North Carolina Regulators Focusing Their Fight On Mortgage Fraud

Officials with the North Carolina Banking Commission are looking to changes in their battle on mortgage fraud to stem the serious foreclosure problem currently existing in the state, according to an article in The News & Observer, at newsobserver.com.

The Commission:

• has proposed rules to improve lending practices for nontraditional mortgages such as interest-only loans and option-payment ARMs,
• has hired three more investigators, and
• is realigning its investigations and examination of lenders and brokers to focus on lenders with high rates of foreclosure.

A concern of the Commission is that, because originating mortgage lenders get paid up front and often sell the loan to another lender, the original lender may be less inclined to make sure the customer will be able to pay the loan over the long haul.

One regulator seems to suggest that, through the use of "Wite-Out or cut-and-paste documents", it has become too easy for originating lenders to "pad a home buyer's bank account", "[change] a potential home buyers' annual income", and otherwise "falsify loan applications". "[Letting] family members with good credit sign for a relative's home" is also a concern.

For more, see Lenders may face new rules.

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Overview Of The New York State Home Equity Theft Prevention Act

Chicago Title Insurance Company has an overview of the New York State Home Equity Theft Prevention Act ("HETPA") on their website, at titleinsuranceny.com. Click here for Chicago Title on HETPA.

For other online resoures on HETPA, see

• New York State Home Equity Theft Prevention Act Becomes Effective, and
• New York Home Equity Theft Prevention Act - Title Insurance Issues

For online resources on New York real estate and title insurance law issues, see Chicago Title's online reference library:

• Informational Articles For Attorneys,
• New York focus briefs (case law summaries), and
• New York legal forms library

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Suspect Charged With Bilking Funds From 88 Year Old Woman

A story of elder abuse began to unfold when Katherine Garcia-Herzog appeared in court Tuesday on charges that she took advantage of an 88-year-old Fiddletown, California woman.

In addition to allegations of credit card use without authorization, it is believed that the proceeds of a reverse mortgage on the alleged victim's home was illegally diverted by the suspect for her own use.

For more, see Prison wife charged with elder abuse, reported by the Ledger-Dispatch at ledger-dispatch.com.

Go here for other posts on reverse mortgage problems. zebra

Kansas Broker Cops Plea In Fraud Scam; Developer In Hot Water

James Sparks, of Lawson, Missouri, pleaded guilty in a Kansas Federal Court on Friday to a single count of conspiracy to commit mortgage fraud, according to an Associated Press article appearing in The Wichita Eagle, at Kansas.com. As a mortgage broker, he obtained loans for prospective home buyers by falsifiying financial information, rent verification and other necessary loan documents, and by using inflated property valuations from appraisers who allegedly were also part of the scheme.

His co-defendants in this indictment include Kansas City area developer F. Jeffrey Miller, as well as participants Stephen W. Vanatta, Hallie Irvin, and Sandra Harris. All are currently awaiting trial.

According to Federal indictments, the alleged scam in this story is nothing more than a continuation of a prior alleged scam in which Miller was indicted for in May, albeit with seven other participants/co-defendants.

For the entire article regarding the more recent case, see Broker pleads guilty to mortgage fraud. See also:

• Missouri man pleads guilty to mortgage fraud (2-26-07, Kansas City Business Journal),
• U,S. Attorney Press Release - Missouri Man Pleads Guilty In Mortgage Fraud Conspiracy (2-23-07)

For additional information on this case, including allegations of:

• soliciting home buyers with credit problems,
• promising to put them into homes with no money down and builder financing,
• unilaterally increasing home prices prior to closing,
• forging buyers' signatures,
• a "file cleaning party", where defendants purged and destroyed files of incriminating evidence with full knowledge of the ongoing federal investigation into the operation,
• the discovery that James Sparks, above, was cooperating with Federal investigators,

see 18 page Indictment - U.S. vs. Miller, Sparks, et. al. (Miller #2)

For details of the earlier indictment of real estate developer F. Jeffrey Miller, including a request of forfeiture in excess of $25 million, see 19 page Indictment - U.S. vs. Miller, et. al. (Miller #1)

State Legislatures Across The Country Consider Pending Fraud Bills

Mississippi
The Mississippi state legislature is considering the passage of two bills to combat the mortgage fraud problems occurring in the state. See Rep. Martinson joins in fight against rising mortage fraud

Utah
House Bill 25 passed the House unanimously on January 26 and is now on its way to the state Senate for consideration. Under provisions of the bill, mortgage fraud would become a second-degree felony with a possible sentence of 1 to 15 years in the Utah State Prison. See Legislation makes mortgage fraud a felony.

