The Seattle Times is reporting tonight that a federal indictment has been issued for a Bellevue loan officer and his assistant.
A former loan officer at a Bellevue mortgage company and his assistant have been indicted on a charge of conspiracy to commit wire fraud in a scheme that prosecutors say involved using straw buyers to purchase dozens of homes at inflated prices and siphoning off the extra cash for their own use.
Christopher Brooks and Amani Moss allegedly obtained more than $27 million in fraudulent loans for the purchase of at least 54 homes beginning in 2005, according to an indictment unsealed this morning.
The charges allege that they recruited straw buyers, who would allow the men to falsify loan papers for them. At the same time, Brooks and Moss would use a realtor, who is identified in the indictment by the initials “L.A.,” to find home sellers who were willing to overstate the purchase price of their homes. The straw buyers were paid between $7,000 and $10,000 for each transaction, the indictment says.
Brooks, who worked for America Mortgage in Bellevue, would then prepare and submit the false loan papers to several lenders in the area, according to court papers.
The difference between the inflated price and the actual purchase price of the home ranged from $30,000 to $778,000 per home, and the charges allege that money was funneled through a business owned by Moss, Peachtree Development, and into their pockets..
Home sellers, if your home is not selling and someone from our industry approaches you with an idea to take your home off the market and relist at a much, much higher price, please turn the person in to his or her regulator. If you are not sure who the regulator is, contact one of us and we can point you in the right direction.
The DFI Licensee database shows America Mortgage in Bellevue as a licensed mortgage broker. I wonder how many of these loans went into early payment default and how many the broker was asked to buy back from the lender.
In order to commit fraud at this level, the Realtor and mortgage broker would have had some help from an appraiser as well as an escrow closer.
Often they close at an attorneys office in such scams. Crooked appraisers are a dime a dozen.
It looks like this is yet another example of the fraud that was possible during the height of the boom as lenders threw caution to the wind, unconcerned about the true quality of loans since they could just sping them off to investors. And why should anyone care about a little diddling with transactions since appreciation would inevitably make everyone whole anyway. After all, real-estate prices only go up…
The unfortunate thing is that all the fraud being revealed these days actually occurred years ago. The authorities are just chasing horses that have already left the barn.
I doubt very much that much fraud is occuring these days. Lenders are MUCH more critical of transactions and unwilling to just accept dubious appraisals or loan applications as they once were.
I suspect if you got an agent, appraiser and escrow together today you could accomplish the same thing. This is perhaps a pretty simplistic scheme, but the thing about fraud is a lot of it can be difficult to detect.
What I don’t understand is why people commit fraud in the real estate area. Sooner or later it’s going to be caught, especially if you have repeat transactions. There’s too much of a paperwork trail.
Kary,
If the mls didn’t block the Selling Agent field for so long, we could easily search who sold the most properties that are now short sales and foreclosures for scads less than they originally sold for.
That’s the problem with suppressing data.
I am amazed that two of the largest companies in this area do not allow the Sunday Open House field to show to their agents to input their Open Houses. When are the Brokers going to “get” that suppressing info is NOT the way to go in this day and age.
Michael,
Or online escrows. Any mass mill of not paying attention helps feed the monster.
Kary says, “but the thing about fraud is a lot of it can be difficult to detect.”
Actually, it’s not all that difficult to detect anymore at the street, retail level. The best detector is a human, usually an underwriter or a processor who has received ample training on fraud detection. Classes on mortgage fraud have been given all over the U.S. by regulators during the past 6 years. Next best detector are the computer systems put into place by the lenders to search for red flags that point to possible fraud.
Experienced people at the retail level know what fraud looks like.
That’s why the fraudsters will often target brand new people; new Realtors and LOs. They will also groom processors or escrow closers, sometimes for many months.
Kary asks, “What I don’t understand is why people commit fraud in the real estate area. Sooner or later it’s going to be caught, especially if you have repeat transactions.”
I’ve done some preliminary research/reading on the type of person who engages in white collar mortgage fraud like this. Usually, but not always, the perpetrator could be classified with a condition called psychopathy also known as your average sociopath: A person that has no moral consciense. Current research suggests that sociopaths are as common as about 1 in 25 people in the world.
These people have a high need for stimulation and are high risk takers. There’s an arrogance and a confidence that they carry with themselves that’s very, very different from an average person. They can be extremely charming and manipulative, and can create an excitement in their relationships with people that regular old folks just aren’t use to.
Imagine a loan processor being completely swept off his feet with charm by one of these gals, offering him a chance to participate in something secretive and possibly life-changing! It all sounds so intriguing and nothing like this has ever happened to him before….
