Builder imprisoned after pleading guilty in mortgage fraud

The Winston-Salem journal reports that the Associated Press said that Greg Smith, a Charlotte-area homebuilder was sentenced to more than two years in prison for his role in a mortgage-fraud scheme that the government said cost lenders $3.7 million. Smith was sentenced Wednesday by Judge Graham Mullen of U.S. District Court, who said that the prison term was "necessary to reflect the seriousness of the offense."
Smith pleaded guilty in September 2004 to three counts of mortgage fraud after a federal investigation showed that he and more than 12 real-estate professionals conspired to inflate the selling prices of homes in subdivisions near Lake Norman, north of Charlotte. The government alleged that Smith participated in 78 such deals.
Smith’s attorney, James Wyatt, asked Mullen for leniency, saying that his client’s role in the deals was minor. "Your honor, I’m very sorry," Smith told the judge in a soft voice. "I accept full responsibility for my wrong." But Mullen responded that the fraud couldn’t have taken place without Smith’s participation.

Smith, who has left the homebuilding business, is the first of at least 11 people who have pleaded guilty in the case to be sentenced. A federal prosecutor said Wednesday that there could be more indictments, based on Smith’s cooperation. Smith built homes in the McKenzie Place and Glenridge subdivisions in Cornelius, where residents told The Charlotte Observer in 2003 that their property values had dropped dramatically after suspicious sales and a string of foreclosures.

Read the Court Docket here.

Typical mortgage-fraud scams work on the promise of a too-good-to-be-true investment, according to the FBI. Investors are told that they can acquire a house without spending a dime, rent it for enough money to cover mortgage payments and then sell it for a profit in a couple of years. Scammers also sometimes dangle an upfront payment of $5,000 or more to lure buyers.
Participants in the fraud then exaggerate appraisals, income statements and other documents to persuade lenders to grant a loan for far more than a house is worth, and more than the buyer can afford. Once the excessive loan is granted, the seller gets his price and the con artists pocket the difference. The buyer gets the house, an upfront payment and mortgage payments he can’t afford - eventually leading to a foreclosure.


Man Arrested for Real Estate Foreclosure Theft and Elder Abuse

In a press release iinvestigators with the San Bernardino County (CA) District Attorney’s Real Estate Fraud Unit arrested William Barahona, 45, of Ontario on suspicion of Real Estate Fraud and Elder Abuse.

Barahona is accused of defrauding victims out of their home in Fontana and having the Grant Deed recorded. The elderly victims lost their home. In addition, Barahona threatened one of the victims involved in this case. Bail was set in the amount of $750,000 .


Construction Alerts Announces New Scam Rocks Foundations of Construction Business

Business Wire reports from Chicago that a clutch of unscrupulous real estate agents are perpetrating a series of scams that are leaving builders and developers broke and helpless. In a dangerous situation for the construction industry, a new type of scam, instigated by unscrupulous real estate agents, is duping builders and developers across America.

These scams involve real estate agents who produce a fake buyer for a property; the buyer will even put down the requisite down payment, and the builder will agree upon a commission for the agent. Just before the deal is closed, however, the agent will convince the builder that the buyer is unable to come up with their required down payment and closing cost. The agent will further suggest, in a move that indicates good faith, that the commission should go towards the closing cost as well.

After the buyer has closed on the deal, fraudulent home inspectors - in cahoots with the agent - declare the new home defective and dangerous. These independent home inspectors are paid to find imperfections or hazards in the home; some agents and buyers have even built upon that to accuse city code inspectors of ignoring violations.

In such a situation, the seller is forced to buy the home back at the full purchase price, plus all costs accruing to the buyer, such as attorney fees. If these demands are not met, verbal and written threats ensue.

"The entire construction and real estate industry is being tarnished by a few bad apples that have managed to swindle builders," says Eric Allen, Editor of Construction Alerts. "As a new publication dedicated to the construction industry, we want to be a force for good, and our campaign against such scams is a part of that effort."

Allen points out that in most cases, the builder will almost invariably give in to these demands to avoid bad publicity. "When the developer is forced to buy the property back, he would essentially be paying double the commission, since originally the agent’s commission was included as part of the closing cost," he says. Further, the law states that a real estate contract is an exception to the Caveat Emptor (Buyer Beware) rule, and that such contracts can be rescinded if the buyer can prove fraud.

