Foreclosure Consultants Are The New Swindlers, Coming From The Ranks Of Unethical Mortgage Brokers In Many Cases

15 01 2009

Until recently, defrauders tried to bilk homeowners out of the equity in their homes. Now, with that equity often dried up, they are presenting themselves as “foreclosure rescue companies” that charge upfront fees to modify loans but often do nothing to stave off foreclosure.

“That’s all I’ve been doing for the last year,” said Angela Rosenau, a deputy attorney general in California, citing more than 300 complaints about fraudulent companies last year, not counting those made to local prosecutors.

 

http://www.nytimes.com/2009/01/15/us/15mortgage.html?_r=1&ref=us&pagewanted=print

As home values across the country continue to plummet, the authorities say a new breed of swindler is preying on the tens of thousands of homeowners desperate to avoid foreclosure.

 

The Federal Trade Commission brought lawsuits last year against five companies representing 20,000 customers, and state and local prosecutors have brought dozens more. In Florida, Attorney General Bill McCollum recently sued a company that he said had more than 600 victims.

“There’s no way for the consumer to sort out the legitimate companies,” said Mr. McCollum, who added that he had limited resources to fight what he called “a sheer volume question.”

The companies under suspicion typically charge an upfront fee of up to $3,000 to help borrowers get lower rates on their mortgages from their lenders. But borrowers often cannot afford the fees, the service can be bogus and, in the worst cases, the homeowners lose their chance to renegotiate with their bank or to file for bankruptcy protection because of the time wasted.

There are companies that provide legitimate foreclosure services, but the industry is largely unregulated, making it difficult for homeowners to separate the good from the bad. Some of the fraudulent companies — often run by former real estate agents or mortgage brokers — are local; others are national. Many have official-looking Web sites that suggest that the companies have government affiliations and give homeowners a false sense of security.

“That’s all I’ve been doing for the last year,” said Angela Rosenau, a deputy attorney general in California, citing more than 300 complaints about fraudulent companies last year, not counting those made to local prosecutors.

Experiences like those of Maria Martinez, of Stockton, Calif., are playing out with greater frequency across the country, the authorities say. Ms. Martinez struggled to pay her mortgage last summer. She had no shortage of people offering to help. Fliers for rescue companies filled her mailbox.

At a seminar for troubled borrowers near her home, one company offered a service that promised just what Ms. Martinez needed: for $1,000, the company said it would negotiate with her mortgage company to lower her interest rate.

“I was desperate,” said Ms. Martinez, 57, a clerk at the San Joaquin County Jail. She made an initial payment of $500 and paid another $500 a few weeks later.

Now the house is in foreclosure, and Ms. Martinez is waiting for the sheriff to evict her. She cannot reach the man she paid to modify her loan.

In California and 20 other states, including New York, companies are prohibited from collecting payment until they have completed their services, something Ms. Martinez did not know. In Colorado, the attorney general’s office has closed 15 mortgage rescue companies that charged fees up front.

Carol McClelland, 46, fell into foreclosure on her Chicago home when she lost her job as a waitress in two restaurants. She received a call from a company called Foreclosure Solutions Experts, promising to stop the foreclosure and lower her mortgage payments to around $550 a month, from $1,056, Miss McClelland said.

“She showed me other clients’ files, and they were paying $650 a month,” she said. The charge for the service was $1,300, which Miss McClelland paid in installments, borrowing the money from friends and relatives.

When the loan servicer notified her that the house was still in foreclosure, Miss McClelland said, the representative from Foreclosure Solutions Experts told her that the matter had been taken care of.

“She told me everything was all settled; I don’t have to worry about anything,” Miss McClelland said. “All I had to worry about was getting the rest of the money to her.”

 





New York Mortgage Broker Fraud Operation Found Straw Buyers For Own Properties, Inflated And Falsified Income, And Then Obtained Mortgages Which Quickly Went Into Foreclosure

13 12 2008

“…The two falsified documents to make it seem that the straw buyer made $23,000 a month – in fact, he parked cars for $22,000 a year, prosecutors said. The scheme unraveled when Poulard could no longer afford mortgage payments to the now-defunct American Brokers Conduit of Melville. She and Spindel pleaded not guilty…”

How prosecutors say the scheme worked:

1. LaDonna looked for phony buyers for three houses owned by him or his company.

2. LaDonna set the prices for the houses above their real value. The phony buyers used fake documents that say they have sufficient funds to be approved for mortgages.

