I attended the Illinois Coalition of Appraisal Professionals (ICAP) sponsored 2006 Illinois Appraisers Update Seminar on 6/1/2006. Representatives from Fannie Mae, HUD, and the IL Appraisal Division of the Dept. of Professional Requlation spoke on a variety of topics including:
- Common Appraisal Errors
- Mortgage and Appraisal Fraud
- Appraisal Forgery
- Identity Theft
Brad Geary, Assistant Special Agent in Charge from HUD - Chicago, OIG - provided some insights from the perspective of a field agent. Mr. Geary, in his self-deprecating fashion, claims that he's only an expert in the "obvious"! He feels that most fraud becomes apparent once a pattern is recognized. To become aware, we have to understand the Universal Truths of Mortgage Fraud listed below:
- Appraiser Fraud
- SSN / Identity Fraud
- Credit Reports / Letters of Explanation
- Ernest Money & Closing Costs
- Verification of Employment
- Verification of Bank Statement (Deposits)
- Verification of Landord
According to Mr. Geary, virtually all mortgage fraud combines at least two of the items above.
An example of this is the case of Wanda Morgan Tyler, 60, of Duluth, Georgia. She was sentenced June 2006 by U.S. District Judge Thrash on charges of mail fraud, relating to a scheme to defraud the Dept. Veterans’ Affairs (“VA”). Tyler was sentenced to 33 months in prison to be followed by 3 years of supervised release, and found liable for approximately $900,000 in criminal restitution.
- In over a dozen cases, Tyler created and submitted to the VA false wage statements, bank records, and other financial documents in the names of the purchasers that she represented, often without the purchasers’ knowledge. She did this to mislead the VA as to the credit-worthiness of the purchasers, thereby ensuring that the transactions would be approved and that Tyler would receive substantial commissions.
- In some cases, Tyler submitted bids under false identities that she created.
- As part of her scheme, Tyler used several aliases and different companies, all to conceal from the VA that Tyler was behind the scheme.
The VA lost over $900,000 as a result. This includes over $180,000 that the VA paid to Tyler in commissions from these fraudulent transactions, as well as over $720,000 in foreclosure losses, as almost all of the purchasers or purported purchasers defaulted on their mortgages.
All of us know that the 3/2005 Fannie Mae appraisal forms (Eff. 11/2005) had significant changes in the amount of information that appraisers need to research and verify. Looking that the list above, it's clear to me that many of the items on the new forms are designed to address the list of "Mortgage Fraud Universal Truths" above
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