The scale of these scams has now touched millions of dollars per year, but most builders refuse to discuss it simply out of sheer embarrassment. A builder, after all, often depends on word of mouth and reputation to ensure success. The scamsters’ methods of fear and intimidation, as well as threats of legal action, are often enough to silence the builder and force his hand to pay.

Builders can however protect themselves by ensuring that they work only with legitimate real estate agencies. They should also refrain from directing sales commissions towards the buyer’s costs. Builders should put every part of their deal down in writing, and any changes to properties should be made with the consent of local building authorities to defend against claims of building code violations. Builders who have already been taken in can contact the real estate board in their respective cities to report the agent as well as other individuals - buyers, lawyers, home inspectors etc. - involved in the case.


AZ Attorney General warns about mortgage telemarketing scam

Arizona Attorney General Terry Goddard today warned Arizona consumers about a home loan telemarketing scam and possible violations of federal Do Not Call laws. Some telephone solicitors are using the name Fannie Mae, a secondary market mortgage lender, to promote low-interest loan rates.

Phoenix-area consumers have reported telephone calls from someone claiming to be with Fannie Mae. The solicitor urged consumers to call a number to ask about possible lower interest rates on loans. In addition to providing a phone number regarding loan rates, consumers were also provided with a "do not call" number that they could call to take their name off the call list. Some consumers reported that they continued to receive calls, even after leaving a message at the "do not call" number.

"It is important to remember that Fannie Mae does not make loans directly to consumers, so any claim about available lower interest rates from Fannie Mae is false and misleading, and could be a violation of Arizona’s Consumer Fraud Act," Goddard said. "Don’t be fooled. These types of calls are made to enrich the scammer and may result in financial harm to consumers."

Goddard also reminded consumers that the Federal Trade Commission (FTC) created a Do Not Call registry that stops telemarketing calls at home. Consumers can register their phone numbers either online at www.donotcall.gov or toll-free at 1.888.382.1222 (TTY 1.866.290.4236). Consumers must call from the phone they want to register, and registration is free.

Goddard offered the following points to protect consumers:

  • Fannie Mae makes loans to other lenders and does not make loans directly to consumers.
  • Fannie Mae does not solicit consumers for loans.
  • Do not give out personal or financial information over the phone unless you know the organization and you initiated the contact.

If you believe you have been a victim of fraud, please contact the Attorney General’s Office in Phoenix at 602.542.5763; in Tucson at 520.628.6504; or outside the Phoenix and Tucson metro areas at 1.800.352.8431. To file complaints online, visit the Attorney General’s web site at www.azag.gov.


Colorado Attorney General announces measures to reduce mortgage fraud

At a Press Conference Colorado Attorney General John Suthers announced today the findings of his Mortgage and Foreclosure Fraud Task Force formed in July to address the rise in mortgage and foreclosure fraud throughout Colorado. He intends to use the findigs to remove Colorado from the list of "Top 10" states suffering from mortgage fraud.

“Earlier this year, the FBI identified Colorado as one of the top ten mortgage fraud ‘hot spots’ in the country,” said Suthers. “This is unacceptable and thanks to the work of the Mortgage and Foreclosure Fraud Task Force, we are making efforts to remove Colorado from this list.”

Among the legislative proposals, the Mortgage and Foreclosure Fraud Task Force recommended legislation requiring foreclosure consultants and equity investors to have written contracts with homeowners. The Task Force also recommended that these written contracts describe in detail the services to be provided and the terms and conditions of any transfer of ownership in the property in foreclosure. Finally, the Task Force recommended that homeowners be given written notice of their right to rescind or cancel these contracts.

Under the recommended legislation, violations can be prosecuted under the Colorado Consumer Protection Act, and certain violations will be misdemeanors punishable by one year in jail and/or a fine of $25,000.  Rep. Tom Massey (R-Chaffee) and Sen. Jennifer Veiga (D-Adams) will sponsor the legislation next session.

