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Tuesday, December 5, 2006

Mortgage Fraud Hits Rehab Neighborhoods

Case here reflects the national rise in mortgage fraud - Robert Patrick (St. Louis Post-Dispatch, November 23)

Sorry for the delay in linking to this article. Read through and find just one of many tales of speculators' using easy 'n' quick mortgages on historic homes in south city and straw buyers to make money. The effect inflates neighborhood rehab housing markets beyond recognition, encouraging legitimate rehabbers to list finished homes at prices grossly beyond their value. Perhaps these stories aren't publicized because politicians hungry to take credit for a city housing market boom are avoiding looking at the cold hard facts to the contrary.

Don't get me wrong; I am all for strong housing values. That's why stories of mortgage fraud are disturbing, because in the end they do more to harm stable, high housing values than to help. Hopefully prosecutors will take these cases seriously.

7 comments:

Anonymous said...

Mortgage fraud crimes have ranked high in many locales in recent years throughout Missouri. Federal prosecutors in the Western District of Missouri (Kansas City) have, indeed, taken these crimes seriously and indicted a number of individuals for these crimes. Federal jursidiction is involved because these frauds often involve false statements to banking institutions, affect interstate commerce in some manner, or the defrauding of some other government regulated industry. Thus, if local prosecutors do not take this problem seriously (and, of course, limited resources require locals to prioritize interests), you may choose to contact the FBI or US Attorney's Office in St. Louis (Eastern District of Missouri). Good Luck.

Anonymous said...

Mortgage fraud has a major impact on neighborhoods and consumers. What does a case of mortgage fraud look like? The guilty parties in the Post article employed a common ruse, whereby a straw party is recruited to secure a loan based on an inflated appraisal. The "fraudster" sells the property to the straw party and pockets the loan proceeds, less the payoffs to the straw party and other conspirators. Conspirators may include an appraiser or mortgage broker, among others.
No one ever moves into the property, even if it is purchased as a primary residence. The fraudster may make some mortgage payments to cover his tracks. The property eventually goes into foreclosure, and may be boarded up after vandalism. Usually the lender regains control of the property and sells it for substantially less than the fraudulent purchase price.
Fraudulent appraisals undermine the integrity of the local housing market. A concentration of fraud in a neighborhood can undermine its stability, discouraging investment, depressing property values and attracting crime. Lenders lose huge sums of money, and eventually pass the cost onto the consumer in the form of higher interest rates.
There are a seemingly endless number of strategies to commit fraud. Bona fide homebuyers are conned by fraudsters into paying too much for properties that may be in poor condition. Fraudsters lure first time "investors" into purchasing rental property at inflated prices on which the purchaser cannot afford the mortgage. Foreclosure is the end result.
Readers who want to look at the mortgage fraud issue in more depth can turn to the following sources:

Chicago Tribune. “The new street hustle” An excellent series on fraud.
http://www.chicagotribune.com/news/specials/broadband/chi-mortgagefraud,0,1052574.htmlstory

Denver Post. “Steal of a Deal”
http://www.denverpost.com/ci_4567736

gmichaud said...

Mortgage fraud is bank robbery. If a couple of poor guys knocked of a bank it would be splashed all over the news. The Post Dispatch and the media in general do a poor job of covering fraud. I will admit it can be complex, but newspapers in Chicago, Denver and Kansas City have had in the vicinity of 10 to 20 articles each in the past year compared to 2 in the Post.
Of course fraud not only affects banks, but individuals can get ripped off also. Then there is the problem of vacant buildings that can not be bought because they are overpriced .In fact flipping properties and fraud do more to degrade neighborhoods than just about any other activities. False and high values make homes unaffordable for potential residents and make it impossible for a legitimate rehabber to purchase and fix up homes for resale.
Crooked appraisers are at the center of the problem. They may not make the most money off the fraud, but the process always requires a distorted appraisal for the transaction to take place.
It is unbelievable that new laws have not been passed to assist in capturing these crooks. Mortgage laws have huge holes in them and need to be revised. Appraisers especially need to be held accountable. Until then it will be a free for all with vacant buildings everywhere and a few people profiting handsomely.
If this was bank robbery on the street level, legislators would be falling all over themselves to tighten up laws, but since they are white collar crimes there seems to be little urgency in resolving the problem. And it is a major problem, Mortgage News Daily reported that the in the past four years the FBI has had 11,362 convictions and 8.1 billion in restitution orders. And these are only the ones they caught.

Michael Allen said...

^

In addition to scant coverage of mortgage fraud by the Post, its cover article on Doug Hartmann was pretty close to being sympathetic to him!

Gerry said...

The RFT investigated the role of Hartmann and DHP attorney Krempasky in the following feature article:
http://www.riverfronttimes.com/Issues/2006-06-21/news/feature.html

gmichaud said...

For a little more information go to this website http://www.mortgagenewsdaily.com/
4112005_Mortgage_Lender_Fraud.asp
It is the mortgage news daily site. If you scroll down to the comments you will see get a view of how citizens are becoming entangled. Ameriquest mortgage for instance is mentioned as a marginal player in the mortgage field. This information may be useful to anyone buying a house or refinancing. There are so many bad players out there you have to be careful. Many people are getting sucked up into this mortgage madness, there are so many variations of fraud and predatory lending that it is hard to keep track. Note I had to do web address on two lines, cut and paste it as one with no spaces.

Anonymous said...

The reason the post went easy on Mr. Hartmann is tht Hartmann's Daddy owns the Post.
They will never fully report what truly happened.