• Mortgage Fraud Law Goes into Effect in North Carolina: Among the list of new laws taking effect tomorrow in North Carolina–a law making it easier to prosecute residential mortgage fraud by defining the practice and creating tougher punishments for repeat offenders.
• Mortgage Inquiries Swamping Arizona: Arizona’s mortgage regulator has shut down a handful of firms for fraud and other illegal lending practices this year, but at least 40 other investigations are stalled because there is no money to fund them.
• California Real Estate Firm Investigated for Fraud: Federal investigators are looking into Crisp & Cole Real Estate’s operations for possible mortgage fraud after a federal raid of 13 of the now-defunct California company’s offices.
• New Jersey Lawyer-Judge at Center of Land-Flip Investigation: A NJ lawyer who is also his town’s judge may have played a central role in a scheme to defraud lenders by obtaining mortgages based on inflated appraisals of run-down properties.
• Minnesota Mortgage Firm is the Focus of Fraud Probe: Investigators are probing mortgage fraud complaints involving Universal Mortgage and several of its employees that are said to have used straw buyers to buy property at inflated prices.
• Guilty Plea Entered in Missouri Fraud Case: A 30-year-old man from St. Louis is the fifth person implicated in a mortgage fraud ring involving dozens of homes and millions of dollars in real estate transactions dating back to 2005. Daniel Mann pleaded guilty to conspiracy to commit wire fraud and now faces a maximum penalty of five years in prison. Mann admitted to arranging a number of fraudulent real estate transactions that were part of a larger fraud ring coordinated by another person who pleaded guilty in September to similar charges and will be sentenced in December.
• Canadian Paralegal Convicted in $30 Million Mortgage Fraud Scam: An Edmonton fraudster has been convicted of supporting a criminal organization by helping to swindle unsuspecting real estate investors out of nearly $30 million. Sixty-one-year-old Terry Ellis was found guilty of 12 counts of fraud and one count of forgery in connection with a massive mortgage fraud believed to be the biggest in Alberta history.
• Editorial Questions Michigan Attorney General’s Record on Real Estate Fraud: In the state hardest hit by real estate and mortgage fraud-related foreclosures, its attorney general, Mike Cox–who has won nationwide notoriety for locking up parents behind in their child support payments–has yet to file a single criminal complaint against any mortgage broker or lending entity.
• Two Sentenced in Connection with $15 Million Mortgage Fraud Case in Ohio: Two people have been sentenced to prison in connection with what prosecutors describe as a mortgage fraud scam in upscale Cleveland suburbs. Builder and developer, Edward Emery received a sentence totaling 34 months and a fine of $10,000. Eloise Anderson will spend nearly a year in prison and has been ordered to pay $35,000 in restitution.

Spurred perhaps by yesterday’s U.S. Conference of Mayors meeting and press conference in the Motor City, today’s issue of The Detroit News has fairly solid coverage of the unmistakable connection between Real Estate and Mortgage Fraud and metro-Detroit’s foreclosure crisis.

From “Fraud deepens Michigan housing crisis — Metro Detroit’s foreclosure explosion linked in part to mortgage scams ,” by Ron French and Mike Wilkinson:

Danny Stokes used to sell drugs, before he discovered it was safer and more lucrative to sell mortgages.

Samer Fawaz and Bashar Farraj were students in a mortgage fraud class where they learned to inflate appraisals and bilk lenders. They murdered one of their fellow con men in their Sterling Heights mortgage office when the scheme began to unravel.

Nelson Sumpter served time for fraud in a scam that drew national media attention in 1994. That criminal record didn’t stop him from beginning a new career as a loan officer. He was recently indicted for fraud.
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Michigan ranks among the nation’s leaders in mortgage fraud, costing residents millions of dollars and adding thousands of homes to the region’s record number of foreclosures, a Detroit News investigation found. Here, scam artists found the perfect combination of eager, unsophisticated borrowers and lax regulation.

French and Wilkinson’s article has lots of interesting information, including the fact that mortgage fraud perpetrated against Michigan banks grew 150-fold over the last 10 years, from nine cases in 1997 to over 1,400 reported cases in 2006.

In a separate article penned by Wilkinson, we learn that foreclosures in one particular Shelby Township (Michigan) neighborhood have raised considerable suspicions:

In the Woodlands subdivision in Shelby Township, the homes come in two sizes: big and bigger. Three-car garages, tiled pools and circular driveways are common. The mortgages are supersized, too, and for some, living there requires the down payment of a life’s savings. But for a handful of folks, all it took was high-interest, no-money-down loans from financial institutions scattered across the country.

The Woodlands’ sales caught the attention of township officials, including the assessor. The prices were well above what other homes in the area were going for, averaging nearly 40 percent more per square foot.

The township sent the FBI a list of homes that had been sold at prices so high that the township wouldn’t use them as comparable sales, township Supervisor Ralph “Skip” Maccarone said. All seven of the foreclosed homes in the Woodlands were on that list. The FBI said it cannot confirm whether an investigation is ongoing. Mark Bowling, the FBI’s supervisory senior resident agent for Macomb, St. Clair and Sanilac counties, said his agents are actively working mortgage fraud cases throughout the county.

Click here for an interactive map detailing the foreclosures in The Woodlands of Shelby subdivision.

Not to offend anyone, but if you are a homeowner facing foreclosure, chances are pretty good that you are not thinking straight. You have no money, you can’t pay your bills, and the bank is sending you one notice after another warning you that if you fail to do something promptly, they will be forced to kick you out of your home. Unless you win the lottery, what recourse do you have?