In addition, a Senate bill, SB199, has been introduced and which would allow regulators to investigate and fine unlicensed people who misrepresent themselves as real estate agents, brokers, real estate appraisers or mortgage officers. See Utah Senate bill takes aim at mortgage fraud.

Colorado
State Attorney General John Suthers unveiled proposed legislation targeting appraisal and mortgage fraud that is fueling record foreclosures in the state on January 8. See New bill targets appraisal, mortgage fraud

Arizona
Arizona Lawmaker Introduces Legislation To Aid Prosecutors In Pursuing Mortgage Fraudsters, and

Bill targeting cash-back mortgage deals moves forward

Michigan
Michigan lawmakers considering laws to combat identity theft. See ID theft attacked by GOP's Caul, Dem Angerer

Texas
House Bill 716 is pending in the legislature and would establish specific punishments for mortgage fraud, including imprisonment for up to 20 years and fines of up to $10,000 for knowingly making false statements. The law would apply both to consumers and to mortgage industry insiders. See Tougher mortgage fraud penalties eyed.
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Two Plead Guilty In Combined Foreclosure Rescue/"Straw Buyer" Mortgage Fraud Scam

(revised 8-16-07)
Two out of five defendants charged in an alleged $12.9 million real estate scam combining a foreclosure rescue scam with a "straw buyer" mortgage fraud scam in which more than 100 Southern California financially strapped homeowners ended up losing their homes have pleaded guilty to their roles in the operation.

Martha Rodriguez entered her guilty plea yesterday, and her cousin, Cynthia Valenzuela, pleaded guilty last week, prosecutors said. Both are scheduled for sentencing on Aug. 20.

The three remaining defendants, Edward Seung Ok, Maria G. Juarez, and Rodriguez' common-law husband, Vladimir Stefanovic, face trial in July.

To read more on the current guilty pleas, see Seal Beach escrow operator pleads guilty in fraud case, reported by The Orange County Register, at ocregister.com.

For an earlier report on this case, see Defendants Face Prison Time for Calif. Foreclosure Scam, reported by DSNews.com.

Click here to read the Stipulated Statement of Facts in the Cynthia Valenzuela Plea Bargain Agreement, pages 15 through 21, describing the specific allegations of foreclosure rescue coupled with a subsequent mortgaging of the victims' homes using straw buyers, and ultimately defaulting on the newly obtained mortgages.

Go here for updated posts on this story.
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Disabled Women Allege Theft Of Home Equity

Two Lodi, California women, blind since infancy and never able to work are on the verge of losing their home that they purchased free and clear only a few years ago, according to two online articles reported at Recordnet.com. Both are alleging to have been victimized by a former caretaker, whom both women befriended in 2004 when the caretaker was sent to the women's home by a home health-care agency two or three times a week for housekeeping and errands.

They allege that the caretaker convinced them to mortgage the home and then turn over most of the money to her, expecting she would make the mortgage payments. The caretaker acknowledges to receiving a $20,000 loan from the women. The balance of the mortgage loan, however, is listed at $320,000.

The filing of an 11th hour bankruptcy petition stopped a scheduled foreclosure sale last week. Local police are reportedly investigating whether a crime was committed. To read more, see:

• Possible fraud victims could lose their house
  (Blind women say former caregiver took advantage of them)

• Blind women file for bankruptcy to hold on to house
  (Lodi roommates say caregiver cheated them)

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Predatory Mortgage Servicing Practices

A recent consumer article by Jack Guttentag provides a list of some of the common abusive practices engaged in by predatory mortgage servicers. To read more, see Home-loan servicing gone awry.

For a story of New Hampshire homeowner Michael Dillon and his nightmare experiences with alleged predatory mortgage servicer Fairbanks Capital Corporation, now known as Select Portfolio Servicing, see Mortgage Go-Betweens Snag NH Consumers.

