FBI official says cities like Gary are still reeling from recent unscrupulous lending tactics

GARY, IN – The effects of the mortgage fraud that helped bring down the nation’s economy and resulted in the financial industries’ federal bailout are still being felt throughout Northwest Indiana.

That was part of the message FBI official Michael Prendergast delivered to members of the Gary Chamber of Commerce during the group’s monthly luncheon meeting at The Buffet & Grill. Prendergast has been assigned to the Gary/Merrillville FBI office for the past 19 years. Among this duties are investigating political corruption, civil rights violations and fraud, including mortgage and securities fraud.

Mortgage fraud became prevalent when mortgage loans were given to people who were not credit-worthy and unable to make those payments. It was a far-reaching scheme that originated with a network of those who could manipulate the system, Prendergast said. In some cases, this fraud included real estate agents, appraisers, title companies, mortgage companies and bank employees.

Many of these mortgage schemes grouped four, five or more residential properties together and obtained loans for more than the properties were worth, Prendergast said.

“They used a model from Las Vegas where the market was manipulated and properties were marked up,” he said. “They promised people who took out the loans that they would provide renters. Well, the renters disappeared after two months, and the owners were left holding the bag.”

Eventually as big banks, such as Chase and Wells Fargo, began buying these mortgages on the secondary market, officials realized the people who had title to the properties couldn’t pay for the loans.

In addition, insurance companies began selling securities based on these mortgages to investors.

Federal money from the Department of Housing and Urban Development also ended up in these schemes.

“Up here in blighted areas like Gary, East Chicago and Hammond, there were multiple schemes to get people to invest in abandoned properties,” Prendergast said. “Some investors got money for rehabbing, but the work was never done and the money skimmed off.”

These faulty mortgages often didn’t include property taxes, so the owners were dunned for back taxes and the property ended up foreclosed and in the sheriff’s sale.

The ripple effect has been a new wariness about investing in places like Gary, Prendergast said. Tighter controls and credit requirements are also freezing some borrowers out of the market, even for single-family primary residences.

Banks are cooperating in the FBI investigation, Prendergast said, and the FBI is going after those who took out the mortgages.

“We may have to be hard on victim-buyers to get information on who organized these mortgage frauds,” he said.

Another problem has arisen because of the amount of money the federal government has given Gary that still hasn’t been accounted for, Prendergast said.

“The federal government gives money out like a faucet turned on, but they don’t track it,” he said. “Tracking funds in Gary is difficult.”

People want to invest in Gary and have good motives, Prendergast said, but because of the misuse of funds, these efforts are being stymied.

By Lu Ann Franklin

A Noblesville woman was sentenced to more than five years in prison for her role in a multi-million dollar mortgage fraud scheme.

A U.S. District Court judge in Indianapolis ordered Beverly A. Ross, 51, to serve 63 months in prison and repay $5.6 million to 21 lenders she defrauded as part of a plea agreement, according to a press release from U.S. Attorney Tim Morrison’s office.

Ross’s partner in the scheme, Donella Locke, 60, Indianapolis, was sentenced to 71 months in prison last month and must pay $2.3 million to 13 different lenders who were defrauded. Locke went to trial and was convicted in September.

The two women were arrested in 2008 after authorities discovered they used other people’s credit information to obtain more than $23.5 million in loans on more than 30 expensive properties in Indianapolis, Fishers, Carmel, Zionsville and other Indiana communities.

Few payments were made on the properties, and Ross filed five bankruptcy petitions to help keep some of the properties from going into foreclosure, according to the press release.

The investigation began in 2005 when one of Ross’s relatives discovered she used his credit information to buy and lease properties and vehicles.

INDIANAPOLIS—Kevin Lafavers, age 46, formerly of Indianapolis, was sentenced today to 33 months in federal prison, and Donald T. Brown, age 67, Lebanon, Indiana was sentenced to 27 months in prison. Circuit Judge David F. Hamilton sentenced both individuals following Lafavers’ guilty pleas to conspiracy to commit wire fraud and wire fraud and Brown’s guilty pleas to conspiracy to commit wire fraud and money laundering. These proceedings concerned the defendants’ participation in a multi-million dollar mortgage fraud scheme operated by Robert Penn in the Indianapolis area.