It’s easy to get overwhelmed in these dire situations — so overwhelmed, in fact, that you may not even realize that you have numerous options to explore. In this blog entry, I explain the most popular options, along with a few that are not quite so common. Depending on your situation, not all of these solutions will be available, but it’s likely that at least a few of them will be.

Tip: Contact the bank who holds your mortgage immediately to discuss your options. One of the worst things you can do is avoid discussing the situation with your bank. I know it’s uncomfortable, but how uncomfortable are you going to be when the sheriff shows up to evict you?

Staying put

If you really want to remain in your home and are willing to work hard to keep it, you probably have several options that enable you to do so:

• Reinstate the mortgage: If you can borrow some money from relatives or friends, you can reinstate the mortgage by catching up on missed payments along with any interest, penalties, and fees your bank has applied to your account.
• Negotiate a forbearance: Your bank may be willing to set you up with a payment plan that enables you to catch up on your payments. Just be careful that the payment plan is affordable, so you don’t end up in the same situation six months down the road.
• Refinance: If you have equity built up in the property, consider refinancing the current mortgage to reduce payments. If you have credit card debt, you may be able to consolidate all your debts into a single monthly payment that is less than the total payments you are currently making.
• Sell to an investor and buy it back: If you are running out of time, you may be able to sell your home to an investor and purchase it back with a lease-option agreement or a land-sale contract (also called a contract for deed).
  
  A lease-option agreement is sort of a rent-to-own deal in which you rent the property for a fixed period of time and then have the option to buy the property back at the end of that time. With a land-sale contract, you simply make payments to the investor who purchased the property rather than to the bank. In both cases, you sign a contract that almost always has a forfeiture clause stating that you lose the house and everything you paid on it if you do not honor the agreement, so check with your attorney before signing anything.
• Sell to an investor and rent it: If the investor is buying the property for long-term rental income, he or she may be willing to rent it back to you, assuming you have proven that you properly maintain the property. This is an excellent option if you have kids in school and need several months or even a year or two to get them through school before moving.
• Redeem the property after the sale: Many states have a mandatory redemption period, during which time you can purchase the property from whoever bought it at the auction. You have to pay the buyer the amount he or she paid plus interest and any qualifying expenses the person paid (such as property taxes and insurance). Contact the register of deeds at your local county courthouse to find out whether your area has a mandatory redemption period and how long it is. This option typically requires borrowing money from a relative, friend, or private investor.

Selling your home

In almost 90-percent of foreclosure cases, distressed homeowners are best served by selling their home and finding more affordable accommodations. This is especially true if you have equity in the home — that is, if you can sell the home for more than you owe on it. That way, you don’t lose the equity (along with your home) in foreclosure.

Here are some options for selling your home:

• Place your home on the market: Hire the Realtor in your area who seems to be selling the most homes to list your property. Tell the Realtor that you are facing foreclosure and ask whether he or she would be willing to accept a lower commission. (Some will, if only to generate a little positive PR.) On average, a Realtor can sell your home in half the time and for significantly more money than you can sell it for by yourself.
• Sell your home to an investor: If you don’t have at least a couple months to sell your house, you may be able to sell it to an investor who can pay cash and close the deal in a hurry. In most cases, however, you are looking at having to accept about 20 percent less than the true market value of your home.
• Negotiate a short sale: If you cannot sell the home for enough to break even, your bank and other lenders may be willing to negotiate a “short sale” — that is, accept less than the full amount owed on their loans. Lenders who hold second mortgages or other liens against your property may be more willing to negotiate, because they stand to lose everything if your home ends up being sold at auction.

Walking out

If you have little, no, or negative equity in the property, don’t really care (and couldn’t do anything about it even if you did care), consider walking away prior to eviction day. This will at least save you from the embarrassment of a forced eviction.

Here are your options when choosing to walk away:

• Offer a deed in lieu of foreclosure: Your bank may be willing to let you off the hook for the money you owe by turning in your keys and signing the deed to the property over to the bank. Make sure you have legal representation if you choose this option, so that the bank can’t come after you later for any shortfall.
• Gift the house and your problems to an investor: You may be able to deed the property over to an investor, who would be in a better position to negotiate short sales with your lenders to make the transaction profitable for himself or herself. Again, consult an attorney before moving forward.
• Walk out the door: Your credit is already going to be damaged if your home is sold at a foreclosure auction, so why not just walk away? Banks rarely pursue homeowners who simply abandon the property. Again, not the best option but certainly an option you have at your disposal.

Buying yourself some time

You can buy yourself some additional time in the property in various ways. Here are what I believe to be the three most common options:

Doing nothing

The absolute worst thing you can do upon receiving a foreclosure notice is nothing. I recommend that you at least contact your lender. Better yet, try everything:

• Place your house on the market.
• Talk to a loan officer about refinancing
• Discuss your situation with a real estate investor.
• Work on tightening your financial belt, so when you do finally get through this crisis, you come out of it in a little better shape.

In my latest book, Foreclosure Investing For Dummies, I discuss these options in greater detail, because anyone who’s investing in foreclosures needs to know how to provide assistance to distressed homeowners. Be careful though when dealing with investors. Some will intentionally mislead you and fail to inform you of all of your options, just so they can scoop up your home for pennies on a dollar.

Now that you know your options, I hope you’ll agree that you are in much better shape to protect yourself, your family, and your home.

