Mortgages in the United States

Legal Materials

A mortgage is a loan secured by real estate.

You can figure a monthly mortgage payment (i.e., do amortization calculations) at Bankrate.com.

For mortgage rates, see Interest Rates in this legal Encyclopedia.

For search and retrieve copies of mortgage documents, see “Real Estate.”

Mortgage Brokers: You can look up mortgage broker registrations in most states using the NMLS Consumer Access database. Many states have individual databases, and you can call the relevant licensing agencies if a database is not available, or if you have questions. Mortgage Brokerage firms may also be registered with the relevant Secretary of State.

Mortgage Fraud

By Marilyn Berlin Snell. She is a San Francisco-based freelance journalist.

When it comes to mortgage fraud, U.S. Attorney’s offices must navigate muddy terrain. The most recent example involves the question of when a lender can lawfully foreclose on a property. After revelations that lenders in some states transferred ownership of the underlying mortgage documents electronically and without proper notarization, major banks declared temporary moratoriums on judicial foreclosures across the nation. If affidavits that a notary had reviewed documents and authenticated signatures prove false, hundreds of thousands of at-risk homeowners may have claims for injunctive relief. And prosecutors may have to distinguish potentially criminal acts from administrative shortcuts. Borderline practices include hiring undertrained employees to fast-track foreclosures, and securitizing massive numbers of risky loans and then unloading on them on investors.

Faced with this enormous task, Benjamin B. Wagner appears both resolute and resigned. “I’ve never viewed my role as only being society’s avenger, out there to sweep the riff-raff off the streets,” he says. But he adds, “Standards got so loose and people talked so openly about cutting corners that I think the sort of normal inhibitions to fraud began to erode.”

Criminal prosecution, Benjamin B. Wagner says, “is typically a lagging indicator, because reports filter through to law enforcement very late in the game.” He defines his office’s goals in modest terms. “Fraud flourishes when people think they can get away with it,” he says. “If we can identify some of the bad actors and take them out of the system, it can help restore confidence a little bit in the real estate industry.”

Mortgage Origination Fraud

“On the front end, we had mortgage origination fraud, either by the borrower or the mortgage broker,” a person recounts. “Then we got foreclosure fraud, where borrowers would get cold calls from people who offered to help save their houses. The latest were builder buyout schemes, where developers and builders would use straw buyers to get houses off their books.”

Wagner (…) says a decade of explosive population growth in the Central Valley provided ideal conditions for mortgage fraud. “The builders created a huge inventory of houses that they had to get rid of,” he says. “That produced a feeding frenzy by mortgage brokers and lenders to get loans out. It meant a lot of money was being made, and I think everybody wanted a piece of the action.”

As long as the lenders got their money and the borrowers saw the value of their homes continue to rise, there were few complaints. “When the market is going up, everybody is making money and nobody cares,” Scott says. “But when the market turns, all of a sudden people are losing money, and they start reporting it.”

According to the FBI, there were 67,190 suspicious activity reports (SARs) by financial institutions nationwide in fiscal year 2009 – up 5.1 percent from FY 2008 and a 44 percent increase from FY 2007. SAR filings in the first six months of FY 2010 were more than 4,400 ahead of their pace in the same period the previous year.

For federal prosecutors, figuring out the hallmarks of a good mortgage fraud case involved “a bit of a learning curve,” Wagner admits. “Until recently, real estate fraud was not something that we were deeply involved in,” he says. “For the most part, the transactions are regulated by state officials. There’s the Department of Real Estate, the licensing board for real estate brokers and appraisers – those are all state functions.”

The most recent sweep by Wagner and the DOJ Task Force – Operation Stolen Dreams, between March and June 2010 – produced 823 federal indictments, charging 1,517 defendants nationwide. “During that same time period, we got 391 guilty pleas or convictions and 245 individuals were sentenced,” he says. The indictments concern both mortgage schemes designed to defraud lenders, and phony foreclosure-rescue schemes targeting distressed homeowners. The majority of those cases were brought under mail or wire fraud statutes (18 U.S.C. § 1341 and § 1343), and so far only a few have reached trial.