Today’s sentencing follows a lengthy investigation conducted by Special Agents of the Internal Revenue Service – Criminal Investigation Division, with the assistance of the Federal Bureau of Investigation. Judge Hamilton previously imposed sentence on six other individuals charged in the scheme as follows: Robert Penn, 84 months’ imprisonment; Mark Roth, 43 months’ imprisonment; Timothy Brown, 37 months’ imprisonment; Stephen Scott Brown, 37 months’ imprisonment; Jerry Jaquess, 30 months’ imprisonment; Tamara Scott, 24 months’ imprisonment.

Between November 2003 and August 2005, at least 136 fraudulent loans, totaling $16,613,850.00, were obtained by Robert Penn and his numerous business entities, assisted by Lafavers and Brown and others. The loans were obtained from Argent Mortgage Company, The MoneyStation, and People’s Choice Mortgage/Countrywide Home Loans.

The mortgage fraud schemes carried out by the defendants were accomplished as follows. Participants in the schemes, including Lafavers, located properties and arranged to purchase them at a fair market value generally by means of an option agreement or unrecorded land contract. Other participants in the scheme located straw purchasers who invested their good credit, but no money, to be the purchasers of these properties at a much higher price than that negotiated with the seller. Co-conspirators, including Brown, funded the down payments.

Lafavers was employed by Penn to locate properties for sale, negotiate the purchases of those properties, and enter into option agreements and land contracts with the sellers on behalf of Penn and his businesses. Lafavers generally received $1,000.00 per property located. Lafavers also attended some property closings on behalf of Penn’s companies and received checks that represented illegal proceeds. Lafavers’ sentence reflected his involvement in approximately 19 fraudulent loans. The total amount of those loans was $3,771,000.00.

Brown was primarily involved in funding down payments for investors on the fraudulent real estate transactions. Brown used a bank account, which was maintained by him and his son in the name of Brown Funding Inc. to fund the down payments. Brown obtained down payment checks and provided those checks to the title company, or to another co-conspirator, to be used for the closing. After the property closing, Brown received repayment of the checks from the fraudulent loan proceeds. In addition, Brown Funding Inc. received a fee of $1,000.00 – $3,000.00 for each down payment provided. The sole purpose of Brown Funding Inc. was to fund down payments for investors.

Brown borrowed some of the money for these down payments from individuals who he knew, but did not tell these people that they were in fact funding a fraudulent real estate scheme. Brown also added investors’ names to the Brown Funding Inc. bank account in order to convince the lenders that the investors had access to money which they did not have. Brown’s sentence reflected his involvement in approximately 113 fraudulent loans, including 86 Windsor Village loans. The total amount of those loans was $12,541,000.00.

According to Assistant U. S. Attorney Susan Heckard Dowd, who prosecuted the cases for the government, Judge Hamilton also ordered Lafavers to serve three years on supervised release, and Brown to serve two years on supervised release following their incarceration. Judge Hamilton also ordered the defendants to pay restitution as follows:  Lafavers – $ 1,475,851.63  and  Brown –  $ 9,985,004.15.

FORT WAYNE, Ind. (AP) — Indiana broadcaster and former Hoosiers player Todd Leary has been arrested on felony charges in connection with what authorities say was a multimillion-dollar fraud scheme.

The 39-year-old Leary was booked into jail Thursday night. He faces charges in Allen County court.

The charges against Leary include conspiracy to misappropriate real estate title insurance escrow funds, by improperly transferring about $1.3 million to a bank account he controlled. Court documents also say Leary once worked for a title insurance broker who pleaded guilty in a $2.7 million scheme.

Leary played for Indiana University in 1989-94, including its 1992 NCAA Final Four team. He is an analyst for IU’s radio broadcasts.

Prosecutors and jail officials had no information on an attorney for Leary.

