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Wednesday, April 15, 2009

DA Office Fumbles as Mortgage Frauds Score

Prosecutions Lag as N.Y. Foreclosure Frauds Surge
The New York Times by MICHAEL POWELL - April 15, 2009

Many New York City prosecutors reacted slowly and brought few indictments as foreclosure swindles and mortgage fraud swept the city during the past decade, allowing problematic operators to flourish even as the nation’s housing market rose and crashed, according to housing lawyers, prosecutors and federal reports. As early as 2000, the federal Department of Housing and Urban Development declared the city a foreclosure fraud “hot zone.” In 2005, the National Consumer Law Center wrote an influential report, “Dreams Foreclosed: The Rampant Theft of Americans’ Homes Through Equity-Stripping Foreclosure ‘Rescue’ Scams,” warning that the F.B.I. and local prosecutors remained dangerously understaffed in this fight. Yet a review of civil lawsuits suggests that many fraud cases go unprosecuted. Officials with several of New York’s district attorneys acknowledge the problem, saying they lack the staff to investigate and prosecute more than a fraction of the potential deed-theft and mortgage-fraud cases. Such cases are typically complex and time consuming; as a consequence, prosecutors say, they often know the names of sophisticated fraudulent operators but have trouble getting indictments.

“Am I frustrated and can I feel the frustration of those who send us the cases? Absolutely,” said Gregory C. Pavlides, the chief of the economic crimes unit in the Queens district attorney’s office. His unit’s 14 lawyers also handle money laundering, counterfeiting, identity theft and environmental cases. For years many district attorneys viewed mortgage fraud as taking a second seat to traditional show-stoppers: homicides, counterfeiting, burglaries and even gambling. At least one New York district attorney still takes that view. “Our natural inclination is that these are civil cases,” said William Smith, spokesman for the Staten Island district attorney, Daniel M. Donovan. Yet mortgage and deed fraud, assistant district attorneys say, are among the most economically destructive crimes prosecuted by their offices. Bank robbers average less than $2,000 and face a 75 percent chance of being caught; a mortgage fraud ring walks away with hundreds of thousands of dollars per house, prosecutors say, and runs little risk of arrest. “Robbing a bank with a gun is not as smart as going into mortgage fraud,” Mr. Pavlides said. “Because of the sheer volume, you have a decent chance of getting away with it.”

Nationwide, mortgage fraud and deed theft cost homeowners $4 billion to $6 billion annually, according to the F.B.I. In New York City, housing fraud has wiped out tens of millions of dollars for thousands of predominantly black and Latino homeowners in large parts of Brooklyn, Queens and Staten Island. Mortgage fraud comes in several varieties. Most common today are deed thieves, who approach distressed owners and offer to straighten out finances by temporarily taking over deeds. Then they refinance and abscond with the owners’ equity. Others, more frequently during the boom years, rely on circles of appraisers who deliver inflated appraisals on demand, and on lawyers paid by the seller but purporting to represent the buyer, and on mortgage brokers, to persuade buyers to take on overpriced and often dilapidated homes. As the foreclosure crisis has deepened, officials have promised a tougher line. Last week, Treasury Secretary Timothy F. Geithner announced plans for federal and state agencies to fight mortgage and foreclosure fraud. And last month, District Attorney Charles J. Hynes of Brooklyn and Senator Charles E. Schumer announced the creation of a real estate fraud unit in Brooklyn, to address what Mr. Hynes described as “the recent flood of mortgage fraud cases plaguing New Yorkers.”