Sociopaths are extremely clever at grooming the people who will eventually help them. There’s always a plan “if caught.” And the plan usually “sounds” rational.
Sniglet says, “The unfortunate thing is that all the fraud being revealed these days actually occurred years ago.”
Yes, we agree on this point. However, having been in the industry for over 25 years now, I can give you a first person account that fraud has always been with us in one form or another.
If we can fast forward 5 years into the future and look back and what happened during the years 2008 through 2013 I predict that we will find fraud going on right now in our market. It’s just morphed into new forms, similar to a virus.
Jillayne, re post 7, you described someone I used to work with! 😉
I wonder how much impact fraud has on price increases. Prices are set at the margins. Since they are selling the houses at inflated prices, they are pushing the margin to the extreme. After one instance of fraud, do comparable properties sell for more? Could one case of fraud raise the sales prices of ten legitimate deals?
That’s not an example of prices being set at the margins, but it conceivably might result in an appraisal coming in higher if the appraiser didn’t throw out the oddball result. I’d suspect though that these houses were probably not in the best condition, and that’s what allowed the bad appraisal to appraise high (and would make it harder to detect). It would be more difficult for an appraiser to appraise property high that was in great condition, because it would be more difficult to find comps to support that higher valuation.
Probably a much larger impact on prices would be seller financing concessions, and other similar concessions, where the net price and gross price are significantly different. I periodically get calls from appraisers asking if there were such concessions on transactions where they’re using one of my sales as a comp, but I don’t get that many so I don’t know how common it is for appraisers to do that. And real estate agents have to sort of guess (I’ve never had a call from an agent that I remember). Sometimes it’s obvious, and sometimes it’s not.
BTW, a couple of years ago I was tracking foreclosures pretty closely, and I’d see a lot of suspect transactions. One was a property that didn’t sell, and was then relisted and sold for about $200,000 more than previously, where the buyer defaulted almost immediately. And there were many others where the buyer apparently never made a single payment. Some of these were $500,000+ properties, so I can only assume fraud was involved.
Ardell, any escrow company can be involved in scams. If you check out local history, we’ve had Ted Grimes who owned Pacific Coast Escrow and I believe he was President of the local Escrow Association.
Do any of these GSE bail-out plans help the shareholders? I have read many of the proposals to allow borrowing at the Fed, or government funding, but nothing seems to make it clear what would happen to shareholder equity in each of these scenarios. Any schemes based on “borrowing” money likely wouldn’t dilute equity, but any actual efforts to raise capital certainly would.
The government needs to make it clear it will bail out the shareholders or we will be in for a world of hurt. It doesn’t help that they will just provide a back-stop to prevent defaults on GSE debt. If the share values drop much further private investors will simply abandon the entire financial system altogether.
Sniglet, I heard one plan where the individual shareholders would have right to buy first, and the government would pick up whatever wasn’t bought. But that’s the only way I know to issue stock and not have it dilutive.
Kary wrote: “I heard one plan where the individual shareholders would have right to buy first, and the government would pick up whatever wasn’t bought”
This doesn’t sound very appetizing. It’s kind of like a bank robber holding a gun to your head. Either cough up more cash or lose the value of your investment. I doubt that will inspire much confidence for investors to continue putting their money into financial firms. Not when they stand the risk of facing serial forced capital-raising efforts every time the institution needs to take another massive write-down.
Local mortgage fraud is what caused me to start blogging!
Did anyone ever hear the result of the state going after Hayes Barnard and Paramount Equity Mortgage for deceptive ads? Apparently the state wanted to fine the company 500k and revoke its license, but I’ve begun to hear Hayes Barnard all over the radio again. Just curious…
Hi Robert,
WA State DFI issued a “consent order” which means “you’re in trouble.” But Paramount can choose to continue to run those ads between the time the consent order was filed, up to their hearing before DFI. Last I heard, Paramount was going to fight the charges.
If you want to keep track of anyone under DFI’s authority, here’s a link to their enforcement actions.
http://www.dfi.wa.gov/cs/adminactions_2009.htm
I notice that they have the actions temporarily disabled.
Have you noticed that between today and back when the consent order was originally filed (several months ago) Paramount’s radio ads have changed.
I no longer hear
“We’ll even pay for your home to be appraised.”
“We can get you a loan with no closing costs”
“The lowest rate of a lifetime”
Instead, I hear:
“With no out of pocket expenses”
“The lowest rates we’ve seen in the last 50 years”
Maybe showing a track record of voluntarily changing their ads will help them negotiate a settlement.
Christopher Brooks received 7 years for his part in mortgage fraud http://seattletimes.nwsource.com/html/localnews/2008793819_webbrooks27m.html
His wife’s trial will follow….