If you are interested in the federal government’s handling of real estate and mortgage fraud prevention and prosecution, read “FBI Halts Some Cases to Investigate Mortgage Frauds,” by Bloomberg’s Robert Schmidt. If you don’t have time to read the entire article, here’s just what you need to know:

• The FBI, confronting a surge in mortgage fraud, has ordered more than two dozen of its field offices to stop probing certain financial crimes so agents can focus on real estate and mortgage fraud.
• Kenneth Kaiser, chief of the bureau’s criminal investigative division, issued this directive late last week on a video conference call with the heads of 26 FBI offices in areas where real estate fraud is out of control.
• An FBI spokesperson said the shift was made after an analysis of how agents are spending their time. Approximately 150 FBI agents were working on more than 1,300 real estate fraud cases before the directive was issued.
• The 26 FBI field offices were told to temporarily suspend opening new cases dealing with price fixing, mass marketing, wire fraud, mail fraud and environmental crimes. Current cases aren’t being dropped, the FBI spokesperson said.
• FBI field offices in Florida, Georgia, California, Nevada, Arizona, Texas, New York, Ohio, Michigan, Illinois, Indiana and Minnesota–all rated as real estate and mortgage fraud hot spots–are participating.
• “Diverting FBI resources to deal with cases of mortgage fraud is exactly what Chairwoman Mikulski wants to avoid,” Melissa Schwartz, a spokeswoman for U.S. Senator Barbara Mikulski, who heads the appropriations subcommittee for the FBI, told Bloomberg late yesterday.
• The Attorney General of the United States, Michael Mukasey said last week that the Justice Department, the FBI’s parent agency, “won’t create a national task force to combat mortgage fraud as the government did with corporate crime after Enron. “This isn’t that kind of phenomenon,” he said.

For more on this developing story, read FBI Halts Some Cases to Investigate Mortgage Frauds.

The FBI just released a comprehensive new report on real estate and mortgage fraud, and, as you might expect given everything we talk about here on Flipping Frenzy, it isn’t a pretty picture. The information contained in the report can get quite technical, with plenty of charts, graphs, and hard numbers. Regardless, it’s worth the read–see “The 2007 Mortgage Fraud Report.” Among the Report’s key findings:

1. Real Estate and Mortgage Fraud is clearly on the rise. Although there is no central way to track the total extent of the problem, the FBI received 46,717 Suspicious Activity Reports related to real estate and mortgage fraud last year—compared to 35,617 in 2006 and just 6,936 in 2003. Only 7% of these reports documented an exact dollar amount in terms of losses, but even so, the total loss from this 7% was $813 million. The FBI’s caseload has also escalated. By the end of fiscal year 2007, the Bureau was handling just over 1,200 real estate and mortgage fraud investigations—a 47% increase from 2006 and a whopping 176% increase from 2003.
2. The downward trend in the housing market will continue (see forecasts provided by the Mortgage Bankers Association in the report), providing further incentive for shady real estate industry insiders to look for dishonest ways to turn a profit and growing opportunities for scam artists to prey on vulnerable homeowners.
3. The subprime lending crisis is a contributing factor to real estate mortgage fraud, both directly and indirectly. Subprime loans, designed for people with poor or limited credit histories, now represent more than 13% of all outstanding loans–double the percentage of five years ago. These high-interest, high-risk loans contributed to the 2.2 million foreclosures filed during 2007, up 75% from 2006. The trouble actually began when home prices were rising a few years ago, leading to relaxed lending practices throughout the industry and the exaggeration of assets by industry insiders and borrowers under their charge anxious to qualify for loans, both of which contributed to fraud.
4. The top 10 hotspots nationwide for mortgage fraud in 2007, carefully mapped from multiple public and private sources, were:
   
   1. Florida
   2. Georgia
   3. Michigan
   4. California
   5. Illinois
   6. Ohio
   7. Texas
   8. New York
   9. Colorado
   10. Minnesota

   Other states significantly affected include: Arizona, Maryland, Utah, Nevada, Missouri, Indiana, Tennessee, Virginia, New Jersey, and Connecticut. The north-central region of the United States had the largest share of fraud, followed by the west and southeast regions.