I received a press release the other day announcing that The U.S. Conference of Mayors would be holding a special meeting in Detroit tomorrow to address the “growing foreclosure crisis and its impact on American families, property values, neighborhood blight and crime.”

Outstanding, glad to here it… may I attend?

Nope… it’s a closed door meeting for a “select group of mayors” and leading non-profit counseling agencies, mortgage providers, and financial institutions to discuss crisis intervention strategies, loan modification and rescue programs and the maintenance and management of foreclosed properties to mitigate their negative effects on neighborhoods.

How interesting… why are Realtors not invited? (Sorry, I was told when I called; that is just the way it is.)

The press release goes on to say:

During the meeting, mayors will also release a report highlighting the economic ripple impact of the foreclosure crisis on U.S. cities/metros — specifically cities in Arizona, California, Michigan, Nevada and Ohio where the effects of the crisis are most prominent.

So in addition to discussing strategy, The U.S. Conference of Mayors is going to release a report telling us what RealtyTrac tells us in mind-blowing detail each and every quarter… namely, that the foreclosure crisis is worsening and is getting really, really bad in states like Arizona, California, Michigan, Nevada and Ohio? Well, thank God, because the cavalry is about to arrive… The U.S. Conference of Mayors is about to tell us how the bad the problem is, and better yet, how to fix it, boys and girls!

Here is a suggestion for the U.S. Conference of Mayors:

Update your precious Mayors 10-Point Plan: Strong Cities, Strong Families for a Strong America to include something–anything–related to protecting homeowners facing foreclosure.> The fact that your widely publicized and circulated plan contains not one single word related to the mortgage meltdown, foreclosure crisis, and Real Estate and Mortgage Fraud just goes to show how significant out of touch you really are!

How on Earth could these so called “leaders” have developed and released a 10-point legislative agenda on issues impacting cities and families back at the beginning of 2007 and not made any plans whatsoever to address foreclosure, the impact of mortgage payment reset, or Real Estate and Mortgage Fraud? For years now the FBI has been telling us that the fastest-growing white-collar crime in the United States is Real Estate and Mortgage Fraud, yet the much-heralded U.S. Conference of Mayors completely ignored the trend and chose instead to promote the following in its 10-point plan:

1. Energy and Environment Block Grant

2. Federal-Local Partnership on Crime Prevention (violent crime, not white-collar, in case you were wondering)
3. Community Development Block Grants
4. Affordable Housing Fund
5. Public Housing
6. Infrastructure Tax Incentive and Bonds
7. Competitive Workforce
8. Children and Youth (children’s health insurance, and summer and after-school youth programs)
9. Homeland Security
10. Unfunded Mandates/Preemptions

“The fastest-growing white collar crime in the United States.”

I’m not making that up–that statement comes directly from the FBI and has been repeated in 2006 and 2007, and yet the U.S. Conferences of Mayors doesn’t think to include boo about it in its 2007 10-point legislative agenda on issues impacting cities and families. Unreal. Simply jaw-dropping.

Here is another suggestion for The U.S. Conference of Mayors:

Rather than grandstand and issue hollow statements about how bad the problem is and that you’re now on the scene taking care of business, do something tangible:

• Start by doing what California recently did… negotiate with leading loan servicing companies–like Countrywide, GMAC, Litton, and HomEq–to streamline “fast-track” procedures that result in helping keep more sub-prime borrowers in their homes.
• Spur loan servicers to publicly commit to modifying loans in a streamlined and scalable manner.
• Bring Realtors to the table. Do not ignore us–we are a part of this mess too, and if you are sincere about moving forward with an educated base of homeowners, you must involve us.
• Commit to funding public awareness campaigns aimed at educating the masses on their rights, how to avoid foreclosure, and the warning signs associated with Real Estate and Mortgage Fraud.

Yes, this is a rant but an extremely timely and relevant one. When an organization as powerful and representative as The U.S. Conference of Mayors holds a meeting to discuss the growing foreclosure crisis and its impact on our families, property values, and crime, and fails to include Realtors as a part of the discussion, well, they should be called out and told what to do about it!

With California impacted more than any other state by the current mortgage meltdown and foreclosure crisis (seven of the top 16 metropolitan areas with the highest rates of foreclosures in the nation are in California), Governor Arnold Schwarzenegger announced last week that his office has reached an agreement with Countrywide, GMAC, Litton, and HomEq to streamline “fast-track” procedures to help keep more subprime borrowers in their homes. Together, Countrywide, GMAC, Litton, and HomEq service more than 25 percent of issued subprime mortgage loans in California.

With this type of cooperation from loan servicers, thousands of homeowners may be saved from being added to California’s growing list of foreclosures. Governor Schwarzenegger’s efforts appear to have resulted in a common-sense approach that does not involve any government subsidy or bailout.

“Borrowers need to do their part too,” said Governor Schwarzenegger in a prepared statement. “If these lenders are willing to meet more than halfway, it’s important that consumers don’t run when they reach out. It was a two-way street that got us into this mess and it will be a two-way street that gets us out.”

The agreement the Governor’s office negotiated with lenders builds off a proposal put forward by the FDIC (Federal Deposit Insurance Corporation) that encourages lending agencies to keep subprime mortgage borrowers at their initial interest rate if they are living in their home, making timely payments, but can’t afford the loan re-set or jump to a higher rate.

A half million Californians have subprime loans that will jump to higher rates in the next two years. The FDIC’s proposal has been endorsed by the Wall Street Journal and New York Times as well as public and community leaders. California is the first state to spur servicers to publicly commit to modifying loans in a streamlined and scalable manner.

