More Mortgage Scams

There is an interesting article from the USA Today about seven firms in Cali closing due to mortgage fraud. Some of the fraud was so unbelievable - and the victims appear to have no recourse. People either had the mortgage papers forged or had so many fees they really very little money from a sizable cash-out refi. Here is the outright fraud story -
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Bremner found pieces of documents that had been cut to remove signatures and notary seals. Loan applications, escrow agreements and other documents had signatures that had been taped on, he said.

"That validated the statements that the victims had been making over and over again: That they did not recall signing these documents and they did not agree to the terms of the loans they were given," says Bremner, a senior investigator in the real estate fraud unit of the San Bernardino County district attorney's office.

Wow, that is pretty sloppy and brazen - and it went on for years. Here is the story about the astronomical fees paid -

For Tracylyn Sharrit, 40, the regulations would be too late. After meeting with Eric Pony, she said she found her signature forged on loan documents and the monthly payments on her three-bedroom, 1,100-square-foot home in San Bernardino jumped from $1,070 to $1,868.

The money promised to her in an equity cash-out has been whittled away on fees, and her loan amount ballooned from $167,000 to more than $260,000.

My guess with this situation is she met the thief made some negotiations and he did something completely else. I assume there were 2 sets of documents, the set she signed that had a lower fee with an acceptable rate schedule and a second set that has exorbitant fees with much higher rates. She signed one, but she used another set.

Among the greed, the careless and no regulations there was no incentive for anyone to follow a decent set of procedures. With the frenzy that was going on and people able to at least break even during the Great Housing Bubble. Even on bad deals the mark was not left holding the bag.

This is also a very sloppy group. I am sure many others were done on scanned documents that will be significantly harder to prove and fight. Now lets find out a little about the

Late Tuesday, the alleged ringleader in the scam, 25-year-old Eric Pony, and his sister, Paulette Pony, 23, turned themselves in to police to face charges including conspiracy, grand theft, forgery and elder abuse. Five other suspects were also arrested.

The crackdown began with Eric Pony's company, Lifetime Financial, and spread to others after Pony lost his real estate license last September and transferred his operations to other companies with active mortgage broker licenses, authorities said.

Paulette Pony had her commission as a notary revoked in December, after investigators uncovered a misdemeanor forgery conviction in 2003, more than a year before she became a legal notary.

The pair, working with their mother, Wilma Pony, channeled most of their mortgage applications through New Century Mortgage, which has since folded. Wilma Pony has not been charged criminally, but is a defendant in the lawsuit filed Monday by the attorney general.

Bremner said loan documents often ran a cumbersome 300 pages. In many cases, problems were missed amid the rush to earn commissions for quickly approving deals.

"Based on the volume of loans that New Century was doing at the time, it was either a combination of just missing these items or just looking the other way," he said.

..."Those [set of proposed] bills together represent a fairly comprehensive package of reforms," Leonard said. "They would fix some of the distorted incentives around kickbacks to (mortgage) brokers ... and strengthen the system of accountability for everyone in the mortgage origination process."

A set of corrupt siblings a more company that was processing anything that came their way and no regulations to adhere to these problems were bound to happen. With incentives to push more deals with flexible/pliable fees and permitting kick-backs what did anyone expect. Between scams and steering fraud conducted by mortgage brokers is going to be a very unfortunate but common story.