The U.S. Attorney’s Office for the Eastern District of Michigan has finally created a multiagency task force to deal with real estate and mortgage fraud in eastern Michigan. As mortgage fraud continues to have significant consequences that affect the housing market, law enforcement in Michigan has decided now is the time to formally step up its commitment to fighting what for the last three years has been the fastest-growing white collar crime in America.

Participating agencies and financial institutions include:

• Bank of America
• Federal Bureau of Investigation (FBI)
• Federal Deposit Insurance Corp. – Inspector General Office
• Flagstar Bank
• Internal Revenue Service
• JP Morgan Chase Bank
• Oakland County Register of Deeds
• Small Business Administration- Office of Inspector General
• State of Michigan Attorney General’s Office
• State of Michigan Office of Financial Regulation
• U.S. Department of Agriculture- Office of Inspector General
• U.S. Dept. of Housing & Urban Dev. – Office Inspector General
• U.S. Trustee Program
• United States Postal Inspection Service
• Washtenaw County Clerk/Register of Deeds
• Wayne County Register of Deeds – Deed Fraud Unit
• Wayne County Sheriff’s Department
• Wayne County Prosecuting Attorney

The acting U.S. Attorney for the District, Terrence Berg, issued a press release stating:

“I want to commend the leadership of the FBI in Detroit for taking the initiative on this project, and also recognize the participation of our private sector partners. I am very encouraged by the commitment of the Task Force members.“

Rather than congratulating themselves for the task force’s formation, as Berg does above, perhaps the U.S. Attorney’s office for the Eastern District of Michigan — along with the other agencies and the banks involved in this new effort — should apologize to the residents of Michigan for taking this long to act in a coordinated way.

As Flipping Frenzy has relentlessly reported over the years, Michigan’s real estate and mortgage fraud woes are legendary. In August of this year, the Mortgage Asset Research Institute (MARI) reported Michigan ranked 3rd in the nation for loans containing alleged fraud or serious material misrepresentation (and just in case you’re wondering, MARI ranked the state #12 in 2001, #8 in 2003, and #5 in 2004). For its part, the FBI’s most recent index of the worst states for mortgage fraud puts Michigan in the slot: #3.

Recognizing that roughly 90% of all reported real estate and mortgage fraud losses involve collaboration or collusion by real estate industry insiders, the Mulit-Agency Mortgage Fraud Task Force will concentrate their efforts on fraud for profit, which everyone knows by now involves the skimming of equity, falsely inflating the value of the property through false appraisals, and the issuance of loans on fictitious properties.

To report real estate and mortgage fraud in Detroit or anywhere in Michigan, Flipping Frenzy readers can call the Detroit Metro Mortgage Fraud Hotline at (313) 237-4530, or contact the Wayne County Register of Deeds’ Deed Fraud Hotline at (313) 224-5869.

In a story that just wont go away, the Wayne County, Michigan, Register of Deeds, Bernard Youngblood–whose office is facing a federal lawsuit seeking millions of dollars in damages and a receiver appointed to replace him–tells Paul Egan of The Detroit News that his office now has plans to compete with the same companies who are suing his ofice by selling its own title insurance. From this morning’s The Detroit News:

Youngblood said Thursday he would announce plans for a fast-track feasibility study of the county offering title insurance. … Title companies doing business in Wayne County claim poor record keeping by the register of deeds has forced them to insure transactions without knowing whether mortgages or other liens have recently been filed against the property being sold. They complain of a gap of up to six months between when a document is filed at the county office and when it is available to someone searching land records on a computer. … Youngblood said his plan to offer title insurance is not related to the recent lawsuit but to concerns over what he said are excessive profits by title insurers and national reports of kickbacks and other industry problems.

Youngblood also tells The Detroit News that the backlog of paperwork in his office is more like six weeks, not six months as the lawsuit claims, and that the very same title companies who are suing his office often wait an unreasonable amount of time before sending mortgages to his office, which he says plays a significant role in real estate fraud.