3. The phony buyers obtained mortgages and completed the home sales in their names. The mortgage lenders paid LaDonna for his properties.

4. The phony buyers received $10,000 to $20,000 for participating in LaDonna’s scam. Only a few payments were made on the homes before they went into foreclosure.

 

http://www.newsday.com/news/local/suffolk/ny-limort125961867dec12,0,2469861,print.story

An ongoing probe into the home mortgage business by the Suffolk district attorney’s office has led to the indictment of a West Islip man on charges of scheming to defraud lenders out of about $2.5 million.

“What we’re seeing in Suffolk County is an explosion of fraud involving, depending on the scheme, every facet of the mortgage process,” District Attorney Thomas Spota said. The probe by Spota’s Mortgage Fraud Unit has resulted in 27 arrests and nine indictments since June.

In the latest case, Louis LaDonna, 39, pleaded not guilty Thursday to 13 counts, including grand larceny. Prosecutors accused LaDonna of inflating the value of houses in West Islip, Babylon and Lindenhurst owned by him or his company, LaDonna Properties.

But LaDonna’s attorney, William Keahon, said the case is weak. “Based upon the documents being given to me by the DA’s office and based on my own investigation, they’re never going to be able to prove what he’s accused of,” Keahon said.

Between 2006 and 2007, LaDonna contacted people who found “straw buyers” to pretend to buy the houses, prosecutors said. The straw buyers received payments of $10,000 to $20,000 for acting as if they were actually purchasing the houses.

“He [LaDonna] engaged appraisers to inflate the values of all of the properties well beyond what they were worth,” Spota said at a news conference.

Using fake documents, the phony buyers overstated their incomes and assets to qualify for no-down-payment mortgages, prosecutors said. When transactions were complete, the lenders – Mortgage-It and First Franklin Financial Corp. – paid LaDonna for the houses. But the lenders only received two or three mortgage payments before the houses went into foreclosure.

LaDonna was released on bail of $750,000 bond and is due back in court on Feb. 4.

Earlier this week, Marie Poulard, 50, of East Quogue, and Frank Spindel, 49, of Miller Place, were arrested on grand larceny charges.

Poulard needed $1.2 million to buy an East Quogue house she couldn’t afford. She and Spindel, her mortgage broker, arranged for a straw buyer to buy the house, prosecutors said.

“This is brokers making this thing work at any cost,” said Maureen McCormack, deputy chief of the economic crimes bureau in Spota’s office.





Mortgage Fraud Investigations And Prosecution Centering On Mortgage Brokers And Title Companies

11 12 2008

“Let’s not lose sight of the fact that there is immense criminal fraud involved in this financial crisis,” said U.S. Attorney McGregor Scott, whose district spans California’s vast Central Valley and is among those most affected by the housing bust. “It’s a profound ripple effect that affects everyone.”

“We are mainly focusing on the mortgage brokers and title companies because they are really at the center of mortgage fraud in this district,” said William Edwards, the acting U.S. attorney for northern Ohio.

In addition to California, large numbers of investigations are under way in Nevada, Florida, Illinois, Arizona, Atlanta and Rust Belt states such as Ohio and Michigan, the areas that have experienced the highest rates of home foreclosure.

 

http://www.google.com/hostednews/ap/article/ALeqM5ieeI0NXfkFVB7LKp1n_hYlEbeagAD95046J80

 

Prosecutors are finding buyers who created fake identities to take out home loans, brokers who paid kickbacks to ensure fraudulent mortgages were approved and lenders who took bribes and forged documents.

They are the ones who fraudulently overstated property values and borrowers’ incomes, who used illegal means to secure loans that homeowners ultimately couldn’t afford, though they had plenty of encouragement from Wall Street.

