Reader tips for the FBI on spotting mortgage fraud

Responding to reports of the FBI's "crackdown" on mortgage fraud -- 144 cases nationwide in recent months -- readers here were unimpressed. Bill commented, "Heck, I could find 144 cases within a 10-minute walk of my house."

Laker adds, "Funny, you don't need FBI investigators spending months researching ... just check sales of houses in 2006, 2007 that got foreclosed within 12 months."

In the spirit of public service, a couple of readers have pointed out a pattern they believe might indicate mortgage fraud.

I'll go slowly: Readers of this blog believe a tell-tale sign of mortgage fraud is when a house sells at what appears to be a wildly inflated price. Then the house goes into foreclosure, or comes back on the market rather quickly, at a much lower price. These would be hints that the high sales price may have been fraudulent, creating a nice windfall of profit for the seller and the "buyer" (who had no intention of paying for the house) to split when they walk away from said house. A ding to the "buyer's" credit score, but a nice windfall.

Here's an example:
House sells in October 2004 for $800,000.
Same house sells again in August 2006 for $1.8 million.
House now for sale, listed at $1.1 millon.

Or:
House sells in February 2007 for $510,000.
House goes into foreclosure and is listed for sale at $279,000.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.

Comments

[Laker]

Ace,
There were 70-100 people at that party, i was just talking to one guy, i really don't know him. I did see the car he drives...AMG 600 something.
Also, while back i mentioned here that i have a friend that was renting a house from probably a fraudsters. But that's about it, i don't personally know/met other fraudsters... I do find ton of fraud while searching for a house.
So Ace, nothing gives.

mrincomestream points out a good question about where prices will go once everything is settled down.
mrincomestream, the combination of NO Stated income loans and down payment requirement is a death sentence to the so cal RE. Let's thing about it, most 2004-2007 did not have/use down payment. If you remove people like this from the qualified buyers, you roll back pricing to at least 2002-3 prices. The huge amount of foreclosures will skew the inventory and will create a fake added supply of houses. That fact will roll back prices to 2001-2002 prices.
The big one however, is the stated income. We all know that there is some percentage of people that make money and do not report it/can't document it for whatever reason. There people can afford certain houses/mortgages but will NOT get the loans for these houses that they actually can afford. So we get here a problem that afford ability will not match pricing as these buyers would not get financing to buy them. If you think about it, it will skew the prices again and LOWER than mean prices for the neighborhoods. We could get 1998-1999 prices as a result of this. And since the lack of stated income is mainly applicable to product higher than $417,000 - that means....high end of LA will crash as a result of this.

[Guano Miner]

Retraction: the russian fortune mentioned above is not built on poop. It's built on mined potash. Isn't this worse though? Does most of this go for agriculture, or does it go to making bombs?

Here's some info on slavic success stories:

http://www.kommersant.com/t-9836/r_4/n_463/

The Prince of Potash, our happy homeowner, is listed there, about 1/3 of the way down the page.

[some investor guy]

Some people who have a case where they know the details and are having difficulty getting federal, state, or local prosecution, should consider civil RICO charges if the perpetrators have money, committed a series of similar offenses, and can still be found.

"Every RICO claim must be based on a criminal violation or, as the statute states, an "act of racketeering." "Acts of racketeering" are all serious crimes and are listed in section 1961(1) of the RICO Act. A civil plaintiff must not only prove that the defendant engaged in acts if racketeering, but must also prove that these acts constituted a "pattern" and must prove all of the other elements of a civil RICO claim. The burden of proof that must be sustained by a civil plaintiff is, however, less onerous than the burden imposed upon criminal prosecutors. A civil plaintiff need only convince a jury by a preponderance of evidence that the defendant committed the acts of racketeering; whereas, a criminal prosecutor must establish the acts of racketeering beyond the reasonable doubt of the jury. The other difference between a civil and criminal RICO claim is the resulting penalties. If a plaintiff succeeds in establishing a civil RICO claim, he or she will be awarded monetary damages, in particular three times the actual damages established at trial plus the plaintiff's attorneys' fees and costs. If a prosecutor establishes a criminal RICO claim, the defendant goes to jail. The greater burden of proof imposed upon a prosecutor arises from the fact that the end result of a successful criminal prosecution is the loss of the defendant's liberty, not just his money. " http://www.ricoact.com/ricoact/faq.asp#remedies

One of the likely RICO sections to be violated is 18 USC 1344: "Whoever knowingly executes, or attempts to execute, a scheme or artifice—
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;
shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both." That section is also available for civil RICO charges in civil court, and does not require that the person was prosecuted criminally.

