DOCSLIB.ORG

Investment Property Fraud

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Investment Property Fraud Remove this text and place your logo here Remove this text and place your logo here Topics . Mortgage Fraud Defined . Common Fraud Schemes and Fraud Elements . Tips and Best Practices . Resources . Reporting Mortgage Fraud Remove this text and place your logo here Mortgage Fraud Defined “The intentional misstatement, misrepresentation, or omission by an applicant or other interested party, relied upon by a lender or underwriter to provide funding, or to purchase, or to insure a mortgage loan.” – FBI, 2007 Mortgage Fraud Report Remove this text and place your logo here Common Fraud Schemes/Fraud Elements Common Fraud Schemes: . Investment Property Schemes . Illegal Property Flips Common Fraud Elements: . Appraisal Fraud . Straw Buyers . Affinity Fraud Remove this text and place your logo here Investment Property Schemes Investment property schemes usually occur when there are one or more investment properties sold to a buyer. The buyer is usually told by the person running the scheme that they are not required to place any money down for the purchase of the property/properties, that the rents will cover the mortgage payments, and they may receive an incentive such as cash back at or after closing for purchasing the property/properties. Remove this text and place your logo here Investment Property Fraud “No, I never went to look at this investment property that I was buying. I believed what I was told.” Remove this text and place your logo here Illegal Property Flips Illegal property flips involve a scheme where recently purchased properties are quickly resold to obtain an illegal profit based on an inflated appraisal report. Illegal property flips typically involve a conspiracy between the fraud organizer, real estate appraiser, loan originator, and the closing agent. Remove this text and place your logo here Illegal Property Flips . Common elements of an illegal property flip are: – Use of a fraudulent, artificially inflated appraisal – Usually done with investment property originations – Organized by the property seller and/or another third party – Property flips may not be illegal – you need to know what the intent is – The buyer of the property may not be aware of the illegal property flip Remove this text and place your logo here Appraisal Fraud Appraisal fraud is not a difference of opinion. Appraisal fraud occurs when the property appraiser deliberately overstates the value, misstates, and/or omits facts that impact the property value relied upon by the lender to originate the loan. Remove this text and place your logo here Appraisal Fraud What you see: Remove this text and place your logo here Appraisal Fraud What you get: Remove this text and place your logo here Appraisal Fraud Renovations never done! Remove this text and place your logo here Straw Buyers . A straw buyer (straw) is a person whose credit profile is used to serve as a cover in a loan transaction. They are sometimes referred to as a nominee borrower or straw borrower. Straw buyers may be deceived, thinking that they're investing in real estate that will be rented out, with the rental payments paying the mortgage. Straw buyers are chosen for their ability to qualify for the mortgage loan. Straws can be willing participants in the transaction, or victims whose identity is being used unbeknownst to them (identity theft). Straw borrowers can cause loans to be approved that would ordinarily be declined. Remove this text and place your logo here Straw Buyers . Straw Buyers usually have good credit and high Fair Issac Corporation Scores (FICO) scores . Straw buyers are often enticed by “get rich quick” come-ons… “Your total contribution is your credit and qualifying for the loan.” “Make $$$ per deal…for your partnership contribution!” “At which point, we will put you on another deal to keep the money coming in for you!” Remove this text and place your logo here Straw Buyers Straw buyers: . May be helping a friend or family member purchase a home . May be paid a large fee for their involvement in purchasing investment property/properties . Usually never intend to own or occupy the property . Are used in combination with many other scams Remove this text and place your logo here Affinity Fraud Affinity fraud exploits the trust and friendship that exist in groups of people who have something in common. The scam artists who promote affinity fraud schemes frequently are – or pretend to be – members of the group. “You can trust me, because I’m like you.” “I’ve made money on this deal and you can too.” “Believe me, I can help you.” “You remind me of how I was…” “I can help; I understand.” Remove