Washington, D.C. – Congressman Kenny Marchant (TX-24) issued the following release today after unveiling his new bill, H.R. 4586 the Mortgage E-Verify Act.

“As a member of the House Financial Services Committee, I am happy to introduce my bill, the Mortgage E-Verify Act, which would require, as a condition for modification of a home mortgage loan held by Fannie Mae or Freddie Mac or insured by the Federal Housing Administration (FHA), that the mortgagor be verified under the E-Verify program. My bill will potentially save millions by cutting down on fraudulent claims from illegal immigrants and protect taxpayers from subsidizing the restructuring or renegotiation mortgages of illegal immigrants.

“E-Verify is a fantastic program which I have supported making permanent for employers. Mandating its use as a condition for home mortgage loan modifications would help eliminate waste, fraud, and abuse in the system and bring integrity to the process. In fact, the Treasury Department’s Financial Crimes Enforcement division (FinCEN) estimates that mortgage fraud increased 1,411 percent from 1997 to 2005. Furthermore, two-thirds of fraud reports in the last decade are due to falsified statements on loan documents. My bill would curb these abuses and protect the taxpayers.”

There was a major case in Nevada where a mortgage company branch manager conspired to manufacture and submit false employment and income documentation for borrowers, most of whom were illegal immigrants. Fifty-eight of the 233 fraudulent FHA loans totaling $6.2 million have, not surprisingly, gone into default, costing HUD nearly $2 million. The branch manager was found guilty on 32 counts of submitting false information to HUD, and one count of conspiracy.

• Nightmare on Highbury Court: A dispute over bricks led to bankruptcy, eviction, jail and fractured lives; first of two parts. Life was good for Roland and Marie Dreilich in the summer of 1999. In their mid-30s at the time, they’d already purchased two homes, taking advantage of the booming real estate market of the 1990s to acquire equity and move up the housing ladder.
• Real estate lawyers asleep at the fee switch: Most puzzlingly of all, is the fact that real estate fraud is actually less prevalent today, than it was when Bill 152 was a glint in the McGinty government’s eyes. Over the past two years, lawyers and title insurers have put into place far more stringent controls and fraud has declined accordingly.
• Mortgage meltdown linked to fraud: The desire to make a “quick buck,” along with extremely lax lending practices, are considered to be among the chief reasons for the recent decline in the nationwide mortgage and housing markets, according to a Utah title company executive.
• Grandview man gets one year for mortgage fraud: The second of three defendants in the mortgage fraud scheme involving former Kansas City Councilwoman Saundra McFadden-Weaver was sentenced Thursday to one year in federal prison. Ricky Hamilton, 53, of Grandview, also was ordered by U.S. Chief District Judge Fernando Gaitan of the Western District of Missouri to pay $144,234 in restitution.
• Stock Market & Stocks: Fraud a Major Concern as Economy Worsens: The people who pay the price for Wall Street abuse need to know what to do if they have been victims of Wall Street or mortgage fraud and abuse, what to do to protect themselves so they can live now, sustain and grow for a secure future, and other steps they can take to best prepare for what we believe is the inevitable recession.
• FBI Launches Mortgage Fraud Task Force in the Nation’s Capital: The FBI is launching a mortgage fraud task force in its Washington field office, joining a widening net of state and local investigators digging into the market crisis. Investigators are seeking to uncover evidence of overvalued home appraisals, shoddy lending practices and alleged irregularities in the packaging and sale of groups of loans that were marketed to ordinary investors, state investment funds and big Wall Street banks.
• Foreclosure Fraud: Freddie Mac Warns Borrowers with Video Dramatization on ‘YouTube’: Can a custom made video posted to YouTube keep troubled borrowers from losing their homes to fraud artists? Freddie Mac aims to find out. One of the nation’s largest investors in residential mortgages, Freddie Mac decided to produce an Internet video dramatizing a common foreclosure fraud scheme after a new survey found one in four delinquent borrowers go to the Internet before their bank or lender for information about avoiding foreclosure. Freddie Mac’s anti-fraud video can be found at http://www.youtube.com/AvoidFraud.
• Six face federal indictments in Provo, Utah mortgage fraud scheme: Six people have been indicted on federal charges for an alleged mortgage fraud scheme that inflated the value of high-end homes in an affluent Provo neighborhood. Prosecutors say the six formed a network of mortgage brokers, investors, real estate agents, appraisers, straw buyers and escrow agents to fraudulently obtain loans secured with property worth less than the loans.
• In Modesto (Calif.), Fraud Destroyed The American Dream For Many: The terms of the loans may have been unusual. But for many of the immigrants who signed up for them, they were simply a way to afford the $300,000 and $400,000 new homes along streets with names like Rancho Encantado and a litany of saints.
• Lousy credit? Buy somebody else’s: The Bush administration came up with one fix for some sub-prime borrowers who are in trouble. A San Diego company offers another: Buy a better credit score. With one or more of the “seasoned primary accounts” that TradeLine Solutions Inc. began selling this week, the company’s website says, you can “dramatically increase your credit score” for as little as $1,199.

