Mortgage fraud

Florida family files multi million dollar law suit against Regions Bank,Nicolas Rodriquez Regions Branch V.P. and Steve Kriegbaum of Regions Mortgage,Continental Real Estate Appraisal Services, Inc. ans Fidelity National Tiltle Insurance, Inc, Ex-Lutz homeowner hits back at lender--97.78.3.84 (talk) 23:27, 1 December 2008 (UTC)St. Pete. Times.

To run this scam you need several parties involved, Bank Manager, Mortgage Lender, Appraiser to over inflate the Appraisal, Title Company to names a few. Per the F.B.I Florida Ranks umber 1 in this Scam

Dean Rivett sold his home in a short sale in September.

Like millions of others across the country, the 36-year-old private investigator was a casualty of the subprime mortgage crisis. He couldn't make the $3,300 monthly mortgage payments after he refinanced his Lutz home last year to pay bills.

Some blame greedy lenders preying on those in financial trouble. Others point the finger at homeowners who should have borrowed more wisely.

While Rivett admits he should have scrutinized the deal more closely, he doesn't think he's the only one at fault. He has sued Regions Bank, accusing it of predatory lending.

"We're looking for restitution in the seven figures," said Jesse Ray Wagoner, an attorney in Tampa representing Rivett. "I think they really targeted Dean. They trapped him in a loan that almost guaranteed he'd lose his house."

There are dozens of cases across the state where home­owners are striking back at lenders, said April Charney, a consumer lawyer at Jacksonville Area Legal Aid. Most get settled out of court, making it harder to use the misdeeds — whether by the homeowner or lender — as a lesson to others.

But assigning blame isn't always productive, she said.

"When you're in a M*A*S*H unit doing triage every day, do you really want to look back and say, 'Who put this hole in this person?' " Charney said. "You just want to fix it."

Rivett's lawsuit specifically targets two bank employees, Nicolas Rodriquez and Steve Kriegbaum, who he says befriended him over several months before offering to refinance his home.

Rodriquez and Kriegbaum declined to comment for this story, referring questions to a bank attorney who did not return repeated calls.

Rivett said he met Rodriquez, branch manager and vice president of Regions Bank at 14965 N. Florida Ave., in early 2007 when the banker came into Rivett's private investigations office to market business accounts. Rivett opened one.

Rivett says Rodriquez would take him to lunch, out for drinks and to sporting events. He said he grew comfortable enough with Rodriquez to share personal problems, including a growing addiction to painkillers that he started taking after a car crash in 2004.

Around that time the economy was slowing down, Rivett recalled. That, combined with his addiction, was taking a toll on his business. His credit card debt was building; his cash flow was not.

Rodriquez told Rivett re-financing could help and the bank was offering a great deal. Rivett's home, which he purchased in 2002 for a little more than $200,000, had built equity.

On June 12, 2007, over Chinese food at lunch, Rivett signed a stack of documents for a $430,000 loan at a 9.2 percent fixed interest rate. It wasn't great, but the $30,000 cash he'd receive at the end would allow him to pay off debt and market his business.

A closer look at the documents, provided by Rivett's attorney, revealed problems:

According to the Hillsborough property appraiser, Rivett's home was worth $233,874. Plus, the application prepared by Rodriquez did not list Rivett's daughter as a dependent.

When asked now if the inconsistencies gave him pause, Rivett confides: "Truthfully, I didn't read it. I just signed. I thought, 'I can get my life back on track, he's going to save me.' "

By June 20, 2007, Regions bank had denied Rivett's loan, according to paperwork given to Rivett's attorney. Rivett said he wasn't immediately told about the denial.

Instead, Rodriquez and Kriegbaum, assistant vice president of the Regions bank and mortgage at 13902 N. Dale Mabry, asked to meet with Rivett for lunch.

All was well with the loan, Rivett said they told him.

On June 22, 2007, a new appraisal valued Rivett's house at $460,000, according to paperwork submitted by the bank.

A few weeks later, Rivett was asked to provide information about his business, including the number of clients.

"At the time I told him I had about 500 clients," Rivett said, recalling a phone conversation with Kriegbaum. "He goes, 'Hey, put it up to like 5,000; it'll look better to the underwriters.' "

That was only one of several red flags.

At the July 25, 2007, closing, Rivett and his wife, Debbie, noticed her name had been removed from the loan because of her credit score, yet her income was still listed.