this text and place your logo here Affinity Fraud Affinity Groups Schemers prey on their own community: . National origin . Religious affiliation . Friends . Family . Co-workers Remove this text and place your logo here Affinity Fraud Affinity Groups How it works: . Immediate level of trust . Others in the group have done it, and made money . High returns are paid to early investors and become walking and talking “commercials” . Immigrants are often targeted due to language barriers and isolation . Loyalty to the group – not reporting schemers or monetary losses to authorities . Shame – keeping quiet and maintaining honor Remove this text and place your logo here Tips and Best Practices . Beware of unsolicited offers to buy real estate . Beware of enticing offers or sales concessions . Seek legal advice prior to buying in any investment property opportunity . Physically inspect the property you are buying with a licensed home inspector . Beware of investment property opportunities where you are offered cash back after closing – say NO to “easy money” . Seek legal advice if a “too-good-to-be-true” incentive is part of the purchase transaction Remove this text and place your logo here Tips and Best Practices . Do not lend your name and credit for investment opportunities . Get important information in writing . Provide accurate information on your loan application . Check the accuracy of the information on the loan application, purchase contract and loan documents . Beware of requests to pay funds to parties not involved in the transaction Remove this text and place your logo here Tips and Best Practices . Know your finances and how much of a mortgage payment you can afford . Consult a lender of your choice for mortgage pre-approval . Get lender references from known reputable sources and know who you are working with . Know your market or contact a real estate agent of your choice to familiarize yourself with the neighborhood and what homes are selling for Remove this text and place your logo here Tips and Best Practices . Do not sign any documents you don’t understand. If you're not sure, don't sign . Do not sign any blank documents . Familiarize yourself with your HUD-1, Settlement Statement . On the HUD-1, make sure that it: – Is issued by the closing agent – Indicates your loan amount – Indicates your down payment and funds needed to close – Shows complete accounting of all loan fees and charges . Do not sign any document containing false information Remove this text and place your logo here Resources . www.mbafightsfraud.mortgagebankers.org Reporting Mortgage Fraud . Freddie Mac’s Fraud Hotline: (800) 4FRAUD 8 or (800) 437-2838 . Contact your state's attorney general office – Locate your state attorney general through the Consumer Fraud Reporting Web site available at www.ConsumerFraudReporting.org/StateAttorneyGeneralList.php .
Load more

Recommended publications
  • Common Red Flags
    Common Red Flags Resources to Help You Combat Mortgage Fraud Fannie Mae is committed to working with our industry partners to help combat fraud by offering the following list of common red flags that may indicate mortgage fraud. Inconsistencies in the loan file are often a tip-off that the file contains misrepresentations. The presence of one or more red flags in a file does not necessarily mean that there was fraudulent intent. However, several red flags in a file may signal a fraudulent transaction. High-level Red Flags § Social Security number discrepancies within the loan file § Address discrepancies within the loan file § Verifications addressed to a specific party’s attention § Verifications completed on the same day they were ordered § Verifications completed on weekend or holiday § Documentation that includes deletions, correction fluid, or other alterations § Numbers on the documentation that appear to be “squeezed” due to alteration § Different handwriting or type styles within a document § Excessive number of automated underwriting system submissions Mortgage Application § Significant or contradictory changes from handwritten to typed application § Unsigned or undated application § Employer’s address shown only as a post office box § Loan purpose is cash-out refinance on a recently acquired property § Buyer currently resides in subject property § Same telephone number for applicant and employer § Extreme payment shock (may signal straw buyer and/or or inflated income) § Purchaser of investment property does not own residence Sales Contract § Non-arm’s length transaction: seller is real estate broker, relative, employer, etc. § Seller is not currently reflected on title § Purchaser is not the applicant § Purchaser(s) deleted from/added to sales contract © 2017 Fannie Mae.