“Mortgage and foreclosure fraud is an increasing consumer problem here in Colorado,” said Rep. Massey who also works as a realtor. “I’m pleased Attorney General Suthers is taking a closer look at what can be done to curb this growing wave of consumer fraud.”

In addition to the legislative proposals, the Mortgage and Foreclosure Task Force formed a subcommittee to address public awareness and outreach. Among their efforts to help educate the public of the rise of mortgage and foreclosure fraud, the group designed a brochure to be used in public trustee offices throughout the state.

The educational brochure features helpful phone numbers and general information on foreclosures as well as tips on what to do to avoid becoming a victim of a foreclosure scam.

“There are numerous scams that cheat the consumer or the lender out of the home’s true value,” said Suthers. “This brochure is one way we can give consumers the knowledge to avoid schemes like foreclosure rescue scams that become so onerous the homeowner often losses their primary asset.”

Attorney General Suthers also noted that he would be visiting cities in Colorado early next year to address mortgage and foreclosure fraud. To date, Attorney General Suthers has held public forums in Northern Colorado and Grand Junction to discuss mortgage fraud and other local concerns.

Two conviced in mortgage scam

United States Attorney Patrick L. Meehan today announced the filing of an indictment charging Katie Gee, a/k/a “Katie Basilovecchio,” and Michael Basilovecchio. The indictment charges bank fraud, making false statements on a loan application and three counts of mail fraud. Gee is charged in each count. Basilovecchio is charged in the mail fraud counts. The indictment alleges that Gee defrauded Farmers First Bank by obtaining a $38,300 loan for the purchase of a motor vehicle using false information regarding her income and earnings.

The indictment further alleges that Gee and Basilovecchio engaged in fraudulent schemes to defraud mortgage companies to secure financing for the purchase of a home in West Chester, Pennsylvania and for refinancing a mortgage on a residence located in Naples, Florida. It is alleged that Gee and Basilovecchio fraudulently secured approximately $304,000 from National City Mortgage Company for the purchase of a residence in West Chester, Pennsylvania and approximately $289,000 from Wachovia Mortgage Company for the refinancing of a property in Naples, Florida.

Read the indictment by clicking here


Woman accused of fraud over second mortgage

The Rutland Herald reports that a federal grand jury in Rutland has returned an indictment charging a 48-year-old woman with fraud involving a second mortgage she received on her home. Cheryl Gilbert Petersen, formerly of Brattleboro, faces up to the 30 years in prison and a $1 million fine if convicted of the charges contained in the two-count indictment filed Wednesday in U.S. District Court in Rutland.

The first count alleged that Petersen committed mail fraud when she obtained a second mortgage on her home with the help of another person who pretended to be her husband.The indictment alleged that the mortgage, which totaled $44,000, was approved by Conseco Finance in February 2000 after documents were sent by Federal Express to Conseco.

The proceeds of the mortgage were then used allegedly to pay credit card companies. In addition, more than $12,000 was also wired into Petersen’s bank account. The second count alleged that Petersen obtained the mortgage by making false representation to Conseco.


Man sentenced to 23 years in prison in foreclosure scam

Alexander Coolidge reports for the Cinncinati Enquirer that convicted swindler Troy Lee Keith was sentenced Friday to more than 23 years in prison for scamming more than $100,000 from homeowners trying to avoid foreclosure.Keith, 38, was convicted in October by a Butler County jury of 41 criminal charges, including 26 counts of theft by deception, 14 counts of tampering with government records and one count of engaging in a pattern of criminal activity.

Butler County Common Pleas Judge Keith M. Spaeth sentenced Keith to 23 years and two months and ordered him to pay $99,875 in restitution.
Prosecutors said Keith stole from 26 victims in Cincinnati and Dayton facing foreclosure by promising to save their homes and assume their mortgages in exchange for a processing fee and monthly rent.

He told customers he’d sell them their houses back once they got back on their feet financially.Keith collected money but didn’t take over the mortgage payments or purchase any houses – leaving his victims in foreclosure. Several of his victims – many of them elderly – learned their mortgages were never paid until after they’d been evicted from the homes.

Keith did business in Hamilton County as KT Property Management, which authorities say is also the name of a legitimate Warren County company that manages apartment buildings but has no connection to the case.