At the time, Kriegbaum told them that Regions denied the loan so they had to go through a new out-of-state bank to get it, Rivett said. The new loan had a 10.7 percent adjustable interest rate. Rivett's payments would go from $3,345 for the first three years to $3,832 for the next 26 years, with a $282,000 balloon payment at the end.

Debbie Rivett was angry: "I said, 'This is ridiculous.' "

Kriegbaum tried to ease their apprehension, she said.

"He said, 'I know all this seems kind of fast and real high," Debbie Rivett recalled. "But … this will put money in your bank right now, and we'll turn around and refinance in a couple months."

A few days later, when Rivett went to pick up his $50,000 check — the cash increased during the deal — he wasn't empty-handed. He had stopped to buy three bottles of Crown Royal for Kriegbaum and a $300 watch for Rodriquez. Earlier, both men had requested the thank-you gifts for helping Rivett out of his jam, Rivett said.

By the time the first payment arrived, Rodriquez and Kriegbaum had stopped calling, Rivett said.

The money lasted less than a year.

In April, Rivett had a heart attack because of his stress and Prescribed pain medications use. After a stint in rehab helped clear his mind, he said he decided to sell the home and go after the bank.

By then he was a month behind on his mortgage and CitiBank owned his loan. The bank allowed Rivett to sell his home for about $277,656 — a loss for the bank of about $136,000 — because of his health problems, he said.

"It's not just losing your house," he said. "It's these people you thought were your friends taking advantage of you."

His attorney Jess Ray of Ray Wagoner filed the law suit in this matter, Some claims Fraud, Predatory Lending, Breach of Fiduciary Responsibilities, RICCO ACT, Black Mail to just name a few. source www.raywagoner.com Insert non-formatted text here

Mortgage fraud is a term used to describe a broad variety of criminal actions where the intent is to materially misrepresent or omit information on a mortgage loan application in order to obtain a loan or to obtain a larger loan than would have been obtained had the lender known the truth. In federal courts, mortgage fraud is prosecuted as wire fraud, bank fraud, mail fraud and money laundering, with penalties of up to thirty years imprisonment. See: http://www.usdoj.gov/usao/gan/press/2006/04-19-06b.pdf As the incidence of mortgage fraud has risen over the past few years, states have also begun to enact their own penalties for mortgage fraud. See http://www.legis.state.ga.us/legis/2005_06/pdf/sb100.pdf.

Mortgage fraud is not to be confused with predatory mortgage lending, which occurs when a consumer is mislead or deceived by agents of the lender.

Examples of mortgage fraud

Occupancy fraud: This occurs where the borrower wishes to obtain a mortgage to acquire an investment property, but states on the loan application that the borrower will occupy the property as the primary residence or as a second home. If undetected, the borrower typically obtains a lower interest rate than was warranted. Because lenders typically charge a higher interest rate for non-owner-occupied properties, which historically have higher delinqency rates, the lender receives insufficient return on capital and is over-exposed to loss relative to what was expected in the transaction. It is considered fraud because the borrower has materially misprepresented the risk to the lender in order to obtain more favorable loan terms.

Income fraud: This occurs when a borrower overstates his/her income in order to qualify for a mortgage or for a larger loan amount. This was most often seen with so-called "stated income" mortgage loans (popularly referred to as "liar loans"), where the borrower, or a loan officer acting for a borrower with or without the borrower's knowledge, stated without verification the income needed to qualify for the loan. Because mortgage lenders have begun to tighten underwriting standards and "stated income" loans are less available, income fraud is increasingly seen in traditional full-documentation loans where the borrower forges or alters an employer-issued Form W-2, tax returns and/or bank account records to provide support for the inflated income. It is considered fraud because in most cases the borrower would not have qualified for the loan had the true income been disclosed. The "mortgage meltdown" was caused, in part, when large numbers of borrowers in areas of rapidly increasing home prices lied about their income, acquired homes they could not afford, and then defaulted.

Employment fraud: This occurs when a borrower claims self-employment in a non-existent company or claims a higher position (e.g., manager) in a real company, in order to provide justification for a fraudulent representation of the borrower's income.

Failure to disclose liabilities: Borrowers may conceal obligations, such as mortgage loans on other properties or newly acquired credit card debt, in order to reduce the amount of monthly debt declared on the loan application. This omission of liabilities artificially lowers the debt-to-income ratio, which is a key underwriting criterion used to determine eligibility for most mortgage loans. It is considered fraud because it allows the borrower to qualify for a loan which otherwise would not have been granted, or to qualify for a bigger loan than what would have been granted had the borrower's true debt been disclosed.

