Federal officials have charged 13 individuals in an alleged elaborate $16.9 million mortgage fraud scheme targeting sales of luxury condominium units in downtown Miami and single-family homes in Coral Gables, according to an unsealed superseding indictment.

According to court documents, the fraud ring – which included a real estate broker and a Wells Fargo Bank loan officer – recruited “straw” buyers to make fraudulent loan applications to Wells Fargo, inflating their salary and deposit figures so they could qualify for loans in excess of $1 million. At closing, those charged then diverted millions by skimming the difference between the inflated purchase price and what actually was paid to the seller, officials said.

The straw buyers ultimately defaulted on the loans, sending the properties into foreclosure and costing Wells Fargo $9.7 million, federal officials said. The case is being prosecuted by the U.S. Attorney’s Office in the Southern District of Florida.

Those charged include: Greta Medina, Ricardo Estrada, Dania Arguelles, Fernanda Abrea, Obed Hernandez, Martin Mere, Nestor Collantes, Alfonso Velasco, Adan Vasquez, Yohamel Caballero, Ana Aviles, Leismy Barcia and Christina Roberts. Real estate broker Margaret Roberts, who negotiated the sales, pleaded guilty earlier.

After reading the following article (from this week’s edition of Crain’s Detroit), see if you have the same reaction I had: Namely, that this is just the first of many lawsuits (between banks and mortgage originators) we’re likely to hear about:

Wells Fargo sues Quicken, claims fraudulent loans
By Tom Henderson and Daniel Duggan

Livonia-based Quicken Loans Inc. is being sued in U.S. District Court by Wells Fargo Bank N.A., in a dispute over what is claimed are fraudulent loans gone bad.

South Dakota-based Wells Fargo filed the suit in June, claiming that Quicken has refused to buy back more than $4 million in loans that didn’t meet underwriting standards, in violation of a 2001 contract between the two companies.

In August, Quicken filed its response, denying the allegations and demanding a jury trial.

In its complaint, Wells Fargo said that “Quicken made certain representations and warranties to Wells Fargo regarding the loans and lines of credit being sold, such as but not limited to the income and employment of the borrower and the fair market value of the real estate collateral.”

Wells Fargo said some loans had false representations and “were not eligible to be sold to Wells Fargo in the first place.”

The lawsuit said that as of June, the amount of bad loans Quicken refused to buy back totaled $4,047,000 and “to the extent additional repurchase demands are made by Wells Fargo and declined by Quicken, this sum will likely increase.”

There is currently no shortage of loans that are being disputed in the mortgage industry, said Tony Garritano, editor of Mortgage Technology, one of several niche publications focusing on the mortgage industry. It is owned by New York-based SourceMedia.

“It’s not uncommon right now for an investor to say “you misspelled this person’s name on line five, you have to buy the loan back,’” he said. “Lenders are being barraged by buy-back requests, and they’re all disputing them, saying they didn’t do anything wrong and were just following the guidelines.”

But Gibran Nicholas, president and chairman of the Certified Mortgage Planning Specialist Institute in Ann Arbor, an organization that certifies financial professionals to provide mortgage and real estate equity advice, said the lawsuit sends the wrong signal.

Nicholas said he’d expect such a dispute to be worked out before it hit federal court, and that it could spook other buyers of Quicken loans, who are already spooked by other developments in the mortgage industry.

“This could very easily turn into a crisis of confidence and have a domino effect. It’s like a run on the bank,” said Nicholas, who is also president and CEO of Nicholas and Co. Mortgage Planners.

Elizabeth Jones, Quicken’s vice president of communications, said the lawsuit won’t cause problems with others who buy its loans. She said Quicken merely followed Wells Fargo’s underwriting guidelines for the loans in question, that it was told it was not required to document income for borrowers who had high credit scores and whose loans had a low loan-to-value ratio.

“This matter, while it involves a very small number of loans originated and sold to Wells Fargo, most more than five years ago, still strikes a nerve as it is an attempt by Wells Fargo to retroactively rewrite its own underwriting guidelines more than five years after the fact,” she said.