But the lawyers who have pleaded with district attorneys, chased witnesses and pointed out the same suspected law breakers for years say that prosecutors failed to stop fraud when it was most rampant. “We gift-wrapped these cases,” said Jessica Attie, co-director of the foreclosure prevention project at South Brooklyn Legal Services. “These are crimes committed in plain sight.” When Doris Dickinson walked into Joe Sanders’s office at Brooklyn Legal Services Corporation A, he noted the sort of detail he thought an assistant district attorney would love. The men who sold one of Ms. Dickinson’s houses filled out a deed in 2002 claiming that she was dead. “Exhibit A: This is Ms. Dickinson and she’s alive,” Mr. Sanders said. “I figured that was a good place for a prosecutor to start.” Ms. Dickinson, 53, is blind, and her father, a transit worker, had scrimped and purchased several homes in hopes of giving her a lifelong income stream. According to a lawsuit in State Supreme Court, two men used the forged deed to obtain a mortgage. Then they sold the house to an accomplice — or straw buyer — and refinanced it, taking $570,000 in equity, court papers say. Ms. Dickinson spent years fighting to regain legal title, eventually taking her case to Richard Farrell, one of the few prosecutors in the Brooklyn district attorney’s office who handles mortgage fraud.

“He gave me his card and said what was done to me was wrong,” said Ms. Dickinson, whose curls cascade around large black sunglasses. Mr. Farrell has called witnesses and searched records, and he has located a suspect. But a year later, no grand jury has been called or indictments brought. “It’s in my hopper,” Mr. Farrell said. Mr. Farrell, chief of the new mortgage fraud unit, said the Brooklyn district attorney’s office has brought 50 cases since 2000 and has obtained 45 pleas and convictions, or five per year in a county of 2.4 million people. In Queens, the district attorney, Richard A. Brown, said in a recent interview that his office obtains 35 to 45 mortgage fraud indictments annually, although often of individual suspects rather than larger operators. The district attorneys speak of their frustration in tracking the more sophisticated operators. “I’m simply emphasizing how difficult these cases are,” Mr. Farrell said. “Each case tends to take in excess of a year.”

Federal and state prosecutors have made more progress. Benton J. Campbell, the United States attorney for the Eastern District of New York, formed a mortgage fraud squad a year ago and recently obtained a conviction of the owner of Olympia Mortgage for defrauding Fannie Mae, the federal mortgage giant, on hundreds of mortgages. The Southern District office, too, has gained several convictions of high-volume swindlers. Mr. Donovan, on Staten Island, is the only New York City district attorney who says his county has no mortgage fraud problem, although his county ranks near the top in foreclosures per capita statewide. “We don’t see many complaints,” said Mr. White, his spokesman. But lawyers with Staten Island Legal Services and State Senator Diane J. Savino, who represents parts of Brooklyn and Staten Island, say they get many reports of fraud and have walked some cases over to Mr. Donovan’s office. “We’ve gotten very little response,” Ms. Savino said.

Linda and Wesley Bryce can attest to Staten Island’s fraud problems. They own a small, $169,000 home on the borough’s working-class north shore. Mr. Bryce, 71, worked in a pigments factory; Ms. Bryce, 55, worked as a chemical technician. Then she injured her spine, and their granddaughter, who is in their care, needed surgery, and in 2006 they fell behind on their mortgage payments. The bank filed notice and a day later two “rescue” specialists from a mortgage broker in Queens knocked on the Bryces’ door. Temporarily share the mortgage with us, the men said, and we’ll give you $10,000 of the refinance proceeds and put your home on solid footing. The Bryces, who are quick to say they lack financial sophistication, agreed. According to a lawsuit in State Supreme Court, the so-called rescuers transferred the deed to a straw buyer. A year later, they told the Bryces that they would have to pay $324,000 to get their house back, or start paying rent of $3,000 per month. When the Bryces protested, the rescue firm filed a petition to evict them. “It was all done in a couple of hours,” Ms. Bryce recalled, resting her chin on her cane, in an interview in their lawyer’s office. The Bryces called Mr. Donovan, and a detective tried to help them. Mr. Donovan’s top deputy said his office investigated but dropped the case after discovering that federal prosecutors had obtained an indictment of one of the mortgage brokers in an unrelated case. An associate of the broker, however, continues to claim ownership of the Bryces’ home; a state judge has intervened but the Bryces still face eviction. “There is this mentality that the victims are complicit if they sign papers they don’t understand,” said Margaret Becker of Staten Island Legal Services. “But who would ever knowingly sell their home for $10,000? Of course it’s fraud.”

