41 Arrested in Mortgage Fraud Sweep
Forty-one people in the New York area were arrested today, charged by U.S. Attorneys in connection with mortgage fraud schemes totaling $64 million dollars -- one of the biggest such sweeps ever.
The alleged scam artists profited off the housing crisis by running fraudulent foreclosure rescue operations, issuing false property appraisals and loan applications, flipping houses, and stripping them of their equity. Usually the schemes involved more than one company: law firms colluded with mortgage brokers and real estate agents in order to defraud both homeowners and banks.
Here are a few stories of how they did it:
• Lavette Bills, of MTC Real Estate, Inc., in the Bronx, regularly ran radio ads and appeared on radio programs in which she advertised herself as a "foreclosure specialist" who could save people from losing their homes to foreclosure.
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According to the indictment, Bills and others convinced homeowners to sell their homes to a company she or her partners controlled, usually through a "short sale," in which the lender agreed to sell the property for less than the balance owed on the loan and to forgive the remainder. Unbeknownst to the lender, and to the homeowners, Bills would resell the property to a straw buyer at an inflated price, often on the very same day.
Bills and her partners made about $5.6 million dollars through these flips and foreclosure rescues, while the homeowners usually received little or no money through the sale of their homes. Some of the straw buyers were themselves homeowners that were targeted by Bills because they were at risk of foreclosure. Bills and others told them that buying another home was a "good investment opportunity" and a way to save their properties.
• Through a tiny law office in Queens, Ravi Persaud fraudulently obtained $23 million dollars worth of home loans on 44 properties, authorities allege. He and his co-workers engaged in rather elaborate tactics: they also used straw buyers -- paying people a fee to act as purchasers of properties and obtaining loans from banks such as IndyMac, only to turn over the properties to his company once the transaction was complete.
Like Bills, Persaud would flip the properties in a few months, reselling them to other straw buyers. They also defrauded lenders by misstating the assets and income of loan applicants -- hiring people to fill out and certify false applications.
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