That fraud helped artificially inflate home values that have since come crashing to earth. Foreclosures are dragging down property values in neighborhoods across the nation. Lenders, in response, have shut the door on almost anyone without platinum credit, and raised a variety of fees to make up for huge losses.

And the fraud is continuing in new ways as desperate homeowners try to unload mortgages they can’t afford and builders shed surplus properties.

The U.S. Justice Department has formed more than 40 mortgage fraud task forces nationwide as prosecutors and investigators struggle with a flood of mortgage-related criminal cases. The FBI reports that its mortgage-fraud caseload has more than doubled in three years to about 1,600 investigations that have cost lenders at least $4 billion. About 200 FBI agents are assigned to the cases, up from 120 a year ago.

Nationally, federal prosecutors charged 226 people with mortgage fraud between July and the end of October, the latest figures available, said U.S. Department of Justice spokeswoman Laura Sweeney. Another 406 were charged as part of a national mortgage-fraud crackdown between March and June.

In Scott’s California district, prosecutors have filed charges related to housing scams against 53 people in 15 ongoing prosecutions. They have another 15 active investigations against 68 individuals.

They estimate hundreds of millions of dollars have been paid out by banks and other lenders because of mortgage fraud in the Central California district, which stretches from just north of Los Angeles to the Oregon border.

“We’re running out of bodies to handle these cases,” said Scott, calling on Congress to approve more money for investigators and prosecutors. “We’re just being overwhelmed.”

Spokesmen for the FBI and Justice Department said there are no plans to ask Congress for more money. They could not say how much the hundreds of agents and prosecutors are spending to investigate mortgage fraud nationwide.

“We continue to re-prioritize as necessary,” Justice spokesman Ian McCaleb said in an e-mail. “Currently, we have shifted significant resources toward investigating mortgage fraud.”

Paul Leonard, director of the California office of the Center for Responsible Lending, welcomed investigators’ attempts to keep up with newer forms of foreclosure and builder fraud. However, wrongdoing remains so widespread that “I think those agencies have to pick their spots,” he said.

“I wish they had engaged in this earlier,” Leonard said. “I think it’s constructive to sort of root out these evil and malicious scams when they occur … Given the state of the economy, it’s too little too late.”

In addition to California, large numbers of investigations are under way in Nevada, Florida, Illinois, Arizona, Atlanta and Rust Belt states such as Ohio and Michigan, the areas that have experienced the highest rates of home foreclosure.

South Florida has been a particular hotbed of activity for federal prosecutors, who have charged 112 people there with an estimated $176 million in mortgage fraud this year.

“It really is an incredible amount,” said Alicia Valle, spokeswoman for the U.S. Attorney’s office in Miami. “You name it and we’ve got it.”

Florida, California and Illinois combined to provide nearly half the nation’s fraud reports in the second quarter, according to a Dec. 2 report from the Mortgage Asset Research Institute. Nationwide, mortgage fraud reports increased 42 percent from January to March and 45 percent from April to June, compared with their year-ago periods.

“We have a duty to put these people in prison,” said Scott, the U.S. attorney in California.

Michael Cardoza, a San Francisco-area attorney representing one of those charged in central California, said prosecutors should be setting their sights higher.

“It’s amazing to me that the people on Wall Street walk away with millions and millions if not billions of dollars,” said Cardoza. “Now they’re just picking off little people … They’re doing scapegoats is what they’re doing.”

The FBI says about 80 percent of mortgage fraud losses under investigation involve industry insiders who inflated property values or made loans based on fictional information.

The remaining 20 percent is by individual borrowers who lied about their income or job history to qualify for loans. So-called “liar loans,” which require little or no documentation about the buyer’s income or employment.

The larger group is where law enforcement is focused.

“We are mainly focusing on the mortgage brokers and title companies because they are really at the center of mortgage fraud in this district,” said William Edwards, the acting U.S. attorney for northern Ohio.

U.S. Attorney Joseph Russoniello is setting the bar at $400,000 or more in his San Francisco-based district, where home values are among the nation’s highest.

