INDICTMENTS FOR MORTGAGE FRAUD ON THE RISE

Investigations and Indictments for mortgage fraud are on the rise in the current climate of the sub-prime mortgage scandal. From high profile investigations involving the powerful to small time straw buyers, the government is showing a zero tolerance policy when it comes to investigating and prosecution of allegations of mortgage fraud.

For example, in July 2007 Sharpe James, the former Mayor of Newark, New Jersey, and a powerful state senator, was indicted, along with a female companion named Tamika Riley, in a real estate flipping scheme. James allegedly directed Riley to low cost city property who would then purchase the property and quickly sell it at exorbitant profit without any redevelopment as required by law. Enough profit that she allegedly made more than $500,000 from the purchases and sales, according to a federal indictment.

In 2006 twenty-one prominent Georgia citizens were indicted in a massive mortgage fraud scheme. In July 2007 seven of those defendants plead guilty to the mortgage fraud scheme. The defendants were indicted in a scheme that used “straw borrowers” – sometimes illegal aliens – to purchases millions of dollars in mortgages at steeply reduced prices.

The federal indictment charged that the defendants used the straw borrowers to purchase residential properties from builders and others at fraudulently inflated prices. The defendants then secured inflated appraisals that supported their purchase prices which, in turn, allowed them to obtain inflated mortgage loans in the names of the straw borrowers. All the parties would then split the excess loan proceeds, including some of the straw borrowers.

In California a foreclosure specialist named Christopher Craig pled guilty in July 2007 to bank fraud in a scheme in which he approached homeowners on the verge of having their homes foreclosed by mortgage lenders. Craig promised to loan them money, but instead got the desperate homeowners to sign documents which deeded their property to “straws” who then applied for home equity loans from Washington Mutual Bank. These “straws” falsely claimed to be the real owners and that there were no other mortgages against the property. Washington Mutual loaned some $1.2 million that ended up in Craig’s bank accounts.

ref: johntfloyd.com