And then there is Dr. Janet Mitchell, 58, the daughter of a butler and a maid who became chief of perinatology at Harlem Hospital Center and a national advocate for black pregnant women with H.I.V. In 1992, she purchased a handsome and affordable brownstone in Fort Greene, Brooklyn. Then early-onset dementia struck. Dr. Mitchell stopped paying her bills in 2005, leading lenders to foreclose. Soon afterward, she walked into a mortgage company, according to a lawsuit filed by her niece. A mortgage specialist persuaded her to sign a handwritten transfer with no lawyer present and paid off her $210,000 in loans. Then he refinanced her house, taking $1.7 million in cash. The doctor now lives, penniless, with her sister in Colorado. South Brooklyn Legal Services gave the files to the Brooklyn district attorney’s office. The prosecutors have not yet brought a case. “We are constantly trying to get them to pursue this case,” Ms. Attie said. “These are the most defenseless of all.”


Anonymous said...

The public would be shocked how wide spread these frauds are. They have been going on for decades but has gone on overdrive with the current mess in the mortgage market. The littany of corrupt and criminal participates includes every participant in the real estate business. They include real estate brokers and agents, lawyers, judges, the courts in general, appraisers, mortgage lenders, contractors, etc...This is a facit of America that is so seedy it is shocking. The fact that Blacks and Latins are the average prey is not shocking as they are often the ones who do not seek out legal representatives to protect their interest. However, every other race of people is also affected. Whenever, anyone is perceived as vulnerable the leeches are out there to pounce on them. The elderly is particularly easy and constant prey for this crime. This is evidenced by the shockingly legal and fully advertised reverse mortgages that are targeted to the elderly. The elderly are being exploited because collectively as a group they are sitting on trillions of dollars in real estate equity. However, the loans are being used to address problems that elderly have many other alternatives to address their problems without going into debt. The reverse mortgages will be scandal in a few years just like the current fraud the article addresses. The solution to this problem is to get legal representative whenever any real estate is involved. I am against anyone anywhere in this country engaging in a real estate transaction of any kind that is not represented by his own attorney. Much of this mortgage fraud would go away if this was the practice. In large parts of this country and in New York people are advised and encouraged not to use a lawyer for their real estate transactions to save money, particularly mortgage refinancing. This is foolish for a number of reasons, legal fees are miniscule relative to the size of the transaction, the documents are universally legal documents prepared by and at the behest of others by lawyers, the transaction involves the largest asset(s) the average person owns and makes up a vast majority of the persons wealth, so why should you engage in a transaction without a lawyer to sign legal documents. It is just plain dumb. Further, one must educate themselves about the matter as much as possible and ask many questions when you don't understand particularly to your lawyer. There is never any shame in asking questions. As the saying goes the dumbest question is the one that was never asked. I could write an essay about this matter but I hope my limited comment has helped someone.

Anonymous said...

I have to say I wasn't shocked at least I wasn't shocked when it became big news. I was shocked well before that when I learned that the industry was recruiting hardened criminals to push mortgages and the regulatory agencies could have cared less.

almost three years ago an Intelligence operative told me he spoke of this with our people in the U.S., and they told him then that the losses are so big they couldn't begin to count it.

lay that at the feet of Dodd and Frank.

'we have met the enemy and it is us' (Pogo -walt kelley )

Pogo said...

Where is Cuomo? Where is that whimp hinding?

libhom said...

The main reason why the DA's aren't going after the banksters is that banksters make big money campaign contributions.

foreclosure relief said...

Abhorrent practices by lenders within the mortgage industry are called abusive lending. There are some guides for you to identify those blabbermouth swindlers.Think first before biting. And it might be necessary to contact an attorney in your particular state to learn more about this kind of abusive lending.

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