Forty-one defendants, in eight separate cases, were indicted yesterday for allegedly engaging in various mortgage fraud scams that collectively defrauded lenders out of more than $64 million in home mortgage loans on more than 100 properties across New York State. Among those charged are six lawyers, seven loan officers, three mortgage brokers, an accountant, and a residential property appraiser.
As part of the coordinated takedown of "Operation Bad Deeds," a joint federal, state, and local law enforcement operation targeting mortgage fraud crimes, 31 defendants were arrested or surrendered to authorities in New York, Pennsylvania, Ohio, and North Carolina. One additional defendant is expected to surrender to authorities later. The defendants taken into custody are expected to be presented in federal court.
Four of the defendants were previously charged and will appear in Manhattan federal court at a later date, and five defendants remain at large.
The mortgage fraud scams alleged in these cases, among other things, include property flips, equity stripping, and appraisal and loan fraud. In one case, defendants operated a foreclosure rescue scheme, targeting individuals who were on the verge of losing their homes by tricking them into giving up the equity in the properties with false promises that their homes would be saved.
In the largest case, involving 11 defendants, the defendants identified distressed properties that could be purchased at a low price, usually by targeting homeowners who had fallen behind on their mortgage payments and whose homes were facing foreclosure. In most instances, the defendants induced the homeowners to sell their homes to companies controlled by the defendants, These companies usually purchased the properties via "short sales," in which the lenders agreed to sell the properties for less than the balance owed on the loans and to discharge the remainder of the loans. The defendants then resold or "flipped" the properties to third party straw buyers at a higher price, usually on the same day. In other instances, the defendants tricked the homeowners into deeding or selling their homes to other persons, by falsely promising the homeowners that title would be returned to them at a later date or telling the homeowners that they were merely refinancing their homes.
The defendants also deceived the straw buyers and the lenders who were providing the mortgages to finance the purchases. In some instances, the straw buyers thought that they were helping the homeowner "save" his or her home from foreclosure, or they were told that they were purchasing an investment property. The straw buyers were also often told that they would not need to make mortgage payments on the properties, either because the payments would be made on their behalf, or because the payments would be covered by the rental income from the properties. The defendants convinced lenders to give the straw buyers mortgages to purchase properties the straw buyers could not otherwise afford by falsifying certain - personal and financial information about the straw buyers. For example, the defendants prepared and submitted to the lenders documents containing false statements about the straw buyers' employment, income, and assets.
From Real Estate Economy Watch