Mortgage fraud sweeps Charlotte, NC
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Wednesday, November 12, 2003 @ 09:23 AM EST
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Contributed by: stameyr
The following article was printed in the Charlotte Observer Sunday, 11/2/03...written by LIZ CHANDLER, KERRY HALL & LISA HAMMERSLY MUNN. Here are excerpts along with a link to the complete article:
Rampant mortgage fraud in the Charlotte region is swindling millions from lenders and leaving naive home buyers financially ruined.
Federal investigators say they're examining as many as eight Charlotte groups they believe may have lied to lenders to get loans.
The schemes involve hundreds
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of home sales, at prices from less than $100,000 to more than $1 million.
Loans under review total as much as $150 million. Losses to lenders over the past three years could reach $50 million, investigators say.
Mortgage fraud -- lying on loan documents to deceive lenders -- is a federal crime punishable by up to 30 years in prison and $1 million in fines.
The FBI says when there is fraud, it usually unfolds this way:
Scammers pick a home on the market and negotiate a price. They recruit a buyer with good credit and promise a too-good-to-be-true investment.
Then they make their pitch. We'll help you buy this house without spending a dime. We'll get the bank to loan you 100 percent of the purchase price. Then, we'll bring in renters to cover your mortgage payments. In a year or two, we'll sell the house and split the profits. Plus, we'll pay you $5,000 or more up front.
Then, the scammers go to work, lying to lenders. They exaggerate appraisals, income statements and other documents to deceive lenders into granting a loan for far more than the house is worth -- and much more than their recruited buyer can afford.
When the overblown loan is approved, the proceeds are divided. The seller gets his price. And the scammers pocket the rest, sometimes more than $100,000.
The handpicked buyer gets the house, a few thousand dollars and a mortgage he can't afford.
If the house is leased, renters seldom pay enough to cover the mortgage. Soon the lender forecloses. And the buyer's credit is ruined.
"This is a target of opportunity for bad guys," says Mark Johnson, FBI white-collar crime unit supervisor for North Carolina. "Our caseload involving mortgage fraud has tripled in the last three years."
Barbara Koziarz of Mint Hill figured she finally had a chance to make some money in real estate.In 1999, she was working as a burial coordinator for a cemetery when a co-worker offered her a deal, she says.
For nothing down, you can buy a second house and a renter will cover the mortgage, her friend told her.
Over time, we'll fix up the house and share the profits when we sell.
All Koziarz needed was her good credit. Plus, she'd get $1,000 or more after the purchase.
"I didn't know the first thing about real estate.... I was just going along," says Koziarz, 48, a college graduate who had moved from New York. "I look back and I still can't believe I did this.... But I trusted them, I really thought I would make money."
Koziarz left her job and joined the real estate investment group her co-worker had formed.
Within six months in 1999, Koziarz bought seven houses valued at nearly $900,000. She was paid $10,300.
Koziarz knew her partners were falsifying her income so she'd qualify for loans, she says. Sometimes she signed documents claiming she'd live in the houses, so lenders would approve the loan.
Koziarz saw her actions as small exaggerations, something everybody did, she says. She never thought about the ramifications, she says.
"They just told me where to sign and I did. Nothing was really explained."
In just a few months the banks began calling -- and sheriff's deputies stopped to deliver foreclosure notices.
"I'd get 20 calls a day and piles of mail...," says Koziarz. "They were calling me at work, leaving nasty messages. Everybody in Charlotte was after me."
The banks foreclosed on all seven houses. Koziarz filed for bankruptcy protection.
Federal prosecutors charged two Charlotte men with defrauding lenders in her case and several others: Patrick Corvo, the co-worker she says got her involved, fled prosecution; David A. Roberts pleaded guilty to wire and mail fraud and conspiracy charges. He was sentenced to five months in prison and ordered to pay $315,745 in restitution.
The two men bought at least nine properties, then immediately resold them for inflated prices, prosecutors say. To get loans, they lied to lenders about buyers' salaries, employment and real estate ownership, prosecutors say. All nine properties -- including Koziarz's seven houses -- fell into foreclosure.
Property flips can signal one of the simplest forms of mortgage fraud, according to the FBI. Scammers buy a house at a low price, then sell it within hours or days to their handpicked buyer at a much higher price.
A flip can be legal and smart business. It's mortgage fraud when scammers lie on documents to get the loan.
The federal government looks at flips suspiciously when the second sale comes within six months because it's hard to generate a big profit in so short a time.
"Unless you sniff out a real deal -- and that's rare -- if a house is worth $100,000 today, next month it should be worth about $100,000," says Cindy Chandler, a real estate broker who teaches other agents how to detect mortgage fraud.
Flip sales are recorded in real estate records, which makes them easy for investigators to track. So another more sophisticated method has evolved, FBI agents say.
"Assignment fee" fraud involves selling a house just once at an inflated price and inserting a large, hidden fee for the scammers. Again, the sale revolves around false loan documents that deceive lenders.
Investigators are focusing on cases involving two or more people working together to commit mortgage fraud.
U.S. Attorney Bob Conrad says his office "will vigorously prosecute mortgage fraud at all levels, including corrupt professionals whose integrity is key to safeguarding consumer lenders and investors."
Note: Again, the above synopsis contains only excerpts from the original article. For the rest of the story go to www.charlotte.com
http://www.charlotte.com/mld/charlotte/business/industries/banking/7162734.htm
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