Sunday, April 19, 2009

Attorney General Zoeller Warns of Mortgage Fraud Scheme

I am so delighted to see Indiana Attorney General Greg Zoeller continue to turn around things in his office as it comes to real estate regulatory issues. I had been very critical of his predecessor Steve Carter whose efforts in this area were lackluster, to say the least.

Recently, Zoeller warned of a mortgage fraud scheme that many of us in the regulatory scheme and real estate industry have suggested needs to be addressed. The Indianapolis Star reports:
Indiana's attorney general is warning about a mortgage fraud scheme in which criminals exploit a loophole in state law to transfer the ownership of properties.

Attorney General Greg Zoeller said the thieves aren't interested in the property they steal, but in using their "ownership" of a property to obtain a fraudulent loan. Once they get the money, they disappear with it and leave the true property owner with the debt.

"The actual homeowners, through no fault of their own, are at risk of losing their home to foreclosure," Zoeller said. "Correcting the problem and clearing the cloud off the title could cost the homeowners thousands of dollars."

Zoeller joined the Indiana Recorders Association and the Association of Indiana Counties in Indianapolis on Thursday to publicize the scheme. He explained that Indiana law does not allow county recorders to demand proof of identification from customers who are recording deeds and other notarized documents.

"Criminals are exploiting a loophole to fraudulently transfer ownership of properties in an effort to steal money from lenders," Zoeller said during the announcement.
A deed only has to be signed by the seller. With the forged deed recorded, the new "owner" can apply for a mortgage. The title company will do a search to ensure the person is in title, and the recorded deed will satisfy that requirement. The person then walks off with the money from the mortgage. Or, what they can do which is not addressed in the article, is turn around and sell the property for cash.

I saw the latter happen first hand last year. I had a client who had the same man forge his name on two quit claim deeds for rental properties he owned. The deeds transferred the properties to the man's company. He then turned around and sold them for cash, at a reduced rate. One of the new, innocent buyers, went out and sunk a bunch of money into rehabbing the property. The forger was reported to the Marion County Prosecutor's office by my client, but the office had no interest in prosecuting him. (It never ceases to amaze me that stealing a loaf of bread is prosecuted, while stealing a whole house is not.) The forger actually showed up in our civil quiet title lawsuit. He did not deny the forgery, but rather suggested what he did was okay because the properties were not being maintained.

In 2007, when I was head of the state's Title Insurance Division, we had several meetings with other regulators and people in the real estate industry where we discussed addressing Indiana's mortgage fraud problem by requiring more information on the deed. Right now the buyer does not even have to sign the deed. Neither the buyer or seller's actual address has to be listed. The title company used does not have to be on the deed. Unlike in many states, Indiana does not require the actual sales price to be on the deed, which would often be a red flag to a fraudulent transfer. Our meetings produced a great deal of consensus on what should be on a revised deed. Unfortunately, Attorney General Steve Carter's office was not interested in participating in that reform group's efforts.

While this additional information on the deed might not eliminate fraudulent transfers, it would make the real estate transfer more transparent, giving valuable information to regulators and prosecutors investigating mortgage fraud. However, we still need county prosecutors who are much more willing to go after white collar crime, like mortgage fraud, than is currently the case. Attorney General Greg Zoeller and other regulators can assist in that effort by making the expertise of their office available to local prosecutors who want to prosecute mortgage fraud.

I applaud Attorney General Greg Zoeller's continued efforts to improve his office's real regulatory efforts.


jabberdoodle said...

Can you explain to me how the County Prosecutor justifies not pursuing this fraud/theft? Is it the white collar aspect?

I know said...

The bigger question should be is why won't the Marion County Prosecutor file any white collar crime of fraud and theft when he has witness after witness supply evidence by the reams and convicted felons tell all they know?

He knows, the AG knows and all they do is tell their friends to lay low and wait for time to make people forget and things will go away. Maybe they think a Statute of Limitations may mask the thieves that walk the streets everyday in white collars and ties!

Sooner or later someone will spill the beans.

Paul K. Ogden said...

Jabber, Your guess is as good as mine. I don't think the Marion County Prosecutor is that unusual though when it comes to not going after real estate fraud.

Thursday night at 11 p.m. Rafael Sanchez is going to be airing an piece where he exposes a guy who enters into land contracts with no intent to ever pay on them. Then he sits barricaded in the house for 6 month or so, which is about how long it takes to evict someone who fights the viction.

Sanchez has reported on this guy at least two other times. He's done it 30 or so times now over several years. The Marion County Prosecutor's Office refuses to take action saying he didn't violate any criminal laws.