California also announced additional steps the state is taking to help homeowners avoid foreclosure:

• Through a statewide outreach campaign, which will include public service announcements, California will help reinforce the importance for consumers to reach out to their lender if they are at risk of foreclosure.
• Governor Schwarzenegger will also lobby Congress to raise federal loan limits so that more California families can take advantage of secure products, rather than relying on subprime loans.
• The State’s “HOPE Hotline” (1-888-995-HOPE) now provides free mortgage counseling 24 hours a day, seven days a week, and can even be reached online at www.995hope.org.

“Losing your home in a foreclosure is an emotional crash that can take years to recover from, but we don’t have to sit idly by and watch the American dream turn into the American nightmare. We must take steps at both the state and federal level to make sure future mortgages are on more sound economic footing. In the meantime, by working together, we can protect the American dream and our economy without hurting the American taxpayer,” said Governor Schwarzenegger.

Earlier this year, Governor Schwarzenegger signed legislation to increase protections for Californians who own or plan to purchase homes and to expand affordable housing opportunities, and directed his staff to form the Interdepartmental Task Force on Non-Traditional Mortgages. California was one of the first states in the nation to form a task force to examine the alarming developments in the non-traditional mortgage market.

According to the latest data, in the Stockton, Riverside/San Bernardino, Sacramento, Bakersfield, Oakland, Fresno and San Diego metropolitan areas, there is an average rate of approximately one foreclosure filing for every 60 households.

In his recent article “Miami condo at ground zero in mortgage fraud,” Reuters-affiliated writer Tom Brown highlights the fact that foreclosures follow fast on the heals of Real Estate and Mortgage fraud. As he points out, “fraud accounts for a sizable share of the bad bets on mortgages,” which often result in foreclosures. Lenders get stuck holding the bag, but as we have seen recently, problems in the mortgage industry affect the entire national economy and can even destabilize the global economy.

Brown focuses his article on a 643-unit condo known as the Club at Brickell (pictured above), which is located in Miami’s swank international banking district. Con artists and other opportunists used this building as a vehicle to commit rampant fraud in what are commonly known as cash-back-at-closing deals. With cash back at closing, buyers, sellers, appraisers, real estate agents, and other real estate professionals often conspire to inflate the value of a property to fool a lender into approving a loan that grossly exceeds the true market value of the property.

The buyer receives the excess proceeds, the sellers are able to sell their property for close to their asking price, the real estate agent receives a higher commission based on the inflated price tag, and the appraiser is rewarded with another satisfied customer.

These cash back at closing schemes have become very popular during the latest housing boom, because they seem like “everybody wins” deals. On the surface, even the lender seems to win-loaning more money and earning more interest over the life of the loan. Unfortunately, however, when the housing bubble bursts, someone gets stuck holding the bag-the lender. And when enough lenders get stuck holding the bag, they simply pass the costs on to investors, homeowners, and taxpayers. The only winners are the con artists who rake in the cash at the closing table.

Real estate professionals and homeowners need to keep in mind that cash back at closing is wrong, however right it may seem when someone pitches the idea. They also need to keep in mind that cash back at closing is just one of the many schemes that con artists use to rip off the system.

Remember that the best defense against scams and the scumbags who perpetrate it is education. (Not to sound like a paid advertisement or anything, but to learn how to spot, stop, and post (report) real estate and mortgage fraud, and save your home and neighborhood, pick up a copy of one of my latest books, Protect Yourself from Real Estate and Mortgage Fraud.)

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Editor’s note: From time to time, Flipping Frenzy readers contact us offline to request that they be allowed to ‘guest blog’ an entry or two on a topic related to Real Estate and Mortgage Fraud. One such reader is Clearwater Beach, Florida-based Larry Rubinoff, who serves a branch manager for Mortgage Lending Direct, a dba of MLD Mortgage, Inc. To paraphrase, Larry says that much of the dialogue surrounding the current mortgage meltdown overlooks and ignores the dramatic impact the crisis is having on honest, hard working mortgage professionals like himself.

In his own words…

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The Real Face of the Meltdown
By Larry Rubinoff

There are millions of stories on what this mortgage meltdown has done to our population and to our economy. While we cannot address or recognize all of them, I will attempt to put a “face” on some of them through a series of guest blog entries, as the story cannot be told in just one.

To date, most of what we hear about are the millions of victims (the homeowners) and the hardships many of them are now facing. There are other victims as well who are also facing hardships due to the “meltdown.” One such group are the professional who work in the mortgage industry. The underwriters, the account executives, the loan originators, the processors, the clerks and staff of the hundreds of companies that have gone out of business not necessarily due to their actions or fraudulent deals, but just due to the shrinking of the real estate and mortgage markets. While this shakeout is getting a lot of bad apples out of the business, it is similarly forcing many good people out as well. My business, as well as the business of many of my friends, has shrunk to almost nothing but this does not even address the thousands of employees at the nearly 190 and counting companies that have gone out of business or those who have had to layoff staff just to survive the mess.

Almost 28,000 people per month are losing their jobs in the mortgage industry. Little is said or reported about them. Many of them are not counted in the unemployment rolls nor do they qualify for unemployment insurance. These people, though faceless, are homeowners themselves, and they too are losing their homes to foreclosure. Like many other people nowadays, they are heads of households with kids to support, car payments to make, and bills to pay (which in many cases they cannot, and like others, their credit is being destroyed). I would say that the majority of these newly unemployed were not the fraudsters, just the everyday hard working people putting in their 8 hours plus per day to feed and support their families.

