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When a then 65-year-old Brooklyn, New York, woman sought the assistance of a foreclosure rescue firm, instead of helping her refinance and save her home, the much maligned Home Savers Consulting Corp. sold her home from under her. To add insult to injury, insolvent IndyMac, which is now controlled by the Federal Deposit Insurance Corp., issued the bogus mortgage on the home.

Now, the 69-year-old woman–Waver Brickhouse–has to convince the FDIC that her mortgage payments shouldn’t include an additional $150,000 added on by mortgage fraud. From yesterday’s edition of The New York Times:

Mortgage Fraud Case Poses Federal Quandary

By MICHAEL POWELL

Waver Brickhouse, gray-haired and soft-spoken, has come undone twice during the nation’s housing crisis.

In 2005, she fell behind on her mortgage payments and turned to a so-called rescue firm, which, court papers allege, tricked her into signing away the deed to her Brooklyn home. She says the company, Home Savers Consulting, secretly sold her home, with the help of a mortgage from IndyMac Federal Bank, and ran up huge new debts.

Now broke, deeply embarrassed and facing the loss of her small row house in the Brownsville neighborhood, Ms. Brickhouse, 69, faces a new problem. She must convince the Federal Deposit Insurance Corporation, which last year took control of IndyMac, now insolvent, that her mortgage payments should not include at least $150,000 tacked on by fraud.

To assume these new costs, she says, would break her in two.

“I’m going to drown in debt,” says Ms. Brickhouse, a retired city parks department worker, shaking her head. “I feel like it’s just a matter of time until I’m on the street with my children.”

F.D.I.C. officials say that they have no desire to put Ms. Brickhouse on the street and that they want to work out affordable payment terms. But Ms. Brickhouse’s lawyers say that the F.D.I.C.’s writ cannot extend to holding her responsible for a fraudulently created mortgage, and they have refused to disclose her finances until the agency drops its claim for the $150,000.

“Our position is that the mortgage with IndyMac is toilet paper — it has no legal standing,” said her lawyer Rick Wagner, litigation director with Brooklyn Legal Services Corporation A. “The law for 200 years is that no title can arise from a fraudulent act.”

Ms. Brickhouse has sued Home Savers, and her case underscores the conundrum facing the F.D.I.C. as it wades through thousands of troubled mortgages it has inherited from failed banks, 40,000 from IndyMac alone.

Tasked with renegotiating mortgages and cautious about preserving taxpayers’ dollars, the F.D.I.C. has tried to steer clear of making judgments about whether homeowners have fallen victim to fraud.

“Our position on stated income loans is that a lot of people say that someone else was responsible for the fraud,” Michael H. Krimminger, special adviser for policy in the office of the F.D.I.C. chairman, said in an interview. “It’s much more productive to get people to a position where they can stay in their homes, and to do that we must be able to verify what a borrower can afford.”

But Ms. Brickhouse’s case has a persuasive ring to it, not least because one of those engaged in the alleged fraud returned her deed and swore out an affidavit describing the scheme. In December, Mayor Michael R. Bloomberg invited Ms. Brickhouse to a press conference and vowed to forestall foreclosures in cases like hers.

Her story finds an echo in many working-class corners of New York City. The company accused of victimizing her, Home Savers Consulting, has been sued by homeowners in Brooklyn, Queens and Staten Island, and nearly every case alleges a similar pattern of deception: An owner behind on a mortgage turns in desperation to Home Savers, which secretly transfers the deed to a “straw buyer” with good credit who qualifies for a cash-out refinancing. Then, it is alleged, Home Savers drains the homes of equity.

Jessica Attie, co-director of the South Brooklyn Legal Services Foreclosure Prevention Project, estimates that Home Savers extracted at least $5 million in equity from the homes of people in a handful of her cases. Legal services lawyers have frequently forwarded information on Home Savers to prosecutors, but no criminal cases have been brought.

One of Home Savers’s founders, Garth Celestine, declined to address any detail of Ms. Brickhouse’s case. “We had a plan to help people,” he said on Thursday. “Maybe it did not always work.”

He said he would explain all of it in a book he is writing. Asked its title, he replied, “I’m thinking of calling it ‘No Good Deed Goes Unpunished.’ ”

Hundreds of new fraud claims like Ms. Brickhouse’s emerge every month. The F.B.I.’s most recent Financial Crimes Report estimates that mortgage fraud costs Americans $4 billion to $6 billion annually. The same report identifies New York State as a “Top 10 hot spot” for fraud, and notes that federal law enforcement is overburdened.

Last week, Sheila C. Bair, the F.D.I.C.’s chairwoman, called mortgage fraud “a significant problem” and warned that “scammers are moving into foreclosure prevention.”

Waver Brickhouse does not come by trust easily.

She grew up in the public housing towers of Brownsville, and her mother drilled it in her that survival depended on keeping to herself. She led a largely solitary life, going to work and church, and adopting four foster children.

In 1996, she took her life savings and purchased her first home. Slowly she became friends with a neighbor, Ophelia Fenner. When Ms. Brickhouse fell behind on her mortgage payments in 2005, Ms. Fenner suggested that Home Savers Consulting might help set her finances straight.

Ms. Fenner, court papers show, received a finder’s fee for guiding her friend to Home Savers, a fact that she did not disclose to Ms. Brickhouse.

