Mortgage Fraud Suspects Indicted in California: How Could They Get Away With It?
This time, it's a builder in Chico, Calif., who has been indicted for allegedly selling unsold new homes to non-existent or straw buyers, thereby scamming loan funds from banks and other duped lenders. Per the FBI and U.S. Department of Justice, almost 500 people have been indicted nationwide since March 1, in a coordinated effort to address the problem of crime in the housing and mortgage industries. Losses from fraud schemes are estimated in excess of $2 billion.
In the Chico case, builder William T. Baker is now facing charges for mortgage fraud for allegedly setting up fake buyers for unsold homes, creating fraudulent loan applications and applying for loans for more than the homes were worth at the time in 2007 and 2008. Foreclosure was the end result, while Baker and accomplices allegedly pocketed the proceeds from the inflated home sales.
Anyone who has ever applied for a mortgage knows that extensive tax and financial information must be produced and that reams of documents must be signed, initialed and often notarized.
How could scammers be able to perpetuate such kinds of fraud?
Fraud on this scale requires the cooperation of numerous individuals, from appraisers to the builders seeking to unload inventory.
In an even grander alleged scheme in Chico, central California-based builder and tract developer Anthony G. Symmes is accused of setting up phony buyers for 62 homes. Prosecutors say that each was appraised and sold for approximately $60,000 more than it was worth. His reported co-conspirator was another local man, an unlicensed mortgage broker named Garrett Griffith Gililland who allegedly helped forge mortgage documents, providing inflated appraisals and false income statements so that straw buyers could purchase homes. The total in the suspect home sales: $21 million. Now, of the 62 homes, 38 are in foreclosure, 10 were subject to short sales, reports the Sacramento Bee.
Because of such scams, California continues to be a hot spot for FBI investigators looking to find mortgage fraud that includes loan origination schemes (as alleged in the Chico incidents), short sales and equity skimming. Often these cases involve so-called mortgage brokers utilizing falsely obtained personal information. (HousingWatch reports on how to guard against these varieties of real estate fraud and protect yourself from scams.)
Real estate fraud has a ripple effect, contends the U.S. Attorney's Office involved in the Baker case: Because houses were appraised at more than they were worth, their foreclosure had more impact on other home values in the neighborhood, impacting equity of those not involved in the scam.
Expect more of these kinds of cases, as Housing Watch reports. Unfortunately, the housing bubble also produced numerous opportunities for white-collar criminals to take advantage of easy money and unsecured loans. Also look for more indictments as "Operation Stolen Dreams" continues.