“You cannot participate in the real estate business without committing felonies. I complained to the boards, and they tried to stifle me. According to the FBI, this is the new Mafia. The things I have seen deserve prison sentences. I filed a complaint with the local FBI office and they are acting on it” [1]
That quote was uttered by Texas appraiser William J. Rose in an article titled The Appraisal Crisis and the FBI. The article was written by Blanche Evans in Realty Times.
Now look at staff writer Rick Thomas’s article headlined “Foreclosures continue at rapid pace” in the Sunday, March 02, 2008, Coeur d’Alene Press Business Section. The line most likely to get attention reads, “She (a local title company officer) did say federal authorities visited the company on Friday looking into cases of fraud, where properties were reconveyed with forged documents.[2]” But the line that should easily generate as much concern reads, “Most (of the local foreclosures) are on behalf of lenders from outside the area, who may have relied on appraisals that were not in tune with the market.”
“…appraisals that were not in tune with the market.” That is just short of saying “appraisal fraud,” the intentional falsification of an appraisal to help either the borrower or the lender give or secure a loan that would likely be disapproved if accurate appraisals were done.
If loan and appraisal frauds are occurring in Coeur d’Alene’s home mortgage industry, it is reasonable to wonder if they might not also be occurring in its commercial properties industry. Let’s hope the federal authorities mentioned earlier looked as closely at commercial property loans and appraisals as they did at residential property loans and appraisals.
To get more insight into the way mortgage and appraisal fraud schemes work, see these Whitecaps blog posts published during 2007. I have not recently rechecked all the links in these posts, so some of them may have become inactive.
[1] Evans, Blanche. (2005, February 2). The Appraisal Crisis and the FBI. Realty Times. Retrieved March 2, 2008, from http://realtytimes.com/rtpages/20050202_appraisalcrisis.htm
[2] Thomas, Rick. (2008, March 2). Foreclosures continue at rapid pace. Coeur d’Alene Press. Retrieved March 2, 2008, from http://www.cdapress.com/articles/2008/03/02/business/bus01.txt
Mortgage and appraisal fraud happen. It is criminal. Usually there is a triad – a realtor, a lender and an appraiser all looking to ‘maximize’ opportunities. Sometimes thewy start out innocent and greed pushes them, sometimes organized crime gets into a market and blows it up. Either way, expect criminal informations to get filed as the debris from the current crisis filters out.
Comment by Pariah — March 2, 2008 @ 9:46 am
This might be a perfect local example.
Not that long ago folks with Infinity Financial Group were investigated.
Broker charged with money laundering
ALLEDGED LEADERS OF MAJOR DRUG TRAFFICKING RING FACE FEDERAL CHARGES
It was reported recently in the S-R that the Keysers – established long time family from Priest River will be facing prison time. I think this may be the tip of the iceberg.
Priest River family admits laundering drug money
Sentencing is scheduled for July 7, 2008
Comment by Stebbijo — March 2, 2008 @ 10:38 am
Since the topic is mortgage fraud and organized crime – I want to add this News Release concerning my above posts that was public information in November of 2007 but we are just hearing about it.
KEY FIGURES IN MAJOR DRUG TRAFFICKING RING PLEAD GUILTY.
Comment by Stebbijo — March 2, 2008 @ 10:55 am
Steb — that looks/sounds like an organized crime variant of mortgage fraud. ZZZZ Best Carpet Cleaning — http://en.wikipedia.org/wiki/Barry_Minkow — is an old example of how organized crime can get into an enterprise and rape it.
Comment by Pariah — March 2, 2008 @ 11:08 am
Pariah:
That’s a good one. However, the poor local folks who are going to prison (proabably because of strong arm mafia ties) may have a great future ahead of them. Crime appears to do the body good after you serve your time and we/taxpayers rehabilitate the criminals. I guess that is where I went wrong. 😉
Comment by Stebbijo — March 2, 2008 @ 11:29 am
Stebbijo and Pariah,
Real estate transactions can be used to launder money. For a very basic understanding of money laundering, read “How Money Laundering Works”. In essence, money laundering takes “dirty” money, money that’s been obtained illegally, and uses it to buy “clean” assets such as jewelry, houses, etc. That “clean” asset may be sold again and the proceeds of that sale be used once again to purchase another “clean” asset. Each subsequent sale and repurchase makes it more and more difficult for officials to trace back to the original source of the “dirty” money.
For links to somewhat more detailed and complex explanations, see my Whitecaps post titled “Doin’ the Laundry”.
Comment by Bill — March 2, 2008 @ 2:45 pm
Wanted to add this recent link to the above story that was just posted on the Priest River Times.
Lifelong residents admit money laundering
Comment by Stebbijo — March 6, 2008 @ 12:12 pm