When a criminal misappropriates a property title with a fake deed, he also has to commit other crimes to complete his fraudulent scheme. This article about mortgage fraud is the first of a series in which I will explain these other violations of the law.
Fraudsters know that mortgage fraud is one of the most lucrative crimes, and it is easy to commit. By lying to a mortgage lender to obtain a loan, a con artist can steal 100s of 1000s of dollars. It doesn’t matter that the real property exists as collateral for the loan. It doesn’t matter if the lender gets back. Once the lender transfers money by relying on false representations of the borrower, then a crime has been committed.
What is mortgage fraud?
As I described in another post about real estate scams, at its very basic level, fraud can be described as Theft by Lie, or lying to persuade someone else to make a decision that they wouldn’t make if they knew the truth. Some other common thefts by lie include:
- Ponzi schemes – In a Ponzi scheme, the con artist lies to investors and promises a high rate of return on their money, but the fraudster doesn’t have a legitimate method of generating such high returns. Instead, he skims off a share of the invested funds to support his own lavish lifestyle, and then he recruits new investors, whose money he uses to make what he claims are interest payments to the older investors. He always needs a new crop of investors to keep paying the older investors, so they think they are actually receiving the returns they were promised. Obviously, this can’t go on forever and in the end, the newest investors lose all of their invested funds.
- In the past I would have said that no investor would knowingly invest in a Ponzi scheme, yet in recent years we have seen millions of people invest in cryptocurrencies that have many of the hallmarks of Ponzi schemes, an opinion expressed by journalist Jared A. Brock.
- Romance scams – According to the FBI: “Romance scams occur when a criminal adopts a fake online identity to gain a victim’s affection and trust. The scammer then uses the illusion [AKA lie] of a romantic or close relationship to manipulate and/or steal from the victim.”
- Journalist Joe Dziemianowicz recently interviewed a forensic psychologist who explained why both men and women are susceptible to these scams. The short answer is that the con artist keeps fishing until they find someone who is emotionally vulnerable, but read the article for more details.
- Healthcare billing fraud – In a typical healthcare billing fraud, the healthcare provider bills Medicare, Medicaid or a health insurance company for services, pharmaceuticals or equipment that was not provided. In more complex scheme, the provider actually creates fictitious patient accounts and bills for services that were purportedly given to those patients.
- Consider the primary care physician, who was sentenced to 87 months in federal prison for billing $15M to the Connecticut Medical Assistance Program for services he never provided. (H/T to journalist Tara O’Neill.)
Like these other fraud crimes, a mortgage fraudster lies to a lender to receive a loan to which he is not entitled. These false statements might be as simple as inflated income or assets or as complex as identity theft. Oftentimes, the fraudster takes over the identity of another person and takes out a mortgage in that person’s name but has the loan funds directed to himself.
Let’s talk about the different types of mortgage frauds.
Mortgage Fraud: The One About the Brownstones
According to journalist Nick Garber, in 2012, Joseph Makani allegedly used false deeds to steal two beautiful brownstone homes in Harlem. These are urban houses, typically found in New York, on which the architects used a pleasant brown sandstone on the façade. Mr. Makani swiped title to one of these homes from a deceased owner and the other from an elderly, disabled owner. Look up the definition of sociopathy, and you might see this guy’s name.
However, mere title to the brownstones didn’t benefit Mr. Makani, and he then proceeded to commit mortgage fraud to suck equity out of one of them. In this case, the critical misstatement that he made to the mortgage lender and on which they relied is that he had legitimate title to the property. The lie netted him $1.2M in funds.
Mr. Makani was arrested in early July 2021 after the New York Attorney General received an indictment against him.
The Mortgage Fraud story about the Guy with the Mobster Name
In June 2021, Marco Lurigio (AKA Demetrio Cardone) and Sandy Lurigio were charged in federal court in Chicago, which was made infamous by the mob boss, Al Capone. The Lurigios are alleged to have committed a much less violent crime than the late Capone, to wit, mortgage fraud.
This dynamic husband and wife duo allegedly stole at least $2.5M from mortgage lenders on behalf of their clients. To convince the banks to part with their money, they lied about the buyers’ employment, income, assets, sources of down payment and more. Each of these misstatements affected the lenders’ decisions about whether the borrowers qualified for the loans. In other words, without the misstatements, the buyers would NOT have qualified.
The Fake Power of Attorney who made Mortgage Fraud look easy!
This is a case I handled a few years ago when I was still practicing law. The bad guy (in this case a gal) wanted to buy a house. First, she conned her good friend into buying the house with her and convinced that friend to contribute the entire down payment. Then she proceeded to steal the identities of an elderly couple, of witnesses and of a notary. She forged all of their names on powers of attorney (POA), and she even forged the notary’s stamp. She then took the two fraudulent POAs to the county recorder’s office and filed them.
Unfortunately, the forged stamp from the notary and the stamp from the recorder’s office made the POAs seem official and legitimate. Using that false authenticity, the bad guy (gal! why do we always say guy?) borrowed a mortgage and bought a house in the name of the elderly couple. This mess sucked everybody – the elderly couple, the notary, the lender and the good friend – into a lawsuit that dragged on for two years. It was a mess.
And the bad gal (how does that sound?) got less than a week in jail. THAT was an injustice.
There are other mortgage-related frauds that I will leave for another blog including reverse mortgage scams, straw buyer real estate fraud, occupancy fraud, short sale fraud and more.
Mortgage Fraud is Common, Easy and Lucrative.
Other than mortgage fraud, how could an average person steal 100s of 1000s of dollars? I can’t think of another good way. If a criminal walks into a bank with a gun, they will leave with about $5000, but the FBI will track them down and they will go to prison for many years. However, if the same criminal walks into the bank with fraudulent mortgage application documents, they can walk out with $500,000 or more, and they might (but are not likely to) get prosecuted for the simple reason that there are not enough fraud detectives and prosecutors in any county anywhere in the country. Once a criminal steals title, it is a no-brainer for them to use mortgage fraud to drain the equity out of a home.
– David Fleck, CEO