Many of these people have been in the industry for 10 to 20 years and longer. They are now faced with the challenge of finding new careers and job-related training. In each case, this is becoming a difficult task. Many employers (in ads that I have actually seen) will not even entertain an applicant that has been in the mortgage industry. The belief, as has been constantly reported over the past year, is that anyone with mortgage industry experience is a bad apple; and when you stop to think about it, why would anyone want to hire a media-tried and convicted criminal. A Harvard law professor in an article in the Boston Globe even went as far as to say that all mortgage brokers were “crooks” who took Yield Spread Premium (YSP) from lenders which she called “bribes.” The fact is, the overwhelming majority of YSP are just ordinary mark-ups on a product to produce profit much like the can of the corn we typically find on a grocers shelf (which is marked up from their cost to cover overhead and produce a profit).

I know an underwriter who truly is one of the most knowledgeable people I know; someone who worked for one particular company for over 10 years yet was given only 30 minutes notice that her company was closing and she was terminated. I know and am friends with many brokers who are honest and knowledgeable and who always worked for the best interest of their clients — yet they too are now out of work and are faced with the prospect of having to end their careers. My own stepdaughter is even a casualty in all of this. I brought her into the business nearly eight years ago as an administrator and processor, and she ultimately became my director of branch relations. When I relocated my business and she was unable to move with us, she went to work for a former associate of ours. He is one of the good guys who at the end of this month will be closing his doors after over 20 years in the business. While he will be ok, my stepdaughter may not be. She has applied for over 100 jobs, makes at least five new contacts a day, and has not had one response as of yet. She is a single mother of two children, and is extremely well qualified in operations, accounting and administration.

While what is happening to homeowners is truly tragic, we do not hear nearly enough about the professionals who have been similarly impacted (they number well over 100,000 and growing). Sadly, all of us are victims, which is even more reason for all of us–homeowners and professionals alike–to educate ourselves and police our motives and actions.

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To leave a comment for the author: Please click on the “Comments” link below to leave a comment for the author or to share your opinion.
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My recent commentary, “The Truth About the Mortgage Meltdown,” inspired a great deal of feedback both positive and negative (some of it was left here on FlippingFrenzy.com; a lot more was emailed to me directly at my work account). Most of the negative feedback came from mortgage brokers who were understandably upset by the fact that I was placing much of the blame about the current mortgage meltdown squarely on their shoulders. Most of the positive feedback came from homeowners who were about to lose their homes because they followed the advice of misdirected mortgage originators and purchased risky products promoted by mortgage lenders.

I do stand corrected on two points. First, not all mortgage brokers are to blame. Every industry has its share of top-notch professionals who look out for the best interests of their clients. Although I single out loan originators in this particular commentary, in my book Protect Yourself from Real Estate and Mortgage Fraud, I list nearly a dozen professions that contribute to real estate and mortgage fraud, including real estate agents, appraisers, loan originators, title company representatives, REO brokers, and notaries. You can find good and bad professionals in all of these groups. Second, as at least two people have pointed out, mortgage brokers are not typically the people who package up the mortgage loans and sell them to investors. The broker may earn a commission or fee for processing the loan, but the mortgage lender actually is the one who packages the loan with other loans and then sells it to investors for a markup. In addition, the broker and originator play no role in creating the product; they didn’t invent the risky products or allow homeowners to take out these loans without setting up escrow accounts for paying taxes and insurance.

Although I do stand corrected on these two points, I stand by the premise of my commentary–the major cause of the current mortgage meltdown has less to do with the fact that homeowners are not making their payments and more to do with the fact that mortgage companies are having to buy back their bad loans. And when they run out of cash and cannot buy back the loans, their warehouse line gets cut off, they are basically forced out of business, credit becomes tight, and homeowners can’t refinance their way out of trouble.

Several disgruntled readers (primarily mortgage loan originators) have pointed out that mortgage lenders (not brokers or loan officers) are to blame for creating high-risk mortgage products and for encouraging their brokers and loan officers to push these products. One person went so far as to describe the broker as “the tool of the lender,” simply marketing whatever products the lender chooses to place on the market.

I agree that lenders and Wall Street are to blame for making risky products available, but lenders can’t force brokers to sell these products to clients who are ill-served by them. As a Real Estate Agent, I would never think of selling a particular home to a buyer who couldn’t afford it or selling defective homes to my clients simply because a builder was pressuring me to sell those homes. I believe that Real Estate professionals who deal directly with consumers should be responsible to their clients, not to the manufacturers of certain products.

Let’s not forget who the customer is!

A pair of brothers from New York’s Staten Island are headed to jail after pleading guilty to a Real Estate Fraud scam that appears to have involved members of the infamous Gambino crime family. Thirty-year-old James LaForte, Jr. and his 36-year-old brother, Joseph LaForte, posed as attorneys for banks in real estate transactions that netted the two and their parents over $14 million in illegal proceeds.

According to Staten Island Live, the younger LaForte has been sentenced to five to 15 years in prison for his role in the scam, while his older brother netted three-and-a-half to 10 years behind bars.

From silive.com and the Staten Island Advance:

James LaForte Jr. and Joseph W. LaForte fronted a Mineola, L.I. law firm and acted as attorneys for banks in real-estate transactions. Along with their parents and other conspirators, they ripped off three dozen personal clients and lending institutions of more than $14 million over 17 months, ending in August 2005, prosecutors said…

Nassau County prosecutors said the siblings and their parents, James LaForte Sr. and Tina LaForte used a relative who was a criminal defense attorney on Staten Island to set up a law office in Mineola to close real-estate deals.

