FBI investigating alleged mortgage fraud in Springfield

FBI Special Agent Josh Nixon couldn’t comment on specific investigations or the alleged perpetrators, but he did say mortgage fraud activity is on the rise in Springfield as it is across the nation. Missouri now ranks sixth among states with the most serious mortgage fraud problems, according to a fraud index compiled by the Mortgage Asset Research Institute.

“Mortgage fraud is one of the fastest-growing frauds in the United States, along with identity theft,” said Nixon, who is based in Springfield. “The FBI has received numerous allegations about mortgage fraud in this area, and we evaluate every allegation.”

The real estate community is buzzing with speculation about disproportionately high list prices in some subdivisions and an upsurge in foreclosures – two signs often associated with mortgage fraud.

Carol Jones Realtor LeeAnn Quinn said a handful of conspicuously priced properties caught her attention several months ago.

“They stuck out like a sore thumb,” Quinn said. “I did show a house that possibly I thought might be in that (alleged scheme). It was sold at a price, and it was bought a few months later at a higher price … quite a bit higher.”

Quinn, who hasn’t noticed the trend lately, said less scrupulous real estate agents or builders may have turned to illicit tactics when the housing market began showing signs of a slowdown last year. Foreclosures in Missouri increased 96.5 percent in 2006, according Foreclosures.com, a California-based real estate investment advisory firm and publisher of foreclosure property information.

Quinn said area real estate agents have filed complaints with the Missouri Real Estate Commission.

Other schemes

Complex mortgage fraud schemes uncovered by authorities in the Kansas City and St. Louis areas have prompted a steady stream of federal indictments in recent years. Last month, a Kansas City councilwoman and a former Jackson County official were among a group of alleged conspirators behind a scheme to defraud mortgage lenders.

The largest mortgage fraud case prosecuted by a U.S. attorney in Missouri was a series of schemes orchestrated by Brent Barber, a Belton man who was sentenced to 12 years in federal prison without parole in October. Barber’s schemes involved loans totaling more than $19 million for more than 300 properties.

FBI Special Agent Nixon cited the Barber case when asked about local mortgage fraud schemes on the bureau’s radar.

Barber recruited investors for rental properties by assuring them he would find tenants and sell the properties a short time later for a quick profit. Prosecutors said Barber provided false information on loan documents and arranged for inflated appraisals to ensure the loans would be approved.

The buyers’ or owners’ credit was damaged when Barber failed to find renters and stopped making monthly mortgage payments. Financial institutions that foreclosed on the properties were often unable to recover the amount of the superfluous loan.

Closer to home

Barber’s modus operandi is distinctly similar to allegations made against Realtor Charles Walker in a lawsuit filed in 2005 by a former business partner. Local, state and federal authorities serving a search warrant at Walker’s South Glenstone Avenue office in July seized computers and documents, but he has not been arrested and no charges have been filed. Officials will not say if Walker is being investigated for a mortgage fraud scheme.

The joint investigation into his business dealings, however, is still active, said Special Agent Bonnie MacLeod with the Internal Revenue Service Criminal Investigations Division.

Walker is no longer a member of the Greater Springfield Board of Realtors, but he is a member of the Southwest Board of Realtors, which serves Lawrence and Barry counties.

Realtors concerned about alleged mortgage fraud in the area – and the potential impact on their industry’s image – are stepping up awareness efforts. Earlier this month, FBI agent Nixon spoke to the Women’s Council of Realtors about recognizing and reporting irregularities indicative of the schemes.

Said WCR President Pat Maynard, “We want the Realtors educated.”

How the Schemes Work

Mortgage fraud schemes typically follow a similar pattern with some slight variations, said FBI Special Agent Josh Nixon.

The scheme is set into motion when a builder or seller puts a house on the market at an inflated price that’s well above the appraised property value.

A “straw buyer” agrees to purchase the property, and depending on the scheme, may or may not be aware of the seller’s intent to defraud a mortgage lender. Unsophisticated buyers are sometimes conned with empty offers of 100 percent financing, cash-back incentives or no payments for a year, Nixon said.

Co-conspirators in the scheme may include appraisers, loan officers or other intermediaries who have been promised a cut of the illegally obtained loan.

The outcome is often foreclosure, but the bank or lending institution can’t sell the house for enough money to cover the artificially high loan acquired with false information.

“If you’re lying or deceiving to get something of value, that’s fraud,” Nixon said. “If you’re lying on the (loan) application, if you’re lying about the value of the collateral, if you’re lying about whether it’s going to be owner-occupied or investment property – if you’re lying about those things, you’re … committing fraud.”[[In-content Ad]]