It’s a bold and somewhat unprecedented move (a municipality selling title insurance under these circumstances). It’ll be interesting, to say the least, to see how this one plays out!

As I first blogged about back on the 6th of April, a backlog at the Wayne County Register of Deeds office is contributing to Detroit and Wayne County, Michigan’s, ranking as one of the nation’s worst areas for mortgage and real estate fraud. Now comes word that seven locally-based title companies have filed a federal lawsuit seeking millions of dollars in damages and a receiver appointed to run the Register of Deeds office. From Paul Egan and this morning’s edition of The Detroit News:

Seven land title companies filed a federal lawsuit Thursday asking that the Wayne County Register of Deeds office be placed in receivership for failing to follow state and federal laws. Wayne County Register of Deeds Bernard Youngblood “has violated numerous state and federal laws in the conduct of his office” and “has abused his position as a public repository of land title records,” the companies allege in a complaint filed in U.S. District Court in Detroit. Youngblood declined comment Thursday afternoon, saying he was aware of the lawsuit but had not yet read it.

At the root of the dispute, the companies allege, is improper record-keeping and months-long delays in recording deeds, liens, mortgages and other real estate transactions. The stalled documentation makes it impossible for buyers to know whether they truly own the property they are buying or whether the property is burdened with hidden debts.

The title companies, which are seeking millions of dollars in damages and want a receiver appointed to run the office, say they are often left holding the bag because they sell insurance that is supposed to guarantee the integrity of the transactions.

They say the situation also contributes to real estate fraud. For example, someone can take out multiple mortgages on a property before any of the involved mortgage companies are aware the other mortgages exist.

Click here for the rest of Egan’s article.

Like I’ve said before, if we ever want to narrow the gap on real estate and mortgage fraud, we have to do something about systems like those in place at the Wayne County Register of Deeds office. If a federal lawsuit creates positive movement on the issue, then so be it! Too much is at stake for us to be sitting on the sidelines while the Register of Deeds office says its attempting to fix the problem.

Sorry for not blogging yesterday. I was slammed with meetings and preparations related to flying out to San Antonio, TX, later today for the NPRRA-REIPA Joint Conference.

There’s an interesting story in this morning’s Detroit News related to real estate and mortgage fraud. From a 1,200-word article penned by the News’ Paul Egan:

A severe backlog at the Wayne County Register of Deeds office is helping make Detroit and Wayne County one of the nation’s worst areas for mortgage and real estate fraud, experts say.

Deeds, mortgages and other real estate documents filed today at the Register of Deeds office in Greektown will not appear in the agency’s computer system for two to six months, because the busy office is behind in recording such transactions.

The problem is compounded because Wayne County does not maintain an entry book — a chronology of all real estate filings that is required by state law — that can be used as a safeguard to check on transactions waiting to be entered into the computer.

Together, the backlog and lack of an entry book mean real estate buyers in Wayne County can’t be sure they’re getting clear legal ownership to the properties they purchase or that the properties don’t come with hidden mortgages or other debts.

Click here for Egan’s entire article.

Wayne County’s Register of Deeds tells The Detroit News that that the logjam is nowhere near six months (he says it’s more like two months). Oh really? Here’s an FYI: This past Tuesday (April 4th) I personally checked with the Wayne County’s Register of Deeds office to see how far behind they were, and I learned that they were just now getting to work on paper filed back on the 15th of December of 2005. That’s nearly four months behind (not the two reported by the Register of Deeds, and not the six reported by the The Detroit News. Regardless, no matter how you slice it–six months, four months, or even two months; what’s the difference! It’s still an awful long time for real estate-related transactions to be recorded.

Simply stated, if we ever want to narrow the gap on real estate and mortgage fraud, we have to do something about systems like those in place at the Wayne County Register of Deeds office. On the positive side of this mess, Wayne County is scheduled to bring a new $5,000,000 computer system online by August, which the Register of Deeds indicates should eliminate the backlog altogether. In the meantime, fraudsters and scammers will continue to take advantage of the system, costing homeowners in my area of the state an untold amount of money and personal heartache.