California Real Estate Fraud Report

Dear Readers,

Short sale fraud is the real estate crime of this decade and the amounts involved are staggering. Anybody who has had his or her home equity stripped by a neighbor committing short sale fraud knows this painfully well. So will law enforcement soon, when enough of our asleep-at-the-wheel politicians will wake up and respond to public pressure to prosecute the offenders.

“How to Commit Short Sale Fraud . . . and Get Away with It” is my just-released e-book. It’s the truth, the whole truth and nothing but the truth regarding the social and economic implications of short sale fraud, REO fraud and real estate fraud in general. My book also offers practical, cost-effective strategies to solve these problems NOW.

You can purchase my book here on the California Real Estate Fraud Report for only $9.95. Just click on the red stop sign on the right-hand side of this blog and you will be sent to the information page, where you can download a free sample of the book. Purchasing and download instructions are on the same page.

This ebook is available for saving and reading on your computer in a secured PDF document; it is not printable. It should work fine on both PCs and Macs.

Real estate fraud, and specifically short sale fraud, are enormously profitable white-collar crimes that are contributing to the further erosion of the American way of life. Don’t allow honest people to be ”collateral damage” – educate yourself, take action and fight it.

Monique Bryher, Publisher
California Real Estate Fraud Report

Dear Readers,

Below is a timely exerpt from my upcoming book on short sale fraud:

Bank of America, which acquired subprime lender Countrywide Financial Corp., has been ordered by the U.S. Department of Labor to reinstate a Countrywide internal investigator it had fired and to pay her $930,000. Eileen Foster had found “egregious fraud spread throughout the entire region” when she was auditing Boston-area branches, which resulted in the closing of most of those branches. An article in the Wall Street Journal reveals that the Department of Labor had concluded that Foster’s investigation found “forgery of loan documents, manipulation of borrowers’ assets and income, manipulation of the company’s automated underwriting system and destruction of valid documents.”

Several Bank of America employees said the whistleblowing Foster had been targeted and that the bank’s own investigators had a “profoundly biased view” against her.

iWatchNews, the publishing arm of the Center for Public Integrity, quotes Assistant Secretary of Labor David Michaels as saying “This employee showed great courage reporting potential fraud and standing up for the rights of other employees to do the same.”

Bank of America, which says it will appeal the order by Labor, said Foster, who filed for whistleblower protection under the 2002 Sarbanes-Oxley corporate reform act, had shown “inappropriate and unprofessional conduct with your staff and displaying poor judgment as a leader.”

Dear Readers,

Short sale fraud is the real estate crime of this decade. Anybody who has had his or her home equity stripped by a neighbor committing short sale fraud knows this. So will law enforcement soon, when political pressure will be applied to prosecute the offenders.

“How to Commit Short Sale Fraud . . . and Get Away with It” is my upcoming e-book that discusses the social and economic implications of short sale fraud, REO fraud and real estate fraud in general. Please keep watch for it, as I will be offering it for sale on the California Real Estate Fraud Report and Amazon/Kindle.

If you are a member of law enforcement (U.S. attorneys, prosecutors, District Attorneys, investigators with federal, state or local agencies) interested in reading it and are willing to write a brief testimonial, please contact me about obtaining an advance copy of my book.

Real estate fraud is an enormously profitable white-collar crime and it takes all of us to fight it.

Monique Bryher, Publisher
California Real Estate Fraud Report

The FBI has released a comprehensive report detailing the state of mortgage fraud in the country. According to their research, the states most affected by mortgage fraud and other real estate crimes are the same states where housing prices escalated rapidly during the mid-2000s: California, Florida, Michigan, Nevada, Arizona, Texas, New York, Illinois, Georgia and New Jersey.

The most prevalent mortgage fraud schemes reported by law enforcement agencies and private industry during fiscal year 2010 included loan fraud in the origination process, mortgage rescue fraud, real estate investment fraud, equity skimming, short sale fraud, illegal property flipping, title fraud, escrow fraud (incl. settlement), commercial loan fraud, builder bailout schemes, loan modification fraud and reverse mortgage fraud.

The FBI notes that short sale fraud has become so prevalent that organized crime committed by Asian, Armenian, Balkan, Eurasian, Russian and La Costra Nostra groups has infiltrated lending institutions in order to have access to financial information, mortgage origination software, notary seals and licensure information.

In other words, all forms of real estate fraud are alive and well and it is being committed by both licensed real estate professionals and unlicensed individuals and criminal organizations. Law enforcement is bailing water out of a ship that needs enormous reinforcements just to stay afloate.

This is an excellent report with a lot of detail and is well-worth reading.

Click here to read the report on the FBI’s website. There is also an excellent synopsis on Inman News.

A survey taken by the National Association of Realtors (NAR) and published in DSNews.com reveals that short sales are at the top of the list for legal issues. REO sales are also the cause of the same.

The report, called Legal Scan: Legal Issues Facing Real-Estate Professionals, blames many of the problems for inadequate training of real estate agents in both short sale transactions and REO transactions.