“We could be looking at thousands of potential cases,” Russoniello said. “We’ve been looking at a number of cases that run the gamut from simple mortgage fraud to collusion involving brokers, appraisers … bait and switch, predatory rescue operations.”

His mortgage-fraud task force contracted with a financial analyst in October to help sort through the transactions. Russoniello expects to soon announce “a significant number” of indictments.

Nevada has the nation’s highest foreclosure rate, and now a corresponding amount of mortgage fraud complaints are flooding law enforcement agencies, said U.S. Attorney Gregory Brower. A special telephone hot line has fielded more than 1,100 calls since it was set up in April, said Nevada FBI spokesman David Staretz.

Brower has had to shuffle attorneys to handle cases like the one Nevada prosecutors say involved 432 fake buyers for 227 properties worth more than $107 million. At least 143 of the homes are now in default, costing lenders more than $17 million. Five Las Vegas brokers, mortgage agents and loan officers have pleaded guilty and six are awaiting trial.

“It’s certainly a contributor, if not the contributor, to some of the economic downturn we’re seeing,” Brower said. “It will be a while before the dust settles.”





Fannie Mae And Freddie Mac Execs Testify To Congress On Scandals And Failures Of Mortgage Agency Lenders

9 12 2008

 

Four former CEOs of Fannie and Freddie are scheduled to testify Tuesday. One pair, Fannie Mae’s Franklin Raines and Freddie Mac’s Leland Brendsel, were both ousted after accounting scandals. The most recent pair of former top executives, Fannie Mae CEO Daniel Mudd and his counterpart at Freddie Mac, Richard Syron, were removed from their jobs this year after the government takeover.

Fannie and Freddie, which own or guarantee around half the $11.5 trillion in U.S. outstanding home loan debt, long used their lobbying muscle in Washington to thwart efforts to impose tighter regulation.

 

 

 

http://news.yahoo.com/s/ap/20081209/ap_on_bi_ge/financial_meltdown

Lawmakers are poised to trade barbs Tuesday about who deserves most of the blame for the collapse and government takeover of mortgage finance titans Fannie Mae and Freddie Mac.

The two companies, which were seized by federal regulators in September, have become highly charged political targets in the debate over what caused the U.S. housing crisis and the resulting financial fallout.

Four former top executives are scheduled to be grilled at the hearing, which is being led by Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, starting at 10 a.m. EST. But there are doubts about whether the hearing will produce any solid conclusions or will just devolve into partisan bickering.

“I think we’re going to get a lot of finger-pointing, which will be totally unproductive,” said Bert Ely, a banking industry consultant in Alexandria, Va.

Fannie and Freddie, which own or guarantee around half the $11.5 trillion in U.S. outstanding home loan debt, long used their lobbying muscle in Washington to thwart efforts to impose tighter regulation.

Washington-based Fannie and McLean, Virginia-based Freddie are the engines behind a complex process of buying, bundling and selling mortgages as investments.

They traditionally backed the safest loans, 30-year fixed rate mortgages that required a down payment of at least 20 percent. But in recent years, they lowered their standards, matching a decline fueled by Wall Street banks that backed the now-defunct subprime lending industry.

Republicans blame Fannie and Freddie, and the effort to promote homeownership under the Clinton administration for sowing the seeds of the financial meltdown. Democrats defend the companies’ role in encouraging homeownership and note that Wall Street banks — not Fannie and Freddie — led a dramatic decline in lending standards.

Both companies have been asked to turn over a long list of documents and e-mail messages concerning the risks they took in their mortgage investments, accounting, and compensation for the companies’ former CEOs.

Four former CEOs of Fannie and Freddie are scheduled to testify Tuesday. One pair, Fannie Mae’s Franklin Raines and Freddie Mac’s Leland Brendsel, were both ousted after accounting scandals. The most recent pair of former top executives, Fannie Mae CEO Daniel Mudd and his counterpart at Freddie Mac, Richard Syron, were removed from their jobs this year after the government takeover.

Freddie Mac last month asked for an initial injection of $13.8 billion in government aid after posting a massive quarterly loss. Fannie Mae has yet to request any government aid but has warned it may need to do so.