    [Show full text]
  • Fraud Is Fun Or How a Foreclosure Rescue Scam Changed My Life
    Fraud Is Fun or How a Foreclosure Rescue Scam Changed My Life Peter A. Holland We are an association of trial lawyers seeking justice were raised there. Her mother died there. Mary told me that for our clients and for society. As such, we study diligently she earned $50,000 a year, and that the house was mostly paid “how” to try a case. Get the documents. Note the depositions. for – she had over $100,000 in equity in that house. Subpoena the witnesses. Anticipate the objections. Know the Now my stomach is grumbling, but I have to ask: “How judge. Prepare the Opening Statement. did you get into this mess which I cannot get you out of?” But before we can learn “how” to try a client’s case, we Although she was working part time at the time that I met her, should ask the big question: “why?” Specifically, we should previously she was being treated for a very aggressive breast ask at a very deep level: “Why should anyone care about this cancer. Although Mary’s employer was great to her, after her client and this case”? If we cannot articulate the answer this surgery, rehabilitation, chemotherapy and brief relapse, she question, then we can never truly “win” the case. Why we care about a cause can – and should – direct how we try the case. got laid off from work. She fell behind in her mortgage. Getting in touch with the why instead of obsessing on With nowhere to move to, and with the looming the how can restore the creative juices and the passion to your foreclosure sale of the family homestead, Mary turned to a practice.
    [Show full text]
  • Property and Mortgage Fraud Under the Mandatory Victims Restitution Act: What Is Stolen and When Is It Returned?
    William & Mary Business Law Review Volume 5 (2014) Issue 1 Article 7 February 2014 Property and Mortgage Fraud Under the Mandatory Victims Restitution Act: What is Stolen and When is it Returned? Arthur Durst Follow this and additional works at: https://scholarship.law.wm.edu/wmblr Part of the Banking and Finance Law Commons, and the Criminal Law Commons Repository Citation Arthur Durst, Property and Mortgage Fraud Under the Mandatory Victims Restitution Act: What is Stolen and When is it Returned?, 5 Wm. & Mary Bus. L. Rev. 279 (2014), https://scholarship.law.wm.edu/wmblr/vol5/iss1/7 Copyright c 2014 by the authors. This article is brought to you by the William & Mary Law School Scholarship Repository. https://scholarship.law.wm.edu/wmblr PROPERTY AND MORTGAGE FRAUD UNDER THE MANDATORY VICTIMS RESTITUTION ACT: WHAT IS STOLEN AND WHEN IS IT RETURNED? ABSTRACT The United States Circuit Courts of Appeals are split on how to calculate restitution in a criminal loan fraud situation where collateral is involved. This trend is best illustrated in cases involving mortgage fraud. The split stems from disagreement over how to account for the lender’s receipt of collateral property. The Third, Seventh, Eighth, and Tenth Circuit Courts of Appeals consider the property returned when the person defrauded receives cash from the sale of collateral property. The Second, Fifth, and Ninth Circuits deem the property returned when the lender takes ownership of the collateral property. This Note argues that the former conception of the off- set value ought to govern. This Note also supports a view of property that considers the lender’s lost opportunity from fraud.
    [Show full text]
  • Foreclosure Rescue Scams
    Foreclosure Rescue Scams HOW IT WORKS The pitch Foreclosure rescue firms use a variety of tactics to find homeowners in distress: Some sift through public foreclosure notices in newspapers and on the Internet or through public files at local government offices, and then send personalized letters to homeowners. Others take a broader approach through ads on the Internet, on television or in the newspaper, posters on telephone poles, median strips and at bus stops, or flyers or business cards at your front door. The scam artists use simple messages and broad promises, like: "Stop Foreclosure Now!" or "We can save your home!" A legitimate housing counselor will explain the hurdles in stopping a foreclosure and the risk that it may not be possible. The claims "We guarantee to stop your foreclosure." No one can guarantee to stop a foreclosure except the lender. "We have special relationships within many banks that can speed up case approvals." Scammers offering to contact lenders charge a fee for making a call any homeowner can make for free. In most cases, lenders won't negotiate with a third party other than a homeowner's attorney or a HUD-certified credit counselor acting on behalf of a homeowner. "We stop foreclosures every day. Our team of professionals can stop yours this week!" Preventing a foreclosure, especially once the process has begun, is a lengthy, complex procedure that involves negotiations with a lender over a repayment plan or modification of the original loan terms. Red flags No legitimate housing counselor will: • Guarantee
    [Show full text]
  • Wholesale Broker Guide
