Did you ever think that you could have possibly have seen a situation that you thought could be mortgage fraud but you weren't sure?....I did.

I wrote a post a few days ago entitled Consumers....Watch Out- Would Your Realtor® Jeopardize Their Real Estate License with this deal?  

I also included this link Consumers...are you flipping houses or are you flipping hamburgers? ...as it somewhat ties into part of this subject but I did not ask him for his views on this one..you'll have to read it over on localism.

It generated quite a few comments...it also seemed to have caught many peoples emotions. Most of the comments came from Realtors® ,mortgage professionals and appraisers. I really appreciated the responses and I am glad that almost all who did comment felt the same as I did. But after thinking about it....I decided to reach out to someone who experienced it first hand.

I wanted to hear from someone who truly can give you his views on this subject. He has had the experience of being a part of this situation...but not on the receiving end. He was one who got caught up in a tough situation and after a few years I guess he learned a lot from it because he speaks to many groups about what happened and how he has dealt with it. I reached out to him by asking him if it would be at all possible to get him to read the post and give his point of view on the subject.

Well he responded to me and said he would be happy to. I was surprised that he took a lot of time to go over what I said and he was kind enough to surprise me with this long response and suggested that he sends it to me in an email. He told me to use it any way I wanted. We agreed that I would just turn it into a short interview on the subject. Some of you will probably know who I am referring to...his name is ......

 
                                                               Ed Rybczynski - Mortgage Fraud Speaker & Expert

I wanted to tell you a little about this gentleman...I took an excerpt from Ed's profile in case you missed out on who he really is.....

Ed Rybczynski is often described as a masterful and provocative speaker with an important message for the real estate industry.  Prior to pleading guilty to charges stemming from a flipping and mortgage fraud scheme, Ed was the owner of a successful title company and a respected member of Baltimore's business community.  Audiences, coast to coast, laugh and cry as Ed brings the reality of a federal conviction to life, particularly the human aspect of life-altering consequences.  Ed explains the mindset of federal prosecutors as they take aim at the practices of an industry that is generally misunderstood and mistrusted. A portion of the presentation is dedicated to a discussion of recent indictments, convictions, RESPA actions, and class action litigation. 

There will be no question and answer here...Ed gave me his ok to publish his response so I will now paste it into this as an interview...thanks again Ed!

Good Morning Ed...thanks you for lending me your views on this subject. I feel your input is very important for both members of our industries and the public to understand that this could happen to anyone.

You might want to direct readers to Ed's blog, Mortgage Fraud Forum.  It's relatively young, but already contains good information and is expanding rapidly.

Neal:

I appreciate the opportunity to take a close look at your near brush with mortgage fraud as the fact pattern is particularly disturbing. When confronted with a questionable situation, it's always a good idea to step back and compare the circumstances at hand to the flow of an ordinary transaction. While most transactions tend to present challenges, there are definite similarities in transactions that aren't influenced by the misguided motives of fraudsters.

I find it interesting that the real estate agent that submitted the original offer wasn't the person named in the document. It's equally significant that the contract purchaser hadn't seen the house and the offer was faxed from a mortgage company. Isn't it customary for a purchaser to examine a property before writing a contract? Why would a real estate agent fax a contract from a lender's office? A pattern seems to emerge. Could it be that someone was playing a numbers game by making similar offers on numerous listings? Is it possible that the broker you spoke with and the mortgage company were two members of a larger team that included a title company and appraiser as well? Is it possible that the contract purchaser was a straw party whose identity would be falsified to obtain a mortgage?

It's impossible to justify the vast difference between asking price and offer as anything but fraud. Equally disturbing is the amount of the proposed gift of equity. Both items fail to pass any test of reasonableness or conformity with customary practices. I suspect you would have been asked to tamper with MLS records had the offer been accepted. Your decision to present the offer was prudent as the obviously fraudulent scheme wasn't shared with you. There was probably no need to attach a letter of explanation for the seller's benefit as an asset manager should know enough to see through the moving parts in this scenario. In the case of other sellers, I would have prepared a disclosure detailing the issues inherent in the offer. You need to be exceedingly thorough when dealing with situations like this.

There's one more thing. As part of the offer package to the seller, I would have attached a letter from a trusted mortgage broker stating that a gift of equity of 25% doesn't conform with established loan guidelines. This simple step adds credibility to your claim that the offer is other than legitimate and possibly points to foul play. I recommend that you obtain the letter for reasons we'll discuss below.

Normally, a great deal of cash is migrated back to the buyer in transactions subjected to fraudulent acts. Regardless of the terms recited in the offer, a higher loan amount would have been needed for the fraudsters to work the deal. I'm thinking that the loan might have been secretly structured as a refinance behind the scenes. You and the seller wouldn't have known about it. Only a subsequent examination of the land records would reveal this fact. In my opinion, this nefarious investor was attempting to cash out on the property, in a criminal sense, and add it to a real estate portfolio. I've seen strikingly similar situations where properties were used as rentals for awhile and eventually abandoned to foreclosure proceedings. The attempted fraud in your scenario is properly characterized as equity skimming since the properly was marketed a little below value and the offer price wasn't necessarily excessive for comparable properties in the area.

It's probably unnecessary to burden the authorities with the facts of this case since you've effectively prevented the fraud from occurring. I would feel differently had the deal made it to the table and purchase funds were wired across state lines. The FBI is the appropriate agency when reporting any incidence of mortgage fraud. At this time, mortgage fraud is prosecuted mostly in federal courts using postal and wire fraud statutes. The prosecution of real estate crimes at the state level leads to erratic results as well intended legislation remains largely untested and subject to a broad spectrum of judicial interpretation. It's very unlikely that federal prosecutors would convene a grand jury to investigate a single claim of mortgage fraud that didn't reach it's fruition or result in actual losses. Still, you need to protect yourself by preparing thoroughly at this point.

I recommend that you act as though the fraudsters encountered by you will be targeted by the feds in the future and that you'll be questioned by authorities in a confrontational setting. Create a separate file containing the hard-copy of the offer and every piece of paper that exists pertaining to this unfortunate scenario. I mean every piece of paper including memos, messages, notes, etc. Include the letter from the mortgage broker suggested earlier as it adds legitimacy to your position. Sit quietly and write every detail that comes to mind including places, times, dates, etc. If the woman that you spoke to had a New York accent, in your opinion, make a note. If by coincidence, you saw the car driven by one of the players, make notations concerning condition, make, color, the existence of bumper stickers that you recall, etc. By preparing now, you'll avoid later problems should these players happen to be the type of "egregious and notorious" offenders the feds typically investigate. It's also important that you place the file in a safe place that you'll remember years from now. In cases involving white collar crimes, it's not uncommon for investigators to expect detailed information about events that occurred years earlier. I sometimes suggest to clients to keep such files in the trunks of their cars. It's an unlikely, almost ridiculous, place for a file that you're likely to recall if questioned.

Hopefully, you've found this information helpful. Please urge your readers to contact me with any specific questions or concerns.

I was given permission to post this material contribution by Ed himself.... Thanks Ed!

Neal,

I'm always glad to get involved, particularly in fraud ridden states like Florida. -> Ed

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