The Bush administration and former Federal Reserve Chairman Alan Greenspan long sounded the alarm about the potential threat to the nation’s financial health if the fortunes of the two mammoth companies turned sour.

In an effort to head off stricter regulations, Freddie Mac enlisted prominent Republicans to lobby on its behalf. Internal Freddie Mac budget records obtained by The Associated Press show $11.7 million was paid to 52 outside lobbyists and consultants in 2006. Power brokers such as former House Speaker Newt Gingrich and former Sen. Alfonse D’Amato of New York were recruited with six-figure contracts.

The more vexing questions will come next year, when lawmakers weigh what role, if any, the two companies play in the future.

Options include taking the companies private, morphing them into a public utility or a federal agency, or leaving them as government-sponsored entities that have private shareholders and profits, with tougher regulations.

Separately, in a report to be released Tuesday, a bipartisan commission chaired by former HUD Secretaries Henry Cisneros and Jack Kemp takes aim at the Bush administration for the foreclosure crisis. The report cites the administration’s lax enforcement of fair housing laws and lackluster response for problems that have disproportionately hit poor and minority populations.

Calling the system “broken,” the seven-member panel calls for the creation of an independent agency separate from the Department of Housing and Urban Development to more vigorously enforce fair housing laws.

 

 





Mortgage Broker Ran Mortgage Fraud Ring In New York And Florida

7 12 2008

Valdes brokered at least 100 of those loans worth $22 million — nearly all based on false and misleading financial information, the newspaper found.

http://www.miamiherald.com/457/story/802703.html

Orson Benn, once a vice president at the nation’s largest subprime lender, spent three years during the height of the housing boom tutoring Florida mortgage brokers in the art of fraud.

From his office in New York, he taught them how to doctor credit reports, coached them to inflate income on loan applications, and helped them invent phantom jobs for borrowers.

When trouble arose — one broker got caught, another got cold feet — Benn called his trusted fixer in Miami to remove the problem and get the loan approved: Yvette Valdes.

The 48-year-old Valdes was a key figure in helping Benn tap into one of the country’s most lucrative mortgage markets during his run with Argent Mortgage, The Miami Herald found.

Benn and several associates were convicted of racketeering this year, but Valdes still sells mortgages from a nondescript storefront in Homestead.

While prosecutors looked at roughly $100 million in loans written by Benn and a cadre of co-workers, that represents just a portion of the loans they approved during his aggressive expansion into Florida.

The Miami Herald found that Benn’s network approved more than $550 million in home loans from Tampa to West Palm Beach to Miami, according to an analysis of court records.

In Miami-Dade County alone, Benn’s office approved more than $349 million in loans on 1,913 homes — more than one in three have since fallen into foreclosure, the analysis shows.

Valdes brokered at least 100 of those loans worth $22 million — nearly all based on false and misleading financial information, the newspaper found.

One borrower claimed to work for a company that didn’t exist — and got a $170,000 loan. Another borrower claimed to work a job that didn’t exist — and got enough money to buy four houses.

In a brief interview with The Miami Herald, Valdes blamed the borrowers, refusing to comment further. Her lawyer, Glenn Kritzer, said she has done nothing illegal.

With so many of Benn’s loans now in foreclosure, Miami-Dade County is littered with still more empty homes. Squatters inhabit some; crack dens occupy others. At least one has been stripped to the ground, leaving only the foundation.

”It’s like a desert,” said Reynaldo Perez, 41, who lives in a Homestead town house financed by Benn three years ago. “Just on my street, there are five or six homes being foreclosed.”

Although the Office of Financial Regulation — the state agency entrusted with policing the mortgage industry — was alerted to Valdes’s role in Benn’s network at least three years ago, it never launched an investigation, the newspaper found.

Since 2005, the agency has had copies of some of the same misleading loan applications that The Miami Herald reviewed.

Terry Straub, the OFR’s director of finance, acknowledged that his agency had evidence against Valdez. ”I don’t have any explanation for why we didn’t pursue it,” he said.

In fact, state regulators ignored more than a dozen written warnings about brokers in Benn’s network, the agency’s records show.

