Mortgage Fraud On The Rise In Missouri

While over the past few years we have seen a strong real estate market and easing mortgage loan guidelines, which is all good, unfortunately, mortgage fraud has been on the rise, according to a report just released by CoreLogic.  According to their 2018 Mortgage Fraud Report, the CoreLogic® National Mortgage Application Fraud Risk Index was 151 for the fourth quarter of 2018, up 10% from a year ago when the index was 138.

According to the report, Missouri was one of the top five states for increases in fraud risk for each of the past two years, moving from number 38 in the 2nd quarter of 2016 up to 15 for the 4th quarter of 2018.  The top risk factor behind Missouri’s increased mortgage fraud risk was income fraud.

Fraud Type Indicators for States with Highest Year-Over-Year Risk Growth

Fraud Type Indicators for States with Highest Year-Over-Year Risk Growth

source: CoreLogic

Mortgage Fraud Risk Report Shows Missouri In Top Five Increased Risk States

CoreLogic just released it’s 2017 Mortgage Fraud Report in which Missouri made the list of the five states with the highest year-over-year risk growth for mortgage fraud.  The two types of fraud Missouri made the list on were Transaction fraud risk and Undisclosed Real Estate Debt fraud risk.

Below are some national highlights from the report (all figures are based upon 2nd quarter 2017 compared with 2nd quarter 2016):

  • Occupancy Fraud Risk increased nationally 7%
  • Transaction Fraud Risk increased 3.9%
  • Income Fraud Risk increased 3.5%
  • Property Fraud Risk decreased 1.9%
  • Undisclosed Real Estate Debt Fraud Risk decreased 2.7%
  • Identity Fraud Risk decreased 7.3%.

 

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FBI Advice on How to Avoid Being a Victim of Loan Modication and Mortgage Fraud

st-louis-realtor-As a result of the Distressed Homeowner Initiative (begun one year ago) which targets companies that defraud distressed homeowners, over 200 companies have been shut down, according to the FBI. As a result, criminal charges have been filed against 530 defendants. The numbers involved in these cases are staggering; losses of more than $1 billion from over 73,000 victims in the U.S.

How do you protect yourself from being a victim of Loan Modification Fraud, Mortgage Fraud or a  foreclosure rescue scam?   The FBI offers the following tips: Continue reading “FBI Advice on How to Avoid Being a Victim of Loan Modication and Mortgage Fraud

How to protect yourself from mortgage fraud

dennis-norman-st-louis-realtorThe collapse of the real estate market, along with a down economy has created a fertile environment for fraudsters to attempt to advantage of the many desperate homeowners that are out there. Their methods vary from foreclosure “rescue” schemes, mortgage assistance scams and other scams that generally offer to lower your payments or debt, prevent foreclosure, etc. Below is a list of tips the Department of Justice published this week to help consumers prevent themselves from becoming a victim of fraudsters. Continue reading “How to protect yourself from mortgage fraud

FBI Report Shows Mortgage Fraud Continues at Elevated Levels

Dennis Norman St Louis RealtorThe FBI released it’s Mortgage Fraud Report for 2010 showing that mortgage fraud continued at elevated levels in 2010 and was consistent with levels seen in 2009. The top states for mortgage fraud activity in 2010 were Florida, California, Arizona, Nevada, Illinois, Michigan, New York, Georgia, New Jersey, and Maryland. Continue reading “FBI Report Shows Mortgage Fraud Continues at Elevated Levels

Real Estate Agent, Loan Officer Among Five Defendants to Plead Guilty to $11 Million Mortgage Fraud

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced that a former real estate agent and a former loan officer are among five co-defendants who have pleaded guilty in federal court to their roles in an $11 million mortgage fraud scheme that involved upscale homes in Lee’s Summit, Blue Springs, Liberty, Parkville, and elsewhere. Continue reading “Real Estate Agent, Loan Officer Among Five Defendants to Plead Guilty to $11 Million Mortgage Fraud