Or click here to listen to the New Hampshire Public Radio report on Michael Dillon's circumstances.

Mr. Dillon has a website devoted to his experiences with Fairbanks, at www.getdshirtz.com

Other consumer articles on this subject are:

Can I fire my mortgage servicer?
It's simple common sense -borrowers need proof of payment!

Click here for a Federal Trade Commission FTC Consumer Fact Sheet on Mortgage Servicers.

Go here , go here , and go here for posts on questionable mortgage servicing practices. questionable mortgage servicing practices tactics zebra
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Two NY Attorneys, 4 Others Accused Of Foreclosure Rescue Scam

Attorneys John Lewis and Angelyn Johnson are among six people who have been charged with selling the house out from under a financially strapped Rosedale, New York woman in a foreclosure rescue arrangement involving forgery, according to online articles on EmpireStateNews.net and the North Country Gazette.

According to the Queens County District Attorney, the attorneys have each been charged with second degree grand larceny, second degree forgery, second degree criminal possession of a forged instrument, first degree scheme to defraud and first degree falsifying business records, and face 15 years in prison if convicted.

The charges are the result of a joint ten month investigation between the DA's office and the NYPD’s Special Fraud’s Squad.

For more, see Mortgage fraud scheme broken up, and Attorneys Arrested In Real Estate Scheme.
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Ex-Lawyer Indicted For Stealing From Former Clients

A Worcester County, Massachusetts grand jury handed up a nine count indictment last week charging disbarred real estate lawyer Peter L. Schofield of Grafton of stealing about $750,000 from former clients, according to an article in the Worcester Telegram & Gazette News, reported at telegram.com.

The thefts from at least two of the alleged victims was of money representing the sale proceeds from real estate transactions. The indictment lists eight other victims. To read more, see Grand jury indicts ex-lawyer (Thefts from clients alleged totaling about $750,000).
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North Carolina AG Suing Foreclosure Rescue Operator

A story of an alleged victim of a foreclosure rescue scam is the subject of a report by WCNC-TV in Charlotte, North Carolina. The scam involved was an upfront fee scam, whereby the operator took a fee of $840 from the homeowner facing foreclosure in exchange for guarantees that the operator would help the homeowner communicate with their mortgage company and refinance the mortgage.

Reportedly, the homeowner got nothing in return. The North Carolina Attorney General's Office received numerous complaints against the operator, Mortgage Assistance of the Carolinas, and are currently suing the company.

To read the story, see Consumer warning: Home foreclosure nightmares.

Click here to watch the WCNC-TV video report.

For a brochure describing the types of foreclosure rescue scams, how they work, and the forms of legal challenges a consumer can make in defending against them, see Saving Older Americans from Foreclosure Rescue Scams.
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Feds Obtain 30 Count Indictment In "Straw Borrower" Scam

An Albany, New York federal grand jury has indicted Anthony Andersen of Florence, Massachusetts last Friday on 30 counts of mortgage fraud and money laundering, according to an online article on EmpireStateNews.net. Andersen recruited others who allowed him to use their names and identifying information to apply for and obtain loans from Union Planters Bank on property he either owned or controlled, according to the allegations.

The indictment alleges that:

• shortly before the loan closings, Andersen would put the title to these properties in the name of the straw borrowers;
• he also represented to the straw borrowers that he would maintain control of the properties;
• he told the straw borrowers that he would be responsible for the loans;
• he also agreed that he and/or entities controlled by him would re-acquire from the straw borrowers title to the properties shortly after the loan closings; and
• unknown to the lender, he would pay the straw borrowers for allowing him to use their names and identifying information to obtain the loans.
• Andersen misrepresented the properties' values and profitablity, the borrowers' identities and qualifications, and the intended distribution of the loan proceeds.

To read the article, see Mortgage fraud, money laundering indictment handed up.

Click here for the 30 Count Grand Jury Indictment against Anthony Andersen.

