Reported incidents of mortgage fraud in the U.S. increased by nearly 50% in the first quarter of 2008 from a year ago, according to a new report released this week. The report is based on data submitted by Mortgage Asset Research Institute (MARISM) subscribers about loans that were originated in the first quarter of this year and have since been classified as fraudulent, and shows a whopping 42% increase in filings. At the local level, Florida continues to lead all states in reported mortgage fraud. In fact, according to the report, Florida accounted for 24% of all properties with material misrepresentation for loans originated during the first quarter of 2008, and the Miami MSA alone boasts 49% of all of the reports submitted for properties in the state.

California ranked second in the first quarter of this year (with 52% of the properties with misrepresentation coming from the Los Angeles area), followed by a three-way tie for third place among Illinois, Maryland and Michigan.

Major urban areas also score the highest in Illinois, Maryland and Michigan. Ninety-four percent of investigations in the state of Illinois are for properties in the Chicago MSA, while in Maryland, 25% of reports are in the Baltimore MSA. In addition, the Detroit MSA counts for 56% of all of the misrepresentation reported for Michigan.

For all states, the most common type of fraud was in the “General Application Misrepresentation” category, followed closely by misrepresentations related to income and employment. In addition, multiple types of fraud types–such as identity theft and identity fraud–continue to appear in a significant percentage of loan transactions.

The report–which available for download here–presents a number of interesting and noteworthy trends:

• In general, misrepresentation on the mortgage application trends high in each of the states.
• Income and employment misrepresentation on the mortgage application rank high in Florida,
  California, Illinois and Maryland. Florida and Maryland report higher income than employment misrepresentation, and California and Illinois report slightly higher employment than income misrepresentation.
• Michigan shows a high percentage of asset and debt misrepresentation on the mortgage application.
• Appraisal misrepresentation (including value inflation and incorrect use of comparables) is most prevalent in Michigan.
• Maryland has an abnormally high percentage — 69% — of tax return and financial statement misrepresentation.

In its final analysis, this week’s report concludes the following:

1. The first quarter data reveals that loan application misrepresentation continues to plague the industry. According to the FBI’s 2007 Mortgage Fraud Report, “the downward trend in the housing market provides an ideal climate for mortgage fraud perpetrators to employ a myriad of schemes suitable to a down market.” Simply stated, mortgage fraud will not disappear — in fact, it is expected to significantly grow, evolve and penetrate new areas within the industry.
2. As the nation’s lenders redraw their credit practices, we see a continued need to highlight and eliminate loans that are not in good order at the point of origination, well before prefunding processors spend any effort to seek added verification or validation of the mortgage application information. If loan applications are not in good order when submitted, the loan data may likely be adjusted to fit the business practice expectation to meet the requirements for funding, which ultimately may result in funded loans that quickly go bad.
3. To save itself from schemes both commonplace and new, the mortgage industry must continue to strengthen its attention to and practice of due diligence to ensure that transactions are in good order at the point of origination. This includes an analysis of the borrower’s identity, as well as the players involved in each of the real estate roles whether they are outsourced or work directly for the lender.
4. As lenders pursue higher-quality loans for the market, the priority should be on identifying poor quality at the earliest possible point in the process — and at the lowest possible cost. In MARI’s view, the origination and prefunding processes offer the largest and least expensive opportunities to assure funding of higher quality loans. How a lender accepts or rejects a loan application at the front door is often all a criminal needs to see how much further he or she may push through the loan process.
5. Pre-funding fraud detection solutions can help prevent the risk of application discrepancies, exposure to compromised identities and establishment of relationships with insiders who leverage someone’s good name to perpetrate fraud. If on the mortgage application general misrepresentation or income, appraiser or employer misrepresentation were checked adequately at origination and pre-funding, in this quarter’s examples, would there still be significant fraud to report…?
6. Mortgage fraud inflicts damage to profits, reputations and consumer confidence. Today, it is wise to ensure you know the customers, employees and vendors involved in every loan transaction — doing this early in the process can result in overall protection from tainted pipelines and hidden threats to loan quality.

