokesman for the Orange Country company says Argent has zero tolerance for fraud, and procedures to prevent it.

But Cleveland-area appraiser Robert Ruckstuhl says lenders were simply too focused on making money to notice.

Robert Ruckstuhl: How many times can you see the same names of the same brokers, or same loan officers, or the same borrowers coming through your system and not raise a question or raise a red flag?

Prosecutors are finding mortgage fraud all over the country. The FBI calls it one of the fastest-growing economic crimes, skimming at least $1 billion off the lending industry in 2005. Experts say the boom in mortgage fraud is tied directly to the boom in subprime lending and relaxed underwriting standards.

Scott Gilbert: As the lenders loosened up their rules, it made it easier for fraudsters to come in and take advantage of those changes to the rules.

Scott Gilbert heads the white-collar crime unit for the Cleveland FBI office. The so-called industry innovation that makes him the craziest are no-document loans. These are mortgages that require little or no proof of income. Last year, nearly half of all subprime loans were no-doc loans.

Gilbert: It’s much easier to commit fraud, because you can fake the bank statements and there’s no real verification of history or work employment.

In 2005, Eloise Anderson used no-document loans to borrow over a million dollars to buy four homes in five months, including one in Solon. Not bad for a U.S. postal worker making $55,000 a year. A county grand jury said Anderson lied to lenders about her income. She didn’t return calls.

Dale Grubb lives across the street from one of Anderson’s houses. He says he saw various people going in and out, but didn’t know who they were. And the most upsetting thing is not knowing what the fraud will do to his biggest asset.

Dale Grubb: If we needed to sell the house, we have no idea what value it now has, given that we have a large inventory of houses now on the street in foreclosure at a questionable value–nowhere near what their actual value is.

Many in the industry, like Detroit realtor Ralph Roberts, say at the end of the housing boom, lenders were frantically boosting their loan volume and selling off loans to Wall Street. Many lenders rewarded local brokers that sent borrowers their way with hefty commissions.

Ralph Roberts: They were getting millions of dollars in bonuses for bringing business in the front door. Well the problem is the quality control on those deals coming in the front door wasn’t being managed.

In Ohio, a new state law has clamped down on no-document loans, and prosecutors have launched highly public anti-mortgage fraud efforts.

But privately, law enforcement isn’t so sure anyone will ever pay for the damage. That’s because sentences for mortgage fraud are relatively light–from two to six years–and that’s if defendants get jail time.

In Cleveland, I’m Mhari Saito for Marketplace.

Back at the end of January, I posted a blog entry that contained the following statement:

To fix the [sic:credit enhancement} problem, credit reporting agencies need to change the formulas they use to calculate credit scores so that the credit scores of additional cardholders do not benefit from the primary cardholder’s credit history. For many homeowners who participate in credit enhancement schemes, the benefits are temporary at best. All of us should be after the three main credit-reporting agencies–Equifax, Experian, and Trans Union–to see what, if anything, they are doing to remedy this problem.

But I digress…

Are you in the market for a mortgage loan with a low interest rate? Instead of qualifying for a discount rate by earning a good credit score, you can simply buy your way to a great credit score—the kind of score that convinces lenders to loan you money at lower interest rates. You simply piggyback on someone else’s excellent credit history. Here’s how it’s done:

1. A credit enhancement company pays people who have excellent credit histories to allow others to be listed, temporarily and in name only, on their credit cards.
2. The credit enhancement company then allows people with lousy credit scores to buy positions on the credit cards of people with good credit histories.
3. The low credit scores get a boost, often allowing high-risk borrowers to qualify for loans with much lower interest rates.

What’s so bad about that? After all, people who sell their good credit profit from the good credit histories they have earned, borrowers with bruised credit have lower monthly payments (and they are the people who really need it), the credit enhancement company provides a valuable service and earns a good profit, and the lender gets another happy customer. Everybody wins, right?

Wrong!

Why? Because these piggybacking schemes are another type of mortgage fraud. Essentially, the borrower is lying to the lender—claiming to have a better credit history than they really have. This practice fools the lender into making a decision to approve a loan based on false information. I don’t know about you, but if someone who was asking to borrow money from me misled me about his or her ability to pay it back, I would get more than a little upset. Just because a bank or other institution rather than an individual is lending the money doesn’t make it any less wrong to lie.