Mortgage Fraud Index Falls to Lowest Level in almost 3 Years

Dennis Norman St LouisThe Mortgage Fraud Index from MortgageDaily.com has fallen 69 percent over the past year to the lowest level since early 2008. For the fourth quarter of 2010 the Mortgage Fraud Index was 814, which is down from 2634 the year before and is the lowest level the index has been at since the first quarter of 2008 when it was 713. Continue reading “Mortgage Fraud Index Falls to Lowest Level in almost 3 Years

Brookwood Man Faces 34-Count Federal Indictment in Mortgage Fraud Scheme

A federal grand jury indicted a Brookwood man yesterday on wire fraud and false statement charges related to a more than $1 million mortgage fraud scheme in the Birmingham area, announced U.S. Attorney Joyce White Vance.

A 34-count indictment filed in U.S. District Court charges SCOTT ERIC PERRY, 34, with 17 counts of wire fraud and 17 counts of making false statements to lending institutions in connection to real estate transactions between February and December, 2006. Continue reading “Brookwood Man Faces 34-Count Federal Indictment in Mortgage Fraud Scheme

Mortgage Fraud Case Activity Drops

Dennis Norman St LouisAfter surging in the second quarter, mortgage fraud case activity sank in the third quarter based on the Third Quarter 2010 Mortgage Fraud Index from Mortgage Daily. The Mortgage Fraud Index came in at 1007 during the third quarter – falling 41 percent from the second quarter. The index hasn’t been this low since the first quarter 2008, when it was just 713.

Continue reading “Mortgage Fraud Case Activity Drops

Four Tips for Avoiding Mortgage Fraud

Dennis Norman

The CEO of Freddie Mac, Ed Haldeman, published a blog post this week which said reports of mortgage fraud were on the rise; there were nearly 38,000 cases of mortgage in the first half of 2010 – a 13 percent increase over the same period in 2009.

 

Haldeman says that the fraudsters prey on the vulnerability of struggling borrowers by offering a quick fix to a homeowner who is under water and desperate.  A common ploy for a scammer is to promise a struggling homeowner mortgage relief of modification of their loan.  Continue reading “Four Tips for Avoiding Mortgage Fraud

Attorney Charged in Property Mortgage Scam

A Massachusetts attorney, Michael R. Anderson, 41, of Framingham, was charged last week in federal court with wire fraud, bank fraud, and money laundering in connection with a multi-year, multi-property mortgage fraud scheme in Dorchester and Roxbury. United States Attorney Carmen M. Ortiz; Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; and William P. Offord, Special Agent in Charge of Internal Revenue Service, Criminal Investigation – Boston Field Division, announced today that the defendant was charged in an Information with 16 counts of wire fraud, nine counts of bank fraud, and two counts of money laundering. Continue reading “Attorney Charged in Property Mortgage Scam

St. Louis Ranked 27th in 2009 For Mortgage Fraud Reports

 

Dennis Norman

The Financial Crimes Enforcement Network (FinCen), a bureau of the U.S. Department of the Treasury, released their 2009 Mortgage Loan Fraud (MLF) study which found the number of mortgage fraud suspicious activity reports (SAR’s) filed in 2009 grew 4 percent compared to 2008. Continue reading “St. Louis Ranked 27th in 2009 For Mortgage Fraud Reports

Mortgage Fraud Trend Down; Still $14 Billion in 2009 Losses

Dennis Norman

Missouri one of 32 States Identified as “Low” risk of mortgage fraud

According to the 2010 Mortgage Fraud Trends Report released by CoreLogic this week, fraud risk in the mortgage industry has declined by 25 percent since it peaked in the third quarter of 2007. Even though the trend is down it is still estimated that there were $14 billion in fraud losses experienced in 2009 alone.