“The Wells case is much worse than Monday-morning quarterbacking. … As long as the loans performed well, Wells enjoyed the income from the loans,” said Jones. “However, Wells apparently misjudged the increased risk associated with this type of stated income loan. As soon as Wells began to experience losses, they mounted a campaign of revisionist underwriting.”

Kevin Moss, executive vice president of Wells Fargo’s Home Equity Group, disputed Jones’ version.

“We disagree with these allegations. Wells Fargo has never demanded repurchase for loans from Quicken simply because they are stated income loans. The bulk of the loans that are the subject of this lawsuit involve substantial fraud. Contractually, Quicken Loans is responsible for the loans that they underwrote and sold to Wells Fargo.”

What a mess. On the one hand you have Quicken Loans saying it did nothing wrong, while on the other, Wells Fargo insists Quicken Loans blatantly ignored underwriting standards. I’ll be interested to see how this one plays out.

In the meantime, based on what you read above, who do you think is to blame and why?

A. Quicken Loans
B. Wells Fargo
C. Both
D. None of the above

If you’ve been following the Cay Clubs’ mess here on FlippingFrenzy.com, you’re already familiar with a former JPMorgan Chase & Co. (NYSE: JPM) loan officer named Ross Pickard. According to a number of Cay Club investors, including Carisa and Craig Urban, unbeknownst to them, while working at Chase, Ross Pickard intentionally fudged their income and assets in order to get their Cay Clubs-related loans approved. As a result, according to the Urban’s, as recently as April of this year, there was a task force looking into Mr. Pickard’s practices, and it may only be a matter of time before he is possibly charged with a real estate or mortgage fraud-related crime.

Fast forward three months and we’re just now learning that Ross Pickard is employed in a loan officer-related role at Wells Fargo. As near as we can tell (from phone calls to placed to Mr. Pickard’s own office), Ross Pickard now works for Wells Fargo Private Client Services‎, which is located at 5625 Strand Blvd. in Naples, Florida.

We’re not sure about anyone else, but we sure are surprised that Wells Fargo chose to engage Mr. Pickard when he stands to lose so much as a result of these alleged bad acts. Inflated incomes and assets–both by homeowners and loan officers–created a lot of our current mortgage mess in the first place, and if Mr. Pickard is doing the same under Wells Fargo’s roof, they too may become caught up in something they just didn’t bargain for when agreeing to work with the likes of Ross Pickard.

In a highly unpublicized development, Wells Fargo Bank (NYSE: WFC) and one of Fidelity National Financial, Inc‘s (NYSE: FNF) companies–the Ticor Title Agency of Arizona–agreed last week to pay over $4 million and $200k respectively for their roles in preparing and submitting false claims to the Federal Housing Administration (FHA).

According to the Office of the United States Attorney District of Arizona, Well Fargo Bank submitted more than 70 false claims to FHA under the pre-foreclosure sales program, and Ticor Title prepared inaccurate escrow documents which allowed lenders to submit false claims to the FHA. The U.S. Attorney for Arizona estimates loses of more than $2.1 million dollars as a result )$2,156,078.00 to be exact), and for their part, Wells Fargo Bank and Ticor Title deny any wrongdoing yet still agreed to pay $4,046,786 and $265,370 respectively.

Under certain circumstances, the FHA’s pre-foreclosure sales program allows homeowners with federally-insured loans to avoid foreclosures by listing their homes for sale. If a sales price is not enough to pay-off a loan, then the lender submits an insurance claim to the FHA, which will pay the lender the balance owing on the loan.

What’s most interesting about this case is that neither company–not Wells Fargo & Company (NYSE:WFC) or Ticor Title Agency’s parent company, Fidelity National Financial, Inc. (NYSE:FNF)–have any information about the settlement on either of their corporate websites. Moreover, none of the national news media outlets picked up on the story, and even the New York Stock Exchange’s (NYSE) own stock quote pages for each company makes no reference whatsoever to the development, which first broke 10 days ago, on the 20th of June.