    Wholesale Broker Guide Revised 7/9/2021 SECTION 1 CONTRACT ............................................................................................................................... 5 1.1 Broker Contractual Obligations ............................................................................................................ 6 1.2 Rules of Interpretation ........................................................................................................................... 6 1.3 Relationship of Parties Under This Guide ............................................................................................ 6 1.4 Power of Attorney .................................................................................................................................. 7 1.5 Broker’s Responsibility ......................................................................................................................... 7 1.6 Discretionary Relationship .................................................................................................................... 7 1.7 Confidentiality ........................................................................................................................................ 7 SECTION 2 PRIVACY OF CONSUMER FINANCIAL INFORMATION .......................................................... 7 2.1 Safeguards ............................................................................................................................................. 8 2.2 Unauthorized Access to Consumer Information
    [Show full text]
  • United States Attorney David E. Nahmias Northern District of Georgia
    United States Attorney David E. Nahmias Northern District of Georgia FOR IMMEDIATE RELEASE CONTACT: Patrick Crosby 01/26/06 (404)581-6016 http://www.usdoj.gov/usao/gan/ FAX (404)581-6160 22 INDICTED FOR MORTGAGE FRAUD Charges Expand in Phillip Hill mortgage fraud scheme Atlanta, GA - In a 181 count superseding indictment, 22 defendants have been charged by a federal grand jury with conspiracy, bank loan fraud, mail fraud, wire fraud, and money laundering relating to a mortgage fraud scheme that targeted the metro-Atlanta area house and condominium market. Today’s indictment expands the scope of prior charges to include over 40 residential houses and over 230 condominiums in the Atlanta area involved in the mortgage fraud scheme. United States Attorney David E. Nahmias said, "The negative impact on our neighborhoods of this multimillion dollar fraud scheme extends far beyond the financial loss to the victim lenders. The Phillip Hill mortgage fraud scheme charged in this indictment is the most extensive this office and federal investigative agencies have uncovered to date in the Atlanta area. This indictment is a major step forward in this office’s commitment to expose and eradicate mortgage fraud schemes in our community." The 22 defendants charged in today’s superseding indictment are: MARCUS C. ALCINDOR, a/k/a "Christopher Alcindor," 42, of St. Lucia; CHRISTOPHER BAKER, 40, of Canada; CARL BEST, 42, of New York City; BARBARA BROWN, 32, of Mableton, Georgia; WILLIAM CHAVIS, 43, of Stone Mountain, Georgia; CHERYL DENNY, 42, of St. Lucia; FRED FARMER, 59, of Roswell, Georgia; MICHAEL FLAKE, 31, of Stone Mountain, Georgia; WESLEY GOLDEN, 57, of Atlanta, Georgia; RILEY GRAHAM, a/k/a "Riley Williams," 39, of Detroit, Michigan; PHILLIP E.
    [Show full text]
  • Acting for Lenders and Prevention and Detection of Mortgage Fraud Code & Guidance
    Acting for Lenders and Prevention and Detection of Mortgage Fraud Code & Guidance Acting for Lenders and Prevention & Detection of Mortgage Fraud Code In this Code ‘you’ refers to individuals and bodies regulated by the CLC; all individuals and bodies providing conveyancing services regulated by the CLC must comply with this Code. You must not permit anyone else to act or fail to act in such a way as to amount to a breach of this Code. Outcomes-Focused The Code of Conduct requires you to deliver the following Outcomes: Clients receive an honest and lawful service; (Outcome 1.2) Clients money is kept separately and safely; (Outcome 1.3) Client matters are dealt with using care, skills and diligence; (Outcome 2.2) Appropriate arrangements, resources, procedures, skills and commitment are in place to ensure Clients always receive a high standard of service; (Outcome 2.3) Clients’ affairs are treated confidentially (except as required or permitted by law or with the Client’s consent). (Outcome 3.6) Prevention and detection of mortgage fraud and acting properly in the interests of lenders helps you deliver these Outcomes and requires you to act in a principled way: 1. Act with Independence and Integrity. (Overriding Principle 1) 2. Maintain High Standards of Work. (Overriding Principle 2) 3. Act in the best interests of your Clients. (Overriding Principle 3) 4. You systematically identify and mitigate risks to the business and to Clients. (CoC P2f) 1 5. You promote ethical practice and compliance with regulatory requirements. (CoC P2g) 6. You enable staff to raise concerns which are acted on appropriately.
