Poor Ms. Webster owns three homes worth over $5 million and she only makes $49,000 annually.  She never lived in any of the homes and she can't afford to pay the mortgages.  She has received at least one foreclosure notice and is now suing Eric Duke, the man who orchestrated the deals and lives in one of the multi-million dollar homes.  Worse yet, one of the homes sold on land contract for over $2.5 million and she never saw a dime! 

Whose job is it to stop mortgage fraud?  Should the title companies be responsible for detecting mortgage fraud? And, what if they fail to do so... do they become criminal co-conspirators?  A Boca Raton title agency, Fortune Title Services, has found itself at the center of a an alleged mortgage fraud scheme that has led to several indictments.  The fraud apparently involved at least two dozen homes and more than $6.5 million in kickbacks described on the mortgage applications as "assignment fees," according to an article in Palm Beach Post.  The attorney for Marni Belkin, the attorney-owner of Fortune Title, claims that she was duped by the fraudsters.  As criminals get more sophisticated, it becomes more difficult for title agents to detect fraud.  Still, that doesn't prevent them from being drawn into an FBI investigation.

“In order to fulfill their duty to consumers and investors, Fannie Mae and Freddie Mac must ensure that Washington Mutual’s mortgages have not been corrupted by inflated appraisals,” said Attorney General Cuomo. “Our expanding investigation into the mortgage industry has uncovered that Washington Mutual improperly pressured appraisers to provide inflated values that best served the lender’s interest. Knowing this, Fannie Mae and Freddie Mac cannot afford to continue buying Washington Mutual mortgages unless they are sure these loans are based on reliable and independent appraisals.”

As you no doubt are aware, lenders now regularly sell the mortgage loans they make into the financial markets, either directly or to investment banks or Government Sponsored Enterprises ("GSEs"), such as Federal National Mortgage Association ("Fannie Mae") or the Federal Home Loan Mortgage Corporation ("Freddie Mac"). The loans are then pooled together, securitized, and sold to the general public as mortgage backed securities.

This configuration has the effect of making the lender less vigilant against risky loans since any risk is quickly transferred to the purchasers of the loans. Moreover, as the lender does not hold many of its loans in its portfolio, the lender's interest in ensuring the accuracy of the appraisal backing the loan is severely diminished. Even worse, because lender's profits are determined by the quantity of loans they successfully close, and not the quality of those loans, there is an incentive for a lender to pressure appraisers to reach values that will allow the loan to close, whether or not the appraisal accurately reflects the home value.

Further jeopardizing the process, mortgage brokers and the lenders' loan production staff are almost always paid on commission. Thus, the income of these individuals depends on whether a loan closes and on the size of the loan. Accordingly, brokers and loan production staff have strong personal incentives to pressure appraisers to value a home at the maximum possible amount, so that loans will close and generate maximum commissions. For these reasons, mortgage brokers and lenders frequently subject real estate appraisers to intense pressure to change values in appraisal reports.

The investment banks and GSEs may also have an interest in inflating (or at least in not questioning) the value of the pooled loans. The values of these loans serve as a basis for the value of their securities. As such, the higher the value of the loans closed, the greater the value for which the securities are sold on the secondary market.

An Illinois couple were accused yesterday of mortgage fraud in a 2005 scam that caused losses of nearly $1 million to five area financial institutions in one day.

Albert and Janna Pliner of Cook County, Ill., were indicted in Franklin County Common Pleas Court and accused of money laundering, theft and securing false documents after an investigation by the Central Ohio Mortgage Fraud Task Force, county Prosecutor Ron O'Brien said.

Arrest warrants have been issued for the couple.

Authorities said the Pliners purchased a home in 2005 near Canal Winchester. Two months later, prosecutors say, they went to five different lenders on the same day and obtained second mortgages and home-equity lines of credit, getting up to $280,000 on each loan.

He was able to fake good credit to buy literally dozens of Tampa properties, including an apartment building... And then secretly, leaving almost no mark at all, according to investigators, he used his building like a burglar’s tool. Again, using a false name, he filed fake documents to make it appear it was paid off... It’s reported Cox took out mortgages on this building worth nearly a $1 million, five times what it was worth.

They were more like Robin Hood, Cox told her—the big fat insurance companies would cover the losses, nobody would actually get hurt.

And so she was willingly sucked in.

Alison rented a home, forged a deed, and then just as Cox told her he’d done again and again, filed phony paperwork to get three real mortgage loans borrowing nearly $400,000 against a property she didn’t even own.

Then, she bought a house under a fake name and incredibly, the Social Security number of her own young son... She filed false paperwork to make it appear a mortgage was paid off, then pulled out hundreds of thousands of dollars and leaving lenders holding the bag.

Atlanta-area lenders who’d been stiffed began alerting authorities about Cox’s schemes.

"The number of victims, the number of stolen identities used, the number of prior mortgages that are erased—all of that makes this case very unique, said Gale McKenzie, assistant U.S. attorney, Atlanta."

• State and federal officials are examining the actions of Barbara Haywood, a former employee of First American Title, whom they believe may have stolen at least $50,000 from her former employer.


• A grand jury in Seattle, Washington indicted six people after they were linked to a massive identity theft scheme that used personal identifying information provided by employees of a mortgage company and escrow firm.


• Norvel Brown, the former president of Mississippi Valley Title Company of St. Louis, Missouri, pled guilty on February 6, 2007 after admitting that he stole more than $3.2 million from his commercial escrow accounts and the Department of Housing and Urban Development (HUD).


• Officials arrested Nina Rogers, a title company employee, for allegedly stealing more than $30,000 from ERA First Advantage of Newburgh, Indiana.