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Cincinnati Scammer Sentenced In "Straw Buyer" Flipping Scheme

Troy S. Clements was sentenced Wednesday in a Cincinnati, Ohio Federal Court to 24 months in prison for his role in a loan scheme that defrauded mortgage lenders out of $2.3 million, according to a report in The Enquirer, at Cincinnati.com. The sentencing came as a result of Clements' agreeing to plead guilty to one charge of bank fraud and one charge of money laundering last September in lieu of demanding a jury trial (originally a 21 count indictment). This is the latest conviction resulting from a joint mortgage fraud investigation by the local U.S. Attorney's Office, FBI, IRS, Secret Service, and the U.S. Postal Inspection Service involving over $50 million in properties in the Greater Cincinnati area.

The victimized financial institutions include ABN Amro Mortgage Group, Inc., Washington Mutual Bank, and Chase Manhattan Bank (now a part of J.P. Morgan Chase Bank of Columbus, Ohio. Other victims include Southstar Funding, LLC and Ashore Funding, Inc., two private mortgage lenders, as well as the homebuyers themselves who were duped into believing that the financing being arranged was legitimate, no money down, 100% financing.

To read the article, see Two years in prison for mortgage fraud. To read the court filings, which detail the grand jury's probable cause findings as to the fraud see:

• 21 Count Grand Jury Indictment - U.S. v. Clements, et. al.
• Plea Bargain Agreement - U.S. v. Clements

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Sub Prime Mortgage Market Compared To "The Titanic"

Commentator Richard Benson makes an interesting comparison between the current state of the subprime mortgage market and the ill-fated oceanliner, The Titanic in a recent online article at GoldSeek.com.

The expected fallout includes sub-prime mortgage lenders either closing down shop or seeking bankruptcy court protection, and homeowners being trapped in a house they either can’t sell or refinance.

To read more, see Subprime Titanic Hits Iceberg: Wall Street Abandons Ship.

For a prior post on this problem, see Is The Sub-Prime Mortgage Market In Trouble?

Other Sources On This Issue:

• Lender Nightmares continue ---- the mass exodus
• Housing Market Subprime Mortgages Timebomb waiting to Explode
• Could Tremors in the Subprime Mortgage Market Be the First Signs of an Earthquake?

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Michigan Usury Law

For those readers who were recently "Google searching" for something on the Michigan usury statutes, I came across a four year old article that possibly may be of some interest to you. For more, see Michigan Usury Law (Mortgage Loans), by Jack Murray.
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Arizona Deed Theft Ring Out Of Business

The operations of a six member deed theft ring was the subject of a recent article in The Arizona Republic, reported at azcentral.com.

The scheme was very straightforward. The ring would "steal a house" by recording a forged deed to the property, unbeknownst to the true owner, and then proceed to obtain a mortgage loan against it. Needless to say, the ring would take the mortgage proceeds and start the process over with another property. The true owners would only find out about the fraud when the mortgage lender, who was duped into making the loan, attempts legal action.

Reportedly, seven families were fleeced out of half a million bucks. Four of the six ring members were recently sentenced by authorities, including ex-real estate agent Lesley Romero, whose real estate license was revoked.

The other two ring members, Jessica Alvarado and Robert Mora, have yet to be apprehended and are currently on the lam. To read the article, see Beware of mortgage-fraud scam.

For links to recent stories on deed theft by forgery in Detroit and Boston, see Detroit Area Law Enforcement Targeting Deed Theft With Dedicated Units.

For a Philadelphia story, click here to see an NBC Channel 10 deed theft video report.

For a Chicago story, click here to see a CBS 2 video report on deed theft.

For a Lee County, Florida story, click here to see an NBC 2 deed theft video report.

For similar stories over the last couple of years, see this collection of deed theft by forgery reports on The Mortgage Fraud Blog, presented by The Prieston Group.

Go here for other deed theft posts. deed theft zorro
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Indiana Foreclosure Rescue Legislation Pending

Indiana Senate Bill 390, which proposes to regulate foreclosure rescue consultants and purchasers, is currently working its way up the Indiana state legislature. One feature in the proposed bill, which is similar to the newly enacted statutes in Illinois and New York, is that there is a provision requiring a "foreclosure purchaser" to pay to a homeowner 82% of the proceeds of any resale of property.