A 60-year-old Washington, DC man has been sentenced to nearly six years in federal prison for engaging in what the FBI says was a scam to obtained money by selling–or offering to sell–homes he did not own. George A. Cowser’s scam netted over $1 million. He was order to pay nearly $560k in criminal penalties and $30k in victim restitution. Following his incarceration, Cowser will have to serve three years of supervised release, during which time he cannot buy, sell or list any property, or open any credit lines or engage in any financial transactions over $5,000.

According to the indictment, between May of 2005 and March of 2006, Cowser devised a scheme to defraud homeowners, buyers, and a mortgage company by making false and fraudulent pretenses, representations, and promises. The purpose of the scam was clear–to sell or attempt to sell real estate in the District of Columbia that Cowser claimed to own or was his to sell by virtue of a particular company’s (Reverse Properties, Inc.) interest in the property.

Neither Cowser nor Reverse Properties, Inc. owned any of the properties, had an independent claim of ownership to the properties, or had any contract to sell the properties on behalf of their true owners. Even though Cowser knew he did not own the properties, he signed sales contracts and closed on the transfer of the properties for significant personal profit.

In one sale, Cowser used a forged deed to claim ownership of a home in the 1300 block of West Virginia Avenue, NE. Amazingly, he succeeded in selling the property to three separate individuals, obtaining money from all three, and actually engaged in two separate closings to two separate people in the same week! Because of the closings, Cowser or his corporate designee received over $540,000, some of which was used to purchase a new car.

Cowser also attempted to fraudulently sell at least two other houses, one in the 1200 block of Orren Street, NE, and the other in the 1300 block of W Street, SE. He did so by signing fraudulent quit claim deeds and recording the quitclaim deeds with the D.C. Recorder of Deeds. He then obtained money from the purported buyers, unbeknownst to the true homeowners. In both cases, the sales did not successfully close. Nevertheless, the FBI says the buyers were not able to recover all of their money and that the true owner of one of the homes had her personal property damaged, including antique furniture, when it was moved out of her house without her knowledge during the attempted sale.

As part of his scam, Cowser claimed that he owned dozens of properties throughout the District of Columbia, even though, in truth, he didn’t own any, and wasn’t even a registered real estate agent. During its investigation, the government discovered that prior to his arrest, Cowser had executed at least 14 forged quit claim deeds to various properties throughout the District of Columbia; each of the forged deeds contained a forged signature of the true owner of the property. Although Cowser did not record these particular deeds, he did use them to defraud other investors out of some serious money.

Washington Post staff writer Debbie Wilgoren has an interesting piece in this morning’s paper about a Washington, D.C.-based man who faces 12 to 18 years behind bars for his role in a real estate fraud scam. From this morning’s online edition of The Washington Post:

A D.C. entrepreneur who has promised to help hundreds of low-income tenants turn their apartments into condominiums is being held without bond in the D.C. jail after he was convicted of cheating investors of nearly $750,000 in an unrelated real estate scheme.

Robert L. Hall Jr., 33, … ran his investment scam from 2001 to 2003, prosecutors said. He gave investment seminars and advertised on the radio, in newspapers and on the Internet. He told people he would double, even triple, their money if they invested in a real estate venture called the Trinidad Project, in the Trinidad area of Northeast Washington. In fact, there was no such project, prosecutors demonstrated at trial. And while Hall made payments to some of his initial investors, that money came from subsequent investors rather than from real estate profits. The payouts were offered as bait, prosecutors said, so that early investors would spread the word and recruit others.

Authorities described the scam as a pyramid, or Ponzi, scheme. Such a scheme is doomed to collapse when it runs out of investors, they said.

Assistant U.S. Attorney Steven J. Durham, the lead prosecutor in the case, said documents showed that about 160 investors had signed contracts with Hall. Of those, 71 responded to government inquiries and said they had lost most or all of their money. They included a soldier now serving in Afghanistan who gave Hall $30,000 he had been saving as a down payment on a house, a university professor from Seattle and a retired New York City police officer who turned over $10,000 that was supposed to pay for his daughter’s wedding. Although Hall is not a lawyer, he represented himself during the trial before Judge Henry H. Kennedy Jr…

Click here for the rest of Wilgoren’s article.

In the meantime, it might be helpful to know that Ponzi schemes are a type of illegal pyramid scheme named for Charles Ponzi, who duped thousands of U.S. citizens into investing in a postage stamp speculation scheme back in the 1920s. According to the U.S. Securities and Exchange Commission, Ponzi thought he could take advantage of the differences between U.S. and foreign currencies used to buy and sell international mail coupons. He told investors that he could provide a 40 percent return in just 90 days compared to 5 percent for bank savings accounts. Ponzi was deluged with funds from investors, reportedly taking in as much as $1 million during one three-hour period—and this was in 1921 for gosh sakes! Though a few early investors were paid off to make the scheme look legitimate, an investigation found that Ponzi had only purchased about $30 worth of the international mail coupons.

Decades later, as we see in the Washington, D.C. case, Ponzi schemes continue to work on the “rob-Peter-to-pay-Paul” principle, as money from new investors is used to pay off earlier investors until the whole scheme collapses.