The ill-gotten proceeds allegedly paid for pricey cars, a boat, real estate and mortgages on homes owned by the defendants and their wives. Most of the 36 victims were from Long Island and Queens.

James LaForte Sr., 61, of New Dorp, is the son of Joseph (Joe the Cat) LaForte, a reputed capo in the Gambino crime family.

Is anyone really surprised the Mob is involved in Real Estate Fraud? For more, read Swindling siblings sentenced in real estate scam

Many people believed this day would never come, but exactly one year to the day from when he was apprehended by Federal authorities, this nation’s most notorious Real Estate and Mortgage Fraud-related criminal has finally been sentenced for his role in a brazen string of acts that stunned nearly everyone who had ever played a hand in Real Estate and Mortgage Fraud forensics.

Thirty-eight-year-old Matthew Bevan Cox, the poster child for Real Estate and Mortgage Fraud in this country… the same man who kept federal authorities at bay for over three years and was the subject of an intense nationwide manhunt (and whose face landed on the U.S. Secret Service’s list of the Most Wanted Fugitives for his role in numerous Real Estate and Mortgage Fraud scams)… cried like a little baby in U.S. District Court in Atlanta yesterday afternoon, and was promptly sentenced to serve 26 years in Federal prison AND pay his victims up to $12 million in restitution.

For those of you who have never heard Matthew Cox talk about his crimes, the following clip, from NBC affiliate WSMV-TV in Nashville, Tennessee, will give you a small taste of what was going his mind:

Matthew Cox was indicted by a Federal grand jury in Atlanta in late-September of 2005 on 42 counts of mortgage fraud, identity theft, money laundering, and conspiracy. The Middle Districts of Tennessee and Florida filed criminal charges against Cox in April of this year, charging him conspiracy to commit mortgage fraud, aggravated identity theft, and passport fraud.

Cox, who was pleaded guilty to all charges on April 10th of this year, was apprehended on November 16, 2006 in Tennessee after a Nashville man read about him in a local newspaper and tipped off U.S. Secret Service agents. In the world of Real Estate and Mortgage Fraud forensics, no one person’s name sends a shiver up the back of a spine more so than Matthew Cox, who was also known as Maxwell Price, David Richard Freeman, Gerald Scott Cugno, Michael Shawn Shanahan, Gary Lee Sullivan, Michael John Eckert, Michael White, Kevin White, David White, James Redd.

Matthew Cox used stolen identities to obtain drivers licenses, purchase vehicles, lease mail drops, rent apartments, and open bank accounts to receive Real Estate-related scheme proceeds throughout the states of Georgia, Florida, Alabama, South Carolina and North Carolina. Cox’s accomplice in many of his scams– Rebecca Marie Hauck–was sentenced on November 15, 2006 (the day before Cox was captured) by a U.S. District Judge in Georgia to serve 5 years and 10 months in prison for her role in the now infamous string of mortgage and bank fraud-related crimes.

How Cox be able to afford the $12 million he was ordered to pay in victim restitution is anyone’s guess, but despite his wicked ways, Matthew Cox was–and may still be–a talented writer and artist who just so happened to leave behind a number of works. According to WXIA-TV in Atlanta, a representative of the victims is planning to offer, perhaps as soon as this coming week, four of Cox’s paintings for sale on eBay, with 100 percent of the proceeds going into the victims’ restitution fund. Cox did signed away the rights to his future works, including any additional paintings and unpublished novels, past and future, to his victims’ restitution fund, so that too may provide some relief.

For now, we can all sleep a little better at night knowing that Matthew Cox is finally paying for his crimes. That said, 26 years in prison and $12 million in fines may not be enough for this guy or the others who try to follow his example.

Alexander MacInnes of the Herald News interviewed me this week for a story about a Bergen County, NJ, Real Estate developer who for years exploited unsuspecting homebuyers while bribing city employees to direct tenants in the houses he managed. The developer, 63-year-old Michael Eliasof, pleaded guilty Wednesday to conspiracy to commit money laundering. He was charged with taking nearly $2.5 million in illegal proceeds from the sale of overvalued properties to buyers not qualified to purchase them. Eliasof, who will be sentenced in late-February of next year, is looking at 10 years in prison and up to $250,000 in fines (or twice the amount he gained from his criminal activity).

From the Herald News, courtesy of NorthJersey.com:

The circle of professionals Eliasof worked with included Garfield Municipal Judge William C. Colacino Jr., who was the closing attorney for dozens of deals Eliasof lined up with inexperienced buyers. Colacino was not in court Wednesday and has not been indicted. He declined to comment Wednesday.

Eliasof and 10 co-conspirators, including mortgage brokers, loan officers and appraisers, artificially inflated the values of properties throughout Paterson. They then falsified loan applications and income levels for those buyers whom Eliasof lured in with “no money-down” deals, according to the federal charges.

Eliasof, 63, admitted to controlling the profits and dispersing kickbacks to his lawyer and mortgage broker. In another example of his reach, Eliasof admitted in court Wednesday that he bribed Paterson Section 8 caseworkers to direct tenants in the houses he managed.

In March, 14 public employees from Paterson and Passaic County were arrested on charges of taking bribes from an unnamed property manager who was cooperating with federal investigators. U.S. Attorney Hope Olds, who is prosecuting those cases, said the witness started cooperating after being caught in a real estate scheme.