CoreLogics’ fraud index can drill down to show states, cities and even streets that have the highest mortgage fraud risk. Highlights of the report:

  • Overall mortgage fraud risk has been steadily decreasing since 2006 and appears to have leveled off in 2009
  • Short sale volume from first quarter of 2008 through fourth quarter of 2009 increased by more than 300 percent
    • Nearly one in every 200 short sales were deemed “very suspicious” by lenders meaning the property was resold less than 60 days after the short sale and the sale price was more than 20 percent higher than the short sale price.
  • The most common type of mortgage fraud (31 percent) is related to the borrower’s income.
  • States with the highest mortgage fraud risk are Florida, South Carolina, North Carolina, California and Georgia.
  • The highest risk zip codes are Jamaica, N.Y., Orlando, FL, Miami, FL, Atlanta, GA and Detroit, Mich.
  • The top scoring street for mortgage fraud is in Orlando. In fact, 5 of the top 10 ten streets with the highest risk of mortgage fraud in the report were in Orlando. Other cities with streets in the top 10 were Prior Lake, MN, Chicago, IL, Oakland, CA, Atlanta, GA and Urbana, IL.

How about that? They can even identify the “risky street”. In the case of the street in Orlando the report didn’t give a name but did say there were 28 loans on the street from 2007 to 2008, the same company was the seller in most cases and the properties are now selling for about 10 percent of what they originally “sold” for.

Mortgage Fraud Sweep Results in Almost 500 Arrests

Dennis Norman

According to a press release issued by the FBI, nearly 500 people have been arrested in a nationwide mortgage fraud take-down as part of “Operation Stolen Dreams.” This operation was launched on March 1, 2010 and, according to the FBI, has lead to a total of 485 arrests, 330 convictions and the recovery of nearly $11 million. The FBI estimates that losses from a variety of fraud schemes are estimated to exceed $2 billion.

Operation Stolen Dreams is the government’s largest mortgage fraud take-down to date. But FBI Director Robert S. Mueller cautioned that there is still much work to be done. The Bureau is currently pursuing more than 3,000 mortgage fraud cases, he said, which is almost double the number from the last fiscal year.

mortgage-fraud-short-sale-scam-illustration“The staggering totals from this sweep highlight the mortgage fraud trends we are seeing around the country,” Attorney General Holder said. “We have seen mortgage fraud take on all shapes and sizes—from schemes that ensnared the elderly to fraudsters who targeted immigrant communities.”

A few examples:

  • In Miami, on Wednesday two people were arrested for targeting the Haitian-American community, claiming they would assist them with immigration and housing issues. Instead, they used victims’ personal information to produce false documents to obtain mortgage loans.
  • In California, a prominent home builder used straw buyers to sell his houses at inflated prices. The scheme inflated prices on other homes in the area, creating artificially high comparable sales and affecting the overall new-home market.
  • And in Detroit yesterday, FBI agents arrested several individuals in a $130 million scheme orchestrated by the local chapter of a motorcycle gang. The conspirators posed as mortgage brokers, appraisers, real estate agents, and title agents and used straw buyers to obtain around 500 mortgages on only 180 properties.

The FBI says to combat the problem, their National Mortgage Fraud Task Force helps identify mortgage frauds such as loan origination schemes, short sales, property flipping, and equity skimming. In addition, they have 23 mortgage fraud task forces in “hot spots” around the country, from California and Texas to Florida and New York.

Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases, but also on civil enforcement and restitution for victims. Federal agencies participating included the Department of Housing and Urban Development, the Treasury Department, the Federal Trade Commission, the Internal Revenue Service, the U.S. Postal Inspection Service, and the U.S. Secret Service. Many state and local agencies were also involved in the operation.

The FBI has produced a video for consumers to help make you aware of the scams that are out there and show you how to avoid them.  To watch the video click the link below:

FBI Video on Common Mortgage Fraud Scams

Former Mortgage Broker, California Woman Plead Guilty to Mortgage Fraud

Beth Phillips, United States Attorney for the Western District of Missouri, announced today that two more defendants have pleaded guilty in federal court to charges related to mortgage fraud schemes, including a $12.6 million conspiracy that involved 25 upscale residential properties in Lee’s Summit, Missouri and Raymore, Missouri and a property-flipping scheme in Kansas City, Missouri.

