Clarence Harris was charged by information and agreed to plead guilty to Conspiracy to Commit Bank Fraud, Wire Fraud and Mail Fraud and Filing a False Income Tax Return in connection with his role in a Cincinnati, Ohio flipping scheme that has thus far resulted in over two dozen guilty pleas. According to court documents, as a result of his fraud, engaged in between June 1, 2002 and January 19, 2006, Harris caused actual and/or intended losses to financial and lending institutions of $872,910. The conspiracy charge carries a maximum penalty of 30 years in prison and a $1,000,000 fine while the tax related charged carries a maximum penalty of three years in prison and a $100,000 fine.
According to the plea agreement, the scheme operated as follows:
• A person would purchase a piece of real estate at a low value, e.g., $20,000
• A buyer would be recruited – usually someone that could not otherwise afford to purchase real estate or an individual interested in properties as an investor
• After finding the buyer, one of the co-conspirators would create false documents, including pay stubs, W-2 forms, bank statements and employment verifications.
• The co-conspirators would obtain a falsely inflated appraisal for the property
• The co-conspirators would submit the false loan package to the lender in order to obtain a highly inflated loan (e.g. $85,000 for the property that was originally purchased months before for $20,000).
Harris acted as a loan originator and a recruiter for many of the flipped properties. He recruited buyers to purchase properties from others at artificially inflated values and was aware that one of his co-conspirators, rather than the buyer, brought the down payment to the closing. He was also aware that buyers often received undisclosed kickbacks outside of the closing. As owner of Check First Mortgage, Harris prepared loan applications that he knew were false, overstating borrower’s income and assets, and which were supported by inflated appraisals.
The plea agreement details two transactions, one a June 19, 2003 transaction whereby Eddie Cooper purchased property at 316 Mohawk Place, Cincinnati, Ohio for $58,000 and the other wherein Rhonda Ballew purchased property at 5211 Lillian Drive, Cincinnati, Ohio for $118,000. The loan documents in both cases falsely reflected that the borrowers contributed the down payments when it was, in fact, they were made by Harris. Both loans were supported by inflated appraisals. Harris received payoffs from fraudulent loan proceeds payable to his mortgage company, Check First Mortgage, and to his shell company, Inman Realty, and failed to report substantial income.
A hearing on the plea agreement is scheduled for February 28, 2006.
Somehow this doesn’t makes me feel better, I can’t stop thinking how many like him will come, how many frauds do we still have to face. We already in a crisis, let’s hope things won’t get worse than that. We have to learn who to trust in handling mortgage.
Seriously, tough times for all of us right now, I am struggling to eat but I am making $5k/month. Things are expensive especially when you have debt and collectors.
The most effective way to avoid prosecution for mortgage fraud is to identify mortgage fraud schemes prior to any actual involvement. Most mortgage fraud offenses fall into one of two general categories: “fraud for housing” and “fraud for profit”. Fraud for housing often involves fraudulent acts committed by a borrower, often coached by his or her mortgage broker or real estate agent, to obtain a loan for the ultimate goal of acquiring a home. These fraudulent facts generally pertain to the falsification of facts and documents during the loan application process to enable the borrower to obtain financing that he or she would otherwise not be qualified to receive. Conversely, fraud for profit typically involves a more concerted plan to abuse the entire real estate transactional process for pecuniary gain.
Mortgage fraud for profit is typically a more complex scheme involving an inflated appraisal, falsified loan applications, equity skimming, property flipping, and sometimes identity theft. The borrower is typically a straw buyer, who never intends to occupy the house. The mortgage payment is paid by the investor, or a company controlled by the investor. Eventually, the investor stops making mortgage payments, forcing the lender to foreclose, or sells (“flips”) the house for additional profit.
The crime of mortgage fraud has developed quite a bit in this country over the past few years. Sometimes called real estate fraud, this type of crime is wreaking havoc across the country as perpetrators get better and better at it and their methods develop and have become quite complex. Two distinct types of mortgage fraud have arisen to take the forefront of this disgusting practice. Let’s have a closer look at the two major types of mortgage fraud and how they operate, perhaps in knowing about them you will be better able to arm and protect yourself against their occurrence.
A rental property is negatively geared when it is purchased with the assistance of borrowed funds and its expenses exceed the rental income and a loss is incurred.Conversely positive gearing is where the income received is greater than the total amount of the expenses and therefore creates a situation where tax must be paid on the net income. Generally you will find a newly purchased negatively geared property will have better capital growth than that of a positively geared property.
Mortgages issued in the first half of 2007 are going bad at a pace that far outstrips the 2006 vintage, suggesting that the blow to the financial system from U.S. housing woes will be deeper than many people earlier estimated.
Receiving mortgage advice early on is invaluable for any home owner. When problems do occur, mortgage advice and debt counseling can often be combined. Ways of saving money can be discussed, methods to make extra money identified and a complete solution brought into action to Stop Repossession.An extension of the mortgage term does result in more interest being paid, but also brings the monthly repayments down. Being able to stop repossession is all about making life more affordable and spreading the cost over longer helps to achieve this objective.
Do you know about reverse mortgage?
Understanding real estate investment is crucial because it usually involves a substantial investment and a long-term one. Moreover , the real estate market can be unpredictable. This is particularly important when one goes beyond buying a home to actually “investing” in real estate.
In today’s modern society there are so many different kinds of fraud taking place right under your own nose it really beggars belief.As well as income tax fraud mortgage fraud is right up there with the rest of them.And if where not keeping a vigil on things then you could be the victim of a fraud your self.
Great stuff loved the post.
Mortgage fraud is a term used to describe a broad variety of criminal actions where the intent is to materially misrepresent or omit information on a mortgage loan application to obtain a loan or to obtain a larger loan than would have been obtained had the lender known the truth.
Hi,
Very nice article, thanks a lot for sharing ….cheers keep going
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interesting read, thanks for helping keep me busy at work