5. The latest mortgage scams run the gamut: from builder-bailout schemes where developers unload excess inventory through financial trickery, to foreclosure rescue schemes that trick homeowners into signing over the deed to their house; from seller-assistance scams that use false appraisals to sell homes, to identity theft that leads to home equity credit lines being opened and drained.

The FBI’s report also briefly recounts the agency’s own response to the problem, including the Bureau’s participation in the Department of Justice’s Mortgage Fraud Working Group, through which the agency says it is helping to identify large-scale real estate industry insiders and criminal enterprises conducting systemic real estate fraud

The purpose of the The 2007 Mortgage Fraud Report is to provide insight into the breadth and depth of real estate and mortgage fraud crimes in the United States. The report updates the 2006 Mortgage Fraud Report and addresses current fraud projections, issues, and hot spots (as noted above). The objective of the report, according to the FBI, is to provide FBI program managers with relative data to justify real estate and mortgage fraud investigative and preventive resources and for investigators to identify real estate and mortgage fraud activity.

Mortgage Fraud Surging in Florida: More potential mortgage fraud cases were reported by lenders in Florida in 2007 than in the entire country the previous year, William Stern, a supervisory special agent with the FBI, said today. And Tampa, he said, ranks seventh on the agency’s top 10 list for mortgage fraud, joining another Florida city on the list, Miami, which is No. 4.

Several face charges in Canadian real estate fraud probe, including…: Ready for this one? Hold onto your hat… A 70-year-old Canadian man is among five people charged and police are looking for others in connection with a massive real estate fraud totalling nearly $4 million. Toronto, Canada police laid 135 fraud-related charges this against five people, and Canada-wide warrants have been issued for two more suspects.

Las Vegas escrow officer arrested for mortgage fraud: Sheila Katherine Williams (pictured below), a Las Vegas, Nevada escrow officer, was arrested after fraud investigators say she pocketed more than $500,000 in escrow funds. Authorities say this case is just the tip of the iceberg in what they believe will be a deluge of mortgage fraud cases in the weeks and months ahead, and that this particular arrest is another ripple effect of Nevada’s worsening foreclosure crisis.

Gary, Indiana attorney sentenced for real estate fraud: According to the AP, Gary attorney Willie Harris has been sentenced to four-and-a-half years in prison for his role in a real estate fraud scheme. Harris was convicted in September on fraud and tax evasion charges for skimming $50,000 from the profits of a 2000 real estate deal involving a now-defunct local enterprise association. The Indiana Supreme Court suspended Harris’ law license earlier this month.

Woman receives $3.5 million judgment in mortgage scam case: A Great Neck, New York woman victimized by mortgage fraud when she unknowingly gave away her house has won a $3.5 million judgment against the mortgage broker who scammed her. Priscila Nano, 66, said she was “scared” and on the brink of losing her longtime home to foreclosure in 2004 when she received an advertisement from a company called Foreclosure Options Inc., and called the company’s number. In court papers, Nano’s attorneys described her as “an underemployed, senior citizen and immigrant with a modest command of the English language … desperate to keep her home.”

Maryland expects significant rise in mortgage and foreclosure scams: A dramatic rise in foreclosures and related scams is expected in Maryland in the coming year, prompting that state’s governor and the General Assembly to roll out several initiatives intended to help people keep their homes and avoid mortgage fraud. Governor Martin O’Malley this week proposed a set of emergency regulatory reforms and bills to target predatory lending and mortgage fraud, more efficiently inform homeowners about foreclosures, and create stricter licensing regulations. In addition, there are at least five more foreclosure-related bills that have originated in the state’s legislature this year. Maryland had 6,969 foreclosures in October and November 2007 alone.

