Salt Lake City FBI and Utah Division of Real Estate Name Top Five Mortgage Scams in 2010
Special Agents and State Investigators Warn Utahns to Beware

• Is someone letting you live in a home for free?
• Did a builder offer you deep discounts to move into a newly constructed house?
• Has a company offered to refinance your mortgage for a fee?

If the answer to any of these questions is “yes,” then you may be a victim of a scam. FBI special agents and the state investigators with the Utah Division of Real Estate have compiled a list of top five mortgage related scams in 2010.

1. Reverse Mortgage Scam: Reverse mortgages can be a legitimate way for senior citizens to take equity from their homes without a monthly payment. However, con artists convince senior citizens they can live in a home for free, obtain a home loan under the occupant’s name, and disappear with the equity, leaving the victim to repay the mortgage.

2. Short Sale Fraud: A “short sale” transaction involves a lender agreeing to sell a property for less than the mortgage amount. Fraud occurs when a distressed homeowner finds a prospective buyer and they secretly set a low sale price. Unbeknownst to the lender, the buyer is willing to pay more for the property and the homeowner pockets the difference.

3. Builder Bailouts: Simply put, builder bailouts are a “kick-back” scheme. They may be more common in a troubled real estate market where builders may have a surplus of unsold properties. The builder offers excessive “incentives” to the purchaser. These incentives are disclosed as a down payment which leads the lender to believe there is equity in a home. Under these circumstances the builder and the buyer are committing fraud.

4. Loan Modifications: The FBI Salt Lake City Field Office issued a consumer alert about loan modifications in the fall of 2009. Special agents and state investigators are concerned homeowners may fall for this same scam in 2010. Companies charge up to $2000, promising to make a homeowner’s mortgage payment more affordable. But some homeowners report that they didn’t get what they paid for. For more information on loan modification scams please find the 2009 news release at: http://saltlakecity.fbi.gov/pressrel/pressrel09/slc110409.htm.

5. Affinity Fraud: Affinity fraud is an ongoing concern for the Salt Lake City FBI Field Office and the Utah Division of Real Estate. Fraudsters who promote affinity scams frequently are, or pretend to be, members of a particular religious, ethnic, or professional group. They often enlist respected community or religious leaders from within the group to spread the word about the scheme. They convince those people that a fraudulent investment is legitimate and worthwhile. Many times those leaders become unwitting victims of the fraudster’s ruse.

Short Sale Fraud   Short Sale Fraud    Short Sale Fraud    Short Sale Fraud   Short Sale Fraud

Special Agents and State Investigators Warn Utahns to Beware

• Is someone letting you live in a home for free?
• Did a builder offer you deep discounts to move into a newly constructed house?
• Has a company offered to refinance your mortgage for a fee?

If the answer to any of these questions is “yes,” then you may be a victim of a scam. FBI special agents and the state investigators with the Utah Division of Real Estate have compiled a list of top five mortgage related scams in 2010.

1. Reverse Mortgage Scam: Reverse mortgages can be a legitimate way for senior citizens to take equity from their homes without a monthly payment. However, con artists convince senior citizens they can live in a home for free, obtain a home loan under the occupant’s name, and disappear with the equity, leaving the victim to repay the mortgage.

2. Short Sale Fraud: A “short sale” transaction involves a lender agreeing to sell a property for less than the mortgage amount. Fraud occurs when a distressed homeowner finds a prospective buyer and they secretly set a low sale price. Unbeknownst to the lender, the buyer is willing to pay more for the property and the homeowner pockets the difference.

3. Builder Bailouts: Simply put, builder bailouts are a “kick-back” scheme. They may be more common in a troubled real estate market where builders may have a surplus of unsold properties. The builder offers excessive “incentives” to the purchaser. These incentives are disclosed as a down payment which leads the lender to believe there is equity in a home. Under these circumstances the builder and the buyer are committing fraud.

4. Loan Modifications: The FBI Salt Lake City Field Office issued a consumer alert about loan modifications in the fall of 2009. Special agents and state investigators are concerned homeowners may fall for this same scam in 2010. Companies charge up to $2000, promising to make a homeowner’s mortgage payment more affordable. But some homeowners report that they didn’t get what they paid for.

5. Affinity Fraud: Affinity fraud is an ongoing concern for the Salt Lake City FBI Field Office and the Utah Division of Real Estate. Fraudsters who promote affinity scams frequently are, or pretend to be, members of a particular religious, ethnic, or professional group. They often enlist respected community or religious leaders from within the group to spread the word about the scheme. They convince those people that a fraudulent investment is legitimate and worthwhile. Many times those leaders become unwitting victims of the fraudster’s ruse.

The promoter of an $18 million real estate investment scheme that targeted African-American individuals in Southern California and other states was sentenced today to 151 months in federal prison. Jeanetta M. Standefor, a 40-year-old resident of Altadena, California, was sentenced in Los Angeles federal court by United States District Judge Percy Anderson. In addition to the prison term, Judge Anderson ordered Standefor to pay $8,688,924.