We have all heard that if an offer sounds too good to be true, it probably is too good to be true. But what if the offer comes from a high profile member of your own community… say it comes from a professional athlete who spent years helping the local NBA team make it to the playoffs and into championship games. Surely, someone as well known as a National Basketball Association player wouldn’t involve himself as a ringleader in real estate fraud scam, would he?

This is the question I encountered recently when Bruce McClellan and his attorney Mike J. Smith contacted my office for information on where to turn for help in an alleged mortgage fraud scam perpetrated by veteran Detroit Pistons basketball player Lindsey Hunter.

Here is what happened, in Bruce McClellan’s own words (provided as an exclusive to FlippingFrenzy.com):

My name is Bruce McClellan (picture left) and this is my account of what happened between myself and NBA player Lindsey Hunter, and Hunter’s real estate investment firm, L&I Enterprises, LLC, and L&I’s other business personnel—Ivan “Iron” Johnson and Denna P. Tansil. I met Lindsey Hunter through his business associate, Ivan “Iron” Johnson, who I originally met years earlier at the Pontiac School system where I work as a boiler engineer.

In February of 2007, Ivan Johnson approached me to see if I would be interested in investing in real estate. According to Ivan, he had just opened a real estate investment firm with Detroit Pistons’ basketball player Lindsey Hunter, and if Lindsey felt they had a deal that I just had to look at, he wanted to know if I’d be interested.

When I asked him to tell me more about this business he was involved in with Lindsey Hunter, Ivan said they had formed a company called L&I Enterprises, LLC, for the purpose of buying and selling homes for a profit. After he swore to me that his business with Lindsey Hunter was 100% legit, I said yes to learning more about real estate investment opportunities.

A few weeks later, Ivan Johnson told me that he and Lindsay Hunter (picture right) had a real estate opportunity that would make me a lot of money. Ivan asked me to meet with himself and Lindsay at L&I Enterprises’ office for the purpose of checking my credit and running a background check on me to ensure that I’d qualify for a loan. When I arrived at their office, Lindsey he had left already, so Ivan handled the request for my credit report all on his own. Once he saw the results, Ivan said I had a great credit score (it was in the neighborhood of 790), and I was told I’d soon be a millionaire from investing in real estate.

At about the end of February, I heard from Ivan Johnson again. This time he said that he and Lindsey Hunter found the perfect property for me to invest in, and that once the deal was finalized, I’d earn $300,000 for my participation. According to Lindsay Hunter and Ivan Johnson, the deal involved buying a $1.2 Million home and selling it for $2.1 Million to a buyer Lindsey and Ivan had already identified and received a commitment from to buy the house. All I needed to do, Ivan and Lindsey told me, was apply for the home loan for the $1.2 Million purchase, and they’d handle the rest.

When I expressed doubt about my ability to qualify for a $1.2 Million loan, both men told me not to worry, that they would handle everything. Once again, as I did when Ivan first told me about Lindsey Hunter and L&I Enterprises, I expressed my concern for only working on legitimate deals and keeping my good credit in good standing. Again, both men told me I had nothing to be concerned about.

For a man making less than $45,000 a year, what Lindsay Hunter was telling me was quite appealing, as was the star treatment I was receiving from a well-known veteran NBA player.

On March 30, 2007, Ivan Johnson called to tell me that he needed me to meet him at LaSalle Bank in Farmington Hills, MI, where it was necessary for me to add my name to Lindsey and Ivy (wife) Hunter’s bank account. When I asked why my name was being added to Lindsey’s account, Ivan told me that this was necessary so it appeared to the bank that I had more money than I really did, which would help me qualify for the loan. When I asked Ivan why Lindsey wasn’t worried about adding me to his personal account, Ivan told me that Lindsey knew that I was an honest person and that I would never attempt to steal from him (which of course was true—I would never steal money from anyone).

