Real Estate and Mortgage Fraud!

 

by flippingfrenzy.com
2006

 

FBI Releases Latest Real Estate and Mortgage Fraud Statistics

FBI Releases Latest Real Estate and Mortgage Fraud Statistics

The FBI just released its latest figures on real estate fraud, and for some parts of the country, the news isn't very good! According to the FBI, Southern California has the most reports of mortgage fraud in the country, topping the closest region in the number of reported cases by over 35 percent. Since January 1 of this year, the FBI has received 2,293 reports of suspected fraud in the Los Angeles area alone, and 4,228 in the Southern California region.


Real estate industry insiders in a number of ways initiate reports of Real Estate and Mortgage Fraud to the FBI. If a lender identifies a suspect, it is required to report the suspected activity to the FBI. However, according to the Los Angeles Times, only lenders that operate as banks are required to file suspicious activity reports with the FBI. That's a growing number of lenders, say the LA Times, but banks account for less than one-half of all mortgage loans (mortgage brokers, which arrange loans but do not fund them, are not required, for some reason, to file reports with the FBI).


The FBI's list of Real Estate and Mortgage Fraud hot spots thus far for 2006, with the number of cases reported through September 25, is as follows:

1.   Los Angeles, California: 2,293
2.   Atlanta, Georgia: 1,459
3.   Chicago, Illinois: 1,245
4.   Miami, Florida: 1,191
5.   San Francisco, California: 942
6.   Detroit, Michigan: 914
7.   New York, New York: 907
8.   Dallas, Texas: 635
9.   Phoenix, Arizona: 631
10.   Houston, Texas: 618


Countrywide Home Loans' Says Indiana Man is Responsible for Massive Mortgage Fraud Scam

The nation's largest independent home loan lender, Countrywide Financial Corp., is suing a Fishers, Indiana, man for orchestrating a mortgage fraud scheme in which dozens of Virginia residents were tricked into buying homes in Indianapolis and Westfield, Indiana, at significantly inflated prices. Countrywide alleges that Robert Penn worked with relatives in Virginia-and associates that included appraisers and mortgage companies-to defraud hundreds of homeowners.


According to the Indianapolis Star, Countrywide's lawsuit lists 112 properties, but on Thursday, Prudential Realtors in Indianapolis put that number closer to 400. By some accounts, the Star reports, the dollar value of the loans, many of which have defaulted or are now in foreclosure, is somewhere between $40-$80 million.


Georgia Auto Dealer Pleads Guilty in Mortgage Fraud Case

The U.S. Department of Justice announced yesterday that 42-year-old Michael Hipe of Snellville, Georgia, pleaded guilty in federal district court to conspiracy to commit mortgage fraud. In May of this year, Hipe was indicted along with three co-defendants-Eric Friedman, Brianna Friedman and Timothy Bauer-on two counts of conspiracy to commit mail fraud and money laundering, two counts of mail fraud, and eight counts of money laundering.


According to United States Attorney in charge of the case, in 2000, Michael Hipe and co-defendant Eric Friedman became partners in a metro-Atlanta used car dealership called "Hipe Motors." Hipe invested in the business while Eric Friedman ran it. In order to raise money to operate the business, in the summer of 2000, Michael Hipe purchased four new condominiums in the metropolitan Atlanta area. For his part, Eric Friedman prepared false loan applications and supporting documentation, including tax returns that misrepresented Hipe's income. At the real estate closings, Hipe signed the false loan applications, certifying them as accurate and true.


In order to pull money out from the closings, Friedman and Hipe misrepresented to lenders that a portion of the loan proceeds would be used for the renovation and construction of the condominiums, even though the they were new or otherwise did not need renovation or upgrade. Then, both men misrepresented to their lenders that the construction work was to be performed by "The Fabricators, Inc.," which in fact was a shell company, not incorporated in the State of Georgia. At the end of the day, Friedman and Hipe used the money to finance Hipe Motors and for Eric Friedman's personal expenses. The funds obtained at closings were run through Hipe's bank accounts and then run through Eric and Brianne Friedman's bank accounts.


When Hipe was unable to obtain further financing to purchase condominiums, he introduced his mother and a family friend, both of whom live and work in Massachusetts, to Eric, who persuaded Hipe's mother to act as a straw buyer on the purchase of three condominiums in Atlanta to provide additional funds to operate Hipe Motors. As you might expect, Eric prepared loan applications containing false information and supporting documentation, including tax returns that misrepresented Hipe's mother's employment and income. At two of the three real estate closings for his mother, Hipe, along with Eric, acted as her attorneys, executing numerous documents, including the loan applications.


Eric also persuaded Hipe's family friend to provide him with his credit information. Once Friedman obtained that information, he opened a checking account at Wachovia Bank in the name of the family friend "d/b/a The Fabricators," Inc. In June 2002, at Eric's behest, the family friend purchased a home in Braselton, Georgia, for the sole purpose of pulling money out of the transaction to further finance Hipe Motors. That transaction was also financed through the submission of a false loan application prepared by Eric Friedman. Then, in February of 2004, the family friend sold the Braselton property another straw purchaser/borrower (Timothy Bauer) to obtain even more money for the scam.


As a result of the scam, lenders foreclosed on all seven of Hipe's condominiums (with losses exceeding $500,000).

For his part, Hipe pleaded guilty to one count of conspiracy to commit mail fraud. He could receive a maximum sentence of five years in prison and a fine of up to $250,000. Sentencing for Hipe has not been scheduled.


On August 23, 2006, Eric Friedman pleaded guilty to conspiracy to commit mail fraud, attempt to evade the payment of income taxes, credit card fraud, and interstate transportation of cars obtained by fraud. He could receive a maximum sentence of forty (40) years in prison and a fine of up to $1,250,000. No sentencing date has been scheduled for Friedman either.


Sources:

www.flippingfrenzy.com

www.indystar.com

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