I see this question asked over and over on housing blogs but most of the answers are so complex and technical that you would need to be a mortgage broker or an accountant to understand the explanation.
Well today as I was reading Miami condo investments a reader named Generalagic left one of the best, easy to understand, examples of how mortgage fraud which he witnessed as a realtor in Miami actually occured.
Just wanted to share this great post with you all;
Generalagic // Mar 21, 2008 at 8:01 pm
Hi Everyone,
As a realtor in South Beach, I know first hand of all the fraud that went on. I unfortunately had to witness it because no one listened to me in the buildings where I work and because both local and Federal authorities turned a blind eye. I saw so many transactions go on where properties were listed on MLS let’s say at $550K. The fraud buyer would pay full price and would tell the seller he is going to get it appraised at let’s say $800K. Seller agrees because all they want to do is sell the apartment and get out. Now the buyer get 100% financing at $800K, gives seller $550K and the fraud buyer just walked away with $250K. In addition, the realtor representing each side made out, even though they knew what was going on.
Now the fraud buyer sticks a tenant in the unit at a discount price. So now the fraud buyer stops paying his mortgage and maintenance on the building while collecting rent and pocketing the profit on the spread. This went on over and over and over in so many building everywhere.
What frustrates me more than anything is that Federal authorities and local either said it was not there jurisdiction and never did anything. I have a lot of evidence yet no one has done anything.
The Mugshot on the left is the 25 year old "CEO" of lifetime financial.
The FBI broke up a Mortgage fraud ring this week which is perhaps one of the most blatant and idiotic commisions of a crime I have ever witnessed, but we are talking mortgage brokers here so what else would you expect.
These mortgage brokers are thief's, in the most literal sense of the word. They would cold call you asking you to refinance at a low 30 year fixed interest rate. If you showed any interest at all, even if you declined their offer after realizing it was a subprime ripoff, they would simply forge your signature on the documents and close your loan anyway.
40 year fixed, 9.5% kind of loans!
The mistake made that led to their arrests included spelling names wrong on the forged signatures they had made. How did these people think they would not be caught!
What tops it off is how the 25 CEO already had 6 million worth of properties, a Ferrari and a Bentley. This article is almost beyond belief so I am posting the whole LA TIMES article below as written, Enjoy!
State and local prosecutors said Tuesday that they had shut down a mortgage fraud ring that allegedly victimized thousands of seniors and others, some of whom lost their homes.
The San Bernardino County district attorney's office arrested five people and were waiting for two more to surrender to face charges of conspiracy, grand theft and elder abuse as part of a crackdown on alleged sub-prime mortgage lending scams with the California Department of Justice.
A related lawsuit filed in Los Angeles County Superior Court accuses six companies of using predatory lending practices to trap homeowners in illegal and expensive loans.
"As the mortgage crisis worsens, a growing number of fly-by-night companies are employing utterly brazen tactics to push homeowners into illegal and unconscionable loans," California Atty. Gen. Jerry Brown said. "The illegal sales practices of these companies . . . included psychological pressure, forgery and outright lies."
The companies used bait-and-switch tactics to take advantage of thousands of consumers, Brown said. On Monday, he received a court order freezing the firms' bank accounts and forbidding them from engaging in predatory lending practices.
The six companies -- Lifetime Financial Inc., Nations Mortgage Inc., Greenleaf Lending Inc., Virtual Escrow Inc., Olympic Escrow and Direct Credit Solutions Inc. -- were operated by Eric Michael Pony, 25, of Tarzana and family members, the lawsuit said.
In a coordinated action, San Bernardino Dist. Atty. Michael A. Ramos announced that Pony, a former real estate salesman, was expected to turn himself in to authorities Tuesday. Pony gave up his state license in September after an investigation by regulators. If convicted, Pony could face 24 years in prison, Ramos said.
Also expected to surrender was his sister, Paulette Pony, 23, of Tarzana, a notary public for Lifetime Financial. The California secretary of state's office lifted her license in December in connection with felony conspiracy charges and for failing to disclose a forgery conviction.
Five other company employees were arrested and hit with criminal charges. Most were held in lieu of $2 million bail.
At a news conference Tuesday in San Bernardino, Ramos said he believed the Pony siblings to be the ringleaders of the operation, describing them as "the worst of the worst" among predatory lending abusers.
Ramos said his office had investigated the operation for nine months and accelerated its action because several of the alleged victims were elderly.
He said the siblings and their colleagues -- including Eric's mother, Wilma Pony -- aggressively targeted victims through telemarketing scams. Wilma Pony, listed as chief executive of Nations Mortgage and Direct Credit Solutions, wasn't charged.
Among the people the group "picked on," Ramos said, were sub-prime borrowers and non-English speakers.
Brown's statement described the plight of 75-year-old Luis Garcia, among 14 San Bernardino County residents hurt by the alleged fraud. Garcia agreed to a 50-year loan with $1,000-a-month payments but instead was hit with a monthly bill of $2,254. Garcia later found that Lifetime Financial had falsified his income and work history. He couldn't afford the payments and lost his house.