16 People Indicted in Austin, Texas Mortgage Fraud Scheme: The United States Attorney for the Western District of Texas announced that a federal grand jury has returned an indictment charging sixteen individuals for their roles in a multi-million dollar mortgage fraud scheme.

A leading online marketplace for foreclosure properties, yesterday released its August 2007 U.S. Foreclosure Market Report, which shows that a total of 243,947 foreclosure filings–default notices, auction sale notices and bank repossessions–were reported during the month, up 36 percent from the previous month and up 115 percent from August of last year. This is the highest number of foreclosure filings in a single month that RealtyTrac has reported since it began issuing the monthly report in January 2005.

The national foreclosure rate of one foreclosure filing for every 510 households for the month is also the highest figure ever issued in the report.

The jump in foreclosure filings may just be the beginning of the next wave of increased activity for house flippers, as a large number of subprime adjustable rate loans are now beginning to reset. A significant factor in the increased level of foreclosure activity is that the number of REO filings (bank repossessions) is increasing dramatically, which means that a greater percentage of homes entering foreclosure are going back to the banks.

Nevada, California, Florida post top state foreclosure rates

Nevada continued to register the nation’s highest state foreclosure rate, one foreclosure filing for every 165 households–more than three times the national average. The state reported 6,197 foreclosure filings during the month, a 21 percent increase from the previous month and more than triple the number reported in August 2006.

California’s foreclosure rate jumped to second highest among the states thanks to a 48 percent month-over-month spike in foreclosure activity. The state reported 57,875 foreclosure filings during the month, a foreclosure rate of one foreclosure filing for every 224 households–more than twice the national average.

Florida foreclosure activity jumped 77 percent from the previous month, boosting the state’s foreclosure rate from seventh highest to third highest among the states. The state reported 33,932 foreclosure filings, a foreclosure rate of one foreclosure filing for every 243 households.

Other states with foreclosure rates ranking among the nation’s 10 highest were Georgia, Ohio, Michigan, Arizona, Colorado, Texas and Indiana.

Sun Belt, Rust Belt states dominate top foreclosure totals

Seven of the top 10 states in terms of total foreclosure filings in August were located in the Sun Belt, and three of the top 10 states were in the Rust Belt. After California and Florida, Ohio registered the third highest state total, with 17,793 foreclosure filings during the month. The state documented a foreclosure rate of one foreclosure filing for every 281 households, fifth highest in the nation.

Texas, Michigan and Georgia all reported more than 10,000 foreclosure filings for the month, documenting the fourth, fifth and sixth highest state foreclosure totals respectively, followed by Arizona, Colorado, Illinois and Nevada.

Top Metro foreclosure rates in California, Michigan, Florida, Nevada and Ohio

California cities once again accounted for six of the top 10 metro foreclosure rates in August, with the top three spots all taken by California cities. Modesto documented the nation’s highest metro foreclosure rate, one foreclosure filing for every 79 households, followed by Stockton and Merced. Other California cities in the top 10 included Vallejo-Fairfield at No. 5, Riverside-San Bernardino at No. 6 and Sacramento at No. 7.

Detroit posted a foreclosure rate of one foreclosure filing for every 87 households, the nation’s fourth highest metro foreclosure rate and more than five times the national average. Fort Lauderdale, Las Vegas and Cleveland, ranked Nos. 8, 9 and 10.

A federal grand jury in Indiana has indicted a 35-year-old Fort Wayne mortgage broker on wire fraud charges in connection with multiple loan applications he filed for the purchase of more than 50 homes. From The Indianapolis Star:

The indictment returned [last] Thursday charges that Justin L. Stuckey, the owner of Maximum Mortgage in Fort Wayne, obtained fraudulent loans in 2002 for investors buying rental properties. Stuckey also faces a civil lawsuit over allegations that he was involved in some $5.5 million in mortgages that resulted in nearly 150 home foreclosures.

Attempts to reach Stuckey on Thursday for comment were unsuccessful, The Journal Gazette reported. Stuckey, however, told the newspaper in March that he had done nothing wrong.