Home Savers Consulting, and its principals — Mr. Celestine and Phillip Simon — are neither real estate agents nor mortgage brokers. They offered to refinance Ms. Brickhouse’s $213,000 home mortgage with the help of a “sponsor,” and to use the proceeds to pay her mortgage for a year. The breathing space would give Ms. Brickhouse time to pay off her debts. At year’s end, Ms. Brickhouse would resume her mortgage payments and Home Savers would take a small fee.

Recounting the arrangement, Ms. Brickhouse shakes her head. “I thought this would save me,” she said.

In May 2007, Ms. Brickhouse attended a meeting, according to court papers and a sworn affidavit. There was a representative from IndyMac Bank; Yolanda Millett, the straw buyer; Ms. Millett’s lawyer; and a Home Savers representative.

Ms. Brickhouse assumed everyone was there to help her; they were in fact selling off her house.

Ms. Millett received $8,000 to serve as the straw buyer, according to the court papers. On the spot, IndyMac gave Ms. Millett a $380,000 mortgage, allowing Home Savers to strip the home of $150,000 worth of equity.

Ms. Millett could not reached for comment.

A year later, Ms. Millett apparently had second thoughts. In August 2008, she swore out an affidavit that accused Home Savers of misleading Ms. Brickhouse at every turn. “She did not at any time believe that ownership of the subject property passed to me,” Ms. Millett stated in the affidavit, “and her intent was never to relinquish ownership.”

Ms. Millett returned the deed to Ms. Brickhouse. But Ms. Brickhouse’s travails had not ended.

About the same time, the F.D.I.C. took over IndyMac Bank. The agency now has responsibility for its assets, including its large mortgage portfolio.

F.D.I.C. officials asked Ms. Brickhouse to forward financial information so they could work out arrangements for her to pay some portion of the $380,000 mortgage. Ms. Brickhouse acknowledges that she is responsible for the $213,000 on her original mortgage. But she refuses to pay any part of the mortgage that she said was obtained through fraud.

Federal officials say they have no way of determining whether Home Savers Consulting committed fraud. And in any case, they add, IndyMac was not involved.

But court papers show that an IndyMac representative sat at the table as Home Savers orchestrated the secret sale.

“They knew that Home Savers had no legal standing whatsoever and yet said nothing,” said Mr. Wagner, Ms. Brickhouse’s lawyer. “IndyMac was writing out bad paper and they knew it.”

For now, F.D.I.C. officials say they are not looking to foreclose on Ms. Brickhouse’s home. But they have turned to a highly paid corporate lawyer who specializes in defending subprime lenders against class-action lawsuits to pursue the case with Ms. Brickhouse. “As the receiver for the bank and deposit insurer, we must balance our action with our duty to protect the depositors from the bank,” Mr. Krimminger said.

As for Ms. Brickhouse, she sits some nights and examines the documents she signed, and wonders at her naïveté. Recently, Ophelia Fenner apologized, saying she felt very bad.

“I told her, ‘So do I,’ ” Ms. Brickhouse said. “This almost cost me a house and a friendship, and I only had one of each.”

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John Nicolo, 75, his wife Constance Roeder, 65, and David Finnman, 61, have all been sentenced for their roles in a real estate scam involving real property tax appraisal and assessment schemes. Last May, after a 10-week trial, a jury convicted Nicolo and Finnman with defrauding Eastman Kodak Company, IBM, Global Crossing, ITT Industries, Inc., and the taxpayers of Greece, New York, in connection with several real property tax appraisal and assessment schemes. Nicolo and Roeder were also convicted of numerous tax fraud counts. Nicolo was sentenced to 12 years in prison. Roeder received probation. David Finnman got a 21-month in sentence.

John Nicolo was convicted of three conspiracy charges, nine mail fraud counts, eight wire fraud counts, and twenty-one money laundering counts, while David Finnman was convicted of one conspiracy count, two mail fraud counts and two money laundering counts.

The charges stem from various schemes in which David Finnman, and later Mark Camarata, while working at Kodak, would hire John Nicolo, a real property appraiser, to perform real property appraisal services for Kodak in connection with many of Kodaks’s properties during the years 1997 through 2005. In return for hiring John Nicolo, David Finnman would receive money representing kickbacks from Nicolo. In addition to the kickbacks received by Finnman, the trial established that the Greece, NY, Town Assessor also received payments from Nicolo in connection with various property tax assessment matters involving property located in Greece.

While there were several schemes proven at trial, the largest scheme involved the Town Assessor accepting bribes in return for reducing the real property tax assessment for Kodak property located in Greece, NY. Kodak had property located in Greece known as Kodak Park. Based on the reductions the Town Assessor made to Kodak Park’s real property tax assessment, John Nicolo calculated the tax savings to Kodak over a 15-year period to be $31,527,168. They also calculated Nicolo’s fee from Kodak to be $7,881,798.00, which was 25 percent of Kodak’s projected tax savings.

Additionally, John Nicolo and Constance Roeder were convicted of conspiracy to defraud the Internal Revenue Service. Nicolo was convicted of nine counts of filing or aiding and abetting the filing of false income tax returns. Roeder was convicted of five counts of filing false income tax returns.

The indictment also contained forfeiture allegations against John Nicolo and David Finnman. The government seized over $12,000,000 dollars in assets during the investigation. The Honorable David G. Larimer has issued a preliminary order of forfeiture regarding the seized assets, and additionally imposed a forfeiture money judgment against Nicolo in the amount of $9.7 Million and against Finnman in the amount of $140,000.