Fraud for profit: A complex scheme involving multiple parties, including mortgage lending professionals, in a financially motivated attempt to defraud the lender of large sums of money. Fraud for profit schemes frequently include a straw borrower whose credit report is used, a dishonest appraiser who intentionally and significantly overstates the value of the subject property, a dishonest settlement agent who prepares two sets of HUD settlement statements or makes disbursements from loan proceeds which are not disclosed on the settlement statement, and a property owner, all in a coordinated attempt to obtain an inappropriately large loan. The parties involved share the ill-gotten gains and the mortgage eventually goes into default. In other cases, naive "investors" are lured into the scheme with the organizer's promise that the home will be repaired, repairs and/or renovations will be made, tenants will located, rents will be collected, mortgage payments made and profits will be split upon sale of the property, all without the active participation of the straw buyer. Once the loan is closed, the organizer disappears, no repairs are made nor renters found, and the "investor" is liable for paying the mortgage on a property that is not worth what is owed, leaving the "investor" financially ruined. If undetected, a bank may lend hundreds of thousands of dollars against a property that is actually worth far less and in large schemes with multiple transactions, banks may lend millions more than the properties are worth.

Appraisal fraud: Occurs when a home's appraised value is deliberately overstated or understated. When overstated, more money can be obtained by the borrower in the form of a cash-out refinance, by the seller in a purchase transaction, or by the organizers of a for-profit mortgage fraud scheme. Appraisal fraud also includes cases where the home's value is deliberately understated in order to obtain a lower price on a foreclosed home, or in a fraudulent attempt to induce a lender to decrease the amount owed on the mortgage in a loan modification. A dishonest appraiser may be involved in the preparation of the fraudulent appraisal, or an existing and accurate appraisal may be altered by someone with knowledge of graphic editing tools such as Adobe Photoshop.

Cash-Back Schemes: Occur where the true price of a property is illegally inflated in order to provide cash-back to transaction participants, most often the borrowers, who receive a "rebate" which is not disclosed to the lender. As a result the lender lends too much, and the buyer pockets the overage or splits it with other participants, including the seller or the real estate agent. This scheme requires appraisal fraud to deceive the lender. "Get Rich Quick" real-estate gurus' courses frequently rely heavily on this mechanism for profitability.

Shotgunning: Occurs when multiple loans for the same home are obtained simultaneously for a total amount greatly in excess of the actual value of the property. These schemes leave lenders exposed to large losses because the subsequent mortgages are junior to the first mortgage to be recorded and the property value is insufficient for the subsequent lenders to collect against the property in foreclosure. The Matthew Cox case is the most notable example of this type of scheme.

Identity Theft: Occurs when a person assumes the identity another and uses that identity to obtain a mortgage without the knowledge or consent of the victim. In these schemes, the thieves disappear without making payments on the mortgage. The schemes are usually not discovered until the lender tries to collect from the victim, who may incur substantial costs trying to prove the theft of his/her identity.

Other background

Mortgage fraud by borrowers from US Department of the Treasury

Mortgage fraud may be perpetrated by one or more participants in a loan transaction, including the borrower; a loan officer who originates the mortgage; a real estate agent, appraiser, a title or escrow representative or attorney; or by multiple parties as in the example of the fraud ring described above. Dishonest and unreputable stakeholders may encourage and assist borrowers in committing fraud because most participants are typically compensated only when a transaction closes.

In 2004, the FBI warned that mortgage fraud was becoming so rampant that the resulting "epidemic" of crimes could trigger a massive financial crisis. According to a December 2005 press release from the FBI, "mortgage fraud is one of the fastest growing white collar crimes in the United States".

The number of FBI agents assigned to mortgage-related crimes increased by 50 percent between 2007 and 2008. In June 2008, The FBI stated that its mortgage fraud caseload has doubled in the past three years to more than 1,400 pending cases. Between 1 March and 18 June 2008, 406 people were arrested for mortgage fraud in an FBI sting across the country. People arrested include buyers, sellers and others across the wide-ranging mortgage industry.

See also

• Phillip E. Hill, Sr.
• United States housing bubble

External links

• "Mortgage fraud: New and improved Lenders have tightened standards, but scam artists have found new ways to beat the system.", CNN Money. October 17. 2008.
• Mortgage Fraud blog, attorney Rachel Dollar's summaries of mortgage fraud cases.
• Report Mortgage Fraud, a complete list of resources to report suspected fraud.
• Flipping Frenzy Blog, Daily news and information about real estate and mortgage fraud.
• Daily Mortgage Fraud News