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ACTIVERAIN WHO"S WATCHING the STORE ??

By
Services for Real Estate Pros with RALPH ROBERTS REAL ESTATE MACOMB COUNTY

Who's Watching the Store?

 

As a recognized expert on real estate and mortgage fraud, I am often approached by people who spot fraudulent transactions and are completely at a loss over what to do. Some are victims, others are whistleblowers, and some are actual accomplices who became aware that what they were doing was wrong and are suddenly concerned over what will happen if they get caught or turn themselves in.

Recently, a whistleblower called a huge case to my attention. She had access to about 50 files proving that a certain fraud ring had scammed a large lending institution out of hundreds of thousands of dollars and was getting ready to con them out of even more.

This ring leader is a name dropper, using a pro football player, a state representative, and a prominent attorney to lend credibility to his scam. He places ads in the paper offering to find homes for people and offering cash back at closing-an illegal practice in which the buyer agrees to pay more for the home than its true market value in order to get cash back when the transaction closes.

In the transaction that broke the case wide open, the con artist approached a 21-year-old man who had been refused mortgage loans because of his low income. The young man had perfect credit, so he was an ideal candidate for this particular type of fraud-he just needed to show that he was earning more money. The con artist solved that problem by hiring a phony company called CB Global to verify the man's employment and salary. I called the "800" number myself to verify the man's income, and they provided me with the false information, too. All I needed to supply was the man's name and the last four digits of his social security number.

Once they got around the minor obstacle of low income, the next step was to find a house and artificially inflate its price. The fraud ring found a house worth about $70,000 and had it appraised for $100,000 (to fool the lender into believing that the home's value was sufficient collateral to secure the loan). They then had the man approved for a $100,000 loan to buy the house, with the understanding that they would split the proceeds (the extra $30,000) they would receive at closing 50/50-the fraudsters would receive $15,000, and the young man would have a house and $15,000 in spending money.

If the fraud ring had paid the young man his $15,000, I probably would not be writing this story right now. The fraudulent deal would have gone undetected. What happened is that they refused to pay the man his cut. Unfortunately for them, this young man's mother worked for the company that was perpetrating the fraud, and when they refused to pay her son, she gathered up some files (over 50 of them), found me on the Internet, and gave me a call. Upon meeting with her and examining the files, I saw immediately what was going on. This was big. Surely the lender would want to know about it. They usually do.

I called the lender to report what was going on. I managed to get pretty high up and left a message for the vice president. He never returned my call. I called back and key details, but he cut me short and said that I really needed to call their fraud hotline. He gave me the "800" number for their mortgage fraud hotline.

I dialed the number. A woman answered and asked me for the loan number. I gave her the loan number off of one of the files I had. She then asked me for my name, and I told her "I'm Ralph Roberts." She then said something like "Well, that's not the name on this file." I told her I knew that, but I was calling to report dozens of fraudulent deals. Her reply? "Well, I don't do that."

I said, "What am I supposed to do? Your mortgage company is being ripped off. You're the fraud hotline, you need to be looking into this." She told me I needed to call the Better Business Bureau. I asked to talk with her supervisor. She placed me on hold and when she returned, she told me, "My supervisor doesn't want to talk to you. My supervisor said that you can write us a letter."

I explained that I did not want to write a letter. I needed to talk to someone. Five closings were scheduled for the coming week... five fraudulent transactions! I told her that I was a real estate and mortgage fraud expert. I knew what I was talking about. I had over 50 files proving that they had been scammed and were about to be scammed again-a stack of files about four feet high sitting on my desk! They were getting conned into approving risky loans. They needed to take action immediately. Instead of doing that, the lady on the fraud hotline proceeded to give me the address where I could send my letter.

I could not believe it. Here was a lender that had been scammed out of hundreds of thousands of dollars in illegal mortgage loans and was about to suffer more losses, and the person working the fraud hotline did not want to hear about it and did not know what to do. Worse yet, the vice president, who I tried talking to in the first place, apparently did not want to hear about it!

Most lenders are very cooperative when I call. They want to hear about instances of fraud being perpetrated against them. Unfortunately, however, I encounter far too many lenders who simply drop the ball on fraud prevention. It is as though the cash register is wide open, and nobody is watching the store. If you are a lender, you have to ask yourself, "Who's watching the store?"

Official Spokesperson for Guthy-Renker Home, Ralph R. Roberts is an award-winning and internationally recognized real estate agent, speaker, and coach and author of several books including his most recent, Flipping Houses For Dummies (John Wiley & Sons), Foreclosure Investing For Dummies (John Wiley & Sons, June 2007), Protect Yourself from Real Estate and Mortgage Fraud: All You Need to Know About Scams and Con Artists (Kaplan, August 2007). For more about real estate and mortgage fraud FlippingFrenzy.com. To learn more about Ralph, visit http://www.aboutralph.com/. You can contact Ralph Roberts by calling 586.751.0000 or e-mailing RalphRoberts@RalphRoberts.com.

