Real Estate and Mortgage FraudEmerging Trends

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Real Estate and Mortgage FraudEmerging TrendsC-10204

CE Forward, Inc.S-1655

Jillayne SchlickeI-0651

Welcome! Please complete your sign-in sheet Cell phones and laptops off while class is in

session. I-pads okay Breaks Bathrooms Coffee Water

Agenda

Real Estate and Mortgage Fraud; Emerging Trends

C-10204

IntroductionsBoundariesWhat do you want to learn today?Case StudiesEmerging TrendsLocal Case StudyQuizEvaluationsCertificatesClose

ObjectivesTo learn about emerging trends in real estate and mortgage fraud.

Boundaries

Real Estate and Mortgage Fraud

Policy

TimeLaw

FBI’s Definition of Mortgage Fraud1) Fraud for Housing is

perpetrated by borrowers and/or one or more industry professionals when they misrepresent information on the loan application. This type of fraud does not usually result in significant losses to a financial institution.

FBI’s Definition of Mortgage Fraud 2) Fraud for profit consists of systematic

transactions by industry professionals who are attempting to steal a significant amount of the funds associated with one or more mortgage transactions. This type of fraud usually involves multiple parties in various disciplines within the mortgage industry, such as mortgage originators, appraisers, real estate brokers, escrow closers, builders and title companies. Fraud for profit usually results in significant—if not catastrophic—losses to financial entities involved in mortgage loan transactions and it is of major concern to the mortgage industry

Section 1: Small Group Assignment Introduce yourself to the people in

your small group.

What do you want to learn today?

What do you want to learn today?“mortgage loan advisor”Loans were not locked on time (bank fraud)

Mortgage rates

4.375 gives a 1% lender credit3.875 at PAR3.375 discount points will cost 1%

Current Issues in R.E. and Mortgage Fraud

Distressed Homeowner FraudShort Sale FraudStrategic DefaultManipulating the BPOStraw Borrowers

R.E. and Mortgage Fraud Silent Second

○ US v. Century Mortgage Straw Buyers

○ Where do flippers find straw buyers? Identity Theft

○ What is a lender required to do? Inflated Appraisals

○ Could this still happen? Equity Skimming

○ Diverting rents collected Foreclosure Rescue All cash luxury home purchase

Recent, local cases Emiel Kandi

“I am a wolf”

Galina and Aleksandr KravchenkoCouple who fled to Eastern Europe plead guilty

Thomas HazelriggFormer Bellevue developer sentenced for tax evasion

Pavel RombakhIllegal money transmitting

Emerging Trends  Collusion of industry insiders

How does a lender figure out if there is collusion if it’s not disclosed and insiders have different last names?

Emerging Trends  Affinity Fraud

An enduring part of mortgage fraud

Ethnic, religious, professional, or age-related groups

Emerging Trends  Inflating income and assets

How could this still be happening if lenders are requiring borrowers to bring in W2s, tax returns, and bank statements?

Emerging Trends  Bankruptcy Fraud

How can this happen when attorneys are supposed to be supervised by the BAR association?

Emerging Trends  Debt elimination/sovereign

citizen extremistsThis would never happen

around here, right?

Emerging Trends  Forensic Audit Fraud

Upfront fees are charged and company claims that homeowner can use the results to avoid foreclosure

Emerging Trends  Mass Joinder Lawsuits

Another upfront fee scam preying on financially distressed homeowners

Emerging Trends  Credit Privacy Numbers

Often advertised as a “credit repair” solution, for a fee customers are given a CPN to use in place of their SSN.

Emerging Trends  Bi-Coastal Property Investment

“Clubs”Sold as a way for the individual

investor to become part owner on many pieces of real estate but the perpetrator flipped the properties to the borrowers using inflated values. No tenants, no maintenance. Homes go into foreclosure

Emerging Trends  Illegal Property Flip w/Cash

Out PurchaseAbove market offer from buyerBuyers require cash back at

closing spelled out in an addendum

Inflated appraised value

U.S. v. Doug White and Diana Merritt

Read the case study. Break into small groups and answer the

questions. Elect a group leader and share your

results with the rest of the class.

Doug White 55 counts of mortgage fraud10 years in jail

Diana Merritt10 Counts of mortgage fraud90 days

QuizRules:1) Jillayne’s quizzes are always only for fun2) True/False = 50% chance of being right!3) Small group quiz = okay to work in groups4) Open book = Answers might be in the handouts5) But they also might not be in the handouts so guessing is cool!

Fraud mitigation CFPB anonymous whistleblower hotline 1-855-411-CFPB

Jim Siwek Assnt Special Agent in Charge Seattle HUD OIG 206-220-5160 jsiwek@hudoig.gov

Recap Real estate and mortgage fraud will

always be around. The schemes change from year to year. Loan originator licensing has helped.

Is there more that the DOL can do on the real estate side?

Recap, Certificates, Evals, Close

Any remaining questions?Will upload questions, answers and links to the website CEForward.comPlease do not lose your certificatesTHANK YOU!

Evals: Please write a narrative description about your experience in class