Cynthia D. Jordan, 43, of Lee’s Summit, pleaded guilty before U.S. District Judge Howard F. Sachs on Friday, May 21, 2010, to mail fraud and wire fraud. Jordan, who was a mortgage loan broker for various mortgage brokers in the Kansas City area, admitted that she participated in a property flipping scheme. Anahit Nshanian, 30, of Long Beach, California, pleaded guilty before U.S. Magistrate Judge John T. Maughmer on Thursday, May 20, 2010, to her role in the $12.6 million conspiracy.

Jordan and Nshanian are among 18 defendants, all of whom have now pleaded guilty.

Jordan admitted that she was involved in a scheme to flip properties — buying residential properties that could immediately be sold in flip transactions for substantially more than the purchase price, without improvements to the properties. Jordan obtained mortgage loans to purchase the properties by submitting fraudulent documentation and making false representations. Jordan falsely represented that she would occupy the homes as her primary residence. As a result of the scheme, Jordan obtained money from the loan proceeds and directed loan proceeds be paid to others under the guise of false invoices and other false documents.

As part of the scheme, Jordan purchased a Kansas City property for $355,000. At the time she entered the contract, she and co-conspirators planned to sell the property before a mortgage payment was due so that she did not have to make a loan payment. Jordan signed a contract to sell the property for $555,000 five days later, for which she received $17,500. Two co-conspirators, as a result of submitting fraudulent invoices, received a total of $172,974.

Jordan also purchased another Kansas City property for $537,000 that she agreed to sell within six days of her purchase for $775,000. Jordan received $17,173 and two co-conspirators, as a result of submitting fraudulent invoices, received a total of $193,000.

Under the terms of today’s plea agreement, the government and Jordan agree that the sentence imposed should not exceed nine years in federal prison without parole. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.

Nshanian admitted that she was involved in a scheme to buy and sell new homes — all of which were built by Jerry R. Emerick, 40, of Raymore — in the Raintree and Belmont Farms subdivisions in Lee’s Summit and the Eagle Glen subdivision in Raymore from February 2005 through May 2007. Buyers purchased the homes at inflated prices, obtaining mortgage loans for more than the actual sale price by providing false information to mortgage lenders, then kept the extra proceeds. Buyers created shell companies for the purpose of receiving those kickbacks from Emerick, with kickbacks of up to $125,000 on each house. Emerick pleaded guilty to his role in the conspiracy and awaits sentencing.

In total during the course of the conspiracy, mortgage lenders approved loans for 25 homes totaling more than $12.6 million. From that total, buyers received approximately $2.3 million without the lenders’ knowledge. Nshanian received approximately $148,614 in kickbacks.

Nshanian purchased two properties in Lee’s Summit as part of the conspiracy. In obtaining mortgage loans, Nshanian made material misrepresentations upon which the lenders relied. Nshanian also admitted that she received money back unbeknownst to the lenders.

Nshanian received a $510,000 loan for one property; after closing, she received an $89,307 kickback, of which co-defendant Jerome Shade Howard, 41, of Anaheim, Calif., received $20,693. Nshanian received a $657,500 loan for another property; after closing, she received a $80,000 kickback and Howard received $25,000.

Under federal statutes, Nshanian is subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000 and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.

This case is being prosecuted by Assistant U.S. Attorneys Linda Parker Marshall and Kathleen D. Mahoney. It was investigated by the Federal Bureau of Investigation and IRS-Criminal Investigation.

Six Charged with Wire Fraud Based on $20 Million Mortgage Fraud Scheme

A 10-count indictment has been unsealed charging six individuals with conspiracy to commit wire fraud and wire fraud, announced U.S. Attorney Karen P. Hewitt. The defendants are charged with submitting false and fraudulent mortgage loan applications and related documents to banks and other lending institutions, thereby inducing the institutions to make approximately 36 loans totaling approximately $20,800,000.

