Because of the sub-prime lending crisis and the 2008 Presidential Election, Real Estate and Mortgage Fraud has somewhat moved to the front of the mind. Unfortunately, very little continues to be done at an industry level to ensure that insiders and those who work alongside them are educated and trained in Real Estate and Mortgage Fraud detection and prevention.
In an article that is slated to appear in tomorrow’s edition of The Washington Post, nationally-syndicated Real Estate columnist Kenneth R. Harney writes that despite all the doom and gloom coverage from the media, “mortgage money is plentiful” and “the majority of mortgage products remain relatively unaffected by troubles in the subprime segment.” He also goes on to say:
“…FICO credit-score standards generally are higher than a year ago, stated-income mortgages with no verifications are hard to find and major investors are on the prowl for anything hinting at fraud.“
As much as I beat the drum for more funding at the state and Federal levels for Real Estate and Mortgage Fraud enforcement and education, things are getting better on some levels, but not all. Here on the ground, far away from Wall Street and the major investors Harney alludes to… here in the real world–in the Realtors’ office and at the closing table–education and enforcement are nowhere to be found.
Earlier this week, the U.S. Attorney for the Southern District of Florida filed conspiracy charges against a licensed mortgage broker, a title attorney, and a former Wachovia Bank loan officer for their role in a $42,000,000 mortgage fraud scam. Richard Crowder, II, Gary Mills, and Karen Sullivan each now face up to thirty years in federal prison, restitution (which, mind you, they’ll never be able to pay in full), and fines of up to $1,000,000.
Crowder is a licensed mortgage broker and the former owner of America’s Best Mortgage Services, located in Coconut Creek, Florida. Mills is a licensed title attorney and the owner of Four Star Title, located in Deerfield Beach, Florida. And Sullivan is a former loan officer for Wachovia Bank.
As a part of their scam, Crowder identified residential properties, including luxury condominiums on Miami’s South Beach, which were available for purchase. He then recruited buyers for the properties by representing to them that he could obtain 100 percent financing. After locating the buyers, Crowder applied for equity lines of credit on their behalf with Wachovia Bank. To get Wachovia to issue the equity lines of credit, Crowder and Mills prepared fraudulent HUD-1 settlement forms that falsely stated that the buyers already owned the properties. The fraudulent HUD-1s were then given to Sullivan, who used them to facilitate the issuance of equity lines of credit from Wachovia.
Simultaneously, or sometimes soon after obtaining the equity lines of credit from Wachovia, Crowder applied for first mortgages on the properties. Not surprising, his applications overstated the buyers’ assets and income, and included false verification of deposit forms prepared by Sullivan. To further induce the lenders to issue loans, Mills prepared documents falsely representing that the buyers were using their own money for the down payments and closing costs. In fact, if you have not figured it out by now, the buyers were using funds from the fraudulently obtained Wachovia equity lines credit or funds provided by Crowder.
What’s going on here?
An attorney, a bank loan officer, and the owner of a mortgage company, all conspiring to rip off nearly $42,000,000, and no one did anything about it until a U.S. Attorney (who received some help from the FBI) stepped in and put a stop to it? What a shame. For years now, Real Estate Fraud Forensics experts have called for funding to support efforts to raise awareness among consumers and industry insiders alike, but all we ever seem to receive are press releases detailing indictments, arrests and a few successful prosecutions.
As I recently shared with an industry colleague, sadly, our federal government appears to believe that only way to stop Real Estate and Mortgage Fraud is through lengthy and time consuming investigations, forced entries, indictments, and convictions. Very little if anything is being done to educate Real Estate industry insiders and to make them truly aware of the significant harm and short-sightedness associated with fraud.