Click here to view Indiana Senate Bill 390.
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North Carolina Modular Home Dealer Fined $1 Million For Fraudulently Financed Home Sales

The now-defunct CMR Properties and Home Finance Group of Fayetteville, North Carolina has been court-ordered to pay fines and penalties of approximately $1 million in connection with legal action brought by the state Attorney General's office, where the company was alleged to have misled dozens of families, many of whom had less than perfect credit, into buying modular homes they couldn't afford and falsified loan application and appraisal forms, according to WTVD Channel 11 (Raleigh - Durham - Fayetteville) on their website at abc11tv.com.

The fallout of the scam includes homeowners either facing foreclosure or stuck with making house payments on a home they can't sell or refinance.

For the full story, including the Channel 11 video report, see Home Dealer Ordered to Pay.
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Equitable Mortgage Defense In Homeowner - Tenant Eviction

The fourth and fifth installments of a multi-part post regarding the defense against an eviction of a tenant in possession of real property who claims to be the equitable owner of said property under the equitable mortgage doctrine have been posted.

The 4th installment involves a 2001 decision of the Colorado Supreme Court involving a financially strapped homeowner who entered into a foreclosure rescue transaction with an investor. For more, see Equitable Mortgage Defense In Homeowner - Tenant Eviction - Part 4.

The 5th installment involves a 1991 New Jersey court decision also involving a financially strapped homeowner who entered into a foreclosure rescue transaction with an investor. For more, see Equitable Mortgage Defense In Homeowner - Tenant Eviction - Part 5. equitable mortgage zebra

Dozen Defendants Sentenced In Hattiesburg Flipping Scam

The remaining seven defendants (out of a dozen) implicated in a property flipping operation were sentenced in a Hattiesburg, Mississippi Federal Court for their roles in the scheme.

Richard Lucas, the ringleader of the scheme, was sentenced to 14 years in jail. Lucas must also make more than $1.3 million in restitution to Countrywide Home Loans and other companies defrauded in the scheme and will serve five years of probation after his release.

Closing attorney Kimberly Castle was sentenced to two concurrent 48-month jail terms followed by a concurrent three- and five-year probation. Castle must also make more than $1.3 million in restitution to Countrywide Home Loans and other companies defrauded in the scheme.

Ken Stalnaker was sentenced to 28 months in prison and must make $938,767 in restitution to companies defrauded in the scheme. Stalnaker will also be subject to five years of probation.

Lucas, Castle, and Stalnaker did not plead guilty to the charges; rather, they went to trial and were found guilty by a jury. Lawyers for the three say they plan to appeal the guilty verdicts.

In addition:

Kenneth Fairley Jr. was ordered to make restitution of $97,055.17 to Countrywide Mortgage, and sentenced to six months of house arrest and five years of probation for his role in the mortgage flipping case.

Loretta Champ was sentenced to nine months incarceration and three years of probation, and must make $152,089.29 in restitution to Countrywide Mortgage and $21,612.60 to another company defrauded in the scheme.

Michael Cox was sentenced to three years of probation, nine months of house arrest and must pay more than $91,000 to companies defrauded in the scheme.

Jacqueline Mosley was sentenced to three years probation, six months of house arrest and to pay restitution.

The remaining defendants, who agreed to plead guilty to charges of conspiracy to commit wire fraud in lieu of going to a trial, waived the right to appeal.

Five other defendants, who all agreed to plead guilty in lieu of going to trial, were sentenced about three weeks ago for their participation in the scam. Their sentences ranged from 60 months probation to 19 months in prison. In addition, they were each ordered to pay restitution to Countrywide Mortgage in an amount totaling almost $1.7 million.

For the whole story on the latest developments on the final seven defendants to be sentenced, see:

• 7 sentenced in mortgage flipping scheme (Hattiesburg American)
• Judge throws book at fraud schemers (WDAM-TV Channel 7; Laurel/Hattiesburg, MS)

See Five sentenced in mortgage fraud scheme for the earlier sentencing of the first five defendants involved in the flipping scam.
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Two Virginia Residents Allege Property Flipping In Class Action Suit

A class action lawsuit filed in October by two Martinsville residents who allege to have been scammed in a property flipping operation is the subject of a media report in today's Martinsville (Virginia) Bulletin, at martinsvillebulletin.com.

The suit, filed and currently working its way up the system in an Indiana Federal Court, alleges that some of the defendants bought modestly priced homes, inflated the property appraisals, and resold them to unwitting buyers for the inflated price.