My note: Although there is no shortage of free or low-cost training for both, these transactions are inherently more complicated than conventional (equity) sales. As readers of this blog know, complexity = more opportunities not only for confusion and honest mistakes, but also fraud for those inclined to create and take advantage of others (short sale fraud, REO fraud).

The other common causes of disputes in real estate transactions are agency issues, disclosures issues (usually failure to disclose) and RESPA (the federal Real Estate Settlement Practices Act) violations. In a normal market, non-distressed real estate market, these are the usual causes of lawsuits and administrative complaints filed against real estate agents.

By the way, I could not find a copy of the NAR report, either on its website or by linking from other websites reporting on it.

Read the original article on DSNews.com.

CoreLogic, a mortgage industry analytical firm based in Santa Ana, California, has announced the release of a product it calls its Short Sale Monitoring Solution.

The product follows a report CoreLogic recently published in which it estimated that 1 out of 53 short sales generated “unnecessary losses”, which may or may not mean there a short sale fraud occurred. Four states, including, California, accounted for 55.8% of the suspicious activity. CoreLogic estimates the average loss to lenders on a short sale fraud to be $41,500.

Attorney Ron Ballard wrote a commentary about the CoreLogic study on his blog California Short Sale Attorney.

Read the original article on DSNews (Default Servicing News).

Short sale fraud has quickly become the real estate fraud du jour. Usually it is committed by property owners who want a write-down of their mortgage and it is facilitated by crooked real estate agents. No matter what the motivation, any party to this transaction is committing short sale fraud.

Now, according to Jeremy Brandt, CEO of 1800CashOffer, the banks are jumping in, allegedly in some cases demanding kick-backs of cash outside the sale. This is a clear violation of the federal RESPA (Real Estate Settlement Practices Act) law. Anyone who is caught could be prosecuted, which could result in prison time for all parties, stiff financial penalties and the revocation of professional licenses.

Brandt and Kayte Gentry of Keller Williams Integrity First Realty are telling stories of second lien holders demanding cash outside of escrow in order to release their liens, in which normally they are paid perhaps 10 cents on the dollar. Brandt says he has spoken with dozens of real estate agents across the country who have complained that banks holding these junior loans are threatening to kill the transaction unless paid under the table, i.e., the money is not declared on the HUD-1. All but except Gentry are afraid to speak up for fear of retribution from the banks.

Fingers have been pointed at JP Morgan Chase, Bank of America and CitiBank. JP Morgan Chase issued a “no comment” response (is that like taking the 5th Amendment against self-incrimination?) and BofA and CitiBank issued denials.

If the accusations are true, the banks are adding short sale fraud to the list of crimes they are committing against taxpayers and communities.

If you know of any instances of short sale fraud, please contact me by email. Your response will be kept entirely confidential.

Watch the video of the CNBC investigation here.

A husband-wife team of real estate brokers in Washington state could lose the right to practice real estate for 10 years based on allegations of short sale fraud.

Brokers Michael Hellickson and Tara Hellickson, touted as short sale experts, had their real estate licenses suspended by the state of Washington’s Department of Licensing, which had received numerous complaints about them and their businesss Hellickson.com Inc. After hearing testimony by witnesses, Administrative Law Judge Terry A. Schuh affirmed six of the 10 violations filed against the Hellicksons, and five of the 10 alleged violations lodged against their business.

According to their attorney, both Michael Hellickson and Tara Hellickson will appeal the suspensions.

*Note: as of the date of this posting, the Washington State Department of Licensing shows the real estate licenses of the Hellicksons to be active. An article in the Seattle Times from May 16 states the licenses are revoked and a second article in Inman News says the licenses are suspended.

Read the original article in Inman News.

According to CoreLogic, one in every 52 short sales in the first half of 2010 was “suspicious.”  The analytics firm states that by the end of 2011, U.S. banks could lose $375 million due to short sale fraud and that the increase is 20% from the $310 million losses it estimated for 2010.

CoreLogic has a very narrow definition of short sale fraud: it is a short sale that is followed by a second sale of the same property at a “substantially higher price,” usually within a few days or weeks. According to Tim Grace, Senior Vice-President of Product Management and Analytics at CoreLogic, “These same-day resales are on average $50,000 greater than the lender agreed upon short sale price.”

Because CoreLogic uses such a narrow definition of short sale fraud (I can identify at least 3-4 other variations that all qualify as short sale fraud), I can say with confidence that the percentage of short sales in California that are fraudulent is several times higher than the 2% his firm estimates. And the victims are less the lenders than the neighborhoods where deliberate undervaluations create sales comparables that steal equity from the fraudulent seller’s neighbors.

Read the full article in the OC Register, Housing Wire and the Press Enterprise.

Dear Subscribers,

Today I am proud to announce that the California Real Estate Fraud Report has surpassed its 500th post. The bad news is that there is so much real estate fraud, mortgage fraud and other scams that I have no shortage of material.

In the coming year, expect short sale fraud to become the most common form of real estate fraud, as the banks and government regulatory and prosecuting agencies have united to do little to stop it.