I remember last time I heard that spin from the Prosecutor's Office, I pulled out the criminal code and found two statutes he could easily be prosecuted under. It's not like this Prosecutor's Office is shy about filing charges. They do it all the time,, often on very little or poor evidence.

I'm with "I Know" too. Brizzi is not prosecuting white collar and political corruption cases like he should be, or at all. I know that would involve some very big names though and step on some very big political toes. But that's his job.

Anonymous said...

We know that there's millions's dollars in money laundering going on as a result of illegal peashake gambling. How's THAT investigation working out?

I know said...

Pea shakes, real estate fraud, contract fraud, illegal gambling, bid rigging, you name it. It probably is not going anywhere in Marion County.

I found it very odd that in Delaware County there was a gambling problem and the Feds took it down and the Prosecutor, Law Enforcement and Greg Garrison all got healthy sums of money.

Marion County apparently has none of that nastiness going on either in Marion County or elsewhere in Indiana where the State Officials condone it from there thrones in Indianapolis. Yeah right!

The media won't report because they want to keep their jobs. Paul is right big toes and big egos would be crushed and people would shudder at who all knows.

I know said...

This was taken from Advance Indiana 3/15/2006. Read the last sentence from the Tully article where Mr. Brizzi is quoted as saying it is easier to steal with a briefcase than it is with a gun....How prophetic. I never did see a conviction anywhere on the defendant for his second felony. The first time Mr. Brizzi said there would be no public corruption on his watch!

Are there currently brief case shenanigans afoot? Somebody needs to check.

From Advance Indiana 3/15/2006:
Brad Hiller, who Brizzi's office prosecuted for theft of funds he oversaw while working for the Indiana Senate Republican Campaign Committee. The Star announced today that Brizzi plans to file new charges against Hiller, just as he is completing a 6-month sentence for his earlier crime, for money he stole from one of his clients at Bose Treacy Associates, the Indiana Soft Drink Association. If he is found guilty of these new charges, he could face several more years in prison. Speaking on his decision to file new charges against Hiller, Brizzi said, "It shows your economic station doesn't matter. If you're going to steal, you're going to steal. He continued, "And it's easier to steal with a briefcase than it is with a gun."

Unigov said...

OOP - Man, I am so glad you wrote about this. Mortgage fraud is HUGE in Indiana and I had come to have no respect at all for the former AG. I filed complaints with him twice, one on a real estate thing where the seller, an agent, lied on the disclosure. Another with a home repair company that didn't follow the new law on written estimates. Got bupkus on both, the GA's office ignored both issues completely.

Diana Vice said...

Do you remember me telling you to give Greg Zoeller a chance to prove himself worthy? He's sure keeping his campaign promises, and he's proving that he's not a clone of his predecessor. This guy is going to make a name for himself if he continues down the road he's currently traveling on.

Anonymous said...

Here's the crux of the issue, "I Know". I had a neighbor who was a mortgage broker with multiple offices. I used to be amazed at how always seemed to be at home. I'd leave for work and he'd be home, and when I returned he'd be home, often walking over to my driveway to offer me a beer. The guy was living large. He had every toy imaginable, a nice house in an upscale golf course community, golfing several times a week, active social life etc. My wife and I would amaze at how they could afford such a lifestyle with almost zero effort, while I was out busting my butt to provide the same for my family.

Then one fine day the sheriff showed up and started asking the neighbors "Can you tell me if _____ lives in that house?" There had been a two year investigation to find the family. The house was purchased with cash under a fake identity, the mortgage offices had all been shuttered years earlier, and the family was living off of money embezzled from banks using inflated appraisals and property swaps via their own title company. They pocketed the loan money and ran from the properties, using false identities to maintain a nice lifestyle.

And why were those folks arrested for their crimes, while RICO activity throughout Marion County and other parts of the state is allowed to continue unfettered? The answer is simple: They weren't on the "approved" list. Rather than using proper channels to buy, intimidate, and/or blackmail political leaders and law enforcement, they thought that they could get away with it by being savvy. They didn't expect a dedicated two year investigating and cooperation between multiple state and local agencies.

It just goes to show that even in crime, it's not "what you know", it's "who you know".

Paul K. Ogden said...


You are correct. I just wish Greg Zoeller would not have campaigned promising to continue Steve Carter's legacy in office, which I don't think was a very good one. I think he has taken criticism to heart and made positive changes. At least that's what I'm hoping.

I know said...

100% agreement on "who"you know and not what you know.