Blog Pimpin Ain't Easy
Posted on 09/29/2006 1:10:22 PM PDT by ex-Texan
It seems like every month, I'm running into people passing out a slick new business card that announces them as a real estate agent or mortgage broker.
Who wouldn't want to get a piece of the action? On certain Portland streets, housing prices are doubling in a matter of months. And when there's this kind of temptation to make quick money, greed can't be far behind.
Insiders call it land flipping. Silent second. Straw buyers. Foreclosure fraud. Equity skimming. Air loans. If there's a thought to do it, there's a scheme attached to it.
"It's the fastest-growing white collar crime in the country," says California attorney Rachel Dollar, whose Web site, www.mortgagefraudblog.com, helps lenders across the country learn about who's doing what to whom. "There's 101,000 schemes. They come up with new ones all the time."
In July, one of Oregon's most prolific con men, Clifford Brigham -- also known as C.J. and Cleveland -- and Melodie MacDuffee were indicted on charges that they allegedly defrauded lenders out of $5 million between October 2004 and August 2005. At the time, Brigham was on release from federal prison pending appeal of his 2003 conviction for another scheme.
So, Portland's latest mortgage fraud allegations -- which involve three folks who are well-known in real-estate circles for being financially successful in their craft -- are not the most egregious.
Last week, Leanne Booth, 48, a real-estate loan broker; Troy Martin, 40, a real estate sales agent; and Ryan Bonneau, 30, a former mortgage loan originator, were indicted on money laundering and wire fraud charges. They are accused of selling two Marine Drive homes at inflated prices so they could pocket the profits. Between the three of them, they couldn't have cleared much more than $250,000.
What raised FBI suspicion is that Bonneau is a convicted felon who served time in federal prison for a 2003 land-flipping scheme that cost banks about $1 million. That crime, which involved six others, is highlighted in the FBI's 2003 report on bank fraud. Bonneau was 27 at the time.
"You'd be surprised," Dollar says, "at how young some of them are."
Prosecutors believe Bonneau persuaded Booth, of Home Mortgage Corp., and Martin, who sells homes for D'Ambrosio & Associates in Clackamas, to sell him the two properties.
One house, at 13515 N.E. Marine Drive, was co-owned by Booth and Martin. It sold at about $100,000 more than its $350,000 market value. The other, next door at 13531 N.E. Marine Drive, was owned by Martin and another person. It sold for $50,000 more than its $350,000 value.
Bonneau, who is expected to be officially charged at 1:30 p.m. today, allegedly received $86,000 for the first sale, $30,000 on the second. Both checks, the indictment says, were directed to a credit union account opened by Bonneau's relatives so he could allegedly hide money from his probation officer.
Bonneau has been back behind bars for three months and couldn't be contacted for comment. Booth said, "Nope, no thank you," before abruptly hanging up the phone Monday.
Martin says he was flabbergasted. "I've never been in this position in my life," he said, before referring me to his attorney, Bob Weaver, who said his client would plead not guilty when Booth and Martin are officially charged Oct. 3.
Whether the three are guilty or not, the biggest loser is the Indianapolis bank that loaned the money. And once the real-estate market bottoms out, the dominoes of loan defaults that will likely result will reveal even more mortgage fraud cases, says Lance Caldwell, one of Portland's assistant U.S. district attorneys.
"It reminds me," Caldwell says, "of the savings and loan crisis."
Indeed, all indications predict that it's a matter of when, not if, this country will once again witness the fall of the house that greed built.
Indeed, all indications predict that it's a matter of when, not if, this country will once again witness the fall of the house that greed built.
Mortgage fraud is just the tip of the iceberg. Organized crime has infected the mortgage industry. Billions are being laundered through loans on inflated real estate. [Learn More?]"Nothing to see here. Lock your doors and windows. Time to move on."
Wow kind of like approving loans for developments for people you know wont be able to pay for it.
WhiteWater anyone?
I'm short on knowledge about real-estate and the mortgage industry. Could somebody please break down what these guys were doing and what about it was illegal?
This is going to be big once the fit hits the shan!
But wait....I thought the bubble had burst!
Blog Pimpin Ain't Easy
The GSE problems are orders of magnitude larger than the S&L bailout.
When you lie and the mortgage broker knows you lied to get that load it is fraud and a crime.
The seller gets more money, the buyer, who often has no intention of repaying the loan, may get a little kickback from the seller (thus, the 2 accounts opened by a relative of the buyer). Once the buyer stops paying on the loan and hits the escape clause (fleeing or the use of falsely filed paperwork), the bank is out the money and can only recover the true value of the house.
I'm getting lots of flack by the naysayers today. Just like a B-17 flying over Nazi Germany. The corrupt Axis of Evil: Organized crime, mortgage brokers and realtors.
One way I have heard is for the appraiser to over value the house for the dubious buyer, then when the seller sells it, he kicks back some dough to the appraiser.
This doesn't make sense. What is illegal about asking for more than a house is worth?
Defrauded lenders? Isn't that like out conning a con man? When banks pay 1% on savings accounts and lend money out at 20 to 30% I'd say there is quite a con game going on.
I don't understand how this could have happened. Who loaned the money to the buyer to pay prices way above market value? Why didn't the lender get an appraisal of the properties from a reputable appraiser before making these loans? This would never happen with any reputable lender who's running a professionally managed mortgage loan business.
> how does one illegally sell a house for $100,000 over it's $350,000 worth?
Roughly, it's all about getting the loan with no intention of re-paying. In that scenario, the bigger the loan, the better.
That's why lenders must hire reputable appraisers from appraisal firms that have been in business for many years with a good reputation. Most big lenders only hire good appraisal firms because appraisals are a critical step in making good loans.
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