According to the USA Today story: Las Vegas called ‘mortgage fraud ground’ – “In recent years, there have been so many mortgage fraud cases, the bureau and local prosecutors have had to establish a special task force to combat the problem.”
Think it can’t happen to YOU!? Continue reading this real-life appraiser’s hard-knocks educational experience where mortgage fraud lay behind the sales transaction.
The seller was not selling and the buyer was not buying. The loan officer falsified the Verification of Deposit from the bank to make the 21 year old, unemployed straw-buyer, appear to earn $18,000 a month.
The aggrieved lender discovered the fraud 3 months later when it performed due diligence checks prior to packaging the loan for sale in the secondary market. Upon discovery, the loan officer, fled to California and became invisible.
The owner of the mortgage company had contact from bank attorneys holding her financially responsible for the criminal fraud perpetrated by the agent working under her license. Quickly attempting to pass responsibility onto the appraiser, the mortgage company owner sent a complaint to the state claiming I had committed fraud by over-valuing the home and demanded that the state revoke my appraiser's license. Noticeably absent from her letter was any mention of the fraud committed by the loan officer in her company.
In short order the bank cast a wide net to recover its losses not only from the mortgage company, but from me, the review appraiser who agreed with the value, Landsafe for hiring the review appraiser, the home owner and the straw buyer who hadn't submitted a tax return for the prior two years and claimed an income of $4,000 on the return from three years back. Bank attorneys apparently did not feel the loan officer/escape artist could be found or should be mentioned in the lawsuit.
The seller and straw buyer both answered their court depositions with attempts to lay blame on the appraiser by using statements such as "I hired an appraiser to tell me how much my house is worth."
All this prompted a visit to Las Vegas by the bank president and vice president of the Utah lender. These men asked if they could meet with people involved in the problem and discuss the matters "off the record" with "no attorneys present."
Curious to know their intention, I attended the meeting where they spoke straight-faced in grim tones saying that if they "didn't leave with $162,000" (from the people assembled), they would move the process "to the next level," the FBI, state licensing agencies and the court where attorney fees would pale the sums demanded that day and lead to bankruptcies and ruined careers.
No words can express the depth of intimidation sweeping the room as we trembled at the terrifying picture unfolding. Across from me was the acting manager who performed the review of the loan application prior to submission for funding. The altered material was so cleverly done he failed to catch it. Now accused of failing to perform due diligence, he faced unimaginable legal fees and agreed to contribute $10,000, the same sum I surrendered.
Another $5,000 was offered by the owner of the mortgage company and also from the unemployed straw buyer who secured the money from his family.
The seller promised to pay much of the remainder if he could get an equity line on his other home . . . but it was already worth less than what he owed on it.
A desperation phone went to the ex-loan officer in California who, probably sensing grave consequences if he did not respond, phoned back within 15 minutes. Laid at his feet was a bill for $26,000 he said he'd try to get. He never did and reverted to his former strategy of not returning calls.
By 4:30 PM that day a total of $45,000 was handed the bank president who, rather than withdrawing the lawsuit, maintained the threat of court action and compounded my legal fees. The fact that Utah had no jurisdiction over Nevada residents led to a dismissal from the Utah court but kept alive the prospect of action in Nevada.
The final tab for me, including the $10,000 shake down money, totaled over $30,000. In the end, people completely innocent of unethical conduct paid thousands to the lender for the seller's fraudulently obtained debt and led to the conclusion that, at least in this case, crime can pay handsomely. Thousands of dollars poorer from legal fees, I am a beaten man.
But the lawsuit seemed to end when the homeowner reacquired title via quit claim deed and refinanced the major part of the fraudulently obtained loan. Later, however, he defaulted on the new loan, losing the home in foreclosure to a second bank that subsequently sold it for pocket change.
My advice to those facing their first lawsuit is to consider eventual legal services beyond the E&O attorneys who will protect the insurance company primarily.
Legal cock and bull will play out over a tortuously long time but, when the direction of the suit appears to take shape, additional counsel may be helpful. Enduring the added legal expense may seem foolish but the cost may actually be less than the increased E & O premiums -- mine jumped 10 fold, from $400 a year to $4,000.
Appraiser's Name Withheld Upon Request
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