By Ralph Roberts
RISMEDIA, May 16, 2007-As a recognized expert on real estate and mortgage fraud, I am often approached by people who spot fraudulent transactions and are completely at a loss over what to do. Some are victims, others are whistleblowers, and some are actual accomplices who became aware that what they were doing was wrong and are suddenly concerned over what will happen if they get caught or turn themselves in.
Recently, a whistleblower called a huge case to my attention. She had access to about 50 files proving that a certain fraud ring had scammed a large lending institution out of hundreds of thousands of dollars and was getting ready to con them out of even more.
This ring leader is a name dropper, using a pro football player, a state representative, and a prominent attorney to lend credibility to his scam. He places ads in the paper offering to find homes for people and offering cash back at closing-an illegal practice in which the buyer agrees to pay more for the home than its true market value in order to get cash back when the transaction closes.
In the transaction that broke the case wide open, the con artist approached a 21-year-old man who had been refused mortgage loans because of his low income. The young man had perfect credit, so he was an ideal candidate for this particular type of fraud-he just needed to show that he was earning more money. The con artist solved that problem by hiring a phony company called CB Global to verify the man’s employment and salary. I called the “800” number myself to verify the man’s income, and they provided me with the false information, too. All I needed to supply was the man’s name and the last four digits of his social security number.
Once they got around the minor obstacle of low income, the next step was to find a house and artificially inflate its price. The fraud ring found a house worth about $70,000 and had it appraised for $100,000 (to fool the lender into believing that the home’s value was sufficient collateral to secure the loan). They then had the man approved for a $100,000 loan to buy the house, with the understanding that they would split the proceeds (the extra $30,000) they would receive at closing 50/50-the fraudsters would receive $15,000, and the young man would have a house and $15,000 in spending money.
If the fraud ring had paid the young man his $15,000, I probably would not be writing this story right now. The fraudulent deal would have gone undetected. What happened is that they refused to pay the man his cut. Unfortunately for them, this young man’s mother worked for the company that was perpetrating the fraud, and when they refused to pay her son, she gathered up some files (over 50 of them), found me on the Internet, and gave me a call. Upon meeting with her and examining the files, I saw immediately what was going on. This was big. Surely the lender would want to know about it. They usually do.
I called the lender to report what was going on. I managed to get pretty high up and left a message for the vice president. He never returned my call. I called back and key details, but he cut me short and said that I really needed to call their fraud hotline. He gave me the “800” number for their mortgage fraud hotline.
I dialed the number. A woman answered and asked me for the loan number. I gave her the loan number off of one of the files I had. She then asked me for my name, and I told her “I’m Ralph Roberts.” She then said something like “Well, that’s not the name on this file.” I told her I knew that, but I was calling to report dozens of fraudulent deals. Her reply? “Well, I don’t do that.”
I said, “What am I supposed to do? Your mortgage company is being ripped off. You’re the fraud hotline, you need to be looking into this.” She told me I needed to call the Better Business Bureau. I asked to talk with her supervisor. She placed me on hold and when she returned, she told me, “My supervisor doesn’t want to talk to you. My supervisor said that you can write us a letter.”
I explained that I did not want to write a letter. I needed to talk to someone. Five closings were scheduled for the coming week… five fraudulent transactions! I told her that I was a real estate and mortgage fraud expert. I knew what I was talking about. I had over 50 files proving that they had been scammed and were about to be scammed again-a stack of files about four feet high sitting on my desk! They were getting conned into approving risky loans. They needed to take action immediately. Instead of doing that, the lady on the fraud hotline proceeded to give me the address where I could send my letter.
I could not believe it. Here was a lender that had been scammed out of hundreds of thousands of dollars in illegal mortgage loans and was about to suffer more losses, and the person working the fraud hotline did not want to hear about it and did not know what to do. Worse yet, the vice president, who I tried talking to in the first place, apparently did not want to hear about it!
Most lenders are very cooperative when I call. They want to hear about instances of fraud being perpetrated against them. Unfortunately, however, I encounter far too many lenders who simply drop the ball on fraud prevention. It is as though the cash register is wide open, and nobody is watching the store. If you are a lender, you have to ask yourself, “Who’s watching the store?”
Official Spokesperson for Guthy-Renker Home, Ralph R. Roberts is an award-winning and internationally recognized real estate agent, speaker, and coach and author of several books including his most recent, Flipping Houses For Dummies (John Wiley & Sons), Foreclosure Investing For Dummies (John Wiley & Sons, June 2007), Protect Yourself from Real Estate and Mortgage Fraud: All You Need to Know About Scams and Con Artists (Kaplan, August 2007). For more about real estate and mortgage fraud FlippingFrenzy.com.