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So-called “creative financing strategies” or cash back
at closing scenarios have become quite common in recent years and in of
itself, pose no threat. However, as many of us have always heard, if
something sounds too good to be true, it probably is.
I would like to take this time now to share a personal
story of mortgage fraud involving the youngest sister of a dear friend of
mine. The young lady in question is Diane*, a 21-year-old college student
with dreams of “making it big” in real estate. At the onset of the
transactions, she had superior credit but very little, if any, cash on hand.
In the middle of 2005, her best friend introduced her to Joshua*, an
industry insider that was going to help build their fortunes in real estate.
Diane soon became acquainted with Joshua who explained the “get rich quick”
scenario to her. Apparently, all Diane had to do was allow Joshua to use her
good credit to purchase properties in the Chicagoland area. For the use of
her credit, Diane was to receive $10,000 per deal. Of course, Diane being
young, naïve and all too trusting, gladly went along with the scenario. To
sweeten the deal, Joshua was even going to buy her a condo for which she was
to live in rent free in exchange for her cooperation. Around this time, I
received a call from Diane asking my opinion on the situation. I quickly
told Diane to be very careful as Chicago has become a hot spot for mortgage
fraud. The best advice I could give her was to make sure she had a reputable
attorney to review all the transactions before proceeding further. It was
only later that I learned that Joshua had his own attorney to review all
deals and Diane was discouraged from seeking outside professional legal
counsel.
Fast forwarding to the summer of 2006, Diane began
receiving multiple notices of foreclosure from several lenders (some of
which were household names). The assessments on the condo that she has moved
into are unpaid and she is receiving calls from creditors and collection
agencies on an almost daily basis. Shortly afterward, Diane returns to live
with her mom and soon discovers that the creditors are calling her at her
mother's house as well. Diane also discovers that she has over $2 million
dollars of property in her name for which she is responsible. She tries to
piece together how this happened as she knows she has no income and no
verifiable assets. Apparently, Joshua, in cooperation with a contact at a
credit bureau, an appraiser, an attorney and a household name lender, was
able to orchestrate all of these transactions. To make matters even worse,
Diane discovers that there is now a $100K Mercedes in her name of which she
had no knowledge and several parking tickets to boot!
Frantically, Diane keeps trying to contact Joshua to no
avail. The young college student is now extremely worried and is losing
sleep trying to plan her next move. She comes upon what she thinks is a
solution - she decides to simply sell the properties. The only problem with
that plan is that the property values have been severely inflated to allow
Joshua to get thousands of dollars cash back at closing. To further
complicate matters, Diane has never attended an actual closing so she has no
closing documents, deeds or any paperwork of any kind. This was clearly NOT
what she had bargained for. And if you are wondering whether Diane ever
received a $10,000 payment from Joshua - the answer is an emphatic NO.
As of the writing of this article, Diane is in the
process of repairing her credit, locating Joshua to press charges, and
trying to move on with her life. She has certainly learned an extremely
costly lesson with regard to real estate “get rich quick” schemes.
Read below to find out about telltale signs of mortgage
fraud, its negative effect on the community and what to do if you suspect
you are a victim of mortgage fraud.
TELLTALE SIGNS:
1) Someone offers you a fee to use your name
and credit information to obtain a mortgage.
2) You are encouraged to include false
information on a loan application.
3) You are asked to leave signature lines or
other important areas of a loan application blank.
4) You are discouraged from seeking outside
legal counsel to review documents before signing them.
NEGATIVE EFFECTS TO THE COMMUNITY
1)
Artificially inflated housing values at the onset (due to bogus appraisals
that do not reflect the true value of the subject property).
2)
Foreclosed properties rise which can later become magnets for criminal
activity (Many of the properties obtained by mortgage fraud are board-ups or
completely uninhabitable).
3) Lost property tax revenues.
4) Decline in the number of lenders willing to
do business in certain neighborhoods.
5)
Loss of homeownership gains for the African-American community (Over 90% of
fraud cases are concentrated in poor, minority neighborhoods.
HOW TO REPORT MORTGAGE FRAUD
1) Contact the Federal Trade Commission to file
a complaint www.ftc.gov
2) Contact the US Department of Justice
202-514-2000
3) Contact your local FBI field office:
Illinois 312.421.6700
* Names have been changed to protect identities.
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Danielle Johnson is an investor and licensed real
estate agent with Williams Realty and Investments. She specializes in Time
Management, Money Management, and Wealth Creation through multiple streams
of income. She can be reached at 773-551-5769. |