The defendants charged with participating in the conspiracy are: Brian Andrew La Porte; Daniel John Schuetz; Michael Wayne Wickware; Roxanne Yvette Hempstead; Darryl Anthony Wallace, aka Darryl Anthony White; and Terrence Smith, aka Terry Lee Smith. The indictment alleges that the defendants devised a scheme to defraud mortgage lenders and to obtain money and property by false and fraudulent means and diverted the proceeds for their personal use and benefit.

According to the indictment, from May 2008, the defendants agreed to submit false loan applications to mortgage lenders to obtain financing to purchase residential properties. The defendants recruited “straw buyers” who had sound credit histories but who otherwise would not have qualified to purchase the residential properties selected by the defendants. The indictment further alleges that, as part of the conspiracy, Brian Andrew La Porte and Daniel John Schuetz prepared fraudulent loan applications on behalf of the straw purchasers, falsely stating the employment and monthly salaries of the straw purchasers.

The indictment further alleges that the defendants submitted fraudulent loan applications on behalf of the straw purchasers to mortgage lenders, including OwnIt Mortgage Solutions Inc., WMC Mortgage Corp., Argent Mortgage Company, Countrywide Home Loans, First Franklin, Finance America LLC, and other mortgage lenders. The defendants then caused escrow agents to disburse the funds to the defendants and others so that the defendants could divert to themselves and others the proceeds of the fraud.

President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who working together to launch a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. The Special Inspector General for the Troubled Asset Relief Program co-chairs the task force’s Rescue Fraud Working Group.

The case is the product of an investigation by agents of the FBI and is being prosecuted in San Diego federal court by Assistant U.S. Attorney Jonathan I. Shapiro.

An indictment itself is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the government meets its burden in court of proving guilt beyond a reasonable doubt.

Ponzi Scheme and Mortgage Fraud Mastermind Sentenced to 15 Years, Eight Months

The founder and head of Chicago Development and Planning was sentenced yesterday to 15 years and eight months in prison, and ordered to pay more than $9 million in restitution for wire fraud, mail fraud, and money laundering, U.S. Attorney Joseph P. Russoniello announced.

Patricia Morgen pleaded guilty on Dec. 16, 2009. According to the plea agreement, she admitted creating a scheme to solicit investors for a company called Chicago Development and Planning, with the promise of substantial guaranteed return profit payments. Morgen falsely promised investors that their funds would be used to purchase real property to be rented or resold for profit, and that their guaranteed returns would come from profits earned on the real estate investments. In fact, Morgen paid investors largely with money obtained from new investors, rather than from real estate-related profits. Morgen admitted that there were more than 400 victims of this Ponzi scheme.

“Patricia Morgen intentionally preyed on unsuspecting victims in order to obtain money she wasn’t entitled to,” said U.S. Attorney Russoniello. “This sentence demonstrates the legal consequences perpetrators of these schemes will face when they are caught—and they will be caught.”

In another scheme, Morgen and a co-defendant submitted fraudulent loan applications to acquire more than 20 properties, most of which were occupied, rent-free, by Chicago Development and Planning employees, including Morgen herself. The fraudulent loan applications included lies as to the borrowers’ employment and income. Morgen’s co-defendant in the mortgage fraud scheme pleaded guilty in January 2010.

Morgen, 63, most recently of Chicago, was indicted by a federal grand jury on Nov. 20, 2008. She fled to Mexico when she learned that federal authorities were investigating Chicago Development and Planning. After spending several months in Mexico, Morgen returned to the United States, but made continued efforts to avoid law enforcement: she did not have a valid driver’s license in her name, did not have a phone in her name, and she cut off contact with family members whose whereabouts were known to federal investigators. Morgen was apprehended in Chicago in June 2009, while threatening to jump from the top of a multi-story building. Morgen’s son, Shalom Gibson, has been indicted in Reno, Nev., in connection with his efforts to shred and burn documents relating to Chicago Development and Planning; his whereabouts remain unknown.