Ivan Johnson and I went to the bank together where Ivan called Lindsay Hunter on his phone. Lindsey spoke to LaSalle Bank employee Shatha Atcho-Salmu, and from what I could hear of the conversation, it was obvious that they knew each other. Anyway, with the assistance of LaSalle Bank’s Shatha Atchoo-Salmu, and without Lindsey Hunter or his wife Ivy Hunter present, I signed my name onto Lindsey and Ivy’s account, which I was told Lindsey had authorized.

On April 30, 2007, Ivan Johnson called to tell me that we got the house (1718 Morningside Way, Bloomfield Hills, MI 48302 — pictured below) and that I needed to meet him to sign all the necessary paperwork. We met at Prudential Cranbrook Real Estate office on Franklin Road in Franklin, MI, to sign the papers. When I arrived I asked if Lindsey would be there and Ivan told me no, Lindsey had a game. I told Ivan that I would be taking his lead because I did not understand the paperwork and Ivan said that was fine. There were about four or five other people there including the sellers of the property.

Luckily, Denna P. Tansil—a realtor from L&I Enterprises, LLC—was there to guide us through the paperwork, which did not include any reference to me receiving $300,000 once the other sale had gone through. When I pointed this out to Denna, she wrote the following into the contract: “Seller will receive no less than $300,000.00 at the sale of the property.” I showed Ivan what Denna wrote, and after he checked over, he said everything was fine and Denna signed the paper and gave me a copy.

After about two months had passed, I asked Ivan Johnson if he could give me a full tour of the house and property. At first, he agreed but on the day we were to meet, Ivan was too busy. So I didn’t try again until much later because I really was not concerned since both Ivan and Lindsey Hunter had told me that they had a buyer for the house and it was basically on its way to being sold.

Later, I told Ivan that I needed to talk to Lindsay Hunter myself because the house had not sold like he said it would and I did not like the way things were going. Ivan called Lindsey while I was there and Lindsey told Ivan to tell me that for sure nothing was wrong. Regardless, I said that I needed to talk to him.

A few days later, Ivan called and told me that Lindsey had invited me to a Detriot Pistons home basketball game for the day of October 24, 2007. After being treated like a VIP in a private suite during the game, Lindsey, Ivan and I went to an upscale restaurant in Bloomfield Hills (MI), where Lindsey proceeded to tell me that everything for the real estate investment deal was in great shape—he reconfirmed that they had a buyer lined up and ready to buy the house from us for $2.1 Million—and that he wasn’t going to do me wrong or get me involved in any illegal activities. Lindsey even went as far as to tell me that he was financially set for the rest of his life, he wanted to make me and Ivan millionaires within the next one to two years, and that he wanted to make me a partner in L&I Enterprises, LLC.

When more time passed by without the house selling, I again became anxious and decided to visit the house myself. When I arrived at the house, I was surprised to find Lindsay Hunter’s truck parked in the driveway. Not knowing why his truck was there, and not seeing a way to gain access to the house, I called Ivan to get a feel for what was going on. It was then that I learned from Ivan that Lindsey and his wife Ivy were going through a rough patch—Ivan said they had separated—and that Lindsey was actually living in the house. Basically, Ivan told me that I shouldn’t go into the house right now because it might be “awkward.”

Understanding that this happens to some people, and keeping in mind Lindsey and Ivan’s previous statements about there already being a buyer for the house—which would yield $300,000 for my part of the investment—I was okay with the situation as explained to me by Ivan, and I went home. From my way of thinking, it was really Lindsey Hunter’s house anyway, and since he already had a buyer lined up and the mortgage was being paid on time—or so I assumed—there really wasn’t anything for me to worry about.

Eventually, in February of 2008, I did end up gaining access to the house, at which time I called Ivan Johnson and told him that I did not think the house was worth $1.2 Million.

In April 2008, I received a phone call from Countrywide inquiring about the mortgage payments. Apparently, the mortgage on the house had not been paid in quite some time, and Countrywide was calling me to demand payment.