As citizens, one of our responsibilities is to protect the American Dream, and one of those dreams is the American Dream of Homeownership. If we begin to turn the other way when people are committing obvious fraud, we place the entire system at risk. Homes will begin to cost more money, loans will be less accessible, and someday our children and grandchildren will no longer be able to afford their own homes.

Credit enhancement companies who engage in this sort of activity claim that they are not breaking any laws. But no matter what they say, using trickery and schemes to beat the system will eventually catch up with all of us, and we will get stuck with the bill—somebody always does. Borrowers need to earn credit scores that honestly reflect their ability to pay back a loan, not fraudulently manipulate authorized user credit card accounts.

Fortunately, Fair Isaac Corp. (the company that computes the most commonly used credit scores) has recently decided to fight back, announcing that its next version of the FICO score “will no longer consider certain types of credit card accounts,” closing a loophole that allowed strangers to coattail on a cardholder’s good credit. See “Fair Isaac combats credit manipulation,” for more details. In essence, the new rule will remove authorized user accounts from consideration by the scoring model in FICO 08, the newest version of the Classic FICO credit score which Fair Isaac expects to become available to lenders starting in September 2007.

Piggybacking on someone else’s good credit may not qualify as a crime, but anyone looking at it can see that it is just plain wrong.

Last November, when my book Flipping Houses For Dummies came out, I billed it as a book about “Flipping Houses the Right Way.” In the book, I provide readers with a realistic approach to flipping houses that does not guarantee easy, risk-free, hassle-free riches through investing in real estate. I show people how to estimate expenses and profits realistically and build in enough of a buffer to be fairly certain of earning a 20-percent return on their investments before they even buy a property. I am careful to say, however, that no form of real estate investing is entirely 100% risk-free.

I was disturbed to see in a recent article, “‘Flip This House’ Star Accused of Fraud,” that the star of the A&E television show Flip This House, Atlanta businessman Sam Leccima, wasn’t exactly following my lead and flipping houses the right way. If the allegations are true, Leccima didn’t even own the properties he was supposedly buying, rehabbing, and selling. The entire “reality” show was one big farce, giving a whole new meaning to the concept of “staging” a home.

For their part, A&E recently issued the following statement:

We are dismayed about the allegations concerning Mr. Leccima, which only recently came to light. A&E Television Networks is not a party to any of the transactions shown in Flip This House, and we believed that the programs accurately depicted the featured properties and sales. As soon as we learned of these allegations, A&E took all episodes featuring Mr. Leccima off the air, and they will remain off the air pending further investigation. A&E no longer works with Mr. Leccima. After the second season of Flip This House, we decided to change direction and focus on different cast members, as we did after the first season.

This breaking story reveals something that honest real estate professionals have been aware of for a long time—not everyone who claims to be an expert in real estate investing is the real thing. Real estate investment gurus abound, promising that their system for investing in real estate offers a no-risk, no-hassle way to big overnight profits. The fact is that you can earn excellent profits by investing in real estate, but that it requires hard work, know-how, and stictoitism. You have to know what you’re doing and work hard to make it happen. In the flipping arena, you have to flip houses the right way, preserve your integrity, and earn the trust of your community in order to achieve long-term success and profits.

Remember that the homes you are flipping are real. The money you invest is real. The families who end up living in the homes you flip are very real. So don’t follow someone who dangles a get-rich-quick carrot in front of your nose or broadcasts an unrealistic version of a supposed reality show. If it sounds too good to be true, it probably is.

Federal prosecutors say a Lake Geneva, Wisconsin; mortgage broker cheated lending companies out of more than $4 million. Thirty-three-year-old James Lytle did what a lot of other Real Estate fraudsters do… he used straw buyers and fraudulent loan applications to obtain properties, collect seller fees and then let the properties go into foreclosure. The Janesville (Wisconsin) Gazette interviewed me for an article on Lytle’s exploits:

Committing mortgage fraud has become easier since sales and loan approvals largely are done through computers, said Ralph Roberts, a mortgage fraud expert who developed the watchdog Web site www.flippingfrenzy.com.

Fudging income numbers or employment history is easy, and creating false documents and identities requires only a few mouse clicks.