In sentencing Morgen, U.S. District Judge Charles R. Breyer commented on the devastation suffered by the unsophisticated victims, noting that Morgen victimized “people who by and large could least afford it,” and that she “ruined people’s lives.” Judge Breyer further stated his belief that a “severe punishment” was warranted because Morgen was “still a very dangerous person” who posed a substantial risk to society.

“We are pleased by the resolution of this matter,” said FBI Special Agent in Charge Stephanie Douglas. “Ms. Morgen betrayed the trust of hundreds of investors, injected bad debt into the economy, and fled the country when faced with the prospect of being held accountable for her actions. The sentence she received today underscores the severity and impact of this sort of crime on our entire community.”

“Today’s sentence sends a clear message to those committing investment fraud: Your greed will not go undetected and unpunished,” said Scott O’Briant, Special Agent in Charge, IRS-Criminal Investigation. “IRS-CI will continue to use all the tools at its disposal to investigate these types of schemes.”

The sentence was handed down by U.S. District Court Judge Breyer following a guilty plea to two counts of mail fraud, two counts of wire fraud in violation, and one count of money laundering in violation. Judge Breyer also sentenced the defendant to a five-year period of supervised release. The defendant has been in custody since June 2009.

Tracie L. Brown and Jeffrey R. Finigan are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Rayneisha Booth. The prosecution is the result of an investigation by the Securities and Exchange Commission, the Internal Revenue Service – Criminal Investigation, and the Federal Bureau of Investigation.

Mortgage Fraud Continues to Climb – Midwest Leads the Way

Incidents of Mortgage Fraud Increase 7 Percent from 2008 to 2009 – Florida, New York and California Top List of States with Highest Mortgage Fraud and Misrepresentation Rates

Dennis Norman

Reported incidents of mortgage fraud and misrepresentation by professionals in the mortgage industry in the U.S. are continuing to climb and increased by 7 percent from 2008 to 2009, according to a new report released today by the Mortgage Asset Research Institute, a LexisNexis® service. While the pace has slowed since the 2007-2008 increase of 26 percent, the continued increase is believed to be attributed to better industry reporting and policing.

The 12th Periodic Mortgage Fraud Case Report examines the current state of residential mortgage fraud and misrepresentation in the U.S. committed by professionals, based on data submitted by LexisNexis® Mortgage Asset Research Institute subscribers.

LEXISNEXIS TOP 10 STATES

Florida, ranked number one in 2006 and 2007, has moved back into first place in the country for mortgage fraud and misrepresentation after being displaced in 2008 by Rhode Island. Florida also has close to three times the expected amount of reported mortgage fraud and misrepresentation for its origination volume. Rhode Island is not ranked on the Top-Ten list for 2009 because the state’s sample size did not meet the minimum requirements set for the survey.

New York moved into second place, followed by California, Arizona, Michigan, Maryland, New Jersey, Georgia, Illinois, and Virginia. This is the first appearance on the LexisNexis Mortgage Asset Research Institute Report Top-Ten list for New Jersey and Virginia.

“The data suggests that in 2009 there was a 7 percent increase in the number of incidents of fraud reported to the LexisNexis Mortgage Asset Research Institute on top of the 26 percent increase reported in 2008. While this is a noticeable increase, we believe that mortgage fraud is significantly understated, even during times of massive origination volumes,” said Jennifer Butts, LexisNexis Mortgage Asset Research Institute manager of Data Processing and co-author of the report.

“Lenders are facing hurdles with compliance, loss mitigation and staving off additional financial losses due to poor loan performance,” said Denise James, LexisNexis® Risk Solutions director of Real Estate Solutions and co-author of the report.