Immediately after I got off the phone with Countrywide, I called Ivan Johnson to see just what in the heck was going on. Ivan informed me at that time—and for the first time ever—that Lindsey Hunter had shut down L&I Enterprises, and that in doing so, he had left a lot of people “holdin’ the bag” and that we were on our own. Lindsey, it seems, had gone home to his wife.

I asked Ivan how I was supposed to pay an $8,700 monthly note on my salary, to which he told that what Lindsey Hunter did was wrong and that he would talk with Lindsey to see if Lindsey would make things right for me. Rather than wait for Lindsey to call Ivan, Ivan tried calling Lindsey several times but discovered that Lindsey had changed his phone numbers; he was impossible to reach.

Finally, around the end of May of 2008, Ivan Johnson and Lindsey Hunter called me on a three-way call and asked: “What do you think you deserve to get you out of this house?” I told them that since my credit was ruined from the lack of mortgage payments, I wanted $50,000 and for them to get caught up on all of the outstanding monies owed to Countrywide. At this point, Lindsey became very angry and started cursing at me over and over. I told Lindsey that I was not cursing at him and I did not understand why he was cursing at me. I told Ivan that I didn’t want to talk under these conditions any more and I hung up. Ivan called me back about twenty minutes later and he said that what Lindsey had done was wrong.

About another week passed and Ivan and Lindsey called me again for a three-way conversation. “Bruce, this is Ivan and Lindsey is on the phone,” Ivan said. I said ok and Lindsey said hello and then proceeded to tell me that he was going to do whatever it took to get me out of the deal. He would restore my credit, get me off the house, and give me $25,000.

Since I just wanted my name off the deal, I agreed. The $25,000 was much less than the $300,000 I was originally told I would receive for investing in the house, but like I said, I just wanted to get free of the whole mess.

I never heard from Lindsay Hunter again.

Long story short, Lindsay Hunter never paid the $25,000 he promised me, my credit is ruined, and come to find out that back in April—when I signed all those closing documents Ivan Johnson and Denna Tansil told me to sign—I unknowingly signed for two loans, not just one!

Now I have legal representation and am hoping that because of this story on FlippingFrenzy.com and Lindsey Hunter’s profile, someone with judicial authority will listen and Hunter, Ivan Johnson, and Denna Tansil will be held accountable for what they’ve done.

~ Bruce McClellan

Thank you, Bruce, for sharing your account of what happened between yourself and Lindsey Hunter and Hunter’s business partners, Ivan Johnson and Denna Tansil. This story involves many of the trademark signatures of real estate and mortgage fraud:

• Bruce was a naïve borrower with nearly perfect credit. He had no idea a scam was taking place right under his nose, which ultimately made him the perfect straw buyer.
• This particular case features a long-term relationship—between Bruce and Ivan— making it easy for Bruce to be conned. Ivan knew that Bruce would jump at the chance to make serious money, and he knew that Bruce was a trusting soul with nearly perfect credit.
• What scam wouldn’t be complete without a glamour player (i.e., a ring leader). In this case, it is a professional basketball player claiming to want to take a common man under his wing and make him a millionaire. In other cases it is the smooth talking, good looking, get the deal done, likeable person. In either case, Lindsay Hunter seems to fit the bill.
• This scam involves fabricating income and/or assets, which is one of the oldest tricks in the book. Lindsay Hunter added Bruce McClellan to his million dollar bank account to boost Bruce’s ability to qualify for a loan.
• Bruce was promised easy money and no risk for his involvement in what he was told was a legitimate real estate deal. How many times have we heard that one!

A common thread running through most real estate fraud schemes is an offer that is to good to be true. When prominent public figures like Lindsay Hunter make offers that seem too good to be true, especially in harsh economic times, consumers tend to lose their judgment and make poor decisions

As a result of Bruce coming forward, I was able to put his case in front of serious law enforcement officials who are now attempting to sort through this mess. From Crain’s Detroit Business:

Is Lindsey Hunter, the veteran guard of the Detroit Pistons, a victim of mortgage fraud? Or is he a perpetrator?

That’s what two investigations, one by the Wayne County Register of Deeds’ mortgage-fraud task force, the other by the FBI, want to determine.