More from Alexander MacInnes and the Herald News:

National real estate experts said the description of the fraud that occurred in Paterson is a variation of either illegal house flipping or a deal called “cash back at closing” — a scheme in which money is transferred off the books between the parties involved.

Ralph Roberts, a Michigan Realtor and author of “Protect Yourself from Real Estate and Mortgage Fraud: Preserving the American Dream of Homeownership,” said there’s a reason this type of fraud exists.

“It’s extremely profitable,” Roberts said. “That’s why they do it. It’s easier than working.”

As lucrative as the deals are, they often falter and leave a distinct footprint on communities.

“They hurt the neighborhoods, they hurt the tax base, they the hurt schools,” Roberts said. “Imagine living across the street from the house that now sits vacant.”

Read MacInnes’ entire article: “Magnate guilty in housing scheme”

Plenty. On August 31, 2007, President George W. Bush’s press secretary announced the President’s three steps to help American Families keep their homes:

1. A call on Congress to pass FHA (Federal Housing Administration) Modernization Legislation. This would expand FHA financing and give homeowners more options for refinancing their existing mortgages with federally insured mortgages. A new initiative called FHASecure would help people with good credit who have had trouble making their payments because their interest rates have adjusted higher.
2. A call on Congress to change a provision of the Federal Tax Code so families who are forced to sell their homes for less than what the home is worth are not published. Prior to this change, if a family sold its home for $20,000 less than what’s required to pay off the mortgage and the lender forgives that $20,000 shortfall, then that $20,000 would be treated as taxable income. The President’s proposal would provide temporary relief, so that the cancellation of mortgage debt would not be taxed.
3. A new foreclosure initiative to assist homeowners in refinancing their way out of foreclosure. The administration is reaching out to groups that offer foreclosure counseling and refinancing, including organizations like NeighborWorks, mortgage lenders and loan servicers, FHA, and government-sponsored enterprises like Fannie Mae and Freddie Mac. This initiative has several goals, including expanding mortgage financing options, identifying homeowners before they face hardships, helping them understand their financing options, and allowing them to find a mortgage product that works for them.

In addition to helping homeowners who are currently having trouble making their monthly mortgage payments, the President is seeking ways to prevent a similar mortgage meltdown in the future. Following are some of the initiatives that are currently being discussed:

• Expanding Truth-In-Lending requirements to ensure borrowers receive complete and accurate information about their mortgages.
• Strengthen mortgage lending standards to prevent lenders from approving loans that consumers cannot afford.
• Implement new rules to make it easier for consumers to comparison shop for loans.
• Support state-based efforts to create comprehensive registration systems for mortgage brokers and loan originators.
• Pursue fraud and predatory lending practices in the mortgage industry.
• Promote financial literacy by educating the public on issues related to mortgage loans.
• Support the efforts of public and private sector groups that are promoting financial literacy and providing foreclosure counseling.
• Explore the possible causes of the mortgage meltdown to prevent it from recurring in the future.

If you’re having trouble making your mortgage payments or are worried that you will have trouble making your mortgage payments, take action now:

• Contact your lender immediately to discuss your options.
• Visit HUD.gov or MyMoneyManagement.net to find a HUD (Housing and Urban Development) and DOJ (Department of Justice) approved credit counselor.

The sooner you take action, the more options you have and the more time you have to explore those options.

If you are at all concerned about the problems associated with Real Estate and Mortgage Fraud, hop on a plane and get yourself to Las Vegas for next week’s inaugural Mortgage Fraud Blog Conference–the first national conference to bring together Realtors, mortgage brokers, bankers, attorneys, appraisers, industry vendors, federal employees, media and others to share best practices and methods in detecting and preventing the fastest-growing white collar crime in America today.

Many of the top people involved in Real Estate and Mortgage Fraud prevention will be attending and speaking at the conference, including:

• William Brewster: Fannie Mae’s Director of Anti-Fraud Initiatives.
• Ellen L. Cohen: Assistant United States Attorney in the West Palm Beach office of the United States Attorneys Office for the Southern District of Florida.
• Kathy Coon: Chief Appraiser-Director of Appraisal Quality Control at FNC, Inc.
• Jon R. Daurio, Esq.: Chairman & CEO of Kondaur Capital Corporation.
• Rachel Dollar, CMB: California attorney and recognized expert in the mortgage lending industry. Rachel is the editor of the acclaimed public service industry website Mortgage Fraud Blog.
• Carl R. Ernst: CEO of Ernst Publishing Co., LLC, and co-chair of the Land Fraud Workgroup of the Property Records Industry Association.
• Timothy Ervin: EMC Mortgage Corporation’s FPD/EPDAudit Team and supervisor of fraud investigations at EMC Mortgage.
• Linda S. Finley: Baker, Donelson, Bearman, Caldwell & Berkowitz, PC.
• Ann Fulmer: Vice President at Interthinx and a former victim of mortgage fraud.
• William P. Heller: Akerman Senterfitt.
• Douglas C. McNabb: McNabb Associates.
• Geoffrey K. Milne: Partner in the Litigation Department of Hunt Leibert Jacobson, PC.
• Barbara E. Nelan: Assistant United States Attorney in the Northern District of Georgia.
• James R. Park: Senior Vice President and Chief Appraiser for Aurora Loan Services, a Lehman Brothers Company.
• Michael R. Pfeifer: Managing Partner of Pfeifer & Reyolds, LLP — a law firm that concentrates on representation of mortgage lenders, brokers, servicers, and investors.
• Ralph Roberts, CRS, GRI: Founder of FlippingFrenzy.com, Realtor, author, blogger, consultant and coach who works alongside enforcement agencies, regulators, and financial institutions to educate, prevent and inform on the problems associated with Real Estate and Mortgage Fraud.
• Robert Russell: Counsel to Office of Thrift Supervision (OTS) Director John Reich.
• Merle Sharick: Business Development at Mortgage Asset Research Institute (MARI).
• Robert Strupp: Director of Research and Policy with the Community Law Center, in Baltimore, Maryland.