“If I did anything illegal, it’s been almost five years since those loans were made. I would have been charged by now,” Stuckey said. “I could write those loans again today. …I just want this stuff to end so I can get back to doing my business. It’s what I’m good at.”

The indictment charges that the mortgage applications submitted by Stuckey falsely claimed his clients had owned the properties in question for at least a year, had at least 20 percent equity in the properties and wanted the loans for refinancing.

Transmitting false information across state lines to obtain a mortgage is a federal crime. The bank involved–ABN Amro–is based in Ann Arbor, Mich., and the money transmitted to the title company closing the loans went through a bank in Florida.

Attorneys for the property owner, the appraiser and the title company have all said their clients have done nothing wrong.

Amro’s fraud expert, Lorie Miller, has testified the bank’s computer records show that after Stuckey entered the information for a loan application that was denied, he went back in four more times and changed numbers until it was approved. Among the changes, Miller testified, was raising the appraised value of the house 25 percent and increasing the borrower’s assets.

The United States Attorney’s Office for Northern Indiana emphasized that an Indictment is merely an allegation and that Stuckey is presumed innocent unless proven guilty in court.

Here is the best example I’ve seen yet of a major metropolitan newspaper calling attention to Real Estate and Mortgage Fraud.

Take a look at this (over there, on the left)… it is the front page of yesterday’s Indianapolis Star (Sunday circulation: 356,995)

Here is an excerpt from the article:

Four years ago, mortgage loan officer Traci Walters got an enticing offer. An unknown broker faxed her office, promising to line up borrowers to buy Indianapolis houses.

She was in Florida. The broker was in Indianapolis. Working by phone, fax and e-mail from Oceans Funding in Clearwater, Walters set up mortgage loans totaling $1.8 million on 22 properties in Indianapolis.

But the deal wrecked Oceans Funding after the monthly mortgage payments stopped suddenly on each loan. All 22 houses went into foreclosure, triggering charges by Marion County Prosecutor Carl Brizzi against three Indianapolis real estate men alleged to have forged documents to obtain the loans.

“I’m going to have to close down,” said Walters, president of the 12-year-old firm, which was put on an industry watch list after the loans went into foreclosure. “In my experience, if there’s a stink associated with your name, nobody wants to do business with you.”

Just how a small and obscure mortgage lender in Florida was snared by an Indianapolis deal that prosecutors say was laced with fraud sheds light on a real estate industry ripe for abuse.

As mortgage lending became a national industry after the 1980s’ savings-and-loan crisis toppled homegrown S&Ls, state and federal regulations did not keep up with the change. That’s opened countless opportunities for illicit real estate deals, touching off a mortgage fraud epidemic in metropolitan Indianapolis and throughout the nation.

Click here to finish reading Open for fraud.

A report released yesterday by RealtyTrac shows more than 1.2 million foreclosure filings were recorded nationwide in 2006, up 42 percent from 2005. The 2006 RealtyTrac Foreclosure Market Report also revealed that there is one foreclosure filing for every 92 U.S. households. While foreclosures are not at historically high levels, a 42 percent year-over-year increase is certainly noteworthy and cause for concern. When foreclosure rates rise, con artists crawl out from the rocks they were hiding under to prey on the vulnerable homeowners. To protect yourself, you should know your options and know your rights.

According to the report, the total number of foreclosure filings rose from a little over 885,000 in 2005 to 1,259,118 in 2006. Colorado documented the nation’s highest state foreclosure rate for the year, one foreclosure filing for every 33 households or 3 percent of the state’s households. The state reported 54,747 foreclosure filings during the year, an 85 percent increase from 2005 and the eighth highest total among all states.

Georgia and Nevada both reported one foreclosure filing for every 41 households in 2006, but Georgia edged out Nevada with a slightly higher percentage of households in foreclosure, 2.5 percent compared to 2.4 percent in Nevada. Georgia reported 75,975 foreclosure filings during the year, the sixth most of any state and a 67 percent year-over-year increase. Nevada foreclosures surged in fourth quarter, pushing the state’s total for the year to 21,045, nearly three times the number reported in 2005.