Image via WikipediaNo one who reads Flipping Frenzy on a regular basis will be surprised by this story, but perhaps it’s just what we need in the fight to educate the public and bring about real change in government when it comes fighting real estate and mortgage fraud. From last night’s online edition of the Daily News (NY, NY):

It took 90 minutes for Daily News to ’steal’ the Empire State Building

BY WILLIAM SHERMAN
DAILY NEWS STAFF WRITER
Tuesday, December 2nd 2008, 10:46 PM

In one of the biggest heists in American history, the Daily News “stole” the $2 billion Empire State Building.

And it wasn’t that hard.

The News swiped the 102-story Art Deco skyscraper by drawing up a batch of bogus documents, making a fake notary stamp and filing paperwork with the city to transfer the deed to the property.

Some of the information was laughable: Original “King Kong” star Fay Wray is listed as a witness and the notary shared a name with bank robber Willie Sutton.

The massive ripoff illustrates a gaping loophole in the city’s system for recording deeds, mortgages and other transactions.

The loophole: The system - run by the office of the city register - doesn’t require clerks to verify the information.

Less than 90 minutes after the bogus documents were submitted on Monday, the agency rubber-stamped the transfer from Empire State Land Associates to Nelots Properties LLC. Nelots is “stolen” spelled backward. (The News returned the property Tuesday.)

“Crooks go where the money is. That’s why Willie Sutton robbed banks, and this is the new bank robbery,” said Brooklyn Assistant District Attorney Richard Farrell, who is prosecuting several deed fraud cases.

Of course, stealing the Empire State Building wouldn’t go unnoticed for long, but it shows how easy it is for con artists to swipe more modest buildings right out from under their owners. Armed with a fraudulent deed, they can take out big mortgages and disappear, leaving a mess for property owners, banks and bureaucrats.

“Once you have the deed, it’s easy to obtain a mortgage,” Farrell said.

Many crooks have done just that:

- Asia Smith stole her 88-year-old grandmother’s house in Springfield Gardens, Queens, pocketing $445,000 in mortgages she took out.

“Her grandmother raised her,” said Queens Assistant District Attorney Kristen Kane. Smith, 22, was arrested last December and is serving a one-year jail term for fraud.

- A man posing as someone who had been dead for 19 years deeded the dead man’s property to himself. He then sold it to the scheme’s mastermind, who took out a $533,000 mortgage and vanished with the cash.

- Toma Dushevic managed to steal seven dilapidated city-owned buildings in Brooklyn 10 years ago.

He got renovation permits, fixed up one of the buildings, and rented out apartments. He sold another building for $250,000 and ran his scam for nearly two years until he was caught. Dushevic returned the buildings and did 18 months behind bars.

The FBI says financial institutions filed 31% more Suspicious Activity Reports involving mortgage fraud last year than in 2006. Nationwide, lenders’ losses totaled $813 million, and New York was one of the top 10 mortgage fraud states.

In the city, deeds accepted by the register’s office are recorded on that agency’s Web site, where they are easily viewed and are the basis for mortgage transactions.

The News investigation disclosed that mortgage brokers, representatives of title companies, lending banks, lawyers and others in the mortgage process often failed to verify identification and other information provided by the thieves.

Unlike the city employees, the brokers and others should check mortgagors’ information, their professional trade associations say.

In one Queens deed fraud case, a mortgage broker and title company representative are accused of taking part in the scam. They are charged with helping obtain $1.4 million in mortgages from two of the biggest banks in the city on behalf of the scammer, who has vanished.

In all cases The News reviewed, the city register’s office accepted and recorded the fraudulent mortgages.

Unlike the thieves, The News did not obtain a mortgage on the Empire State Building.

Instead, The News returned the property to its rightful owners Tuesday - less than 24 hours after the fake deed was filed. The News also is withholding key details of how the scam works.

Real thieves get the mortgage cash, ripping off banks and leaving the properties’ owners with mortgage debt and ruined credit.

“Mortgages stay with properties,” Farrell explained.

When the victims don’t pay the mortgages they didn’t take out, lending banks foreclose on the properties.

A major tool thieves use is the notary stamp on documents, one item city employees check.

“They don’t check to see if it’s real, but they do check to see if it’s there,” said a lawyer familiar with the system. The stamps are easy to get and cost about $30.

National mortgage broker and title company trade associations said their members try to verify identification but can be fooled by clever hustlers.

“We know you can forge driver’s licenses,” said Marc Savitt, president of the National Association of Mortgage Brokers.

“Every time the industry finds out measures to stop fraud, the thieves always get one up on us.”

Anne Anastasi, a member of the board of governors of the American Land Title Association, said, “There are people who are very good at this and it’s hard to stop.”

© Copyright 2008 NYDailyNews.com

To see the documents used in this heist for yourself, check out the following:

• PDF: Deed of Empire State Building sale (Page 1 of the Deed.)
• PDF: Deed of Empire State Building sale (Page 2 of the Deed.)
• PDF: Fake notary stamp

California REALTOR® Jose Oliva Sentenced for Real Estate Fraud: A real estate agent from Fontana, Calif., who was arrested in July of this year on felony charges connected to real estate fraud, has finally been sentenced… to six (6) months in jail followed by three (3) years probation.