    [Show full text]
  • Mortgage Fraud Penalties Uk
    Mortgage Fraud Penalties Uk Enoch usually nominates physiologically or besteaded above when squealing Tally detonating gauntly and unmitigatedly. Tainted and causeless Tye never sullying his shriek! Home-baked and hull-down Matthaeus faking potentially and exchanges his phyllode tautly and outdoors. This could face prosecution If we are a bounce back loans should be upfront ineverything you should we use, a loan companies, and penalties for. Tax and penalties because of Furlough Fraud a Business Bounceback Loan aggregate and urge the 4500 reported cases to date are just grip tip. Frequently Asked Questions US Department caught the Treasury. Mortgage fraud FCA. Cookie had already equals to designate one currently used. This means that a breach should have decent range of adverse effects on individuals, which include emotionaldistress, and physical and material damage. JAny certificate certificate of valuation sentence or week of condemnation or. How most Fraud Punished Fraud that The UK? When wait is suspected Checking a borrower's income or income source will reduce risk in certain circumstances such as screening for. The penalties for you can be mortgage fraud penalties uk. It if important crown you accord the hashing algorithms you shower, as direction time care can locate outdated. Why a penalty. Do get started on codes tocomply with privacy notice expires when cse code general guide that your crimes are allowed to mortgage fraud penalties uk company. Do I seek consent decree let while certain get a civil-to-let mortgage. One study places the losses resulting from there on mortgage loans. Once an investigation results in a decision to interact and a company call an individual is charged with supreme offence we shoulder the alien name and.
    [Show full text]
  • Public Safety Strategies for Addressing Mortgage Fraud and the Foreclosure Crisis Author About This Report Acknowledgements
    Best Practices Public Safety Strategies for Addressing Mortgage Fraud and the Foreclosure Crisis author about this report acknowledgements Robert V. Wolf This report was supported by the Bureau of A number of people provided essential assistance. Director of Communications Justice Assistance under grant number Foremost among them are the participants in the two Center for Court Innovation 2009-DC-BX-K018 awarded to the Center days of conversations on foreclosure, vacant proper- for Court Innovation. The Bureau of Justice ties, and mortgage fraud organized by the Bureau of May 2010 Assistance is a component of the U.S. Justice Assistance. The participants not only shared Department of Justice’s Office of Justice their good ideas but provided feedback on early drafts. Programs, which also includes the Bureau Also crucial to the development of this report are of Justice Statistics, the National Institute of James H. Burch II, Pamela Cammarata, Ben Gorban, Justice, the Office of Juvenile Justice and Preeti Puri Menon, Kim Norris, Cornelia Sorensen Delinquency Prevention, and the Office for Sigworth, and Paul Steiner of the Bureau of Justice Victims of Crime. Points of view or opinions Assistance; Greg Berman, Julius Lang, and in this document do not represent the offi- Christopher Watler of the Center for Court cial positions or policies of the U.S. Innovation; and Caroline Cooper and Tenzing Lahdon Department of Justice. of American University. A FULL RESPONSE TO AN EMPTY HOUSE| 1 A FULL RESPONSE TO AN EMPTY HOUSE: PUBLIC SAFETY STRATEGIES
    [Show full text]
  • The Concept and Federal Crime of Mortgage Fraud
    THE CONCEPT AND FEDERAL CRIME OF MORTGAGE FRAUD Matthew A. Edwards* ABSTRACT The impact of mortgage fraud on the United States ®nancial and economic sys- tem during the past twenty years has been severe and enduring. Nothing illus- trates this fact better than the 2007±2008 ®nancial crisis. Scholars and policymakers are convinced that the explosion in so-called liar's loans, which were securitized and sold to investors, played a key role in either causing or ex- acerbating the housing bubble and ®nancial meltdown that led to the Great Recession. Unfortunately, efforts to understand and address the problem of mortgage fraud are undermined by fundamental confusion regarding the nature of mort- gage fraud as a federal criminal offense. Some of this confusion is due to the fact that there is no single federal mortgage fraud statute. Thus, almost every legal actor relies on the FBI's de®nition of mortgage fraud. Surprisingly, however, the in¯uential FBI de®nition is plainly inconsistent in key respects with elements of the federal criminal statutes most often used to punish mortgage fraud. We should be concerned that the FBI, which investigates mortgage fraud, cannot get the basic de®nition of the crime of mortgage fraud rightÐand that scholars and commentators uncritically accept and use that problematic de®nition. This Article provides scholars and lawmakers with an understanding of the meaning of mortgage fraud as a federal crime. In particular, it makes three prac- tical contributions to public policy discourse regarding mortgage fraud. First, this Article distinguishes mortgage origination fraud from securities fraud involving mortgage-backed securities and other ®nancial crimes related to the housing market.