Other states with foreclosure rates among the nation’s 10 highest included Texas, Michigan, Indiana, Florida, Ohio, Utah and Tennessee. Texas reported 156,876 foreclosure filings for the year, the most of any state, and nearly 13 percent of the national total. The state consistently reported big foreclosure numbers throughout 2006, documenting the highest monthly total eight times, and foreclosures for the year were up more than 14 percent from 2005. Texas’ foreclosure total represented nearly 2 percent of the state’s households, or one foreclosure filing for every 51 households, giving the Lone Star state the nation’s fourth highest state foreclosure rate.

Rising foreclosure activity in the fourth quarter pushed California’s 2006 foreclosure total to second highest among all U.S. states. California reported 142,429 foreclosure filings during the year, more than twice the number reported in 2005, and accounting for more than 11 percent of the national total. California’s 2006 foreclosure rate of one filing for every 86 households ranked 14th in the U.S.

Florida’s foreclosure activity remained relatively flat in 2006, up just 2 percent from 2005, but the state’s foreclosure total still placed third highest among all the states. Florida reported 124,721 foreclosure filings during the year, a foreclosure rate of one foreclosure filing for every 59 households. The state’s foreclosure rate dropped to seventh highest in 2006 after claiming the top spot in 2005.

With an average of more than 10,000 foreclosure filings in each quarter, Detroit, Michigan, documented the highest annual foreclosure rate among the nation’s 100 largest metropolitan areas. Atlanta, Georgia’s 2006 foreclosure total of 63,737 represented 4.4 percent of the city’s households, ranking it second in the nation. Indianapolis, Indiana’s foreclosures decreased in the second, third and fourth quarters of 2006, but the city still documented the nation’s third highest metro foreclosure rate: 4.3 percent of all households.

Other cities with foreclosure rates among the nation’s 10 highest include Denver, Dallas, Fort Worth, Las Vegas, Memphis, Fort Lauderdale, and Miami.

The nation’s largest independent home loan lender, Countrywide Financial Corp., is suing a Fishers, Indiana, man for orchestrating a mortgage fraud scheme in which dozens of Virginia residents were tricked into buying homes in Indianapolis and Westfield, Indiana, at significantly inflated prices. Countrywide alleges that Robert Penn worked with relatives in Virginia–and associates that included appraisers and mortgage companies–to defraud hundreds of homeowners.

According to the Indianapolis Star, Countrywide’s lawsuit lists 112 properties, but on Thursday, Prudential Realtors in Indianapolis put that number closer to 400. By some accounts, the Star reports, the dollar value of the loans, many of which have defaulted or are now in foreclosure, is somewhere between $40-$80 million.

Click here for more on this developing story.

With fewer houses selling, increases in foreclosures and real estate prices dropping, the housing market is experiencing the “soft landing” that has been long predicted, and the mid-western United States is once again the most vulnerable part of the country when it to real estate fruad. Earlier this week, CoreLogic released the latest edition of the Core Mortgage Risk Monitor, a report that forecasts the geographic regions most likely to experience the economic consequences of increased levels of fraudulent activity over the next 12 to 18 months.

According to the latest report, the risk index rose by 5 percent between the first and second quarters of 2006, after increasing by 6.4 percent between the fourth quarter of 2005 and first quarter this year. This increase indicates that the risk of real estate and mortgage fraud causing economic impact in vulnerable markets continues to rise at an unprecedented rate.

The top five major metropolitan statistical areas most at risk are:

1. Detroit-Livonia-Dearborn, Michigan
2. Memphis, Tennessee
3. Dayton, Ohio
4. Akron, Ohio
5. Gary, Indiana

The top five markets showing the most noticeable increase quarter over quarter are:

1. Gary, Indiana
2. Detroit-Livonia-Dearborn, Michigan
3. Goldsboro, North Carolina
4. Flint, Michigan
5. Florence, South Carolina

The Core Mortgage Risk Monitor measures what we call ‘collateral risk,’ which is the risk associated with the accuracy of a residential property valuation and the sustainability of that valuation over the life of the mortgage due to the unique characteristics of the property, market, and mortgage contract participants.