John Matouk pleads guilty in Michigan of quitclaim deed fraud: According to the Wayne County Prosecutor’s Office, in February 2004, Matouk, who owned half a property in the 1100 block of Telegraph in Dearborn, forged a quitclaim deed from an elderly couple that transferred the entire property to his company, LM Investments of Dearborn LLC. Before his sentencing last week, Matouk was ordered to pay $26,000 in real estate taxes, the outstanding balance on a $650,000 loan, and court and probation costs. Because of his plea, Matouk received a sentence of two (2) years’ probation.

Rockland County, New York, task force targets mortgage fraud: Rockland County, NY, officials are trying to fight the worsening mortgage fraud problem by forming a Real Estate Fraud Investigation Task Force. The task force, a joint effort of Rockland District Attorney, County Clerk and County Sheriff, will investigate and prosecute cases involving recorded real estate documents, with an emphasis on instances in which the victim’s home is at risk of foreclosure.

U.S. Attorney charges Missouri mortgage brokers with cash-back-at-closing fraud: John F. Wood, United States Attorney for the Western District of Missouri, announced that several mortgage brokers are among six Missouri residents indicted by a federal grand jury last week for participating in several related mortgage fraud schemes. Charles M. Davis, 34, of Rogersville, Mo., Cheryl Joan Kassebaum, 42, and her husband, Scott Allen Kassebaum, 42, both of Ozark, Mo., Randall Lee Hall, 59, and Shanda Lynn Moore, 44, both of Springfield, Mo., and Steven Ray Spencer, 47, of Carl Junction, Mo., were charged in a 55-count indictment returned by a federal grand jury in Springfield. Davis, a former mortgage broker, was the owner of Master Marketing Consultants. The Kassebaums, former mortgage brokers, were owners of Metro Consulting Group. Hall is a former mortgage broker.

Westport, Connecticut, mortgage broker Fred Stevens pleads guilty to mortgage fraud: Stevens, 53, of Easton, Conn., is charged with submitting fraudulent mortgage applications with IndyMac Bank and other financial institutions resulting in losses of over $1,000,000.

Florida real estate appraiser Juan Gonzalez guilty of mortgage fraud: Gonzalez fraudulently obtained loans on more than 40 properties, victimizing numerous lenders and grossing over $5,000,000 in the process. As a result, the 51-year-old will spend the next 30 years in federal prison and pay a $1 million fine.

Following a 14-day trial, two members of a foreclosure rescue scheme have been found guilty of conspiracy, wire fraud and bank fraud as a result of engaging in a $10 Million dollar mortgage fraud scheme. The former owners of Homes R Us USA — Andrea Moore and Michael Irving — were found guilty last Thursday (11/13/08) of participating in a foreclosure rescue scheme which defrauded homeowners who were facing foreclosure and banks and other lenders who made mortgage and home equity loans.

According to the evidence presented at trial and other documents obtained by Flipping Frenzy:

• From September 2004 through April 2005, Andrea Moore and Michael Irving engaged in a fraud scheme targeting homeowners whose homes, primarily in Brooklyn and the Bronx, were in foreclosure or facing foreclosure.
• Homeowners were offered a plan to “save” their homes, including by refinancing their debt with new, larger mortgages.
• Because the distressed homeowners typically had poor credit and were not eligible to refinance their debt at favorable terms, Andrea Moore and Michael Irving induced them to sell their homes to straw buyers who would apply for loans to be used to “save” the home.
• Andrea Moore and Michael Irving promised that once the straw buyer obtained the mortgage, the proceeds would be used to pay off the homeowners’ old debt and make one year’s worth of payments on the new loans.
• The homeowners were told that, during that year, they could continue to live in their homes and work on improving their finances and credit.
• Finally, Moore and Irving explained to the homeowners that, at the end of the year, the title to their homes would be returned to them by the straw buyers, with their credit repaired and their homes saved.

There were also cases in which Moore and Irving did not explain to homeowners that the plan to “save” their home required them to deed their house to a third party an did not obtain permission to deed the homes to others. In such cases, Andrea Moore and Michael Irving effectively stole the property of the homeowners by forging the homeowners’ signatures on various documents that transferred the homes to straw buyers without the homeowners’ knowledge.

As a part of the scheme, Andrea Moore and Michael Irving submitted loan applications to various banks and lending institutions on the straw buyer’s behalf. In submitting these applications, they regularly used documents containing false or misleading information, including information concerning the straw buyer’s income, assets, and existing debt, to improve the straw buyer’s credit-worthiness.

In addition to false statements concerning the straw buyers’ financial profile, Moore and Irving misrepresented to lenders that the straw buyers intended to reside in the property that would secure each mortgage or loan, when, in fact, the properties were already occupied by the distressed homeowners.

Moore, who directed the daily operations of the scheme, and Irving, who served as a recruiter and later as a partner to Moore in the scheme, obtained numerous home mortgages and/or equity loans valued at well over $10 million. In some instances, Andrea Moore and Michael Irving failed to make even one payment on the loans, causing the loans to default immediately; in nearly every other case, they eventually failed to make the payments and defaulted on the loans, thereby “cashing out” on the properties. As a result, the distressed homeowners lost the titles to their homes and faced eviction, the straw buyers owed the lenders hundreds of thousands of dollars that they were unable to repay, and the lenders suffered losses from the defaulted loans.

Profits of the fraudulent scheme consisted of the difference between the value of the new and old loans, and they also earned hundreds of thousands of dollars in fees.