    [Show full text]
  • The Causes of Fraud in Financial Crises: Evidence from the Mortgage-Backed Securities Industry
    IRLE IRLE WORKING PAPER #122-15 October 2015 The Causes of Fraud in Financial Crises: Evidence from the Mortgage-Backed Securities Industry Neil Fligstein and Alexander Roehrkasse Cite as: Neil Fligstein and Alexander Roehrkasse (2015). “The Causes of Fraud in Financial Crises: Evidence from the Mortgage-Backed Securities Industry”. IRLE Working Paper No. 122-15. http://irle.berkeley.edu/workingpapers/122-15.pdf irle.berkeley.edu/workingpapers FRAUD IN FINANCIAL CRISES The Causes of Fraud in Financial Crises: Evidence from the Mortgage-Backed Securities Industry* Neil Fligstein Alexander Roehrkasse University of California–Berkeley Key words: white-collar crime; finance; organizations; markets. * Corresponding author: Neil Fligstein, Department of Sociology, 410 Barrows Hall, University of California– Berkeley, Berkeley, CA, 94720-1980. Email: [email protected]. We thank Ogi Radic for excellent research assistance, and Diane Vaughan, Cornelia Woll, and participants of conferences and workshops at Yale Law School, Sciences Po, the German Historical Society, and the University of California–Berkeley for helpful comments. Roehrkasse acknowledges support by the National Science Foundation Graduate Research Fellowship under Grant No. DGE 1106400. All remaining errors are our own. FRAUD IN FINANCIAL CRISES ABSTRACT The financial crisis of 2007-2009 was marked by widespread fraud in the mortgage securitization industry. Most of the largest mortgage originators and mortgage-backed securities issuers and underwriters have been implicated in regulatory settlements, and many have paid multibillion-dollar penalties. This paper seeks to explain why this behavior became so pervasive. We evaluate predominant theories of white-collar crime, finding that those emphasizing deregulation or technical opacity identify only necessary, not sufficient conditions.
    [Show full text]
  • Florida Real Estate Guide
    FLORIDA REAL ESTATE GUIDE Sales Associate Pre-License Text Book Approved by the Florida Real Estate Commission ©2008-2017 Copyright by David Collins All rights reserved PREFACE Florida is growing faster than any state in the country, and the real estate industry is a major participant in that growth. A real estate career in Florida can be very rewarding. Whether you are acting as an agent for others or are acting on your own behalf, the more you know about the real estate business, the better your chances are for success. This book is based on the most current FREC Course I syllabus published by the Florida Real Estate Commission for sales associate's pre-licensing education. In addition, the author of this book practices real estate on a full-time basis and therefore brings a unique insight to understanding the practical application of real estate brokerage. The author would like to take this opportunity to thank a number of individuals who were instrumental to the success of this book. Many thanks to the late James Mitchell, Esq., former Assistant State Attorney General assigned to counsel the Florida Real Estate Commission and the Foundation Advisory Commission, for providing invaluable insight and understanding to a complicated business. A Big thanks must also go to Mary Gerlach for her professional review and editing efforts of the text and to Philip Armour for the design of the cover. Additionally, many thanks to the thousands of students who gave their input enabling the author to produce what he believes are an exceptional publication. Finally, the author wishes to express his sincerest hopes for your success in the real estate business.
    [Show full text]