Despite a law banning criminals from getting licensed — created after a Miami Herald series was published this summer — two brokers in Benn’s network who pleaded guilty in May to conspiracy charges in the case remain licensed.





Beware New Fraud From “Foreclosure Consultants” Who Collect Fees Illegally And Don’t Perform

19 11 2008

“…the seven companies collected upfront fees and then failed to negotiate or perform any services on behalf of the homeowners, leaving them at risk of losing their homes…”

“…the company promised a “money-back guarentee (sic)” on its web site and that it has a 97 percent success rate and a “combined 25 years of real estate, financial and lending experience.” By this evening it had removed the misspelled “guarentee.”

http://www.rrstar.com/news/x1720658976/Attorney-general-sues-Rockford-company-for-mortgage-fraud 

A mortgage-rescue company with a Rockford office was one of seven sued by Illinois Attorney General Lisa Madigan today.

Madigan’s office filed the lawsuit in Winnebago County Circuit Court against StopMyForeclosure.net, which appears to have a location on the 3900 block of Abbotsford Road, for violating the state’s Illinois Mortgage Rescue Fraud Act. The act prohibits companies from requiring payment from consumers before completing all terms of a rescue contract.

Madigan claims the seven companies collected upfront fees and then failed to negotiate or perform any services on behalf of the homeowners, leaving them at risk of losing their homes.

A record wave of foreclosures locally and nationally have pushed the economy to the brink of recession. As foreclosure actions have increased, so have the number of companies promising help to homeowners behind on payments.

Madigan has sued 22 companies, including those sued today, so far this year for violating the state mortgage rescue fraud act.

“There are so many of these companies, and most have no idea that the state has a law that restricts what they do,” said Bob Campbell, executive director of the Rockford Affordable Housing Coalition, a U.S. Housing and Urban Development-certified housing-assistance organization. “Since they don’t know that the law is in place, most of these for-profit companies end up violating the law.”

Early today, the company promised a “money-back guarentee (sic)” on its web site and that it has a 97 percent success rate and a “combined 25 years of real estate, financial and lending experience.” By this evening it had removed the misspelled “guarentee.”

The site also displays two seals of approval by the Better Business Bureau.

Dennis Horton, executive director of the Rockford office of the Better Business Bureau, said he believed both BBB symbols are pirated.

“This company is not registered with the BBB anywhere in the United States,” Horton said.

Rhonda Poshka, who said she is owner of the Queen Oak, Ariz.-based company, said the company is registered with the Arizona Better Business Bureau but not accredited.





Mortgage Banker Duped Borrowers Into Signing “Two Sets Of Loan Documents”, Selling Phony Loan To Investor And Leaving Victims With Mortgages They Didn’t Know They Had

18 11 2008

lgfp1667wanted-jack-sparrow-pirates-of-the-caribbean-2-poster

“…They said Taneja prepared some legitimate mortgages, mostly for members of the Indian community, but would dupe people into signing dual sets of loan documents. He would then create a fictitious mortgage based on the second set of documents and sell the phony loan to an investor, which would leave the victims with mortgages they didn’t know they had….”

“…Prosecutors said he created bogus mortgage loans, sold legitimate loans to more than one buyer and pocketed the proceeds of refinancings…”

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/13/AR2008111302145_pf.html 

He was an icon in the local Indian community, a flashy movie producer who invested millions in Bollywood films and brought Indian musical acts to the Washington area.

Vijay K. Taneja had an aura about him, a celebrity image that made people trust him, according to people who know the Fairfax County businessman. Problem was, Taneja admitted in federal court yesterday, his entertainment ventures were financed with money obtained through an extensive mortgage fraud scheme.

Taneja pleaded guilty in U.S. District Court in Alexandria to a fraud enterprise that cost banks at least $33 million, the largest mortgage fraud case in Virginia in almost 20 years and among the largest nationally. Prosecutors said he created bogus mortgage loans, sold legitimate loans to more than one buyer and pocketed the proceeds of refinancings.