Moore was found guilty of one count of conspiracy to commit bank and wire fraud, four counts of wire fraud and one count of bank fraud. Irving was found guilty of one count of conspiracy to commit bank and wire fraud and one count of wire fraud. The conspiracy and bank fraud counts carry a maximum prison term of thirty years and a maximum fine of the greatest of $1,000,000 or twice the gross pecuniary gain or loss resulting from the crimes. The wire fraud counts carry a maximum prison term 20 years and a maximum fine of the greatest $250,000 or twice the gross pecuniary gain or loss resulting from the crimes.

In addition, Moore and Irving — who are scheduled to be sentenced on February 18, 2009 — are required to pay restitution to the victims of their crimes.

According to Michael Irving’s attorney, Christopher Chang, “Irving was the government’s scapegoat for a debacle which was the making of lenders and bankers who not only have escaped accountability for their grossly irresponsible conduct but now are bailed out of mess they created,” Chang said in an e-mail sent to the Associated Press. Chang, according to the AP, says he plans to appeal.

Details are now emerging from a Congressional subcommittee hearing that seem to suggest that the City of New York, along with the New York Yankees, may have committed real estate fraud in their attempt to pay for the construction of a new $1.3 Billion stadium in the South Bronx.

According to the Interim Report into Public Financial Assistance for the New Yankee Stadium, which was prepared for the House Oversight and Government Reform Committee’s Subcommittee on Domestic Policy by New York Assemblyman Richard L. Brodsky, City of New York officials intentionally misrepresented to the Internal Revenue Service (IRS) the value of the stadium’s property, which in turn helped the City secure special tax deals from the federal government.

Apparently, the City of New York used comparable land values in the borough of Manhattan rather than the Bronx to place a value for the new property upon which the stadium is being built. (The new ballpark is being constructed across the street from the current one, on the present site of Macombs Dam Park.)

Today’s House Oversight and Government Reform subcommittee hearing in Washington, D.C., was called by Congressman Dennis Kucinich (Democrat, Ohio), Chairman of the Subcommittee on Domestic Policy, to examine whether the use of the federal tax code to subsidize the construction of professional sports stadiums and arenas furthers the public interest. It was the third hearing held by Kucinich’s group on this subject and the first to examine alleged improprieties in the financing process of the New York Yankees new stadium.

“In the case of the new Yankee Stadium,” Congressman Kucinich said, “not only have we found waste and abuse of public dollars subsidizing a project that is for the exclusive benefit of a private entity, the Yankees, but also we have discovered serious questions about the accuracy of certain representations made by the City of New York to the federal government.”

Furthermore, Kucinich says that the Subcommittee on Domestic Policy has found substantial evidence of improprieties and possible fraud by the financial architects of the new Yankee Stadium.

As Flipping Frenzy readers know, inflated appraisals are often involved in the advancement of real estate and mortgage fraud. More often than not, a key player in an illegal flipping operation is the appraiser, who inflates the value of the house on paper to enable the buyer to qualify for a higher loan. Sometimes, a real appraiser is pulled into the scheme. In other cases, the appraisal is simply a phony document.

At issue for the City of New York, the New York Yankees, the IRS, and now the United States Congress, is the valuation of the land used for the site of the new stadium. Similar to residential real estate, municipal real estate developments require appraisals. In the case of Yankee Stadium, New York Assemblyman Brodsky and others–including members of Congress–believe that the value of the stadium land was grossly inflated and misrepresented to the IRS in order to justify more than $900 Million in tax-exempt bonds that were issued to finance construction of the stadium.

If in fact the allegations are true, the City of New York and the New York Yankees may just be key figures in the largest real estate fraud scam ever to be uncovered in the U.S.

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.

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

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.

We talk about a lot of “constants” here on Flipping Frenzy (e.g., constant threads in real estate and mortgage fraud; the constant barrage of seemingly never-ending real estate and mortgage fraud cases; the constant denial by many in the real estate industry and elsewhere that real estate and mortgage fraud is that big of a problem; etc.). So today we’re joyous over the news out of Brooklyn, New York, of another “constant” development… namely, that one Emmanuel Constant–a Haitian national who, despite being convicted for crimes against humanity, has been living freely in New York since the mid-1990s–has been found guilty of six felony counts against him related to a mortgage fraud scheme.

(photo (c) 2007 Jesse Ward)

A Kings County, NY, Supreme Court jury found Emmanuel Constant guilty last Friday of fraudulently arranging millions of dollars in home loans for three Brooklyn properties. Constant, who has been convicted in Haiti, in absentia, for crimes against humanity, will remain in police custody. Sentencing will occur on September 10, 2008.

In an elaborate mortgage fraud scheme, Emmanuel Constant and other co-conspirators fraudulently arranged bank financing for the purchase or refinancing of three Brooklyn properties. After locating a property for sale and generating an artificially high appraisal value for the property, they would pay a straw buyer to get loans from mortgage banks to purchase the house at the inflated value. Constant and the co-conspirators would then divert the proceeds of the fraudulently obtained home loans to themselves. Many of Constant’s co-conspirators have been arrested, and some contributed to the testimony against him.

For part of the period of the mortgage fraud scheme, Emmanuel Constant, 51, served as the Suffolk County branch manager for D & M Financial, Inc., a New Jersey-based mortgage bank. In a separate conviction also prosecuted by the New York AG’s office, Constant served two years in prison for his involvement in the theft of over $1 million in mortgage funds from the fraudulent sale of a Suffolk County home. Constant completed serving this jail time on July 1, 2008.