So far, Wayne County investigators consider him a victim, with someone else serving as what they describe as “a mastermind.” The FBI, on the other hand, according to sources close to its investigation, has him as its main focus and as a leading participant in at least two possibly fraudulent deals that went awry.

Stay turned to FlippingFrenzy.com for more information and developments on this story. In the meantime, read “Pistons guard: Duplicitous or dupe in mortgage fraud?” for more information.

A federal grand jury in Michigan has indicted four men–including a mortgage broker and an appraiser–for allegedly running a $1.9 million real estate/mortgage fraud scheme. Hassan Nagi, 30, of Dearborn Heights, Michigan; Ali Haidous, 24, of Dearborn; Safi Bzeih, 35, of Dearborn; and Hussein Aoun, 23, of Dearborn Heights reportedly conspired to secure fraudulent mortgages from Countrywide Bank, Washington Mutual, Fifth Third Bank, IndyMac Federal Bank, Net Bank, and Sun Trust for more than 15 properties between April 2005 and April 2008.

The indictment alleges that Hassan Nagi worked as a mortgage broker and was responsible for submitting false and fraudulent applications to obtain the mortgages. Ali Haidous was a real estate appraiser who provided fraudulent appraisals for the properties. Bzeih and Aoun recruited sellers and straw buyers for the properties.

According to the indictment, after the Nagi and Haidous identified a willing seller of a property, Nagi secured financing for a straw buyer. False income and employment information was provided to the lender using fraudulent W-2 forms. In support of each loan, Nagi also submitted an inflated appraisal, created by Haidous.

After the inflated mortgage was funded at closing, the seller received sufficient funds to pay off any existing mortgage as well as a bonus for participating in the real estate fraud scheme. The remainder of the proceeds from the inflated mortgage were shared between Hassan Nagi, Ali Haidous and one of the straw buyers.

Nagi, Haidous, and Bzeih were expected to appear in federal court before Magistrate Judge Virginia Morgan yesterday afternoon, for their initial appearances and arraignment on the indictment. Hussein Aoun is a fugitive in Lebanon. The case is being prosecuted by Assistant U.S. Attorney Leonid Feller.

It was interesting to me that in her response to Gayle Bu’s claims about her company–the Millionaire Mindset, LLC, a.k.a. The Investors Edge University, a.k.a. Financial Freedom Through Foreclosures–company co-owner Dwan Bent-Twyford wrote the following (and this is a direct quote from a comment Dwan left here on FlippingFrenzy.com within the last 24 hours):

“We NEVER promise coaching by us because we don’t personally have the time to do it. Galye heard what she wanted to hear.”

~ Dwan Bent-Twyford, August 19, 2008

In case anyone is confused, when Dwan says “… coaching by us…“, the “us” refers to coaching delivered by herself or her husband and business partner Bill Twyford.

Curious to know if Dwan’s statement was accurate, I asked Gayle to provide further proof of her claim, which is what appears below in the form of PDF-formatted screen capture from Dawn and Bill Twyford’s company website:

You will have one on one time with Bill to get all of your questions answered. He also teaches you how to talk to the banks and howmeowners to do BPOs and work with title companies. Imagine having Bill on hand to help you through your deals. He’ll even conference call banks and sellers with you! There is nothing else like it on the market today.

To read all of the website copy and claim in question, click on the image above. (Note: Clicking on this image will yield or download a PDF file.)

According to their own website, it seems like Dwan’s claim that “Galye heard what she wanted to hear” isn’t accurate. Right there on their own website–regardless of whether that site is live today or not (because it was live when Gayle enrolled in her course)–the Twyford’s state that paying customers like Gayle Bu have direct and consistent access to Bill Twyford.

From Gayle:

Notice point #3 which clearly states “You will have one on one time with Bill”.

So if you get a sales call (ironically I did two weeks ago) from Dwan Bent-Twyfords “Business Developing Division” or anyone from New Income Today (newincometoday.com and millionairemindsetcollection.com) and they promise one on one coaching from Dwan Bent-Twyford, you have heard from Dwan herself that she doesn’t have time to personally coach you, despite the sales pitch.

