Mortgage Fraud Surging In Florida

By SHANNON BEHNKEN The Tampa Tribune

Published: Jan 19, 2008

ST. PETERSBURG - More potential mortgage fraud cases were reported by lenders in Florida in 2007 than in the entire country the previous year, William Stern, a supervisory special agent with the FBI, said Friday.

And Tampa, he said, ranks seventh on the agency's top 10 list for mortgage fraud, joining another Florida city on the list, Miami, which is No. 4. Stern highlighted the state's particular dishonor at an Appraisal Fraud Conference in downtown St. Petersburg that drew 110 appraisers, lenders, title agents and Wall Street investors.

"Florida was never a gray area," Stern said, pointing to a map of states coded in red, blue and gray, depending on the level of fraud cases in 2007. "Some of the people involved in these cases are in rings of organized fraud. Others are in [street] gangs that found mortgage fraud was the next big thing."

The housing boom fueled an environment ripe for mortgage fraud. Buyers could obtain credit easily, and industry professionals - from real estate agents to loan officers - had great financial incentives to push deals through, experts at the conference said. A key to most of these deals: an appraiser willing to inflate the value of the home to match the bumped-up sales price.

Now that the housing boom has cooled, property values are falling, foreclosures are rising and lenders are discovering they approved loans based on bogus appraisals. As a result, those homes aren't worth the mortgage amount and many of those loans are now in foreclosure.

Friday's conference was hosted by Cincinnati-based Allterra Group, an industry group that offers continuing education courses and publishes an appraisal newsletter. Appraisers said they continue to feel pressured by loan officers and real estate agents to value a property at or above the sales price.

Many of those appraisers, who usually earn a few hundred dollars for their work, said they see blatant mortgage fraud deals and they've reported them to investigating authorities, but their complaints have fallen on deaf ears.

"It's frustrating when you know something strange is going on, you try to tell people, and nothing happens," said Jacqueline Green, an appraiser with Green Appraisal Group Inc. in Orlando.

Stern went over two types of mortgage schemes:

•Fraud for property, in which buyers lie about their incomes on applications to convince lenders they can afford homes they really can't.

•Fraud for profit, in which several people inflate the purchase price, misrepresent the true value of a home and borrow substantially more than the sales price so that those involved can split the money.

Eighty percent of mortgage fraud cases are the for-profit type, Stern said, and those are the ones the FBI is going after.

Robert Johnson, senior review appraiser for Morgan Stanley Valuations said he's combing through appraisals to check for accuracy and the company "isn't buying many loans right now."

"Most of you have no idea how many times your appraisal is looked at," he said. "I think we're all still shell shocked by what's happened in our industry."

The numbers have also gotten the attention of state officials, who say they plan to make an "important legislative announcement regarding mortgage-related fraud" on Tuesday at the Capitol. No details were offered.

Despite all the worries about fraud in Florida, Green, the appraiser, came away from Friday's conference feeling encouraged. She met other real estate professionals who want to fight mortgage fraud and made contacts with law enforcement agencies and lenders to report suspicious cases.

But the most encouraging: a phone call from a lender saying they would look into one of the suspicious deals she reported.

"I'm on a mission," she said. "I'm excited. But if I get shot someday, you'll know why."

Reporter Shannon Behnken can be reached at (813) 259-7804 or sbehnken@tampatrib.com.