“Guys are able to just plug this stuff into a computer,” Roberts said. “The world has gone virtual. When you used to buy money (through a mortgage) for a house, you’d sit across from someone at a bank or a credit union and they’d ask you questions.”

FBI Supervisory Special Agent Dave Gorr, who is in charge of the White Collar Crime Program in Milwaukee, said mortgage fraud is becoming one of the bureau’s top priorities. Industry insiders commit about 80 percent of all mortgage fraud and there are many types of schemes that can be hidden in the paper trail.

Read Case shows dangers of fraud.

A Los Angeles, California, mortgage banker has agreed to plead guilty to federal criminal charges in a massive mortgage fraud scam that caused more than $18.5 million in losses to banks. Federal prosecutors filed criminal charges yesterday afternoon against 53-year-old Richard Maize, co-founder of Americorp Funding, a mortgage banking company with offices in West Los Angeles and Pasadena. In a plea agreement also filed yesterday, Maize agreed to plead guilty to the five felony counts and to cooperate in the government’s ongoing probe of the scheme.

According to court documents, Americorp originated, brokered, funded and sold mortgage loans. Maize was Americorp’s top-producing mortgage banker, closing more than $192 million in loans in 2001 and more than $245 million in loans in 2002. Maize owned 45 percent of Americorp until about December 2000, when he and his partners sold the company to Prism Mortgage Company (later known as RBC Mortgage Company). At that time, Maize became the president of the Americorp division of a Prism/RBC subsidiary.

Maize and five others previously charged in the case were involved in a wide-ranging and sophisticated conspiracy to defraud federally insured mortgage lenders out of tens of millions of dollars. As part of the swindle, Maize and his co-conspirators obtained inflated mortgage loans on expensive homes in some of California’s most exclusive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills and Malibu.

Five people have previously been charged in the scam. They are:

• Charles Elliott Fitzgerald, 47, of Newbury Park
• Mark Alan Abrams, 45, of Long Beach
• Nicole LaViolette, 37, of Palm Springs
• Jamieson Matykowski, 33, of Laguna Niguel
• Timothy Holland, 35, of Santa Ana

Fitzgerald, who is in custody, is scheduled to go on trial July 31 on a host of federal charges related to the scheme. The other four previously charged have pleaded guilty to charges related to the fraud scheme and are pending sentencing.

According to court documents, in late 1999 or early 2000, Fitzgerald and Abrams started a mortgage brokering company called Desert Pacific Financial, Inc. (DPF). The company sent mortgage loan applications to lenders for review and funding, and received commissions from those lenders when the loans closed. In late-2001, Fitzgerald and Abrams renamed the company Beverly Hills Estates Funding, Inc. (BHEF).

Fitzgerald and Abrams purchased homes at their real market values. Abrams and his associates then recruited straw borrowers to obtain the inflated loans that were used to purchase homes from Fitzgerald and Abrams. The straw borrowers allowed conspirators to use their names and credit to obtain mortgages as part of what Federal prosecutors call a “property-flipping” process. Armed with inflated appraisals and other false documentation, the conspirators submitted false and inflated loan application packages. As president of Americorp, Maize had contacts and business relationships with the victim lenders, which he exploited to deceive the victim lenders into approving and funding the inflated loans. He also abused his position as president and defrauded his employer, Prism/RBC, by deceiving the company into funding the inflated loans.

As one example, the case against Maize details the purchase by Fitzgerald and Abrams of a Bel Air home for $735,000. When they flipped the property, they sold the residence to a straw borrower for $2.37 million. A bogus loan application package went to Lehman Brothers Bank, and the bank unwittingly funded a loan of more than $1.4 million on the property–nearly double the true $735k purchase price–almost all of which ended up in one of the in-house escrow companies controlled by Fitzgerald and Abrams.

According to the Maize charges, Lehman Brothers Bank alone was deceived into funding about 40 such inflated loans from March 2000 through July 2002. These 40 loans were for more than $28 million over the true prices of the homes. According to court documents, Maize received hundreds of thousands of dollars in kickbacks for his assistance in getting the loans approved. In 2001, he failed to report more than $175,000 of these kickbacks on his federal tax return.

Maize faces a maximum possible sentence of 98 years in federal prison. In his plea agreement, he agreed to pay $2.75 million in restitution before his sentencing, although he may be ordered to pay more at sentencing.