[dilbert dogbert]

Uncle Billy,
Don't swallow all of Mt. Pelerin. Take small bites infreqently with lots of booze. Swallowing the whole mountain will cause a tummy ache.

[A Scanner Darkly]

The condition of the Real Estate/Mortgage Lending industry can be explained mememically: Poisonous Imbedded Kleptocratic Thought Viruses.

[Don't Say Uncle]

dilbert: I was working under the assumption that if you just keep whacking away at it, it'll break into smaller more easily edible pieces. Tummy is made of iron. Plus there are so many out there to share with.

Here's a little present: Items 1 and 3 on Lansner's blog today:

http://lansner.freedomblogging.com/

[robert tapia]

here is a blatant example from the Antelope Valley: http://avenue-s.us/flashfraudalert.html

[CHRISTOPHER SCOTT]

Hello, my name is Christopher Scott founder of Mortgage Recovery Service Center of Los Angeles. We are a para-professional mortgage fruad research group. Our services envolve evaluateing loan applications and determine if the broker or lender falsified the income or assets, draft federal complaint out lining the fruad and file the complaint in federal court. Currently there are thousands of victoms of this kind of mortgage fruad. And most of them do not even know. I say, if you could afford your home prior to the new loan. You should be able to afford a new one loan "if the broker and lender used your correct income and assets. It's the broker and lenders responsibillity to process a loan the homeowner can afford. And reject the loan if you are under-qualified! I ask that all of those who are having trouble with your loans. Take a look at your loan application ( it's called a 1003). Compare the income and assets on the loan application to the income and assets you show on your tax return and check stubs? If they don't match. And you had nothing to do with falsifying this information on the loan application. Your a victim of MORTGAGE FRUAD! THAT'S WHY YOUR LOSING YOUR HOME AND THE BANKS WANT MODIFY THE LOAN. THEY REALIZE YOU COULD'NT AFFORD IT IN THE FIRST PLACE, HOWEVER, FOR THE SAKE OF GREED, THE BROKER SUBMITTED THE LOAN AND THE LENDER CLOSED THEIR EYES AND FUNDED IT. THEY DON'T WANT TO GO THROUGH THAT AGAIN, SEEING THE THAT THESE TYPES OF LOANS ARE PROSECUTED AROUND THE COUNTY BY THE UNITED STATE DISTRICT ATTORNEY'S OFFICE. DID YOU KNOW THAT FALSIFYING THIS INFOMATION CARRY' A PRISON TERM OF UP TO THIRTY YEARS AND A FINE OF UP TO ONE MILLON DOLLARS. CAN YOU COPE WITH THAT? HAD THE BROKER OR LENDER TOLD YOU THIS IN THE BEGINNING, WOULD YOU HAVE SIGNED THE LOAN APPLICATION? THIS IS CALLED UNFAIR AND UNLAWFUL PRACTICES! NOW IF YOUR ONE OF THOSE UNFORTUNATE PERSONS WHO HAS LOST AN INCOME OR JOB. AND THAT'S THE REASON WHY YOU CAN'T AFFORD THE MORTGAGE. THAT'S NOT WHO I'M TALKING ABOUT! BUT THOSE OTHER, IF YOU DON'T HAVE YOUR LOAN APPLICATION. CALL YOUR BROKER AND ORDER IT OR PICK IT UP. TELL THEM YOU WANT TO USE THE SAME INFORMATION THAT YOU USED WHEN YOU GOT THE KNEW LOAN. ALSO TELL THEM THAT YOU NEED IT TO HELP GET YOUR LOAN MODIFIED. CALL ME AND WE CAN GO OVER THE APPLICATION. YOUR LENDER MAY BE RESPONSIBLE FOR YOUR HARDSHIP! DON'T LET THEM GET AWAY WITH IT!
CHRISTOPHER SCOTT
Mortgage Recovery Service
Center of Los Angeles
310-957-7079
P.O. Box 470697
Los Angeles, CA 90047