The alleged ringleaders have been accused of recruiting unwitting "straw buyers" by inviting them to participate in a real estate investment club and who were told the club would buy rental property in the Indianapolis area, finance the purchases with loans that required no down payment or cash contribution from participants, and manage the properties at no cost to participants. Further, the participants were told that the properties would throw off enough rental income to both cover the house payments and pay profits to them, according to court filings.

Included in the allegations for one or more of the 21 named defendants are charges of fraud, theft by deception, civil conspiracy, negligence against the appraisers, negligent misrepresentation against the appraisers, and violations of both state and federal racketeering (RICO) statutes.

Indiana resident Robert Penn and Ace Appraisal Services are listed on the suit as the lead defendants among the 21 defendants named in the suit. To read more, see Another lawsuit alleges fraud.

To read the lawsuit, click here for Copy of Lawsuit - Watkins, Hairston, et. al. v. Robert Penn, Ace Appraisal Services, et al.

For a related ABC News Nightline story, see Giant Scam? Real Estate Dreams Dashed (Investment Club Turns Into a Nightmare Idea); or watch video - Nightline Online: Town's Boom & Bust.

Is The Sub-Prime Mortgage Market In Trouble?

It appears that the sub-prime mortgage market, which reportedly accounts for 20% of all new loans, is currently in the throes of a meltdown as ResMae Mortgage Corp. of Brea, California, filed for bankruptcy last week, becoming at least the 20th mortgage company to be sold or closed as delinquencies rise and the market for home loans to high-risk borrowers contracts.

Apparently, $308 million in loans that the company originated and sold off to Wall Street powerhouse Merrill Lynch & Company have gone sour prior to the expiration of the "early payment default" buy back period, during which Merrill can demand that ResMae buy back the loans. Merrill has exercised its rights to demand of ResMae a buy back of those bad loans. In bankruptcy filings, the company attributes its "crippled" operations on the buyback demands that have been made of it.

Reportedly, other Wall Street big shots like J.P. Morgan Chase & Co., HSBC Holdings PLC and others are also trying trying to force mortgage originators to buy back the same high-risk, high-return mortgages that the big banks were eagerly buying over the last couple of years. In particular, HSBC, which has recently added $1.76 billion to cover unanticipated losses from delinquencies and foreclosures on the sour mortgages it's stuck with, has reportedly sued several small mortgage originators in federal court in Illinois after they refused HSBC's repurchase requests.

In addition, other mortgage companies have either announced cutbacks in subprime production, quarterly losses, or sharply-elevated delinquency rates. Some major banks have announced staff reductions in subprime and moved to tighten underwriting rules.

(I wonder if these sub-prime mortgage market problems have anything to do with the proliferation of inflated, bogus appraisals, see Is The Real Estate Appraisal Profession In Trouble?, or so-called "stated income" loans (aka liars' loans), see Problems With Stated Income (Liars') Loans???)

Fasten your seat belt. The problems are only just beginning.

Sources:

• Subprime Mortgage Meltown Could Squeeze Some Credit-impaired Home Buyers
• Sub-prime lender seeks bankruptcy protection
  (ResMAE joins a list of mortgage companies hurt by the growing number of defaults)
• Payback: Big Money Gets Tough On Bad Mortgages

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Missouri FBI Active In Mortgage Fraud Investigations

Receipt of numerous allegations about mortgage fraud schemes in the Springfield area has resulted in active investigations by the FBI, according to an article in the Springfield Business Journal Online Edition, reported at sbj.net.

Disproportionately high list prices for homes in some subdivisions and an upsurge in foreclosures has the local real estate community buzzing with speculation about possible widespread fraud.

Reference to one incident is made where, subsequent to a 2005 civil lawsuit against Realtor Charles Walker filed by a former business partner in which possible fraud-related allegations were made, authorities (local, state and federal) seized computers and documents from Walker's office pursuant to a search warrant.

To date, Walker has not been arrested, no charges have been filed against him, and officials will not comment on any possible criminal investigation of Walker himself, although reportedly, a joint FBI and IRS investigation into his business dealings is active.

To read the entire article, see:

FBI investigating alleged mortgage fraud in Springfield
(Abnormally high sale prices and foreclosures cause concern in real estate circles)
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