Vol. 3, No. 16
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June 15, 2006
Nevada's Online State News Journal
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Feature Story:
Mortgage Fraud In Nevada Puts State's Borrowers In Jeopardy
Silver State Ranked Seventh In Nation, Predators, Deceptive Practices Abound
The owner of Nevada First Residential Mortgage is headed to federal prison, Ameriquest Mortgage can no longer conduct business in Nevada, and USA Capital is in bankruptcy, and according to information from Nevada's Mortgage Lending Division, mortgage fraud continues to be one of the most devastating crimes that can be perpetrated on the state's citizens. Millions of dollars in fraud deny some of the state's elderly their homes even after they have been paid off, millions of dollars of fraud keep some young from becoming home-owners, and some perpetrators are looking to be interviewed by representatives of the FBI, the IRS, and HUD. Mortgage fraud is devastating to many, and from many different angles. Racial and ethnic minorities, the elderly, the less than educated are favored targets.
Actually the losses have been close to the one billion-dollar mark just in 2005. The FBI believes that at least 15 percent of their caseload comes from mortgage fraud. In Nevada, mortgage companies are regulated by the Mortgage Lending Division of the Department of Business Industry. We recommend two web sites in Nevada for more information: http://www.dbi.state.nv.us and http://www.mld.nv.gov
The FBI says that in 2005 they have more than 21,000 cases of mortgage fraud investigations. From the point of view of the borrower there are several things that must be carefully investigated before signing one's name on that dotted line.
Predators
One particular fraud that surfaces regularly according to Scott Bice, Mortgage lending division commissioner involves companies that coerce borrowers into lying to get their mortgage. A company will offer to set up a bank account or brokerage account in the applicant's names so credit companies can verify ownership of those accounts. The money or other assets are rented via a sub-account of the company's master account, usually at five percent. The applicant cannot otherwise use or draw from the funds.
This gives the impression that the borrower has assets that don't exist in real time. Another ploy is to offer "employment verification." This also gives the impression the borrower is in fine economic condition and a mortgage loan will be processed. At the same time, those working a fraud will attempt to get a client to borrow more than he or she can afford to pay. The loan goes through, and shortly thereafter the mortgage loan isn't being paid, foreclosure takes place with the property owner in default. Guess who then owns the property? And it can be sold again and again.
According to HUD high interest rates to borrowers are often based on race or national origin and not on actual credit history. Often mortgage companies that may be ethically challenged will set up shop in the poorest neighborhoods, similar to the way the payday loan sharks operate. When seniors are targeted, often they will find that a home that is completely paid for has increased in value by hundreds of thousands of dollars.
Seniors often live on fixed incomes, but when they are convinced to borrow against their considerable equity, fraudulent companies will over sell, the seniors will find payments are far more than they were told, and could find themselves losing their homes. High interest rates, according to HUD are often hidden in the bookwork and strip the homeowners of their property. In the trade it's called "stripping" which means a loan is made based on the equity in the property rather than on a borrower's ability to repay the loan. Those loans are designed to fail according to the Federal Trade Commission (FTC).
Have you seen the ads guaranteeing you a loan regardless of your credit? Don't believe a word. According to an organization known as Fraud Watch International, a scam known as the Advance Loan Scam is designed to strip money from you and you get nothing in return. Through e-mail, snail mail, or advertising a consumer might respond to a pre-approved loan plan. Again the poor and the elderly are generally the targets. There is no such thing as being pre-approved. When you inquire you are told that, yes you can get that loan, all you have to do is pay an advance fee.
"Legitimate credit lenders," Fraud Watch International (FWI) says, "will never guarantee credit to a consumer before they apply, especially if they are dealing with consumers with bad credit histories." The organization says, "There should be no pay involved either. Paying for a credit report is one thing, paying for guaranteed credit doesn't exist in law."
The owner of Nevada First Residential Mortgage, Mark Young, was sentenced to six years in prison, three years of supervised release, and ordered to pay a half million dollars in restitution to HUD following federal trial on falsification of loans for unqualified borrowers. He was charged with falsifying loan papers, and creating false mortgage loans for low-income borrowers. Many of those were high interest, bogus loans offered to illegal aliens. Because of the falsifications, the loans were processed by lenders licensed and insured by HUD.