Through her Pasadena-based company, Accelerated Funding Group (AFG), Standefor operated a bogus “foreclosure reinstatement” program that attracted more than 600 investors between 2005 and 2007. The scheme purported to use investors’ funds to cure defaults on distressed properties about to be put into foreclosure. While soliciting investor money and promising returns of up to 50 percent in time periods as short as one month, Standefor and AFG were instead operating a Ponzi scheme that used money from new investors to pay previous investors.

Jeanetta Standefor pleaded guilty in September 2008 to two counts of mail fraud.

Standefor’s case involved what is commonly called “affinity fraud,” that is, a fraud directed at a particular community. Jeanetta Standefor and AFG targeted investors in the African-American community through a now-defunct Web site, word of mouth, real estate seminars and testimonials by other seemingly successful African-American investors.

Standefor claimed investor funds would be used to assist owners of distressed properties. Written materials put out by AFG touted its foreclosure reinstatement program as “virtually risk-free” and promised investors that their principal would be safely returned within 72 hours at their request. However, Standefor and AFG did not use investor funds to cure defaults on any residential properties, and investors’ requests for return of their investments were ignored.

Jeanetta Standefor used more than $1.9 million of investor funds for personal expenses, such as her lavish wedding and honeymoon, cars, jewelry, tickets to entertainment events and home renovations.

Recently, an investigative reporter for Seattle, Washington’s King 5 News broke a story that illustrates a concept and a phrase that may be unfamiliar to many, Affinity Fraud. Affinity Fraud refers to a situation where a trusted member of a shared group or organization preys upon a victim. In the recently reported story, reporter Susannah Frame found that a mortgage broker affiliated with a Filipino Christian congregation devised a fraudulent scheme to procure home loans for church members with damaged credit. The mortgage broker deceived homebuyers and lenders by substituting the identities and credit histories of past customers who were also church members. These unsuspecting and misdirected individuals thought they were purchasing homes when, in fact, ownership was vested in the names of others. It should come as no surprise that forged documents can be traced to a single title company and a number of its employees who are notaries. The mortgage broker took the scheme to new depths by collecting monthly payments from borrowers and allowing the loans to default.

Susannah Frame was correct to question the practices of the title company identified in her report; notary abuse is just one visible symptom of a greater disregard for accepted practices. Real estate fraud requires a great deal of planning and coordination among numerous insiders; it takes a team. The fraudster has no choice but to enlist the cooperation of a title agent who is uniquely positioned as the “last line of defense” in any transaction. The transparency of this particular scheme and the brazenness of the fraudsters should shock everyone. Clearly, they felt they would not be caught, or that nothing would happen to them if they did. Boy, were they were sorely misinformed! The number of real estate-related crimes reported each year has become a primary focus of federal investigators and prosecutors. State and local authorities are equally as concerned and only slightly less so prepared to take a serious stance (budgets permitting). Still, a title community comprised of properly trained professionals should have proven a formidable barrier to the criminal aspirations of the mortgage broker described in the King 5 News report. So, what exactly is the problem?

The title industry faces an enormously complex set of challenges as it evolves from something that it was in the past to something that it’s expected to be in the present. I often ask audiences of title agents to define their work product in 10 words or less. The answer is not quite as simple as it seems. The traditional sources of business for the title industry now have an affinity of their own for sharing profits in return for directed title orders. The title industry once possessed a moral high ground that has eroded in the face of anti-competitive forces. Today’s title agent lacks the ability to confront partners in joint ventures or to replace lost sources of business. Is the title company in the King 5 News report guilty of greed in a traditional sense, or is it guilty of a newly spawned category of real estate fraud, “complacency on demand?” Only a thorough investigation by authorities will reveal the real motive… both are criminal offenses.

It is my opinion that the land title industry exists for the following reasons:

1. To expertly examine titles and provide curative remedies for title issues
2. To disclose all material facts (in writing) to interested parties
3. To actively promote fraud prevention in real estate transactions

Many title agents lack the professional skills needed to fulfill the legal duty to act in the best interest of consumers and lenders. Licensing standards are determined by individual states, as are continuing education requirements. For the most part, it requires very little experience or practical knowledge to become a title agent. Continuing education is geared towards the novice and has little to offer seasoned practitioners. Additionally, title insurers are far too zealous in their efforts to expand market share by signing new agencies. The overall effect has been disastrous for the public as evidenced by current fraud statistics and the endless barrage of news reports illuminating the activities of fraudsters.

Back to King 5 News reporter Susannah Frame…she has a blog that adds valuable insight into the human side of Seattle’s real estate-related affinity fraud. Honest and well-intended members of Seattle’s real estate community are properly concerned that the reputation of their industry has been tarnished by the unscrupulous behavior of one single mortgage broker and a single title company. Members of Christian groups worry as well that the public will be unforgiving in its assessment of their religious beliefs. The actions of real estate professionals profoundly influence the lives of many.

At the end of the day, after contemplating the motives of a title company that lacks the courage to say “no” and the actions of a dishonest woman hiding behind a veil of religious values, one question remains: What has happened to human decency?