November 08, 2006

When The FBI Gets Involved, You Know We Are in a Bubble!



Marcia Vickers has an amazing story about mortgage fraud, in particular of a supposed realtor/financer Matthew Cox and his female associates, on Yahoo! Finance. You can read the article in its entirety at:

Bonnie and Clyde of the Mortgage Industry

The entire story is chalk full of wonderful morsels regarding the evolution of what has got to be the most corrupt sector of our economy since Enron. Take a look at the below:

“The real estate market has never offered such opportunity for graft. Since the housing market started to soar in 2001, mortgage fraud has become the fastest-growing white-collar crime, according to the FBI. Last year crooks skimmed at least $1 billion from the $3 trillion U.S. mortgage market.

Now that the market is slowing, fraud is only rising. As business dries up, there's increasing pressure on lenders, brokers, title companies and appraisers to be profitable. That means loan and title documents aren't scrutinized as carefully as they might be, and courts - many of them so low-tech they resemble Mayberry - can't keep up with the volume of paper.

Then there's the mad rush to sell, particularly by people who paid high prices for homes and suddenly can't afford the mortgages.”


Well what do we have here? Can we all collectively say “NO S*@T! SHERLOCK!” I mean this story only touches the tip of this monolithic iceberg of what we will be seeing in the next few years. 1 billion dollars in fraud and this is only reported cases because we all know that those complicit to the housing bubble have kept their mouths shut; but now that the cash-flow has turned into a flow of something else people are trying to hang whoever they can get a hand on. One would think that lenders, bankers, and brokers would be the most ethical people right especially when standards are tightening? Continue reading on:

“For the better part of the past decade Cox has stalked his prey through MLS (multiple listing service) real estate ads. He has studied county courts, looking for ones he could easily dupe with falsified documents.

Schooled as an artist, he is an expert at forging signatures. He knows how to obtain corporate seals of actual banks. He launders money in complex webs of cashier's checks made out to counterfeit names. Authorities suspect he has stolen at least $15 million through fraudulent mortgages, although the figure could be much higher.

Cox's victims have been forced to pay tens of thousands of dollars to lawyers to save their property from foreclosure on unpaid fraudulent loans. They have had to clean up ruined credit. "It's been so stressful, both financially and psychologically," says Bridget Brown.

Schlesinger says classic con men, besides being psychopathic and greedy, are driven by a need to show the world how clever they are. "Their thinking is, 'Look at all these schmucks who actually go to work and earn so much less than I do. I get up at 11, work four hours a day, and make millions.' "

Their crimes are meticulously planned, and not just to elude law enforcement. "They have an overwhelming need to let others know how smart they are," says Schlesinger. "That's why they often leave notes and various clues behind.""


Schooled as an artist? Did I tell you ANYONE can jump into the real estate frenzy? Not only that, but when you are operating in a system that is conducive to passing the buck, no one cares as long as they are getting their cut. The fact of the matter in this case, Matthew essentially played upon the greed and insecurity of all those involved. This guy was sophisticated and studied each facet of the real estate complex; lenders, insurance, sellers, buyers, and most of all how to close a fraudulent deal. The following describes how Matthew researched “experts” in his industry to gain fodder for his activities:

“Like, for instance, a 317-page hard-boiled crime novel about a serial con artist who becomes a mortgage fraud ace. Federal authorities believe an unpublished book by Cox, called "The Associates," is a blueprint for his crimes.

They say he started writing it while running a mortgage company in Tampa. To research it, he interviewed top real estate lawyers, mortgage brokers, title agency owners and others - telling them he was working on a novel and quizzing them about the ins and outs of real estate cons.

The main character in the book, Christian Locke, is a hard-working Tampa mortgage broker who ends up running his own company. He gets more crooked as the pages turn.”


Running a mortgage company in Tampa? I hate to tell you this but this kind of fraud is common essentially in many high priced areas. Don’t think so? I point you to another wonderful site called Mortgage Fraud Blog and you will see that this is far from being uncommon. You think people who’s livelihood depends on selling a home are going to argue about a few dollars or missed signatures? Why not ask the fox to guard the hen house eh? This article goes on to discuss how Matthew convinced female associates to join his scam:

“Like all great con men, Cox recognized early on he needed a moll, a charming frontperson who exudes innocence and engenders trust. Rebecca Marie Hauck, a perky, petite blond in her mid-30s, fit the bill perfectly.

Cox and Hauck, starting in December 2003, embarked on a crime spree crisscrossing six states, engaging in identity theft, money laundering and bank fraud, according to an indictment filed in U.S. District Court in Atlanta.

While on the run with Cox, Hauck assumed at least five identities and forged numerous documents, obtained fake driver's licenses, leased mail drops, rented apartments and opened bank accounts.”