According to many the Nevada First Residential Mortgage case was a text book application of fraud. The false information included phony employment records including income information, tax forms, credit references, even falsified immigration information.
Because of the remarkable increase in the value of homes over the last 30-years, many now retired find themselves with opportunities to create investment potential through refinancing their homes. Too often the costs are higher than they anticipated and they are then led into another horrible form of mortgage fraud called "flipping." This occurs when a lender induces a borrower to repeatedly refinance a loan, over and over within a short time frame, charging high points and fees each time.
In some cases mortgage companies will attempt to force appraisers to come to them with fixed appraisals, which is illegal. To tell the appraiser before the property is looked over what to fix as the value of the property is coercion. Another disastrous loan that borrowers must be aware of is called the "balloon payment." According to the FTC when one has fallen behind in payments, foreclosure is being threatened, another lender will offer to save you from foreclosure by refinancing your mortgage and lowering your monthly payments. Look carefully, the FTC warms. The payments may be lower because the lender is offering a loan on which you pay only the interest each month. At the end of the loan term, the principal, that is the entire amount you borrowed, is due in one lump sum, the balloon payment.
If you can't make the balloon payment or refinance again, you face the loss of your property. Those that commit mortgage fraud have no morals, have no sense of shame, and only want your property and your money. For example, if you are having trouble paying your mortgage and the lender is threatening foreclosure, you may be contacted by another lender saying something to the effect, before he can help he needs you to deed your property to him, claiming it's just a temporary measure to prevent foreclosure. The promised refinancing never comes through; the fraudulent lender owns your property.
According to state and federal mortgage overseers, it isn't often that an entire company will be involved in mortgage fraud, that it is usually individuals within a structured company. Often though they will be high up in the company or corporation. In Nevada currently Ameriquest has been stripped of its right to offer mortgages. This apparently was a company wide attempt to de-fraud, and the scams took place across the nation.
The Nevada Mortgage Lending Division has this information on their web site. "If you have obtained a loan through Ameriquest on a property located in Nevada or while a resident of Nevada, please complete the complaint form available on the web site." They say a restitution process is being developed and the complaint form will be your first step toward restitution. It is a nation-wide restitution with about $1.7 million to be released to those that may have been bilked by the company.
Tips from HUD on being a Smart Consumer
• 1. Before you buy a home, attend a homeownership education course offered by the U.S. Department of Housing and Urban Development-approved, non-profit counseling agencies.
• 2. Interview several real estate professionals and ask for and check references before you select one.
• 3. Get information about the prices of other homes in the neighborhood.
• 4. Hire a properly qualified and licensed home inspector to carefully inspect the property before you are obligated to buy. Determine whether you or the seller is going to be responsible for paying for the repairs.
• 5. Shop for a lender and compare costs. Be suspicious if anyone tries to steer you to just one lender.
• 6. Do not let anyone persuade you to make a false statement on your loan applications, such as overstating your income, the source of your down payment, failing to disclose the nature and amount of your debts, or even how long you have been employed. When you apply for a mortgage loan, every piece of information that you submit must be accurate and complete. Lying on a mortgage application is fraud and may result in criminal penalties.
• 7. Do not let anyone convince you to borrow more money than you know you can afford to repay. If you get behind on your payments, you risk losing your house and all of the money you put into your property.
• 8. Never sign a blank document or a document containing blanks. If information is inserted by someone else after you have signed, you may still be bound to the terms of the contract. Cross through any blanks so information cannot be added.
• 9. Don't sign anything you don't understand. Ask questions, see your attorney, consult with a trusted real estate professional, or go to a HUD-approved Housing Counseling Agency near you.
• 10. Be suspicious when the cost of a home improvement goes up if you don't accept the contractor's financing.
• 11. Be honest about your intention to occupy the house. It is a federal law to lie on this one.
All of the above sounds like common sense, obvious, but the obvious part is this. A scammer talks someone out of his or her life savings hourly in this country. As mentioned, 15 percent of the FBI workload is mortgage fraud. People are ripped off by way of mortgage fraud daily. In Nevada during the current fiscal year there have been 41 cases of mortgage fraud. The number of cases being investigated at this time isn't known.
They are out there and they want your money and your property. Be aware.
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