Someone much smarter than me once said, “Many of us spend our lives searching for success when it is usually so close that we can reach out and touch it.”

I’m in Indianapolis, Indiana, today delivering the Keynote Address for the Real Estate Success Summit. Close to 400 Realtors from around the greater-Indianapolis and surrounding areas are here at the Radisson Hotel in downtown Indy to hone their Business Planning, Pricing, Counseling Buyers, Systems Development, Niche Marketing, and Lead Generation skills around. My role, as the first speaker of the day, is to get the crowd pumped up and ready for a great day of learning and networking, and to remind everyone of our collective successes.

Teaching today’s sessions–at the invitation of STAR POWER® Systems founder Howard Brinton–are the following top producing Realtors, all of whom are STAR POWER Stars:

• Rob Levy from Prudential Northwest Properties in Portland, OR
• Leslie McDonnell from RE/MAX Suburban in Libertyville, IL
• Cathy Russell from Cathy Russell Real Estate in West Lafayette, IN
• Martin Bouma from Keller Williams Realty in Ann Arbor, MI
• Debbie Yost from RE/MAX Of Casa Grande in Casa Grande, AZ
• Mike Watkins from Mike Watkins Real Estate Group in Greenwood, IN
• Terry Moerler from AVIARA Real Estate in Westlake Village, CA
• Michael Maher from RE/MAX First in Shawnee Mission, KS
• Alexis Bolin from ERA Old South Properties in Pensacola, FL
• Jana Caudill from Keller Williams Realty Leaders in Crown Point, IN
• Darryl Baskin from Mcgraw Davisson Stewart Realtors in Broken Arrow, OK
• Debbie Morris from Morris Group Realty in Indianapolis, IN

That’s all for now (oh, aside from the fact that Ameriquest–yes, the same Ameriquest that earlier this year settled a $295,000,000.00 mortgage fraud claim–yesterday announced that it will implement a new “business model” that will result in the closing of 229 retail branch offices and the layoffs of about 3,800 workers, effective immediately). New “business model,” huh? So that’s what they’re calling it these days! Interesting.

I’m headed to Indianapolis, Indiana, in a few weeks to keynote this event. In the meantime, I’m glad to hear that the Mayor of Indianapolis, Bart Peterson, and the state’s Attorney General, Steve Carter, are making plans to crack down on foreclosure-related fraud. According to my sources in Indiana, changes to state law will soon provide homeowners with significant protections from those “We Buy Homes” scams.

As we all know, there are people out there who prey on families who’ve fallen on hard times–namely, ‘foreclosure consultants’ who target homeowners who have been threatened with foreclosure. In a typical foreclosure-consulting scheme, homeowners pay consultants with hopes that the consultant can stop or delay foreclosure on their home. In reality, the consultant does not pay the mortgage, and the original homeowner ends up losing the home in spite of the fees paid to the consultant’s company. Indiana’s new rules governing foreclosures will empower homeowners with more information and place disclosure requirements on companies that engage in foreclosure-related activities.

Starting July 1, 2006, Indiana law governing foreclosure rescue would:

1. Require significant written disclosures to inform homeowners about critical aspects of
   the services they are purchasing.
2. Provides homeowners with a 3-day right to cancel an agreement with a foreclosure consultant.
3. Prohibits a company/individual from obtaining power of attorney from the homeowner.
4. Requires foreclosures consultants to obtain a surety bond of at least Twenty-five Thousand dollars ($25,000).

The new rules, which were officially put into place by Indiana House Enrolled Act 1114, increase penalties and enforcement abilities for consumers harmed by fraudulent foreclosure consultants. Specifically, the new rules allow a person damaged by a violation to bring an action to recover the greater of two times (2x) the amount of actual damages and attorney’s fees, and bring an action against the consultant’s bond to recover an amount equal to that of the damages.

Way to go, Indiana!