“We’re really looking at the career people who are scamming banks, perhaps in multiple jurisdictions,” Wagner says. “In those kinds of cases, local investigators are not as well situated as we are to gather evidence.”

Assistant U.S. Attorney Russell L. Carlberg, the lead prosecutor on several high-profile cases in Wagner’s office, has seen (that) more than half of Carlberg’s work involves mortgage fraud. In one case, ten Chico-area defendants are charged with participating in a massive builder-bailout scheme that defrauded lenders of more than $4 million (United States v. Gililland, No. Cr. 08-376 (E.D. Cal. superseding indictment filed June 17, 2010)). He’s also investigating a multi-tiered Ponzi scheme that, according to a forfeiture complaint, spans five states, involving several hundred properties and potential losses of tens of millions of dollars. Directors of Roseville-based Loomis Wealth Solutions are accused of loan and credit fraud; identification document fraud; mail, wire, and bank fraud; and money laundering (United States v. Approximately $133,803.53, No. 09-00254 (E.D. Cal. filed Feb. 17, 2009)).
“There’s a cookie-cutter aspect to many of them,” Carlberg says. “Generally speaking you’ll have falsified income, falsified employment histories, false assets stated on the loan applications, and false declarations of primary residence. Often with a straw buyer, they’ll buy four houses at the same time, all as a primary residence. The difficulty is that because there are so many people in the underwriting process, attributing knowledge and criminal intent can be an evidentiary challenge. People can insulate themselves by never putting something in email, or by being very careful about what they say on the phone.”

In an ongoing investigation led by the FBI in collaboration with AUSA Boone in Fresno, five former employees of Bakersfield’s Crisp & Cole Real Estate have admitted scheming to defraud lenders. The two principals of the firm, David Crisp and Carl Cole, lost their real estate licenses but have not been criminally charged. “White-collar cases are so different from other criminal prosecutions,” Boone says. “DAs have guns and knives as evidence. We get checks – a lot of checks.”

One of Carlberg’s most document-heavy and complex cases at present is the Gililland prosecution. The 50-count indictment alleges mail fraud, false statements on loan applications, money laundering, bulk cash smuggling, and criminal forfeiture. According to the indictment, between approximately October 2006 and May 2008 real estate broker Garret Griffith Gililland III allegedly recruited straw buyers for various properties, conspired with the builder/owner of the homes to inflate the selling prices, created false loan applications for the higher amounts, and then credited a percentage of the difference between that price and the true market value to himself and his co-defendants.

According to Carlberg, some checks were cut directly to Gililland from entities owned by Anthony Symmes, a Chico homebuilder, but “never disclosed to lenders, for $60,000 per transaction.” After agreeing to cooperate, Gililland and his wife fled to Spain, where he allegedly had $20,000 cash sent to him in a Pringles potato chip can. The couple were extradited and are now in custody awaiting trial.

Symmes has pleaded guilty to one count of conspiracy to commit mail fraud and one count of conducting a monetary transaction in property derived from unlawful activity. He has also paid $4 million into a restitution fund; according to Carlberg, Symmes is cooperating with the prosecution and likely won’t be sentenced until after the Gililland trial concludes.

Scott Tedmon, Gililland’s Sacramento-based defense lawyer, admits that the indictment has a gripping story line, but he points out that his client was charged with only substantive counts of fraud. “Rather than attempt to prove conspiracy to commit fraud,” Tedmon says, “it’s probably just cleaner for [the government] to go after the straight fraud allegations.”

Tedmon adds, “I’m not big on casting a political light on why the U.S. Attorney’s Office files certain cases. But from a global perspective, there’s no doubt that judicial policy can’t be separated from the realities of politics. That’s why they have task forces. That’s why they target certain types of criminal activity. Say what you want, there’s a political side to it.”

(Tedmon has a point. When Attorney General Holder announced the results of Operation Stolen Dreams at a press conference in June, the Gililland case was one of three examples he cited of schemes responsible for more than $2.3 billion in losses nationwide.)