“That’s an incredible amount of loss,” said Adam Lee, supervisory special agent for financial crimes in the FBI‘s Washington field office, which operates one of 42 new bureau task forces nationwide focusing on escalating mortgage fraud.

Taneja, 47, of Fairfax City entered his plea to one count of conspiracy to commit money laundering in a soft, hesitant voice. U.S. District Judge Claude M. Hilton asked him no specific questions about the case, and he declined to comment afterward. His attorney, Robert P. Trout, declined to comment as well. Taneja faces up to 20 years in prison when he is sentenced Jan. 30.

Prosecutors told the judge that Taneja invested millions of his mortgage proceeds in Indian films and theatrical productions through one of his companies, Elite Entertainment, and that they are still trying to untangle the financial web. “He has millions of dollars unaccounted for,” Assistant U.S. Attorney Stephen Learned said as he asked Hilton to order Taneja to be electronically monitored to ensure that he doesn’t flee before sentencing. “There’s so much money, and it’s difficult to figure out where it all went.”

Trout emphasized that Taneja, a U.S. citizen, has cooperated extensively with the government, and Hilton ordered him released on a personal recognizance bond.

Members of the Washington region’s tightly knit Indian community said Taneja was revered by many because of his show business connections and insistence on doing business mainly with others in the community.

He brought renowned Indian acts to the United States and also invested in the entertainment industry in India.

“He knew people in the film and music industry, and he produced these shows,” said Anuj Sud, a Maryland lawyer who said several of his relatives were victimized by Taneja. “People see this guy out there involved in Bollywood and the attraction is, ‘Hey, this guy is popular.’ ”

David Lamb, a Washington lawyer who represents several of Taneja’s victims, said that “everyone looked up to him. He had all this big flashy money, and they thought he was a star. He could get them to do things for him.”

Although the $33 million loss was borne by four financial institutions — First Tennessee Bank, Franklin Bank, Wells Fargo Bank and EMC Mortgage Corp. — prosecutors said numerous area residents were victimized as well. They said Taneja prepared some legitimate mortgages, mostly for members of the Indian community, but would dupe people into signing dual sets of loan documents. He would then create a fictitious mortgage based on the second set of documents and sell the phony loan to an investor, which would leave the victims with mortgages they didn’t know they had.

One area business owner said her credit was ruined because she obtained several mortgages with Taneja and only later realized that he had taken out several more in her name. “When I went to refinance my house, they told me I had $6 million in mortgages,” said the woman, who declined to be identified.

Court documents say Taneja’s main company, Financial Mortgage Inc., also did refinancings and defrauded banks by not paying off the first mortgages. For example, a customer would borrow $500,000, intending to receive $100,000 as cash and use $400,000 to pay off his first mortgage. Taneja would give the customer the $100,000 and pocket the $400,000. The bank that held the first mortgage wouldn’t notice because it didn’t know there had been a refinancing.

Taneja also admitted that he would take out a mortgage loan and then sell that loan on the secondary mortgage market to more than one investor, pocketing the proceeds. Federal investigators said the banks were slow to catch on to the schemes because they were eager to lend money in the soaring housing market.

“The banks were not doing due diligence,” said one law enforcement official, who declined to be identified because he was not authorized to speak about the case. “They saw mortgages as a good source of revenue, and he took advantage of that mentality. He took advantage of the height of the real estate boom.”

Federal officials said Taneja’s scheme escalated as the nation’s economy spiraled downward. He was also a real estate developer — his four companies filed for bankruptcy protection this year — and officials said he booked more phony mortgages as housing prices fell.

Agent Lee said that mortgage fraud is “an absolute top priority” for the FBI and that investigators are focusing on Northern Virginia because of a high rate of foreclosures. A spokesman for the Internal Revenue Service, which also investigated Taneja, said that agency is zeroing in on mortgage fraud as well.

Federal mortgage fraud prosecutions have more than tripled in the past two years, according to Justice Department statistics, and experts said even more cases are coming as banks take bad loans off their books.

“That’s when we’ll see why these loans went so bad, and there will be criminal investigations,” said Curt Novy, a California broker who testifies as an expert witness in mortgage fraud cases.