Predatory borrowing--Florida edition

NY Times:

Federal prosecutors on Monday announced the indictment of 31 people in connection with a mortgage fraud scheme involving at least 28 properties in South Florida and fraudulent loans totaling more than $14.2 million.

The loans ranged from about $145,000 to $891,000, according to the indictment.

Officials said the scheme included participants at every stage of the transactions, including bank employees, title agents, appraisers and fake buyers, and involved property in Miami-Dade and Broward Counties and in the city of Marco Island on the state’s southwest coast.

Mortgage fraud “has become a real and daily threat to the asset most important to most of us Floridians: our homes,” R. Alexander Acosta, the United States attorney for the Southern District of Florida, said in a statement.

The indictments are the latest strike in law enforcement efforts intended to short-circuit rising mortgage fraud in Florida, which has the highest rate of it in the country.

The extent of the problem only came to light when the once-booming real estate market in the region began to crash last year.

In September, the authorities started two interagency task forces to combat the crime in South Florida: one under the auspices of Miami-Dade County and the other, a state and federal initiative, led by the United States Attorney’s Office here, which oversaw the investigation that resulted in Monday’s indictment.

According to the indictment, Juan Torrens, 40, a defendant and the owner of two real estate investment companies, would identify property owners who were willing to overstate the selling price of their properties.

Mr. Torrens and another defendant, Daniel Ramos, 40, would recruit people to pose as buyers, the indictment said. Mr. Torrens and his wife, Rachael, would then prepare fraudulent mortgage loan applications on behalf of the straw buyers, including false pay stubs and tax forms, according to the indictment.

Meanwhile, to support the inflated sales prices, Alonso A. Muxo, 48, an appraiser, would prepare fraudulent appraisals, the indictment said.

In at least one case, the indictment says, Roger Rosario, an employee of Regions Bank, provided a fraudulent verification of deposit in connection with a mortgage loan application.

The defendants would skim off the difference between the sale price and the mortgage loan and pay off all the participants in the scheme, officials said.

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There have been several similar cases in Houston brought by the Harris County District Attorney. I think these cases may be just the tip of the iceberg in predatory borrowing by crooks who are responsible for some of the foreclosure problems in the mortgage markets. It appears to go hand in hand with the decoupling of the lending decision from the actual lenders.

Investigations by Congress into the subprime lending practices should also look at borrower fraud.