“This is not to say that mortgage fraud is going away; it is still a serious problem, and new trends continue to emerge. It remains critical for those in the mortgage industry to reassess their processes, work together by sharing information and reporting incidents of fraudulent activity, and ready themselves for more complex schemes in order to continue the fight against mortgage fraud,” said James

LEXISNEXIS COMMON FRAUD OCCURRENCES

The top fraud incident type in 2009 – representing 59 percent of all reported fraud types – was application misrepresentation. This is the sixth year in a row it has topped the list. In second place were frauds related to appraisal and valuation misrepresentation, which increased from 22 percent of reported misrepresentation in 2008 to 33 percent; with an 11-percent increase, this is the most notable increase in reported fraud types in 2009. Additional documented fraud types included, in order of volume, verifications of deposit, verifications of employment, escrow or closing costs, and credit reports. Overall there has been a slight downward trend in total application fraud and misrepresentation moving from a high of 67 percent in 2005 to 59 percent in 2009.

Other highlights of the report:

  • Arizona has moved into the top five for the first time;
  • Eight of the top ten states are in the eastern half of the country;
  • New Jersey and Virginia made their first appearance in the top ten for loans originated in 2009;
  • The states with the highest concentration of appraisal fraud and misrepresentation nationwide are all Midwestern States; Ohio,Illinois and Michigan

Five Indicted in Foreclosure Rescue and Mortgage Fraud Scheme

Scam Involved Lawyers, Mortgage Brokers, and More Than $14.6 Million in Loans

PHILADELPHIA—A 15-count indictment was filed today against five defendants charged in a $14.6 million mortgage fraud scheme that resulted in at least 35 fraudulent mortgage loans, announced United States Attorney Michael L. Levy, Special Agent-in-Charge of the FBI Janice K. Fedarcyk, and Pennsylvania Secretary of Banking Steven Kaplan. Charged are Edward G. McCusker and John Alford Bariana, owners of Axxium Mortgage, Inc., McCusker’s wife, Jacqueline, and Jeffrey A. Bennett and Stephen G. Doherty, owners of the Doylestown law firm Bennett & Doherty, P.C.

According to the indictment, the defendants targeted financially distressed homeowners facing foreclosure, falsely promised them help in saving their homes, engaged in real estate transactions with straw purchasers, and obtained dozens of fraudulent mortgages. The defendants took whatever equity the homeowner had left, funneled it through various shell corporations they controlled, used some of it to pay the new mortgages, and put the rest of the equity into their own bank accounts.

“Unfortunately, the downturn in the economy has given rise to unscrupulous predators looking to cash in on the misfortune of others,” said Levy. “This sort of fraudulent activity not only preys on desperate homeowners, it weakens our financial institutions, destroys neighborhoods by leaving properties abandoned, and devalues the homes of innocent neighbors. This office will investigate and prosecute those who victimize financially distressed homeowners.”

The indictment alleges that the defendants promised financially distressed homeowners that they would find an “investor” who would help them save their home. The defendants would then arrange for a straw purchaser to obtain a fraudulent mortgage and then transfer of the title of the homeowner’s residence to the straw purchaser. Using their company Axxium Mortgage, Edward McCusker and Bariana, along with Jacqueline McCusker obtained the fraudulent mortgages by submitting false documents to mortgage lenders and making false claims about the straw purchasers’ finances. The defendants also concealed from the lender the fact that the homeowner was going to continue to reside in the home and that the mortgage payments were going to continue to be made, in part, by the distressed homeowner and funneled through the straw purchaser. Bariana and Jacqueline McCusker each acted as straw purchasers for 10 homes. The defendants also recruited at least seven other persons to act as straw owners in order to obtain additional fraudulent mortgages.

Bennett and Doherty participated in the scheme at the front and back end. Doherty solicited and referred distressed homeowners to Edward McCusker and used fraudulent bankruptcy filings for some of the distressed homeowners to delay foreclosure until McCusker had obtained an investor and a mortgage. Bennett handled the closings for the real estate transfers, manipulating the information provided to the lender in order to hide the nature of the scheme until after the loan was funded.