I am now an educated consumer and a collector of details and this is exactly what helped me win my case in court before the judge. Anyone that has been to court is fully aware that a judge doesn’t indiscriminately hand out rulings (even judgment by default rulings) unless solid evidence is provided. I had copies of all evidence on hand to present to Bill Twyford and Dwan Bent-Twyford during the trial and they did have the option of hearing the testimony of witnesses, but they chose not to attend.

Thank you again Gayle for granting FlippingFrenzy.com permission to share this latest information with our readers. I sincerely hope Bill Twyford and Dwan Bent-Twyford live up to the April 17, 2008 court order and that they think twice about the notion of truth in advertising.

The former head of the Urban League of Northeastern New York was sentenced last week to serve 5.25 years in federal prison, and ordered to pay more than $1.9 million dollars, for his leadership role in a massive mortgage fraud scheme that rocked Albany, New York. Thirty-nine-year-old Aaron Dare’s conviction stems from a guilty plea he entered on November 13, 2006 for wire fraud, mortgage fraud, and causing false statements to be made on HUD-Insured Loans.

From late 2000 through August of that same year, Aaron Dare defrauded AMI Capital, Inc. of Bethesda, Maryland, and the U.S. Department of Housing and Urban Development to obtain money and property by means of false and fraudulent pretenses. Dare purchases included the Hinckel Brewery Apartments, a multi-family residential housing project located at 201 Park Avenue, in Albany, NY; the Olde Franklin School Apartments, another multi-family residential housing project, located at 1675 Avenue B, in Schenectady, NY; and, the Historic Pastures Village Apartments, a multi-family residential housing project consisting of approximately 39 residential buildings located in the Historic Pastures area of Albany.

As part of the scheme, Aaron Dare provided false information to AMI and HUD, which insured the loans, regarding his experience and qualifications, and the identity, experience and qualifications of his purported investors. Promissory notes in the amounts of $1.8 million and $700,000 were prepared and executed between Dare’s company, Emerge Real Properties, LLC, and entities affiliated with the seller, which falsely made it appear to AMI and HUD that Dare and/or Emerge Real Properties had approximately $2.5 million in equity and credit to apply toward the purchase of the properties when, in fact, the promissory notes were false and fraudulent and Dare and his companies did not have such equity and credit to apply toward the purchase of the properties.

As another part of Aaron Dare’s scheme, an additional promissory note was prepared and executed, which was not provided to AMI or HUD, and which effectively cancelled out the purported equity reflected in the false and fraudulent $1.8 million promissory note.

Dare’s stated purchase price of the properties was inflated from approximately $6 million to $8.5 million to take into account the bogus promissory notes. Also, notwithstanding the existence of a significant financial relationship between Dare and the owner of the properties, Identity of Interest Disclosure Statements were prepared and executed that basically represented to AMI and HUD that there was no identity of interest between the entities that were identified as the borrower and the seller of the properties.

After reviewing extensive documentation provided by Dare and others, and in reliance on the false statements and documents admitted by Dare as part of his plea today, AMI made HUD- insured loans in the total amount of $7,577,400 to Dare’s company for the purchase of the three residential housing projects, with a total stated purchase price of approximately $8.5 million.

In execution of this scheme, on or about August 29, 2002, Dare knowingly caused to be transmitted in interstate commerce from AMI’s warehouse vendor in the State of Ohio to the State of New York, a wire transfer of funds in the amount of $3,678,866.42 for the purchase of the Historic Pastures Village Apartments. Shortly after the closing on the third loan in August 2002, all three loans went into delinquent status and, eventually, defaulted. Pursuant to the terms of the loan agreements, HUD foreclosed on the properties and, following the sale thereof, suffered a total loss of approximately $1,952,200.

When it comes to questionable business practices among real estate industry insiders, nothing quite beats the loan officer who purposefully chooses not to disclose critical information to the borrower. Simply stated, unethical loan officers don’t like to give borrowers the whole picture of what the final loan looks like before closing for fear that the borrower may do what they’re supposed to… namely, shop for the best deal.

