“Rogue Builder” Duped JP Morgan Chase Into Making Mortgage Loans In Mortgage Fraud Scheme

27 12 2008

“…the suit alleges that Percudani, Chase Manhattan Mortgage, Stroudsburg appraiser Dominick Stranieri and several others engaged in widespread fraud by selling homes in Monroe County at inflated prices through several of Percudani’s companies, including Raintree Homes, Why Rent? and Chapel Creek Mortgage…”

 

 

“…Chase Manhattan Mortgage, a division of JP Morgan Chase, denied the allegations, claiming that Percudani was a rogue builder who duped Chase into making the loans. Chase also argued that after being alerted to the alleged scam, it reduced the principal on more than 200 mortgages in 2002 after appraisers hired by Chase determined many of the homes were sold for as much as $50,000 more than their true value…”

http://www.mcall.com/news/local/all-b3_5chase.6720064dec26,0,5613229,print.story

 

A U.S. District judge has called for an attempt at a negotiated settlement and delayed the trial related to the federal lawsuit that alleges more than 100 home buyers were defrauded by JP Morgan Chase Bank and a Poconos developer.

Originally scheduled for February, Judge Christopher Connor rescheduled the trial to June 1, 2009, after a mediation session with retired Judge Diane M. Welsh was scheduled for Jan. 28.

The mediation was ordered by Connor after he delivered a strongly worded opinion filed in October saying the ”record supports the conclusion that the Chase defendants” aided the alleged scheme by Tannersville builder Gene Percudani to sell homes at inflated prices.

Filed in 2002, the suit alleges that Percudani, Chase Manhattan Mortgage, Stroudsburg appraiser Dominick Stranieri and several others engaged in widespread fraud by selling homes in Monroe County at inflated prices through several of Percudani’s companies, including Raintree Homes, Why Rent? and Chapel Creek Mortgage.

The suit claims that Chase took part in the alleged scam by ignoring its usual underwriting guidelines in approving mortgages for Percudani’s customers, many of whom were people with poor credit from the New York area drawn to the Poconos by an advertising campaign that asked ”Why Rent?” and which offered new homes for as little as $1,000 down and mortgage payments of $685 per month.

But the actual payments were much higher and mortgages far more than the real value of the homes. Unable to sell or refinance their mortgages, many of the plaintiffs were forced into bankruptcy and foreclosure while others suffered financial hardships, according to the suit.

Chase Manhattan Mortgage, a division of JP Morgan Chase, denied the allegations, claiming that Percudani was a rogue builder who duped Chase into making the loans. Chase also argued that after being alerted to the alleged scam, it reduced the principal on more than 200 mortgages in 2002 after appraisers hired by Chase determined many of the homes were sold for as much as $50,000 more than their true value.

After six years of depositions, Connor said testimony from current and former Chase employees indicates that Chase officials knew about the scam, and even established unusual underwriting guidelines to approve the mortgages, many of which didn’t go into default until after they were sold by Chase to the secondary market, chiefly Fannie Mae and Freddie Mac.

A Chase spokesperson could not be reached for comment.

Percudani has denied the allegations. He closed his homebuilding businesses and now operates the Cherry Valley Golf Course near Stroudsburg.





Minnesota Mortgage Fraud Ring Convicted Of Lining Up Straw Buyers, Originating Fraud Mortgages, And Then Selling Properties At Inflated Prices

22 12 2008

“…Shinon Lindberg would allegedly recruit “straw buyers” for pieces of real estate. They had a third accomplice, a mortgage broker who would secure fraudulent loans, and then Scott Rosenlund would use his company 10Spring Homes to buy and sell the properties at inflated prices…”

http://www.myfoxtwincities.com/myfox/pages/News/Detail?contentId=8104640&version=2&locale=EN-US&layoutCode=TSTY&pageId=3.2.1

Two men were found guilty Thursday in a big mortgage scam that’s made headlines for a year. Prosecutors say they defrauded banks and investors all over Hennepin County.


Shinon Lindberg and Scott Rosenlund allegedly masterminded the largest mortgage fraud case in
Minnesota‘s history. They were found guilty Thursday of racketeering and seven counts of theft by swindle.”We’re seeing too many schemes. This is one time the bad guys got caught and they’re doing time,” says Mike Freeman, Hennepin County

Attorney.

Shinon Lindberg would allegedly recruit “straw buyers” for pieces of real estate. They had a third accomplice, a mortgage broker who would secure fraudulent loans, and then Scott Rosenlund would use his company 10Spring Homes to buy and sell the properties at inflated prices.

For instance, court documents show that one parcel of land was bought and sold the same day for a $100,000 mark-up.

Deals like this were done time and time again over three years, eventually bilking banks and unwitting investors out of more than $100 million.

Freeman says the properties were scattered all over southwest Hennepin County, and investors never saw any of the money they were promised.

Rosenlund and Lindberg will be sentenced in February. They face up to 100 months in prison.





Mortgage Lenders Forced Appraisers To Inflate Home Values

5 12 2008

“They would get on the phone and scream at me to inflate values,” he said. “They said, ‘If you keep coming in low, we’re not going to work with you anymore.’ ” Finally, the brokerage delivered on the threat, cutting off business with Fincham’s company.

skullcross

http://hamptonroads.com/2008/12/appraisers-say-they-were-pushed-overvalue-properties

Real estate appraisers in Hampton Roads and across the nation say they have felt intense pressure from lenders, mortgage brokers and real estate agents to deliver inflated valuations – a serious ethical breach that may have played a role in puffing up the real estate bubble and promoting mortgage fraud.