“Governor Rendell and I are pleased when state and federal agencies can cooperate to protect consumers and deter improper and criminal activity,” said Pennsylvania Secretary of Banking Steve Kaplan. “U.S. Attorney Levy’s announcement today helps underscore our respective commitments to consumer protection and the Department of Banking’s ability to bring financial expertise to criminal prosecutions.”

“The type of criminal activity alleged in this indictment is particularly despicable in that it targeted those victims who were the most vulnerable financially and the most desperate for some type of assistance to avoid foreclosure on their properties,” said Special Agent-in-Charge Janice K. Fedarcyk of the Philadelphia Division of the FBI. “It also represents an affront to the millions of hard-working Americans who struggle every day to meet their mortgage obligations and keep their families in their homes. The FBI is committed to aggressively pursuing those who engage in schemes designed to illegally profit from the current economic situation of many of our fellow Americans.”

The defendants are charged with conspiracy to commit mail and wire fraud, mail and wire fraud, and conspiracy to commit money laundering. Doherty is also charged with bankruptcy fraud.

INFORMATION REGARDING THE DEFENDANTS

Department of Justice Press Release

NAME ADDRESS YEAR OF BIRTH
EDWARD G. MCCUSKER New Hope, PA 1964
JEFFREY A. BENNETT Springfield, PA 1966
STEPHEN G. DOHERTY Doylestown, PA 1966
JOHN A. BARIANA Mullica Hill, NJ 1972
JACQUELINE D. MCCUSKER New Hope, PA 1964

Defendants Edward and Jacqueline McCusker, Jeffrey Bennett, and John Bariana face maximum sentences of 240 years’ imprisonment, $3.25 million in fines, three years supervised release, and a $1,200 special assessment. Defendant Stephen Doherty faces a maximum sentence of 385 years’ imprisonment, $4 million in fines, three years supervised release, and a $1,500 special assessment. These are the maximum sentences that may be imposed if the defendants are convicted; the advisory United States Sentencing Guidelines call for a sentence less than the statutory maximum.

The indictment seeks forfeiture of the proceeds of the fraudulent scheme, which is alleged to be approximately $14.6 million.

This case was investigated by the Federal Bureau of Investigation and the Pennsylvania Department of Banking. It is being prosecuted by Assistant United States Attorney Nancy Rue.

President of Metropolitan Money Store Sentenced to Over 12 Years in Prison for $37 Million Mortgage Fraud Scheme

FBI Baltimore

Joy Jackson Personally Responsible for Over $16 Million in Losses to Mortgage Lenders; Used Over $800,000 of Fraudulently Obtained Proceeds to Pay for Her Wedding

U.S. District Judge Roger W. Titus sentenced the president of the Metropolitan Money Store, Joy Jackson, age 41, of Fort Washington, Maryland, today to 151 months in prison followed by five years of supervised release for conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, announced United States Attorney for the District of Maryland Rod J. Rosenstein. Judge Titus also entered a judgement ordering Jackson to pay restitution of $16,880,884.86 and to forfeit three residential properties in Oxon Hill, Capitol Heights and Laurel, Maryland and three vehicles. Continue reading “President of Metropolitan Money Store Sentenced to Over 12 Years in Prison for $37 Million Mortgage Fraud Scheme

Mortgage Fraud Surge Investigation Nets More Than 100 Individuals Throughout Middle District of Florida

Tampa FBI Mortgage FraudDepartment of Justice Press Release

TAMPA—United States Attorney A. Brian Albritton today announced the results of a nine-month-long Mortgage Fraud Surge investigation that has resulted in charges against more than 100 defendants and involves allegations concerning more than $400 million in loans procured by fraud and more than 700 properties. U.S. Attorney Albritton is holding events throughout the district this week to highlight the announcement.

There are currently mortgage fraud-related charges pending against approximately 500 defendants in federal mortgage fraud cases around the nation. The cases concern both mortgage schemes designed to defraud mortgage lenders and “foreclosure rescue schemes” which prey on distressed homeowners. Continue reading “Mortgage Fraud Surge Investigation Nets More Than 100 Individuals Throughout Middle District of Florida