Think about it for a second. If a borrower finds a loan that costs less, offers a better rate, or is a more stable product, they might decide to go with that loan instead of the one being offered by the loan officer who reveals little to no information about his or her loan offering. By not allowing the borrower to make a fully informed and educated decision, the unethical loan officer increases the chances that the loan–whatever its ultimate terms are–will close.

Some of the information commonly withheld or not given in a timely fashion–as you will see in the following homeowner’s story–includes a loan’s costs, fees, interest rate, and other crucial information about the loan product itself. As you read the story below, see if it doesn’t sound like an all too familiar one.

My husband and I live on a farm in the eastern part of Michigan. Soon after we purchased our place, we had well over 20% worth of “down equity,” and collectively, my husband and I had what we felt was a very good income. In 2000, after being told they could beat our current lending institution’s costs and rates, we switched our mortgage to Countrywide Home Loans, a division of Countrywide Financial.

Like many homeowners, we thought we could trust our loan officer (I’ll simply refer to him as “R.C.”); so much so that we recommended him to members of our family.

R.C. told us that a “No Doc” loan would be the easiest way to avoid looking for all the paperwork we would need to be approved for the new loan, and since my husband and Iwere busy with our lives, we determined that the No Doc route was the perfect option.

We told R.C. that we wanted a 30-year fixed loan, and we knew enough to ask for the costs associated with the mortgage upfront. Even though he was easy to talk to and seemed trustworthy, my husband and I had to pry every bit of information out of R.C. I asked several times for specific papers before closing, so I could review them, but was always told not to worry about costs because they were going to be attached to the back of the loan.

At the end of the day, despite asking repeatedly, we never received any of our costs in advance. It wasn’t until our closing—which R.C. did not attend–that I finally saw the true costs associated with the loan.

When we looked into refinancing—this time in 2005–we asked Countrywide. how much we could borrow, to which they replied, “How much to you want?” (apparently, a credit rating of 690 along with a solid income translated into the feeling that we could truly ask for any amount and get it). . At the time, we did not give them a figure but were really surprised when our appraisal came back showing that our home was worth a whopping $411,000. From our perspective, there was no way that amount was correct. At best, our home at that time was worth somewhere in the range of $315,000 to $325,000 (based on the sale prices of comparable homes in our immediate area). Again, we did not know any of this until the time of closing.

At our closing, we learned that we had another secondary equity loan on the property for $60,000. I was not happy and called our loan officer, R.C., again at the closing.

I asked to have the entire amount rolled into one loan and he made excuses about why they had to structure it this way to get the loan through. How could that be with a high credit rating, I wondered In addition, R.C. assured us that we could always consolidate the loans together after closing if we would like.

Another errant item I noticed at the closing was that Countrywide was trying to charge my husband and I for homeowner’s insurance, which I already had and had sent proof of to the company. If I had not caught it, we were sure to be paying for it.

By the time 16 months had gone by, the interest on the home equity loan jumped from 8.25% to 11%, often jumping as much as .25% in a month’s time for several months in a row As you can imagine, we just could not afford the payments on any longer. I tried to refinance again, but of course, our credit score had lowered as a result of struggling to make payments. Like many other people, we were told it wasn’t possible to refinance because our house wasn’t worth as much now. In other words, our house was now upside down in its value.

Countrywide posts everywhere–on all their paperwork and strategically throughout their website–that they can help if you are struggling with payments and that they have “counselors” you can talk to. They even sent us letters to that effect. My husband and I called many times to try to work things out with them and they just demanded money and made harassing threats. Countrywide representatives often called us six or more times a day demanding payment, and even went so far as to harass us at work. They even told my secretary of my situation and harassed her!