Comments (18)

Jennifer Hillegas
Sign Your Deed Realty - Rome, GA
Every Seller Does It!
I believe that I know of a mortgage fraud deal that closed this week involving the appraisal in a new subdivison where none of the houses sold for over $160,000 and then this particular one contracted to sell for $163,000 and iit was SMALLER than the one that sold for $160,000.  I think that the loan officer answered a questions in the declarations wrong also.  The one that ask the borower have you filed bankruptcy in the past 7 years?  The true answer is yes and the LO checked NO.  As you know Fannie Mae and Freddie Mac guidelines WILL NOT approve a borrower out of BK less than 3 years, this particular borrower filed and dismissed 2 years ago.  The borrower is a manipulator b/c she used and attorney to TRICK the creditors by disputing the credit every 30 days until........ you guessed it they mixed up and didn't verify the info on the credit .......so the lawyer had it removed from public records so it appears that she has a 750,730 and a 680 credit score!!!  She stiffed me for an appraisal and went to another lender b/c I would not lie and I was only getting an approval for FHA which required 3,000 down b/c the house only appraised for $160,000.  So the other mortgage company lied on the loan app to get the borrower a conventional 100% loana nd then found an appraiser to lie about the value........and it happens all the time with this loan officer.........she changes W-2's and VOE's.......all kind of things get changed.......Who is watching the STORE?
Jun 05, 2007 02:39 PM
Randy L. Prothero
eXp Realty - Hollister, MO
Missouri REALTOR, (808) 384-5645
Ralph this is an interesting post.  I remember when you originally posted it.  Has anything come of it since then?
Jun 05, 2007 06:43 PM
Marty Van Diest
Valley Market Real Estate - Wasilla, AK
Your Alaskan Realtor

Yes, I did read this post before.  I think it was featured then too.

Still it's interesting.

Jun 05, 2007 08:14 PM
Todd MacMillan
MacMillan Real Estate - Georgetown, KY
ABR, GRI, SFR
Ralph, Mortgage Fraud falls under the FBI's jurisdiction. (313) 965-2323 in Detroit.
Jun 05, 2007 09:56 PM
Maggie Dokic /Indialantic | 321-252-8696
Magdalena Dokic - Indialantic, FL
Selling the beach in Florida's space coast
Ralph, your story makes me hesitant to report one such incident I saw.  Although it was only one, it was big.  True sales price was $585K but everything shows $970K.  Almost $400,000 fraud!! 
Jun 05, 2007 10:10 PM
Diane Bell, Hilton Head Real Estate, Bluffton
Charter 1 Real Estate, Hilton Head, Bluffton, SC - Hilton Head Island, SC

Ralph,

Great post---Unfortunately, some of this is still happening.  I do think we'll see an improvement, though,

Jun 05, 2007 11:43 PM
Brian Schulman
Coldwell Banker Residential Brokerage, Lancaster PA - Lancaster, PA
Lancaster County PA RealEstate Expert 717-951-5552
Ralph - the way that this lender didn't want to hear about your fraud information - is it possible that the lender is in on the fraud as well?
Jun 06, 2007 12:55 AM
Tom Burris
NMLS# 335055 - Baton Rouge, LA
Texas/Louisiana Mortgage Pro - 13 YRS Experience

Who's minding the store? Someone who doesn't want to do any extra work, thats who.

In a time of thinning margins, quality help has gone by the wayside.

Jun 06, 2007 01:30 AM
Abraham Chaffin
Sand Shell Realty - Cambria, CA
Cambria Real Estate

Mortgage fraud can be boiled down to. Are you trying to deceive the lender? If you are then it's fraud. You can buy a property with a loan that is over the asking price if it is okay with the lender. Better to get something in writing if it might be construed as fraud.

Jun 06, 2007 02:44 AM
Janet Guilbault
Platinum Home Mortgage Company - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Ralph, did you read my post, Excuse Me There's a Dead Man Driving That Merdedes?

This is a scam that happened to me while in the car leasing business. I came to the same conclusion: No one cared!

Jun 06, 2007 03:20 AM
Esko Kiuru
Bethesda, MD

Ralph,

That's scary. People working for that lender evidently had no loyalty to their employer. It wasn't just one bad apple, but several, it seems. I wonder if the thinking is that they'll sell the loans right away and that way pass on the potential trouble to the buyer.

Jun 06, 2007 04:29 AM
Anonymous
Rosey
Why did this young man's mother wait until her son was burned before reporting this scheme?
Jun 06, 2007 04:50 AM
#12
Robert D. Ashby
Cruise Planners of South Florida - Plantation, FL
Providing Personalized Travel
Scams abound, but mortgage fraud take son other forms, including either not completely filling out an application (ie leaving an ex-employer off) or outright lying on the application or elsewhere during its process.  People do things that benefit themselves and some even think, who cares, it won't hurt anybody?  It is still fraud any way you look at it.
Jun 06, 2007 05:24 AM
Teresa Boardman
Boardman Realty - Saint Paul, MN
In Minnesota our new attorney general has started watching the store.
Jun 06, 2007 07:47 AM
John S.
RealtorRatingz.com - Canandaigua, NY
Ralph, this is a great post.  I think you should publish the name of the lender, the name of the VP you spoke to, and perhaps give the local newspaper a call.  This kind of fraudulent behavior needs to be exposed, and I'd like to see the lender's efforts to sweep it under the rug fail.
Jun 06, 2007 08:05 AM
Rick & Ines - Miami Beach Real Estate
Majestic Properties - Miami Beach, FL
Ralph - there's plenty of that going around here in Miami.  We're in the process of getting information from one particular offer so we can start blowing that whissle.  Question:  in your opinion where's the best place to report these offenders?  I truly believe that the only way to stop this is for these people to realize that it is a crime.
Jun 06, 2007 03:16 PM
Ryan Hukill - Edmond
405home @ ERA Courtyard - Edmond, OK
Realtor, Team Lead
It's amazing that this stuff is still going on "undetected." Problem is, the undetecting is almost intentional. Great post! Please keep us updated.
Jun 07, 2007 03:42 AM
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Jan 17, 2008 10:01 PM
#18