by Brian Mahany
Mortgage fraud comes in many flavors. We see lenders engaging in predatory lending practices, shady brokers writing bad loans (meaning sure defaults and that means taxpayers holding the bag), banks that defraud their own employees of commissions and of course, loan servicers that engage in widespread foreclosure fraud. Appraisers have their fair share of fraudulent behavior too.
Many mortgage scams require artificial property values in order to succeed. Lenders wont write a mortgage without knowing the value of the property securing the loan. That means appraisers.
Some appraisers are corrupt and part of larger mortgage fraud conspiracies. Others are just lazy and inept and allow themselves to be duped. Either way, banks and borrowers are often left on the hook.
To fool appraisers, some crooks create phony paper transactions to document comparable sales in the neighborhood.
In many cases, the appraiser is part of the criminal behavior. In one case, the FBI successfully prosecuted a loan officer at a Michigan lender for a multimillion mortgage fraud scheme using inflated appraisals. According to the U.S. Attorney, both the loan officer and the appraiser conspired together. Both men were sentenced to prison.
Last month, our friends at the U.S. Attorneys Office in Manhattan successfully shut down a mortgage fraud ring involving 14 people. The group was successful because one of the defendants overvalued the properties duping lenders into lending on the properties. That defendant was an appraiser.
Some folks think these crimes are victimless but they are anything but. U.S. Attorney Preet Bahara said, “The integrity of real estate transactions depends on properties being valued fairly. When [Defendant] overstated the value of these properties in his appraisals, it allowed others to commit mortgage fraud, ultimately ripping off the homeowners and the Government, which stood behind the loans to help home buyers.”
We know that many bank and mortgage company employees know of people who produced intentionally fraudulent appraisals. Lately, more and more good workers are coming forward. Whistleblowers that come forward and speak out about the fraud may be entitled to a large cash award from the government. Of course, they are doing something good to restore confidence and stability in the real estate market.
If you have inside information and would like to learn how you can do your part to put an end to fraud, give us a call. Our fraud lawyers represent the whistleblower in the largest federal false claims act case in the U.S. against a lender. A $2.4 billion claim against Allied Home Mortgage.
Whistleblowers can receive up to 30% of the money recovered on behalf of the government. Do the math on the case above and one can see how quickly the awards can grow.
For more information, contact attorney Anthony Dietz by email at or attorney Brian Mahany at . Need to speak with someone right away? Brian can also be reached by telephone at (direct). All inquiries are kept in strict confidence.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in many jurisdictions.