Also named as victims were Tracylyn and Ronald Sharrit of San Bernardino, who said they were contacted in June 2006 by a Lifetime Financial representative who offered to refinance the couple's loan.
A month later, Eric Pony came to their home with loan papers, which contained terms different from the ones they had originally been offered, Tracylyn said in an interview Tuesday.
"He pulled up and he had a nice car, a nice suit and talked like he knew his business," she said.
Still, the couple declined to sign the papers. They later discovered their loan had been refinanced anyway -- using forged documents with signatures that weren't theirs and that misspelled their last name.
"We feel financially raped," said Tracylyn, 40. "Why did this happen to us?"
A statement issued by Brown accused Lifetime Financial, Nations Mortgage and Greenleaf Lending of promising borrowers unrealistically low interest rates of less than 6% a year and then having them sign contracts that carried higher rates. Lifetime Financial charged hidden loan fees of as much as $20,000 per transaction, the statement said.
Brown said he was seeking penalties and restitution of more than $20 million and had already identified a number of bank accounts and properties for possible seizure.
The criminal and civil actions against the Pony family members and associates and their companies are believed to be the most ambitious by law enforcement since California's once-booming housing industry was hit last year by a crippling downturn that made it difficult for tens of thousands of borrowers to pay soaring sub-prime mortgages with adjustable interest rates. Brown said it was only the first of several legal actions planned to fight mortgage fraud.
The move, though limited, was welcome and would help "to rid the marketplace of the most egregious illegal practices," said Paul Leonard, director of the California office of the Center for Responsible Lending, a consumer advocacy organization. "But the illegal practices are only the tip of the iceberg. The vast proportion of the problems in the sub-prime market were caused by perfectly legal but systematic failures."
The investigation of the Pony companies also involved the Los Angeles Department of Consumer Affairs, the California Department of Real Estate and the state Department of Motor Vehicles.
I just wanted to apologize for the long delay between posts. I have been working two jobs, and going to college taking some hard courses so I have just not had the energy to post lately. I will try and post more articles soon and update the site more often.
With gas prices soaring to record highs, life savings being eroded away by inflation, and the housing market in complete disarray many people are starting to wake up to the fact that something is seriously wrong with this country.
It becomes very apparent when one does a little research that the government is working for their banker buddies on Wall Street and the special interest who take them out to lobster dinners rather then for the American people who they should be truly taking care of.
As the economy tumbles more and more rapidly towards economic collapse, many wonder who they can turn to to get the truth about why this is really happening. The Mainstream media has become a laughable joke of government propaganda that only tells one side of the story. Additionally the media rigs the outcome of political elections based on their biased and unbalanced airtime for certain candidates while unleashing a constant barrage of underhanded "POLLS" and polling data under the guise of reporting the will of the voters, when it is in fact these very polls that determine the outcome of elections because most people are swayed by them and will only vote for one of the top two candidates thus becoming a self fulfilling prophecy.
At the same time, most Americans are completely clueless because entertainment has become the opiate of the 21st century the same way religion was the opiate in Marx's time. American Idol, Playstation III, Wii, 24 hour sports, and free credit cards to anyone with a pulse keep even the poorest and most exploited Americans passive and content with their lives.
If you have come to this website and are reading this article, you have woken up to that fact that things are not as they appear and you have taken the first step to realizing the truth of what this country has become.
So who can you trust and who is an enemy to the constitution?
Say what you want about Ron Paul, but this is a man who loves America and the principles it is founded on more than any other man alive today. He fights for you in congress every day and stands up to the power, and evil that has taken control of our country. Ron Paul is the champion of the constitution and we need a few more congressmen exactly like him.
2 years ago this man was on TV predicting everything that happened in the past year and he was laughed at and ridiculed by the "experts" and "analyst" well... Everything he predicted has come true and he has made everyone else look like a fool. Peter Schiff is the God of economics and if you need to know where to put your money, read what he has to say and you will not go wrong.
I was watching his show last week and he was talking about the outsourcing of an air force contract that went to a French company and cost Americans thousands of jobs. Watch the emotion he shows when discussing the loss of American jobs and tell me it doesn’t move you a little bit.
I did not like the way this guy treated Ron Paul, but he does see what’s going on and wrote a book called “An Inconvenient truth” which brings to light many of the things I have been talking about on this blog since last fall.
But we give it to you anyway. Miami Condo Investments, Housing Panic, Housing Doom, and all the rest give you the real information and let you make your own decisions.
Bernanke and the fed will continue to destroy the dollar and cause inflation to skyrocket in a futile attempt to keep undeserving irresponsible people in houses they don't deserve and to bail out the bankers on wall street at the expense of your standard of living.
War makes a lot of money, and these guys make money building the bombs and planes that are being used in no win police actions like Iraq. The have donated a ton of money to Hillary and McCain and they want the war to go on forever so their profits keep rising at the expense of tax payers.
The disconnect between Wall Street and Main Street is staggering. While regular Americans on Main street are having a hard time putting gasoline in their car and buying food, the multi-million a year hedge fund managers are living a lifestyle most people only dream of and feel absolutely no hint of recession as the stock market soars to new highs (due to the crashing dollar) which devastates the standard of living of main street.
