Mortgage Fraud

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Assistant U.S. Attorney for the District of Arizona Bill Solomon discusses what his office is doing to fight mortgage fraud.

Ted Simons:
Good evening and welcome to "Horizon." I'm Ted Simons. Preventing mortgage fraud is one of the U.S. attorney's top priorities. I recently spoke with Bill Solomon, assistant district attorney for the district of Arizona about what his office is doing to fight mortgage fraud. Thanks for joining us.

Bill Solomon:
Thanks for having me.

Ted Simons:
Mortgage fraud, what are we talking about here?

Bill Solomon:
We're talking about several different schemes we've seen in the valley. It started during the height of the real estate bubble with loan origination fraud. Basically, the fraudsters would buy a property at a low price and find a real estate agent to assist them and find an appraiser who would assist in elevating the cost of the property, once they bought it - fraudulently elevating it, and so it started with mortgage origination fraud and devolving into mortgage modification assistance and mortgage rescue fraud, because we're having some many people who are underwater with their homes and people needing assistance with their homes and there are companies popping up telling them they can assist with their mortgages and getting loan modifications but aren't helping them and these people are losing their homes. So that's what we're seeing now, and we're also seeing reverse mortgage fraud. That's for seniors over the age of 62 who have built up equity. They can take out cash based on the equity they've built up on their homes, and use it for any purpose and we're finding that the fraudsters are taking the cash from the seniors once they take it out of their house.

Ted Simons:
Is this something that was always going on below the radar but once the bubble, the burst hit, it went all over the place?

Bill Simons:
With loan origination fraud, yes. I think it was happening for quite a while. When the bubble burst, people were no longer able to afford homes that they couldn't begin to afford in the first place. And they were losing their jobs and in dire financial straits and that's when it came to light.

Ted Simons:
You've got the mortgage fraud initiative. What's is that?

Bill Solomon:
It's an initiative that the U.S. attorney -- he wants to educate the public. We -- there's so much of it out there. We want, number one, to educate the public and let them know what mortgage fraud we're seeing and how to avoid being a victim. We want to let them know how they can look for assistance if they're having trouble making payments on their home and we want to ask them to report to us mortgage fraud they see.

Ted Simons:
Mortgage fraud that they see or mortgage fraud they think they see? Because some of these violations can be awfully difficult to detect.

Bill Solomon:
They can be. That's why we're doing the mortgage fraud initiative. It's difficult to detect. With a traditional crime, maybe a robbery on the street, they call 9-1-1 and report it to police. That's how law enforcement learns about the crime. With these crimes, especially the crimes against consumers, they're difficult to detect and sometimes found in reams of paper and we need the public to help us.

Ted Simons:
So basically, the public gets a hold of you and I've got concerns, maybe someone in the real estate industry says I know of some concerns? These kinds of things?

Bill Solomon:
Exactly. We want to reach out both to those who have been victimized by what they think is mortgage fraud, as well as those in the industry who may see others in the industry doing things that seem to be fishy, and may be mortgage fraud.

Ted Simons:
True or false, you can share maybe in some the recovery and reward if you doprovide information?

Bill Solomon:
That is true. There's a formal process for you to provide information to our office. Congress established this clear back in the 1990s to deal with the savings and loan crisis. But if you file with our office a formal declaration giving us specific information on the violations of the mortgage fraud laws, if that results in recovery of fund or assets or if it results criminal conviction you can be entitled to share in the civil recovery and may be entitled to a reward if a criminal conviction leads from your information.

Ted Simons:
Interesting. Give us some warning signs to watch out for involving scams and fraud, etc.

Bill Solomon:
First of all, with the mortgage rescue scams as we sometimes call them, people get notices from these companies, either in the mail, they send out mass mailings, they get notices over radio ads, over the television and these companies promise to help them modify their loans. Some of the warning signs are guarantees of a loan modification, guaranteed lower interest rates principle reductions and promising money-back guarantees to some consumers and we're finding that they're finding ways to give consumers hope. The people they're targeting are in very desperate financial circumstances. No one wants to lose their home and they're finding ways to make people feel comfortable with the services to get them hooked in and pay a fee and then they really don't do much to help them and it's a sad story. Most of the people we interview, a mortgage is a complicated thing and they feel they need assistance to get help from their bank and they don't. But these companies are selling them a bill of goods, making them believe they need assistance and they're just not giving much assistance to them.

Ted Simons:
Is that the most common scam you're seeing?

Bill Solomon:
Right now, especially with the number of foreclosures. Arizona ranks second in the number of foreclosure filings in the country, behind Nevada and we think because of the record number of foreclosure filings we're seeing, these fraudsters are seeing this as their next avenue to get money.

Ted Simons:
Real quickly, a couple of operations. Operation cash back, talk to us about that and I know and couple people were involved and already been sentenced, I believe. Talk to us about that.

Bill Solomon:
Operation Cash Back was a operation we had here in Arizona, it concluded, I believe, last year. Most of the folks that were arrested under operation cash back have been prosecuted. Operation Cash Back involved the indictment of 46 individuals here in Arizona. Most of them involved in what we talked about the origination, the loan origination fraud. One of those individuals, Mario Burnadell was sentenced to 17 years in prison. For a white collar offense, that's a hefty sentence. Another individual by the name of Jeffrey Crandall was sentenced to five years for a similar scheme. As an example, they again were loan origination fraud schemes. They would find houses and buy them at low prices, they would then find what we call a straw buyer, someone who was not really going to move into the house to purchase the home and falsify the loan documents, making it look like they had a job they maybe didn't have and their income was substantially higher than it was. The straw buyer would purchase the home and turn around and sell the home at an inflated price with the help of an appraisal professional. Sell it at an inflated price and that's basically what the scheme was. Then they would take the cash proceeds from that second sale and pocket those proceeds.

Ted Simons:
For someone watching right now and hears this and goes, hmm, that sounds familiar, whether they're in the business or not, how do they report? Where do they go?

Bill Solomon:
Report informally to the FBI or to myself directly. They can reach me at 602-514-7547. And we want to know both from those who have been victimized and those who have family members who have been victimized and from the professionals, we want them to report to us.

Ted Simons:
All right, very good. Thank you very much for joining us.

Bill Solomon:Assistant U.S. Attorney for the District of Arizona;

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