The problem has been around for some time, says Woody Fincham, a Chesapeake-based appraiser. For several years in the mid-2000s, Fincham said, his company, FM & Associates, did steady business with a Virginia Beach mortgage brokerage but faced escalating pressure to deliver inflated appraisals.

“They would get on the phone and scream at me to inflate values,” he said. “They said, ‘If you keep coming in low, we’re not going to work with you anymore.’ ” Finally, the brokerage delivered on the threat, cutting off business with Fincham’s company.

“They said, ‘You’re not hitting the numbers we need you to hit,’ ” Fincham said.

That brokerage, Everyday Lending, is now out of business, dragged down by the collapse of the subprime mortgage market. One of its former loan officers, Aretha Smiley, has been named in two civil lawsuits alleging mortgage fraud.

The volume of inflated real estate values has declined with the contraction of the housing market over the past year, Fincham and other appraisers say, but the pressure to pump up values hasn’t gone away.

 

Appraisers play a crucial role in the buying and selling of real estate: They place a value on the property to be sold.

In theory, the appraiser is an independent operator, not influenced by the buyer, the seller or anyone else. The reality, say Fincham and fellow appraisers across the country, is far different.

It’s not as if there was no warning.

Back in 2001 the Appraisal Institute, a worldwide association of real estate appraisers, told Congress that members were facing increasing pressure from lenders, brokers and realty agents to inflate property values.

Such pressure can enable lenders to make loans larger than the actual value of the house, the institute warned. Moreover, those inflated transactions can later be cited as comparable sales in appraisals of nearby properties, creating a multiplier effect.

“Such a cycle of ever escalating values adds unnecessary risk to our mortgage finance system” and “can contribute to mortgage fraud,” the institute warned.

Those words seem prescient in this era of deflating home values, mounting foreclosures and emerging cases of fraud.

Since 1999, more than 10,000 appraisers nationwide have signed an online petition urging the federal government to clamp down on lender pressure to inflate values. Such pressure is pervasive, the petition says, and includes blacklisting appraisers who refuse to go along.

Some local appraisers were unwilling to discuss the issue on the record, saying they feared losing business.

One willing to talk was Suzanne Shannon, an appraiser in Hampton.

“I’ve been told numerous times, right flat-out in plain English, ‘If you don’t do what I want you to do, you’ll never work for me again,’ ” Shannon said.

The deflation of the housing bubble has prompted some lenders to look more critically at appraisals, Shannon said. Occasionally over the past few months she has been asked to review high valuations turned in by other appraisers.

In one instance, a waterfront property in Gloucester County had been appraised at $2.1 million; Shannon’s review put the value at only $1.2 million.

 

A 2007 national study found that 90 percent of appraisers reported being pressured to raise property valuations to enable deals to go through. The prime culprits, according to the survey, were mortgage brokers.

Mortgage brokers, on the other hand, put the onus back on appraisers.

“The appraisers have to step up here and take the high ground,” said Marc Savitt, president of the National Association of Mortgage Brokers. “I understand a lot of them have been threatened with loss of business and so forth. I’m not saying it didn’t happen.

“If they get pressured, they need to report it to the appropriate regulator. That’s the first thing. The second thing is, if they do commit fraud, then they have to understand there’s consequences for that, and just because somebody tried to influence or pressure them, that’s not an excuse for committing fraud.”

The trouble is, when coercion occurs, appraisers have little recourse, said Glenn James, a Norfolk appraiser and a member of the Virginia Real Estate Appraiser Board.

“Mortgage brokers are totally unregulated” in Virginia, James said, so there’s no one to complain to.

Another problem, appraisers say, is that the pressure is usually applied in oral form, not written, making it hard to prove.

But not always.

Mark White, a Roanoke appraiser, told of getting a faxed order from an out-of-state broker that mentioned a figure of $195,000 and asked him if he could “match this value.”

A cursory review of the property – a 37-year-old, 1,000-square-foot house – showed that it was worth $150,000 at most, White said.

According to the Uniform Standards of Professional Appraisal Practice, the national appraisers’ code of ethics, it is unethical for an appraiser to accept an assignment that is contingent on reporting a predetermined value.

In Virginia, those ethical standards have been incorporated into the state regulations governing appraisers. Violations can result in a variety of sanctions, including license revocation.

Pressure on appraisers to pump up the numbers was particularly intense during the run-up in prices during the early and mid-2000s, said Bill Garber, director of government relations at the Appraisal Institute.

“Good appraisers said no to it and went about their business and did their jobs professionally,” Garber said. “But there are institutionalized conflicts of interest that exist – pressure points in the lending process – that can allow people with a vested interest in the transaction to control the appraisal process.”

Such coercive tactics are a violation of federal banking regulations.

Earlier this year, the Federal Reserve Board adopted a rule barring mortgage brokers and lenders from coercing appraisers.

The new rule is a positive step, Garber said, but the proof will be in the pudding: “Enforcement is key. It’s going to be incumbent upon the regulatory agencies to keep this issue on the front burner.”

The problem is, for every appraiser who abides by the rules, there’s another one down the street who’s willing to violate them to get more business, said Cheri Eimer, an appraiser in Newport News.

“It’s very disheartening for an honest appraiser to lose business because they’re doing the job that they’re hired to do,” she said. “It’s a big problem. It needs to be fixed.”








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