Before being arrested for mortgage fraud, Constant, a native of Haiti, had been living freely in New York despite a 1995 federal immigration warrant and a 1995 federal deportation order. He was convicted in Haiti, in absentia, for crimes against humanity. He was the founder and commander of the Front Revolutionnaire Pour L’Advancement et le Progres d’Haiti, or “FRAPH,” which was dedicated to terrorizing and torturing political opponents of Haiti’s military regime.

The Kings County Supreme Court jury found Emmanuel Constant guilty of two class C felonies, two class D felonies, and two class E felonies. Sentencing will occur on September 10, 2008. Emmanuel Constant faces a maximum of 15-45 years in prison.

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.

The FBI, along with the U.S. Attorney’s Office for the Southern District of New York, announced today the filing of an indictment charging Dominick Devito and Robert Didonato with participating in a broad scheme to commit mortgage fraud, and Devito and Didonato, along with John Liscio and Louis Cordasco, Jr., with participating in an associated insurance fraud scheme. Devito was also also charged with obstruction of justice.

According to the indictment filed in Manhattan federal court:

From January 2002 through November 2004, Devito was the leader of a fraudulent real estate investment scheme, which had as its primary objective the purchase of multimillion-dollar residential properties in various communities in Westchester County–including Purchase, New York–with loans obtained through the submission of false and misleading information to banks and other lenders. Many of the loans were for amounts equal to or more than 100% percent of the property’s actual sale price, so that the defendants and their co-conspirators did not have to put any of their own money at risk in the transaction.

Devito identified properties for sale, orchestrated the purchase of the properties and performed construction work at the properties. Didonato was a residential real estate broker for Devito and other co-conspirators in their purchase of the properties, which were the subject of the scheme.

In order to further their scam, the defendants submitted to various federally-insured banks loan applications, contracts of sale, deeds, real estate transfer documents, title reports, and other documents which contained materially false or misleading information about the income, assets, existing debt and credit-worthiness of the borrower, the chain of title to the property, and the sale price of the home. They also indicated the borrower’s intent to reside in the property as a primary residence, when the properties were typically purchased for investment purposes.

Devito and Didonato cashed out on certain properties by taking additional private loans against the already fraudulently-inflated sale price of the properties. The proceeds of these loans–which were never repaid in full–were deposited in a bank account used for the benefit of Devito.

As a result of the their scheme to defraud, Devito and Didonato obtained millions of dollars in loan proceeds, enabling them to control certain properties that they otherwise would not have been able to purchase and finance. In addition, Devito and Didonato earned money from fees and commissions on the sale or re-financing of the properties. The banks, on the other hand, lost millions of dollars when the Devito and Didonato and their co-conspirators defaulted on mortgage payments and caused several of the properties to go into foreclosure.

In addition, from January 2003 through February 2005, Devito, Didonato, along with John Liscio and Louis Cordasco, Jr., engaged in a scheme to defraud insurance companies by submitting false and misleading insurance claims and supporting documents for water damage caused by broken pipes at several of the homes purchased as part of the mortgage fraud scheme.

John Liscio was a licensed insurance agent who sold insurance policies to the owners of the homes purchased in the scheme and helped Devito submit insurance claims for water damage. Louis Cordasco, Jr., working for a company that specializes in emergency clean-up services for water damage to residential homes, was responsible for performing emergency clean-up services for some of the homes that were damaged as part of the insurance fraud scheme.

In February 2005, Cordasco and Liscio also planned to break pipes at a home in Purchase, NY, in order to submit a false insurance claim for water damage.

The Indictment also charges Devito with obstruction of justice in connection with a 2003 proceeding in Manhattan federal court. Specifically, Devito submitted false and misleading information regarding the value of his assets and his personal net worth following his sale of a property in Purchase, New York.

All four are expected to be arraigned before a U.S. District Court Judge next Monday (May 5, 2008).

The Mortgage Bankers Association (MBA) yesterday announced that the Mortgage Asset Research Institute (MARI) has completed its 10th Periodic Mortgage Fraud Case Report to MBA. The report examines the current state of residential mortgage fraud and misrepresentation in the U.S. based on participating subscribers’ reports to MARI.

The report, which sites Florida as topping the MARI Fraud Index list for the second consecutive year and Nevada climbing to the No. 2 ranking, was released during MBA’s annual National Fraud Issues Conference in Chicago.

Clearly, the current market conditions, compounded by mortgage fraud, are having a detrimental impact on our entire national economy. The MARI report provides critical insight for those in the real estate finance industry to better understand the factors contributing to these circumstances so that our communities are better protected.

According to the Mortgage Fraud Case Report, “The conditions in the mortgage industry for the last half of 2007 made the year one for the record books.” Overall, 2007 marked the lowest volume of mortgage loan originations since 2002, the highest number of delinquencies and foreclosures, rapid and near complete shutdown of the non-conforming secondary market and hundreds of announced closures of mortgage originators.

Highlights in the Mortgage Fraud Case Report include:

• In addition to Florida and Nevada, the remainder of this year’s top ten (in order): Michigan, California, Utah, Georgia, Virginia, Illinois, New York and Minnesota
• Colorado showed the greatest improvement from prior years’ rankings, dropping out of the top ten for the first time in five years
• The most common types of fraud found in 2007 originations continue to be in the areas of employment history and claimed income
• The continuing unsettled state of the mortgage market as a whole does not bode well for any improvement in avoiding fraud in the coming year

The complete Mortgage Fraud Case Report is available both on the MBA Website, and MARI’s Web site.

