In Connecticut, a licensed real estate agent, has pleaded guilty from her involvement in a “short sale” mortgage fraud scheme. The charges had stemmed from an alleged “short sale” mortgage fraud scheme involving four properties located in Connecticut.
A “short sale” of a home involves a lender who enters into an agreement to release its mortgage or lien on real property in exchange for an amount less than the total amount owed on the existing mortgage balance. In this day and time there 1000’s of short sale transactions that are legitimate to assist homeowners avoid foreclosure.
She worked with another real estate agent, to defraud Regions Bank, which held two mortgages on a residential property in Bridgeport, Connecticut. She was the listing agent for the property, received an offer to purchase the property for a price of $132,500. Although, they both then informed Regions Bank that the highest offer to purchase the property was for $102,375 by an Asset Management entity that one of the real estate agents owned and controlled. The bank agreed to a short sale of the property for the lower price, and released its mortgages on the property and the two real estate agents retained the difference in the two sale prices.
The overall scheme creates a straw buyer transaction in order to negotiate with mortgage lenders which allow the sale of a property to occur without paying the mortgages in full, in most cases to avoid foreclosure. Then during the short sale negotiations with the lenders, while the real estate agents knew that legitimate new buyers of the home already had signed purchase and sale agreements with the property owners to purchase the property at higher prices. On each of the transactions, the agents had arranged for two closings to take place, the first from the property owner to the straw buyer at the lower short sale price from the lender, and the second from the straw buyer selling the property to the legitimate purchaser at a higher price. In most cases these closing happen on the same day if not within a couple of hours of each other. This is all done with the mortgage lenders having no idea about the second closing, thus not receiving and of the additional proceeds from the second closing.
They are both awaiting sentencing and could face a maximum term of imprisonment of 30 years, a fine of up to $1 million, and an order of restitution.
We should all congratulate the Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation Division; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes.
We must be vigilant against fraud, recognizing its signs and taking proactive, definite, and realistic steps to not only prevent it but also punish it.
It starts with me.
It starts with you.
It starts with us…
You are all encouraged to report any suspected mortgage fraud activity to authorities.
Michael S. Richardson
Director/Mortgage Fraud Services
Author of “An American Epidemic, Mortgage Fraud a Serious Business”