During our time of trying to make the payments, I was often driven to tears and hysterics by Countrywide’s harassing phone calls, threats and no help whatsoever from their customer service department. It was just awful! They didn’t give us any alternatives; just threats if we did not make the payments. We were told we would face criminal charges, be tossed out on the street, lose everything we have, and be marked as debtors forever on our credit reports and more. They humiliated us at every chance they could and treated us like dirt. I cannot begin tell you the stress it created at an already stressful time.

~ Jean and Steven Sample

When you stop to consider the lack of information given to some borrowers and the tactics used by some loan officers to “get the loan done,” it is not all that difficult to see why there are so many problems with loans in the market today. The refinancing party ultimately comes to an end, leaving the borrower to pick up the shattered pieces.

According to the Federal Bureau of Investigation (FBI), which earlier today issued yet another Mortgage Fraud Advisory, here are the latest Real Estate Fraud statistics:

• Estimated Annual Losses: $4 billion to $6 billion
• Total Mortgage Fraud Suspicious Activity Reports in Fiscal Year 2007: 46,717, with $813 million in losses
• Total FBI Mortgage Fraud Task Forces/Working Groups (June 2008): 42
• Pending FBI Mortgage Fraud Investigations (May 2008): 1,380
• Cases opened in Fiscal Year 2007: 462 (compared to 295 in Fiscal Year 2003)
• Successes in Fiscal Year 2007: 321 indictments/informations; 260 convictions
• States with Significant Mortgage Fraud problems in 2008:

1. Florida
2. Nevada
3. Michigan
4. California
5. Utah
6. Georgia
7. Virginia
8. Illinois
9. New York
10. Minnesota

A New Jersey woman who raised more than $10 million from hundreds of investors in connection with real estate investments has been arrested and charged with operating a Ponzi scheme. According to Justin W. Arnold, the Assistant U.S. Attorney handling the prosecution, Marcia Sladich, 50, of Clifton, NJ, was arrested yesterday morning by Special Agents of the FBI and Postal Inspectors at her home. Prosecutors have charged Sladich with one count of mail fraud, which carries a maximum statutory prison term of 20 years and a fine of $250,000.

The U.S. Attorney’s office for the District of New Jersey alleges that beginning in 2004 and continuing through at least August of 2007, Marcia Sladich solicited hundreds of investors, most of them members of her church, to invest money with her and her company, Kay Services, LLC. According to the Criminal Complaint filed in the case, Sladich told investors that she was partnering with a successful businesswoman who would be responsible for investing their money in real estate here in the U.S. and abroad. Prosecutors say Sladich promised investors that the investments were safe and secure and guaranteed 100% annual returns.

Contrary to the representation she made to investors, Sladich did not have a successful business partner. Rather, she forged that individual’s signature on numerous investment contracts to deceive investors. What’s more, there were no bona fide investments made on behalf of any investors during the course of the scam. To perpetuate her scheme, Sladich simply used new investor money to make required payments to existing investors (i.e., she ran a Ponzi scheme).

Sladich is said to have misappropriated at least $400,000 of investor funds to purchase real estate in Florida and in Brazil for herself, and used other investor funds to pay for numerous personal expenses, including credit card bills and everyday expenses.

Following up on a story first reported by Flipping Frenzy in August of 2007, the president of a New York-based real estate investment firm has been sentenced to serve more than 11 years in federal prison and fined more than $22 million for his role in a real estate investment scam that defrauded more 200 people from 2002 through 2007. Forty-six-year-old Wilson James Baston, Jr., who is also known as Will James, pleaded guilty in March to 17 count of mail fraud and wire fraud in connection with the scheme.

For more on this story, including details on Baston’s methods, read our August 20, 2007 post, “ President of NY Real Estate Investment Firm Indicted On Multi-Million Dollar Fraud Charges.”

Glen G. McGorty, Assistant United States Attorney for the Southern District of New York, successfully prosecuted the Baston case. Prior to prosecution, the case was investigated by the Criminal Investigators of the United States Attorney’s Office, the United States Postal Inspection Service, and the Federal Bureau of Investigation. Federal District Judge for the Southern District of New York, Harold Baer, Jr.. presided over the case and imposed Baston’s sentence and fine on August 7, 2008.