Ex-Utah mayoral candidate charged with real estate fraud: The Utah Attorney General’s Office charged a former Eagle Mountain mayoral candidate with fraud on Wednesday. Richard Culbertson, 55, and his wife Kathleen Culbertson, 51, were charged in a mortgage fraud case in which they allegedly used their daughter and son-in-law’s names to buy a home. According to the Attorney General’s Office, the Culbertsons used someone else’s names to obtain multiple home loans and also inflated their income on applications by more than $10,000 per month. One loan was earmarked for remodeling and landscaping work, but the $59,324 was pocketed by Richard Culbertson instead.

Squatters, scams plague foreclosures: Call them signs of a tattered economy - indicators that something’s amiss including in the San Fernando Valley: squatters inhabiting foreclosed homes, a record number of cars being repossessed, a growing number of family heirlooms being left behind at local pawn shops. With more than 80,000 foreclosures in California during the last quarter of 2007 setting a state record - up 115 percent over the previous year - property owners have struggled to keep squatters and thieves off their vacant properties.

Sacramento realty fraud unit’s funds decline; complaints rise: The funding for real estate fraud investigations and prosecutions has dwindled to the lowest level since 2001 in Sacramento County, even as the two detectives who investigate the crimes say they’re fielding a mounting number of complaints. In real estate fraud units, investigators’ and prosecutors’ salaries are funded with $2 fees paid each time certain deeds are filed in the county recorder’s office. The real estate downturn corresponds with a nose dive in the recording fees. In fiscal 2001, the county collected $460,000 in such fees, but is now on track to collect only about $400,000 by the time this fiscal year ends in June.

Pennsylvania official pushes mortgage reforms: The state’s top banking regulator is pushing a slate of reform measures to end predatory lending, staunch mortgage fraud and foreclosures across the state. “We’re hoping the (reform) package will be completed and become law sometime this year,” said Steven Kaplan, secretary of banking. “Pennsylvania consumers need more protection from mortgage fraud.” Mortgage fraud in the Pittsburgh area was highlighted a month ago when 24 people were charged with operating lending scams by the U.S. Attorney General’s office here. It is conducting more than 50 mortgage-fraud examinations as part of its newly formed Western Pennsylvania Mortgage Fraud Task Force.

New York politicians offer a good first step: It’s too soon to declare New York’s subprime mortgage crisis over and done with - an estimated 28,000 New Yorkers statewide remain at risk of losing their homes to foreclosure - but Gov. Spitzer and Attorney General Andrew Cuomo this week announced reforms that will make it much harder to repeat the abuses of recent years. At the root of the mortgage crisis was the tendency of bankers, brokers, appraisers and other real estate professionals to bend lending rules and home price estimates to the breaking point in order to book loans and walk off with lucrative fees. In many cases, people without sufficient income to repay a loan ended up with mortgages - only to fall behind on payments and lose their homes.

Indictment names four Texans in mortgage fraud case: A federal grand jury in Houston has indicted four people in connection with a $15 million mortgage fraud scheme carried out over four years, the U.S. Attorney’s Office said Wednesday. According to the indictment, Carlos Paul Gonzalez and Ken Russell Browder, who ran Advantage C&R Funding Group and First Advantage Funding Group, would find people with good credit to pose as home buyers and apply for mortgages. Though the borrowers didn’t qualify for the loans and didn’t plan to live in the homes, the applications were doctored to gain approval from lenders, the indictment alleges. The homes were spread throughout the Houston area, according to the indictment.

Real Estate and Mortgage fraud is funding crime in the United Kingdom: The UK’s Association of Chief Police Officers (ACPO) says property sales are also being used launder money made from drugs, trafficking and prostitution. Average UK mortgage fraud losses are £700m a year and the figure is growing. False valuations and bogus applications were among the methods used, said the intelligence report being sent to the financial industry and police forces.

Michigan AG’s ties to mortgage firms may explain inaction on foreclosures: Evidence is surfacing that home loan institutions have, based on demographic studies, steered minority homeowners into high-risk subprime mortgages. That opens the door to possible prosecution of civil rights violations in addition to the abuse of fair lending laws. With calls increasing for state attorney generals to sue guilty lenders, Michigan Attorney General Mike Cox may be compromised. His list of campaign contributors includes a number of mortgage interests.

According this morning’s edition of The Wall Street Journal, tensions are rising between federal and state authorities as the number of agencies–including the FBI, SEC, Justice Department, Office of Federal Housing Enterprise Oversight, and New York Attorney General Andrew Cuomo’s office–investigating mortgage fraud expands.

Cuomo, the Journal reports, “is in a tussle with the Office of Federal Housing Enterprise Oversight (OFHEO), the federal regulator that oversees mortgage giants Fannie Mae and Freddie Mac… Their dispute is over who should be the investigating allegations of fraudulent appraisals and mortgage fraud.”

From Kara Scannell at The Wall Street Journal:

The interaction of state and federal oversight has long been a political hot potato. Friction is expected to increase as rising number of participants — including the Justice Department and Securities and Exchange Commission — probe the mortgage area.

Mr. Cuomo’s office is precluded by law from investigating federally chartered banks, where federal oversight pre-empts state interest.

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.