When Carlberg is asked to describe the characteristics of some defendants, he recalls the grifters from Boiler Room, a film about a pump-and-dump stock scheme. “They’re twentysomethings, very intelligent,” Carlberg says. “They seem not to have wanted a college degree or a W-2 job. They wanted to hit it big. They’re hard workers – but they apparently have no moral regulator telling them that lying and Photoshopping documents is any kind of problem.”
Still, he says, “I don’t think they did anything that was radically different from what a lot of industry professionals were doing at the time. I think they took certain loose practices of the industry and just took it to a new level.” Federal prosecutors, Carlberg says, are to some extent forced to “regulate by indictment” due to a failure to regulate the financial industry as a whole.

In September 2010, Phil ANGEL- ides, former California state treasurer and chairman of the congressional Financial Crisis Inquiry Commission, expressed similar views in Sacramento at the commission’s final public hearing; it will issue a report in Ocober 2010. “What’s disturbing about [the financial crisis] is that we so lowered the ethical standard. We made acceptable and legal conduct that was inappropriate, damaging, and devastating,” Angelides says in an interview. “Some law enforcement agencies appear to have adopted a narrow definition of mortgage fraud that focuses primarily on borrowers and brokers.”

“It’s quite striking that the prosecutions of the 1980s were of the people running the companies,” Angelides adds. And today? “Zero! Zip! Nada!” he says. (…)

Afterward, Wagner showed frustration over the exchange. “The crimes Mr. Angelides is talking about would be crimes committed by the higher-ups at the bank – not the people who originated the loans but people who were packaging the loans and selling them to Wall Street,” Wagner says. “There’s a lot of clamor out there for another Enron. We want heads to roll. We want to see a perp-walk.” But he says his office can’t prosecute someone just for creating an environment that invites fraud.

As for Angelides’s comment about relaxed ethical standards, Wagner says he understood the drift of the commissioner’s remarks but disagreed. “The federal statutes didn’t change when underwriting standards became more lax or when people started issuing no-doc loans,” he says. “The problem is when the whole industry – or large portions of it – acts in a reckless manner. It becomes more difficult to prosecute and convict people of criminal activity. It’s not that legal standards changed, but that identifying those who are the true criminals – separating their conduct from everyone else’s – becomes, just as a proof issue, more difficult.”

Once again defending the limits of his office, Wagner says his prosecutors pursue a realistic goal: “We’re trying to at least rein in mortgage fraud so that people don’t think they can just act with impunity. But we’re not going to litigate ourselves out of this crisis.”

Mortgage Financial Fraud

As part of a crackdown in 2012 by President Barack Obama’s Financial Fraud Enforcement Task Force, foreclosed properties have piled up in California, which has the second highest foreclosure rate in the country, behind Nevada.

Bid-riggers conspire not to bid against a designated bidder among them at a public auction. After the designated bidder buys the property, the group then holds a private auction, at which each conspirator bids the amount above the public auction price each is willing to pay. The highest bidder gets the property. The difference between the price at the public auction and that at the second auction is the group’s illicit profit, whichA federal crackdown on foreclosure bid-rigging has led to a flurry of indictments in recent months, is divided among the conspirators in payoffs.

Mortgages and the State Laws

Select from the list of U.S. States below for state-specific information on Mortgages:

Mortgages Explained

References

Florida Mortgages Database

This is a database related to interests in and transfers of real estate, in the following material: State Treatises, Forms, and Practice Guides. A description of this real estate database is provided below:

Full text of Florida Mortgages, which covers topics such as lien theory; mortgage instruments; types of mortgages; substantive mortgage clauses; promissory notes; payment, satisfaction, and cancellation of mortgages; recording and priorities; receiverships; and lis pendens.

Further information on United States legal research databases, including real property databases, are provided following the former link.

Mortgages

Mortgages in the United States

Legal Materials

Mortgage Fraud

Mortgage Financial Fraud

Mortgages and the State Laws

Mortgages Explained

References

See Also

Florida Mortgages Database

Resources

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Further Reading

Sam in the context of Real Estate

Resurces

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