Mortgage Fraud

By
Real Estate Appraiser with BAYER APPRAISALS

2 brokers disciplined in Colorado:  purchased properties at inflated prices - with the excess funds retuned to the fraudsters under an LLC company - one agent lost his / her license, the other person's RE licensed was suspended for 90 days.  One property in the scheme was listed for sale at $300,000 - the purchase price was jacked up to $425,000 - with a $135,000 commission check issued.  3/18/2008

Loan Officier, RE Agent & Appraiser indicted in Illinois: included 40 or more fraudalent real estate sales - by making false representation, including fraudulent appraisals.  If convicted each mail fraud offence carries a manimum penalty of up to 30 years and a fine of $1 million dollars (each and there are 40+) 3/14/2008

Las Vegas couple indicted for a scheme to defraud federally-insured financial institutions in order to benefit themselves: They recuited individuals (straw buyers) to purchase homes above the asking prices, applying for mortgages - using false information - such as false places of employment, income, assets - to qualify for the loans.  Straw buyers were asked to transfer the properties to an LLC company controled by the couple.  Once the couple obtain ownership they would re-sale the property to another straw buyer they had found.  The mortgage payments were not made on many of the loans - causing them to go to foreclosure.  resulting in a loss of $15 million to the duped lenders.  3/14/2008   "It is a violaton of federal law for a person to make a false statement regarding income, assets, debt, or matters of identification, or to willing overvalue any land or property in a loan and credit application for the purpose of influancing in any way the actions of a federally-insured financial institution," said U.S. Attorny Brower. 

Illinois Man gets 8 years for Flipping:  Knox would find sellers of low value or distressed properties - where the prices were inflated and fraudalent appraisals were produced by Wiese - hitting the target values requested by Knox, sometimes by actually creating comparable sales.  The true condition of the properties was not reported.  Knox who served time in prison in the 1990s got 235 months this time. 3/13/2008

Florida Appraiser plead guilty to accepting suggusted valuations: facing a maximum sentance of 20 years and a fine of $250,000 for each count of wire fraud.  Again cases of inflated appraisals and straw buyers with cash back at closing.  Fradulent IRS forms and W-2s were used plus false employment documations and deposit forms.  3/12/2008

Appraisers find it is not unusual to received requests to appraise to unrealistic values.  Often appraisal requests will come with a minimum value attached - with the request to call if that magic number can not be achieved.  Appraisers short on work or low in ethics will take the bait in order to collect an appraisal fee.  Many will lie to themselves and others that value is just an opinion and they were doing nothing wrong.  If fact if they agree to a value directed by another, and misrepresent the property or appraise to something other than the most probable sales prices as of the valuation date - they can be convicted of mortgage (appraisal) fraud under the Uniform Standards of Professional Appraisal Practice.  So you may believe it is hard to prove an appraiser over-valued delibertely - IT IS NOT.  There are signs - such as presenting the property as being superior to what it really is - picking comps that are superior and instead of adjusting downwards they adjust upwards; good comps are over-looked and less comparable, older sales or sales of homes from other locations (generally superior locations) are used, instead. 

Much of the Fannie / Freddie / Cuomo plan is set to address these issues - by preventing the loan originator from picking or pressuring the appraiser.  Of course the better fix to the mortgage mess will be when all loan originators are licensed and help accountable for the loans they worked on that go bad. 

I just got another request for a "comp check" AKA tell me the value of the property and they will decided if it is high enough to commit to an actual appraisal (and pay for it).  Of course that is without actually seeing the property; but spending my time, using data sources I pay for and using my experience and expertise to find sales data of similar properties.  If the Cuomo deal goes through loan makers will not be asking for free stuff, for they will not be allowed to pick the appraiser, and what good is a list of sales from another appraiser. 

Beverly

 

 

 

 

 

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