• Fraud Seen as a Driver In Wave of Foreclosures: Skyrocketing foreclosures are a testament to how easy it was to borrow from mortgage lenders in recent years. It may also have been easy to steal from them, to judge from a multimillion-dollar fraud scheme that federal prosecutors unraveled here in Atlanta. The criminals obtained $6.8 million in mortgages from Bear Stearns Cos., including a $1.8 million mortgage to Calvin Wright, a New Yorker who told the investment bank that he and his wife earned more than $50,000 a month as the top officers of a marketing firm. Mr. Wright submitted statements showing assets of $3 million, a federal indictment alleged. In fact, Mr. Wright was a phone technician earning only $105,000 a year, with assets of only $35,000, and his wife was a homemaker. The palm-tree-lined mansion they purchased with Bear Stearns’s $1.8 million recently sold out of foreclosure for just $1.1 million. Bear Stearns, meanwhile, posted the first quarterly loss in its 84-year history as it wrote down $1.9 billion of mortgage assets yesterday.
• No solutions for borrowers who are ‘upside down’: Martinez said struggling borrowers have flocked to his office asking for help. Martinez started as an insurance adjuster/investigator more than a decade ago, but began investigating real estate fraud two years ago and suddenly found himself bombarded with cases.
• Fraud and bubbles: Like a horse and carriage: Here’s what’s interesting: It seems likely that a big part of the run-up in housing values may also have been a result of fraud. Demand was inflated by fraudsters making bids on homes that they couldn’t afford — and lenders who were lending based on fraudulent misrepresentations. How big of a role did mortgage fraud play in inflating home prices? It’s impossible to know but now that the frauds are being exposed, we’re seeing home prices dropping precipitously. And without mortgage fraud, there are fewer people with the resources to scoop up homes.
• Realtors reassure peninsula buyers: Kenai Peninsula real estate agents reacted Wednesday with strong words and public assurances in the wake of U.S. Grand Jury fraud indictments handed down Dec. 13 against nine individuals and one corporation in the Anchorage real estate market. According to U.S. Attorney Nelson P. Cohen, the accused allegedly engaged in “a widespread, three-year scheme” cheating 13 banks and home loan mortgage companies. In all, 57 different loan transactions netted more than $1.7 million in profits and cost financial institutions over $1 million to date.
• $3 million bond set for Evergreen president: Bond was set at $3 million cash this morning for Evergreen Corporation President David B. Willan. Willan, 37, was among 17 people named on Thursday in a 147-count Summit County indictment in connection with a two-year investigation into Akron-area mortgage fraud.

  

  Willan, who appeared before Common Pleas Magistrate John H. Shoemaker, was charged with a first-degree felony for engaging in a pattern of corrupt activity, aggravated theft, mortgage fraud, money laundering and other alleged offenses. Authorities said Willan was being held at the the county jail this afternoon in lieu of the $3 million cash bond.

• The Real Mortgage Fraud: Nothing is more fun than doing noble deeds with someone else’s money, and right now, Democrats are getting ready for a rollicking good time. Contemplating the subprime mortgage problem, with numerous borrowers unable to pay their debts, the party’s presidential candidates and congressional leaders have a simple solution: Fleece the lenders.
• Realtor gets 20 months in prison for mortgage fraud: A Rockford Realtor was sentenced to 20 months in prison this afternoon for his role in falsifying documents to help Hispanic families qualify for loans backed by the Federal Housing Authority. Cesar Arenas was the fourth person sentenced in the five-person mortgage-fraud ring that operated from 2001 through 2003 and the second to receive prison time. Rhonda Torossian, the loan officer in the scheme, was sentenced Monday to 20 months in federal prison.
• Guest Opinion: More must be spent to stop mortgage fraud: The Arizona Department of Financial Institutions investigates mortgage fraud cases before referring them to the Arizona Attorney General’s Office for prosecution. The department relies on money from a revolving fund to initiate and fund its investigations, but that money has an annual cap of only $50,000. This amount is inadequate and has not been raised in at least 10 years.
• Banks in England crack down on mortgage fraud: Banks are seeking to crack down on mortgage fraud as evidence mounts of a rise in the number of fraudulent borrowers. Abbey and Lloyds TSB are among the banks reporting a surge in the volume of potentially fraudulent mortgage applications. The Council for Mortgage Lenders is also cracking down, working with police to investigate the possibility that organised criminals are operating in the market. “We are identifying two or three times as many cases of possible fraud as we did in the first part of this year,” said Steve Williams, risk director at Abbey.

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

If you visit American Home Mortgage’s website, you’ll be greeted with the following message:

Important Notice: American Home Mortgage is unable to continue the origination or funding of mortgage loans, and no new loans are being accepted. After carefully assessing the sudden adverse impact on the Company’s business with respect to its liquidity, due to the extraordinary disruptions now occurring in the secondary mortgage and real estate markets, American Home Mortgage Investment Corp. and certain of its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware.

If you want one possible take on what is really going on, check out this summary of related events from Sarah Ryley at the Brooklyn Daily Eagle

American Home Mortgage — once among the nation’s 10 largest lenders before filing for bankruptcy in August and laying off most of its 7,000 employees (including 1,400 on Long Island) — is under investigation for criminal misconduct by the FBI and federal prosecutors from the Eastern District in Brooklyn, Newsday reports.

The investigation is in its preliminary stages, and is looking into whether various federal statutes such as conspiracy, securities, mail and wire fraud, and money laundering were violated, resulting in the company’s bankruptcy, according to Newsday.

“Given the hundreds of millions of dollars lost in the company’s collapse, a conviction for fraud could led [sic] to prison sentences of 10 years or more under federal sentencing guidelines.”