But of course Hauck must have had some previous education and knowledge of real estate to help Matthew right? I mean who would sign a deal potentially being the largest in their personal life to quick talking folks only because they can close quickly, want to offer you above asking in a slow market, and are as fake as a Hollywood chest. Unfortunately many people fell for this including a medical doctor, not exactly the poster boy of stupidity.

“When her attorney, Paula Hutchinson, arrives, Hauck is thrilled that she's brought makeup for a Fortune photo session. Hauck, who is called "Becky" by almost everyone, has no more than a high school education, yet she's quite articulate. She says, "People naturally like me 'cause they say I have the gift of gab. I can talk to anyone about anything."

So again the mortgage industry is corrupt because there is zero accountability. When mortgage holders have a secondary market and hedged risked, a Fed that has flooded the system with easy financing, and essentially underwriting standards made by two-year olds we can see why these things occur. We have people making the largest monetary transaction and it is handled by high school graduates? Art school majors? Are you kidding me? No offense but if someone were to operate on my stomach, I sure hope that they have been trained in that area of expertise. If someone is working on my teeth, I sure hope they have proper dental training. And if I’m making the largest financial decision in my life, I damn well will make sure the person is credible, understands finance, has a grasp of real estate, and understands the legal and ethical issues of a binding contract. Is that too much to ask? Well when a sample of 100 no-doc loans results in 60 overstating income by 50 percent need I say more?

Any reader on the housing blog circuit needs to print this article out and store it in a drawer. Pull it out at the end of 2007 when these stories will be much more common to prove to you (and your sanity) that yes, we did and are living in a thing called the housing bubble.

1 Comments:

Jack Olson said...

The escalation of Mortgage Fraud and the brazeness of the parties doing it is because of the Do Nothing FBI! Mortgage Fraud is already a Title 18 federal felony with up to $1m fine and 30 yrs prison per occurence. Mortgage Fraud is also Bank Fraud, Wire Fraud, Mail Fraud. Yet the FBI does not investigate, indict nor convict even when confronted with the preponderance of clear and convincing public record evidence of a continuing series of fraudulent loans from a Reno Realtor with the blessing of his Broker who braggs "everyone's doing it" and has admitted in the public records offering bribes to a loan officer to do the fraudulent loans for him and his clients - which the loan officer refused, then the Reno Fraudster Realtor and his Broker (of a well known nation wide brokerage) both threatened to the loan officer, the sales manager, the branch manager and the area manager they would get the loan officer and the lender blackballed by every Realtor in Reno, then closed the fraudulent loans with other lenders - 8 of them for more then $2m. The Reno Fraudster Realtor even wrote a threatending letter to one of the witnesees threatending to sue her if she didn't mind her own business as his production was the only thing he and his broker were concerned about. It's the Do Nothing National Association of Realtors, State Association of Realtors, local Reno association of Realtors who don't hold their fellow Realtors accountable, even when they know who the fraudster Realtors are and that honest Realtors can't compete against the Fraudster Realtors. It's the Do Nothing NV State Mortgage Division who evidently took a bribe from the Fraudster Realtor and covered his and his clients Mortgage Fraud up. Money buys a very large Conspiracy of Silence. It's the Do Nothing NV State Real Estate Division and NV State Attorney General who also cover up the Mortgage Fraud even when presented with a preponderance of clear and convincing public record evidence by several complaintants against this Reno Fraudster Realtor. It's the Do Nothing Lenders who want that short-term quarterly profit to show Wall Street they made off the origination of the fraudulent loans who don't call the loans due when confronted with the evidence the loans are fraudulent. It's the No Nothing Nationally Known Brokerage who is ethically challenged when they allow their agents and Broker to threaten to blackball the loan officer and bank who refuses to take the bribes offered by the Reno Fraudster Realtor for the fraudulent loans then closes the fraudulent loans with other lenders while threatening to get the loan officer fired for not "doing what everyone does." It's the Do Nothing Mortgage Bankers Association Fraud Committee Members (many presidents of their banks)who refuse to take action on the fraudulent loans their companies originated because they don't want to lose the Realtor business. So naturally their local managers nationwide do the same. It's the Do Nothing Freddie Mac and Fannie Mae who refuse to act on the fraudulent loans when presented with the Mortgage Fraud because they're worried Wall Street will find out how at risk they really are. Integrity in the quality of the loans purchased by the secondary market? Ha ha. Now that's a house of a trillion cards. There is no quality in those loans - it's all smoke and mirrors. In a falling tide, all the garbage (foreclosures) is revealed. The IRS has described perpetuators of Mortgage Fraud as "economic terorists" and profits from Mortgage Fraud as Money Laundering. Due to Mortgage Fraud being the fastest growing white collar crime, all these Do Nothings mean the trillions of dollars in the American real estate market is a House of Cards rapidly crumbling down and makes the S & L Crisis look small in comparison which each one of us ended up paying for. Suck it up my fellow Americans as the Perfect Storm of Mortgage Fraud is upon us and the lenders and Realtors will soon find a way to make us pay again rather than Do Anything now to avoid it.