The Inaugural Mortgage Fraud Blog Conference is being held from Wed., Nov. 14 through Thurs., Nov. 15 at Circus Circus Casino & Hotel in Las Vegas, Nevada. For more information or to register before it’s too late to attend, visit the Mortgage Fraud Blog Conference website.

In the past, Real Estate and Mortgage Fraud cases in one central California town might have gone undetected or sent to federal authorities, but thanks to a two-year-old Real Estate Fraud Unit funded by a $2 surcharge on every real estate transaction recorded, Modesto, California, is cracking down on the bad guys at a higher rate than ever before. Case in point: The Stanislaus County district attorney’s office recently filed a 68-count criminal complaint against three real estate agents and seven others.

The three are accused of stealing more than $2 million from lenders by filing false documents with Stanislaus County’s clerk-recorder’s office, indicating that loans on three properties had been paid–all so straw buyers could secure new loans, then cash out with the illegally obtained proceeds.

From The Modesto Bee:

For more, read 3 accused of mortgage fraud.

The accused, courtesy of The Modesto Bee:

• Real estate agent Eric Charles Braun, 29, of Modesto is charged with 63 felonies. He is accused of masterminding the scheme with Noah Yates, who handled the paperwork while Braun did the legwork.
• Real estate agent Noah Adam Yates, 29, of Modesto is charged with 53 felonies. He is accused of having a home full of computers used to create fraudulent documents and a Web site that said people legally can eliminate their mortgages.
• Jearod Miles Robinson, 34, of Ceres is charged with 18 felonies. He is accused of acting as a straw buyer in a mortgage elimination scheme run by his cousin, Braun, who never paid Robinson $100,000 as promised.
• Real estate agent Doug Eugene Wallick, 32, of Waterford is charged with 15 felonies. He is accused of using a Modesto home he owned in a mortgage elimination scheme with Yates and Braun.
• Darin Eric Abell, 41, of Turlock is charged with nine felonies. He and his wife are accused of using a Turlock home he owned in a mortgage elimination scheme with Braun and Yates.
• Dawna Lea Abell, 38, of Turlock is charged with nine felonies. She and her husband are accused of using a Turlock home he owned in a mortgage elimination scheme with Braun and Yates.
• Elizabeth Marcela Ayhens, 24, of Stockton is charged with two felonies. She is accused of forging names on real estate documents and receiving $1,000 from Yates.
• Nicholas Matthew Ayhens, 24, of Modesto is charged with two felonies. He is accused of using forged names on real estate documents and receiving $20,000 from Yates.
• Arnold Vergara Rodriguez, 32, of Modesto is charged with two felonies. He is accused of receiving $50,000 for referring Braun to a lender who was targeted in a fraudulent scheme.
• Brian William Heytz, 32, of Ceres is charged with one felony. He is accused of attempting to defraud a lender by making false representations while trying to purchase a home from Wallick and Yates.

Christopher Rakel, 29, of St. Louis County, Missouri has been charged in a two-count indictment alleging a far-ranging scheme to defraud banks and mortgage lenders and money laundering. According to the indictment, Rakel, a mortgage broker with Tri-State Mortgage, facilitated the purchase of dozens of fraudulent real estate transactions, primarily in South St. Louis, during 2005 and 2006. Rakel would prepare fraudulent loan applications and other documents to assist buyers in obtaining millions of dollars in financing they could not otherwise obtain. The indictment alleges the mortgage fraud scheme involved dozens of properties, and a number of co-conspirators, including investors, mortgage brokers and appraisers.

Rakel was indicted by a federal grand jury on one felony count of conspiracy to commit bank, wire and mail fraud, and one felony count of money laundering. If convicted, he faces up to 15 years of imprisonment and $500,000 in fines.

A federal grand jury has indicted the former executive vice president and CFO of a San Ramon, California-based mortgage company on charges that he planned and executed a mortgage fraud scheme that defrauded financial institutions of over $13 million. Edward Batayeh, a.k.a. Ed Bhataybh, who worked for CHL Mortgage Group, fled from FBI Special Agents last November and is now considered armed and dangerous.

According to his indictment, Bateyah is accused of “double funding” fraudulent loans by selling variations of the same loan to multiple investors without the investors’ knowledge. Bateyah carried out the conspiracy by sending fraudulent loan packages (e.g., mortgage notes, Deeds of Trust, loan applications, verifications of employment, etc.) to financial institutions without property owners knowledge. The 40-year-old Bateyah is also alleged to have obtained properties in the name of fellow CHL Mortgage Group employees, and then obtained multiple fraudulent loans on said properties.

Oh wait, there’s more… Batayeh is also charged with tax evasion for failing to pay his taxes from 2001 through 2004, and authorities found out about his alias because–get this–he recently sent a false resume using the name of Ed Bhataybh to Aurora Loan Services, Inc., one of the financial institutions he defrauded.

Anyone with information regarding Bateyah’s whereabouts should contact the FBI at (415) 553-7400.